Document:

Unassociated Document

Exhibit 10.1

COMSTOCK MINING INC.

  

2011 EQUITY INCENTIVE PLAN

1. Purpose

 

The Corporation’s philosophy is to align total compensation with the goal of the Company for creating wealth, in the same manner, for all stakeholders. This Plan has been adopted to support that philosophy and the interest of the Corporation and its stockholders by providing appropriate forms of stock-based compensation alternatives that strengthen the ability of the Company to attract, motivate and retain directors, employees and others in a position to affect the financial and operational performance of the Company.

 

2. Definitions

 

Wherever the following capitalized terms are used in this Plan, they shall have the meanings specified below:

 

(a) “Affiliate,” and correlative terms, means, with respect to any Person, (i) any other Person that directly or indirectly Controls, is Controlled by or is under common Control with such Person or (ii) any director, officer, partner or employee of such Person or any Person specified in clause (i) above.

 

(b) “Award” means an award granted under this Plan.

 

(c) “Award Agreement” means a written (including electronic) agreement, document or instrument evidencing an Award that is signed (including electronically) by the Corporation. An Award Agreement may, but need not be, executed or acknowledged by the applicable Participant.

 

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

 

(e) “Cause” means (unless otherwise defined in another agreement between a Participant and the Corporation or an Award Agreement):

 

(i) intentional or negligent failure of a Participant to substantially perform his duties (other than due to Disability);

 

(ii) a Participant’s conviction of or plea of no contest to a crime constituting (A) a felony (or equivalent) under applicable laws or (B) a misdemeanor involving deceit, dishonesty or fraud that relates to the Company; or

 

(iii) intentional or negligent conduct of a Participant which is demonstrably injurious to the Company, monetarily or otherwise (other than to a de minimus extent).

 

(f) “CEO” means the Chief Executive Officer of the Corporation.

 

(g) A “Change in Control” shall be deemed to occur if any of the following events or circumstances shall occur:

 

(i) any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act becomes the beneficial owner of 40% or more of the then outstanding Common Stock or 40% or more of the then outstanding voting securities of the Corporation;

 

(ii) any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act acquires, by proxy or otherwise, the right to vote on any matter or question with respect to 40% or more of the then outstanding Common Stock or 40% or more of the combined voting power of the then outstanding voting securities of the Corporation;

 

(iii) Present Directors and New Directors cease for any reason to constitute a majority of the Board (and, for purposes of this clause (iii), “Present Directors” shall mean individuals who, at the beginning of any consecutive twenty four month period, were members of the Board and “New Directors” shall mean individuals whose election by the Board or whose nomination for election as directors by the Corporation’s stockholders was approved by at least two-thirds of the Present Directors and New Directors then in office);

 

  

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(iv) the stockholders of the Corporation approve a plan of dissolution or complete or substantially complete liquidation of the Corporation; or

 

(v) the consummation of:

 

(A) any reorganization, restructuring, recapitalization, reincorporation, merger, consolidation or similar form of corporate transaction involving the Corporation (a “Business Combination”) unless, following such Business Combination, (1) all or substantially all of the Persons who were the beneficial owners of Common Stock and voting securities of the Corporation outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the common equity securities, and more than 50% the combined voting power of the voting securities, of the entity resulting from such Business Combination (which phrase, for purposes of this clause (v), includes the Corporation, if it is such resulting entity, and an entity that, as a result of such Business Combination, owns the Corporation or all or substantially all of the consolidated assets of the Corporation either directly or through one or more subsidiaries) outstanding after such Business Combination in substantially the same proportions as their ownership of Common Stock and combined voting power of voting securities of the Corporation, respectively, outstanding immediately prior to such Business Combination, (2) no “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act (excluding (x) any entity resulting from such Business Combination and (y) any employee benefit plan (or related trust) of any entity resulting from such Business Combination) beneficially owns 40% or more of the common equity securities, or 40% or more of the combined voting power of the voting securities, of the entity resulting from such Business Combination outstanding after such Business Combination (except to the extent that such beneficial ownership existed prior to such Business Combination with respect to Common Stock and voting securities of the Corporation outstanding immediately prior to such Business Combination) and (3) at least a majority of the members of the board of directors (or similar governing body) of the entity resulting from such Business Combination were members of the Board at the earliest of the time of the execution of the initial agreement providing for such Business Combination, the time of the action of the Board approving such Business Combination or, if such approval is required or sought, at the time of action of the stockholders approving such Business Combination; or

 

(B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or a majority of the consolidated assets of the Corporation, whether held directly or indirectly through one or more subsidiaries (excluding any pledge, mortgage, grant of security interest, sale-leaseback or similar transaction, but including any foreclosure sale).

 

Notwithstanding anything contained herein to the contrary, a “Change in Control” shall not be deemed to have occurred:

 

(x) pursuant to the preceding clause (i) or (ii) solely because 40% or more of the then outstanding Common Stock or the then outstanding voting securities of the Corporation is or becomes beneficially owned or is or becomes directly or indirectly held or acquired by one or more employee benefit plans (or related trusts) maintained by the Company;

 

(y) only for purposes of determining the timing of a delivery of Shares with respect to any Award that is a “deferral of compensation” under Section 409A, unless the event or circumstance also constitutes a “change in the ownership or effective control” of the Corporation or a “change in the ownership of a substantial portion of the assets” of the Corporation, in each case, within the meaning of Section 409A; provided, however, that such an Award shall still vest upon a Change in Control (as defined herein without regard to this clause (y)) to the extent the applicable Award Agreement provides for vesting upon such a Change in Control; or

 

 

  

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(z) pursuant to the preceding clause (i) or (ii) so long (but only for so long) as the Winfield Group collectively holds, beneficially and entirely for their own respective accounts, at the time of such event or circumstance, and thereafter continues to hold, beneficially and entirely for their own respective accounts, at least a majority of the voting power of the then outstanding voting securities of the Corporation.

 

For purposes of this definition, references to “beneficial owner” and correlative phrases shall have the same meanings as set forth in Rule 13d-3 under the Exchange Act (except that ownership by underwriters (including when acting as initial purchasers in a private offering) solely for purposes of a distribution or offering shall not be deemed to be “beneficial ownership”), references to “affiliate” and “associates” shall have the same meanings as set forth under the Exchange Act and references to the Exchange Act shall mean the Exchange Act as in effect on April 30, 2011.

 

(h) “Code” means the Internal Revenue Code of 1986 and the rules, regulations and official guidance thereunder.

 

(i) “Committee” means the Compensation Committee of the Board (or an independent director or group of independent directors performing the functions thereof) or the Board, if either there is no such Committee or the Board is acting in lieu of such Committee. Except to the extent prohibited by applicable laws, rules or regulations, the Board shall have the right, power and authority to exercise any and all rights, powers and authorities of the Committee in respect of this Plan and any Award.

 

(j) “Common Stock” means the common stock, par value $0.000666 per share, of the Corporation or such other securities of the Corporation as may be substituted therefor pursuant to the provisions hereof.

 

(k) “Company” means the Corporation, the Subsidiaries and its and their controlled Affiliates, individually or collectively as may be appropriate in the applicable circumstances.

 

(l) “Consultant” means a consultant, advisor, representative, agent or other independent contractor who performs services (other than as an Employee) for the Company.

 

(m) “Control,” and correlative words, with respect to any Person, mean the ability of another Person to control or direct the management, actions or policies of such Person, whether by ownership of voting securities, by contract or otherwise.

 

(n) “Corporate Event” has the meaning set forth in Section 3.3.

 

(o) “Corporation” means Comstock Mining Inc. and such successor as may be substituted therefor pursuant to the provisions hereof.

 

(p) “Detrimental Conduct” means activities which have been, are or would reasonably be expected to be detrimental to interests of the Company, as determined in the sole and good faith judgment of the Board. Such activities include unlawful conduct under securities, antitrust, tax or other laws, improper disclosure or use of confidential or proprietary information or trade secrets, competition with or improper taking of a corporate opportunity of any business of the Company, failure to cooperate in any investigation or legal proceeding, or misappropriation of property.

 

(q) “Disability” means (unless otherwise defined in another agreement between a Participant and the Corporation or an Award Agreement) a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than 6 months, (ii) becomes entitled to benefits under any long term disability plan than maintained by the Company by reason of any physical or mental impairment or (iii) for purposes of determining the timing of a delivery of Shares with respect to, or other compensation payable in respect of, any Award that is a “deferral of compensation” under Section 409A and payable upon a Participant’s Disability, is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than 12 months.

 

  

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(r) “Dividend Equivalent” means an amount equal to cash dividends and distributions that are payable during the period beginning on the day after the Grant Date and ending on the Exercise Date in respect of the applicable Award.

 

(s) “Effective Date” means the date of adoption of this Plan by the Board.

 

(t) “Eligible Person” means any Employee and, in the case of Awards other than Incentive Stock Option Awards, (i) any Consultant and (ii) any Non-Employee Director.

 

(u) “Employee” means any Person who is employed by the Company.

 

(v) “Exchange Act” means, except as otherwise provided in Section 2(g), the Securities Exchange Act of 1934 and the rules, regulations and official guidance thereunder.

 

(w) “Exercise Date” means, with respect to an Award (unless otherwise provided in the applicable Award Agreement), (i) the date on which such Award is properly exercised, or on which an election to have such Award settled or to have payment or delivery made thereunder is properly made, by the Participant or (ii) for an Award that is not “exercisable,” the date on which payment or delivery under such Award becomes due pursuant to the terms thereof.

 

(x) “Exercise Price” or “Award Price,” with respect to an Award, means the exercise, base or purchase price (if any) in respect thereof.

 

(y) “Fair Market Value” of a share of Common Stock as of any date means:

 

(i) the closing sale price on such date or, if there are no trades on such date, the mean between the closing bid and asked prices on such date, on the principal exchange or market on which the Common Stock is then publicly traded (as reported by such exchange or market or, if not so reported, as reported by another customary financial reporting service); or

 

(ii) if the Common Stock is not publicly traded or, if it is publicly traded but the sales prices or bid and asked prices are not so reported, the fair market value as determined by the Committee in accordance with Section 409A.

 

(z) “Grant Date” means the date specified by the Committee on which a grant of an Award to a Participant shall become effective, which shall not be earlier than the date on which the Committee takes action with respect thereto.

 

(aa) “Incentive Stock Option” means an option to purchase Shares granted pursuant to Section 6, which is intended to qualify and in fact qualifies as an incentive stock option under Sections 421 and 422 of the Code.

 

(bb) “Non-Employee Director” means a member of the Board, or a member of the board of directors of a Subsidiary, who is not an Employee.

 

(cc) “Non-Qualified Stock Option” means an option to purchase Shares granted pursuant to Section 6, which is not an Incentive Stock Option.

 

(dd) “Option” means an Incentive Stock Option or a Non-Qualified Stock Option.

 

(ee) “Option Award” means an Award of an Incentive Stock Option or a Non-Qualified Stock Option.

 

(ff) “Participant” means any Eligible Person who holds an outstanding Award.

 

(gg) “Performance Objective” means, for a Performance Period, an objective (i.e., a performance goal) established by the Committee for such Performance Period based on Performance Measures selected by the Committee.

 

(hh) “Performance Measures” means, with respect to an Award, one or more performance criteria, which may be applied with respect to an individual Participant, the Corporation, any Subsidiary, the Company or any division, line of business or functional or business unit and which may be measured on an absolute, adjusted or relative basis, including: stock price; earnings or earnings per share; stockholder return; return on capital, investment or stockholders’ equity; cash flow or throughput; return on assets employed; operating profit; working capital; market share; net worth; inventory turnover; completion of significant projects or implementation of significant new processes; and achievement of strategic objectives. For Awards which are Section 162(m) Awards, “Performance Measures” means those that satisfy the requirements of and are adopted as required by Section 162(m). For Awards which are not Section 162(m) Awards, “Performance Measures” means those prescribed by the Committee.

 

  

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(ii) “Performance Period” means a period established by the Committee at the time any Performance Share or Performance Unit Award is granted or at any time thereafter (so long as, in the case of a Section 162(m) Award, such period is established within the time allowed under Section 162(m)) during which any Performance Measures with respect to such Award are to be achieved.

 

(jj) “Performance Share Award” means an Award granted pursuant to Section 10, representing the unfunded and unsecured right to receive Shares contingent upon the ac

hievement of one or more Performance Measures.

(kk) “Performance Unit Award” means an Award granted pursuant to Section 10, representing the unfunded and unsecured right to receive one or more units, denominated in Shares or cash or a combination thereof, contingent upon achieving one or more Performance Measures.

 

(ll) “Permitted Transferee” means, with respect to a Participant, a member (including by reason of adoption) of such Participant’s immediate family, which shall include grandparents, parents, aunts, uncles, nieces, nephews, spouses, siblings, children and grandchildren of such Participant and his or her spouse and lineal descendants thereof, and any estate, trust, corporation, limited liability company, partnership, or other entity, 90% of the voting, equity and beneficial interests in which are held by or for such Persons and such other Person as the Committee may authorize.

 

(mm) “Person” includes an individual, an estate, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization, an association and any other entity as well as a government or any department, agency or political subdivision thereof.

 

(nn) “Phantom Stock Award” means an Award granted pursuant to Section 9, representing the unfunded and unsecured right to receive cash in an amount equal to the Fair Market Value of Shares.

 

(oo) “Plan” means this Comstock Mining, Inc. 2011 Equity Incentive Plan, as amended.

 

(pp) “Restricted Stock Award” means an Award granted pursuant to Section 8, representing the unfunded and unsecured right to receive a Share.

 

(qq) “Restricted Stock Unit Award” means an Award granted pursuant to Section 9, representing the unfunded and unsecured right to receive one or more units, denominated in Shares.

 

(rr) “Section 162(m)” means Section 162(m) of the Code and the rules, regulations and official guidance issued thereunder.

 

(ss) “Section 162(m) Award” means any Option and any other Award that is intended to qualify and in fact qualifies for the performance-based compensation exemption to the application of the $1 million deduction limit under Section 162(m).

 

(tt) “Section 409A” means Section 409A of the Code and the rules, regulations and official guidance issued thereunder.

 

(uu) “Share” means a share of Common Stock.

 

(vv) “Securities Act” means the Securities Act of 1933 and the rules, regulations and official guidance thereunder.

 

(ww) “Separation from Service” means a “separation from service” within the meaning of Section 409A.

 

  

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(xx) “Specified Employee” means an Employee treated as a “specified employee” as of his or her “Separation from Service” under Section 409A(a)(2)(B)(i) of the Code.

 

(yy) “Stock Appreciation Right Award” or “SAR Award” means an Award granted pursuant to Section 7, representing the unfunded and unsecured right to receive Shares with a Fair Market Value equal to the excess (if any) specified in Section 7.

 

(zz) “Subsidiary” means a Person that is Controlled, directly or indirectly, by the Corporation; provided, however, that, with respect to Incentive Stock Options, the term “Subsidiary” shall include only a Person that qualifies under Section 424(f) of the Code as a “subsidiary corporation” with respect to the Corporation.

 

(aaa) “Substitute Award” means an Award granted pursuant to Section 3.2 solely in connection with the assumption of, or in substitution for, outstanding awards previously granted by a Person acquired by the Company or with which the Company merges or combines.

 

(bbb) “Terminated Plans” means the various equity plans of the Corporation, in each case, as in effect on the Effective Date, including, without limit, the equity incentive plans of the Company adopted in 2005 and 2006.

 

(ccc) “Transfer,” and correlative words, means, with respect to any Award, the gift, sale, assignment, transfer, pledge, hypothecation or other disposition (whether for or without consideration and whether voluntary, involuntary or by operation of law) of such Award or any interest therein.

 

(ddd) “Winfield Group” means John V. Winfield, his heirs, personal representatives, entities and family trusts created and controlled by Mr. Winfield, any individual retirement accounts held by Mr. Winfield, Santa Fe Financial Corporation, Portsmouth Square, Inc. and InterGroup Corporation.

 

3. Shares and Adjustments

 

3.1 Number of Shares.  Subject to Sections 3.2 and 3.3, the aggregate number of Shares that may be delivered under this Plan in any type of Award(s) is 6,000,000 Shares. The Shares delivered under this Plan may consist of authorized but unissued Shares, treasury Shares or issued Shares that have been reacquired by the Company on the open market or otherwise. Notwithstanding anything contained herein to the contrary, in no event shall the number of Shares subject to Awards granted to any one Participant during any one calendar year exceed 50% of the aggregate number of Shares that may be delivered under the Plan.

 

3.2 Calculation of Shares.  To the extent that any Award is terminated, forfeited or cancelled or expires or is otherwise surrendered or returned to the Company, in each case prior to delivery of Shares thereunder, or is paid or settled in cash, the underlying Shares will no longer be charged against the aggregate number set forth in Section 3.1 (until they become subject to another Award) and may again be made subject to Awards under this Plan. For purposes of calculating the number of Shares used and available for use under this Plan (i) only Shares underlying Awards that have been or, by their terms, may be settled by delivery of Shares shall be charged against such number, (ii) Awards in respect of which payment of cash is made in lieu of delivery of Shares shall be deemed to have been terminated prior to the delivery of Shares thereunder, (iii) Shares deliverable or delivered under Substitute Awards shall not be charged against such number, (iv) shares retained by or relinquished to the Corporation in payment of any Exercise Price or satisfaction of any tax withholding obligation in respect of an Award shall not be charged against such number and (v) outstanding Shares delivered to the Corporation in payment of any Exercise Price or satisfaction of any tax withholding obligation in respect of an Award shall be added to such number.

 

3.3 Mandatory Adjustments.  If (i) any reincorporation, recapitalization, reorganization, reclassification, stock dividend, stock split, reverse stock split or other change in the capital stock of the Corporation shall occur, (ii) any asset or stock acquisition or divestiture, merger, consolidation, share exchange, spin-off, split-up or other business combination involving the Company shall occur, (iii) any unusual and material impairment, judgment, settlement, change in accounting principles, change in tax or other laws, rules or regulations, change in fiscal year, gain or loss or other corporate event or transaction involving the Company shall occur or (iv) any dividend or distribution (other than a cash dividend that is ordinary in nature and amount) shall be declared or made with respect to the Common Stock (each, a “Corporate Event”) or if any Change in Control shall occur, the Committee shall, in the manner and to the extent that it deems appropriate and equitable, cause an adjustment to be made in: (A) the maximum number and kind of securities subject to this Plan; (B) the number, kind and amount of securities, rights and cash subject to then outstanding Awards; (C) the Exercise Price of then outstanding Awards, and (D) the other terms of this Plan and then outstanding Awards (including Performance Objectives, Performance Periods and Performance Measures, to the extent permitted under Section 162(m)); provided, however, that, in the case of Incentive Stock Options and Section 162(m) Awards, such adjustments shall be made in a manner consistent with the applicable requirements of Sections 162(m) and 424(a) of the Code; provided further, however, that, in the case of Options intended to not provide for the “deferral of compensation” within the meaning of Section 409A, such adjustment shall be made in a manner consistent with the applicable requirements of Section 409A. Such adjustment shall be conclusive and binding for all purposes.

 

  

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3.4 Permissible Adjustment on a Change in Control.  Without limiting the adjustments required or permitted under Section 3.3, but subject to the requirements of Section 162(m), in the case of a Section 162(m) Award, and Section 409A, in the case of an Award that provides for the “deferral of compensation” within the meaning of Section 409A, the Committee may prescribe additional provisions relating to the effect of a Change in Control or a Corporate Event on an Award. Such provisions need not be in an Award Agreement, will not require the consent of a Participant and may include: (i) acceleration of the vesting and exercisability of any Award; (ii) extension of time periods for satisfying vesting or Transferability conditions with respect to, or exercising or realizing payments, rights, benefits or gains from, any Award; (iii) elimination or modification of conditions related to vesting, Transferability or exercisability of or payments, rights, benefits or gains under, any Award; (iv) provision for the settlement of any Award with an equivalent value in other securities, cash or properties; (v) requirement that outstanding Awards that are “in-the-money” be settled in cash in an amount equal to the amount by which they are “in-the-money”, as determined by the Committee; (vi) requirement that Participants surrender their outstanding Awards that are “in-the-money” in exchange for a settlement immediately following the Change in Control, as determined by the Committee; (vii) cancellation of any or all Awards that are not “in-the-money” without consideration; and (viii) cancellation or forfeiture of any Awards that are not vested as of the date of the Change in Control without consideration. Such surrender, settlement and cancellation shall take place as of the date of the Change in Control or such other date as the Committee may specify. For purposes of this Section 3, an Award is deemed to be “in-the-money” if the excess of the Fair Market Value as of the date of the Change in Control over the Award Price is a positive value.

 

3.5 Permissible Adjustment on a Corporate Events.  Without limiting the adjustments required or permitted under Section 3.3, except as provided in Section 10.2(a) (and without otherwise limiting the authority granted hereunder to the Committee), the Committee shall have the authority, to effect, at any time and from time to time, upon the occurrence of a Corporate Event (i) the cancellation of any or all outstanding Awards and the grant in substitution therefor of new Awards covering the same or different numbers or kinds of securities and having an Award Price which may be the same as or different than the Award Price of the Awards being cancelled, (ii) the cancellation of any or all outstanding Awards in exchange for payment to the applicable Participants of an amount equal to (A) an equivalent value in other securities, cash or properties or (B) an amount equal to the amount by which they are “in-the-money” which may be no consideration for Awards that are not “in-the-money,” as determined by the Committee and (iii) the amendment of the terms and conditions of any and all outstanding Awards; provided, however, that no such action shall materially adversely affect the rights or benefits of a Participant under any outstanding Award without the consent of such Participant.

 

3.6 Acceleration.  Subject to the requirements of Section 162(m), in the case of a Section 162(m) Award, and Section 409A, in the case of an Award that provides for the “deferral of compensation” within the meaning of Section 409A, the Committee shall have authority to accelerate the vesting, exercisability or payment of any and all outstanding Awards at any time or on the occurrence of any event or circumstance.

 

3.7 Foreign Employees.  In order to facilitate the grant of Awards under this Plan to Participants who are foreign nationals, or who are employed by the Company outside of the United States, the Committee may prescribe such special terms for Awards, approve such supplements or amendments to, or alternative versions of, this Plan, as it may consider necessary, appropriate or expedient to accommodate differences in local law, rule, regulation, tax policy or custom without thereby affecting the terms of this Plan for any other purpose; provided, however, that no such supplements, amendments or alternative versions shall include any provisions that are inconsistent with the terms of this Plan, as then in effect, unless this Plan could have been supplemented or amended to eliminate such inconsistency without further approval by the stockholders under rules of any market or exchange on which the Shares are then listed.

 

  

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4. Administration and Approval

 

4.1 Committee.  This Plan shall be administered by the Committee, which shall have all rights, powers and authorities necessary, appropriate or expedient in connection therewith. Neither the Company nor any member of the Committee shall be liable for any action, omission or determination made in good faith with respect to this Plan or any Award, including any failure of an Award to qualify as a Section 162(m) Award or an Incentive Stock Option Award or meet the requirements for exemption from or compliance with Section 409A. Except to the extent prohibited by applicable laws, rules or regulations, the Committee shall have the authority to delegate administration of this Plan, in whole or in part, to third party service providers and administrators as well as Employees. Without limiting the preceding sentence, but subject to Section 10.2(a), the Committee shall have the authority to delegate to the CEO, or his designee, authority to (i) administer the Plan and (ii) designate Employees to participate in a pool of Awards, the terms and conditions of which (including the aggregate number of Shares subject to Awards within the pool) shall have been specified by the Committee. Where appropriate in order to give effect to a delegation under this Section 4.1, references to the Committee shall also include the CEO or such designee.

 

4.2 Discretionary Authority.  Subject only to the express limitations of this Plan, the Committee shall have authority to determine the Eligible Persons to whom, and the time or times at which, Awards are granted, the type of Awards granted, the number of Shares subject to Awards, the Award Price (if any) of Awards, the time or times at which Awards vest and become exercisable or payable, the form in which Awards become payable, the term of Awards, the procedures for exercise and settlement of Awards and all other terms and conditions of Awards. Subject only to the express limitations of this Plan, the Committee shall have sole authority to interpret this Plan and each Award, to make all factual determinations under this Plan and each Award (including determinations as to the achievement of Performance Measures), and to make all other decisions necessary or advisable for administration of this Plan and any Award. The Committee shall have the authority to prescribe, amend and rescind rules and regulations relating to this Plan and the administration thereof. The Committee may amend this Plan or any Award Agreement to correct any defect, error or omission or to reconcile any inconsistency herein or therein. The determinations of the Committee under this Plan need not be uniform and may be made selectively among Persons who receive, or are eligible to receive, Awards, whether or not such Persons are similarly situated. All interpretations, determinations, decisions and actions by the Committee may be made in the exercise of its sole discretion and shall be final and binding upon all parties.

 

4.3 Terms of Awards.  The Committee shall establish the material terms and conditions of each Award at the time it grants such Award. Such terms and conditions may include payment of any Award Price in Shares, cash or a combination thereof (which form of payment may be either prescribed by the Committee or subject to the discretion of the Company or the Participant), Performance Measures, tandem or reload features, vesting schedules (and provisions regarding acceleration of vesting), registration provisions (including indemnification and contribution arrangements), provisions relating to withholding of taxes, Transferability provisions, forfeiture and clawback provisions, anti-dilution provisions and provisions relating to the effect of a Change in Control or Corporate Event, provisions relating to voting, dividends and distributions, and exercise provisions (including provisions relating to conditional exercises, net exercises and timing of payment of Award Prices). Subject to Sections 3.4 and 3.5, each Award shall be evidenced by an Award Agreement that shall include such terms and conditions.

 

4.4 Section 409A.  Notwithstanding anything contained herein to the contrary, the terms of the Plan are intended to, and shall be interpreted and applied so as to, comply in all respects with Section 409A. The Committee may amend the terms of any Award in order to cure any potential defects under Section 409A, in a manner deemed appropriate by the Committee, without the consent of the Participant. It is the intention of the Corporation that no Award be subject to the additional tax imposed by Section 409A(b)(5)(i) of the Code. Without limiting the generality of the foregoing, it is intended that (i) all Options will be granted in a manner so that they will be exempt from Section 409A and (ii) all other Awards will be granted in a manner so that they either (a) do not provide for a deferral of compensation subject to Section 409A or (b) will be subject to Section 409A. If an Award is intended to be subject to Section 409A, then the Award shall be settled and paid in a single lump sum as of a specified date upon the Participant’s Separation from Service or upon the earlier of such dates, as specified by the Committee at the time of grant, and shall otherwise be granted, administered, settled and paid in accordance with Section 409A; provided, however, that no such settlement or payment shall be made to a Specified Employee upon a Separation from Service before the date which is 6 months after the date of the Specified Employee’s Separation from Service (or, if earlier, the date of death of the Specified Employee); provided, further, that Performance Share Awards and Performance Unit Awards may be paid upon a Change in Control that is a permissible payment event under Section 409A. Nothing in this Section 4.4 shall be construed as an admission that any of the compensation and or benefits payable under this Plan constitutes “deferred compensation” subject to Section 409A.

 

  

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4.5 Notices.  The Corporation shall use reasonable efforts to inform Participants of (i) the record date, if any, for any Corporate Event sufficiently in advance to enable them to exercise vested Awards or, if otherwise permitted by the terms thereof then in effect, unvested Awards prior to such record date and (ii) any adjustments pursuant to Section 3.3, 3.4, 3.5 or 3.6; provided, however, that neither the Company nor any director, officer, employee, agent, consultant or representative of the Company shall be liable for failure to do so and the failure to do so shall not affect the authorization, validity, enforceability or consummation of any Corporate Event.

 

4.6 Stockholder Approval.

 

(a) To make Awards of Incentive Stock Options, this Plan must be approved by the stockholders in a manner intended to comply with Sections 422(b)(i) of the Code no later than the earlier of (i) 12 months following the Effective Date and (ii) the date an Award is first settled under the Plan.

 

(b) To make Section 162(m) Awards, until such time as this Plan is approved by the stockholders in a manner intended to comply with Section 162(m), any such Awards must be contingent on such stockholder approval and no such Awards may be settled prior to such stockholder approval. In addition, to make Section 162(m) Awards following the expiration of any prior stockholder approval, this Plan must be reapproved by the stockholders in accordance with the requirements of Section 162(m).

 

5. Eligibility and Awards

 

All Eligible Persons are eligible to be selected by the Committee to receive an Award under this Plan. Except as otherwise agreed by the Company, no Person shall have a right to receive an Award or, having received an Award in the past, have a right to again receive an Award. The Committee is expected to consult with the CEO before granting Awards, except in cases where the Committee determines that such consultation would be inappropriate; provided, however, the authorization, validity and enforceability of any Award shall not be adversely affected due to any failure to so consult.

 

6. Stock Option Awards

 

6.1 Grant of Option Awards.  An Option Award may be granted to any Eligible Person selected by the Committee; provided, however, that, in addition to any other limitations required to comply with the applicable provisions of the Code, Incentive Stock Options shall be granted only to Employees. Unless otherwise designated by the Committee and complying with the applicable provisions of the Code, each Option shall be a Non-Qualified Stock Option.

 

6.2 Exercise Price.  Except in the case of Substitute Awards, the Committee shall prescribe the Exercise Price per Share under each Option Award; provided, however, that the Exercise Price per Share under an Option Award (other than a Substitute Award) shall not be less than the Fair Market Value per Share on the Grant Date.

 

6.3 Vesting; Term of Option Award.  The Committee shall prescribe the number of Shares covered by an Option Award and the time or times at which, and the conditions upon which, each Option Award shall become vested and exercisable, if any. The Committee shall prescribe the term of each Option Award; provided, however, that no Option Award shall have a term that is longer than ten years after the applicable Grant Date.

 

  

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6.4 Repricing.  Notwithstanding anything contained herein to the contrary, the Committee shall not have authority, without stockholder approval, to (i) amend previously granted Option Awards to reduce the Exercise Price of such Option Awards or (ii) except pursuant to Sections 3.3, 3.4 or 3.5, cancel such Option Awards and grant replacement Awards with a lower Exercise Price than the Option Awards being cancelled.

 

6.5 Exercise of Option Award.  Subject to such terms and conditions set forth in this Plan or as may be prescribed by the Committee, an exercisable Option Award may be exercised in whole or in part at any time during the term thereof by delivery of written notice to the Corporation, together with payment of the aggregate Exercise Price applicable to the Shares underlying such Option Award, or the part thereof, exercised. Such payment shall be made in cash; provided, however, that the Committee may: (i) allow a delay in payment of up to thirty (30) days from the date of exercise; (ii) allow payment, in whole or in part, through the delivery of Shares already owned by the Participant, duly endorsed for Transfer to the Corporation with a Fair Market Value on the date of delivery equal to such aggregate Exercise Price; (iii) allow payment, in whole or in part, through the surrender of Shares then issuable upon exercise of such Award having a Fair Market Value on the date of exercise equal to such aggregate Exercise Price; (iv) allow payment, in whole or in part, through the delivery of a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Committee; (v) if the Shares are then publicly traded, allow payment, in whole or in part, through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to Shares issuable upon such exercise and that the broker has been directed to pay a portion of the net proceeds of the sale to the Corporation sufficient to pay such aggregate Exercise Price; or (vi) allow payment through any combination thereof. In the case of a promissory note, the Committee may also prescribe the form of such note and the security, if any, to be given for such note.

 

6.6 Additional Rules for Incentive Stock Options.

 

(a) No Incentive Stock Option shall be granted to a Participant to the extent that, as a result of such grant, the aggregate Fair Market Value (determined as of the proposed Grant Date) of the Shares with respect to which “incentive stock options” under Section 422 of the Code are exercisable for the first time in any calendar year under this Plan and all other plans of the Company would exceed the maximum amount permitted under Section 422(d) of the Code. This limitation shall be applied by taking “incentive stock options” under Section 422 of the Code into account in the order in which granted.

 

(b) No Incentive Stock Option Award shall provide that such Incentive Stock Option may be exercised later than three months following termination of employment of the Participant with the Company, except to the extent permitted under special rules relating to death and disability in accordance with Section 422 of the Code.

 

(c) Notwithstanding anything contained herein to the contrary, the terms and conditions of an Incentive Stock Option Award may contain such additional terms and conditions, not inconsistent with the terms of this Plan, as are deemed necessary or desirable by the Committee so as to cause such Incentive Stock Option to qualify as an “incentive stock option” under Section 422 of the Code; provided, however, the authorization, validity and enforceability of any Incentive Stock Option Award shall not be adversely affected due to a failure to comply with Section 422 of the Code. Such terms and conditions, together with the terms of this Plan, shall be interpreted so as to cause such Incentive Stock Option to qualify as an “incentive stock option” under Section 422 of the Code. Such terms and conditions shall include, if applicable, limitations on Incentive Stock Options granted to owners of ten percent or more of the Company. An Incentive Stock Option shall be treated as a Non-Qualified Stock Option to the extent that requirements applicable to “incentive stock options” under Section 422 of the Code shall not be satisfied, shall not be Transferable other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the applicable Participant only by such Participant.

 

  

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(d) If Shares acquired by exercise of an Incentive Stock Option are disposed within two years following the Grant Date or one year following the delivery of such Shares to the Participant upon exercise thereof, such Participant must be required to, promptly following such disposition, notify the Company in writing of the date and terms of such disposition and provide such other information regarding such disposition as the Company may request.

 

7. Stock Appreciation Rights Awards

 

7.1 Grant of SAR Awards.  An SAR Award may be granted to any Eligible Person selected by the Committee.

 

7.2 Base Price.  Except in the case of Substitute Awards, the Committee shall prescribe the base price under each SAR Award; provided, however, that the base price per Share under a SAR Award (other than a Substitute Award) shall not be less than the Fair Market Value of a Share on the Grant Date.

 

7.3 Vesting; Term of SAR Award.  The Committee shall prescribe the number of Shares covered by SAR Award and the time or times at which, and the conditions upon which, each SAR Award shall become vested and exercisable, if any. The Committee shall prescribe the term of each SAR Award; provided, however, that no SAR Award shall have a term that is longer than ten years after the applicable Grant Date.

 

7.4 Exercise of SAR Award.  Subject to such terms and conditions set forth in this Plan or as may be prescribed by the Committee, an SAR Award may be exercised in whole or in part at any time during the term thereof by delivery of written notice to the Corporation. Upon exercise of an SAR Award in whole or in part, the Participant shall be entitled to receive such number of Shares that in the aggregate have a Fair Market Value equal to the excess, if any, of (i) the Fair Market Value of the Shares underlying such SAR Award or the part thereof exercised as of the date of exercise over (ii) the aggregate base price applicable to such Shares.

 

7.5 Freestanding Awards.  Notwithstanding anything contained herein to the contrary, no SAR Award shall be awarded in tandem with an Option Award.

 

8. Restricted Stock Awards

 

8.1 Grant of Restricted Stock Awards.  A Restricted Stock Award may be granted to any Eligible Person selected by the Committee.

 

8.2 Purchase Price.  A Restricted Stock Award may provide for an award of Shares without requiring payment of any purchase price, or may require the Participant to pay a specified purchase price, for the Shares underlying such Restricted Stock Award. The Committee shall prescribe any such purchase price under any Restricted Stock Award.

 

8.3 Vesting.  The Committee shall prescribe the time or times at which, and the conditions upon which, each Restricted Stock Award shall become vested, if any.

 

8.4 Restrictions.  The Shares underlying a Restricted Stock Award may be immediately Transferable or subject to restrictions on Transfer. The Committee shall prescribe the time or times at which, and the conditions upon which, each Restricted Stock Award shall become Transferable. The Committee shall prescribe the term for satisfying any conditions to Transferability; provided, however, that such term shall not be longer than seven years after the Grant Date. The Committee may prescribe that the certificates representing the Shares underlying a Restricted Stock Award shall remain in the physical custody of the Company or an agent designated by the Company until all such restrictions and conditions have been satisfied on or are waived, terminated or expired.

 

8.5 Forfeiture.  Unless otherwise prescribed by the Committee, failure to satisfy any conditions and restrictions to vesting or Transferability shall result in the forfeiture (and return to the Corporation) by the Participant of the Shares underlying the applicable Restricted Stock Award and the return by the Company to the Participant of any purchase price paid by the Participant in respect thereof.

 

8.6 Rights as Stockholder.  Subject to the terms and conditions set forth in this Plan or as may be prescribed by the Committee, the Participant will have all rights of a stockholder with respect to the Shares underlying a Restricted Stock Award, including the right to vote such Shares and, subject to such requirements as the Committee may prescribe (including requirements as to vesting, Transferability, custody and forfeiture consistent with those applicable to the underlying Shares), to receive all dividends and other distributions paid with respect to such Shares, at the same time and form as other stockholders of the Corporation receive such dividends or distributions or such other time and form as may be prescribed by the Committee.

 

  

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8.7 Section 83(b) Election.  The Committee may prescribe that a Restricted Stock Award is conditioned upon the applicable Participant refraining from making an election with respect to such Restricted Stock Award under Section 83(b) of the Code. Irrespective of whether a Restricted Stock Award is so conditioned, the applicable Award Agreement shall specify that, if the applicable Participant makes an election pursuant to Section 83(b) of the Code with respect to such Restricted Stock Award, such Participant shall be required to promptly file a copy of such election with the Corporation.

9. Restricted Stock Unit Awards and Phantom Stock Awards

 

9.1 Grant of Restricted Stock Unit Awards and Phantom Stock Award.  A Restricted Stock Unit Award or a Phantom Stock Award may be granted to any Eligible Person selected by the Committee.

 

9.2 Vesting.  The Committee shall prescribe the time or times at which, and the conditions upon which, each Restricted Stock Unit Award and Phantom Stock Award shall become vested, if any. The Committee shall prescribe the term for satisfying any such requirements; provided, however, that such term shall not be longer than ten years after the applicable Grant Date.

 

9.3 Benefit Upon Vesting.  Subject to such terms and conditions set forth in this Plan or as may be prescribed by the Committee, upon vesting of a Restricted Stock Unit Award and Phantom Stock Award, the applicable Participant shall be entitled to receive Shares (with respect to Restricted Stock Unit Awards) or cash (with respect to Phantom Stock Awards) in an amount equal to the Fair Market Value of the Shares underlying such Award on such date.

 

9.4 Dividends.  Subject to the terms and conditions of this Plan or as may be prescribed by the Committee, the Participant will have, subject to such requirements as the Committee may prescribe (including requirements as to vesting, custody and forfeiture consistent with those applicable to the underlying Shares), the right to receive all dividends and other distributions paid with respect to Shares underlying a Restricted Stock Unit Award and a Phantom Stock Award, at the same time and form as other stockholders of the Corporation receive such dividends or distributions or such other time and form as may be prescribed by the Committee.

 

10. Performance Share Awards and Performance Unit Awards

 

10.1 Grant of Performance Share Awards and Performance Unit Awards.

 

(a) Performance Share Awards and Performance Unit Awards may be granted to any Eligible Person selected by the Committee. Performance Share Awards and Performance Unit Awards shall be based on the achievement, over a specified period, of Performance Measures as prescribed by the Committee. Performance Share Awards and Performance Unit Awards may be paid in Shares, cash or a combination thereof as prescribed by the Committee.

 

(b) Notwithstanding anything contained herein to the contrary, the Committee’s obligations under Section 10.2 cannot be delegated.

 

10.2 Qualified Performance-Based Compensation.

 

(a) The Committee may specify Awards are intended to be considered “qualified performance-based compensation” under Section 162(m). In connection with granting Section 162(m) Awards, the Committee must satisfy the requirements of Section 162(m) with respect to who is entitled to grant such Awards. To the extent applicable, any Award intended to constitute a Section 162(m) Award shall be conditioned on the achievement of one or more Performance Objectives during a Performance Period. The Committee shall use reasonable efforts to take such action as is required so that Awards intended to constitute Section 162(m) Awards comply with Section 162(m). Notwithstanding anything contained herein to the contrary, Section 162(m) Awards shall be granted only by vote or consent of a committee or by unanimous vote or consent of the Board where at least two directors shall satisfy the requirements for an “outside director” under Section 162(m) and the grant of Section 162(m) Awards and establishment of Performance Objectives and Performance Periods shall be made during the times specified and in accordance with the terms of Section 162(m). To the extent that any such Awards are intended to be “qualified performance-based compensation” under Section 162(m), no such Award may be made as an alternative to another Award that is not designated as “qualified performance-based compensation” but instead must be separate and apart from all other Awards.

 

  

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(b) When Performance Share Awards or Performance Unit Awards intended to be considered “qualified performance-based compensation” are granted, the Committee shall establish (i) the objective Performance Objectives that must be met, (ii) the Performance Period during which performance will be measured, (iii) the maximum amounts that may be paid if the Performance Objectives are met and (iv) any other conditions that the Committee deems appropriate and consistent with this Plan and the requirements of Section 162(m) for “qualified performance-based compensation.” The Committee shall establish the Performance Objectives either before the beginning of the Performance Period or during a period ending no later than the earlier of (A) 90 days after the beginning of the Performance Period or (B) the date on which 25% of the Performance Period has been completed or such other date as may be required or permitted under Section 162(m). The Committee may, at any time during the first 90 days of the Performance Period (or, if shorter, the first 25% of the Performance Period, as allowed under Section 162(m)), adjust or modify the calculation of a Performance Objective. Performance Objectives must be established in a written form within the time prescribed by Section 162(m). The Performance Objectives shall satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the Performance Objectives be substantially uncertain at the time they are established and that the Performance Objectives be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the Performance Objectives have been met. Except as provided in this Section 10.2(b), the Committee shall not have discretion to increase the amount of compensation that is payable upon achievement of Performance Objectives.

 

(c) The Committee shall certify and announce the results for the Performance Period to all relevant Participants. The Committee shall determine the amount, if any, to be paid pursuant to each Award based on the achievement of the Performance Objectives and the terms of each Award Agreement.

 

(d) The Committee may provide that Awards shall be settled, in whole or in part, in the event of the Participant’s death or Disability, a Change in Control or under other circumstances consistent with Section 162(m) and Section 409A.

 

(e) Unless the Committee prescribes otherwise, Performance Share Awards and Performance Unit Awards will be payable in a lump sum prior to the 15th day of the third month of the year immediately following the year in which the end of the Performance Period occurs in accordance with the applicable short-term deferral exception provisions of Section 409A or, in accordance with procedures established by the Committee and the applicable provisions of Section 409A, on a deferred basis.

 

11. Substitute Awards, Dividend Equivalents and Other Awards

 

Substitute Awards, Dividend Equivalents and Awards other than Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Phantom Stock, Performance Share and Performance Unit Awards may be granted to any Eligible Person selected by the Committee. Such other Awards may be granted alone or in addition to any other Awards granted under this Plan and may be paid in Shares or cash as the Committee shall determine. The terms and conditions of such Awards shall be prescribed by the Committee.

 

12. Requirements for Issuance of Shares and Restrictions on Transfer

 

12.1 Share Certificates and Delivery.

 

(a) Shares issued hereunder may be evidenced in such manner as the Corporation may deem necessary, appropriate or expedient, including book entry registration or issuance of a physical certificate, which may be retained by the Secretary of the Corporation or such escrow agent as the Corporation may appoint. Shares issued hereunder may be delivered in such manner as the Corporation may deem necessary, appropriate or expedient, which may include delivery in book entry form by causing the Shares to be credited to the Participant’s account (to be opened and maintained by the Participant) at such brokerage firm as may be designated from time to time by the Corporation to assist in the administration of the Plan (the “Broker”). When Shares are delivered in book-entry form, such delivery as well as all subsequent Transfers and other matters relating to the Shares will be subject, in addition to all other provisions hereof, to the rules and requirements imposed by the Broker and such administrative rules and requirements as may be imposed by the Corporation.

 

  

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(b) Prior to vesting and payment of any applicable loans, the Shares will be subject to stop transfer instructions given by the Corporation to the Broker and the transfer agent for the Shares. Upon vesting of any Shares, such stop transfer instructions will be terminated (except to the extent that any Shares may be subject to loans or sold to satisfy applicable withholding requirements). Upon forfeiture of any Shares, the Broker and such transfer agent will be instructed to debit such Shares from such account and return them to the Corporation. Each physical certificate and each book entry, in each case relating to Shares may include such restrictive legends in such forms as the Corporation may deem convenient, expedient, necessary or appropriate relating to the restrictions under this Plan or the applicable Award Agreement, as applicable, applicable securities, tax or other laws or applicable rules of any securities exchange or market.

 

12.2 Delivery of Cash.  All cash payments in satisfaction of an Award (other than Dividend Equivalents) shall equal the Fair Market Value of the Shares to which the cash payment relates, determined as of the Exercise Date or the settlement date of the Award, as applicable, and such payment shall be made within 3 business days thereafter.

 

12.3 Securities Laws.  Notwithstanding anything contained herein or in any Award Agreement to the contrary, no Shares shall be issued or Transferred in connection with any Award unless and until all requirements under securities and other laws, rules and regulations, under the rules of any securities exchange or market on which the Common Stock is then listed and under Company policies and procedures shall have been complied with.

 

12.4 Legends.  Certificates and book entries representing Shares issued or Transferred under this Plan may be subject to such stop-transfer orders and other restrictions, and bear such other legends, as the Corporation may deem necessary, appropriate or expedient.

 

12.5 Registration.  The Corporation shall use commercially reasonable efforts to file, at its expense, a registration statement or statements on Form S-8 (or any applicable successor Form) to register the sale, issuance, transfer or resale of the Shares subject to this Plan under the Securities Act, at such time or times as the Corporation may deem necessary, appropriate or expedient. Any issuance, transfer or resale of Shares pursuant to such registration statement or statements shall be subject to (i) the continued effectiveness of such registration statement or statements and (ii) any blackout, insider trading, short-swing profits, holdback or other trading restrictions which the Corporation may impose or to which the Participant may be subject, by law, rule or regulation, under Company policies, or otherwise. For so long as the Shares subject to this Plan are not registered for issuance by the Corporation, the Corporation shall be under no obligation to issue or deliver any Shares pursuant to an Award unless such Shares may be issued and delivered without such registration pursuant to an available exemption therefrom, the terms and conditions of such exemption shall have been fully complied with and the Corporation elects to rely thereon (which it shall be under no obligation to do). In connection therewith, the Participant may be required to make representations similar to those set forth in Annex A.

 

12.6 No Company Liability.  The Corporation shall have no liability to a Participant in respect of any loss, expense, cost, damage or claim in respect of an Award due to a delay in delivery or issuing, or failure to deliver or issue, any Share or to notify the Participant that an Award may be exercised or settled due to the fact that the Corporation is unable or reasonably believes that it is unable to deliver Shares in compliance with applicable securities, tax and other laws, rules and regulations or force majeure. In addition, the Corporation shall have no liability in respect of any Award that expires prior to exercise or settlement, or that is terminated, cancelled or otherwise forfeited, pursuant to the terms of this Plan or the applicable Award Agreement.

 

  

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12.7 Indemnification.  Any Participant for whom the resale of Shares is included in a registration statement or statements will indemnify the Corporation, each of its directors and officers and each Person who Controls the Corporation (other than such Participant) against all claims, losses, damages, expenses and liabilities (or actions in respect thereof) arising out of or based upon any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement or statements, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Corporation, each of its directors and officers and each Person controlling the Corporation (other than such Participant) for all legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged statement) or omission (or alleged omission) is made in such registration statement or statements in reliance upon and in conformity with written information furnished to the Corporation by such Participant with respect to such Participant; provided, however, that the liability of any such Participant under this Section 12.7 shall be limited to the amount of proceeds received by such Participant in the resale giving rise to such liability.

 

12.8 Market Stand-Off Agreement.  In the event of a public offering of the Corporation’s securities and upon request of the Corporation, each Participant shall agree not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Shares or take any similar actions as may be specified by the Corporation, without the prior written consent of the Corporation for such period of time (not to exceed one hundred eighty (180) days from the effective date of the applicable registration statement or statements) as may be specified by the Corporation.

 

13. Miscellaneous Plan Provisions

 

13.1 Conflicts.  In the event of a conflict between the terms of this Plan and any Award Agreement, the terms of this Plan shall prevail.

 

13.2 Forfeiture Events.  Unless otherwise provided in an Award Agreement, in addition to any otherwise applicable continued employment or performance conditions as prescribed by the Committee, a Participant’s rights, payments, gains and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture and recoupment by or at the direction of the Committee upon termination of employment for Cause, violation of Company policies, breach of noncompetition, confidentiality or other restrictive covenants, engagement in Detrimental Conduct and any other events specified by the Committee and set forth in an Award Agreement.

 

13.3 No Transfer of Awards; Plan Binding; Beneficiaries.  Unless otherwise prescribed by the Committee, Awards shall not be Transferable, except by will or by the laws of descent and distribution, and, during the lifetime of a Participant, Awards shall be exercised only by the Participant or by his guardian or legal representative. This Plan shall be binding upon the Corporation and its successors and the Participants and their permitted successors in interest. Each Participant shall have the right to designate a beneficiary or beneficiaries who shall be entitled to take any action, make any election and receive any rights, payments, benefits or gains under an applicable Award following such Participant’s death.

 

13.4 Deferrals of Payment.  Notwithstanding anything contained herein to the contrary, the Committee may permit a Participant to defer the receipt of payment or delivery of cash, securities, rights or other property that would otherwise be due to such Participant by virtue of the exercise of or the satisfaction of vesting or other conditions or restrictions with respect to an Award. If any such deferral is to be permitted, the Committee shall establish the rules and procedures relating to such deferral, including the period of time in advance of payment or delivery when an election to defer is required to be made, the time period of the deferral, the events that would result in payment or delivery of the deferred amount, the interest or other earnings attributable to the deferred amount and the method of funding (if any) attributable to the deferred amount. Any deferrals made pursuant to this Section 13.4 shall be made in a manner and subject to terms and conditions so as to comply with Section 409A.

 

13.5 Rights as Stockholder.  Except as otherwise provided in this Plan, no Participant shall have any rights (including rights with respect to voting, dividends or distributions) with respect to any securities underlying an Award until the date such securities are delivered to the Participant.

 

  

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13.6 Employment or Service.  Nothing in this Plan, in the grant of any Award or in any Award Agreement shall confer upon any Eligible Person or Participant the right to continue in any capacity in which he is employed by, or otherwise serves, the Company and shall not interfere in any way with any right that the Company would otherwise have to terminate his or her employment or other service at any time.

 

13.7 Other Compensation and Benefit Plans.  After the Effective Date, no further awards shall be granted under any of the Terminated Plans. The adoption of this Plan shall not affect any future stock incentive or other compensation plans of the Company and shall not preclude the Company from establishing any other forms of stock incentive or other compensation for Employees, Non-Employee Directors or other Persons. The amount of any compensation deemed to be received by a Participant pursuant to an Award shall not constitute compensation with respect to which any other benefits of such Participant are determined, including benefits under any bonus, pension, profit sharing, life insurance or salary continuation plan, except as otherwise specifically provided by the terms of such plan. The Plan shall not entitle Eligible Persons or Participants to any future compensation. The Plan is not an element of the Employees’ base salary or base compensation and shall not be considered as part of such in the event of severance, redundancy, or resignation. The Company has no obligation to offer incentive plans to Eligible Persons or Participants in the future. This Plan shall be effective only for the time period specified herein. The Company assumes no obligation to any Participant under this Plan with respect to any doctrine or principle of acquired rights or similar concept.

 

13.8 Tax Withholding. The Participant or his successor in interest shall be responsible for payment of all taxes and other charges required by law to be withheld from an Award or securities, cash or other property paid or delivered in settlement of an Award. Payment shall be made: (i) in cash or by check; (ii) at the discretion of the Committee, in Shares, valued at the Fair Market Value of such Shares on the applicable date; (iii) by deduction from the settlement of the applicable Award; (iv) at the discretion of the Committee, by a combination of the methods described above; or (v) by such other method as may be approved by the Committee. Without limiting the foregoing, the Company may deduct from other compensation, including wages, to be paid by the Company or withhold from any Shares or cash or other property deliverable under this Plan in settlement of an Award, in the amount of any federal, state or local taxes that the Company is required to withhold with respect to such Awards.

 

13.9 Unfunded Plan.  This Plan shall be unfunded. Neither the Company nor any other Person shall be required to establish any special or separate fund or to make any other segregation of assets to assure the settlement of any Awards. Nothing contained in this Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between the Company or any other Person and any Participant (or any of his successors in interest). No Participant or other Person shall under any circumstances acquire any property interest in any specific assets of the Company or any other Person. To the extent that any Person acquires a right to receive settlement from the Corporation hereunder, such right shall be no greater than the right of an unsecured general creditor of the Corporation. Neither the adoption of this Plan nor the setting aside of securities, cash or other property by the Company with which to discharge its obligations hereunder shall be deemed to create a trust or other funded arrangement. The Company shall have the right to implement or set aside securities, cash or other property in a grantor trust, subject to the claims of the Company’s creditors, to discharge its obligations under this Plan.

 

13.10 Interpretation.  Unless otherwise expressly stated in the Plan:

 

(a) the words “hereof,” “hereby” and “hereunder,” and correlative words, refer to this Plan as a whole and not any particular provision;

 

(b) the words “includes” and “including,” and correlative words, are deemed to be followed by the phrase, “without limitation”;

 

(c) the word “written” and the phrase “in writing,” and correlative words and phrases, include e-mail, PDF and facsimile transmissions;

 

(d) the words “asset” and “property” are synonymous and include owned, leased and licensed real, personal and intangible property of every kind, including contractual rights, tort claims, cash, securities and information;

 

  

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(e) the masculine, feminine and neuter form of a word includes the other forms of such word and the singular and plural forms of a word have correlative meanings;

 

(f) the word “or” is not exclusive;

 

(g) the words “will” and “shall” be construed to have the same meaning and effect;

 

(h) references to a Person shall include the successors and assigns thereof, except to the extent otherwise expressly provided in this Plan;

 

(i) references made to any law or regulation herein, unless explicitly provided otherwise, are references to such law or regulation as amended, supplemented, modified, replaced or construed;

 

(j) capitalized terms that are correlative to terms defined in Section 2 shall have correlative meanings; and

 

(k) the headings set forth herein have been inserted for convenience of reference only, shall not be considered a part of this Plan and shall not limit, modify or affect in any way the meaning or interpretation of this Plan.

 

13.11 Severability.  If any provision of this Plan or any Award is or becomes, or is deemed by the Committee to be, invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify this Plan or any Award under any law, rule or regulation deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, rules or regulations or, if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of this Plan or such Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of this Plan and such Award shall remain in full force and effect.

 

13.12 GOVERNING LAW.  THE VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEVADA (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE INTERNAL LAWS OF THE STATE OF NEVADA).

 

13.13 Fractional Shares.  No fractional Shares shall be delivered pursuant to this Plan or any Award, and the Corporation shall determine whether cash or other securities shall be paid or delivered in lieu of any fractional Shares or whether any fractional Shares or rights thereto shall be canceled or otherwise eliminated.

 

13.14 Assignment and Successor.  The obligations of the Corporation under the Plan shall be binding upon any successor Person, whether resulting from the merger, consolidation, reorganization, asset sale or otherwise. The Corporation shall take all such actions as may be necessary so the Plan and any Award Agreement entered into hereunder is binding on each such successor. This Plan shall be binding upon each Participant, his beneficiaries, his estate (which includes his executor or administrator) and his Transferees.

 

13.15 Compliance with Law.

 

(a) Notwithstanding anything contained herein or in any Award Agreement to the contrary, the Committee may amend, supplement or cancel any Award to the extent necessary to comply with applicable law, rule or regulation.

 

(b) With respect to Participants subject to Section 16 of the Exchange Act transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 under the Exchange Act. To the extent that compliance with any Plan provision applicable solely to such Participants that is included solely for purposes of complying with Rule 16b-3 is not required in order to bring a transaction by such Participant in compliance with Rule 16b-3, it shall be deemed null and void as to such transaction, to the extent permitted by applicable laws, rules and regulations and deemed advisable by the Committee. To the extent any provision in the Plan or action by the Committee involving such Participants is deemed not to comply with an applicable condition of Rule 16b-3, it shall be deemed null and void as to such Participants, to the extent permitted by law and deemed advisable by the Committee.

 

  

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13.16 Limitation of Liability.

 

(a) Except for indemnification provisions specifically set forth in this Plan or an Award Agreement, no Person shall be liable for any special, indirect, incidental, consequential or punitive damages arising out of any breach of this Plan or an Award Agreement, even if informed of the possibility of such damages in advance.

 

(b) Except for performance of payment obligations, no Person shall be liable for its failure to perform under this Plan or an Award Agreement, and the obligation of any Person to perform hereunder and thereunder shall be suspended, to the extent that performance is made impracticable, delayed or prevented, in whole or in part, due to any occurrence beyond its reasonable control, including: acts of God; inclement weather; floods; accidents; strikes; lockouts; fires; wars; equipment failures; labor disputes; labor sabotage; riots; terrorism; demonstrations; embargoes; laws, rules, regulations, orders or decrees of governmental or other authorities, whether valid or invalid (including import or export prohibitions or priorities, requisitions, allocations and price adjustment restrictions); inability to obtain or unavoidable delay in obtaining necessary power, materials, facilities, services or equipment; or interruption or unavoidable delay in communication or transportation. If the obligations of a Person are suspended pursuant to the preceding sentence, such Person shall use commercially reasonable efforts to remedy the cause of the suspension as expeditiously as possible, except that such requirement shall not require the settlement of strikes, lockouts or other labor difficulties, the incurrence of capital expenses, or the employment of additional personnel.

 

13.17 Leave.  If approved by the Committee, an Employee’s absence or leave because of military or governmental service, disability or other reason shall not be considered an interruption of employment for any purpose under the Plan; provided, however, that, to the extent that an Award under this Plan is subject to Section 409A, such absence or leave shall be considered a Separation from Service to the extent so provided by Section 409A.

 

13.18 Effective Date.  This Plan shall become effective on the date of approval of this Plan by the Board.

 

13.19 Termination.  The authority to grant new Awards under this Plan shall terminate on the date immediately preceding the tenth anniversary of the Effective Date. The Board may, at any earlier date, terminate this Plan. No termination of this Plan shall materially adversely affect any Award theretofore granted, without the consent of the applicable Participant (or his estate, beneficiaries or permitted Transferee, unless such right has been reserved in this Plan.

 

13.20 Amendment.  The Board may, at any time and from time to time and in any respect, amend or supplement this Plan. The Board may seek the approval of any amendment or supplement by the stockholders to the extent that it deems necessary or advisable, in its sole discretion, for purposes of compliance with the Code, the listing requirements of any market or exchange or any other purpose. No amendment or supplement of this Plan shall adversely affect any Award theretofore granted without the consent of the applicable Participant (or his permitted successor in interest), unless such right has been reserved in this Plan or such amendment or supplement is required to comply with applicable laws, rules or regulations.

 

13.21 Survival.  The authority of the Committee to take any action (other than grant new Awards) hereunder shall continue after the authority for grant of new Awards hereunder has been exhausted or terminated (and, for these purposes, new Awards do not include actions taken under Section 3.3, 3.4 or 3.5 or grants of Substitute Awards).

 

 

18

 

 

Representations by Participant

 

 

(a) The Participant understands that the acquisition of the Shares has not been approved or disapproved by the Securities and Exchange Commission or any administrative agency charged with the administration of the securities laws of any state and represent that he has had access to all material information and is knowledgeable about the Company, its business, opportunities, risks and uncertainties, and the material facts and circumstances relating to any investment therein and that all documents, records and books pertaining to this investment have been made available upon reasonable notice for inspection by him or his purchaser representative, counsel, accountant or business advisor.

 

(b) The Participant represents that he (i) is able to bear the economic risks of this investment, (ii) is able to hold this investment for an indefinite period of time, (iii) is presently able to afford a complete loss of this investment and (iv) has no need for liquidity in this investment.

 

(c) The Participant represents that the Shares will be acquired in good faith solely for his own account for investment purposes only and are not being acquired with a view to or for the resale, distribution, subdivision or fractionalization thereof.

 

(d) The Participant represents that he has no contract, undertaking, understanding, agreement or arrangement, formal or informal, with any Person to sell, Transfer or pledge to any Person any of the Shares or any part thereof and has no present plans to enter into any such contract, undertaking, understanding, agreement or arrangement.

 

(e) The Participant understands that the legal consequences of the representations set forth herein are that he must bear the economic risks of this investment for an indefinite period of time because the Shares have not been registered under the Securities Act, or the securities law of any state and, therefore, cannot be sold unless they are subsequently so registered or an exemption from such registration is available.

 

(f) The Participant understands that no federal or state agency has passed on or made any recommendation or endorsement of the Shares and that the Corporation is relying on the truth and accuracy of the representations and warranties and confirmations made by the Participant in offering the Shares to him without having first registered the Shares under the Securities Act and any applicable state securities laws.

 

(g) The Participant consents to the placement of a restrictive legend or legends on any certificate evidencing the Shares.

 

(h) The Participant represents that he (i) is o/ is not o (check one box) an “accredited investor” as defined in Rule 501(a) under the Securities Act, (ii) is not, and is not required to be, registered as a broker-dealer under the Exchange Act and (iii) is not and will not be acquiring the Shares as a result of any general solicitation or general advertisement.

 

  

19MANUFACTURING AND SUPPLY AGREEMENT

This MANUFACTURING AND SUPPLY AGREEMENT (this "Agreement") is made as of June 1, 2011, (the "Effective Date") by and between Mikah Pharma, LLC, organized and existing under the laws of the State  of Delaware, having offices at 20 Kilmer Drive, Hillsborough, New Jersey 08844, (referred to herein as "Mikah") and Elite Pharmaceuticals, Inc., a company organized under the laws of Delaware having offices at 165 Ludlow Avenue, Northvale, NJ 07647 (referred to herein as “Elite” or “Manufacturer”).  Mikah and Elite are each a "Party" and together constitute the "Parties" to this agreement.

A. WHEREAS Mikah desires that Elite performs certain services relating to the Product(s) (as defined below), including (a) developing and preparing the documentation required for the transfer of the manufacturing process to Elite’s facility and the filing of a CBE30 for the ANDA, and (b) manufacturing finished dosage forms appropriate for commercial sale, marketing and distribution in the Territory (as defined below) in accordance with the requirements of this Agreement; and

B. WHEREAS Elite desires to perform such technology transfer, manufacturing and supply services to enable Mikah or its designees to commercially market, sell and distribute the Product(s) upon the terms and conditions of this Agreement entered into between the Parties and incorporated herein by reference.

NOW, THEREFORE in consideration of the mutual covenants and agreements contained herein, the sufficiency and satisfaction of which are hereby acknowledged, Mikah and Elite hereby agree as follows:

ARTICLE 1

DEFINITIONS

The following capitalized terms have the meanings set forth in this Agreement:

"Affiliate(s)" shall mean any person or entity which, directly or indirectly, controls, is controlled by, or is under common control with, a party or its assignee.  Control shall be determined based upon either their legal right to control or de facto control of the entity.

 

"ANDA" means Abbreviated New Drug Application and all amendments thereto, that have to date been filed with the FDA seeking authorization and approval to manufacture, package, ship and sell, as more fully defined in 21 C.F.R. Part 314, the Products, as well as the Abbreviated New Drug Application for any other Product hereafter added to the terms of this Agreement.

"API" means the active pharmaceutical ingredient required for the Products.

"Applicable Laws" means all laws, ordinances, codes, rules and regulations within the Territory applicable to the Manufacturing of the Product or in any territory applicable to any aspect thereof and the obligations of Elite or Mikah, as the context requires under this Agreement, including, without limitation: (a) all applicable federal, state and local laws and regulations of the Territory (including Environmental Laws) relating to the Manufacture of the Products; (b) the United States Federal Food, Drug and Cosmetic Act, and (c) the regulations promulgated under the FD&C Act including without limitation those regarding the Good Manufacturing Practices ("cGMP"), each as amended from time to time.

"Confidential Information" is as defined in Section 10.2.

"Data" shall refer to all data, materials, plans, reports, test results and other information developed solely by or for Mikah in connection with the Technology Transfer and/or the Manufacturing of the Products.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

"Defective Product" means any Product that fails to conform to the Specifications or Applicable Laws.

“Exhibit Batch” means a full commercial size GMP batch manufactured and tested by Elite to accommodate the CBE-30 filing.

"Effective Date" means the date this Agreement was fully executed.

“Equipment” means the equipment loaned by Mikah to Elite as defined in Exhibit E. The Equipment shall be returned to Mikah upon request.

"Facility" means Elite's manufacturing facility located at 165 Ludlow Avenue, Northvale, NJ 07647.

"FDA" means the United States of America Food and Drug Administration.

"Intellectual Property" means without limitation, patents, patent applications, knowhow, trade secrets, copyrights, trademarks, designs, concepts, technical information, manuals, standard operating procedures, instructions or specifications.

"Latent Defect" means a defect: (a) which could not reasonably have been discovered upon receipt and careful inspection of the Product and (b) for which the assignable cause has been attributed to the actions or omissions of Elite prior to delivery of the Product.

"Manufacture(d)" or "Manufacturing" means the compounding, filling, producing, testing and/or packaging of the API and Raw Materials into a finished dosage form in accordance with the Specifications and the terms and conditions set forth in this Agreement.

"Mikah Technology" means any and all data, Specifications, formulations, analytical methods, reports, studies, or other information in whatever form, relating to the Products, that are owned or controlled by Mikah as of the Effective Date and/or during the Term of this agreement.

"Patent Defect" shall mean any instance where a Product, fails to conform to the Specifications or fails to conform to the indemnifications given by Elite herein, and such failure is discoverable upon reasonable physical inspection or standard testing procedures upon receipt by Mikah or its affiliates in accordance with applicable standard operating procedures.

"Product" means each of the pharmaceutical products now or hereafter listed on Exhibit A, as it may be amended by the Parties from time to time.

"Purchase Order" shall have the meaning set forth in Section 3.4.

"Raw Materials" means all raw materials (including APIs), supplies, components and packaging necessary to manufacture and ship the Product in accordance with the Specifications.

"Regulatory Authority" means any governmental regulatory authority within a Territory involved in regulating any aspect of the development, manufacture, testing, market approval, sale, distribution, packaging or use of the Product.

"Rolling Forecast" shall have the meaning set forth in Section 3.2.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

"Specifications" means with respect to each Product, the procedures, requirements, standards, quality control testing and other data and the scope of services as set forth or referenced in the ANDA, the relevant portions of which shall be supplied to Elite, and are hereby incorporated by reference into this Agreement, along with any amendments or modifications thereto, subject to the terms and conditions set forth in Article 7.

"Technology Transfer" shall mean transfer of the ANDA’s manufacturing process and analytical methods developed or owned by Mikah to Elite, including but not limited to: the transfer of the formulation; range finding; the manufacture of a confirmation batch and an exhibit batch at the Facility; methods transfers and improvements; updating USP and regulatory requirements as they relate to the methods; selection of suitable API, excipients and specifications; the manufacturing of pivotal submission batches at the Facility and the preparation of all documentation required for Mikah’s filing and approval of a CBE30 with FDA.

"Term" shall have the meaning set forth in Article 14.1.

“Territory” means the United States of America, its territories, possessions, commonwealths and any other country, which the Parties agree in writing to add to this definition of Territory in an amendment to this Agreement.

ARTICLE 2

TECHNOGY TRANSFER, VALIDATION & RELATED SERVICES

2.1         Services. Elite shall perform, at its sole cost and expense, all Technology Transfer, validation and qualification services (including: equipment, methods and facility qualification), validation and stability services required by Applicable Laws to commence manufacturing the Product for commercial sale by Mikah or its designees in accordance with the terms of this Agreement.

2.2          Supply of API, Excipients and Packaging Material. Elite shall provide the API, excipients, capsules, bottles, labels and chemicals needed for the manufacture of the Product pursuant to this Agreement. Elite will be responsible for the testing and conforming release of the API, excipients and packaging materials and maintaining the required storage conditions directed by the Specifications.

2.3          Labeling. Mikah shall provide Elite with all artwork copy or other material templates developed or produced by Mikah or its Affiliates for the Product labels, printed packaging materials and Product inserts. Elite shall purchase the labels and printed materials. Elite shall not make any changes to the artwork, copy or other materials submitted by Mikah without the prior written approval of Mikah or its Affiliates. Elite will submit to Mikah, for Mikah’s approval, a proof of all Product labels, printed packaging materials and Product inserts prior to printing.

ARTICLE 3

MANUFACTURE AND SUPPLY

3.1          Supply and Purchase of Product. During the Term of this Agreement and subject to the provisions herein, Mikah shall purchase from Elite and Elite agrees to manufacture and supply solely and exclusively to Mikah, such Product as Mikah may order from time to time pursuant to this Agreement. Mikah hereby grants to Elite a nonexclusive, royalty-free license, under which Elite has no right to grant sublicenses, and to use Mikah Technology and the Work Product to Manufacture and supply Product solely for and to Mikah. Elite shall manufacture the Product at its Facility in accordance with the ANDA, the Specifications, Applicable Laws, and the terms and conditions of this Agreement. During the Term of this Agreement and subject to Mikah receiving final approval of the Product ANDAs from FDA, Mikah shall purchase the Product, in finished packaged form, from Elite in accordance with the terms and conditions of this Agreement. Elite shall not manufacture the Product or any derivative thereof, whether for itself or for any other company, broker, or distributor whatsoever subject to Section 9.1.13.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

3.2          Forecasts.  Commencing three months before the anticipated commercial launch of each Product, Mikah or Actavis, Mikah’s designee, shall provide Elite with non-binding rolling twelve (12) month forecasts of its Product requirements by delivery date.  These forecasts will become binding only upon issuance of a Purchase Order by Mikah.  The forecasts will be updated monthly during the first business week of each calendar month (“Rolling Forecasts”). The Parties agree to discuss the forecasts and the status of the business for the Product quarterly. The Parties further agree that all such forecasts are for planning purposes only and Mikah shall have no obligation to purchase Product consistent with such forecasts hereunder except as may be set forth in a Purchase Order (defined below). Elite agrees to keep at least that amount of inventory of Raw Materials on hand or with Elite to meet Mikah's forecasted Product requirements. It is understood between the Parties that all forecast information must be kept completely confidential.

 

3.3          Reliance on Forecasts.  Elite shall use the forecasts to order and maintain the Raw Materials necessary to fulfil the forecasted Product requirements, taking into account the Raw Material vendor’s lead times, minimum order quantities, and Elite’s lead time.  In no case will Elite maintain more than a three (3) month supply of Raw Materials without Mikah’s prior written consent.

3.4          Purchase Orders.  Mikah or Actavis, Mikah’s designee, shall submit Purchase Orders for Product (“Purchase Orders”) specifying: (a) the number of units of Product to be purchased, (b) the Price, (c) the expected delivery date, and (d) such other special terms and conditions that may be applicable to such order.  For every delivery, per Product, a firm binding order must be made at least two (2) months in advance of delivery date or such lesser period of time that the Parties may agree to, in writing.  Elite shall confirm the order and projected date of shipment within seven (7) calendar days after having received a Purchase Order.  All Purchase Orders received and not rejected by Elite within 7 days of Elite’s receipt shall be deemed to have been confirmed by Elite in accordance with its reflected terms. Elite shall accept all Mikah Purchase Orders (whether submitted by Mikah or Actavis), as described herein.  Though Elite shall not be obligated to fulfill any order received less than two (2) months prior to a requested shipment date for any Product, Elite shall use commercially reasonable efforts to accommodate any requested shipment date.

 

3.5          Capacity. Elite shall, at all times during the term hereof, maintain the Manufacturing capacity to supply at least 125% of the quantities forecasted by Mikah.

 

3.6          Terms of Sale.  Mikah’ orders for Product shall be made pursuant to its (or Actavis’) standard form of Purchase Order. To the extent such Purchase Order contains terms or conditions that are in conflict with the terms and conditions of this Agreement, the conflicting terms or conditions of the Purchase Order will have no effect, unless Elite agrees, in writing, to such terms or conditions or that such terms and conditions will supersede the terms of this Agreement.

 

3.7         Order Cancellation or Changes.  Mikah may cancel a Purchase Order or modify the date of shipment or the quantity of Product specified in a Purchase Order, by submitting a written change order to Elite at least thirty (30) days in advance of the previously requested date of shipment.  All such change orders shall be binding and effective upon receipt by Elite.  If Mikah requests a cancellation or modification of a Purchase Order less than 30 days in advance of the previously requested delivery date, such change order shall be binding and effective only upon the written approval by Elite.  Elite shall use commercially reasonable efforts to approve the cancellation or modification requested by Mikah, or such other modifications that might be mutually acceptable, and shall advise Mikah of its determination within 3 business days of the submission of Mikah’s proposed change order.  In the case of partial acceptance, Elite shall specify the quantities and date of shipment of the portion of the Order it can accept, and Mikah shall be entitled to fill any additional amounts not Manufactured by Elite from a Second Source.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

3.8          Timeliness of Delivery.  It is of essence to this Agreement that Elite delivers the Product at the date of shipment stated in the order confirmation.  If for any reason Elite believes that delivery of any Purchase Order will be delayed, Elite shall promptly advise Mikah as well as the new anticipated delivery date.  If Elite fails to deliver the full quantity of Product on or before the delivery date specified in the applicable confirmed Purchase Order, for any reason other than Force Majeure, Elite shall compensate Mikah for any losses or fines imposed by its direct or indirect customer, and Mikah shall have the right to find or use a second source for the supply of the Product.

3.9          Shipment. All Products shall be delivered EXW, Elite’s loading dock. Upon Elite’s delivery of the Product EXW, Mikah will bear all risk of loss, delay, or damage in transit as well as all costs of further shipment and appropriate insurance. All Product delivered hereunder shall be suitably packed for shipment by Elite in accordance with good commercial practice, and instructions provided to Elite by Mikah, with respect to protection of such Product during transportation and marked for shipment to Mikah.  Such shipment shall also include a Certificate of Analysis (“C of A”) and a Certificate of Compliance (“C of C”) in accordance with the terms of the Quality Agreement.

 

3.10       Residual Materials.  If Mikah (i) cancels or modifies its Purchase Orders pursuant to Section 3.7, or (ii) requests that Elite purchase any Raw Materials prior to the placement of the related Purchase Order, which creates residual inventory of the API or other Raw Materials that Elite has purchased in accordance with the terms of this Agreement, Mikah shall purchase any API and other Raw Materials that Elite purchased in accordance with Section 3.3 of this Agreement which Elite cannot return or use elsewhere, as reasonably determined by Elite. Mikah shall purchase such API or other Raw Materials from Elite for an amount equal to Elite’s actual cost therefore, within sixty (60) days of Elite’s written request and delivery of such Raw Materials, provided Elite certifies to Mikah that the API and other Raw Materials purchased by Mikah have been stored and otherwise maintained by Elite under cGMP conditions.

3.11       First Priority. Elite hereby agrees that it shall not Manufacture or process goods for itself or for a third party where to do so will, as a consequence, delay delivery of Mikah's firm Purchase Order requirements of Product under this Agreement or cause Elite to refuse or fail to accept a Purchase Order in the manner set forth herein. With respect to Phedimetazine tartrate 37 mg finished product; in addition to other obligations and remedies under this Agreement, whenever shipment of Product orders is delayed beyond the date specified in this Agreement, Elite shall use commercially reasonable efforts to expedite shipment of the Product to MIKAH, and shall exert at least equivalent effort in resolving a Product shortage as compared to ELITE’s production requirements for its other customers’ production requirements.

 

3.12       Second Source. During the term of this Agreement, Mikah may, upon six (6) months written notice to Elite, seek to establish a second source for the Manufacture of any or all of the Products. Upon notice of such intention, and in compliance with all applicable confidentiality obligations set forth herein or elsewhere, Elite shall cooperate in any way reasonably necessary to permit such second source to be validated as a Manufacturing site of the Product under the ANDA.

3.13       Facility Transfer. In the event that Elite breaches any of its obligations or requirements under this Agreement and fails to cure any such breach within 60 days of notice thereof by Mikah (or if earlier, on the date such breach results in the inability of Mikah to sell and market the Products or any of them under the provisions of the FD&C Act or applicable laws), Mikah shall have the right to take all actions necessary to accomplish a Technology Transfer to a different manufacturing facility for the Product so effected (a “Facility Transfer”). The Facility Transfer shall be at the cost and expense of Elite. Upon and after a Facility Transfer made pursuant to this Section, Mikah shall not be obligated to make any payments to Elite with respect to Product that is not manufactured at Elite's Facility. Any Facility Transfer shall be effective until the Product Termination Date for each individual Product. The rights of Mikah under this Section shall be in addition to its other rights under this Agreement.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

  

  

  

ARTICLE 4

PRICE AND PAYMENT

4.1          Supply Price and Other Payments. Attached hereto as Exhibit B is the pricing for the Product and certain additional payments that shall be made by Mikah to Elite in connection with this Agreement.

4.2          Audit Right. Mikah reserves the right, upon advance written notice to audit Elite's documentation related to any charges submitted to Mikah. In the event that such an audit results in a calculation, which differs, from the audited party's calculations, the Parties agree to negotiate in good faith to reach agreement as to the amount of the Price adjustment. In the event that the Parties cannot reach agreement, the Parties agree to hire an independent third party auditor, and share the costs of such audit, whose determination shall be binding on both Parties.

4.3          Payment Terms. All amounts payable under this Section shall be expressed in United States Dollars and shall be due and payable by Mikah to Elite within 60 of delivery of the finished packaged lots. All payments shall be made by wire transfer in accordance with written instructions given by Elite from time to time.

ARTICLE 5

PRODUCT CONFORMITY TO SPECIFICATIONS

5.1          Notification of Defective Product. Mikah shall notify Elite within sixty (60) days after receiving the Product if Mikah has determined that such shipment contains a quantitative defect such that Elite has delivered a quantity of Product that is less than the quantity stated in any invoice or bill of landing. Elite shall, at its own cost and expense, supply Mikah with any missing quantities of Product as soon as practical after receipt of such Notice (as defined herein). Notice of Patent Defect shall be provided by Mikah to Elite within sixty (60) days of inspection of Product in such shipment. Mikah shall provide Elite a sample of such Defective Product. Notice of a Latent Defect shall be provided within thirty (30) days after Mikah notices the Latent Defect.

5.2          Resolution of Defective Product. Notwithstanding the foregoing, Mikah shall have the right to reject any batch of Product having Latent Defects prior to the expiry of such batch of Product. If Elite agrees that the batch is Defective Product, Elite shall, at its option, replace the Defective Product or repay the full amount of any payments, including shipping and recall costs and cost of API, made by Mikah for such Product. If Elite does not agree with Mikah's determination that such Product is Defective Product, then after reasonable efforts to resolve the disagreement, either Party may submit a sample of such Product to a mutually agreed upon independent third party who is an expert or is familiar with the industry to determine whether the Product meets the Specifications. The independent party's results shall be final and binding and if such results indicate that the Product was a Defective Product, Elite shall, at its option, replace the Defective Product or repay the full amount of any payments, including shipping costs and cost of API, made by Mikah for such Product. Unless otherwise agreed to by the Parties in writing, the costs associated with such testing and review shall be borne by the non-prevailing Party.

ARTICLE 6

DELIVERY

6.1          Delivery. Elite shall segregate and store all Product until its shipment on the dates reasonably meeting the delivery dates specified by Elite’s commitments issued in connection with Mikah's Purchase Orders. Elite shall tender the Product for delivery to the destination specified by Mikah. Mikah shall be responsible for all costs associated with the Product after delivery by Elite to the specified destination in accordance with the terms of this Agreement.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

 

6.2          Shelf Life. All Product shipped to Mikah shall have at least twenty-one (21) months of saleable shelf life remaining upon receipt of Product at destination in accordance with Section 6.1 except for the exhibit and validation lots.

ARTICLE 7

CHANGES TO SPECIFICATIONS

All Specifications and any changes thereto agreed to by the Parties from time to time shall be in writing, dated and signed by the Parties. No change in the Specifications shall be implemented by Elite without the prior written approval of Mikah. Elite shall respond promptly to any request made by FDA or Mikah for a change in the Specifications or the Facility, and both Parties shall use commercially reasonable, good faith efforts to agree to the terms of any requested change in the Specifications or the Facility that affects the Manufacture of the Product in a timely manner.

ARTICLE 8

RECORDS AND REGULATORY MATTERS

8.1          Batch Records and Data. Within a reasonable period of time following the completion of Manufacturing of the first batch of each Product, and on the anniversary of the signing of this Agreement thereafter, Elite shall provide Mikah with properly completed copies of batch records prepared in accordance with the Specifications; provided, however, that if testing reveals an out-of-Specification result, Elite shall provide such batch records within 14 days following resolution of the out-of- Specification result. In addition, for all shipments of Product, Elite shall provide Mikah with an accurate COA and Mikah shall accept such COA given in good faith, regardless of whether or not Mikah shall accept the Product.

8.2          Recordkeeping. Elite shall maintain true and accurate books, records, test and laboratory data, reports and all other information relating to Manufacturing under this Agreement, including all information required to be maintained by all Applicable Laws. Such information shall be maintained in original forms, notebooks and records for a period of at least three (3) years from the relevant finished Product expiration date or longer if required under Applicable Laws.

8.3          Regulatory Compliance. Elite shall act as Mikah’s regulatory agent and shall be responsible for the correspondence with the Regulatory Authority with respect to the Product and the Specifications, including any product licenses, applications and amendments in connection therewith. Elite will be responsible to maintain all permits and licenses required by any Regulatory Authority with respect to the Facility and its equipment and the manufacture and distribution of the Product.  Each Party intends and commits to cooperate to satisfy all Applicable Laws within the scope of its respective responsibilities under this Agreement.

8.4          Regulatory Correspondence. Mikah shall be the sole owner of the ANDA. Elite shall notify Mikah immediately of any correspondence, any inspections, and the result of any inspection(s) with the FDA or any Regulatory Authority. Elite shall immediately send a draft to Mikah of all correspondence Elite intends to send to any Regulatory Authority, related to the Product. For all correspondence with a Regulatory Authority, related to the Product that is not in response to a regulatory deficiency or problem, Mikah shall have fourteen (14) business days to approve the draft correspondence, and if Mikah is silent after fourteen (14) business days, it is understood Mikah gives its constructive consent to the correspondence. For all correspondence with a Regulatory Authority, related to the Product that is in response to a regulatory deficiency or problem, Mikah shall have the absolute right to approve the draft correspondence before such correspondence is sent to the Regulatory Authorities. In such a case, Mikah will make every effort to act expediently in approving the draft correspondence.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

8.5          Governmental Inspections and Requests. Elite shall immediately advise Mikah if an authorized agent of any Regulatory Authority visits the Facility or any portion thereof, which may affect the Manufacturing of the Product. Elite shall furnish to Mikah a copy of the report by such Regulatory Authority, if any, within ten (10) days of Elite's receipt of such report. Further, upon receipt of a Regulatory Authority request to inspect the Facility or audit Elite's books and records and such inspection would affect the Manufacturing under this Agreement, Elite shall immediately notify Mikah, and shall provide Mikah with a copy of any written document received from such Regulatory Authority.

8.6          Recall. In the event Elite believes a recall, field alert, Product withdrawal or field correction may be necessary with respect to any Product provided under this Agreement, Elite shall immediately notify Mikah in writing. (For the sake of clarification "immediately" as used in this section shall mean no more than two (2) days.).  Elite will not act to initiate a recall, field alert, Product withdrawal or field correction without the express prior written approval of Mikah, unless otherwise required by Applicable Laws. In the event Mikah believes a recall, field alert, Product withdrawal or field correction may be necessary with respect to any Product provided under this Agreement, Mikah shall immediately notify Elite in writing and Elite shall provide all necessary cooperation and assistance to Mikah. The cost of any recall, field alert, Product withdrawal or field correction shall be borne by Mikah except that Elite shall be obligated to reimburse Mikah for recall, field alert, Product withdrawal or field correction costs incurred by Mikah to the extent such recall, field alert, Product withdrawal or field correction is caused by Elite's breach of its representations, warranties, or obligations under this Agreement, Applicable Laws or its negligence or willful misconduct. For purposes hereof, recall costs shall be limited to reasonable, actual and documented administrative costs incurred by Mikah or third party customers directly in connection with such recall, withdrawal or correction, replacement and disposal of the Defective Product to be recalled, in accordance with Article 5.

8.7          Inspections and Audits by Mikah. Representatives of Mikah shall have access to the Facility for the purpose of: (a) conducting inspections of such facility and Elite's maintenance and usage of the equipment utilized in the development and manufacture of Product, (b) performing quality control audits or (c) witnessing the development, manufacturing, storage or transportation of the Product or the materials related to or used in the manufacture of Product including API. Mikah shall have access to the results of any tests performed by Elite relating to Product and the API or the processes or materials used in the development and manufacture. Elite shall use its best efforts to ensure that Mikah has similar access to the facilities, data and records of Elite's or Elite’s agents.  Such inspections do not relieve Elite of any of its obligations under this Agreement or create new obligations on the part of Mikah. Such visits by Mikah's representatives shall be conducted during normal business hours.

ARTICLE 9

REPRESENTATIONS AND WARRANTIES

9.1         Elite. Elite hereby represents, warrants and covenants to Mikah that:

9.1.1       At the time of each delivery of the Product as provided under this Agreement, such Product and its corresponding Raw Materials will conform to and will have been manufactured, stored and transported in full conformance with the Specifications, cGMPs and all Applicable Laws;

9.1.2       The Product shall not, at the time of delivery to Mikah, contain any material or be manufactured, handled or stored in any way that would cause the Product to be adulterated in any way within the meaning of Section 501 or misbranded within the meaning of Section 502 of the Food, Drug and Cosmetic Act, as amended;

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

 

9.1.3       As of the Effective Date and at all times during the Term, Elite and the Facility and all equipment utilized in the manufacture of the Product is and will be in compliance with all Applicable Laws, including all applicable workplace safety regulations under OSHA (or the equivalent local governmental entity), all tax regulations and Environmental Laws;

9.1.4       At all times during the Term, Elite shall obtain Mikah's written approval for the use of any third party contract laboratory intended for the testing and release of API, excipients and/or finished Product if such laboratory is not filed in said ANDA.

9.1.5       At all times during the Term, Elite shall continue to hold all licenses, approvals, permits and similar authorizations of Regulatory Authorities necessary or required to operate the Facility and its equipment;

9.1.6       Neither Elite nor any of its employees has ever been: (a) debarred, or (b) convicted of a crime for which a person can be disbarred under Section 306 (a) or (b) of the Generic Drug Enforcement Act of 1992, as amended from time to time, or (c) been convicted of any crime in the country where the Product is manufactured. Elite agrees to immediately notify Mikah should any Regulatory Authority threaten any action that could possibly result in a breach of this Section;

9.1.7       The Manufacture, storage, packaging and labeling of the Product shall be in complete accordance with all Applicable Laws, the ANDA and the Specifications and will be made, stored, packaged, labeled and controlled by Elite in accordance with any other applicable manufacturing information, or regulatory requirements;

9.1.8       Unless otherwise agreed by the Parties in writing, Elite has: (a) reviewed and approved all Specifications, (b) if applicable, reviewed and approved all in-process and finished Product test results to ensure conformity of such results with the Specifications, regardless of which Party is responsible for finished Product release;

9.1.9       The COA which will accompany each shipment of Product shall be accurate, truthful and made in good faith such that Mikah shall be able to legally rely on each COA;

9.1.10     During the Term of this Agreement, and subject to the provisions herein, including but not limited to Section 3.2, Elite shall not develop, manufacture, market or sell any product competitive with the Product, nor shall it offer any assistance, or permit any of its employees to offer any assistance to any third party (including for this purpose any Affiliate of Elite in the world) to take any action which Elite would be prohibited from engaging in pursuant to this Article subject to Section 9.1.13;

9.1.11     Neither Elite nor any of its Affiliates is manufacturing the Product or any derivative thereof for any other person, entity or company whatsoever. Following the execution of this Agreement, neither Elite nor any of its Affiliates shall develop or manufacture the Products with or for any third party.

9.1.12     Neither Elite nor any of its Affiliates shall manufacture, market or distribute any of the Products, whether for their own benefit or for the benefit of a third party, for a period of five years following the termination of this Agreement.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

9.1.13    As far as Phendimetrazine tartrate 35 mg is concerned, Mikah acknowledges that Elite has developed its own generic phendimetrazine tartrate 35 mg product.  Notwithstanding anything to the contrary contained in this Agreement, Mikah acknowledges that Elite may develop a generic product containing phendimetrazine of any strength including the filing of an abbreviated new drug application relating to such product and nothing herein shall be construed to limit or otherwise restrict Elite from developing, commercializing, manufacturing and distributing any pharmaceutical product similar to, or which may compete with, the Product or the ANDA. Elite shall not use, incorporate or utilize Mikah’s know-how, methodology or technology in Elite products or process.

 

9.2         Mikah. Mikah hereby represents, warrants and covenants to Elite that:

9.2.1       All artwork templates and the content thereof provided to Elite shall comply with all Applicable Laws;

9.2.2       All Product delivered to Mikah by Elite will be held, used and/or disposed of by Mikah in accordance with all Applicable Laws; and

9.2.3       Mikah will comply with all Applicable Laws applicable to Mikah's performance under this Agreement and its use of any materials or Product provided by Elite under this Agreement; and

9.3         Mutual. Each Party hereby represents, warrants and covenants to the other Party that:

9.3.1       Existence and Power. Such Party: (a) is duly organized, validly existing and in good standing under the laws of the state in which it is organized, (b) has the power and authority and the legal right to own and operate its property and assets, and to carry on its business as it is now being conducted, and (c) is in compliance with all requirements of Applicable Laws.

9.3.2       Authorization and Enforcement of Obligations. Each Party: (a) has the power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder and (b) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder;

9.3.3       Execution and Delivery. This Agreement has been duly executed and delivered on behalf of each Party, and constitutes a legal, valid, binding obligation, enforceable against such Party in accordance with its terms;

9.3.4       No Consents. All necessary consents, approvals and authorizations of all Regulatory Authorities and other persons required to be obtained by such Party in connection with the Agreement have been obtained; and

9.3.5       No Conflict. The execution and delivery of this Agreement and the performance of such Party's obligations hereunder: (a) do not conflict with or violate any requirement of Applicable Laws; and (b) do not materially conflict with, or constitute a material default or require any consent under, any current contractual obligation of such Party.

9.4         Survival. The obligations of this Article 9 will terminate five (5) years from the expiration or termination of this Agreement.

9.5         Limitations. THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE ARE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY EACH PARTY TO THE OTHER AND NEITHER PARTY MAKES ANY OTHER REPRESENTATIONS, WARRANTIES OR GUARANTEES OF ANY KIND WHATSOEVER, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

 

ARTICLE 10

CONFIDENTIAL INFORMATION

10.1       Mutual Obligation. Elite and Mikah agree that they will not disclose the other Party's Confidential Information (defined below) to any third party without the prior written consent of the other Party except as required by law, regulation or court or administrative order; provided, however, that prior to making any such legally required disclosure, the Party making such disclosure shall give the other Party as much prior notice of the requirement for and contents of such disclosure as is practicable under the circumstances. Notwithstanding the foregoing, each Party may disclose the other Party's Confidential Information to any of its Affiliates that: (a) need to know such Confidential Information for the purpose of performing under this Agreement, (b) are advised of the contents of this Article, and (c) agree to be bound by the terms of this Article.

10.2       Definition. As used in this Agreement, the term "Confidential Information" includes all such information related to the Product furnished by Elite or Mikah, or any of their respective representatives or Affiliates, to the other or its representatives or Affiliates, whether furnished before, on, or after the date of this Agreement and furnished in any form, including but not limited to written, verbal, visual, electronic or in any other media or manner. Confidential Information includes all proprietary technologies, Intellectual Property, analyses, compilations, business or technical information and other materials prepared by either Party, or any of their respective representatives, containing or based in whole or in part on any such information furnished by the other Party or its representatives. Confidential Information also includes the existence of this Agreement and its terms as well as the Confidentiality Agreement signed as of May 18, 2010, which is hereby made a part of this Agreement and is attached hereto as Exhibit D.

10.3       Exclusions. Notwithstanding Section 10.2, Confidential Information does not include information that: (a) is or becomes generally available to the public or within the industry to which such information relates other than as a result of a breach of this Agreement, or (b) is already known by the receiving Party at the time of disclosure as evidenced by the receiving Party's written records, or (c) becomes available to the receiving Party on a non-confidential basis from a source that is entitled to disclose it on a non-confidential basis, or (d) was or is independently developed or discovered by or for the receiving Party without reference to the Confidential Information, as evidenced by the receiving Party's written records.

10.4       Return of Confidential Information. Upon termination of this Agreement, the receiving Party shall, upon request, promptly return within thirty (30) days all such Confidential Information, including any copies thereof, and cease its use or, at the request of the disclosing Party, shall promptly destroy the same and certify such destruction to the disclosing Party; except for a single copy thereof, which may be retained for the sole purpose of complying with the scope of the obligations incurred under this Agreement.

10.5       Survival. The obligations of this Article 10 will terminate five (5) years from the expiration of this Agreement.

 

ARTICLE 11

INTELLECTUAL PROPERTY

11.1       Notice of Infringement Claim. In the event that a third party at any time provides written notice of a claim to, or brings an action, suit or proceeding against, any Party, any of their respective Affiliates, in each case claiming infringement of third party patent rights based upon an assertion or claim arising out of the filing of an ANDA for the Product, or development, manufacture, marketing, distribution, sale, import or use of the Products in the Territory by Mikah ("Infringement Claim"), such Party shall promptly notify the other Party of the claim or the commencement of such action, suit or proceeding, enclosing a copy of the claim and all papers served.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

 

11.2      Exclusive Right to Defend. Mikah shall have the sole and exclusive right, but not the obligation, to defend and/or settle any such Infringement Claim. If an Infringement Claim is brought against Elite ("Elite Infringement Claim"), then Elite shall so notify Mikah in writing within fifteen (15) days of receipt. Upon proper notification of the Elite Infringement Claim,

	
  

	
(i)

	
Mikah shall have the sole and exclusive right to select counsel for such claim and final decision-making authority regarding all aspects of the defense and settlement of such claim,

	
  

	
(ii)

	
Elite shall be entitled to participate in the defense of an Elite Infringement Claim and to employ counsel at its expense to assist therein, and

	
  

	
(iii)

	
Elite shall provide Mikah with such information and assistance as Mikah may reasonably request.

11.3       Elite Assistance. Upon written request from Mikah, Elite shall promptly provide Mikah and/or its counsel with such access to information about, and personnel knowledgeable of, the Products and their formulation, use and process of manufacture to enable Mikah to:

	
  

	
(i)

	
ascertain whether the manufacture, marketing, distribution, sale, import or use of the Products in and for the Territory will infringe any existing patent of a third party;

	
  

	
(ii)

	
determine its conduct in relation to any proceedings alleging infringement of a third party's patent in the Territory;

	
  

	
(iii)

	
provide witnesses or documentation from Elite in any proceedings alleging infringement of a third party's patent in the Territory; and

	
  

	
(iv)

	
if deemed advisable, the Parties shall enter into a joint defense agreement containing customary terms and conditions for the purpose of, inter alia, preserving confidentiality and any applicable privilege attaching to information and data exchanged by the parties under and pursuant to this Agreement.

ARTICLE 12

INDEMNIFICATION

12.1       Indemnification by Elite. Elite shall defend, indemnify and hold harmless Mikah, and its directors, officers, employees and agents ("Mikah Indemnitees") from and against any and all suits, claims, losses, demands, liabilities, damages, costs and expenses (including reasonable attorneys' fees) in connection with any suit, demand or action by any third party ("Losses") arising out of or resulting from: (a) any breach of its representations, warranties or obligations set forth in this Agreement or resulting from the breach of its obligations to deliver Product in full conformity to the Specifications, or for Product to remain in full conformity through its expiration date and in conformity with all Applicable Laws or (b) any negligence or willful misconduct by Elite, except to the extent that any of the foregoing arises out of or results from any Mikah Indemnitee's obligations set forth in Section 12.2 below.

12.2       Indemnification by Mikah. Mikah shall defend, indemnify and hold harmless Elite, its Affiliates, and their respective directors, officers, employees and agents ("Elite Indemnitees'') from and against all Losses arising out of or resulting from: (a) any breach of its representations, warranties or obligations set forth in this Agreement; or (b) any negligence or willful misconduct by Mikah, except to the extent that any of the foregoing arises out of or results from any Elite Indemnitee's obligations set forth in Section 12.1 above.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

12.3       Indemnification Procedures. All indemnification obligations in this Agreement are conditioned upon the Party seeking indemnification: (a) promptly notifying the indemnifying Party of any claim or liability of which the Party seeking indemnification becomes aware (including a copy of any related complaint, summons, notice or other instrument); provided, however, that failure to provide such notice within a reasonable period of time shall not relieve the indemnifying Party of any of its obligations hereunder except to the extent the indemnifying Party is prejudiced by such failure; (b) cooperating with the indemnifying Party in the defense of any such claim or liability; and (c) not compromising or settling any claim or liability without prior written consent of the indemnifying Party.

ARTICLE 13

INSURANCE

13.1       Elite Insurance.  Elite shall, at its own cost and expense, obtain and maintain in full force and effect the following insurance during the term of this Agreement: (i) Commercial General Liability insurance with per-occurrence and general aggregate limits of not less than $1,000,000; (ii) Products and Completed Operations Liability Insurance with per-occurrence and general aggregate limits of not less than $5,000,000; (iii) Statutory Workers’ Compensation and Employer’s Liability Insurance with an amount not less than $500,000 including excess liability coverage.  In the event that any of the required policies of insurance are written on a claims made basis, then such policies shall be maintained during the entire term of this Agreement and for a period of not less than three (3) years following the termination or expiration of this Agreement. Elite shall waive subrogation rights against Mikah for workers’ compensation benefits and shall obtain a waiver from any insurance carriers with which Elite carries workers’ compensation insurance releasing their subrogation rights against Mikah.  Mikah shall be named as an additional insured under the Commercial General Liability and Products and Completed Operations Liability insurance policies as respects the manufacturing services outlined in this Agreement.  Elite shall furnish certificates of insurance for all of the above noted policies and required additional insured status to Mikah within 10 days after the Effective Date of the Agreement and upon renewal of any such policies.

13.2       Mikah Insurance. Mikah or its affiliate shall, at its own cost and expense, obtain and maintain in full force and effect the following insurance during the term of this Agreement: (i) Products and Completed Operations Liability Insurance with per-occurrence and general aggregate limits of not less than $5,000,000; (ii) Statutory Workers’ Compensation and Employer’s Liability Insurance with an amount not less than $500,000 including excess liability coverage.  In the event that any of the required policies of insurance are written on claims made basis, then such policies shall be maintained during the entire term of this Agreement and for a period of not less than three (3) years following the termination or expiration of this Agreement.  Mikah shall waive subrogation rights against Elite for workers’ compensation benefits and shall obtain a waiver from any insurance carriers with which Mikah carries workers’ compensation insurance releasing their subrogation rights against Elite.  Elite shall be named as an additional insured under the Products and Completed Operations Liability insurance policies as respects the Product and completed operations outlined in this Agreement.  Mikah shall furnish certificates of insurance for all of the above noted policies and required additional insured status to Elite within 10 days after the Effective Date of the Agreement and upon renewal of any such policies.

ARTICLE 14

TERM AND TERMINATION

14.1       Term. This Agreement shall commence on the Effective Date and shall continue for a period of five (5) years after commercial launch of Product, on a Product-by-Product basis, unless earlier terminated under this section (the “Term"). The Term shall automatically renew for additional periods of one (1) year each ("Renewal Term") unless Mikah provides written notice of termination to Elite at least six (6) months prior to the expiration of the Term or any Renewal Term. Elite agrees to continue to supply Product to Mikah under the terms of this Agreement until Mikah has satisfactorily qualified a Second Source of Product.

	
14.2

	
Termination by Either Party.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

	
  

	 

 

14.2.1      Material Breach. Either Party may terminate this Agreement effective upon sixty (60) days prior written notice to the other Party, if the other Party commits a material breach of this Agreement and fails to cure such breach by the end of such sixty (60) day period;

14.2.2      Bankruptcy. Either Party may terminate this Agreement effective upon written notice to the other Party, if the other Party becomes insolvent or admits in writing its inability to pay its debts as they become due, files a petition for bankruptcy, makes an assignment for the benefit of its creditors or has a receiver, trustee or other court officer appointed for its properties or assets, and shall comply with Section 2 herein.

14.3       Termination by Mikah.

14.3.1      Mikah shall have the right, on six (6) months written notice, to terminate this Agreement, or a single Product under this Agreement for any reason and without penalty.

14.3.2      In the event of a termination pursuant to Section 14.3.1 above, other than for intellectual property or safety reasons, the Parties shall coordinate to sell off all in process inventory (and/or Safety Stock) that may remain in Elite's Facility upon receipt of the Notice. In order that Elite get the benefit of absorption and Mikah have the ability to retain its customer base until such post-notification inventory is processed and Safety Stock sold, the post notification inventory shall be manufactured into finished dosage Product by Elite as well as the Safety Stock sold to Mikah at cost or the Parties can split the costs of the components which were purchased by Elite to fill a Purchase Order at the time of termination or to manufacture the Safety Stock.

14.3.3      Elite shall provide Mikah all reasonable assistance in transferring the Product(s) to a manufacturing facility of Mikah's choice, while maintaining shipment of product orders placed by Mikah or her affiliates.

14.4       Termination by Elite.

14.4.1      Elite shall have the right, on six (6) months written notice, to terminate this Agreement, or a single Product under this Agreement for any reason and without penalty, if and only if Mikah was able to secure FDA approval for an alternate manufacturing site during the defined period. Mikah shall do whatever is commercially reasonable to qualify a second CMO. Elite shall continue supplying Mikah with Finished Product until such time where the said products are transferred to a CMO and the transfer is approved by the FDA.

14.4       Force Majeure. Except as to payments required under this Agreement, if any default or delay occurs which prevents or materially impairs a Party's performance and is due to a cause beyond the Party's reasonable control, and provided that the default or delay is not caused by or the fault of such Party, including but not limited to an act of God, flood, fire, explosion, earthquake, casualty, accident, terrorism, war, revolution, civil commotion, blockade, terrorism or embargo, injunction, law, proclamation, order, regulation or governmental demand, the affected Party shall promptly notify the other Party in writing of such cause and shall exercise diligent efforts to resume performance under this Agreement as soon as possible. Neither Party will be liable to the other Party for any loss or damage due to such cause; nor will the Term be extended thereby. Neither Party may terminate this Agreement because of such default or delay except upon thirty (30) days' prior written notice to the other Party if the default or delay has existed for five (5) months and is continuing at the end of the thirty (30) day notice period.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

14.5       Effect of Termination. Expiration or termination of this Agreement shall be without prejudice to any rights or obligations that accrued to the benefit of either Party prior to such expiration or termination. In the event that this Agreement is terminated by either Party, Elite shall assist Mikah in effecting a smooth transition to an alternate contractor of the Product at Mikah's sole cost and expense. The rights and obligations of the Parties shall continue under Articles 4, 6, 8, 9, 10, 11, 12, 13, 14, 15, and 16 notwithstanding expiration or termination of this Agreement.

ARTICLE 15

LIMITATIONS OF LIABILITY

NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL (EXCEPT FOR THOSE INDEMNITY OBLIGATIONS UNDER ARTICLE 12 THAT ARE DEFINED AS CONSEQUENTIAL DAMAGES) DAMAGES ARISING OUT OF PERFORMANCE UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, LOSS OF REVENUES, PROFITS OR DATA, WHETHER IN CONTRACT OR TORT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

ARTICLE 16

NOTICE

All notices and other communications hereunder ("Notice(s)") shall be in writing and shall be deemed given: (a) when delivered personally; (b) when delivered by facsimile transmission (receipt verified); (c) when received or refused, if mailed by registered or certified mail (return receipt requested), postage prepaid; or (d) when delivered if sent by reliable express courier service with a confirmation, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice; provided, that notices of a change of address shall be effective only upon receipt thereof):

	
To Mikah:

	  	
Mikah Pharma LLC

	  	  	
20 Kilmer Drive

	  	  	
Hillsborough, New Jersey 08844

	  	  	
Attn: Nasrat Hakim, President

	  	  	
Email: nasrathakim@mikahpharma.com

	  	  	  
	
To Elite:

	  	
Elite Pharmaceuticals, Inc.

	  	  	
165 Ludlow Avenue

	  	  	
Northvale, NJ 11413

	  	  	
Attn: Chris Dick, Chief Operating Officer & President

	  	
  

	
Email: cdick@elite.com

ARTICLE 17

MISCELLANEOUS

17.1       Entire Agreement; Amendments. This Agreement, the exhibits, attachments, and any amendments hereto or thereto, including the Quality Agreement and the Confidentiality Agreement, constitute the entire understanding between the Parties with respect to the specific subject matter hereof. No term of this Agreement may be amended except upon written agreement of both Parties, unless otherwise provided in this Agreement.

17.2       Recitals. The recitals are hereby incorporated by reference and made part of this Agreement.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

17.3       Captions. The captions in this Agreement are for convenience only and are not to be interpreted or construed as a substantive part of this Agreement. The terms "Article" and "Section" shall be used interchangeably.

17.4       Further Assurances. The Parties agree to execute, acknowledge and deliver such further instruments and to take all such other incidental acts as may be reasonably necessary or appropriate to carry out the purpose and intent of this Agreement.

17.5       No Waiver. Failure by either Party to insist upon strict compliance with any term of this Agreement in any one or more instances will not be deemed a waiver of its rights to insist upon such strict compliance with respect to any subsequent failure.

17.6       Severability. If any term of this Agreement is declared invalid or unenforceable by a court or other body of competent jurisdiction, the remaining terms of this Agreement will continue in full force and effect.

17.7       Independent Contractors. The relationship of the Parties is that of independent contractors, and neither Party will incur any debts or make any commitments for the other Party except to the extent expressly provided in this Agreement. Nothing in this Agreement is intended to create or will be construed as creating between the Parties the relationship of joint ventures, co-partners, employer/employee or principal and agent.

17.8       Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Parties, their successors and permitted assigns. Neither Party may assign this Agreement, in whole or in part, without the prior written consent of the other Party, except that either Party may, without the other Party's consent, assign this Agreement to an Affiliate or to a successor to substantially all of the business or assets of the assigning company.

17.9       Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware, United States of America, excluding its conflicts of law provisions.

17.10     Alternative Dispute Resolution. If any dispute arises between the Parties ("Dispute"), such Dispute shall be presented to the respective presidents or senior executives of the Parties for their consideration and resolution. Each Party shall endeavor to amicably resolve the dispute in good faith as a first step, prior to taking any other action.

17.11     Prevailing Party. In any dispute resolution proceeding between the Parties in connection with this Agreement, the prevailing Party will be entitled to its reasonable attorney's fees and costs in such proceeding.

17.12     Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. Any photocopy, facsimile or electronic reproduction of the executed Agreement shall constitute an original.

17.13     Publicity. Neither Party will make any press release or other public disclosure regarding this Agreement or the transactions contemplated hereby without the other Party's express prior written consent, except as required under applicable law or by any governmental agency, in which case the Party required to make the press release or public disclosure shall use commercially reasonable efforts to obtain the approval of the other Party as to the form, nature and extent of the press release or public disclosure prior to issuing the press release or making the public disclosure.

17.14     Conflicting Terms. To the extent this Agreement and the ANDA Development Agreement have directly conflicting terms, this Agreement shall govern.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

17.15      Currency. Wherever a currency is indicated throughout this Agreement, that currency shall be United States Dollars, unless otherwise clearly indicated.

17.16     Days. Wherever reference is made to days, working days or any measurement of time in days, calendar days shall be used regardless of weekends and holidays.

17.17     Sophisticated Parties. Each Party to this Agreement is a sophisticated business party negotiating in good faith with the advice of legal counsel. Each Party is hereby advised to seek the advice of legal counsel prior to executing this Agreement.

17.18     English Language. This Agreement has been negotiated and is written in the English language, and while some of the Parties may not speak English as their first language, they have sought the use of translators, if necessary and understand the meaning of this entire Agreement.

 

IN WITNESS WHEREOF, the Parties have caused their duly authorized representative to execute this Agreement effective as of the Effective Date.

	
MIKAH PHARMA LLC

	
ELITE PHARMACEUTICALS, INC.

	  	  
	
     

	  	
     

	  
	
Name: Nasrat Hakim

	
Name: Chris Dick

	
Title: President & CEO

	
Title: COO & President

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

EXHIBIT A

PRODUCTS

ANDA(s) and all amendments thereto:

	  	  	 	
Bottle of

30’s

	 	
Bottle of

90’s

	 	
Bottle of 

500’s

	
77-169

	
Isradipine Casules USP, 2.5 mg and 5 mg

	 	
X

	 	
X

	 	
X

	
40-762

	
Phendimetrazine Tartrate Tablets USP, 35 mg

	 	  	 	
X

	 	
X

Specifications

As set forth by each product’s ANDA, United States Pharmacopeia, applicable GMP and FDA.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

EXHIBIT B

SUPPLY PRICE AND OTHER PAYMENTS

	
1.

	
Pricing for Isradipine: Elite will test, manufacture and package the Finished Product, as outlined in this agreement, for an amount equal to its actual cost for the API (if Elite purchased the API) plus {***} (whether capsules or tablets), packaged in the requested configuration. In addition, Elite will receive a {***} royalty on Isradipine’s finished product sales “net profit”. The payment is to be calculated and paid quarterly.  Mikah shall be responsible for the cost and procurement of the API.

	
2.

	
Pricing for Phendimetrazine: Elite will test, manufacture and package the finished product, as outlined in this agreement, for an amount equal to its actual cost for the API (if Elite purchased the API) plus {***} (whether capsules or tablets), packaged in the requested configuration.

	
3.

	
Mikah will pay Elite a one time payment of {***} for each ANDA (Isradipine and Phendimetrazine), for the extra work associated with the Technology transfer, the validation lots and stabilities. The payment shall be made upon the successful manufacturing and testing of the exhibit batch.

	
4.

	
Two years from the launch date of the finished product identified in Exhiblit A, price adjustments may occur, upon mutual agreement of the Parties, in the event (i) modifications to the Specifications requested by Mikah increases or decreases the cost of Manufacturing or Raw Materials as a result of such changes in Spcifications, or (ii) there are special increases or decreases in the cost of Raw Materials that impact the total costs of goods for that SKU by more than 10%.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

EXHIBIT C

FORM OF QUALITY AGREEMENT

 [To be finalized by the Parties within 60 days of executing this Agreement.]

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

EXHIBIT D

CONFIDENTIALITY AGREEMENT

Previously Executed

Attached.

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

 

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

 

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

 

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

 

  

  

  

 

	  	
EXHIBIT D

	  	
Equipment List

 

Description: {***}

Serial number: {***}

Model: {***}

ID number: {***}

Description: {***}

Capacity: {***}

ID number:   {***}

 

{***} Confidential portions of this exhibit have been redacted and filed separately with the Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended

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