Document:

Exhibit 10.1

 

EXCLUSIVE LICENSE AGREEMENT FOR TOSTREXTM

 

BETWEEN

 

STRAKAN INTERNATIONAL LIMITED

 

AND

 

CELLEGY PHARMACEUTICALS, INC.

 

 

CONFIDENTIAL

 

[*]           designates portions of this document
that have been omitted pursuant to a request for confidential treatment filed
seperately with the Commission

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1 DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  Affiliates

  	
   

  
	
  Agreement

  	
   

  
	
  Approvals

  	
   

  
	
  Burdened Costs

  	
   

  
	
  Cellegy Information

  	
   

  
	
  Cellegy Marks

  	
   

  
	
  Cellegy Patents

  	
   

  
	
  Commercially Reasonable and Diligent Efforts

  	
   

  
	
  Competing Licensed Products

  	
   

  
	
  Current SmPC”

  	
   

  
	
  Development”

  	
   

  
	
  Dollars” or “$”

  	
   

  
	
  Effective
  Date”

  	
   

  
	
  Euros”
  or “€

  	
   

  
	
  GMP”

  	
   

  
	
  Intellectual Property Rights”

  	
   

  
	
  Know-How

  	
   

  
	
  Launch
  Date

  	
   

  
	
  Licensed Product”

  	
   

  
	
  Licensee Product

  	
   

  
	
  Loss

  	
   

  
	
  Major European Countries

  	
   

  
	
  Manufacturer

  	
   

  
	
  Minimum Sales

  	
   

  
	
  M.R.P

  	
   

  
	
  Net
  Sales

  	
   

  
	
  Party

  	
   

  
	
  Patent
  Rights

  	
   

  
	
  Relevant Regulatory Authority

  	
   

  
	
  Steering Committee

  	
   

  
	
  Sublicensee

  	
   

  
	
  Technical Agreement

  	
   

  
	
  Territory

  	
   

  
	
  Third
  Party

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2 GRANT OF LICENSE

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Grant

  	
   

  
	
  2.2

  	
  Right to sub-license

  	
   

  
	
  2.3

  	
  Acceptance of Appointment; Sales Outside
  Territory

  	
   

  
	
  2.4

  	
  Competing Products

  	
   

  
	
  2.5

  	
  Right of First Negotiation Regarding
  Licensee Product in North America

  	
   

  

 

REDACTED COPY

 

i

 

	
  ARTICLE 3 REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  
	
  3.1

  	
  Representations and Warranties of Cellegy

  	
   

  
	
  3.2

  	
  Representations and Warranties of Licensee

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 MANAGEMENT OF THE
  COLLABORATION

  	
   

  
	
   

  	
   

  
	
  4.1

  	
  Steering Committee.

  	
   

  
	
  4.2

  	
  Responsibilities of the Steering Committee

  	
   

  
	
  4.3

  	
  Voting; Deadlocks

  	
   

  
	
  4.4

  	
  Approval Plan; Marketing Plan.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 REGULATORY MATTERS; APPROVALS

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Regulatory Matters; Approvals

  	
   

  
	
  5.2

  	
  Reversion of Product Rights in Certain
  Circumstances

  	
   

  
	
  5.3

  	
  Cooperation Regarding Material Events

  	
   

  
	
  5.4

  	
  Copies of Documents

  	
   

  
	
  5.5

  	
  Approval Application in Sweden.

  	
   

  
	
  5.6

  	
  Meetings With Regulatory Authorities.

  	
   

  
	
  5.7

  	
  Inspection

  	
   

  
	
  5.8

  	
  Clinical Trials

  	
   

  
	
  5.9

  	
  Cellegy Obligations

  	
   

  
	
  5.10

  	
  Approvals

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 POST- APPROVAL
  RESPONSIBILITIES

  	
   

  
	
   

  	
   

  
	
  6.1

  	
  Responsibility

  	
   

  
	
  6.2

  	
  Collaboration

  	
   

  
	
  6.3

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 INFORMATION; DATA;
  PHARMACOVIGILENCE

  	
   

  
	
   

  	
   

  
	
  7.1

  	
  Clinical Data

  	
   

  
	
  7.2

  	
  Safety Data Base

  	
   

  
	
  7.3

  	
  Adverse Events

  	
   

  
	
  7.4

  	
  Product Complaints

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 MILESTONE PAYMENTS; ROYALTIES
  AND RELATED PAYMENTS

  	
   

  
	
   

  	
   

  
	
  8.1

  	
  Milestone Payments

  	
   

  
	
  8.2

  	
  Sales Milestones

  	
   

  
	
  8.3

  	
  Fee Conditions.

  	
   

  
	
  8.4

  	
  Royalties in General

  	
   

  
	
  8.5

  	
  Period for Royalty Payments; Residual
  Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9
  ROYALTY REPORTS AND ACCOUNTING

  	
   

  
	
   

  	
   

  
	
  9.1

  	
  Quarterly Royalty Reports; Records

  	
   

  
	
  9.2

  	
  Payment Due Dates

  	
   

  
	
  9.3

  	
  Right to Audit Licensee

  	
   

  
	
  9.4

  	
  Right to Audit Cellegy

  	
   

  
	
  9.5

  	
  Overpayment or Underpayment of Burdened
  Costs

  	
   

  
	
  9.6

  	
  Disagreement with Auditor Findings

  	
   

  

 

ii

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

	
  ARTICLE 10 MARKETING

  	
   

  
	
  10.1

  	
  General Promotional Duties

  	
   

  
	
  10.2

  	
  Marketing Effort; Minimum Expenditures for
  Commercialization

  	
   

  
	
  10.3

  	
  Licensee’s Failure to Commercialize in the
  Territory

  	
   

  
	
  10.4

  	
  Minimum Sales

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11 MANUFACTURING; SUPPLY OF
  LICENSED PRODUCT

  	
   

  
	
   

  	
   

  
	
  11.1

  	
  Production and Supply of Product

  	
   

  
	
  11.2

  	
  Forecasts.

  	
   

  
	
  11.3

  	
  [*]

  	
   

  
	
  11.4

  	
  Product Packaging and Labeling; Revisions
  to Forecasts and Minimum Sales Amounts.

  	
   

  
	
  11.5

  	
  Pricing

  	
   

  
	
  11.6

  	
  Cellegy Report

  	
   

  
	
  11.7

  	
  Timing of Firm Orders

  	
   

  
	
  11.8

  	
  Delivery.

  	
   

  
	
  11.9

  	
  Title and Risk of Loss

  	
   

  
	
  11.10

  	
  Export Controls

  	
   

  
	
  11.11

  	
  Manufacture and Supply Warranty

  	
   

  
	
  11.12

  	
  Defective Product

  	
   

  
	
  11.13

  	
  Recalls

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12 PATENT RIGHTS

  	
   

  
	
   

  	
   

  
	
  12.1

  	
  No Ownership By Licensee

  	
   

  
	
  12.2

  	
  New Cellegy Inventions/Improvements to the
  Licensed Product

  	
   

  
	
  12.3

  	
  Improvements by Licensee

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13 CELLEGY MARKS

  	
   

  
	
   

  	
   

  
	
  13.1

  	
  Use of Cellegy Marks by Licensee

  	
   

  
	
  13.2

  	
  Acknowledgment of Ownership

  	
   

  
	
  13.3

  	
  Marking

  	
   

  
	
  13.4

  	
  Registration.

  	
   

  
	
  13.5

  	
  Termination of Use

  	
   

  
	
  13.6

  	
  Trademarks

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14 INFRINGEMENT;
  INDEMNIFICATION AND OTHER CLAIMS

  	
   

  
	
   

  	
   

  
	
  14.1

  	
  Infringement of Intellectual Property
  Rights

  	
   

  
	
  14.2

  	
  Alleged Infringement of Third Party
  Intellectual Property Rights

  	
   

  
	
  14.3

  	
  Product Liability Claims

  	
   

  
	
  14.4

  	
  Notice from Licensee

  	
   

  
	
  14.5

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15 CONFIDENTIALITY

  	
   

  
	
   

  	
   

  
	
  15.1

  	
  Treatment of Confidential Information

  	
   

  
	
  15.2

  	
  Right to Disclose

  	
   

  
	
  15.3

  	
  Release From Restrictions

  	
   

  
	
  15.4

  	
  Confidentiality of Agreement

  	
   

  
	
  15.5

  	
  Return of Confidential Information

  	
   

  

 

iii

 

	
  15.6

  	
  Previous Confidentiality Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16 TERM; TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  16.1

  	
  Term

  	
   

  
	
  16.2

  	
  Bilateral Termination Rights

  	
   

  
	
  16.3

  	
  Cellegy’s Right to Terminate

  	
   

  
	
  16.4

  	
  Licensee’s Right to Terminate

  	
   

  
	
  16.5

  	
  Rights Upon Termination or Expiration

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 17 REGISTRATION OF LICENSE;
  LIMITATION OF LIABILITY

  	
   

  
	
   

  	
   

  
	
  17.1

  	
  Registration

  	
   

  
	
  17.2

  	
  Limitation of Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 18 GENERAL PROVISIONS

  	
   

  
	
   

  	
   

  
	
  18.1

  	
  Force Majeure

  	
   

  
	
  18.2

  	
  Further Assurances

  	
   

  
	
  18.3

  	
  Severability

  	
   

  
	
  18.4

  	
  Notices.

  	
   

  
	
  18.5

  	
  Assignment.

  	
   

  
	
  18.6

  	
  Amendment

  	
   

  
	
  18.7

  	
  Entire Agreement

  	
   

  
	
  18.8

  	
  Waiver.

  	
   

  
	
  18.9

  	
  No Implied Licenses

  	
   

  
	
  18.10

  	
  Injunctions

  	
   

  
	
  18.11

  	
  Independent Contractors

  	
   

  
	
  18.12

  	
  No Third Party Beneficiaries

  	
   

  
	
  18.13

  	
  Governing Law

  	
   

  
	
  18.14

  	
  Resolution of Disputes

  	
   

  
	
  18.15

  	
  Headings

  	
   

  
	
  18.16

  	
  Counterparts

  	
   

  
	
  18.17

  	
  Late Payment

  	
   

  
	
  18.18

  	
  Strakan Group Limited Guarantee

  	
   

  

 

	
  SIGNATURES

  
	
   

  	
   

  
	
  EXHIBIT A

  	
  LICENSED PRODUCT

  
	
  EXHIBIT B

  	
  COUNTRIES IN THE TERRITORY

  
	
  EXHIBIT C

  	
  MINIMUM SALES REQUIREMENTS

  
	
  EXHIBIT D

  	
  PATENT RIGHTS

  
	
  EXHIBIT E

  	
  CELLEGY MARKS

  
	
  EXHIBIT F

  	
  STRAKAN GROUP GUARANTEE

  

 

iv

 

EXCLUSIVE
LICENSE AGREEMENT

 

THIS EXCLUSIVE LICENSE AGREEMENT (this “Agreement”) is made and entered into as
of July 9, 2004 (the “Effective
Date”), by and between Cellegy Pharmaceuticals, Inc., a
California corporation having its principal place of business at 349 Oyster
Point Boulevard, San Francisco, California 94080, US (“Cellegy”), and
Strakan International Limited, a   company
organized and existing under the laws of Bermuda with a branch office at
Buckholm Mill, Galashiels, TD1 2HB, UK (“Licensee”“).

 

BACKGROUND

 

A.                                   Cellegy
owns or possesses certain intellectual property rights with respect to the
Licensed Product (as hereinafter defined) and certain rights pertaining to
Cellegy’s Marks (as hereinafter defined).

 

B.                                     Licensee
desires to obtain an exclusive license to certain rights to the Licensed
Product under such intellectual property rights, and to Cellegy’s Marks within
the Territory (as hereinafter defined) .

 

C.                                     Cellegy
is willing to grant an exclusive license to Licensee under such intellectual
property rights, and is willing to grant an exclusive license to Cellegy’s
Marks to Licensee, each within the Territory, all as more particularly
described in, and subject to the terms and conditions of, this Agreement.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth and other good and valuable consideration, the
receipt of which is hereby acknowledged, the Parties (as hereinafter defined)
mutually agree as follows:

 

ARTICLE 1

DEFINITIONS

 

As used in this Agreement, the following terms, whether used in the
singular or the plural, shall have the following meanings:

 

“Affiliates” shall mean, with respect to any party, any person, which, directly
or indirectly, is controlled by, controls or is under common control with such
party. For purposes of this definition, the term control (including with
correlative meanings, the terms controlled by and under common control with)
means having the power, whether held directly or indirectly and by whatever
means (and whether or not enforceable at law or in equity) to:

 

(i)                                     exercise
or control the right to vote attached to 50% or more of the issued shares in
the party;

 

(ii)                                  dispose
of or exercise a right of disposal in respect of 50% or more of the issued
voting shares in the party;

 

1

 

(iii)                               appoint
one half or more of the number of directors to the board of the party; or

 

(iv)                              determine
substantially the conduct of the party’s business activities.

 

“Agreement”
means this Exclusive License Agreement.

 

“Approvals” are
registration approvals, registrations or authorizations provided by the
Relevant Regulatory Authority in the Territory for the importation, storage,
Development, promotion, marketing, distribution or sale of the Licensed
Product, but excluding any pricing approvals that may be required by any
Relevant Regulatory Authority of a country within the Territory.

 

“Burdened Costs”
means Cellegy’s fully burdened costs for the Licensed Product.  Cellegy’s Burdened Costs shall be based on
Cellegy’s financial records and shall include, without limitation, all
manufacturing, shipping, insurance, handling, order processing and supervisory
costs, customary overheads, warehousing costs, and costs for raw materials,
filling and packaging of the Licensed Product for the Territory, all as set
forth on the Burdened Cost addendum separately delivered by Cellegy to Licensee
contemporaneously with the execution and delivery of this Agreement (the “Burdened Cost Addendum”).  The Burdened Costs shall be reviewed on a
yearly basis.

 

“Cellegy Information”
means the technical and clinical information concerning the Licensed Product
that is developed by Cellegy and that is included in the new drug application
filed with the Relevant Regulatory Authority in Sweden, and Cellegy’s European
common technical document format, and which may include, without limitation,
data in support of indications, bioequivalency data and information, clinical
data, pharmaco-toxicological data, analytical methods, stability and
pharmaceutical data concerning the Licensed Product, and any other related
supporting documentation or other information or materials in Cellegy’s
possession from time to time that Cellegy may in its discretion from time to
time develop before the date that all required Approvals are obtained and that
may be necessary for, or useful in connection with obtaining and maintaining
Approvals for the Licensed Product in the Territory.

 

“Cellegy Marks”
means the trademarks, service marks and/or trade names owned by Cellegy or that
Cellegy has the right to use in connection with the Licensed Product as set
forth on Exhibit E hereto and as further described in Section 13.1,
that are used by Licensee, its Affiliates or Sublicensees in connection with
the importation, storage, Development, promotion, marketing, distribution and
sale of the Licensed Product.

 

“Cellegy Patents”
means the patents identified on Exhibit D hereto.

 

“Commercially Reasonable and Diligent Efforts” shall mean with respect to Development and commercialization of
the Licensed Product, a Party’s reasonable efforts no less than those efforts
used by the Party in its other development, commercialization or marketing
projects with other technologies and products having comparable commercial
potential.

 

“Competing Licensed Products”
has the meaning set forth in Section 2.4.

 

2

 

“Current SmPC” has
the meaning set forth in Section 11.4.

 

“Development” (including variations
such as “Develop” and the like) shall mean all appropriate measures, steps and
the like that are necessary to prepare and compile dossiers appropriate for
obtaining Approvals for the Licensed Product in the Territory and conducting
clinical trials in the Territory (if required) .  As it relates to Cellegy, “Development” shall mean that Cellegy
shall provide Licensee a copy of the dossier concerning the Licensed Product
filed by Cellegy with the Relevant Regulatory Authority in Sweden, and such
other materials relating thereto or to obtaining other Approvals for the
Licensed Product in the Territory as Cellegy may in its discretion from time to
time develop before the date that all required Approvals are obtained.

 

“Dollars”
or “$”
means United States dollars.

 

“Effective Date”
means the date set forth at the beginning of this Agreement.

 

“Euros” or “€” shall mean
currency denominated in Euros.

 

“GMP” means good
manufacturing practices in conformity with the regulations and regulatory
interpretations of the Relevant Regulatory Authorities in each country in the
Territory, including without limitation EU cGMP such regulations covering good
manufacturing practices set forth in the relevant legislation or guidelines and
applicable to the Territory, as such regulations may be amended and interpreted
by the Relevant Regulatory Authorities from time to time.

 

“Intellectual Property Rights”
means all rights and interests, vested or arising out of any industrial or
intellectual property, whether protected at common law or under statute, which
includes (without limitation) the Patent Rights, Trade Marks and Know-How and
any rights and interests in inventions (both patentable and unpatentable),
patents, copyrights, moral rights, designs (whether registered or
unregistered), trade marks (whether registered or unregistered), trade secrets,
goodwill, samples, materials, data, , results and Confidential Information.

 

“Know-How”
means all data, information, methods, procedures, processes and materials,
which is or comes to be possessed, acquired, licensed or owned by Cellegy as of
the Effective Date and from time to time thereafter of this Agreement, to the
extent that such data, information, methods, procedures, processes and
materials specifically relates to the manufacture, development, testing or use
of the Licensed Product, including but not limited to, biological, chemical,
biochemical, toxicological, pharmacological, metabolic, formulation, clinical,
analytical and stability information and data (other than such Know-How which
is the subject of a patent or of a provisional or filed patent application),
and for which Cellegy has the right to license, disclose or provide to
Licensee.

 

“Launch Date” means
following Approval the date upon which the Licensed Product is first
commercially offered for sale in a country in the Territory, determined on a
country by country basis.

 

3

 

“Licensed Product” means
the pharmaceutical product known as TostrexTM (testosterone) 2% topical
testosterone gel for the treatment of male hypogonadism, in the pharmaceutical
presentation described in Exhibit A.

 

“Licensee Product”
has the meaning set forth in Section 2.4.

 

“Loss” means any
and all loss, liability, damage, fee, cost, (including without limitation
actual reasonable court costs and reasonable attorneys’ fees regardless of
outcome) expense, suit, claim, demand, judgment and prosecution.

 

“Major European Countries” shall mean France, Germany, Italy,
Spain and United Kingdom.

 

“Manufacturer”  means
Cellegy’s nominated Third Party manufacturer of the Licensed Product.

 

“Minimum
Sales”
means agreed targets for unit sales of Licensed Product in the Territory,  as set forth on Exhibit C hereto.

 

“M.R.P” means the mutual
recognition procedure as defined in Article 28 of European Directive
2001/83/EC.

 

“Net Sales”
means the gross proceeds from sales of the Licensed Product that is due, or
otherwise received by, Licensee, or its Affiliates or its Sublicensees from
Third Party customers for such Licensed Product, less:

 

(i)                                     reasonable
credited allowances actually granted to such Third Party customers,

 

(ii)                                  the
amounts of reasonable trade and cash discounts actually allowed, to the extent
such trade and cash discounts are specifically allowed on account of the
purchase of such Licensed Product,

 

(iii)                               sales
taxes, excise taxes, use taxes and import/export duties and any other
government charges (other than taxes on income) actually due or incurred or
paid by Licensee, or its Affiliates or Sublicensees, in connection with the
sales of the Licensed Product to any Third Party, and

 

(iv)                              reasonable
allowances, adjustments, reimbursements, discounts, chargebacks and rebates
actually granted to Third Parties, including, but not limited to, rebates given
to health care organizations or other Third Parties, and any bona fide payment
made in respect of any sales of Licensed Product to any governmental or
quasi-governmental body or agency, whether during the actual royalty period or
not.

 

“Party” means Cellegy or
Licensee and Parties shall mean both Cellegy and Licensee.

 

4

 

“Patent Rights”
means (i) the patents and patent applications listed in Exhibit D hereto and
any patents and patent applications existing as of the Effective Date; (ii) any
patent or patent application hereafter which is acquired by Cellegy or under
which Cellegy becomes licensed and with the right to sublicense to Licensee,
during the term of this Agreement, in each case of (i) and (ii) above relating
to the Licensed Product, its manufacture, use or sale, including methods of use
and screening or processes that use the Licensed Product; (iii) any
divisionals, continuations and continuations-in-part defined in (i) or (ii);
(iv) any extension, renewal or reissue or patent identified in any reissue or
re-examination of any patent or patent application identified in (i) through
(iv), in each case, to the extent that such items relate to the Licensed
Product.  Such items set forth in
sub-items (i) through (iv) will be identified and added by the Parties to
Exhibit D from time to time during the term of this Agreement.

 

“Relevant Regulatory Authority”,
in relation to a country or region in the Territory, means the governmental
authority, regulating the use, importation, storage, Development, promotion,
marketing, distribution or sale of therapeutic substances and the grant of
Approvals in such country or region.

 

“Steering Committee”
means the Steering Committee, as described in Article 4 of this Agreement.

 

“Sublicensee”
means any person to whom Licensee sublicenses the rights, or any portion
thereof, granted by Cellegy to Licensee pursuant to Section 2.1 hereof.

 

“Technical Agreement”
means the agreement between Cellegy and any Manufacturer defining the roles
and responsibilities for all parties in relation to, inter alia, (i)
manufacture and supply of the Licensed Product to GMP; and (ii) regarding
regulatory, safety and pharmacovigilence issues, as separately provided by
Cellegy to Licensee as of the date of this Agreement.

 

 “Territory” means the
countries listed on Exhibit B hereto.

 

“Third Party”
means any party other than Cellegy or Licensee, or Licensee’s Affiliates or
Sublicensees.

 

ARTICLE 2

GRANT OF LICENSE

 

2.1                                 Grant.  Cellegy hereby grants to Licensee an
exclusive, royalty-bearing, license, with a right to sublicense as set forth
herein, under all of Cellegy’s Intellectual Property Rights to import, store,
Develop, have Developed (through agreements with contract research
organizations or similar Third Parties, performing work on behalf of and for
the benefit of Licensee), promote, market, distribute, offer for sale, and sell
the Licensed Product within the Territory, and to use Cellegy’s Intellectual
Property Rights in connection with the importation, storage, Development,
promotion, marketing,  distribution and
sale of Licensed Product and obtaining any Approvals hereunder.  Licensee’s rights to the Licensed Product
and the

 

5

 

Intellectual Property Rights are limited to those expressly granted,
and all others are reserved to Cellegy.

 

2.2                                 Right to sub-license.  Subject to Section 2.5 below, Licensee
may sub-license any of its rights or obligations under this Agreement, directly
or indirectly, in whole or in part:

 

(a)                                  to Third Parties approved by Cellegy in
writing, which approval will not be unreasonably withheld and delayed; and

 

(b)                                 to
any of its Affiliates that are engaged primarily in the business of
importation, storage, Development, promotion, marketing, distribution and sale
of pharmaceutical products, as Licensee sees fit.

 

Any such sublicense shall not relieve Licensee of any of its
obligations hereunder, and Licensee shall remain responsible and liable for
compliance by any such Third Party, Affiliate or Sublicensee with this
Agreement, all relevant laws, regulations and requirements relating to the
importation, distribution, marketing, promotion and sale of the Licensed Product
in the Territory, and any acts or omissions by any such Third Party, Affiliate
or Sublicensee that would constitute a breach of this Agreement if such
sublicense had not been entered into and the actions or omissions were those of
Licensee rather than the Third Party, Affiliate or Sublicensee.  Any sublicense agreement shall contain terms
and conditions that are not inconsistent with those of this Agreement.

 

2.3                                 Acceptance of
Appointment; Sales Outside Territory.

 

(a)                                  Licensee
hereby accepts appointment as Cellegy’s exclusive licensee of Licensed Product
in the Territory, as provided in Section 2.1 above.

 

(b)                                 Licensee
shall not, and Licensee shall use all Commercially Reasonable and Diligent
Efforts to ensure that its officers, directors, employees, Affiliates, agents
or representatives (collectively, “Agents”) shall not, without the prior written
consent of Cellegy, directly or indirectly promote, sell, distribute or
otherwise make available (for remuneration or gratuitously) Licensed Product
outside the Territory or sell, distribute or otherwise make available (for
remuneration or gratuitously)  Licensed
Product to persons outside the Territory for the purpose of resale or
distribution (whether for remuneration or gratuitously) outside the Territory.  Without limiting the foregoing, Licensee
agrees to use all Commercially Reasonable and Diligent Efforts to ensure
compliance with the preceding sentence, including without limitation placing
appropriate notices on the labels or Licensed Products; provided, however, that
Licensee shall not be obligated to include any notices in a particular country
in the Territory that would conflict with any relevant requirements of the
Relevant Regulatory Authority for such country, and Licensee’s failure or
refusal to include any such notices in such circumstances shall not constitute
a breach of any provision of this Agreement.

 

6

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

2.4                                 Competing Products.  During the term of this Agreement, or, if
earlier, the maximum period of time permitted by applicable European Union
regulations, Licensee shall not, and shall use all Commercially Reasonable and
Diligent Efforts to ensure that its officers, directors, employees, Affiliates,
Sublicensees, agents or representatives (collectively, “Agents”) shall not,
directly or indirectly, promote, sell or distribute products within the Territory
that are directly competitive in the treatment of male hypogonadism or such
other indications for the Licensed Product as may be added to this Agreement
(the “Competing Licensed
Products”), excluding Licensee’s [*] (the “Licensee Product”).  For the avoidance of doubt, this shall not preclude Licensee from
conducting research and development in relation to projects or products that
may be associated with the treatment of male hypogonadism or such other
indication for the Licensed Product added to this Agreement.  If applicable law or applicable European
Union regulations provide that the foregoing covenant is unenforceable or
require that the duration of the foregoing covenant be shorter than the term of
this Agreement, then if at any time during the term of this Agreement when such
covenant is not effective Licensee or its Agents directly or indirectly
promote, sell or distribute Competing Licensed Products, Cellegy may terminate
this Agreement with respect to any country where such Competing Licensed
Products are being promoted, sold or distributed by delivery of written notice
to Licensee.

 

2.5                                 Right of
First Negotiation Regarding Licensee Product in North America.  Before Licensee enters into any agreement
with any Third Party which includes the right to develop, promote, distribute
or sell the Licensee Product for use in males in territories that include the
United States of America or Canada (“North America”), or any agreement with any Third Party
which includes worldwide rights to develop, promote, distribute or sell the
Licensee Product, Licensee shall first offer to Cellegy in writing (the “Negotiation Notice”)
a one-time right of exclusive first negotiation to negotiate with Licensee
concerning exclusive development, marketing and/or distribution rights in North
America (or worldwide, as the case may be) for such Licensee Product, for a
negotiation period not to exceed [*] (the “Negotiation Period”).  Cellegy shall exercise the Right of First
Negotiation granted herein by providing written notice of its election (the “Exercise Notice”) to
Licensee within [*] after the date of delivery of the Negotiation Notice to
Cellegy.  The Negotiation Period shall
commence upon delivery to Licensee of the Exercise Notice.  During the Negotiation Period, Licensee
shall not enter into any agreement with any person other than Cellegy with
respect to the development, promotion, distribution or sale of the Licensee
Product within any country in North America (or worldwide, as the case may be).  During the Negotiation Period, the Parties
shall negotiate in good faith; provided, however, that nothing in this
Article shall be deemed to create a legal obligation on the part of
Licensee to enter into any such agreement. 
This Right of First Negotiation shall terminate upon the first to occur
of (i) Cellegy’s failure to timely deliver its Exercise Notice following
receipt of the Negotiation Notice; (ii) the expiration of the Negotiation
Period; (iii) the mutual termination of negotiations by the Parties conducted
under this Article; or (iv) the effective date of termination of this Agreement
by either Party as provided elsewhere in this Agreement.

 

7

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

 

3.1                                 Representations
and Warranties of Cellegy.  Cellegy hereby represents and warrants to
Licensee that:

 

(a)                                  Cellegy is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of California, with the corporate power and authority to
enter into this Agreement and to perform its obligations hereunder.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of Cellegy.  This Agreement has been duly executed and
delivered by Cellegy and constitutes the valid, binding and enforceable
obligation of Cellegy, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors’ rights generally from
time to time in effect and to general principles of equity.

 

(b)                                 Cellegy is not subject
to, or bound by, any provision of: (i) its articles of incorporation or
by-laws, (ii) any mortgage, deed of trust, lease, note, shareholders’
agreement, bond, indenture, license, permit, trust, custodianship, or other
instrument, agreement or restriction, or (iii) any judgment, order, writ,
injunction or decree of any court, governmental body, administrative agency or
arbitrator, that would prevent, or be violated by, or under which there would
be a default as a result of, nor is the consent of any person required for, the
execution, delivery and performance by Cellegy of this Agreement and the
obligations contained herein, including without limitation, the grant to Licensee
of the license described in Section 2.1 hereof.

 

(c)                                   Cellegy
is the exclusive owner of all right, title and interest in the Patent Rights in
the applicable countries in the Territory, and the patent applications included
in the Patent Rights have been duly filed and contain no material errors.
Cellegy shall maintain all Patent Rights for the full duration of this
Agreement.  Attached hereto as Exhibit D
is a complete and accurate list of all patents and patent applications included
in the Patent Rights .

 

(d)                                  Cellegy
is the exclusive owner of all right, title and interest in the Cellegy Marks in
the Territory. Cellegy shall maintain at its sole expense where applicable all
Cellegy Marks for the full duration of this Agreement.  Attached hereto as Exhibit E is a complete
and accurate list of all trade marks and trade mark applications included in
the Cellegy Marks.

 

(e)                                   To
the best of Cellegy’s knowledge, neither the development, use or sale of the
Licensed Product or the practice of any of the inventions included in the
Patent Rights or the use of the Cellegy Marks or the use of the Know-How by
Licensee as contemplated by this Agreement infringes upon any Third Party’s
know-how, patent, trade mark or other intellectual property rights in the
Territory.

 

8

 

(f)                                     To
the best of Cellegy’s knowledge, there is no Third Party using or infringing
any or all of the Patent Rights or the Cellegy Marks in derogation of the
rights granted to Licensee in this Agreement.

 

(g)                                  To
the best of Cellegy’s knowledge, there is no interference or opposition actions
or litigations pending or any communication, which threatens interference or
opposition actions or litigation before any patent and trade mark office, court
or any other governmental entity in any jurisdiction in regard to the Patent
Rights or the Cellegy Marks.

 

(h)                                  Cellegy
represents and warrants that, to the best of its knowledge, it has furnished or
will furnish (in accordance with the terms of this Agreement) to Licensee all
of the Know-How which Cellegy owns or possesses.

 

(i)                                      CELLEGY
MAKES NO REPRESENTATION OR WARRANTY OTHER THAN THOSE EXPRESSLY PROVIDED
HEREUNDER, AND CELLEGY HEREBY DISCLAIMS ALL SUCH OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY, OR THE
FITNESS FOR A PARTICULAR PURPOSE, OF THE LICENSED PRODUCT OR THE KNOW-HOW.  EXCEPT AS MAY BE EXPRESSLY PROVIDED
ELSEWHERE HEREIN, CELLEGY MAKES NO REPRESENTATION OR WARRANTY THAT THE LICENSED
PRODUCT IS OR WILL BE SHOWN TO BE SAFE OR EFFECTIVE FOR ANY INDICATION.  THE FOREGOING SHALL NOT REDUCE THE SCOPE OF
ANY REPRESENTATION OR WARRANTY OF CELLEGY EXPRESSLY MADE TO LICENSEE HEREIN.

 

(j)                                      Cellegy
will use all Commercially Reasonable and Diligent Efforts to ensure that
Cellegy will not alter the Cellegy Information supplied to Licensee or the
materials or processes described in that information in relation to any of the
Licensed Product without the prior written notification to Licensee.

 

3.2                                 Representations
and Warranties of Licensee.  Licensee hereby represents and warrants to
Cellegy as follows:

 

(a)                                  Licensee
is a corporation duly incorporated, validly existing and in good standing under
the laws of Bermuda, having a branch office in the UK with the corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder.  The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of
Licensee.  This Agreement has been duly
executed and delivered by Licensee and constitutes the valid, binding and
enforceable obligation of Licensee, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors’
rights generally from time to time in effect and to general principles of
equity.

 

(b)                                 Licensee’s Affiliates
shall not conduct themselves in such a way that Licensee will be in breach of
any term or condition of this Agreement.

 

9

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

(c)                                  Licensee currently is
in compliance in all material respects with all applicable laws and has
received, or will receive where relevant, all applicable pharmaceutical product
certifications and registrations from appropriate governmental entities that
are necessary to perform its obligations under this Agreement.

 

ARTICLE 4

MANAGEMENT OF THE COLLABORATION

 

4.1                                 Steering
Committee.

 

(a)                                  Upon
execution of this Agreement, Cellegy and Licensee shall establish a Steering
Committee (the “Steering Committee”)
which shall have the responsibilities described in this Article 4.  The Steering Committee shall be initially
comprised of a total of six (6) members, of which three (3) members shall be
appointed by Licensee and three (3) members shall be appointed by Cellegy.  The total number of Steering Committee
members may be changed by the Steering Committee from time to time as
appropriate, but in all cases it will be comprised of an equal number of
members designated by each of Cellegy and Licensee, and in no event shall the
Steering Committee be comprised of an aggregate of less than six (6)
members.  Each of Cellegy and Licensee
may substitute its representatives from time to time and the substitution shall
be effective upon notice to the other Party. 
The Steering Committee shall meet once every quarter during the first
year of the term of this Agreement and thereafter at such other times as the
Steering Committee may agree (but at least one time each year), on such dates
and at such places as to be agreed upon between the Parties.  In any event, the Steering Committee will
meet thirty (30) days after the execution of this Agreement or as soon as
practicable as mutually agreed by the Parties. 
Each representative on the Steering Committee will have one vote in
decisions submitted to the Steering Committee. 
The meetings of the Steering Committee may be held in person or in any
other reasonable manner, including, without limitation, by telephone, video
conference or e-mail.

 

(b)                                 [*]
shall designate a Chairperson who will serve as such.  The Chairperson shall send notices (not less than 15 business
days in advance of such meetings) and agendas for all regular Steering
Committee meetings to all Steering Committee members.  The location of regularly scheduled Steering Committee meetings
shall alternate among the offices of the Parties, unless otherwise agreed.  Meetings may be held telephonically or by
video conference, but each member shall attend at least one meeting in person
each year.  The Party hosting any
Steering Committee meeting shall appoint one person (who need not be a member
of the Steering Committee) to attend the meeting and record the minutes of the
meeting.  Such minutes shall be
circulated to the Parties promptly following the meeting for review, comment
and approval.

 

4.2                                 Responsibilities
of the Steering Committee.  The Steering Committee will be primarily
responsible for activities relating to implementation of the activities
contemplated by this Agreement.  The
Steering Committee shall, subject to the provisions set forth in this Agreement
(including the dispute resolution procedures hereof), be the primary vehicle
for interaction between the Parties with respect to the Development and
commercialization of the Licensed Product in the Territory.  In particular, the Steering Committee shall
perform the following functions:

 

10

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

(a)                                  exchange
of information and facilitation of cooperation and coordination between the
Parties as they exercise their respective rights and meet their respective
obligations under this Agreement;

 

(b)                                 perform
such other functions as appropriate to further the purposes of this Agreement,
as determined by the mutual agreement of the Parties;

 

(c)                                  with
the exception of the Approval application that Cellegy has already submitted in
Sweden, prior to submitting any Approval application, the Steering Committee
shall discuss the scope and content of such Approval application.  The Steering Committee may review and
comment on all Approval applications, and such comments will be considered by
the Parties as long as such comments are provided in a timely manner. In the
event of a dispute within the Steering Committee or between the Parties
directly or indirectly relating to the choice of countries within the Territory
where Approval applications shall be filed and Approvals shall be obtained then clause 4.3 shall not
apply. Licensee shall have final decision-making authority with respect
to such Approval application issues; however, any such decisions shall be based
on Licensee’s good faith belief that such decision is consistent with
commercialization requirements of the Territory; and

 

(iv)                              In
the event that the Current SmPC requires substantial and significant changes as
described in Section 11.4(b), then the Steering Committee shall review the
timetable and the Approval Plan, and if it so determines to revise and modify
such timetable and Approval Plan, then the time periods for obtaining Approvals
(as set out in Section 5.1(b)) and consequently commercializing the
Licensed Product (as set out in Sections 10.3(i) and (ii)) shall be extended by
the amount of time determined by the Steering Committee.

 

(v)                                 at
the end of [*] review and attempt to agree on the Minimum Sales for [*].

 

4.3                                 Voting; Deadlocks.  Each member of the Steering Committee shall
have one vote, and all the decisions of the Steering Committee shall be made by
a simple majority of the members of such committee; provided, however,
that in the event the members of the Steering Committee are deadlocked and
cannot reach a decision within three (3) days after notice of a deadlock with
regard to any decision required to be made by such committee (each, a “Dispute”), then the
Dispute shall be referred to the Chief Executive Officer of each Party.. If
such Dispute is not resolved by the Chief Executive Officers within five (5)
working days of such referral, then (i) Cellegy’s Chief Executive Officer (or
such other officer as Cellegy determines) will have the authority to cast the
tie-breaking vote with regard to such Dispute if, and only if, the Dispute
relates to clinical studies or trials where, in Cellegy’s good faith opinion,
the conduct or results of the studies or activities could have a detrimental
effect on the commercial viability of the Licensed Product outside of the
Territory, and (ii) for other kinds of Disputes, if the Chief Executive
Officers cannot agree within such time period, then the Dispute shall be
resolved by means of the dispute resolution procedures set forth in
Section 18.14 of this Agreement.

 

11

 

4.4                                 Approval Plan; Marketing Plan.  The overall timetable
to obtain Approvals for the Licensed Product in the Territory shall be set
forth in a written plan (the “Approval Plan”). 
In addition, Licensee shall prepare a marketing plan, including details
of promotional effort, size of sales force, associated budget in connection
with the promotion, marketing and distribution of the Licensed Product in the
Major European Countries (the “Marketing Plan”).  The initial Marketing Plan for Sweden shall be submitted no later
than six (6) weeks after the Effective Date of this Agreement.  The initial Marketing Plans for the Major
European Countries shall be submitted no later than three (3) months after the
Effective Date of this Agreement, and the initial Marketing Plans for the other
countries in the Territory shall be submitted no later than one (1) year after
the Effective Date of this Agreement. 
Such initial Marketing Plans shall be subject to review and approval by
Cellegy, such approval not to be unreasonably withheld or delayed.  The Marketing Plans shall be consistent in
all material respects with the provisions of this Agreement.  Subsequent revisions and updates to the
Marketing Plan shall be delivered annually and no later than the end of the
first week in January (or, if Licensee makes interim revisions or updates,
then as soon as reasonably practicable after Licensee prepares such revisions
or updates).

 

ARTICLE 5

REGULATORY MATTERS; APPROVALS

 

5.1                                 Regulatory Matters; Approvals.

 

(a)                                  Licensee
shall use Commercially Reasonable and Diligent Efforts, subject to this
Agreement, and with the exception of the Approval application that Cellegy has
already submitted in Sweden, to obtain at its sole expense obtain all Approvals
that are necessary for the sale of the Licensed Product within the Territory
including without limitation: any additional clinical trials, studies or data
in addition to the Cellegy Information that may be required in order to obtain
or maintain Approvals for Licensed Product in each country in the Territory,
and comply with any and all applicable statutory, administrative or regulatory
requirements of the Territory or any governmental or political subdivisions
thereof (collectively, “Laws”)
in relation to the importation, storage, Development promotion, marketing,
distribution or sale of the Licensed Product in the Territory under this
Agreement, including, without limitation, Licensed Product documentation such
as Licensed Product tracking, samples, Licensed Product complaints, adverse
event reporting requirements, post-marketing surveillance activities, and
documentation of recalls, which documentation shall be maintained by the
Licensee for the period required by the Relevant Regulatory Authorities in the
Territory notwithstanding termination or expiration of this Agreement, any
Licensed Product registrations with any government agency or health authority,
or any registration, approvals, or filing of this Agreement.  Licensee shall inform Cellegy on at least a
semi-annual basis (and more frequently if Cellegy so reasonably requests) about
the progress of such registration work, and will promptly provide Cellegy with
a copy of all presentations and documents submitted by Licensee to any Relevant
Regulatory Authority with respect to the Licensed Product. Cellegy shall do all
that is necessary to assign the Approval in Sweden to Licensee, including
notifying the Swedish Relevant Regulatory Authority of such a change.  Cellegy shall, upon Licensee’s written
request, provide reasonable assistance to Licensee, at Licensee’s sole cost,
regarding obtaining such

 

12

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

Approvals in the Territory, including allowing Licensee reasonable
access to relevant experts in relation to the Cellegy Information for the
purpose of obtaining Approvals.

 

(b)                                 Licensee
agrees that it will make all filings that are required to seek and obtain
Approvals for the Licensed Product in each Major European Country by initiating
the M.R.P. no later than [*] after the date on which Licensee is assigned the
Approval of the Licensed Product from the Relevant Regulatory Authority in
Sweden provided that the dossier used in Sweden is acceptable for use in an
M.R.P application.  If the Relevant
Regulatory Authority in a country other than Sweden determines that such
dossier is not complete or acceptable for the initiation of an M.R.P.
application in such country, then the Steering Committee shall promptly meet
and attempt to agree on an appropriate course of action, and recommend an
appropriate modification to the above deadline as applied to such country.  Licensee agrees that it will make all
filings that are required to seek and obtain Approvals for the Licensed Product
in other countries in the Territory no later than [*] after the completion of
the M.R.P. and to use Commercially Reasonable and Diligent Efforts to take such
actions as may be required to promptly obtain Approvals in all of the foregoing
countries.  If Licensee desires to not
seek Approvals in one or more countries in the Territory because Licensee
concludes in good faith that for regulatory or marketing reasons it would not
be in the parties’ best interests to pursue Approvals in such countries, it
shall notify the Steering Committee and the Steering Committee shall decide
whether Approvals will be sought in such country or countries.  If alteration by Cellegy of the Cellegy
Information after the date of this Agreement requires additional time to submit
or revise regulatory filings relating to Approvals, then the time periods set
forth above for making filings and obtaining Approvals shall be extended by the
additional period of time required to submit or revise such filings.

 

(c)                                  With
the exception of the Approval application that Cellegy has already submitted in
Sweden and such other materials as Cellegy in its discretion may provide to
Licensee pursuant to this Agreement, Licensee shall pay all costs in connection
with the filing, prosecution, meetings, communications, and review by Relevant
Regulatory Authorities of Approval applications and Approvals relating to the
Licensed Product in the Territory and complying with applicable laws and
regulations.

 

5.2                                 Reversion
of Product Rights in Certain Circumstances.  If further clinical development is required
for Approval in a given country (or countries) within the Territory and
Licensee elects not to conduct any required clinical studies within twenty-four
(24) months after the need for further clinical studies is identified, then the
rights in the Licensed Product in any such country shall revert to Cellegy at
no further cost to Licensee.

 

5.3                                 Cooperation
Regarding Material Events.  Each Party will immediately notify the other
Party of any material events relating to the Development of the Licensed
Product in the Territory, including, without limitation, any material comments
or concerns raised by any Relevant Regulatory Authority.

 

5.4                                 Copies of Documents.  Each Party agrees to provide to the other
Party a copy of (i) any documents or reports relating to the Licensed Product
that are filed with any Relevant Regulatory Authority in the Territory under
this Agreement, including any Approval

 

13

 

applications; and  (ii) all data,
database information and safety reports from clinical trials conducted by or on
behalf of Licensee.  In particular,
Licensee acknowledges that Cellegy has provided to Licensee a copy of the
dossier concerning the Licensed Product filed in Sweden.  All such documents and reports shall be
centralized and held at Licensee or by a Third Party selected by Licensee and
agreed to by Cellegy, provided however, that Cellegy shall be entitled to
obtain and keep copies of any such documents and records but only for the uses
specifically set forth in this Agreement.

 

5.5                                 Approval Application in Sweden.  Cellegy
agrees to continue the ongoing Approval process in Sweden; provided, however,
that the foregoing shall not obligate Cellegy to conduct any additional studies
or trials.  Cellegy shall provide
Licensee with a copy of such other reports, analysis and clinical data relating
to the Licensed Product in a timely manner as Cellegy may from time to time
develop before the date that all required Approvals are obtained.

 

5.6                                 Meetings
With Regulatory Authorities.  Licensee
shall be responsible for conducting all meetings and discussions and routine
telephone communications with any Relevant Regulatory Authority, related to
clinical studies, Approval applications and Approvals for the Licensed Product
in the Territory; provided that Licensee shall use Commercially Reasonable and
Diligent Efforts to conduct such meetings and discussions to facilitate the
Approval of the Licensed Product in the Territory.  Licensee will inform Cellegy and the Steering Committee early in
advance of all meetings with such Relevant Regulatory Authorities and will keep
Cellegy and the Steering Committee apprised of all material communications with
such Relevant Regulatory Authorities. 
Cellegy or its designee shall be entitled to attend all meetings with
Relevant Regulatory Authorities. If appropriate Cellegy, or Cellegy’s designee,
will provide reasonable assistance and technical support for the preparation of
and attendance at any relevant meeting with a Relevant Regulatory Authority.

 

5.7                                 Inspection.  Licensee and Cellegy, and Cellegy shall use
all Commercially Reasonable and Diligent efforts to procure that Manufacturer,
shall cooperate in good faith with respect to the conduct of any inspections by
any Relevant Regulatory Authority of Licensee’s or Manufacturer’s site and
facilities related to the Licensed Product, and each Party shall be given the
opportunity to attend such site inspection and the summary, or wrap up, meeting
related to the Licensed Product with such Relevant Regulatory Authority at the
conclusion of such site inspection.  To
the extent either Party receives written or material oral communication from
any Relevant Regulatory Authority relating to the Licensed Product in the
Territory, the party receiving such communication shall notify the other
parties and provide a copy of any written communication as soon as reasonably
practicable.

 

5.8                                 Clinical Trials.  Licensee shall at its own cost be
responsible for the conduct of all studies and clinical trials that may be
necessary or appropriate to obtain all required Approvals (excluding Sweden)
and any post-Approval Clinical Trials and for the grant of all necessary
approvals and maintaining in effect all appropriate policies of insurance for
clinical trials for the Licensed Product in the Territory.  All clinical trials for the Licensed Product
in the Territory that are initiated after the date of this Agreement shall be
performed in compliance with and in conformity to ICH and E.U. good clinical
practice guidelines.  Licensee shall
provide Cellegy with the study plans and/or protocols relating to any such
clinical trial before the trial is started,

 

14

 

and Cellegy shall have the right to review and comment on such trial
plans or protocols.  At the completion
of each clinical trial initiated after the Effective Date of this Agreement,
Licensee shall prepare a written report, in compliance with the relevant ICH
guidelines summarizing the results of such clinical trial, and containing an
analysis of the clinical significance of such results, which reports shall be
submitted to Cellegy as soon as is reasonably practicable after completion of
the relevant clinical trial.  Cellegy
will use Commercially Reasonable and Diligent Efforts to provide the clinical
supplies of the Licensed Product that Licensee may reasonably request, at
Licensee’s expense at a purchase price to Licensee determined on a pass-through
cost basis based on Cellegy’s manufacturing cost per unit.  Cellegy may enter into one or more
manufacturing and supply agreement(s) (or similar arrangements) with Third
Party contract manufacturer(s) for such clinical supplies, and such agreements
or arrangements shall provide for reasonable rights of access by Licensee’s
quality representatives to inspect the premises of such manufacturer(s)
relating to such pharmacovigilence and quality issues as Licensee reasonably
considers appropriate.

 

5.9                                 Cellegy Obligations.  Promptly following entering into this
Agreement Cellegy shall:

 

(a)                                  provide Licensee with a
complete copy of the Cellegy Information;

 

(b)                                 provide
Licensee with any information in its possession that is reasonably likely to
jeopardize or otherwise have a material adverse impact on the application, or
any grant, maintenance, variation or renewal of the Approvals;

 

(c)                                  except
as provided in Section 5.8 above, at its cost promptly provide to Licensee
a sufficient quantity of the Licensed Product reasonably necessary for Licensee
to prepare and submit the application, and the grant, maintenance, variation or
renewal of Approvals;

 

(d)                                 use
Commercially Reasonable and Diligent Efforts to assist Licensee and to procure
the assistance of any third party supplier of raw materials to Cellegy, in
meeting the demands of the Relevant Regulatory Authority relating to any
application and any grant, maintenance, variation or renewal of Approvals;

 

(e)                                  procure
that the Manufacturer enters into the Technical Agreement with Cellegy; and

 

(f)                                    notify
Licensee and promptly provide all relevant assistance and supporting
documentation to Licensee, should Cellegy make any alteration to the Licensed
Product, or the manufacture, or packing of the Licensed Product that needs to
be notified to a Relevant Regulatory Authority.

 

5.10                           Approvals.

 

(a)                                  All
Approvals by any Relevant Regulatory Authority which are necessary to sell the
Licensed Product within the Territory shall be issued to, and held in the name
of Licensee for the benefit of Cellegy; provided, however, that all such
Approvals shall constitute the sole property of Cellegy.

 

15

 

(b)                                 Licensee
shall promptly provide to Cellegy, upon Cellegy’s request, such evidence that
Cellegy shall reasonably require, confirming that all Approvals necessary to
import, store, Develop, promote, market, distribute and sell the Licensed
Product in the Territory have been obtained.

 

(c)                                  Cellegy
hereby acknowledges that, except as may otherwise be required by law, Licensee
has no obligation to verify the Cellegy Information.

 

ARTICLE 6

POST- APPROVAL RESPONSIBILITIES

 

6.1                                 Responsibility.  Each Party acknowledges that Licensee or the
Affiliate or Sublicensee named by Licensee as the holder of the Approvals bears
the ultimate responsibility vis-à-vis the Relevant Regulatory
Authorities for complying with the regulatory requirements applicable to the
manufacture, importation, storage, Development, promotion, marketing,
distribution and sale of the Licensed Product in the Territory provided that
Cellegy represents and warrants that it shall bear the responsibility vis-à-vis
Licensee and/or the Affiliate and/or the Sublicensee named by Licensee as the
holder of the Approvals for complying with the regulatory requirements
applicable to the manufacture and storage (until such time as the Licensed
Product is delivered to Licensee or such Affiliate or Sublicensee) of the
Licensed Product in the Territory.

 

6.2                                 Collaboration.  The Parties shall collaborate with each
other and each Party agrees to provide the other Party with any reasonable
assistance it may require to ensure compliance with the Approvals.

 

6.3                                 Insurance.  To the extent commercially available, both
Parties shall maintain in full force and effect for the term of this Agreement
and for five (5) years thereafter product liability insurance and property
damage insurance on its operations naming the other Party as an additional
insured, with terms reasonably satisfactory to the other Party.  The amount and extent of coverage of the
insurance required hereunder, if any, shall be not less than a single limit
liability of not less than U.S. $5 million in one claim and in the aggregate,
and each Party shall furnish to the other Party copies of policies of insurance
or certificates evidencing the existence and amounts of such insurance within
thirty (30) days of the other Party’s request for such copies.  Each Party shall provide the other Party
with written notice of any cancellation of any insurance hereunder at least
thirty (30) days prior to such cancellation. 
Cellegy shall use all Commercially Reasonable and Diligent efforts to
notify Licensee of the relevant insurance policies maintained by any
Manufacturer of raw materials used in the manufacture of the Licensed Product,
to the extent such information is available.

 

ARTICLE 7

INFORMATION; DATA; PHARMACOVIGILENCE

 

7.1                                 Clinical Data.  All
clinical data and reports related to clinical trials for the Licensed Product
in the Territory shall be owned by the Party funding such clinical trial(s).

 

16

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

Other than to a Sublicensee in connection with the transactions
contemplated by this Agreement, Licensee shall not sell, disclose to or share
with any Third Party, or grant any Third Party right to use, any clinical data
arising owned by Licensee as a result of the preceding sentence.  Each Party shall have access to, and copies
of, all such data and reports related to clinical trials for the Licensed
Product in the Territory, and each Party may use such data without any
additional payments to the other Party. 
Each Party shall treat such data and reports as Confidential Information
of the other Party, and neither Party shall disclose or use such data or
reports for any purpose other than performing its obligations under this
Agreement or as otherwise expressly authorized in writing by the Steering
Committee, and except for such disclosures as a Party reasonably believes is
required by securities or regulatory laws or regulations.    If a Party itself obtains data from a
clinical trial hereunder, it shall promptly transfer all of the clean, final
data for such trial to Licensee or to such Third Party, as the case may
be.  The Steering Committee shall
coordinate the transfers of any such data.

 

7.2                                 Safety Data Base.  The
Parties will, as soon as practical, organize a serious adverse event data base
(the “SAE Data Base”).  Cellegy and Licensee shall jointly own the
SAE Data Base and all data contained therein, and the data from the SAE Data
Base shall be made available to both Parties. 
Licensee shall be responsible for, and bear the costs of, data for the
SAE Data Base related to the Territory. 
Cellegy shall be responsible for, and bear the costs of, data for the
SAE Data Base related to territories outside the Territory. The provisions
governing the management of such SAE Data Base shall be detailed in the Technical
Agreement.

 

7.3                                 Adverse Events.  The Parties recognize that as the holder of
the Approvals, Licensee will be required to submit information and file reports
to various governmental agencies on compounds under clinical investigation,
compounds proposed for marketing, or marketed drugs.  The process and responsibilities for such reports will be
governed by the Adverse Event Reporting Addendum separately agreed to by the
Parties.

 

7.4                                 Product Complaints.  Each Party will maintain a record of all
non-medical and medical Licensed Product-related complaints and will notify the
other Party of any complaint in a sufficient time to allow the other Party to
comply with any regulatory requirements it may have with respect to such
complaint.The details and responsibilities governing the management of such
Licensed Product-related complaints shall be detailed in the Technical
Agreement.

 

ARTICLE 8

MILESTONE PAYMENTS; ROYALTIES AND RELATED PAYMENTS

 

8.1                                 Milestone Payments.  Licensee shall pay Cellegy a milestone payment
in the particular amounts specified below:

 

(a)                                  Five Hundred Thousand
Dollars ($500,000) within five (5) business days after the date this Agreement
is executed and delivered by both parties hereto.

 

(b)                                 With
respect to [*], the amounts set forth below, payable on the earlier to occur of
[i] [*], or (ii) [*]:

 

17

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

[*]

8.2                                 [*]

 

(a) [*]

 

(b) [*]

 

(c) [*]

 

(d) [*]

 

8.3                                 Fee Conditions.  Each and every payment
made under this Article shall be independent,  non-refundable, and shall not be considered an advance or credit
on any royalties or other obligation received or owed.

 

8.4                                 Royalties in General.  In consideration of the exclusive license
granted to Licensee hereunder, Licensee shall pay or cause to be paid to
Cellegy the Royalty set forth herein. 
The “Royalty”
shall be equal to the following amounts:

 

(a)                                  For
aggregate, annual Net Sales of the Product in the Territory up to [*] Million
Euros [*], the Royalty shall be equal to [*] Percent [*]of Net Sales.

 

(b)                                 For
aggregate, annual Net Sales of the Licensed Product in the Territory in excess
of [*] Million Euros [*], the Royalty shall be equal to [*] Percent [*] of Net
Sales.  (For example, Net Sales of [*]
would accrue Royalties equal to [*] of [*] and [*] of [*], which is equal to
[*].)

 

8.5                                 Period
for Royalty Payments; Residual Payments.  Royalty payments will continue as set forth
above, on a country by country basis, until the later of (i) ten years from the
Launch Date for the Licensed Product in such country, or (ii) expiration, lapse
or invalidation by a final, non appealable order or judgment of a court or
other governmental authority of competent jurisdiction, of the last valid claim
included within any of the Cellegy Patents covering such country in the
Territory relating to the Licensed Product. 
Thereafter, following the period of time described in the preceding
sentence, Licensee will pay Cellegy a [*] royalty with respect to Net Sales in
such country for ongoing use of Cellegy’s trademark TostrexTM and know-how
relating to the Licensed Product.

 

ARTICLE 9

ROYALTY REPORTS AND ACCOUNTING

 

9.1                                 Quarterly
Royalty Reports; Records.  During the term of this Agreement after the
first Launch Date,  Licensee shall
furnish or cause to be furnished to Cellegy a written report within sixty (60)
days following the end of each preceding calendar quarter (the “Royalty Report”)
covering such preceding calendar quarter (the “Royalty Period”) showing:

 

18

 

(a)                                  the Net Sales of the
Licensed Product in each country of the Territory during the royalty period;

 

(b)                                 the Royalties, payable
in Dollars, which shall have accrued hereunder in respect to such
Net Sales; and

 

(c)                                  the exchange rates
used in determining the amount of Dollars, using the exchange rates normally
used by Licensee in its management and financial reporting, provided, however,
that the exchange rates used by Licensee in preparation of the Royalty Report
shall not be materially different from the exchange rates posted in the London edition of the Financial Times published on the last day
of such Royalty Period.

 

With respect to sales of Licensed Product invoiced in Dollars, the Net
Sales and royalty payable shall be expressed in Dollars.  With respect to sales of Licensed Product
invoiced in a currency other than Dollars, the Net Sales and royalty payable
shall be expressed in the domestic currency of the country where such sale was
made together with the Dollar equivalent of the royalty payable, calculated
using the exchange rates as described in clause (c) above.  Licensee, and its Affiliates and
Sublicensees shall keep contemporaneous, legible, verifiable and accurate
records in sufficient detail to enable the royalties payable hereunder to be
determined and substantiated.  A final
Royalty Report shall be due upon the expiration or termination of this
Agreement.  Any income or other tax
which Licensee is requested to pay or withhold on behalf of Cellegy with
respect to any upfront or milestone payment and Royalties shall be deducted
from the amount of such upfront and milestone payments and Royalties due,
provided, however, that in regard to any such deduction Licensee shall give
Cellegy such assistance as may reasonably be necessary to enable or assist
Cellegy to claim appropriate tax credits or exemptions therefrom and shall upon
request give Cellegy proper evidence from time to time as to the withholding
and payment of the tax.  If Cellegy is
unable to claim such an exemption or recover such amounts that have been
deducted or withheld, or if any restrictions are imposed by a governmental
entity in a particular country in the Territory regarding the payment of
milestones or Royalties to companies outside of such countries, then the
Steering Committee shall promptly meet to agree upon a suitable response.  If the Steering Committee is unable to agree
on a suitable response, then Cellegy may, in its discretion, discontinue the
supply of the Licensed Product to Licensee for sale in such country.

 

9.2                                 Payment Due Dates.  Royalties shown to have accrued by each
Royalty Report provided for hereunder shall be due and payable on the date such
Royalty Report is due.  Payment of
royalties in whole or in part may be made in advance of such due date.  All royalty and other payments due to
Cellegy hereunder, shall be made in Dollars, delivered to the account(s)
specified by Cellegy from time to time.

 

9.3                                 Right to Audit Licensee.

 

(a)                                  Upon
the written request of Cellegy, at Cellegy’s expense and not more than once in
each year, Licensee and its Affiliates shall permit an independent public
accountant and auditor bound to strict secrecy (the “Auditor”), selected
by Cellegy to have access during normal business hours to those records of
Licensee and its Affiliates as may be reasonably

 

19

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

necessary to verify the accuracy of the Royalty Reports furnished by
Licensee hereunder in respect of any year ending not more than twenty four (24)
months prior to the date of such request. 
Cellegy acknowledges that the Auditor shall conduct its audit in such a
manner so as to not unreasonably interfere with Licensee’s, its Affiliates’, or
Sublicensees’ business.

 

(b)                                 Licensee shall include
in each written sublicense granted by it pursuant to this Agreement a provision
requiring the Sublicensee to keep and maintain records of sales made pursuant
to such Sublicense and to grant access to such records by Cellegy’s independent
accountant bound to strict secrecy subject to the same terms and conditions as
stated herein.

 

(c)                                  If the Auditor’s
report shows any underpayment of royalties, Licensee shall remit, or shall
cause its Affiliates or Sublicensees to remit, to Cellegy the amount of such
underpayment within thirty (30) days after Licensee’s receipt of the Auditor’s
report assuming there is no disagreement as to the Auditor’s calculation; if
there is such a disagreement, the result shall be resolved under
Section 18.14 of this Agreement. 
In the event that the amount of any underpayment of royalties is in
excess of five percent (5%) of the total royalties due to Cellegy with respect
to the period covered by the Auditor’s report, Licensee shall reimburse Cellegy
for the reasonable cost of the audit in which the underpayment was
discovered.  In addition, in the event
that the amount of any underpayment of royalties is in excess of ten percent
(10%) of the total royalties due to Cellegy with respect to the period covered
by the Auditor’s report, Licensee shall reimburse Cellegy for the reasonable
cost of the next subsequent audit.

 

9.4                                 Right to Audit Cellegy.  Upon the written request of Licensee, at
Licensee’s expense and not more than once in each year, Cellegy and its
Affiliates shall permit Auditor selected by Licensee to have access during
normal business hours to those records of Cellegy as may be reasonably
necessary to verify the accuracy of the Burdened Costs furnished by Cellegy
hereunder in respect of any year ending not more than twenty four (24) months
prior to the date of such request. 
Licensee acknowledges that the Auditor shall conduct its audit in such a
manner so as to not unreasonably interfere with Cellegy’s or its Affiliates’
business.

 

9.5                                 Overpayment
or Underpayment of Burdened Costs.  If the Auditor’s report shows any
overpayments of Burdened Costs, Cellegy shall remit to Licensee the amount of
such overpayment within thirty (30) days after Cellegy’s receipt of the
Auditor’s report.  In the event that the
amount of any overpayment is in excess of [*] percent [*] of the total Burdened
Costs paid to Cellegy with respect to the period covered by the Auditor’s
report, Cellegy shall reimburse Licensee for the reasonable cost of the audit
in which the overpayment was discovered. 
In addition, in the event that the amount of any overpayment of Burdened
Costs is in excess of [*] percent [*] of the total “Burdened Costs” due to Cellegy
with respect to the period covered by the Auditor’s Report, Cellegy shall
reimburse Licensee for the cost of the next subsequent audit.

 

9.6                                 Disagreement
with Auditor Findings.  If either Party disagrees with the determination made above by
the Auditor and such disagreement over the amount in question is in excess of
[*] then the Party who disagrees with such amount shall (i) provide written
notice to the other Party within thirty (30) days (iii) discuss such
disagreement with the other Party; and (iii) reserve all rights under
Section 18.14  and Article 16
of this Agreement.

 

20

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

ARTICLE 10

MARKETING

 

10.1                           General
Promotional Duties.

 

(a)                                  Licensee
shall:  (i) at all times display,
demonstrate and otherwise represent the Licensed Product fairly in comparison
with other competitive products or therapies, (ii) shall not make false or
misleading representations to customers or other persons with regard to the
Licensed Product or Cellegy, and (iii) subject to sub-clause (ii), shall not
make any representations with respect to the specifications, features or capabilities
of the Licensed Product which are not consistent with the relevant
Approvals.  Licensee, its Affiliates and
Sublicensees shall promote, market and sell the Licensed Product only for the
therapeutic indications for which Approvals are granted in the Territory.

 

10.2                           Marketing
Effort; Minimum Expenditures for Commercialization.

 

(a)                                  Licensee
agrees to exert its Commercially Reasonable and Diligent Efforts to introduce,
promote and, sell the Licensed Product within the Territory, including, without
limitation, the attainment of the Minimum Sales, and to commence sales of the
Licensed Product in all Major European Countries within [*] months following
Approval in such countries, subject to Section 10.3 below.

 

(b)                                 Licensee
shall detail commercialization expenditures relating to the Development and
marketing of the Licensed Product in the Territory in the Marketing Report as
described at Section 4.4 of this Agreement.

 

10.3                           Licensee’s
Failure to Commercialize in the Territory.

 

(a)                                  If
Licensee fails to make commercial sales of the Product in a particular country
within the Territory within (i) [*] in Major European Countries, and (ii) [*]
for other countries in the Territory, after Approval has been obtained
(including price reimbursement approval where applicable) for commercial sale
in such country, other than failures caused by (i) the Relevant Regulatory
Authority approving a minimum reimbursement price for sale of the Product in
such country that does not permit the Licensed Product to be economically sold
in such country; or (ii) Cellegy’s inability to supply Licensed Product in a
timely manner, or (iii) Cellegy’s material breach of any relevant obligation
under this Agreement; (iv) health or safety reasons relating to the Licensed
Product, or (v) the assertion of a proceeding or lawsuit brought against
Licensee by any Third Party that the Intellectual Property Rights infringe such
Third Party’s patent, trade mark, protected know-how or other intellectual
property right that prevents sales of the Licensed Product in a particular
country of the Territory, then Cellegy may, upon notice to Licensee, terminate
all of Licensee’s rights under this Agreement with respect to the Licensed
Product in such country and recapture all rights granted to Licensee with respect
to the Licensed Product in such country hereunder.  In the event that rights to the Licensed Product are returned to
Cellegy due to a failure to launch within a particular country within the time
frames specified above, a minimum royalty for [*] will be due with respect to
the Major European Countries, and a minimum royalty for [*] will be due in any
other country in the Territory.

 

21

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

Should price reimbursement approval for the Licensed Product not be
achieved in any country of the Territory the Parties shall meet to discuss how
to proceed.

 

(b)                                 If
Licensee decides in good faith for commercial reasons not to file an
application for Approval in a particular country within the Territory or to
pursue commercial launch in that country following Approval, it shall notify
Cellegy and the Parties shall discuss in good faith the termination of the
license granted in Section 2.1 and the return of all rights to the
Licensed Product to Cellegy within such country.

 

10.4                           Minimum Sales.

 

(a)                                  Exhibit
C hereto sets forth certain targets for the agreed minimum unit sales of
Licensed Product in the Territory (“Minimum Sales”) for a period of [*].  In the event that all Approvals pursuant to
the MRP are not obtained within [*] following the Launch Date in the first
country of the Territory the Parties shall meet to discuss the Minimum Sales
accordingly.

 

(b)                                 If
Licensee fails to achieve the Minimum Sales in a given year then Licensee shall
pay to Cellegy the Royalties that would have been due to Cellegy had the
Minimum Sales for that particular year been achieved, such shortfall in the
Royalties to be paid within sixty (60) days following the end of the relevant
year.  For the avoidance of doubt this
shall be Cellegy’s sole remedy for Licensee’s failure to achieve the Minimum
Sales in any year, except as provided in paragraph (d) below.  However in the event Licensee fails to pay
the relevant shortfall within sixty (60) days following the end of the relevant
year this shall constitute material breach and Cellegy shall be entitled to
terminate this Agreement in accordance with Section 16.2(c).

 

(c)                                  The
Minimum Sales amounts set forth on Exhibit C are subject to review and revision
as described in Section 11.4 below.

 

(d)                                 At
any time commencing with “Year 3” Minimum Sales as set forth on Exhibit C, if
Licensee fails to achieve, in any particular country, the annual Minimum Sales
amounts for such country as set forth on Exhibit C for any [*] consecutive
years, and if the Relevant Regulatory Authority for such country has not
required any substantial and significant changes to the Current SmPC that can
reasonably be expected to materially and adversely affect Licensee’s
competitive position and ability to market and sell the Licensed Product in
such country, then if the Steering Committee cannot agree (without the
occurrence of a deadlock) on mutually satisfactory modifications to the Minimum
Sales amounts for such country, then Cellegy may, at its option, make the
exclusive license granted pursuant to Sections 2.1 and 2.2 herein a
nonexclusive license for the remainder of the term of this Agreement as it
relates to such country in the Territory, except for the right to use Cellegy
Marks granted to Licensee hereunder, which shall continue to be exclusive for
Cellegy’s Mark actually being used in connection with the Licensed Product, and
without limiting the above may import, store, Develop, have Developed, promote,
market, distribute, offer for sale, and sell the Licensed Product in such
country on its own or through a Third Party licensee.

 

22

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

ARTICLE 11

MANUFACTURING; SUPPLY OF LICENSED PRODUCT

 

11.1                           Production
and Supply of Product.

 

(a)                                  During the term of this Agreement or
thereafter, Cellegy reserves the right, without obligation or liability to
Licensee, to manufacture, have manufactured, produce, assemble, warehouse or
source the Product at any worldwide location, including Canada or any other
locations outside of the United States of America and locations within or
outside the Territory as long as such site is EU cGMP approved and can
manufacture according to the Approvals. 
The Manufacturer shall not change following Approval without Licensee’s
consent, which consent shall not be unreasonably withheld or delayed, with
Licensee being given no less than [*] notice of any such proposed change.

 

(b)                                  During
the term of this Agreement, Cellegy shall use Commercially Reasonable and
Diligent Efforts to provide an adequate supply of raw materials to Manufacture
in order to fulfill its obligations under this Agreement and supply the
Licensed product to Licensee in accordance with Licensees order.  Cellegy agrees to solicit and to allow
Licensees input and advice on manufacturing issues that may arise from time to
time in relation to the Licensed Product and will not take any intentional
action with regard to the manufacturing of the Licensed Product that will
disadvantage Licensee’s ability to Develop, use, promote, distribute or sell
the Licensed Product in the Territory.

 

(c)                                  Cellegy
shall be solely responsible for conducting, or having conducted, at its own
expense, all manufacturing activities relating to the Licensed Product.  Licensee agrees that, until terminated by
Licensee as set forth herein, Licensee will purchase from Cellegy (and will not
make or have made) all units of the Licensed Product distributed in the
Territory.

 

(d)                                 If
Cellegy is unable to supply any of the Licensed Product ordered by Licensee in
accordance with the terms of this Agreement for two consecutive requested
deliveries, then Licensee may enter into direct arrangements with the
Manufacturer for supply of the Licensed Product, until such time as Cellegy is
able to resume supplying the Licensed Product.

 

11.2                           Forecasts.

 

(a)                                  Licensee
shall, at least 6 (six) months before the Launch Date, provide Cellegy for each
country in the Territory with a first forecast of its estimated requirements
for the Product until the end of the following calendar year.  Such forecast shall set forth the quantity
of Licensed Product that Licensee intends to purchase in the current and the
following calendar year.  Thereafter,
during the term of this Agreement, Licensee shall provide Cellegy with a
quarterly written forecast of its requirements for the Licensed Product for a
rolling twenty four (24) month period, setting forth the quantity of Licensed
Product (including total unit volume, on a country-by-country basis), that
Licensee intends to purchase in the following twenty four (24) month
period.  Each such first quarter
projection in the twenty four (24) month forecast shall constitute a firm
commitment order by Licensee for such quantities of Licensed Product.

 

23

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

(b)                                 The
forecasts are subject to review and revision as described in Section 11.4
below.

 

11.3                           [*]

 

11.4                           Product
Packaging and Labeling; Revisions to Forecasts and Minimum Sales Amounts.

 

(a)                                  Licensee
agrees to provide Cellegy (or, if Cellegy requests, Manufacturer) with all
artwork desired for packaging and labeling of the Licensed Product, and Cellegy
shall, and in the Technical Agreement shall procure the Manufacturer’s
agreement to, pack and label the Licensed Product pursuant to Licensee’s
standard export procedure.

 

(b)                                 Cellegy
has previously delivered to Licensee the currently proposed labeling for the
Licensed Product as of the date of this Agreement, as included in the new drug
application filed with the Relevant Regulatory Authority in Sweden (the “Current SmPC”).  If the Relevant Regulatory Authority in
Sweden, or any other Relevant Regulatory Authority in a country within the
Territory, require substantial and significant changes to the Current SmPC as a
condition of granting Approval in such country, and Licensee in good faith
believes that such changes are reasonably likely to adversely affect the
competitive position for sales of the Licensed Product in such country,
Licensee shall notify Cellegy as promptly as reasonably practicable.  In such event, Licensee may submit
additional data and may negotiate with the Relevant Regulatory Authority in
order to respond to the concerns of such Relevant Regulatory Authority
regarding the Current SmPC and to attempt to improve the labeling.  If the Relevant Regulatory Authority still
requires substantial and significant changes to such labeling that can
reasonably be expected to materially and adversely affect Licensee’s
competitive position and ability to market and sell the Licensed Product in
such country, then the Steering Committee shall promptly meet and attempt to
renegotiate the sales forecasts described in Section 11.2, the Minimum
Sales amounts described in Section 10.4, and the purchase price paid by
Licensee to Cellegy for units of the Licensed Product under Section 11.5,
to take account of the competitive impact on sales of the Licensed Product in
such country resulting from such different labeling requirements.  Failure to achieve mutually agreeable
changes to such amounts shall be resolved through the arbitration procedures
described in Section 18.14.  To the
extent acceptable to the Relevant Regulatory Authorities, package labeling
shall include the phrase “licensed by Cellegy.”  Both parties will cooperate and use Commercially Reasonable and
Diligent efforts with the Relevant Regulatory Authorities to minimize country
specific packaging and labeling requirements.

 

11.5                            Pricing.  In addition to the other payments set forth
above, for so long as Licensee purchases Licensed Product from Cellegy,
Licensee will pay Cellegy the purchase price for Licensed Product as set forth
below.  For each order of Licensed
Product, Licensee will pay Cellegy the Burdened Costs as detailed on the
Burdened Cost Addendum (plus, if applicable, the percentage set forth below)
within forty-five (45) days of the receipt of the invoice for such order such invoice
not to be received before the date of delivery FCA Manufacturer’s premises
(Incoterms 2000).  The purchase price
that License shall pay Cellegy for units of the Licensed Product shall be
determined as follows:

 

24

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

(a)                                  If
the royalty paid to Cellegy for each unit of Licensed Product sold is equal to
or greater than [*], Licensee shall pay Cellegy an FCA delivered manufacturer’s
premises (Incoterms 2000) price (in US dollars) equal to Cellegy’s Burdened
Costs for the manufacturing of the Licensed Product in a 60-gram metered dosing
canister.

 

(b)                                 If
the royalty paid to Cellegy for each unit of Licensed Product sold is between
[*], Licensee shall pay Cellegy an F.C.A. delivered manufacturer’s premises
(Incoterms 2000) price (in US dollars) equal to Cellegy’s Burdened Costs for
the manufacturing of the Licensed Product in a 60-gram metered dosing canister,
plus [*] of the Burdened Costs.

 

(c)                                  If
the royalty paid to Cellegy for each unit of Licensed Product sold is less than
[*], Licensee shall pay Cellegy an F.C.A. delivered manufacturer’s premises
(Incoterms 2000) price (Dollars) equal to Cellegy’s Burdened Costs for the
manufacturing of the Licensed Product in a 60-gram metered dosing canister,
plus [*] of the Burdened Costs.

 

(d)                                  Both
Parties agree to work in mutual cooperation to manage the cost, production, packaging,
delivery and availability of the Licensed Product for sale in the
Territory.  The Parties agree to explore
arrangements for Cellegy to contract with a secondary manufacturer as a back-up
manufacturer of Licensed Product as soon as reasonably possible.  Cellegy agrees to inform Licensee of any
amendments to any Manufacturer contract that may have any material effect on
the purchase price of the Licensed Product.

 

(e)                                  If
the Parties mutually agree in writing to additional package size(s) or to replace
the 60gm metered dosing canister, then the Parties shall in good faith mutually
agree on a pricing formula and purchase prices for such additional or different
package size(s) similar to that established for the 60gm metered dosing
canister, utilizing assumptions similar to those underlying the pricing
determinations set forth above.  If the
Parties are unable to agree, then the dispute shall be resolved by binding
arbitration as provided in this Agreement at Section 18.14.

 

11.6                           Cellegy Report. 
Cellegy agrees to provide an inventory status report on a monthly basis
that details the number of units of the Licensed Product in manufacturing,
finished goods, in-transit and on order.

 

11.7                           Timing of Firm Orders.  Firm orders from Licensee for the Licensed Product
shall be placed at least four (4) months before delivery date by fax or email
indicating the ordered quantities of the Licensed Product, the designated
country, labeling, packaging the desired date and place of delivery.  Licensee and Cellegy will use all
Commercially Reasonable and Diligent Efforts to agree to establish ordering
quantities that will facilitate minimum ordering patterns to suit manufacturing
requirements so that orders are placed in minimum quantities that are set to
match reasonable minimum lots sizes announced by Manufacturer of the Licensed
Product.  An order shall not be
cancelable by Licensee, and if Licensee fails to make purchases provided for in
an order, Licensee shall be responsible for the price of the order except in
the case of Defective Product under Section 11.12.

 

25

11.8                           Delivery.  Licensee shall
promptly provide to Cellegy, upon Cellegy’s request, confirmation that all
Approvals necessary to import and sell the Licensed Product in the Territory
have been obtained. If such evidence is not received by Cellegy upon request,
Cellegy shall be entitled to hold shipment of the Licensed Product until such
evidence is received. Cellegy shall
use Commercially Reasonable and Diligent Efforts to deliver the quantity of the
Licensed Product ordered firm and properly according to this Agreement by
Licensee as far as the ordered quantities comply with the respective forecast
and provided that Cellegy did not reject the respective forecast within one
month after receipt of the respective forecast. However, notwithstanding
anything else in this Agreement, Cellegy shall not be bound to deliver
quantities exceeding twenty-five percent (25%) of the respective forecast for
the second quarter of each projection period, but shall use all Commercially
Reasonable and Diligent Efforts to deliver in the required quantities. The
Licensed Product required to be supplied by Cellegy during a particular month
shall be shipped no later than the last day of that month and in accordance
with a schedule agreed upon in writing between Licensee and Cellegy  In
the event that Cellegy anticipates a forward supply issue and/or experiences a
back order, Cellegy will promptly notify Licensee and provide written notice of
the delay, projected time to remedy the issue and any impact the back order is
expected to have on Cellegy’s ability to maintain adequate supply of the
Licensed Product to meet demand in the Territory.

 

11.9                           Title and Risk of Loss.  All Licensed Product shall be delivered
F.C.A. Manufacturer’s premises (Incoterms 2000). Title to Licensed Product and
all risk of loss shall pass from Cellegy to Licensee at the time and place of
such delivery by Cellegy, notwithstanding that Cellegy may retain rights of
possession or repossession to ensure collection of the purchase price thereof.
Licensee shall be solely responsible for insuring Licensed Product after such
delivery.

 

11.10                     Export Controls.  Cellegy’s obligation to sell and deliver
Licensed Product to Licensee shall be subject in all respects to such laws and
regulations of the United States of America, Canada and the Territory as shall
from time to time govern, respectively, the sale and delivery of goods abroad
by persons subject to the jurisdiction of the United States of America and
Canada and the sale and delivery of goods in the Territory.  Subject to the right of the Licensee to
export, re-export or transship any of the Licensed Product to another country
within the Territory, Licensee shall not directly or indirectly export,
re-export or transship any of the Licensed Product, except as shall be permitted
by the laws and regulations of the United States of America, Canada and the
Territory in effect from time to time. 
Upon the reasonable request by Cellegy, Licensee shall give written
assurances against such export, re-export or transshipment.

 

11.11                     Manufacture
and Supply Warranty.

 

(a)                                  Cellegy
represents and warrants to Licensee that the Licensed Product manufactured and
supplied under this Agreement will upon delivery and for the duration of shelf
life: (1) conform to the approved specifications for the Licensed Product
contained in the relevant Approvals; (2) be manufactured, tested, and (subject
to Licensee’s contributions under 11.4) labeled and packaged in accordance with
the Approvals relating to the manufacture,

 

26

labeling, packaging and
testing of the Licensed Product; and (3) will be manufactured in accordance
with GMP.

 

(b)                                 Warranty
Limitation; Disclaimer.  Except as
expressly set forth in this Agreement, the sole warranty given by Cellegy
regarding any Licensed Product shall be that written limited warranty, if any,
which shall accompany such Licensed Product or which shall otherwise be
designated in writing by Cellegy as applicable to such Licensed Product, as the
same may be revised by Cellegy from time to time. After the initial commercial
launch of the Licensed Product, subsequent changes to the written limited
warranty must be approved by Licensee, which approval shall not be unreasonably
withheld.  THE WRITTEN LIMITED WARRANTY, IF ANY,
APPLICABLE TO ANY PARTICULAR PRODUCT SHALL STATE THE FULL EXTENT OF CELLEGY’S
LIABILITY, WHETHER DIRECT OR INDIRECT, SPECIAL OR CONSEQUENTIAL, RESULTING FROM
ANY BREACH OF SUCH WARRANTY.  EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT WITH RESPECT TO WARRANTIES MADE TO
LICENSEE, CELLEGY FURTHER DISCLAIMS ALL EXPRESS, STATUTORY AND IMPLIED
WARRANTIES APPLICABLE TO THE LICENSED PRODUCT.

 

11.12                     Defective Product.

 

(a)                                  If
Licensee notifies Cellegy within forty-five (45) days of the date of arrival in
the Territory of any shipment of the Licensed Product that Licensee believes
any of the Licensed Product does not conform to the warranties set out in
Section 11.11 as limited by Section 3.1 on QC inspection on arrival
in the Territory (the “Defective Product”) the Parties agree to consult with
each other in order to resolve the issue. If a recall is based upon any
Relevant Regulatory Authority objection or concern, Cellegy will cooperate
fully and expediently to assist Licensee in meeting the objections and concerns
of such Relevant Regulatory Authority.

(b)                                 If
such consultation does not resolve the discrepancy within a further forty-five
(45) days from receipt of the notice, the parties agree to nominate an
independent analyst, acceptable to both parties (the “Independent Analyst”),
that will carry out tests on representative samples taken from such shipment,
and the results of such tests will be binding on the parties.

 

(c)                                  If
the Independent Analyst determines that the Defective Product does not conform
to the warranties set out in Section 11.11 (as limited by
Article 3.1), Cellegy will, at its expense, replace any such Defective
Product and reimburse Licensee for the costs of the Independent Analyst.

 

(d)                                 If
the Independent Analyst determines that the Defective Product does conform to
the warranties set out in Section 11.11 (as limited by Section 3.1),
then Licensee will reimburse Cellegy for the costs of the Independent Analyst.

 

(e)                                  In
the case of Defective Product being supplied to Licensee Cellegy shall use
Commercially Reasonable and Diligent Efforts to ensure that Licensee is
provided with

 

27

 

replacement Licensed
Product to ensure the continued supply of Licensed Product in the Territory.

 

11.13                     Recalls.

 

(a)                                  Subject
to Licensee’s right to initiate a Licensed Product recall pursuant to
subparagraph (c) below, the Parties may by mutual written agreement recall any
quantity of Licensed Product at any time, and Licensee will administer any such
recall in the Territory.

 

(b)                                 If
the Relevant Regulatory Authority requires or otherwise initiates a recall of
the Licensed Product for any reason whatsoever, Licensee will immediately
administer the recall.

 

(c)                                  The
parties may submit a sample of the Licensed Product to an Independent Analyst
for a report.

 

The cost of the
report of the Independent Analyst will be paid by the party against which the
report is unfavorable.

 

(d)                                 If
an Independent Analyst finds that the sole reason for the recall of the
Licensed Product is the action or inaction of Cellegy, then Cellegy will be
liable for the cost of the recall and will reimburse Licensee for all
reasonable costs and expenses of such recall and will provide replacement
quantities of Licensed Product, free of charge.  If an Independent Analyst finds that the sole reason for the
recall of the Licensed Product is the action or inaction of Licensee, then
Licensee will be liable for all such costs and expenses and will reimburse
Cellegy for all reasonable costs and expenses (and the cost of any replacement
quantities of Licensed Product) incurred by Cellegy in connection with such
recall.  If an Independent Analyst finds
that the action or inaction of both Cellegy and Licensee were reasons for the
recall, then Cellegy and Licensee will each be responsible for one-half of such
costs of the recall unless the report of the Independent Analyst allocates
responsibility in a different proportion.

 

ARTICLE 12

PATENT RIGHTS

 

12.1                           No Ownership By Licensee.  Licensee shall not be deemed by anything
contained in this Agreement or done pursuant to it to acquire any right, title
or interest in or to the Cellegy Patent Rights or any patent owned by or
licensed to Cellegy now or hereafter covering or applicable to any Licensed
Product, nor in or to any invention or improvement, owned by Cellegy, now or
hereafter embodied in the Licensed Product, whether or not such invention or
improvement is patentable under the laws of any country.

 

12.2                           New
Cellegy Inventions/Improvements to the Licensed Product.  If Cellegy develops and commercially offers:

 

(a)                                  any
improvements in terms of dosage, route of administration or formulation of the
Licensed Product for the same indication; or

 

28

 

(b)                                 any
improvement in terms of dosage, route of administration or formulation of any
product derived from the Licensed Product for the same indication; then such
improvements shall be included within the definition of Licensed Product herein
at no additional costs to Licensee.

 

12.3                           Improvements by Licensee.  If, during the term of this Agreement or
within one (1) year after the date of its termination, Licensee or any
Sublicensee invents or designs any improved Licensed Product or any associated
method, apparatus, equipment or process related to or having application to the
Licensed Product, or makes an improvement thereon, whether or not patented or
patentable in any jurisdiction, Licensee shall make or cause a prompt and full
disclosure to Cellegy of such invention, design or improvement (“Licensee Improvement”),
and hereby irrevocably transfers, conveys and assigns to Cellegy all of its
right, title and interest therein. 
Licensee shall execute such documents, render such assistance, and take
such other action as Cellegy may reasonably request, at Cellegy’s expense, to
apply for, register, perfect, confirm, and protect Cellegy’s rights therein.
Cellegy shall have the exclusive right to apply for or register any patents or
other proprietary protections with respect thereto.  Such Licensee Improvements shall be licensed back from Cellegy to
Licensee as, and shall be deemed part of, the Licensed Product, at no
additional cost to Licensee.

 

ARTICLE 13

CELLEGY MARKS 

 

13.1                   Use of Cellegy Marks by Licensee.  Licensee, its Affiliates and Sublicensees
will have the exclusive right to use Cellegy’s Mark Tostrex in the Territory in
connection with the importation, storage, Development, promotion, marketing,
distribution and sale of Licensed Product. In such event, Licensee and its Affiliates
(and Sublicensees) shall use Cellegy’s Marks only in the form and manner
prescribed by Cellegy.  In no event
shall Licensee use any of Cellegy’s Marks or any similar mark or term as part
of its business name.  Should Tostrex
not be registered or registerable by Cellegy in all countries of the Territory,
then Cellegy may notify Licensee that one of the other “Cellegy’s Marks” will
be used; and if no such marks are registered or registerable by Cellegy in all
countries of the Territory, then Licensee may propose an alternative trade
mark/s for Cellegy’s approval, such approval not to be unreasonably withheld or
delayed Cellegy shall apply for and maintain such alternative trade mark at
Cellegy’s sole expense and such alternate trade mark shall become a Cellegy
Mark under the terms of this Agreement.

 

13.2                           Acknowledgment
of Ownership. 
Licensee acknowledges that

 

(a)                                  Cellegy
owns Cellegy’s Marks and all goodwill associated with or symbolized by
Cellegy’s Marks;

 

(b)                                 Licensee
has no ownership right in or to any of Cellegy’s Marks; and

 

(c)                                  Licensee
shall acquire no ownership interest in or to any of Cellegy’s Marks by virtue
of this Agreement.  Licensee shall do
nothing inconsistent with Cellegy’s

 

29

 

ownership of Cellegy’s Marks and related goodwill, shall not directly
or indirectly contest the validity of or Cellegy’s rights in the Cellegy Marks,
and agrees that all use of Cellegy’s Marks by Licensee shall inure to the
benefit of Cellegy.  Nothing in this Agreement
shall be deemed to constitute or result in an assignment of any of Cellegy’s
Marks to Licensee or the creation of any equitable or other interests
therein.  Licensee shall not use any of
Cellegy’s Marks in any manner as a part of its business, corporate or trade
name.

 

13.3                           Marking.  Licensee shall mark all advertising,
promotional or other materials created by it and bearing any of Cellegy’s Marks
(the “Licensee Material”)
with such notices as Cellegy may reasonably require, including, but not limited
to, notices that Cellegy’s Marks are trademarks of Cellegy and are being used
with the permission of Cellegy.

 

13.4                           Registration.  Cellegy shall have the sole right to take
such action as it deems appropriate to obtain trademark registration in the
Territory for any of Cellegy’s Marks. 
If it shall be necessary for Licensee to be the applicant to effect any
such registrations, Licensee shall cooperate with Cellegy to effect any such
registrations, and hereby does assign all of its right, title and interest in
and to each such application, and any resulting registration, to Cellegy, and
shall execute all papers and documents necessary to effectuate or confirm any
such assignment.  Licensee shall perform
all reasonable and necessary acts and execute all necessary documents to affect
the registration of Cellegy’s Marks as Cellegy may request, all at Cellegy’s
sole expense.  Licensee shall not obtain
or attempt to obtain in the Territory, or elsewhere, any right, title or
interest, registration, or otherwise, in or to Cellegy’s Marks, or any of
them.  In the event that any such right,
title or interest should be obtained by Licensee in contravention hereof,
Licensee shall hold the same on behalf of Cellegy and shall transfer the same
to Cellegy upon request and without expense to Cellegy.

 

13.5                           Termination of Use.  Upon expiration or earlier termination of
this Agreement, Licensee shall cease using Cellegy’s Marks in any manner,
either similar or dissimilar to the use enumerated above.

 

13.6                           Trademarks.  Licensee further agrees not to use any
Cellegy marks in connection with any products other than the Licensed
Product.  Licensee also will include the
appropriate trademark notices when referring to any Licensed Product in advertising
and promotional materials.  Licensee
covenants and warrants that Licensee’s use of Cellegy’s Marks or other
trademarks, trade names, logos and designations of Cellegy on any Licensed
Product, Licensed Product packaging or labels, or related materials that
Licensee or its Agents prepare or use will be in accordance with Cellegy’s
reasonable intellectual property policies in effect from time to time,
including but not limited to trademark usage and cooperative advertising
policies.  Licensee agrees not to attach
any additional trademarks, trade names, logos or designations to any Licensed
Product except in compliance with such policies or otherwise with Cellegy’s
prior written consent, which shall not be unreasonably delayed or
withheld.  Licensee will include on each
Licensed Product that it distributes, and on all containers and storage media
therefor, all trademark, copyright and other notices of proprietary rights
included by Cellegy on such Licensed Product. 
Licensee agrees not to alter, erase, deface or overprint any such notice
on anything provided by Cellegy. 
Licensee also will include the appropriate trademark notices when
referring to any Licensed Product in advertising and promotional
materials.  Licensee shall

 

30

 

submit to Cellegy for its prior written approval (which shall not be
unreasonably delayed or withheld) and before any use is made thereof,
representative samples of the initial Licensed Product, packages, containers,
and advertising or promotional materials bearing any of Cellegy’s Marks which
Licensee or its Sublicensees prepare, but need not seek prior approval for
subsequent uses of such materials that are in compliance with Cellegy’s
policies.  Licensee shall also submit to
Cellegy for its prior written approval (which shall not be unreasonably delayed
or withheld) any such materials that may not be consistent with Cellegy’s
intellectual property policies in effect from time to time, and Cellegy shall
use all reasonable efforts to respond promptly to give its approval or indicate
the respects in which changes are required in light of Cellegy’s policies.  Cellegy and Licensee shall cooperate with
each other and use reasonable efforts to protect the Cellegy Marks from
infringement by Third Parties.

 

ARTICLE 14

INFRINGEMENT; INDEMNIFICATION AND OTHER CLAIMS

 

14.1                           Infringement of Intellectual Property Rights.  In the event Cellegy or Licensee have reason to believe that a
Third Party may be infringing or diluting, as the case may be, Intellectual
Property Rights or misappropriating the Licensed Product, such Party shall
promptly notify the other Party. 
Cellegy may, in its discretion, elect to enforce the Intellectual
Property Rights through legal action or otherwise, and Licensee agrees to
reasonably cooperate with Cellegy in such enforcement subject to reimbursement
of its reasonable out-of-pocket expenses together with any reasonable attorneys
fees incurred in connection therewith. 
In the event Cellegy elects not to enforce the Patent Rights relating to
the Licensed Product within sixty (60) days after notice of the possible
infringement or dilution, and Licensee can demonstrate that the potential
infringement or dilution is reasonably likely to result in material lost sales
of the Licensed Product within the applicable country, then Licensee may
institute a lawsuit or other such actions at its expense to prevent
continuation of such potential infringement or dilution, and then (i) during
the pendency of such action, Licensee shall be entitled to defer the payment of
50% of the royalties due to Cellegy on Net Sales under Section 8.4 in the
relevant country or countries, with such deferred amount being paid to Cellegy
at the successful conclusion of such action, and (ii) Licensee will retain all
award, damages or compensation obtained by Licensee in such suit, except that
Cellegy shall receive a portion equivalent to the royalties it would have
received in accordance with the terms of this Agreement as if such amount were
Net Sales of Licensee.  Cellegy will
provide reasonable cooperation with respect to any lawsuit which Licensee may
bring pursuant to this Article, subject to reimbursement of its reasonable
out-of-pocket expenses and reasonable attorneys fees in connection
therewith.  Licensee shall not enter
into any settlement or compromise of any such claim without the prior written
consent of Cellegy, which shall not be unreasonably delayed or withheld.

 

14.2                           Alleged Infringement of Third Party Intellectual
Property Rights. 

 

(a)                                  If a claim or
lawsuit is brought against Licensee alleging infringment of any patent or
infringement or dilution of any trademark owned by a Third Party arising from
Licensee’s importation, storage, Development, promotion, marketing,
distribution and saleof the Licensed Product or use of proprietory rights, Licensee shall
provide to Cellegy all information in Licensee’s possession regarding such
claim or lawsuit. Within a reasonable time after

 

31

 

receiving
notice of such claim or lawsuit, but in any event within sixty (60) days after
receiving such notice, Cellegy shall advise Licensee of Cellegy’s decision as
what action it plans to take to dispose of such claim or defend such
lawsuit.  

 

(b)                                 If Cellegy
elects not to dispose of such claim or defend such lawsuit, Licensee may defend
the claim or lawsuit.  Licensee shall
not enter into any settlement or compromise of any such claim or lawsuit
without the prior written consent of Cellegy, which shall not be unreasonably
delayed or withheld.  For the purpose of
Licensee’s conduct of the claim or defense, Cellegy shall furnish to Licensee
such reasonable assistance as Licensee may need and from time to time
reasonably request.

 

14.3                           Product Liability Claims.  Licensee shall immediately notify Cellegy in
writing of any product liability claim or action brought with respect to the
Licensed Product based on alleged defects in the manufacture or supply of the
Licensed Product or other adverse claim regarding the Licensed Product (a “Product Liability Claim”).
 Upon receiving such written notice,
Cellegy shall assume and have sole control of the defense of any such claim or
action, including the power to conduct and conclude any and all negotiations,
compromises or settlements.  Licensee
shall comply with all reasonable requests from Cellegy for information,
materials or assistance, with respect to the conduct of such defense at
Cellegy’s expense.  Cellegy shall be
responsible for payment of all claims, except those arising from the negligence
or willful default of Licensee, and all legal expenses and costs incurred in
that regard.  Nothing in this
Article shall be construed as requiring Cellegy to conduct and/or assume
Licensee’s independent defense against any claim or action, if such claim or
action involves the independent conduct, acts or omissions of Licensee for
Product Liability Claims or actions brought with respect to design or
manufacturing defects in the Licensed Product.

 

14.4                           Notice from Licensee.  Licensee shall promptly notify Cellegy of
any potential or actual litigation or governmental activity in the Territory
relating to the Licensed Product or the business operations of Licensee or
Cellegy.  Licensee shall provide such
notice within ten (10) days from the time that Licensee learns of such litigation
or activity.

 

14.5                           Indemnification.  

 

(a)                                  Cellegy
assumes all risk of loss and indemnifies and holds harmless Licensee, its
Affiliates, Sublicensees and their respective directors, officers and employees
from and against any and all Loss arising from or incidental to or relating to
any claim, demand, lawsuit, action or proceeding (a “Claim”) arising from
or relating to:

 

(i)                                     any
claim or lawsuit which relates to or arises out of the alleged infringement by
Licensee of any patent or trademark owned by a Third Party to the extent that
the alleged infringement relates to actions covered by the Exclusive License
granted to Licensee under Section 2.1 of this Agreement; 

 

(ii)                                  the
importation, storage, Development, promotion, marketing, distribution or sale of
the Licensed Product based on action or inaction of Cellegy;

 

32

 

(iii)                               a
Product Liability Claim based on action or inaction of Cellegy; or 

 

(iv)                                any negligence or
willful default of Cellegy relating to the Licensed Product or this Agreement;
or any breach by Cellegy of any representation or warranty given in this
Agreement.

 

(b)                                 Licensee
assumes all risk of loss and indemnifies and holds harmless Cellegy from all
Loss arising from or incidental to or relating to any claim, action or
proceeding arising from or relating to:

 

(i)                                       the importation,
storage, Development, promotion, marketing, distribution, or sale, of the
Licensed Product based on action or inaction of Licensee, Affiliates,
Sublicensees or their respective directors, officers and employees (Licensee
and such other Persons sometimes referred to as “Licensee Indemnified Persons”);

 

(ii)                                    any Product
Liability claim based on action or inaction of any Licensee Indemnified Person;

 

(iii)                                 any breach by any
Licensee Indemnified Person of any representation or warranty given in this
Agreement; any negligence or willful default of any Licensee Indemnified Person
relating to the Licensed Product or this Agreement; or

 

(iv)                              any
breach by Licensee of any representation or warranty given in this Agreement.

 

(b)                                 Licensee
shall give Cellegy written notice (a “Notice of Claim”) promptly after Licensee
becomes aware of the assertion, whether orally or in writing, of a Claim
brought by a Third Party (in each such case, a “Third-Party Claim”) that may require
indemnification pursuant to this Agreement. Each Notice of Claim by a party
hereunder will contain the following information:

 

(i)                                     that
the Person has incurred, paid or accrued or, in good faith, believes it will
have to incur, pay or accrue, Losses and, if reasonably determinable at the
time, a good faith estimate of the aggregate amount of Losses arising from such
Claim (which amount may be the amount of damages claimed by a third party in
the Claim); and

 

(ii)                                    A BRIEF
DESCRIPTION, IN REASONABLE DETAIL (TO THE EXTENT REASONABLY AVAILABLE TO THE
PARTY), OF THE FACTS, CIRCUMSTANCES OR EVENTS GIVING RISE TO THE ALLEGED LOSSES
BASED ON THE PARTY’S GOOD FAITH BELIEF THEREOF, INCLUDING THE IDENTITY AND
ADDRESS OF ANY THIRD-PARTY CLAIMANT AND COPIES OF ANY FORMAL DEMAND OR
COMPLAINT, THE AMOUNT OF LOSSES, THE DATE EACH SUCH ITEM WAS INCURRED, PAID OR
ACCRUED, OR THE BASIS FOR SUCH ANTICIPATED LIABILITY, AND THE SPECIFIC NATURE
OF THE BREACH TO WHICH SUCH ITEM IS RELATED.

 

33

 

ARTICLE 15

CONFIDENTIALITY

 

15.1                           Treatment
of Confidential Information.  Except as otherwise provided in this
Article 15, during the term of this Agreement and for a period of five (5)
years thereafter, Licensee and its Affiliates will retain in confidence and use
only for purposes of this Agreement any information, data, and materials
supplied by Cellegy or on behalf of Cellegy to Licensee and its Affiliates
under this Agreement, and Cellegy will retain in confidence and use only for
purposes of this Agreement any information, data, and materials supplied by
Licensee or on behalf of Licensee to Cellegy under this Agreement.  For purposes of this Agreement, all such
information and data which a party is obligated to retain in confidence shall
be called “Confidential
Information.”  For the
avoidance of doubt, Cellegy Information shall constitute Confidential
Information of Cellegy.

 

15.2                           Right to Disclose.  To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement or any rights which survive termination or expiration hereof,
Licensee may disclose Confidential Information to its Affiliates, Sublicensees,
consultants, outside contractors, clinical investigators or other Third Parties
on condition that such entities or persons agree in writing (a) to keep
the Confidential Information confidential for the same time periods and to the
same extent as Licensee is required to keep the Confidential Information
confidential and (b) to use the Confidential Information only for such
purposes as Licensee is entitled to use the Confidential Information.  Each Party or its Affiliates or sublicensees
may disclose such Confidential Information to government or other regulatory
authorities to the extent that such disclosure (i) is reasonably necessary
to obtain Approvals; or (ii) is otherwise legally required.

 

15.3                           Release From Restrictions.  The foregoing obligations in respect of
disclosure and use of Confidential Information shall not apply to any part of
such Confidential Information that the non-disclosing party, or its Affiliates
(all collectively referred to as the “Receiving Party”) can demonstrate by
contemporaneously prepared written evidence: 

 

(a)                                  is
or becomes part of the public domain other than by acts of the Receiving Party
in contravention of this Agreement;

 

(b)                                 is
disclosed to the Receiving Party or its Affiliates or Sublicensees by a Third
Party, provided such Confidential Information was not obtained by such Third
Party directly or indirectly from the other party under this Agreement;

 

(c)                                  prior
to disclosure under this Agreement, was already in the possession of the
Receiving Party or its Affiliates or Sublicensees, provided such Confidential
Information was not obtained, directly or indirectly, from the other party
under this Agreement; or

 

(d)                                 results
from research and development by persons who have not had access to the
disclosures made to Receiving Party under this Agreement, including any
information obtained through the testing, manufacturing regulatory approval, or
distribution of

 

34

 

the Licensed Product, or other activities undertaken in connection with
this Agreement by the Receiving Party.

 

15.4                           Confidentiality of Agreement.  Except as otherwise required by law or the
terms of this Agreement or mutually agreed upon by the Parties, each Party
shall treat as confidential the terms, conditions and existence of this
Agreement, except that each Party may disclose such terms and conditions and
the existence of this Agreement to its Affiliates, sublicensees, and
shareholders to the extent required by the any corporate laws, and provided,
that each Party shall seek confidential treatment of the key business terms
contained in this Agreement, including but not limited to all payments owed
hereunder.  Upon the execution of this
Agreement, the Parties shall draft a joint press release, the text of such shall
be mutually agreeable to each Party, announcing the execution of the
Agreement.  

 

15.5                           Return
of Confidential Information.  Upon termination of this Agreement with
respect to the entire Territory, the Parties and Affiliates and sublicensees
shall return all Confidential Information of the other Party, in their
possession along with a certification that they no longer possess any such
Confidential Information.  

 

15.6                           Previous Confidentiality Agreements.  Confidential information disclosed by either
Party to the other Party or its Affiliates prior to the Effective Date of this
Agreement under any written agreement executed by Cellegy and Licensee shall be
treated as Confidential Information under Section 15.1 notwithstanding
expiration of such prior Confidentiality Agreement.

 

ARTICLE 16

TERM; TERMINATION

 

16.1                           Term.  Unless terminated sooner pursuant to this
Article 16, this Agreement shall become effective as of the Effective Date
and shall continue in full force and effect in each country until the later of
(i) the date of expiration of the last to expire of Licensee’s obligation to
make royalty payments in a particular country, or (ii) ten years from the
Launch Date.  For countries in which
none of Cellegy’s Patents are filed, the Agreement shall terminate upon the
date of the last to expire of Cellegy’s Patents in the last applicable country.
Such termination may be made with respect to one or more countries of the
Territory without affecting the rest of this Agreement or the Exclusive License
granted hereunder in any other country of the Territory.  

 

16.2                           Bilateral Termination Rights.  Either Party may terminate this Agreement in
whole or in part upon the occurrence of any of the following:  

 

(a) The other Party becomes the subject of voluntary bankruptcy or
insolvency case; or

 

(b) The other Party becomes the subject of an involuntary bankruptcy or
insolvency case that is not dismissed within ninety (90) days; or

 

35

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

(c)                                  Upon
or after the material breach of any provision of this Agreement by the other
Party, if such material breach is not cured (if such default is capable of
cure) within thirty (30) days after written notice thereof to the Party in
default.

 

16.3                            Cellegy’s Right to Terminate.

 

Cellegy may terminate this Agreement with immediate effect upon written
notice to Licensee if a Change in Control of Licensee shall occur, PROVIDED
THAT this shall not apply in the case whereby Licensee or its Affiliates
undergoes an initial public offering of its stock on a recognized stock
exchange.  Subject to the aforesaid
provision, for purposes of this Article, a “Change in Control” means (i) any reorganization,
consolidation, merger, tender offer, purchase of stock or similar transaction
or series of related transactions (each, a “combination transaction”) in which
Licensee (or any direct or indirect parent entity of Licensee (a “Parent”)) is a constituent
corporation or is a party if, as a result of such combination transaction, the
voting securities of Licensee (or any Parent) that are outstanding immediately
before the consummation of such combination transaction (other  than
any such securities that are held by an “Acquiring Stockholder”, as defined
below) do not represent, or are not converted into, securities of the surviving
corporation of such combination transaction (or such surviving corporation’s
parent or other Affiliate)  that,
immediately after the consummation of such combination transaction, together
possess at least a majority of the total voting power of all outstanding
securities of such surviving corporation (or its parent or other Affiliate, if
applicable) that are outstanding immediately after the consummation of such
combination transaction, including securities of such surviving corporation (or
its parent or other Affiliate, if applicable) that are held by the Acquiring
Stockholder; or (ii) a sale of all or substantially all of the assets or the
business of the Licensee  (or any
Parent), if, and only if, in each of the above cases, the acquiring entity (or
its parent or other Affiliate) engages in the development, distribution, or
sale of Competing Licensed Products. 
For purposes of this Article, an “Acquiring Stockholder” means a stockholder or
stockholders of the Licensee (or any Parent) that (i) merges or combines with
the Licensee (or any Parent) in such combination transaction or (ii) owns or
controls a majority of another corporation that merges or combines with
the Licensee (or Parent) in such combination transaction.  Licensee agrees to use its Commercially
Reasonable and Diligent Efforts to notify Cellegy at least thirty (30) days before
any such Change in Control.

 

16.4                           Licensee’s Right to Terminate.  Licensee may terminate this Agreement; (i)
immediately on written notice on health or safety grounds in relation to the
Licensed Product; (ii) immediately on written notice if Approval is not
obtained by Cellegy in Sweden; (iii) immediately on written notice if Approvals
is not obtained, through no fault of Licensee, in all Major European Countries
within [*] of MRP being initiated; (iv) on one (1) year’s written notice to
Cellegy should it no longer be economically viable to market the Licensed
Product, based on Licensee’s reasonable opinion and determined on a country by
country basis; or (v) immediately upon written notice if a claim by any Third
Party that the Intellectual Property Rights infringe such Third Party’s patent,
trade mark, protected know-how or other intellectual property right is made
against Licensee and which either (A) prevents use of the Licensed Product in
any country of the Territory for a period of sixty (60) consecutive days, or
(B) is not being challenged by either Party pursuant to Article 14 in
relation to such country.

 

36

 

16.5                           Rights
Upon Termination or Expiration.  Termination of this Agreement shall not
extinguish debts and other obligations created or arising between the Parties
by virtue of contracts or arrangements entered into hereunder before the
effective date of termination of this Agreement (the “Termination Date”).  Without limiting the generality of the
foregoing, upon and following the Termination Date:

 

(a)                                  Licensee
shall not be relieved of its obligation to (i) pay for Licensed Product
delivered by Cellegy prior to the Termination Date, or (ii) accept and pay for
all Licensed Product covered by orders received and accepted by Cellegy prior
to the Termination Date.  Cellegy shall
be obligated to complete all orders received and accepted prior to the
Termination Date, provided that Cellegy receives reasonable assurance of
payment.  In each such case, Licensee
shall be permitted to store, promote, sell and distribute such Licensed Product
as well as any Licensed Product in Licensee’s inventory within the Territory,
subject to the provisions of paragraph (h) below and provided that Licensee
shall not sell or otherwise dispose any of the Licensed Product in bulk, in any
non-customary manner or otherwise circumvent its regular customers.  

 

(b)                                 Licensee
shall cooperate with Cellegy to allow for the orderly transfer of Approvals
within the Territory to Cellegy or its designee upon request and without
expense to Cellegy.  Licensee shall
provide Cellegy with (i) full and immediate access to and copies of all
marketing and sales information and other materials pertaining to the Licensed
Product, including, without limitation, customer lists, past sales history and
Licensed Product pricing information, and (ii) any inventions or other
materials or rights required to be assigned to Cellegy pursuant to this
Agreement.  Notwithstanding any other
term or provision of this Agreement, effective upon the Termination Date,
Licensee shall execute any documents that are necessary to transfer to Cellegy,
or Cellegy’s designee, all Approvals or intellectual property which are then in
the name of and/or held by Licensee and which relate to the marketing or sale
of the Licensed Product (the “Relevant Documents”). 
In the event that full Approvals for any Licensed Product in the
Territory are not completed before any transfer of operations pursuant to this
Article, Licensee shall also transfer to Cellegy or Cellegy’s designee, free of
any charge, the Cellegy Information and all the data submitted to the Relevant
Regulatory Authorities therefor.  At
Cellegy’s request, Licensee shall authorize Cellegy’s nominee, without any
delay, to perform all the required activities in order to obtain the transfer
of such permits and registration rights. 
If Licensee fails to execute the Relevant Documents, it hereby appoints
Cellegy as its agent and authorizes Cellegy to act on its behalf, in order to
execute all Relevant Documents.  Licensee,
its Affiliates and Sublicensees shall terminate any use of the Cellegy Marks
and shall, at Cellegy’s option, either destroy or return to Cellegy at
Licensee’s cost all literature, labels, or other materials, incorporation or
bearing same.

 

(c)                                  Each
party shall cease to use any of the other party’s Confidential Information
relating to or in connection with its continued business operations and shall
promptly return or assign to the other party any and all physical, written and
descriptive matter (including all reproductions and copies thereof) containing
that party’s Confidential Information, provided that each party may:

37

 

(i)                                     provide one copy of the other
party’s Confidential Information to its legal advisers to be held by them
solely for the purpose of determining the scope of that party’s obligations
under this clause;

 

(ii)                                  retain one copy of such of the other
party’s Confidential Information that is required by the Relevant Regulatory
Authorities in the Territory, to be retained by that party; and

 

(iii)                               retain
any documents confidential to it (including board papers, strategic plans and
operational reviews) in which the other party’s Confidential Information is
incorporated, provided that such confidential information shall continue to be
treated as Confidential Information hereunder.

 

(e)                                  Upon
expiration or termination for any reason, the obligations of confidentiality
and use of Confidential Information under Article 15 shall survive for the
period provided therein;

 

(f)                                    Upon
expiration or termination for any reason, Articles 14 and 16 of this Agreement
shall survive for the maximum duration permitted by law;

 

(g)                                 Articles
5, 8 and 9 shall survive until all outstanding payment obligations and reporting
obligations of Licensee and its Affiliates and Sublicensees have been
fulfilled, and Sections 9.3 and 9.4 shall survive for two years following the
year in which such or expiration became effective; and

 

(h)                                 Cellegy
shall have the right to repurchase all then-current inventory of the Licensed
Product then in Licensee’s possession, at the landed cost paid by Licensee for
such inventory (including delivery, insurance and any applicable import/export
taxes paid thereon).

 

ARTICLE 17

REGISTRATION OF LICENSE; LIMITATION OF LIABILITY

 

17.1                           Registration.  Licensee may, at its expense, register the
exclusive license granted under this Agreement in any country of the Territory
where the government of such country would require one for use, sale or
distribution of the Licensed Product in such country and Cellegy shall
reasonably cooperate in such registration at Licensee’s expense.  Upon request by Licensee, Cellegy agrees
promptly to execute any “short form” licenses developed in a form reasonably
acceptable to both Licensee and Cellegy and reasonably submitted to it by
Licensee from time to time in order to effect the foregoing registration in
such country at no cost to Licensee.

 

17.2                           Limitation of Liability   NEITHER PARTY
SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL
DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, WARRANTY, TORT (INCLUDING
NEGLIGENCE) OR OTHERWISE, AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE. 
NOTHWITHSTANDING ANYTHING TO THE 

 

38

 

CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY WITH RESPECT
TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY AMOUNTS IN EXCESS OF THE
AMOUNTS RECEIVED BY CELLEGY FROM LICENSEE HEREUNDER.  THIS LIMITATION WILL APPLY NOTWITHSTANDING ANY FAILURE OF
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.

 

ARTICLE 18

GENERAL PROVISIONS

 

18.1                           Force Majeure.  Neither Party shall be held liable or
responsible to the other Party nor be deemed to have defaulted under or
breached this Agreement for failure or delay in fulfilling or performing any
term of this Agreement, other than an obligation to make payments hereunder, when
such failure or delay is caused by or results from fire, floods, embargoes,
government regulations, prohibitions or interventions, war, acts of war
(whether war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts, acts of God or any other cause beyond the reasonable control
of the affected party to anticipate, prevent, avoid or mitigate (a “Force Majeure Event”);
provided, however, that any failure or delay in fulfilling a term of this
Agreement shall not be considered a result of a Force Majeure Event if it
arises from a failure of Licensee or Cellegy to comply with applicable laws and
regulations.  In the event of force
majeure lasting more than sixty days (60) days, the Parties agree to meet and
discuss how this Agreement can be justly and fairly implemented under the
circumstances prevailing in such Country or Countries and if the Parties are
unable to agree upon how the Agreement can be implemented then either Party may
terminate the Agreement in relation to such country or countries upon sixty
(60) days written notice.

 

18.2                           Further Assurances.  Each Party to agrees to perform such acts,
execute such further instruments, documents or certificates, and provide such
cooperation in proceedings and actions as may be reasonably requested by the
other Party in order to carry out the intent and purpose of this Agreement,
including without limitation the registration or recordation of the rights
granted hereunder.

 

18.3                           Severability.  Both Parties hereby expressly acknowledge
and agree that it is the intention of neither party to violate any public
policy, statutory or common law, rules, regulations, treaty or decision of any
government agency or executive body thereof of any country or community or
association of countries and specifically agree that if any word, sentence,
paragraph, clause or combination thereof in this Agreement is found by a court
or executive body with judicial powers having jurisdiction over this Agreement
or any of the parties hereto in a final unappealed order, to be in violation of
any such provisions in any country or community or association of countries,
then in such event such words, sentences, paragraphs, clauses or combination
shall be inoperative in such country or community or association of countries and
the remainder of this Agreement shall remain binding upon the parties hereto.

 

18.4                           Notices.  Any notice required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been properly given if delivered in person, or by an

 

39

 

[*] designates portions of this document that
have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

internationally recognized overnight courier, or by facsimile (and
promptly confirmed by overnight courier), to the addresses given below or such
other addresses as may be designated in writing by the parties from time to
time during the term of this Agreement. 
Any notice sent by overnight courier as aforesaid shall be deemed to
have been given two (2) working days after sending.

 

 

	
  In the case of
  Cellegy:

  	
  With a required copy to:

  
	
  Cellegy Pharmaceuticals, Inc.

  	
  Weintraub Genshlea Chediak

  
	
  349 Oyster Point Boulevard

  	
  Sproul

  
	
  San Francisco, California 94080

  	
  400 Capitol Mall, 11th floor

  
	
  Attention: 
  John Chandler

  	
  Sacramento, CA 95814

  
	
  Telephone No.:(650) 616-2200

  	
  Attention: Kevin Kelso, Esq.

  
	
  Facsimile No.:(650)616-2222

  	
  Telephone No.:(916) 558-6110

  
	
   

  	
  Facsimile No.:(916) 446-1611

  
	
  In the case of
  Licensee:

  	
   

  
	
  Strakan International Limited

  	
   

  
	
  Buckholm Mill

  	
   

  
	
  Galashiels

  	
   

  
	
  TD 1 2HB, UK

  	
   

  
	
  Attention: 
  Mr. Andrew McLean,

  	
   

  
	
  Corporate Director

  	
   

  
	
  Telephone No.:44-1896-668060

  	
   

  
	
  Facsimile No.:44-1896-667061

  	
   

  

 

18.5                           Assignment.  This Agreement may not
be assigned or otherwise transferred by either Party without the written
consent of the other Party; provided, however, that either Party
may, without such consent, assign this Agreement (i) in connection with the
transfer or sale of all or substantially all of its business related to this
Agreement; or (ii) in the event of the merger or consolidation of such Party
with another corporation; or (iii) to an Affiliate. Any permitted assignee
shall assume all obligations of its assignor under this Agreement.

 

18.6                           Amendment.  The parties hereto may amend, modify or
alter any of the provisions of this Agreement, but only by a written instrument
duly executed by both parties hereto.  

 

18.7                           Entire Agreement.  This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes and replaces all previous negotiations, understandings and
representations whether written or oral including, but not limited to, the
Heads of Agreement dated [*] 2004 between the Parties and the Confidentiality
Agreement described at Section 15.6. This Agreement shall not be modified,
altered or amended except by a written document signed on behalf of and
delivered by both Parties.

 

18.8                           Waiver.  The failure of a party
to enforce, at any time or for any period, any of the provisions hereof shall
not be construed as a waiver of such provisions or of the rights of such party
thereafter to enforce each such provision.

 

40

 

18.9                           No Implied Licenses.  Except as expressly and specifically
provided under this Agreement, the parties agree that neither party is granted
any implied rights to or under any of the other party’s current or future
patents, trade secrets, copyrights, moral rights, trade or service marks, trade
dress, or any other intellectual property rights.

 

18.10                     Injunctions.  The parties agree that any breach or
threatened breach by one party of the confidentiality provisions contained in
this Agreement may cause substantial harm to the other party that cannot be
remedied by monetary damages, and therefore each party agrees that either party
shall have the right to apply for equitable remedies, without bond, including
injunctions and repossession of Confidential Information, to abate actual or
threatened breaches of this Agreement.

 

18.11                     Independent Contractors.  The parties agree that the relationship of
Cellegy and Licensee established by this Agreement is that of independent
licensee and licensor.  Furthermore, the
parties agree that this Agreement does not, is not intended to, and shall not
be construed to, establish a partnership or joint venture, and nor shall this
Agreement create or establish an employment, agency or any other
relationship.  Except as may be
specifically provided herein, neither party shall have any right, power or
authority, nor shall they represent themselves as having any authority to
assume, create or incur any expense, liability or obligation, express or
implied, on behalf of the other party, or otherwise act as an agent for the
other party for any purpose.

 

18.12                     No Third Party Beneficiaries.  All rights, benefits and remedies under this
Agreement are solely intended for the benefit of Cellegy and Licensee, and no
Third Party shall have any rights whatsoever to (i) enforce any obligation
contained in this Agreement (ii) seek a benefit or remedy for any breach of
this Agreement, or (iii) take any other action relating to this Agreement under
any legal theory, including but not limited to, actions in contract, tort
(including but not limited to negligence, gross negligence and strict
liability), or as a defense, setoff or counterclaim to any action or claim
brought or made by the parties.

 

18.13                     Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California, exclusive of
its choice-of-law rules.  

 

18.14                     Resolution of Disputes.  All disputes arising out of or related to
the terms and conditions of this Agreement, or the breach thereof, will be
settled as follows.

 

(a)                                  If
a dispute arises under this Agreement, a representative of each party must,
following whatever investigation each considers appropriate, promptly discuss
the dispute.

 

(b)                                 If
the dispute is not resolved as a result of the discussions in paragraph (a),
either party may give written notice to the other party requesting the
commencement of negotiations in good faith. 
The notice shall:  

 

(i)                                     set
out the issues in dispute and any other relevant circumstances; and

 

41

 

[*] designates portions of this
document that have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

(ii)                                  designate
a senior representative with the appropriate authority to negotiate the
dispute.

 

(c)                                  Within
ten (10) business days of receipt of the notice referred to in paragraph (b)
the recipient shall notify the other party of a senior representative with
similar authority to negotiate the dispute and specify a reasonable time and
place to meet within the following fourteen business days.

 

(d)                                 The
representatives must meet in accordance with the notice referred to in
paragraph (b) and, using all reasonable endeavors, commence negotiations
in good faith to resolve the dispute.

 

(e)                                  If
the dispute is not resolved within thirty (30) days of notification under
paragraph (b), then the dispute shall be settled by binding arbitration in
San Francisco, California, in accordance with the then existing rules of
International Chamber of Commerce. In any arbitration pursuant to this Section the
award shall be rendered by a single arbiter if the Parties agree to one or a
majority of three (3) arbiters, one (1) of whom shall be appointed by each
Party and the third of whom shall be appointed by mutual agreement of the two
Party-appointed arbitrators. Either Party may initiate such an arbitration by
giving written notice to the other Party of such arbitration, specifying, in
reasonable detail, the dispute to be resolved thereby.  The determination of the arbitrators with
respect to any dispute will be conclusive and binding on the Parties, and the
arbitrators will have right to award attorneys’ fees and costs, including but
not limited to the costs of the arbitration, to the prevailing Party.  Judgment upon the award rendered in any
arbitration may be entered in any court of competent jurisdiction in any
country.  The Parties agree to the
exclusive jurisdiction and venue of any state or federal court located in San
Francisco, California for purposes of any action arising out of or relating to this
Agreement that is not subject to mandatory arbitration, and agree that service
of process in any such action may be made in the manner provided for in this
Agreement for the delivery of notices.

 

(f)                                    Neither
Party shall be prevented from
applying to a court at
any stage for urgent injunctive or other relief.

 

18.15                     Headings.  The Article and section headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.

 

18.16                     Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document.

 

18.17                     Late Payment.  If Licensee fails to pay to Cellegy any amount
when due, Licensee agrees to pay interest on the overdue balance at the rate of
the LIBOR rate (as quoted in the London edition of the Financial Times and in
effect from time to time) plus [*] of such rate or, if such rate exceeds the
maximum rate permitted by law, the maximum rate permitted by law.  Payments received from Licensee when any
overdue balance exists shall be applied first against

 

42

 

accrued interest.  Licensee
shall pay all collection charges and expenses, and including, but not limited
to, attorneys’ fees, which are incurred by Cellegy in connection with Cellegy’s
collection of any amounts under or relating to this Agreement, or otherwise in
connection with the enforcement of this Agreement.

 

18.18                     Strakan Group Limited Guarantee.  Strakan Group Limited, of which Licensee is
a wholly-owned subsidiary, hereby guarantees the performance of Licensee under
this Agreement to the extent, and pursuant to the terms of, the Guarantee
attached hereto as Exhibit F.

 

[Remainder
of this page intentionally left blank]

 

43

 

IN WITNESS HEREOF, the parties have executed this Agreement as of the
Effective Date.

 

 

	
  STRAKAN INTERNATIONAL LIMITED

  	
  CELLEGY PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:
  

  	
   

  	
   

  	
  Its:
  

  	
   

  	
   

  
	
   

  	
   

  
	
  STRAKAN
  GROUP LIMITED, only as to

  	
   

  
	
   

  	
   

  
	
  Section 18.18
  and the Guarantee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:
  

  	
   

  	
   

  	
   

  
										

 

44

 

[*] designates portions of this
document that have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

 

EXHIBIT A

LICENSED
PRODUCT

 

[*] gram metered dosing canister.

 

A

 

EXHIBIT
B

COUNTRIES IN THE TERRITORY

 

 

TERRITORIES

	
  1.
  Europe

  
	
  Andorra

  
	
  Albania

  
	
  Austria

  
	
  Belgium

  
	
  Bosnia-Herzegovina

  
	
  Bulgaria

  
	
  Croatia

  
	
  Cyprus

  
	
  Czech Republic

  
	
  Denmark

  
	
  Estonia

  
	
  Finland

  
	
  France

  
	
  Germany

  
	
  Gibraltar

  
	
  Greece

  
	
  Hungary

  
	
  Ireland

  
	
  Italy

  
	
  Latvia

  
	
  Liechtenstein

  
	
  Lithuania

  
	
  Luxembourg

  
	
  Republic of Macedonia

  
	
  Malta

  
	
  Monaco

  
	
  Netherlands

  
	
  Norway

  
	
  Poland

  
	
  Portugal

  
	
  Romania

  
	
  Slovak Republic

  
	
  Slovenia

  
	
  Spain

  
	
  Sweden

  
	
  Switzerland

  
	
  United Kingdom

  
	
  Republic of Yugoslavia

  

 

B

 

[*] designates portions of this
document that have been omitted pursuant to

request for confidential treatment filed separately with the Commission.

 

 

EXHIBIT C

MINIMUM
SALES REQUIREMENTS

 

[*]

 

C

 

EXHIBIT D

PATENTS
RIGHTS

 

“Cellegy Patents”

 

 

WO 99/24041 – Entitled ‘Penetration enhancing and irritation reducing
systems, including improvements thereto, relating to the Licensed Product in
the Field and Territory.

 

 

	
  Country

  	
   

  	
  Application
  No.

  	
   

  	
  Filing
  Date

  	
   

  	
  Patent or
  

  Publication No.

  	
   

  	
  Issue/Pub
  Date

  	
   

  	
  Status

  	
   

  
	
  Europe: AT, BE, CH, CY, DE, DK, ES, FI, FR, GB,
  GR, IE, IT, LU, MC, NL, PT, SE*

  	
   

  	
  98956663.3

  	
   

  	
  11/09/98

  	
   

  	
  Pub. No.

  EP 1030668A1

  	
   

  	
  Pub. 8/30/00

  	
   

  	
  Pending

  	
   

  
	
  Norway

  	
   

  	
  20002422

  	
   

  	
  11/09/98

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Pending

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PCT

  	
   

  	
  PCT/US98/23750

  	
   

  	
  11/09/98

  	
   

  	
  WO 99/24041

  	
   

  	
  5/20/99

  	
   

  	
  National Phase

  	
   

  

 

D

 

EXHIBIT E

CELLEGY
MARKS

 

	
  Name

  	
   

  	
  Status

  	
   

  	
  Country

  	
   

  	
  Registration

  Date

  	
   

  	
  Renewal

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Austria

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Belgium

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Cyprus

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Czech Republic

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Denmark

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Estonia

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Finland

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  France

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Germany

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Greece

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Hungary

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Ireland

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Italy

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Latvia

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Liechtenstein

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Lithuania

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Luxemburg

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Malta

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Netherlands

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Norway

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  

 

E-1

 

	
  Name

  	
   

  	
  Status

  	
   

  	
  Country

  	
   

  	
  Registration

  Date

  	
   

  	
  Renewal

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Poland

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Portugal

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Romania

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Slovak Republic

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Slovenia

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Spain

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Sweden

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
  Tostrex

  	
   

  	
  Registered as EU community mark

  	
   

  	
  United Kingdom

  	
   

  	
  6/20/2003

  	
   

  	
  1/21/2012

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tostrex

  	
   

  	
  Registered

  	
   

  	
  Switzerland

  	
   

  	
  1/22/2002

  	
   

  	
  1/22/2012

  
	
  Tostrex

  	
   

  	
  No application pending

  	
   

  	
  Andorra

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostrex

  	
   

  	
  No application pending

  	
   

  	
  Albania

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostrex

  	
   

  	
  No application pending

  	
   

  	
  Bosnia-Herzegovina

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostrex

  	
   

  	
  No application pending

  	
   

  	
  Bulgaria

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostrex

  	
   

  	
  No application pending

  	
   

  	
  Croatia

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostrex

  	
   

  	
  No application pending

  	
   

  	
  Gibraltar

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostrex

  	
   

  	
  No application pending

  	
   

  	
  Republic of Yugoslavia

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostrex

  	
   

  	
  No application pending

  	
   

  	
  Republic of Macedonia

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostrex

  	
   

  	
  No application pending

  	
   

  	
  Monaco

  	
   

  	
  —

  	
   

  	
  —

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Status

  	
   

  	
  Country

  	
   

  	
  Registration

  Date

  	
   

  	
  Renewal

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Austria

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Belgium

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  

 

E-2

 

	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Cyprus

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Czech Republic

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Denmark

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Estonia

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Finland

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  France

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Germany

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Greece

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Hungary

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Ireland

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Italy

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Latvia

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Liechtenstein

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Lithuania

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Luxemburg

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Malta

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Netherlands

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Norway

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Poland

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Portugal

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Romania

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Slovak Republic

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Slovenia

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  

 

E-3

 

	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Spain

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  Sweden

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
  Tostran

  	
   

  	
  Registered as EU community mark

  	
   

  	
  United Kingdom

  	
   

  	
  2/4/2004

  	
   

  	
  5/102012

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tostran

  	
   

  	
  Registered

  	
   

  	
  Switzerland

  	
   

  	
  9/3/2002

  	
   

  	
  5/3/2012

  
	
  Tostran

  	
   

  	
  No application pending

  	
   

  	
  Andorra

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostran

  	
   

  	
  No application pending

  	
   

  	
  Albania

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostran

  	
   

  	
  No application pending

  	
   

  	
  Bosnia-Herzegovina

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostran

  	
   

  	
  No application pending

  	
   

  	
  Bulgaria

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostran

  	
   

  	
  No application pending

  	
   

  	
  Croatia

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostran

  	
   

  	
  No application pending

  	
   

  	
  Gibraltar

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostran

  	
   

  	
  No application pending

  	
   

  	
  Republic of Yugoslavia

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostran

  	
   

  	
  No application pending

  	
   

  	
  Republic of Macedonia

  	
   

  	
  —

  	
   

  	
  —

  
	
  Tostran

  	
   

  	
  No application pending

  	
   

  	
  Monaco

  	
   

  	
  —

  	
   

  	
  —

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Status

  	
   

  	
  Country

  	
   

  	
  Registration

  Date

  	
   

  	
  Renewal

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Austria

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Belgium

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Cyprus

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Czech Republic

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Denmark

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Estonia

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Finland

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  France

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Germany

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  

 

E-4

 

	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Greece

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Hungary

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Ireland

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Italy

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Latvia

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Liechtenstein

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Lithuania

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Luxemburg

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Malta

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Netherlands

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Norway

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Poland

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Portugal

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Romania

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Slovak Republic

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Slovenia

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Spain

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  Sweden

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
  Fortigel

  	
   

  	
  Pending approval

  	
   

  	
  United Kingdom

  	
   

  	
  4/28/2003

  	
   

  	
  Unknown

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Switzerland

  	
   

  	
  —

  	
   

  	
  —

  
	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Andorra

  	
   

  	
  —

  	
   

  	
  —

  
	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Albania

  	
   

  	
  —

  	
   

  	
  —

  
	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Bosnia-Herzegovina

  	
   

  	
  —

  	
   

  	
  —

  
	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Bulgaria

  	
   

  	
  —

  	
   

  	
  —

  
	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Croatia

  	
   

  	
  —

  	
   

  	
  —

  

 

E-5

 

	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Gibraltar

  	
   

  	
  —

  	
   

  	
  —

  
	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Republic of Yugoslavia

  	
   

  	
  —

  	
   

  	
  —

  
	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Republic of Macedonia

  	
   

  	
  —

  	
   

  	
  —

  
	
  Fortigel

  	
   

  	
  No application pending

  	
   

  	
  Monaco

  	
   

  	
  —

  	
   

  	
  —

  

 

E-6

 

EXHIBIT F

STRAKAN
GROUP LIMITED GUARANTEE

 

Strakan Group Limited (“Group”) hereby unconditionally guarantees and undertakes
to Cellegy that Licensee will duly and punctually observe and perform all the
undertakings, covenants and obligations of Licensee under this Agreement
(including the payment of any damages becoming due to Cellegy as a result of
any breach by Licensee of such undertakings, covenants and obligations) and
under any agreements between the Parties (or any of them) which are expressly
supplemental to this Agreement or which this Agreement requires to be executed
(the “Obligations”)
to the intent that if Licensee shall fail for whatever reason so to observe and
perform any Obligations, Group shall be liable to perform the same in all
respects as if Group was the party principally bound thereby in place of
Licensee on demand from Cellegy.

 

FExhibit 10.1

 

WATER PIK TECHNOLOGIES, INC.

 

1999 INCENTIVE PLAN

 

(As Amended and Restated as of May 13, 2004)

 

ARTICLE I

 

PURPOSE AND ADOPTION OF THE PLAN

 

1.01.                        Purpose.  The purpose of the Water Pik Technologies,
Inc. 1999 Incentive Plan (hereinafter referred to as the “Plan”) is to assist
in attracting and retaining highly competent employees, to act as an incentive
in motivating selected officers and other key employees of Water Pik
Technologies, Inc. and its Subsidiaries to achieve long-term corporate objectives
and to enable cash incentive awards to qualify as performance-based for
purposes of the tax deduction limitations under Section 162(m) of the
Code.

 

1.02.                        Adoption
and Term.  The Plan has been
approved by the Board of Directors of Water Pik Technologies, Inc., to be
effective as of the effective date of the distribution by Allegheny Teledyne
Incorporated to its stockholders of Water Pik Technologies, Inc. Common Stock
(the “Effective Date”), but is subject to the approval of the stockholders of the
Company.  The Plan shall have a fixed
term of ten years from the Effective Date unless earlier terminated by action
of the Board; provided, however, that no Incentive Stock Option may be granted
hereunder after the tenth anniversary of the Effective Date and the provisions
of Articles VII, VIII and X and Section 9.01 and 9.02 with respect to
performance-based awards to “covered employees” under Section 162(m) of
the Code shall expire as of the fifth anniversary of the most recent approval
by the stockholders of the Company of this Plan (whether initially or as
amended).

 

ARTICLE II

 

DEFINITIONS

 

For the purpose of this Plan, capitalized terms shall have the
following meanings:

 

2.01.                        Award
means any one or a combination of Non-Qualified Stock Options or Incentive
Stock Options described in Article VI, Stock Appreciation Rights described
in Article VI, Restricted Shares described in Article VII,
Performance Awards described in Article VIII, Stock Units described in
Section 9.03, Awards of cash or any other Award made under the terms of
the Plan.

 

 

2.02.                        Award
Agreement means a written agreement between the Company and a Participant
or a written acknowledgment from the Company to a Participant specifically
setting forth the terms and conditions of an Award granted under the Plan.

 

2.03.                        Award
Period means, with respect to an Award, the period of time set forth in the
Award Agreement during which specified target performance goals must be
achieved or other conditions set forth in the Award Agreement must be satisfied.

 

2.04.                        Beneficiary
means an individual, trust or estate who or which, by a written designation of
the Participant filed with the Company or by operation of law, succeeds to the
rights and obligations of the Participant under the Plan and the Award
Agreement upon the Participant’s death.

 

2.05.                        Board
means the Board of Directors of the Company.

 

2.06.                        Change
in Control means, and shall be deemed to have occurred upon the occurrence
of, any one of the following events:

 

(a)                                  The acquisition in one or more
transactions, other than from the Company, by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of a number of Company Voting Securities in excess of 25% of the
Company Voting Securities unless such acquisition has been approved by the
Board;

 

(b)                                 Any election has occurred of
persons to the Board that causes two-thirds of the Board to consist of persons other
than (i) persons who were members of the Board on the Effective Date and (ii)
persons who were nominated for elections as members of the Board at a time when
two-thirds of the Board consisted of persons who were members of the Board on
the Effective Date, provided, however, that any person nominated for election
by a Board at least two-thirds of whom constituted persons described in clauses
(i) and/or (ii) or by persons who were themselves nominated by such Board
shall, for this purpose, be deemed to have been nominated by a Board composed
of persons described in clause (i);

 

(c)                                  Approval
by the stockholders of the Company of a reorganization, merger or
consolidation, unless, following such reorganization, merger or consolidation,
all or substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Common Stock and Company Voting
Securities immediately prior to such reorganization, merger or consolidation,
following such reorganization, merger or consolidation beneficially own,
directly or indirectly, more than seventy five percent (75%) of, respectively,
the then outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the election
of directors or trustees, as the case may be, of the entity resulting from such
reorganization, merger or consolidation in substantially the same proportion as
their

 

2

 

ownership of the Outstanding Common Stock and
Company Voting Securities immediately prior to such reorganization, merger or
consolidation, as the case may be; or

 

(d)                                 Approval
by the stockholders of the Company of (i) a complete liquidation or dissolution
of the Company or (ii) a sale or other disposition of all or substantially all
the assets of the Company.

 

2.07.                        Code
means the Internal Revenue Code of 1986, as amended. References to a
section of the Code shall include that section and any comparable
section or sections of any future legislation that amends, supplements or
supersedes said section.

 

2.08.                        Committee
means the Committee defined in Section 3.01.

 

2.09.                        Company
means Water Pik Technologies, Inc., a Delaware corporation, and its successors.

 

2.10.                        Common
Stock means Common Stock of the Company, par value $0.01 per share.

 

2.11.                        Company
Voting Securities means the combined voting power of all outstanding voting
securities of the Company entitled to vote generally in the election of
directors to the Board.

 

2.12.                        Date
of Grant means the date designated by the Committee as the date as of which
it grants an Award, which shall not be earlier than the date on which the
Committee approves the granting of such Award.

 

2.13.                        Exchange
Act means the Securities Exchange Act of 1934, as amended.

 

2.14.                        Exercise
Price means, with respect to a Stock Appreciation Right, the amount
established by the Committee in the Award Agreement which is to be subtracted
from the Fair Market Value on the date of exercise in order to determine the
amount of the payment to be made to the Participant, as further described in
Section 6.02(b).

 

2.15.                        Fair
Market Value means, on any date, the average of the high and low quoted
sales prices of a share of Common Stock, as reported on the Composite Tape for
New York Stock Exchange Listed Companies on such date or, if there were no
sales on such date, on the last date preceding such date on which a sale was
reported.

 

2.16.                        Incentive
Stock Option means a stock option within the meaning of Section 422 of
the Code.

 

2.17.                        Merger
means any merger, reorganization, consolidation, exchange, transfer of assets
or other transaction having similar effect involving the Company.

 

3

 

2.18.                        Non-Qualified
Stock Option means a stock option which is not an Incentive Stock Option.

 

2.19.                        Options
means all Non-Qualified Stock Options and Incentive Stock Options granted at
any time under the Plan.

 

2.20.                        Outstanding
Common Stock means, at any time, the issued and outstanding shares of Common
Stock.

 

2.21.                        Participant
means a person designated to receive an Award under the Plan in accordance with
Section 5.01.

 

2.22.                        Performance
Awards means Awards granted in accordance with Article VIII.

 

2.23.                        Performance
Goals means operating income, operating profit (earnings from continuing
operations before interest and taxes), EBITDA (earnings before interest, taxes,
depreciation and amortization), free cash flow, IBT (income before taxes),
earnings per share, return on investment or working capital, return on average
capital employed, return on stockholders’ equity, any other measurement of
business value, economic value added (the amount, if any, by which net
operating profit after tax exceeds a reference cost of capital), reductions in
inventory, inventory turns and on-time delivery performance, any one of which
may be measured with respect to the Company or any one or more of its
Subsidiaries and divisions and either in absolute terms or as compared to
another company or companies, and quantifiable, objective measures of
individual performance relevant to the particular individual’s job
responsibilities.

 

2.24.                        Plan
means the Water Pik Technologies, Inc. 1999 Incentive Plan as described herein,
as the same may be amended from time to time.

 

2.25.                        Purchase
Price, with respect to Options, shall have the meaning set forth in
Section 6.01(b).

 

2.26.                        Restoration
Option means a Non-Qualified Stock Option granted pursuant to
Section 6.01(f).

 

2.27.                        Restricted
Shares means Common Stock subject to restrictions imposed in connection
with Awards granted under Article VII.

 

2.28.                        Retirement
means early or normal retirement under a pension plan or arrangement of the
Company or one of its Subsidiaries in which the Participant participates.

 

2.29.                        Rule
16b-3 means Rule 16b-3 promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act, as the same may be
amended from time to time, and any successor rule.

 

4

 

2.30.                        Stock
Appreciation Rights means awards granted in accordance with
Article VI.

 

2.31                           Stock Unit means a
unit of value, equal at any relevant time to the Fair Market Value of a share
of Common Stock, established by the Committee as a means of measuring the value
of a Participant’s Stock Unit Account.

 

2.32                           Stock Unit Account
means the bookkeeping account maintained by the Committee on behalf of each
Participant who is credited with Stock Units and dividend equivalents thereon
pursuant to Section 9.03.

 

2.33                           Stock Option Gain
shall mean, with respect to the exercise of a Non-Qualified Stock Option
(whether an option granted under this Plan or any other plan sponsored by the
Company), the number of shares of Common Stock issuable with respect to such
exercise that exceed the number of shares of Common Stock delivered to the
Company (or deemed delivered to the Company) as payment of the exercise price
for such stock option.

 

2.34.                        Subsidiary
means a subsidiary of the Company within the meaning of Section 424(f) of
the Code.

 

2.35.                        Termination
of Employment means the voluntary or involuntary termination of a
Participant’s employment with the Company or a Subsidiary for any reason,
including death, disability, retirement or as the result of the divestiture of
the Participant’s employer or any similar transaction in which the
Participant’s employer ceases to be the Company or one of its
Subsidiaries.  Whether entering military
or other government service shall constitute Termination of Employment, or whether
a Termination of Employment shall occur as a result of disability, shall be
determined in each case by the Committee in its sole discretion.

 

ARTICLE III

 

ADMINISTRATION

 

3.01.                        Committee.                                     The
Plan shall be administered by a committee of the Board (“Committee”) comprised
of at least two persons.  The Committee
shall have exclusive and final authority in each determination, interpretation
or other action affecting the Plan and its Participants.  The Committee shall have the sole
discretionary authority to interpret the Plan, to establish and modify
administrative rules for the Plan, to impose such conditions and restrictions
on Awards as it determines appropriate, and to take such steps in connection
with the Plan and Awards granted hereunder as it may deem necessary or
advisable.  The Committee shall not,
however, have or exercise any discretion that would disqualify amounts payable
under Article X as performance-based compensation for purposes of
Section 162(m) of the Code, or have any authority to substitute any Awards
or use any other methods that would constitute a “repricing” under

 

5

 

the rules of the New York Stock Exchange.  The Committee may delegate such of its powers and authority under
the Plan as it deems appropriate to a subcommittee of the Committee and/or
designated officers or employees of the Company.  In addition, the full Board may exercise any of the powers and
authority of the Committee under the Plan. In the event of such delegation of authority
or exercise of authority by the Board, references in the Plan to the Committee
shall be deemed to refer, as appropriate, to the delegate of the Committee or
the Board.  Actions taken by the
Committee or any subcommittee thereof, and any delegation by the Committee to
designated officers or employees, under this Section 3.01 shall comply
with Section 16(b) of the Exchange Act, the performance-based provisions
of Section 162(m) of the Code, and the regulations promulgated under each
of such statutory provisions, or the respective successors to such statutory
provisions or regulations, as in effect from time to time, to the extent
applicable.

 

ARTICLE IV

 

SHARES

 

4.01.                        Number
of Shares Issuable.  The maximum
number of shares of Common Stock authorized to be issued under the Plan shall
be 1,900,000 shares.  In addition to
such amount, for each share of outstanding restricted stock (that was
originally granted under the terms of the Water Pik Technologies, Inc. Stock
Acquisition and Retention Program or any other benefit plan of the Company, whether
currently existing or adopted in the future) that is contributed to the Plan in
accordance with Section 9.03 and thereby is cancelled by the Company and
is no longer outstanding, an additional share of Common Stock will be added to
the authorized shares to be issued under the Plan; provided that the number of
shares added to the Plan under this sentence shall not exceed 500,000
shares.  No more than 945,000 shares of
Common Stock may be issued under the Plan as Incentive Stock Options.  The number of shares available for issuance
under the Plan shall be further subject to adjustment in accordance with
Section 11.07.  The shares to be
offered under the Plan shall be authorized and unissued Common Stock, or issued
Common Stock which shall have been reacquired by the Company.

 

4.02.                        Shares
Subject to Terminated Awards. 
Common Stock covered by any unexercised portions of terminated Options
(including cancelled Options) granted under Article VI, Common Stock
forfeited as provided in Section 7.02(a), Stock Units forfeited as
provided in Section 9.03, Restricted Shares issued under the Plan that are
cancelled in exchange for Stock Units under Section 9.03(c), and Common
Stock subject to any Awards which are otherwise surrendered by the Participant may
again be subject to new Awards under the Plan. 
Common Stock subject to Options, or portions thereof, which have been
surrendered in connection with the exercise of Stock Appreciation Rights shall
not be available for subsequent Awards under the Plan, but Common Stock issued
in payment of such Stock Appreciation Rights shall not be charged against the
number of shares of Common Stock available for the grant of Awards
hereunder.  In the event of the exercise
of Stock Appreciation Rights not granted in tandem with Options, only the
number of shares of Common Stock actually issued in payment of such Stock

 

6

 

Appreciation Rights shall be charged against the number of shares of
Common Stock available for the grant of Awards hereunder.

 

ARTICLE V

 

PARTICIPATION

 

5.01.                        Eligible
Participants.  Participants in the
Plan shall be such officers and other key employees of the Company and its
Subsidiaries, whether or not members of the Board, as the Committee, in its
sole discretion, may designate from time to time.  The Committee’s designation of a Participant in any year shall
not require the Committee to designate such person to receive Awards or grants
in any other year.  The designation of a
Participant to receive awards or grants under one portion of the Plan does not
require the Committee to include such Participant under other portions of the
Plan.  In order to be eligible to
participate in the deferral arrangements described in Section 9.03, an
individual must be specifically designated by the Committee as a Participant
for purposes of that Section.  The
Committee shall consider such factors as it deems pertinent in selecting
Participants and in determining the type and amount of their respective
Awards.  Notwithstanding any provision
herein to the contrary, the Committee may grant Awards under the Plan, other
than Incentive Stock Options, to non-employees who, in the judgment of the
Committee, render significant services to the Company or any of its
Subsidiaries, on such terms and conditions as the Committee deems appropriate
and consistent with the intent of the Plan. 
Subject to adjustment in accordance with Section 11.07, in any
calendar year, no Participant shall be granted Awards in respect of more than
500,000 shares of Common Stock (whether through grants of Options or Stock
Appreciation Rights or other grants of Common Stock or rights with respect
thereto) and $2,000,000 in cash.

 

ARTICLE VI

 

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

 

6.01.                        Option
Awards.

 

(a)                                  Grant
of Options.  The Committee may
grant, to such Participants as the Committee may select, Options entitling the
Participant to purchase shares of Common Stock from the Company in such number,
at such price, and on such terms and subject to such conditions, not
inconsistent with the terms of this Plan, as may be established by the
Committee.  The terms of any Option
granted under this Plan shall be set forth in an Award Agreement.

 

(b)                                 Purchase
Price of Options.  The Purchase
Price of each share of Common Stock which may be purchased upon exercise of any
Option granted under the Plan shall be determined by the Committee; provided,
however, that the Purchase Price 

 

7

 

of the Common Stock purchased pursuant to
Options designated by the Committee as Incentive Stock Options shall be equal
to or greater than the Fair Market Value on the Date of Grant as required under
Section 422 of the Code.

 

(c)                                  Designation
of Options.  Except as otherwise
expressly provided in the Plan, the Committee may designate, at the time of the
grant of each Option, the Option as an Incentive Stock Option or a
Non-Qualified Stock Option.

 

(d)                                 Incentive
Stock Option Share Limitation.  No
Participant may be granted Incentive Stock Options under the Plan (or any other
plans of the Company and its Subsidiaries) which would result in shares with an
aggregate Fair Market Value (measured on the Date of Grant) of more than
$100,000 first becoming exercisable in any one calendar year.

 

(e)                                  Rights
As a Stockholder.  A Participant or
a transferee of an Option pursuant to Section 11.04 shall have no rights
as a stockholder with respect to Common Stock covered by an Option until the
Participant or transferee shall have become the holder of record of any such shares,
and no adjustment shall be made for dividends in cash or other property or
distributions or other rights with respect to any such Common Stock for which
the record date is prior to the date on which the Participant or a transferee
of the Option shall have become the holder of record of any such shares covered
by the Option; provided, however, that Participants are entitled to share
adjustments to reflect capital changes under Section 11.07.

 

(f)                                    Restoration
Options Upon the Exercise of a Non-Qualified Stock Option. In the event
that any Participant delivers to the Company, or has withheld from the shares
otherwise issuable upon the exercise of a Non-Qualified Stock Option, shares of
Common Stock in payment of the Purchase Price of any Non-Qualified Stock Option
granted hereunder in accordance with Section 6.04, the Committee shall
have the authority to grant or provide for the automatic grant of a Restoration
Option to such Participant.  The grant
of a Restoration Option shall be subject to the satisfaction of such conditions
or criteria as the Committee in its sole discretion shall establish from time
to time.  A Restoration Option shall
entitle the holder thereof to purchase a number of shares of Common Stock equal
to the number of such shares so delivered or withheld upon exercise of the
original Option and, in the discretion of the Committee, the number of shares,
if any, delivered or withheld to the Corporation to satisfy any withholding tax
liability arising in connection with the exercise of the original Option.  A Restoration Option shall have a per share
Purchase Price of not less than 100% of the per share Fair Market Value of the
Common Stock on the date of grant of such Restoration Option, a term not longer
than the remaining term of the original Option at the time of exercise thereof,
and such other terms and conditions as the Committee in its sole discretion
shall determine.

 

(g)                                 Deferral
of Stock Option Gains.  Stock Option
Gains with respect to Non-Qualified Stock Options granted under this Plan may
be deferred in accordance

 

8

 

with Section 9.03 by any Participant who is designated by the
Committee as eligible to participate in such deferral arrangement.

 

6.02.                        Stock
Appreciation Rights.

 

(a)                                  Stock
Appreciation Right Awards.  The
Committee is authorized to grant to any Participant one or more Stock
Appreciation Rights.  Such Stock
Appreciation Rights may be granted either independent of or in tandem with
Options granted to the same Participant. Stock Appreciation Rights granted in
tandem with Options may be granted simultaneously with, or, in the case of
Non-Qualified Stock Options, subsequent to, the grant to such Participant of
the related Option; provided however, that: (i) any Option covering any share
of Common Stock shall expire and not be exercisable upon the exercise of any
Stock Appreciation Right with respect to the same share, (ii) any Stock
Appreciation Right covering any share of Common Stock shall expire and not be
exercisable upon the exercise of any related Option with respect to the same
share, and (iii) an Option and Stock Appreciation Right covering the same share
of Common Stock may not be exercised simultaneously.  Upon exercise of a Stock Appreciation Right with respect to a
share of Common Stock, the Participant shall be entitled to receive an amount
equal to the excess, if any, of (A) the Fair Market Value of a share of Common
Stock on the date of exercise over (B) the Exercise Price of such Stock
Appreciation Right established in the Award Agreement, which amount shall be
payable as provided in Section 6.02(c).

 

(b)                                 Exercise
Price. The Exercise Price established under any Stock Appreciation Right
granted under this Plan shall be determined by the Committee, but in the case
of Stock Appreciation Rights granted in tandem with Options shall not be less
than the Purchase Price of the related Option. 
Upon exercise of Stock Appreciation Rights granted in tandem with
options, the number of shares subject to exercise under any related Option
shall automatically be reduced by the number of shares of Common Stock
represented by the Option or portion thereof which are surrendered as a result
of the exercise of such Stock Appreciation Rights.

 

(c)                                  Payment
of Incremental Value.  Any payment
which may become due from the Company by reason of a Participant’s exercise of
a Stock Appreciation Right may be paid to the Participant as determined by the
Committee (i) all in cash, (ii) all in Common Stock, or (iii) in any
combination of cash and Common Stock. 
In the event that all or a portion of the payment is made in Common
Stock, the number of shares of Common Stock delivered in satisfaction of such
payment shall be determined by dividing the amount of such payment or portion
thereof by the Fair Market Value on the Exercise Date.  No fractional share of Common Stock shall be
issued to make any payment in respect of Stock Appreciation Rights; if any
fractional share would be issuable, the combination of cash and Common Stock
payable to the Participant shall be adjusted as directed by the Committee to
avoid the issuance of any fractional share.

 

(d)                                 Deferral
of Certain Stock Appreciation Rights. 
In the case of Stock Appreciation Rights that are payable solely in
shares of Common Stock, the shares

 

9

 

of Common Stock issuable upon the exercise thereof may be deferred in
accordance with Section 9.03 by any Participant who is designated by the
Committee as eligible to participate in such deferral arrangement.

 

6.03.                        Terms
of Stock Options and Stock Appreciation Rights.

 

(a)                                  Conditions on Exercise.  An
Award Agreement with respect to Options and/or Stock Appreciation Rights may
contain such waiting periods, exercise dates and restrictions on exercise (including,
but not limited to, periodic installments) as may be determined by the
Committee at the time of grant.

 

(b)                                 Duration
of Options and Stock Appreciation Rights. 
Options and Stock Appreciation Rights shall terminate upon the first to
occur of the following events:

 

(i)                                     Expiration of the Option or
Stock Appreciation Right as provided in the Award Agreement; or

 

(ii)                                  Termination of the Award in the
event of a Participant’s disability, Retirement, death or other Termination of
Employment as provided in the Award Agreement; or

 

(iii)                               In the case of an Incentive
Stock Option, ten years from the Date of Grant; or

 

(iv)                              Solely in the case of a Stock
Appreciation Right granted in tandem with an Option, upon the expiration of the
related Option.

 

(c)                                  Acceleration
or Extension of Exercise Time.  The
Committee, in its sole discretion, shall have the right (but shall not be
obligated), exercisable on or at any time after the Date of Grant, to permit
the exercise of an Option or Stock Appreciation Right (i) prior to the time
such Option or Stock Appreciation Right would become exercisable under the
terms of the Award Agreement, (ii) after the termination of the Option or Stock
Appreciation Right under the terms of the Award Agreement, or (iii) after the
expiration of the Option or Stock Appreciation Right.

 

6.04.                        Exercise
Procedures.  Each Option and Stock
Appreciation Right granted under the Plan shall be exercised by accessing a
telephonic voice/data response system or internet web site maintained or
otherwise approved by the Company or its designated agent prior to the close of
business on the expiration date of the Option or Stock Appreciation Right (or
by such other method as provided in the Award Agreement or as the Committee may
establish or approve from time to time). 
The Purchase Price of shares purchased upon exercise of an Option
granted under the Plan shall be paid in full by means of a cashless exercise
program under which, if so instructed by the Participant, shares may be issued
directly to the Participant’s broker or dealer upon the Participant’s
irrevocable election.  Alternatively,
the Participant may pay the purchase price by cash or any other method approved
in advance by the Committee.  In the
event that any Common

 

10

 

Stock shall be transferred to the Company to satisfy all or any part of
the Purchase Price, the part of the Purchase Price deemed to have been
satisfied by such transfer of Common Stock shall be equal to the product
derived by multiplying the Fair Market Value as of the date of exercise times
the number of shares of Common Stock transferred to the Company.  The Participant may not transfer to the
Company in satisfaction of the Purchase Price any fractional share of Common
Stock.  Any part of the Purchase Price
paid in cash upon the exercise of any Option shall be added to the general
funds of the Company and may be used for any proper corporate purpose.  Unless the Committee shall otherwise determine,
any Common Stock transferred to the Company as payment of all or part of the
Purchase Price upon the exercise of any Option shall be held as treasury
shares.

 

6.05.                        Change
in Control.  Unless otherwise
provided by the Committee in the applicable Award Agreement, in the event of a
Change in Control, all Options outstanding on the date of such Change in
Control, and all Stock Appreciation Rights shall become immediately and fully
exercisable.  The provisions of this
Section 6.05 shall not be applicable to any Options or Stock Appreciation
Rights granted to a Participant if any Change in Control results from such
Participant’s beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of Common Stock or Company Voting Securities.

 

ARTICLE VII

 

RESTRICTED SHARES

 

7.01.                        Restricted
Share Awards.  The Committee may
grant to any Participant an Award of Common Stock in such number of shares, and
on such terms, conditions and restrictions, whether based on performance
standards, periods of service, retention by the Participant of ownership of
purchased or designated shares of Common Stock or other criteria, as the
Committee shall establish.  With respect
to performance-based Awards of Restricted Shares to “covered employees” (as
defined in Section 162(m) of the Code), performance targets will be
limited to specified levels of one or more of the Performance Goals.  The terms of any Restricted Share Award
granted under this Plan shall be set forth in an Award Agreement which shall
contain provisions determined by the Committee and not inconsistent with this
Plan.

 

(a)                                  Issuance
of Restricted Shares.  As soon as
practicable after the Date of Grant of a Restricted Share Award by the
Committee, the Company shall cause to be transferred on the books of the
Company, or its agent, Common Stock, registered on behalf of the Participant,
evidencing the Restricted Shares covered by the Award, but subject to
forfeiture to the Company as of the Date of Grant if an Award Agreement with
respect to the Restricted Shares covered by the Award is not duly executed by
the Participant and timely returned to the Company.  All Common Stock covered by Awards under this Article VII
shall be subject to the restrictions, terms and conditions contained in the
Plan and the Award Agreement entered into by the Participant.  Until the lapse or 

 

11

 

release of all restrictions applicable to an Award of Restricted
Shares, the share certificates representing such Restricted Shares may be held
in custody by the Company, its designee, or, if the certificates bear a
restrictive legend, by the Participant. 
Upon the lapse or release of all restrictions with respect to an Award
as described in Section 7.01(d), one or more share certificates,
registered in the name of the Participant, for an appropriate number of shares
as provided in Section 7.01(d), free of any restrictions set forth in the
Plan and the Award Agreement shall be delivered to the Participant.

 

(b)                                 Stockholder
Rights.  Beginning on the Date of
Grant of the Restricted Share Award and subject to execution of the Award
Agreement as provided in Section 7.01(a), the Participant shall become a
stockholder of the Company with respect to all shares subject to the Award
Agreement and shall have all of the rights of a shareholder, including, but not
limited to, the right to vote such shares and the right to receive dividends;
provided, however, that any Common Stock distributed as a dividend or otherwise
with respect to any Restricted Shares as to which the restrictions have not yet
lapsed, shall be subject to the same restrictions as such Restricted Shares and
held or restricted as provided in Section 7.01(a).

 

(c)                                  Restriction
on Transferability.  None of the
Restricted Shares may be assigned or transferred (other than by will or the
laws of descent and distribution, or to an inter vivos trust with respect to
which the Participant is treated as the owner under Sections 671 through 677 of
the Code, except to the extent that Section 16 of the Exchange Act limits
a participant’s right to make such transfers), pledged or sold prior to lapse
of the restrictions applicable thereto.

 

(d)                                 Delivery
of Shares Upon Vesting.  Upon
expiration or earlier termination of the forfeiture period without a forfeiture
and the satisfaction of or release from any other conditions prescribed by the
Committee, or at such earlier time as provided under the provisions of
Section 7.03, the restrictions applicable to the Restricted Shares shall
lapse.  As promptly as administratively
feasible thereafter, subject to the requirements of Section 11.05, the
Company shall deliver to the Participant or, in case of the Participant’s
death, to the Participant’s Beneficiary, one or more share certificates for the
appropriate number of shares of Common Stock, free of all such restrictions,
except for any restrictions that may be imposed by law.

 

7.02.                        Terms
of Restricted Shares.

 

(a)                                  Forfeiture
of Restricted Shares.  Subject to
Sections 7.02(b) and 7.03, all Restricted Shares shall be forfeited and
returned to the Company and all rights of the Participant with respect to such
Restricted Shares shall terminate unless the Participant continues in the
service of the Company or a Subsidiary as an employee until the expiration of
the forfeiture period for such Restricted Shares and satisfies any and all
other conditions set forth in the Award Agreement.  The Committee shall determine the forfeiture period (which may,
but need not, lapse in installments) and any other terms and conditions applicable
with respect to any Restricted Share Award.

 

12

 

(b)                                 Waiver
of Forfeiture Period. 
Notwithstanding anything contained in this Article VII to the
contrary, the Committee may, in its sole discretion, waive the forfeiture
period and any other conditions set forth in any Award Agreement under
appropriate circumstances (including the death, disability or Retirement of the
Participant or a material change in circumstances arising after the date of an
Award) and subject to such terms and conditions (including forfeiture of a
proportionate number of the Restricted Shares) as the Committee shall deem
appropriate.

 

(c)                                  Deferral
of Restricted Shares.  Restricted
Shares granted under this Plan may be deferred in accordance with
Section 9.03 by any Participant who is designated by the Committee as
eligible to participate in such deferral arrangement.

 

7.03.                        Change
in Control.  Unless otherwise
provided by the Committee in the applicable Award Agreement, in the event of a
Change in Control, all restrictions applicable to the Restricted Share Award
shall terminate fully and the Participant shall immediately have the right to
the delivery of share certificate or certificates for such shares in accordance
with Section 7.01(d).

 

ARTICLE VIII

 

PERFORMANCE AWARDS

 

8.01.                        Performance
Awards.

 

(a)                                  Award
Periods and Calculations of Potential Incentive Amounts. The Committee may
grant Performance Awards to Participants. A Performance Award shall consist of
the right to receive a payment (measured by the Fair Market Value of a
specified number of shares of Common Stock, increases in such Fair Market Value
during the Award Period and/or a fixed cash amount) contingent upon the extent
to which certain predetermined performance targets have been met during an
Award Period. Performance Awards may be made in conjunction with, or in
addition to, Restricted Share Awards made under Article VII.  The Award Period shall be two or more fiscal
or calendar years as determined by the Committee.  The Committee, in its discretion and under such terms as it deems
appropriate, may permit newly eligible employees, such as those who are
promoted or newly hired, to receive Performance Awards after an Award Period
has commenced.

 

(b)                                 Performance
Targets.  The performance targets
may include such goals related to the performance of the Company or, where
relevant, any one or more of its Subsidiaries or divisions and/or the
performance of a Participant as may be established by the Committee in its
discretion.  In the case of Performance
Awards to “covered employees” (as defined in Section 162(m) of the Code),
the targets will be limited to specified levels of one or more of the
Performance Goals.  The performance
targets established by the Committee may vary for different Award Periods and
need not be the same for each Participant receiving a Performance Award in an
Award Period.  Except to

 

13

 

the extent inconsistent with the performance-based compensation
exception under Section 162(m) of the Code, in the case of Performance
Awards granted to employees to whom such section is applicable, the
Committee, in its discretion, but only under extraordinary circumstances as
determined by the Committee, may change any prior determination of performance targets
for any Award Period at any time prior to the final determination of the Award
when events or transactions occur to cause the performance targets to be an
inappropriate measure of achievement.

 

(c)                                  Earning
Performance Awards.  The Committee,
at or as soon as practicable after the Date of Grant, shall prescribe a formula
to determine the percentage of the Performance Award to be earned based upon
the degree of attainment of performance targets.

 

(d)                                 Payment
of Earned Performance Awards. 
Subject to the requirements of Section 11.05, payments of earned
Performance Awards shall be made in cash or Common Stock, or a combination of
cash and Common Stock, in the discretion of the Committee.  The Committee, in its sole discretion, may
define such terms and conditions with respect to the payment of earned
Performance Awards as it may deem desirable.

 

8.02.                        Terms
of Performance Awards.

 

(a)                                  Termination
of Employment.  Unless otherwise
provided below or in Section 8.03, in the case of a Participant’s
Termination of Employment prior to the end of an Award Period, the Participant
will not have earned any Performance Awards.

 

(b)                                 Retirement.
If a Participant’s Termination of Employment is because of Retirement prior to
the end of an Award Period, the Participant will not be paid any Performance
Awards, unless the Committee, in its sole and exclusive discretion, determines
that an Award should be paid. In such a case, the Participant shall be entitled
to receive a pro-rata portion of his or her Award as determined under Subsection (d).

 

(c)                                  Death
or Disability.  If a Participant’s
Termination of Employment is due to death or disability (as determined in the
sole and exclusive discretion of the Committee) prior to the end of an Award
Period, the Participant or the Participant’s personal representative shall be
entitled to receive a pro-rata share of his or her Award as determined under
Subsection (d).

 

(d)                                 Pro-Rata
Payment.  The amount of any payment
made to a Participant whose employment is terminated by Retirement, death or disability
(under circumstances described in Subsections (b) and (c)) will be the amount
determined by multiplying the amount of the Performance Award which would have
been earned, determined at the end of the Award Period, had such employment not
been terminated, by a fraction, the numerator of which is the number of whole
months such Participant was employed during the Award Period, and the
denominator of which is the total number of months of the Award Period.  Any such payment made to a Participant whose

 

14

 

employment is terminated prior to the end of an Award Period under this
Section 8.02 shall be made at the end of the respective Award Period,
unless otherwise determined by the Committee in its sole discretion.  Any partial payment previously made or
credited to a deferred account for the benefit of a Participant as provided
under Section 8.01(d) of the Plan shall be subtracted from the amount
otherwise determined as payable as provided in this Section.

 

(e)                                  Other
Events.  Notwithstanding anything to
the contrary in this Article VIII, the Committee may, in its sole and
exclusive discretion, determine to pay all or any portion of a Performance
Award to a Participant who has terminated employment prior to the end of an
Award Period under certain circumstances (including the death, disability or
retirement of the Participant or a material change in circumstances arising
after the Date of Grant) and subject to such terms and conditions as the
Committee shall deem appropriate.

 

8.03.                        Change
in Control.  Unless otherwise
provided by the Committee in the applicable Award Agreement, in the event of a
Change in Control, all Performance Awards for all Award Periods shall
immediately become fully payable to all Participants and shall be paid to
Participants in accordance with Section 8.02(d), within 30 days after such
Change in Control.

 

ARTICLE IX

 

OTHER STOCK-BASED AWARDS

 

9.01.                        Grant
of Other Stock-Based Awards.  Other
stock-based awards, consisting of stock purchase rights (with or without loans
to Participants by the Company containing such terms as the Committee shall
determine), Awards of cash, Awards of Common Stock, or Awards valued in whole
or in part by reference to, or otherwise based on, Common Stock, may be granted
either alone or in addition to or in conjunction with other Awards under the
Plan. Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the persons to whom and the time or times at
which such Awards shall be made, the number of shares of Common Stock to be
granted pursuant to such Awards, and all other conditions of the Awards.  Any such Award shall be confirmed by an
Award Agreement executed by the Committee and the Participant, which Award Agreement
shall contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of this Plan with respect to such Award.

 

9.02.                        Terms
of Other Stock-Based Awards.  In
addition to the terms and conditions specified in the Award Agreement, Awards
made pursuant to this Article IX shall be subject to the following:

 

(a)                                  Any Common Stock subject to
Awards made under this Article IX may not be sold, assigned, transferred,
pledged or otherwise encumbered prior to the date

 

15

 

on which the shares
are issued, or, if later, the date on which any applicable restriction,
performance or deferral period lapses; and

 

(b)                                 If specified by the Committee in
the Award Agreement, the recipient of an Award under this Article IX shall
be entitled to receive, currently or on a deferred basis, interest or dividends
or dividend equivalents with respect to the Common Stock or other securities
covered by the Award; and

 

(c)                                  The Award Agreement with respect
to any Award shall contain provisions dealing with the disposition of such
Award in the event of a Termination of Employment prior to the exercise,
realization or payment of such Award, whether such termination occurs because
of Retirement, disability, death or other reason, with such provisions to take
account of the specific nature and purpose of the Award.

 

9.03                           Stock
Unit Awards.

 

(a)                                  In
General.  Without limiting the
generality of the foregoing provisions of this Article IX, and subject to
such terms, limitations and restrictions as the Committee may impose,
Participants designated by the Committee as Participants for purposes of this
Section 9.03 may receive Awards of Stock Units in connection with: (i) the
deferral of Stock Option Gains, (ii) the deferral of restricted stock (whether
granted under this Plan or any other plan sponsored by the Company) and (iii)
in connection with the deferral of other types of compensation, including
without limitation, stock appreciation rights, phantom stock awards and other
types of compensation awards that are payable solely in shares of Common Stock
(whether granted under this Plan or any other plan sponsored by the
Company).  The Committee shall establish
rules and regulations governing the deferrals and the Stock Unit Awards under
any such arrangement as may be established.

 

(b)                                 Deferral
of Stock Option Gains.  Subject to
such timing rules as the Committee may establish, a Participant may irrevocably
elect to defer receipt of all or any portion of Stock Option Gains and receive
a credit under his or her Stock Unit Account of an equivalent number of Stock
Units in accordance with such limitations, terms and conditions as the
Committee may determine.  Any such
deferral election must occur in a time period designated by the Committee from
time to time, but such election must occur prior to the exercise of such stock
option and within such time frame as determined by the Committee in its
discretion so that such election could qualify for income tax deferral in accordance
with then applicable federal tax law. 
Nothing in this Section 9.03(b) of the Plan shall be interpreted to
permit a Participant to exercise any stock option to the extent such stock
option is not vested or is not otherwise exercisable in accordance with the
applicable plan and agreement.  A
Participant’s election to defer Stock Option Gains shall only apply to Option
exercises in connection with which the Participant, in accordance with the
applicable plan and agreement, pays the total amount of the exercise price of
such stock option by the delivery (or deemed delivery) of shares of Common
Stock held by the Participant for at least the period of time required by the
applicable plan and agreement, but in any event, held with no restrictions prior
to

 

16

 

delivery and for such time frame as determined by the Committee in its
discretion so that such election could qualify for income tax deferral in
accordance with then applicable federal tax law; provided, however, that
subject to such terms, conditions and restrictions as the Committee may
determine, Participants may be permitted, in the Committee’s discretion, to
defer into this Plan gains attributable to stock options exercised by means
other than the payment of the exercise price by the delivery (or deemed
delivery) of shares of Common Stock.

 

(c)                                  Deferral
of Restricted Stock.  Subject to
such timing rules as the Committee may establish, a Participant may irrevocably
elect to defer receipt of all or any number of shares of restricted stock
(whether granted under this Plan or any other plan sponsored by the Company)
and receive a credit under his or her Stock Unit Account of an equivalent
number of Stock Units.  Any such
deferral election must be made in a time period designated by the Committee
from time to time, but such election must occur before the restrictions on the
restricted stock lapse and within such time frame as determined by the
Committee in its discretion so that such election could qualify for income tax
deferral in accordance with then applicable federal tax law.  If a Participant elects to defer all or a
portion of a restricted stock award that has previously been granted, the
Participant shall transfer the restricted stock subject to such restricted
stock award to the Company.  Upon such
transfer, the restricted stock shall be cancelled by the Company and no longer
outstanding, except as treasury stock. 
The Stock Units credited to a Participant’s Stock Unit Account with
respect to a deferral of shares of restricted stock shall vest and shall be
forfeited subject to the same terms and conditions as were applicable to the
original restricted stock.  The number
of Stock Units credited to a Participant’s Stock Unit Account shall be reduced by
the number of Stock Units so forfeited.

 

(d)                                 Other
Deferrals.  A Participant may
irrevocably elect to defer receipt of all or any number of shares of Common
Stock issuable upon the exercise of any stock appreciation rights, phantom
stock awards or other types of compensation awards that are payable solely in
shares of Common Stock (whether granted under this Plan or any other plan
sponsored by the Company) and receive a credit under his or her Stock Unit
Account of an equivalent number of Stock Units.  Any such deferral election must be made in the time period
designated by the Committee from time to time.

 

(e)                                  Dividend
Equivalents.  A Participant’s Stock
Unit Account shall be credited with a number of Stock Units equal in value to
the amount of any cash dividends or stock distributions that would be payable
with respect to such Stock Units had such Stock Units been outstanding shares
of Common Stock (“dividend equivalents”). 
The number of Stock Units credited with respect to cash dividends shall
be determined by dividing the amount of cash dividends that would be payable by
the Fair Market Value of Common Stock as of the date such cash dividends would
be payable.  Dividend equivalents
credited to a Participant’s Stock Unit Account that are attributable to Stock
Units that are subject to vesting and forfeiture restrictions as a result of a
deferral of receipt of restricted stock shall be forfeited at such time as any
such underlying Stock Units are forfeited.

 

17

 

(f)                                    Vesting
of Stock Units.  A Participant shall
be vested in the Stock Units credited to such Participant’s Stock Unit Account
that are attributable to Stock Option Gains, deferred shares of restricted
stock, deferred stock appreciation rights, phantom stock awards and other types
of compensation that are payable solely in Common Stock, and the dividend
equivalents credited with respect to each type of award, in accordance with the
same terms and conditions contained in the applicable award agreement and plan
under which such stock option, restricted stock, stock appreciation right,
phantom stock or other type of compensation award was originally granted.  Stock Units that are not vested on the date
of a Participant’s Termination of Employment shall be forfeited.

 

(g)                                 Distribution
of Stock Units.  The vested Stock
Units in a Participant’s Stock Unit Account shall only be distributed, or
commence to be distributed, solely in the form of Common Stock to the
Participant, only upon such participant’s Termination of Employment, in a lump
sum payment or in periodic payments over time as the Participant may elect in
accordance with procedures established by the Committee; provided, however,
that the Committee may establish procedures pursuant to which a Participant may
elect to defer the commencement of distribution to a date later than the
Participant’s Termination of Employment. 
Notwithstanding any other provision of this Section 9.03 or of the
Plan, the balance credited to a Participant’s Stock Unit Account (whether or
not it is then otherwise in pay status, but only to the extent it is otherwise
vested (whether over time or by acceleration) under the terms of the agreements
originally granting the stock) shall be distributed in a lump sum, immediately
prior to and conditioned upon, the consummation of any transaction constituting
a Change in Control.  A Participant
shall be entitled to receive a distribution of one share of Common Stock for
each Stock Unit credited to his or her Stock Unit Account and cash equal to the
Fair Market Value of any fractional Stock Unit credited to his or her Stock
Unit Account.

 

(h)                                 Unsecured
General Creditor.  With respect to
all Stock Units and Awards under Section 9.03 of the Plan, Participants
and their beneficiaries, heirs, successors and assigns shall have no legal or
equitable rights, claims or interest in any specific property or assets of the
Company.  The Company’s obligation under
Section 9.03 of the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay shares of Common Stock in the future, and the
rights of the Participants and beneficiaries with respect thereto shall be no
greater than those of unsecured general creditors.  However, the Committee may, in its discretion, establish one or more
vehicles for payment of its obligations under Section 9.03 of the Plan,
including a trust, know as a “rabbi trust,” for use in funding the benefits
under Section 9.03 of the Plan with a trustee to be selected by the
Committee in accordance with a trust agreement meeting the requirements of Rev.
Proc. 92-64, as it may be amended or supplemented in the future.  The Awards and benefits under
Section 9.03 of the Plan are intended to be unfunded for tax purposes under
the Code and for purposes of the Employee Retirement Income Security Act of
1974, as amended.

 

9.04.                        Foreign
Qualified Awards.  Awards under the
Plan may be granted to such employees of the Company and its Subsidiaries who
are residing in foreign jurisdictions

 

18

 

as the Committee in its sole discretion may determine from time to
time. The Committee may adopt such supplements to the Plan as may be necessary
or appropriate to comply with the applicable laws of such foreign jurisdictions
and to afford Participants favorable treatment under such laws; provided,
however, that no Award shall be granted under any such supplement with terms or
conditions inconsistent with the provision set forth in the Plan.

 

ARTICLE X

 

SHORT-TERM CASH INCENTIVE AWARDS

 

10.01.                  Eligibility.  Executive officers of the Company who are
from time to time determined by the Committee to be “covered employees” for
purposes of Section 162(m) of the Code will be eligible to receive
short-term cash incentive awards under this Article X.

 

10.02.                  Awards.

 

(a)                                  Performance
Targets.  For each fiscal year of
the Company after fiscal year 1999, the Committee shall establish objective
performance targets based on specified levels of one or more of the Performance
Goals.  Such performance targets shall
be established by the Committee on a timely basis to ensure that the targets
are considered “preestablished” for purposes of Section 162(m) of the
Code.

 

(b)                                 Amounts
of Awards.  In conjunction with the
establishment of performance targets for a fiscal year, the Committee shall
adopt an objective formula (on the basis of percentages of Participants’
salaries, shares in a bonus pool or otherwise) for computing the respective
amounts payable under the Plan to Participants if and to the extent that the
performance targets are attained.  Such
formula shall comply with the requirements applicable to performance-based
compensation plans under Section 162(m) of the Code and, to the extent
based on percentages of a bonus pool, such percentages shall not exceed 100% in
the aggregate.

 

(c)                                  Payment
of Awards.  Awards will be payable
to Participants in cash each year upon prior written certification by the
Committee of attainment of the specified performance targets for the preceding
fiscal year.

 

(d)                                 Negative
Discretion.  Notwithstanding the
attainment by the Company of the specified performance targets, the Committee
shall have the discretion, which need not be exercised uniformly among the
Participants, to reduce or eliminate the award that would be otherwise paid.

 

(e)                                  Guidelines.  The Committee shall adopt from time to time
written policies for its implementation of this Article X. Such guidelines
shall reflect the

 

19

 

intention of the Company that all payments hereunder qualify as
performance-based compensation under Section 162(m) of the Code.

 

(f)                                    Non-Exclusive Arrangement.  The
adoption and operation of this Article X shall not preclude the Board or
the Committee from approving other short-term incentive compensation
arrangements for the benefit of individuals who are Participants hereunder as
the Board or Committee, as the case may be, deems appropriate and in the best
of the Company.

 

ARTICLE XI

 

TERMS APPLICABLE GENERALLY TO AWARDS

GRANTED UNDER THE PLAN

 

11.01.                  Plan
Provisions Control Award Terms. 
Except as provided in Section 11.16, the terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the Committee
have the power to grant any Award under the Plan which is contrary to any of
the provisions of the Plan.  In the
event any provision of any Award granted under the Plan shall conflict with any
term in the Plan as constituted on the Date of Grant of such Award, the term in
the Plan as constituted on the Date of Grant of such Award shall control.  Except as provided in Section 11.03 and
Section 11.07, the terms of any Award granted under the Plan may not be
changed after the Date of Grant of such Award so as to materially decrease the
value of the Award without the express written approval of the holder.

 

11.02.                  Award
Agreement.  No person shall have any
rights under any Award granted under the Plan unless and until the Company and
the Participant to whom such Award shall have been granted shall have executed
and delivered an Award Agreement or received any other Award acknowledgment
authorized by the Committee expressly granting the Award to such person and
containing provisions setting forth the terms of the Award.

 

11.03.                  Modification
of Award After Grant.  No Award
granted under the Plan to a Participant may be modified (unless such
modification does not materially decrease the value of the Award) after the
Date of Grant except by express written agreement between the Company and the
Participant, provided that any such change (a) shall not be inconsistent with
the terms of the Plan, and (b) shall be approved by the Committee.

 

11.04.                  Limitation
on Transfer.  Except as provided in
Section 7.01(c) in the case of Restricted Shares, a Participant’s rights
and interest under the Plan may not be assigned or transferred other than by
will or the laws of descent and distribution, and during the lifetime of a
Participant, only the Participant personally (or the Participant’s personal
representative) may exercise rights under the Plan.  The Participant’s Beneficiary may exercise the Participant’s
rights to the extent they are exercisable under the Plan following the death of
the Participant. Notwithstanding the foregoing, to the extent

 

20

 

permitted under Section 16(b) of the Exchange Act with respect to
Participants subject to such Section, the Committee may grant Non-Qualified
Stock Options that are transferable, without payment of consideration, to
immediate family members of the Participant or to trusts or partnerships for
such family members, and the Committee may also amend outstanding Non-Qualified
Stock Options to provide for such transferability.

 

11.05.                  Taxes.  The Company shall be entitled, if the
Committee deems it necessary or desirable, to withhold (or secure payment from
the Participant in lieu of withholding) the amount of any withholding or other
tax required by law to be withheld or paid by the Company with respect to any
amount payable and/or shares issuable under such Participant’s Award, or with
respect to any income recognized upon a disqualifying disposition of shares
received pursuant to the exercise of an Incentive Stock Option, and the Company
may defer payment or issuance of the cash or shares upon exercise or vesting of
an Award unless indemnified to its satisfaction against any liability for any
such tax. The amount of such withholding or tax payment shall be determined by
the Committee and shall be payable by the Participant at such time as the
Committee determines in accordance with the following rules:

 

(a)                                  The Participant shall have the
right to elect to meet his or her withholding requirement (i) by having
withheld from such Award at the appropriate time that number of shares of
Common Stock, rounded up to the next whole share, whose Fair Market Value is
equal to the amount of withholding taxes due, (ii) by direct payment to the
Company in cash of the amount of any taxes required to be withheld with respect
to such Award or (iii) by a combination of shares and cash.

 

(b)                                 The Committee shall have the
discretion as to any Award, to cause the Company to pay to tax authorities for
the benefit of any Participant, or to reimburse such Participant for the
individual taxes which are due on the grant, exercise or vesting of any share
Award, or the lapse of any restriction on any share Award (whether by reason of
a Participant’s filing of an election under Section 83(b) of the Code or
otherwise), including, but not limited to, Federal income tax, state income
tax, local income tax and excise tax under Section 4999 of the Code, as
well as for any such taxes as may be imposed upon such tax payment or
reimbursement.

 

(c)                                  In
the case of Participants who are subject to Section 16 of the Exchange
Act, the Committee may impose such limitations and restrictions as it deems
necessary or appropriate with respect to the delivery or withholding of shares
of Common Stock to meet tax withholding obligations.

 

11.06.                  Surrender
of Awards.  Any Award granted under
the Plan may be surrendered to the Company for cancellation on such terms as
the Committee and the holder approve. 
With the consent of the Participant, the Committee may substitute a new
Award under this Plan in connection with the surrender by the Participant of an
equity compensation award previously granted under this Plan or any other plan
sponsored by the Company; provided, however, that no such substitution or any
other change shall be

 

21

 

permitted if it would constitute a “repricing” under the rules of the
New York Stock Exchange.

 

11.07.                  Adjustments
to Reflect Capital Changes.

 

(a)                                  Recapitalization.
The number and kind of shares subject to outstanding Awards, the Purchase Price
or Exercise Price for such shares, the number and kind of shares available for
Awards subsequently granted under the Plan and the maximum number of shares in
respect of which Awards can be made to any Participant in any calendar year
shall be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Plan or the Awards
granted under the Plan.  The maximum
number of shares in respect of which Awards can be made to any Participant in
any calendar year shall be proportionately adjusted to reflect any other event
that results in an increase in the number of issued and outstanding shares of
Common Stock.  The Committee shall have the
power and sole discretion to determine the amount of the adjustment to be made
in each case.

 

(b)                                 Merger.  After any Merger in which the Company is the
surviving corporation, each Participant shall, at no additional cost, be
entitled upon any exercise of all Options or receipt of other Award to receive
(subject to any required action by shareholders), in lieu of the number of
shares of Common Stock receivable or exercisable pursuant to such Award, the
number and class of shares or other securities to which such Participant would
have been entitled pursuant to the terms of the Merger if, at the time of the
Merger, such Participant had been the holder of record of a number of shares
equal to the number of shares receivable or exercisable pursuant to such
Award.  Comparable rights shall accrue
to each Participant in the event of successive Mergers of the character
described above.  In the event of a
Merger in which the Company is not the surviving corporation, the surviving,
continuing, successor, or purchasing corporation, as the case may be (the “Acquiring
Corporation”), shall either assume the Company’s rights and obligations under
outstanding Award Agreements or substitute awards in respect of the Acquiring
Corporation’s stock for such outstanding Awards.  In the event the Acquiring Corporation fails to assume or
substitute for such outstanding Awards, the Board shall provide that any
unexercisable and/or unvested portion of the outstanding Awards shall be
immediately exercisable and vested as of a date prior to such Merger, as the
Board so determines.  The exercise
and/or vesting of any Award that was permissible solely by reason of this
Section 11.07(b) shall be conditioned upon the consummation of the
Merger.  Any Options which are neither
assumed by the Acquiring Corporation nor exercised as of the date of the Merger
shall terminate effective as of the effective date of the Merger.

 

(c)                                  Options
to Purchase Shares or Stock of Acquired Companies.  After any Merger in which the Company or a
Subsidiary shall be a surviving corporation, the Committee may grant
substituted options under the provisions of the Plan, pursuant to
Section 424 of the Code, replacing old options granted under a plan of
another party to the Merger whose shares or stock subject to the old options
may no longer be issued

 

22

 

following the Merger.  The
foregoing adjustments and manner of application of the foregoing provisions
shall be determined by the Committee in its sole discretion.  Any such adjustments may provide for the elimination
of any fractional shares which might otherwise become subject to any Options.

 

11.08.                  No
Right to Employment.  No employee or
other person shall have any claim of right to be granted an Award under this
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Company or
any of its Subsidiaries.

 

11.09.                  Awards
Not Includable for Benefit Purposes. 
Payments received by a Participant pursuant to the provisions of the
Plan shall not be included in the determination of benefits under any pension,
group insurance or other benefit plan applicable to the Participant which is
maintained by the Company or any of its Subsidiaries, except as may be provided
under the terms of such plans or determined by the Board.

 

11.10.                  Governing
Law.  All determinations made and
actions taken pursuant to the Plan shall be governed by the laws of the State
of Delaware and construed in accordance therewith.

 

11.11.                  No
Strict Construction.  No rule of
strict construction shall be implied against the Company, the Committee, or any
other person in the interpretation of any of the terms of the Plan, any Award
granted under the Plan or any rule or procedure established by the Committee.

 

11.12.                  Compliance
with Rule 16b-3.  It is intended
that, unless the Committee determines otherwise, Awards under the Plan be
eligible for exemption under Rule 16b-3. 
The Board is authorized to amend the Plan and to make any such
modifications to Award Agreements to comply with Rule 16b-3, as it may be
amended from time to time, and to make any other such amendments or
modifications as it deems necessary or appropriate to better accomplish the
purposes of the Plan in light of any amendments made to Rule 16b-3.

 

11.13.                  Captions.  The captions (i.e., all
Section headings) used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize
or affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions have been used in the Plan.

 

11.14.                  Severability.  Whenever possible, each provision in the
Plan and every Award at any time granted under the Plan shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of the Plan or any Award at any time granted under the Plan shall be
held to be prohibited by or invalid under applicable law, then (a) such
provision shall be deemed amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law and

 

23

 

(b) all other provisions of the Plan and every other Award at any time
granted under the Plan shall remain in full force and effect.

 

11.15.                  Amendment
and Termination.

 

(a)                                  Amendment.  The Board shall have complete power and
authority to amend the Plan at any time; provided, however, that the Board
shall not, without the requisite affirmative approval of shareholders of the
Company, make any amendment which requires shareholder approval under the Code
or under any other applicable law or rule of any stock exchange which lists
Common Stock or Company Voting Securities. No termination or amendment of the
Plan may, without the consent of the Participant to whom any Award shall
theretofore have been granted under the Plan, adversely affect the right of
such individual under such Award.

 

(b)                                 Termination.  The Board shall have the right and the power
to terminate the Plan at any time. No Award shall be granted under the Plan
after the termination of the Plan, but the termination of the Plan shall not
have any other effect and any Award outstanding at the time of the termination
of the Plan may be exercised after termination of the Plan at any time prior to
the expiration date of such Award to the same extent such Award would have been
exercisable had the Plan not terminated.

 

11.16.                  Special
Provision Relating to Certain Stock Issuances. Notwithstanding anything to
the contrary contained in this Plan, shares of Common Stock authorized to be
issued under this Plan may be issued to pay awards originally made under and
satisfy options originally granted under the Allegheny Teledyne Incorporated
1996 Incentive Plan or any other stock compensation plan adopted by ATI (an
“ATI Plan”), as provided in the Employee Benefits Agreement dated as of
November 12, 1999, between the Company and Allegheny Teledyne
Incorporated.  All shares of Common
Stock issued in payment of an award or grant shall be governed exclusively by
the terms of such award or grant under the applicable ATI Plan, and any terms
of this Plan inconsistent therewith shall be inapplicable to such shares.

 

 

Adopted by Board of
Directors on 11/12/99.

Approved by
Shareholders on 5/4/00.

Amended by Board of
Directors on 11/1/03.

Amended, restated
and approved by Board of Directors on 3/9/04 and by Shareholders on 5/13/04.

 

24

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