Document:

exv10w29

 

Exhibit 10.29

EMPLOYMENT AGREEMENT

AGREEMENT, dated as of August 21, 2007 (the “Effective Date”) by and between NUCRYST
Pharmaceuticals Corp. (together with its successors and assigns, the “Company”) and Thomas
E. Gardner (the “Executive”);

W I T N E S S E T H :

WHEREAS, the Company desires to employ the Executive and to enter into an agreement embodying the
terms of such employment;

WHEREAS, the Executive desires to accept employment with the Company, subject to the terms and
provisions of this Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for
other good and valuable consideration, the receipt of which is mutually acknowledged, the Company
and the Executive agree as follows:

     1.   Definitions.  Capitalized terms not otherwise
defined herein shall have the meanings set forth in Exhibit A.

     2.   Term of Employment.  The Company hereby employs the Executive under this Agreement,
and the Executive hereby accepts such employment, for the Term of Employment. The Term of
Employment shall commence as of August 22, 2007 (the “Start Date”) and shall end on
December 31, 2008; provided, however, that the Term of Employment shall thereafter be
automatically extended for an unlimited number of additional one-year periods on the same terms
unless either Party shall give the other written notice at least sixty (60) days prior to the
then-scheduled date of expiration of the Term of Employment that such Party is electing not to so
extend the Term of Employment. Notwithstanding the foregoing, the Term of Employment may be
earlier terminated in strict accordance with the provisions of Section 8.

     3.   Positions, Duties and Location.

          (a)   During the Term of Employment, the Executive:

               (i)   shall serve as the President and Chief Executive Officer of the Company and as Chairman of its
Board of Directors (the “Board”); shall have all authorities, duties and responsibilities
customarily exercised by an individual serving in those positions in a corporation of the size and
nature of the Company; may be assigned such additional duties and responsibilities, consistent with
the foregoing, as the Board may from time to time reasonably determine; and shall report solely and
directly to the Board;

               (ii)   shall faithfully serve the Company and at all times act in and promote the best interests of
the Company, shall devote substantially all of his business time and efforts to the Company and its
Affiliates and shall not, without the prior approval of the Board, carry on or engage in any other

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business or occupation or become a director, officer, employee or agent of or hold any
position or office with any other company or business entity, provided that nothing herein shall
preclude the Executive from: (A) serving on the boards of a reasonable number of trade associations
and charitable organizations with the approval of the Board, such approval not to be unreasonably
withheld, (B) engaging in charitable activities and community affairs, (C) accepting and fulfilling
a reasonable number of speaking engagements, (D) serving on the boards of directors and holding the
other positions disclosed in the Executive’s notification letter, dated the Start Date, to the
Board, and (E) managing his personal investments and affairs (which may include serving as an
officer, director or employee of a family held company); provided that such activities do not in
the aggregate interfere with the proper performance of his duties and responsibilities hereunder,
violate any provision hereof, or otherwise create any conflict of interest with respect to his
duties and responsibilities hereunder; and

               (iii)   shall comply with all rules, regulations, policies and procedures of the Company as in effect
from time to time, including the Company’s Code of Conduct, Whistleblower Policy, Disclosure Policy
and Insider Trading Policy and any rules or policies that may be adopted by the Company from time
to time to restrict or prohibit actual or perceived conflicts of interest.

          (b)   During the Term of Employment, the Executive’s principal office, and place of employment,
shall be in Wakefield, Massachusetts or such other location as may be determined by the Executive
with the approval of the Board. The Executive acknowledges that he will be required to travel
frequently to other locations in which the Company and its Affiliates conduct their activities,
including Canada.

          (c)   During the Term of Employment, the Executive will promptly, fully and frankly disclose to the
Company in writing:

               (i)   the nature and extent of any interest the Executive has or may have, directly or indirectly,
in any contract or transaction or proposed contract or transaction of or with the Company or any
Affiliate of the Company; and

               (ii)   every office the Executive may hold or acquire, and every property the Executive may possess
or acquire, whereby a duty or interest might be created directly or indirectly in conflict with the
interest of the Company or with the Executive’s obligations under this Agreement.

     4.   Base Salary.  Commencing as of the Start Date, the Executive shall receive an
annualized Base Salary of $400,000, payable in accordance with the regular payroll practices
applicable to senior executives of the Company but no less frequently than monthly. The Base
Salary shall be reviewed no less frequently than annually during the Term of Employment for
increase in the discretion of the Board (or its Compensation Committee). The Base Salary shall not
be decreased at any time, or for any purpose, during the Term of Employment (including, without
limitation, for the purpose of determining benefits due under Section 8) without the prior written
consent of the Executive. The Executive shall not receive any additional director fees for his
service as a member of the Board.

     5.   Annual Incentive Awards.  The Executive shall be entitled to an annual incentive award
in respect of each calendar year that ends during the Term of Employment if he meets or exceeds
bonus criteria established as described below. The Executive’s annual target award opportunity
shall be no less than 50% of his annualized Base Salary beginning with calendar year 2008, and the
annual bonus criteria

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shall be as determined by the Board (or its Compensation Committee) in good faith and in
consultation with the Executive. In lieu of a pro-rated annual incentive award for calendar year
2007, the Executive shall be granted Restricted Stock Units vesting on the Start Date under the
NUCRYST Pharmaceuticals Corp. 1998 Equity Incentive Plan, as amended (the “1998 Plan”), and
pursuant to the terms and conditions of a Restricted Stock Unit Award Agreement in the form
attached hereto as Exhibit B, in an amount equal to $100,000 based on the per share price of
Company stock at the close of the NASDAQ market on August 21, 2007. The Executive shall be paid
his annual incentive award in respect of each calendar year commencing with the 2008 calendar year
no later than the earlier of (x) the date that other senior executives of the Company are paid
their annual incentive awards for such year and (y) such date as soon as practicable after January
1 of the following year on which the Company has sufficiently final financial data to calculate the
Executive’s annual incentive award, but in no event later than March 31 of the following year.

     6.   Long-Term Incentives.

     (a)   As of the Start Date, the Executive shall be granted nonqualified stock options under the 1998
Plan, and pursuant to the terms and conditions of a Stock Option Award Agreement in the form
attached hereto as Exhibit C for the purchase of five hundred thousand (500,000) shares of the
common stock of the Company (the “Shares”) at the NASDAQ market per share closing price on August
21, 2007. The stock options described in this Section 6(a) will vest and become exercisable in
accordance with the following schedule: (i) options with respect to 166,667 Shares will vest and
become exercisable on the Start Date, (ii) options with respect to 166,667 Shares will vest and
become exercisable on the first anniversary of the Start Date, and (iii) options with respect to
166,666 Shares will vest and become exercisable on the second anniversary of the Start Date,
provided (except to the extent otherwise provided in Section 8 below) that the Executive is
employed by the Company on such vesting date. The stock options described in this Section 6(a)
will expire on the earlier of (x) the tenth anniversary of the Start Date or (y) such earlier date
as may be specified in this Agreement.

     (b)   If the Executive is employed by the Company on December 31, 2008, if neither the Executive nor
the Company has given a notice of non-extension in accordance with Section 2 hereof and if in the
judgment of the Board (or its Compensation Committee) such grant is appropriate in view of the
Executive’s satisfactory performance, then the Executive shall be granted nonqualified stock
options under the 1998 Plan and pursuant to the terms and conditions of a Stock Option Award
Agreement in the form attached hereto as Exhibit C for the purchase of a number of Shares equal to
the 2008 Grant Amount at the NASDAQ market per share closing price on December 31, 2008, or if such
date falls within a trading blackout period under the Company’s Insider Trading Policy, then on the
first business day following the expiration of such blackout period (the “2008 Option Grant
Effective Date”). The “2008 Grant Amount” shall mean a number of shares such that, when added to
the Restricted Stock Units granted to the Executive pursuant to Section 5 above and the stock
options granted to the Executive pursuant to Section 6(a) above, the Executive will have received
grants with respect to seven hundred thousand (700,000) shares pursuant to this Agreement. The
stock options described in this Section 6(b) will vest and become exercisable in accordance with
the following schedule: (i) options with respect to one-third of the Shares will vest and become
exercisable on the 2008 Option Grant Effective Date, (ii) options with respect to one-third of the
Shares will vest and become exercisable on the first anniversary of the Option Grant Effective
Date, and (iii) options with respect to one-third of the Shares will vest and become exercisable on
the second anniversary of the Option Grant Effective Date, provided (except to the extent otherwise
provided in Section 8 below) that the Executive is employed by the Company on such

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vesting date. The stock options described in this Section 6(b) will expire on the earlier of
(x) the tenth anniversary of the 2008 Option Grant Effective Date or (y) such earlier date as may
be specified in this Agreement.

     (c)   During the Term of Employment, the Executive shall be eligible, in the Board’s sole
discretion, for additional and other incentives (including, without limitation, additional Stock
Option grants and participation in any bonus pool that may from time to time be put into effect in
connection with any actual or potential sale of the Company or its business), at a level, and on
terms and conditions, that are commensurate with his positions and responsibilities at the Company
and appropriate in light of corresponding awards (if any) to other senior executives of the
Company.

     7.   Other Benefits.

     (a)   Employee Benefits. During the Term of Employment, the Executive shall be entitled to
participate in all employee benefit plans, programs and arrangements made available generally to
senior executives of the Company, including, without limitation, pension, profit-sharing, income
deferral, savings and other retirement plans or programs, medical, dental, vision, hearing,
prescription drug, hospitalization, short term and long-term disability and life insurance plans
and programs, accidental death and dismemberment protection, travel accident insurance, and any
other employee benefit plans, programs or arrangements that may from time to time be made
available, including any plans, programs or arrangements that supplement the above-listed types of
plans, programs or arrangements, whether funded or unfunded; provided, however, that nothing in
this Agreement shall be construed to require the Company to establish or maintain any such plans,
programs or arrangements except as expressly set forth herein.

     (b)   Fringe Benefits, Perquisites and Vacations. During the Term of Employment, the Executive
shall be entitled to participate in all fringe benefits and perquisites available to senior
executives of the Company generally; shall be entitled to receive such additional fringe benefits
and perquisites as the Company may, in its discretion, from time to time provide; and shall be
entitled to no less than twenty (20) days’ paid vacation per calendar year (which, if not used, may
be carried over from year to year up to a maximum of twenty (20) days).

     (c)   Reimbursement of Business and Other Expenses. The Executive shall be promptly reimbursed for
all expenses reasonably incurred by him in connection with his duties and responsibilities under
this Agreement, subject to documentation in accordance with reasonable policies previously
communicated to him in writing. The Company shall also, upon presentation of appropriate
documentation, promptly pay the Executive up to a maximum of five thousand dollars ($5,000) per
month for up to 12 months from the Start Date for temporary living expenses in the Boston area.

     8.   Termination of Employment.

     (a)   Termination Due to Death. In the event that the Executive’s employment hereunder is
terminated due to his death, his estate or his beneficiaries (as the case may be) shall be entitled
to the following:

          (i)   Base Salary for a period of 90 days following the date of death;

          (ii)   prompt payment of a Pro-Rata Annual Incentive Award for the year in which his death occurs;

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          (iii)   full vesting, as of the date of death, of all Restricted Stock Units to the extent that such
Restricted Stock Units were then scheduled to become vested on or before the first anniversary of
the date of death; and

          (iv)   full vesting and exercisability, as of the date of death, for all outstanding Stock Options to
the extent that such Stock Options were then scheduled to become vested or exercisable on or before
the first anniversary of the date of death, each such Stock Option to remain exercisable for the
lesser of (x) one year following the date of death and (y) the remainder of its stated term.

     (b)   Termination Due to Disability. In the event that the Executive’s employment hereunder is
terminated due to Disability, he shall be entitled to the following:

          (i)   prompt payment of a Pro-Rata Annual Incentive Award for the year in which his employment
terminates;

          (ii)   full vesting, as of the Termination Date, of all Restricted Stock Units to the extent that
such Restricted Stock Units were then scheduled to become vested on or before the first anniversary
of the Termination Date; and

          (iii)   full vesting and exercisability, as of the Termination Date, for all outstanding Stock Options
to the extent that such Stock Options were then scheduled to become vested or exercisable on or
before the first anniversary of the Termination Date, each such Stock Option to remain exercisable
for the lesser of (x) one year following the Termination Date and (y) the remainder of its stated
term.

     No termination of the Executive’s employment for Disability shall be effective unless the
Party terminating his employment first gives 15 days’ written notice of such termination to the
other Party. The Parties acknowledge that the definition of Disability contained in Exhibit A
hereto differs from the definition of Disability contained in the Plan, and the Parties confirm
their intent that the definition contained in Exhibit A govern for all purposes under this
Agreement, including for purposes of determining the vesting and exercisability of Restricted Stock
Units and Stock Options under this Section 8(b).

     (c)   Termination by the Company for Cause.

          (i)   No termination of the Executive’s employment hereunder by the Company for Cause shall be
effective as a termination for Cause unless such termination is pursuant to the affirmative vote of
a majority of the then members of the Company’s Board after a Board meeting at which the Executive
has been given an opportunity to be heard on the question whether Cause exists. For purposes of
this Agreement, “Cause” shall mean (A) the Executive’s willful and material breach of the
terms of this Agreement; (B) the Executive’s commission of any felony or any crime involving moral
turpitude; (C) gross neglect or gross misconduct by the Executive in connection with his position,
duties or responsibilities hereunder; (D) the Executive’s willful and unjustified refusal to
perform his duties hereunder; (E) theft, fraud, misappropriation or material dishonesty by the
Executive involving the property or affairs of the Company; (F) the Executive’s chronic
absenteeism; (G) the Executive’s lack or

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performance due to chronic alcoholism or other form of substance abuse; or (H) the failure of
any of the Executive’s representations and warranties contained in Section 13(b)(ii) below to be
true and correct, causing a third party to seek money damages or injunctive or other relief from
the Company; provided, however, that the Executive shall be permitted ten (10) days’
written notice and opportunity to cure (assuming a cure can be effected within 10 days) prior to a
termination based on clause (A), (D), (F) or (G).

          (ii)   In the event that the Executive’s employment hereunder is terminated by the Company for Cause
in accordance with Section 8(c)(i), he shall be entitled to (A) the continued right to exercise any
Stock Options, to the extent that such Stock Options are vested or exercisable as of the
Termination Date, each such Stock Option to remain exercisable for the lesser of (x) 30 days
following the Termination Date and (y) the remainder of its stated term and (B) the benefits
described in Section 8(h)(i).

     (d)   Termination Without Cause. In the event that the Executive’s employment hereunder is
terminated by the Company, other than for Disability in accordance with Section 8(b), for Cause in
accordance with Section 8(c)(i), or by expiration of the Term of Employment pursuant to notice of
non-extension in accordance with Section 2 given by the Company, he shall be entitled to:

          (i)   an amount equal to one year’s Base Salary, at the annualized rate in effect on the Termination
Date, payable in a lump sum within seven (7) days following the effective date of the Executive’s
executed release of all claims against the Company;

          (ii)   prompt payment of a Pro-Rata Annual Incentive Award for the year in which his employment
terminates; and

          (iii)   full vesting, as of the Termination Date, of all Restricted Stock Units to the extent that
such Restricted Stock Units were then scheduled to become vested on or before the first anniversary
of the Termination Date; and

          (iv)   full vesting and exercisability, as of the Termination Date, for all outstanding Stock Options
to the extent that such Stock Options were then scheduled to become vested or exercisable on or
before the first anniversary of the Termination Date, each such Stock Option to remain exercisable
for the lesser of (x) one year following the Termination Date and (y) the remainder of its stated
term.

     (e)   Constructive Termination Without Cause. In the event that a Constructive Termination Without
Cause occurs, the Executive shall have the same entitlements as provided under Section 8(d) for a
termination by the Company without Cause.

     (f)   Voluntary Termination. In the event that the Executive terminates his employment hereunder
prior to the then-scheduled expiration of the Term of Employment on his own initiative, other than
for Disability or by a Constructive Termination Without Cause, he shall give the Company at least
ninety (90) days’ written notice of such termination and shall have the same entitlements as
provided in Section 8(c)(ii) in the case of a termination by the Company for Cause. A voluntary
termination under this Section 8(f) shall not be deemed a breach of this Agreement.

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     (g)   Expiration of Term of Employment. In the event that the Executive’s employment hereunder
terminates by expiration of the Term of Employment pursuant to notice of non-extension from the
Company in accordance with Section 2, the Executive shall be entitled to:

          (i)   the amount as provided in Section 8(d)(i) in the case of a termination by the Company without
Cause;

          (ii)   the Executive’s incentive award in respect of his final year of employment, payable in
accordance with Section 5 above;

          (iii)   full vesting, as of the Termination Date, of all Restricted Stock Units to the extent that
such Restricted Stock Units were then scheduled to become vested on or before the first anniversary
of the Termination Date; and

          (iv)   full vesting and exercisability, as of the Termination Date, for all outstanding Stock Options
to the extent that such Stock Options were then scheduled to become vested or exercisable on or
before the first anniversary of the Termination Date, each such Stock Option to remain exercisable
for the lesser of (x) one year following the Termination Date and (y) the remainder of its stated
term.

     (h)   Miscellaneous.

          (i)   On any termination of the Executive’s employment hereunder, he shall be entitled to:

               (A)   Base Salary through the Termination Date;

          (B)   a lump-sum payment in respect of accrued but unused vacation days at his Base
Salary rate in effect as of the Termination Date;

          (C)   other or additional benefits in accordance with the applicable terms of
applicable plans, programs and arrangements of the Company and its Affiliates
(including, without limitation, those described in Sections 5, 6, 7, 9 and 10 of
this Agreement and in any Stock Option or Restricted Stock Unit Award Agreement);
and

          (D)   payment, promptly when due, of all amounts owed to him in connection with the
termination, such payments to be made by wire transfer of same day funds to the
extent reasonably requested by the Executive.

          (ii)   In the event of any termination of the Executive’s employment hereunder, the Executive shall
be under no obligation to seek other employment or otherwise mitigate the obligations of the
Company under this Agreement, and there shall be no offset against amounts due the Executive under
this Agreement on account of any remuneration or other benefit earned or received by the Executive
after such termination. Any amounts due under this Section 8 are considered to be reasonable by
the Company and are not in the nature of a penalty.

          (iii)   There shall be no contractual or similar restrictions on the Executive’s activities following
the Termination Date other than as expressly set forth in this Agreement.

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     9.   Change in Control.

     (a)   In the event that the Executive’s employment hereunder is terminated within 120 days prior to,
or within 12 months following, a Change in Control in a termination that is governed by Section
8(d), 8(e) or 8(g) (relating to terminations without Cause or non-extension of this Agreement by
the Company):

          (i)   in lieu of any amounts otherwise payable to the Executive under Section 8(d), 8(e) or 8(g),
the Executive shall be entitled to an amount equal to two years’ Base Salary, at the annualized
rate in effect on the Termination Date, payable in a lump sum within seven (7) days following the
effective date of the Executive’s executed release of all claims against the Company;

          (ii)   any outstanding Stock Options shall become fully vested and exercisable and shall remain
exercisable for the lesser of (x) one year following the Termination Date and (y) the stated term
of such Stock Option;

          (iii)   any outstanding Restricted Stock Units shall become fully vested;

          (iv)   any other amounts, entitlements and benefits in which the Executive is not yet vested shall
become fully vested (and thus nonforfeitable) to the extent that such vesting does not conflict
with the applicable terms of the applicable benefit plans, programs and arrangements of the Company
and its Affiliates; and

          (v)   the Executive shall be entitled to additional or other benefits (if any) in accordance with
the applicable terms of applicable plans, programs and arrangements of the Company and its
Affiliates.

     (b)   If the aggregate of all amounts and benefits due to the Executive, under this Agreement or any
other plan, program, agreement or arrangement of the Company or any of its Affiliates, which, if
received by the Executive in full, would constitute “parachute payments” as such term is defined in
and under Section 280G of the Code (collectively, “Change of Control Benefits”), reduced by all
federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to
Section 4999 of the Code, is less than the amount the Executive would receive, after taxes, if the
Executive received aggregate Change of Control Benefits equal to only three times the Executive’s
“base amount”, as defined in and under Section 280G of the Code, less $1.00, then such cash Change
of Control Benefits as the Executive shall select shall be reduced or eliminated to the extent
necessary so that the Change of Control Benefits received by the Executive will not constitute
parachute payments (provided that reduction in such cash Change of Control Benefits can achieve
this objective). The determinations with respect to this Section 9(b) shall be made by an
independent auditor (the “Auditor”) paid by the Company. The Auditor will be the Company’s regular
independent auditor unless the Executive reasonably objects to the use of that firm, in which event
the Auditor will be a nationally recognized United States public accounting firm chosen by the
Executive in consultation with the Company.

     (c)   It is possible that after the determinations and selections made pursuant to Section 9(b) the
Executive will receive Change of Control Benefits that are, in the aggregate, either more or less
than the limitations provided in Section 9(b) (hereafter referred to as an “Excess Payment” or
“Underpayment”, respectively). If it is established, pursuant to a final determination of a court
or an

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Internal Revenue Service proceeding that has been finally and conclusively resolved, that an
Excess Payment has been made, such Excess Payment shall be deemed for all purposes to be a loan to
the Executive made on the date the Executive received the Excess Payment and the Executive shall
repay the Excess Payment to the Company on demand, together with interest on the Excess Payment at
the applicable federal rate (as defined in and under Section 1274(d) of the Code) from the date of
the Executive’s receipt of such Excess Payment until the date of such repayment. In the event that
it is determined (i) by a court of competent jurisdiction, or (ii) by the Auditor upon request by
the Executive or the Company, that an Underpayment has occurred, the Company shall pay an amount
equal to the Underpayment to the Executive within 20 days of such determination together with
interest on such amount at the applicable federal rate from the date such amount would have been
paid to the Executive until the date of payment.

     10.   Indemnification.

     (a)   Simultaneously with the execution and delivery of this Agreement, the Executive and the
Company are entering into an Indemnity Agreement in the form attached hereto as Exhibit D (the
“Indemnity Agreement”).

     (b)   During the Term of Employment and thereafter until the sixth anniversary of the Termination
Date, the Company shall provide directors’ and officers’ liability insurance coverage to the
Executive that is no less favorable to him in any respect (including, without limitation, with
respect to scope, exclusions, amounts, and deductibles) than the directors’ and officers’ liability
insurance coverage (if any) then being provided to any other present or former senior executive or
director of the Company, provided that doing so does not, after the Term of Employment, increase
the cost of such insurance to the Company by more than ten thousand dollars ($10,000) per annum.

     11.   Restrictive Covenants.

     (a)   Confidentiality, Disclosure of Information.

          (i)   The Executive recognizes and acknowledges that the Executive has had and will have access to
Confidential Information (as defined below) relating to the business or interests of the Company
and its Affiliates or of persons with whom the Company may have business relationships. Except as
permitted herein, the Executive will not during the Term of Employment, or at any time thereafter,
use, disclose, lecture upon, publish or permit to be known by any other person or entity any
Confidential Information of the Company (except (w) to the Company, to any of its then current
Affiliates, or to any authorized (or apparently authorized) agent or representative of the
foregoing, (x) in connection with performing his duties hereunder, (y) when required to do so by
law or by a court, governmental agency, legislative body or arbitrator with apparent jurisdiction
to order him to divulge, disclose or make accessible such information or (z) in confidence to an
attorney or other professional advisor for the sole purpose of securing professional advice). In
the event the Executive is requested or becomes legally compelled by subpoena or other similar
legal process to disclose any Confidential Information, he will provide the Company with prompt
written notice of such compulsion or other legal process so that the Company may seek a protective
order or other appropriate remedy and/or waive compliance with the provisions of this Section
11(a). In the event such protective order or other remedy is not obtained, or that the Company
waives compliance with the provisions of this Section 11(a), the Executive will furnish only that
portion of the Confidential Information that is legally required and will

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exercise reasonable efforts to obtain reliable assurances that confidential treatment will be
accorded the Confidential Information. The term “Confidential Information” means
information relating to the Company’s business affairs, proprietary technology, trade secrets,
patented processes, information regarding plans for research, development, new products, marketing
and selling, research and development data, know-how, market studies and forecasts, competitive
analyses, pricing policies, employee lists, employment agreements (other than this Agreement),
information about the skills and compensation of the Company’s employees, personnel policies, the
substance of agreements with customers, suppliers and others, marketing arrangements, customer
lists, commercial arrangements, or any other information relating to the Company’s business that is
not generally known to the public (other than through a breach of this Agreement). This
obligation shall continue until such Confidential Information becomes publicly available, other
than pursuant to a breach of this Section 11 by the Executive, regardless of whether the Executive
continues to be employed by the Company.

          (ii)   It is also understood and agreed that the Company has received and in the future will receive
information from third parties (“Third Party Information”) subject to a duty on the Company’s part
to maintain the confidentiality of such information and to use it only for certain limited
purposes. During the Term of Employment and thereafter, the Executive agrees to hold Third Party
Information in the strictest confidence and not to disclose Third Party Information to anyone
(other than Company personnel who need to know such information in connection with their work for
the Company) or to use Third Party Information, except in connection with his work for the Company
and in compliance with the Company’s obligations to third parties regarding confidentiality and
use.

          (iii)   It is further agreed and understood by and between the parties to this Agreement that all
“Company Materials,” which include, but are not limited to, computers, computer
software, computer disks, tapes, printouts, source, HTML and other code, flowcharts, schematics,
designs, graphics, drawings, photographs, charts, graphs, notebooks, customer lists, sound
recordings, other tangible or intangible manifestation of content, and all other documents whether
printed, typewritten, handwritten, electronic, or stored on computer disks, tapes, hard drives, or
any other tangible medium, as well as samples, prototypes, models, products and the like, shall be
the exclusive property of the Company and, upon termination of Executive’s employment with the
Company, and/or upon the request of the Company, all Company Materials, including copies thereof,
as well as all other Company property then in the Executive’s possession or control, shall be
returned to and left with the Company; provided that the Executive shall be entitled to
retain (x) his personal rolodex and correspondence files, if, and to the extent that, such items do
not contain Confidential Information and (y) documents relating to his compensation, entitlements
and benefits.

     (b)   Inventions Discovered by Executive. The Executive shall promptly disclose to the Company any
invention, improvement, discovery, trade secret, data, program, process, formula, or method or
other intellectual property, whether or not patentable or copyrightable (collectively,
“Inventions”), conceived or first reduced to practice by the Executive, either alone or jointly
with others, during the Term of Employment (or, if based on any Confidential Information, at any
time during or after the Term of Employment) (a) which pertains to any line of business activity,
research or investigations of the Company, whether then conducted or then being planned by the
Company, with which the Executive was or is involved, (b) which is developed using time, material
or facilities of the Company, whether or not during working hours or on the Company premises, or
(c) which relates to or is suggested by any of the Executive’s work during the Term of Employment,
whether or not during normal working hours. To the fullest extent permitted by applicable law, the
Executive hereby assigns to the Company all of the

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Executive’s right, title and interest in and to any such Inventions. During and after the
Term of Employment, the Executive shall execute any documents necessary to perfect the assignment
of such Inventions to the Company and to enable the Company to apply for, obtain and enforce
patents, trademarks and copyrights in any and all countries on such Inventions, including, without
limitation, the execution of any instruments and the giving of evidence and testimony, without
further compensation, during the Term of Employment, beyond the Executive’s agreed compensation and
thereafter at the Company’s sole expense. Without limiting the foregoing, the Executive further
acknowledges that all original works of authorship by the Executive, whether created alone or
jointly with others, related to the Executive’s employment with the Company and which are
protectable by copyright, are “works made for hire” within the meaning of the United States
Copyright Act, 17 U.S.C. § 101, as amended, and the copyright of which shall be owned solely,
completely and exclusively by the Company. If any Invention is considered to be work not included
in the categories of work covered by the United States Copyright Act, 17 U.S.C. § 101, as amended,
such work is hereby assigned or transferred completely and exclusively to the Company. The
Executive hereby irrevocably designates counsel to the Company as the Executive’s agent and
attorney-in-fact to do all lawful acts necessary to apply for and obtain patents and copyrights and
to enforce the Company’s rights under this Section. This Section 11(b) shall survive the
termination of the Executive’s employment under this Agreement. Any assignment of copyright
hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other
rights that may be known as or referred to as “moral rights” (collectively “Moral Rights”). To the
extent such Moral Rights cannot be assigned under applicable law and to the extent the following is
allowed by the laws in the various countries where Moral Rights exist, the Executive hereby waives
such Moral Rights and consents to any action of the Company that would violate such Moral Rights in
the absence of such consent. The Executive agrees to confirm any such waivers and consents from
time to time as reasonably requested by the Company.

     (c)   Non-Competition and Non-Solicitation. The Executive acknowledges that the Company has
invested substantial time, money and resources in the development and retention of its Inventions,
Confidential Information (including trade secrets), customers, accounts and business partners, and
further acknowledges that during the course of the Executive’s employment with the Company the
Executive will have access to the Company’s Inventions and Confidential Information (including
trade secrets), and will be introduced to existing and prospective customers, accounts and business
partners of the Company. The Executive acknowledges and agrees that any and all “goodwill”
associated with any existing or prospective customer, account or business partner and relating to
the business of the Company belongs exclusively to the Company, including, but not limited to, any
goodwill relating to the business of the Company that is created during the Term of Employment as a
result of direct or indirect contacts or relationships between the Executive and any existing or
prospective customers, accounts or business partners. Additionally, the Parties acknowledge and
agree that the Executive possesses skills that are special, unique or extraordinary and that the
value of the Company depends upon his use of such skills on its behalf during the Term of
Employment.

11

 

In recognition of this, the Executive covenants and agrees that:

     (i)   During the Term of Employment, and for a period of one (1) year after the Termination Date,
the Executive may not, without the prior written consent of an officer that has been authorized to
give such consent by the Company’s Board, manage, operate, advise, invest in, give financial
assistance to or otherwise engage or participate, directly or indirectly (whether as an officer,
director, employee, agent, servant, owner, partner, principal, consultant, independent contractor,
representative, stockholder, member or in any other capacity whatsoever) in, any business,
enterprise or undertaking that carries on in any place throughout the world any business, work,
research, development or investigation (collectively, “Business”) that competes with any Business
carried on by the Company during or after the Term of Employment (“Competitive Business”) or that
sells, offers, manufactures, distributes, develops or supplies anywhere throughout the world any
products or services that compete with those sold, offered, manufactured, distributed or developed
by the Company during or after the Term of Employment (“Competitive Products”);
provided that the Executive may in any event (x) participate after the Termination Date in
a Competitive Business or in a business offering Competitive Products if his association is with a
separately managed and operated division, subsidiary or affiliate of such a business and such
division, subsidiary or affiliate does not carry on a Competitive Business or offer Competitive
Products and he has no business communications with employees of any division, subsidiary or
affiliate of the business that does carry on a Competitive Business or offer Competitive Products
regarding the business of the competitive division, subsidiary or affiliate, and (y) acquire,
solely as an investment and through market purchases, and not as part of any control group, up to
2% of the outstanding securities of any publicly-traded entity.

     (ii)   During the Term of Employment, and for a period of one (1) year thereafter, the Executive may
not entice, solicit or encourage any person who is or was, at the time of or within six months
prior to such enticement, solicitation or encouragement, a Company employee or independent
contractor to the Company to leave the employ of the Company, to sever his engagement with the
Company or to become affiliated with any business, enterprise or undertaking in which the
Executive, directly or indirectly, has an interest, absent prior written consent to do so from an
officer that has been authorized to give such consent by the Company’s Board.

     (iii)   During the Term of Employment, and for a period of one (1) year thereafter, the Executive may
not, directly or indirectly, solicit any customer, prospective customer, vendor, strategic partner
or business associate of the Company for the purpose of offering Competitive Products or for the
purpose of encouraging or enticing such Person to cease doing business with the Company, to reduce
its relationship with the Company or to refrain from establishing or expanding a relationship with
the Company.

     (d)   Provisions Necessary and Reasonable.

          (i)   The Executive agrees that (A) the provisions of Sections 11(a), 11(b) and 11(c) of this
Agreement are necessary and reasonable to protect the Company’s Confidential Information,
Inventions, and goodwill; (B) the specific temporal, geographic and substantive provisions set
forth in Section 11(c) of this Agreement are reasonable and necessary to protect the Company’s
business interests in part because the Company’s business is international in scope; and (C) in the
event of any breach of any of the covenants set forth herein, the Company would suffer substantial
irreparable harm and would not have an adequate remedy at law for such breach.

12

 

          (ii)   If any of the covenants contained in Sections 11(a), 11(b) and 11(c) hereof, or any part
thereof, are hereafter construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants, which shall be given full effect without regard to the
invalid portions.

          (iii)   If any of the covenants contained in Sections 11(a), 11(b) and 11(c) hereof, or any part
thereof, are held to be unenforceable by a court of competent jurisdiction because of the temporal
or geographic scope of such provision or the area covered thereby, the Parties agree that the court
making such determination shall have the power to reduce the duration and/or geographic area of
such provision and, in its reduced form, such provision shall be enforceable.

          (iv)   In the event of any actual or threatened breach by the Executive of any of the provisions of
Sections 11(a), 11(b) and 11(c), the Company shall be entitled to seek an injunction restraining
the Executive from violating such provision. The Parties agree that any such action may be
initiated and maintained in the federal or state courts located in the State of Massachusetts,
without posting any bond or security, and the Parties consent to the personal jurisdiction of such
courts for such purpose. The seeking of any such injunction shall not affect the Company’s right to
seek and obtain damages on account of any such actual or threatened breach.

     12.   Assignability; Binding Nature.

     (a)   This Agreement shall be binding upon and inure to the benefit of the Parties and their
respective successors, heirs (in the case of the Executive) and assigns.

     (b)   No rights or obligations of the Company under this Agreement may be assigned or transferred by
the Company except that such rights and obligations may be assigned or transferred pursuant to a
reconstruction, amalgamation, merger, consolidation or other combination in which the Company is
not the continuing entity, or a sale or liquidation of all or substantially all of the business and
assets of the Company, provided that the assignee or transferee is the successor to all or
substantially all of the business and assets of the Company and such assignee or transferee
expressly assumes the liabilities, obligations and duties of the Company as set forth in this
Agreement. In the event of any reconstruction, amalgamation, merger, consolidation, other
combination, sale of business and assets, or liquidation as described in the preceding sentence,
the Company shall use its best efforts to cause such assignee or transferee to promptly and
expressly assume the liabilities, obligations and duties of the Company hereunder.

     (c)   No rights or obligations of the Executive under this Agreement may be assigned or transferred
by the Executive other than his rights to compensation and benefits, which may be transferred only
by will or operation of law, except as provided in Section 15(d).

     13.   Representations.

     (a)   The Company represents and warrants that (i) it is fully authorized by action of its Board
(and of any other Person or body whose action is required) to enter into this Agreement and to
perform its obligations under it; (ii) the execution, delivery and performance of this Agreement by
it does not violate any applicable law, regulation, order, judgment or decree or any agreement,
plan or corporate governance document to which it is a party or by which it is bound; and (iii) upon
the execution and delivery of this

13

 

Agreement by the Parties, this Agreement shall be a valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally.

     (b)   The Executive represents and warrants that (i) the execution, delivery and performance of this
Agreement by him do not violate any applicable law, regulation, order, judgment or decree to which
the Executive is a party or by which he is bound, (ii) the execution, delivery and performance of
this Agreement by him do not and will not violate or conflict with any contractual or other
provision or restriction to which the Executive is subject or by which he may be bound, and (iii)
upon the execution and delivery of this Agreement by the Executive and the Company, this Agreement
shall be a valid and binding obligation of the Executive, enforceable against him in accordance
with its terms, except to the extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors’ rights generally.

     14.   Notices.  Any notice, consent, demand, request, or other communication given to a
Person in connection with this Agreement shall be in writing and shall be deemed to have been given
to such Person (a) when delivered personally to such Person or (b), provided that a written
acknowledgment of receipt is obtained, five days after being sent by prepaid certified or
registered mail, or two days after being sent by a nationally recognized overnight courier, to the
address (if any) specified below for such Person (or to such other address as such Person shall
have specified by ten days’ advance notice given in accordance with this Section 14, in the case of
the Company only, on the first business day after it is sent by facsimile to the facsimile number
set forth below (or to such other facsimile number as shall have specified by ten days’ advance
notice given in accordance with this Section 14), with a confirmatory copy sent by certified or
registered mail or by overnight courier in accordance with this Section 14.

	 	 	 
	If to the Company:

	 	NUCRYST Pharmaceuticals Corporation

10102 – 114 Street

Fort Saskatchewan, Alberta

Canada T8L 3W4

Attn:  General Counsel
	 
	 	 
	With a copy to:

	 	Maureen W. McCarthy, Esq.

126 Waverly Place, #3E

New York, NY 10011
	 
	 	 
	If to the Executive:

	 	The address of his principal residence as it appears in the
Company’s records, with a copy to him (during the Term of
Employment) at his principal office at the Company.
	 
	 	 
	If to a beneficiary
of the Executive:

	 	The address most recently specified by the Executive or beneficiary.

14

 

     15.   Miscellaneous.

     (a)   Entire Agreement. This Agreement contains the entire understanding and agreement between the
Parties concerning the subject matter hereof and supersedes all prior agreements, understandings,
term sheets, discussions, negotiations and undertakings, whether written or oral, between them
relating to this Agreement. In the event of any inconsistency between any provision of this
Agreement and any provision of any employee handbook, personnel manual, program, policy or
arrangement of the Company or any of its Affiliates or any provision of any agreement, plan, or
corporate governance document of any of them, the provisions of this Agreement shall control unless
the Executive otherwise agrees in a writing that expressly refers to the provision of this
Agreement whose control he is waiving.

     (b)   Amendment or Waiver. No provision in this Agreement may be amended unless such amendment is
set forth in a writing that expressly refers to this Agreement and that is signed by the Executive
and by an authorized officer of the Company. No waiver by any Person of any breach of any
condition or provision contained in this Agreement shall be deemed a waiver of any similar or
dissimilar condition or provision at the same or any prior or subsequent time. To be effective,
any waiver must be set forth in a writing signed by the waiving Person and must specifically refer
to the condition(s) or provision(s) of this Agreement being waived.

     (c)   Headings. The headings of the Sections and sub-sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.

     (d)   Beneficiaries/References. The Executive shall be entitled, to the extent permitted under
applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or
benefit hereunder following the Executive’s death by giving the Company written notice thereof. In
the event of the Executive’s death or a judicial determination of his incompetence, references in
this Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.

     (e)   Survivorship. Except as otherwise set forth in this Agreement, the respective rights and
obligations of the Parties hereunder shall survive any termination of the Executive’s employment.

     (f)   Severability. To the extent that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall remain in full force and effect so as to achieve the intentions
of the Parties as set forth in this Agreement, to the maximum extent possible.

     (g)   Withholding Taxes. The Company may withhold from any amounts or benefits payable under this
Agreement taxes that are required to be withheld pursuant to any applicable law or regulation.

     (h)   Executive’s Acknowledgement. The Executive acknowledges that he fully understands the terms
of this Agreement, that he knowingly and voluntarily, of his own free will without any duress,
being fully informed and after due deliberation, accepts its terms as his own free act. The
Executive further acknowledges that he has had the opportunity to seek the advice of counsel in
connection with his entry into this Agreement.

15

 

     (i)   Governing Law. This Agreement shall be governed, construed, performed and enforced in
accordance with its express terms, and otherwise in accordance with the laws of the State of
Massachusetts, without reference to principles of conflict of laws; provided, however, that the
Indemnity Agreement, the Restricted Stock Unit Award Agreement and the Stock Option Award
Agreements shall be governed by and construed in accordance with the laws of the Province of
Alberta, Canada. The Parties agree that any claim arising out of or relating to this Agreement,
any other agreement between the Executive and the Company or any of its Affiliates, the Executive’s
employment with the Company or the termination thereof may be initiated and maintained in the
federal or state courts located in the State of Massachusetts, and the Parties consent to the
personal jurisdiction of such courts. Claims arising out of or relating to the Indemnity
Agreement, the Restricted Stock Unit Award Agreement and the Stock Option Award Agreement may be
brought in the courts of the Province of Alberta, Canada, and the Parties consent to the personal
jurisdiction of such courts for such purpose.

     (j)   Counterparts. This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original and all of which together shall be deemed to be one and the same instrument.

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

	 	 	 	 	 
	 	 
NUCRYST Pharmaceuticals Corp.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
 
	 	The Executive

 	 
	 	 	 
	 	Thomas E. Gardner 	 
	 	 	 	 
	 

16

 

EXHIBIT A

DEFINITIONS

     a.   “Affiliate” of a Person shall mean any Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person.

     b.   “Agreement” shall mean this Employment Agreement, which includes for all purposes its
Exhibits.

     c.   “Associate” shall have the meaning ascribed to such term in the Business Corporations
Act (Alberta), as the same may be amended from time to time, and any successor legislation thereto.

     d.   “Base Salary” shall mean the salary provided for in Section 4 or any increased salary
granted to the Executive pursuant to Section 4.

     e.   “Change in Control” shall mean the occurrence of a transaction or series of
transactions, either alone or in conjunction with other events or transactions, as a result of
which:

     i.   any “person,” as such term is currently used in Section 13(d) of the Securities
Exchange Act of 1934, as amended (other than the Executive or any of his Associates or The Westaim
Corporation [“Westaim”] or its Affiliates), becomes (directly or indirectly) a “beneficial
owner,” as such term is currently used in Rule 13d-3 promulgated under that Act, of more than
fifty percent (50%) of the Voting Securities of the Company (measured either by number of Voting
Securities or by number of votes entitled to be cast), whether through the acquisition of
previously issued and outstanding Voting Securities, or of Voting Securities that have not been
previously issued, or any combination thereof, or any other transaction having a similar effect,
unless the acquisition of such Voting Securities is approved by a majority of Incumbent Directors
(as defined below);

     ii.   fifty percent (50%) or more of the issued and outstanding Voting Securities become subject
to a voting trust in which neither the Executive nor any or his Associates nor Westaim nor any of
its Affiliates participate;

     iii.   a majority of the members of the Board are removed from office at any annual or special
meeting of shareholders, or a majority of the directors of the Company (calculated without
including the Executive) resign from office in the course of any 60-day period, unless the
vacancies created thereby are either (A) filled by appointments made by the remaining members of
the Board or (B) are filled by nominees proposed by the Board, the Executive or any of his
Associates or Westaim; or

     iv.   (x) the Company combines with another entity and is the surviving entity, or (y) all or
substantially all of the assets or business of the Company is disposed of pursuant to a sale,
merger, consolidation, liquidation or other transaction or series of transactions, unless
the holders of Voting Securities of the Company immediately prior to such combination, sale,
merger, consolidation, liquidation or other transaction or series of transactions (collectively, a
“Triggering Event”) own, directly or indirectly and immediately following such Triggering Event, by
reason of their ownership of Voting Securities of the Company immediately prior to such Triggering
Event, more than fifty percent (50%) of

17

 

the Voting Securities (measured both by number of securities and by voting power) of: (q) in
the case of a combination in which the Company is the surviving entity, the surviving entity and
(r) in any other case, the entity (if any) that succeeds to substantially all of the business and
assets of the Company.

For purposes of the definition of Change in Control, the term “Incumbent Directors,” means
the members of the Board on the Effective Date; provided that any individual becoming a
director subsequent to such date whose election or nomination for election was supported by
two-thirds of the directors who then comprised the Incumbent Directors shall be considered to be an
Incumbent Director.

It is understood and agreed that no Change in Control shall be deemed to exist or occur as a result
of any alteration in the current equity ownership of, or the current voting control over, the
Company that is a direct consequence of Westaim’s realignment of its ownership interests in the
Company, including but not limited to any transfer by Westaim of its interests; provided, however,
that if Westaim transfers fifty percent (50%) or more of the issued and outstanding Voting
Securities to a bona fide third party purchaser from Westaim in an arms’ length negotiated
transaction, the occurrence of such transfer shall constitute a Change in Control.

     f.   “Code” shall mean the Internal Revenue Code of 1986, as amended. Any reference to a
particular section of the Code shall include any provision that modifies, replaces or supersedes
such section.

     g.   “Company” shall have the meaning set forth in the preamble to this Agreement.

     h.   “Constructive Termination Without Cause” shall mean a termination by the Executive of
his employment hereunder on 20 days’ written notice given by him to the Company following the
occurrence of any of the following events without his express prior written consent, unless the
Company shall have fully cured all grounds for such termination prior to the expiration of such
20-day notice period:

          i.   any failure to continue the Executive as the Chief Executive Officer of the Company and as a
member of its Board;

          ii.   the appointment or election of any employee of the Company other than the Executive as
Chairman of the Board of the Company;

          iii.   any material diminution in the Executive’s duties or authorities; or any change in the
reporting structure so that the Executive reports to a Person or Persons other than the Board or
its Chairman;

          iv.   any material breach by the Company of any of its obligations under Sections 3 through 7, 9 or
10 or of any of its representations or warranties in Section 13(a) or of any material term of, or
representation in, the Indemnity Agreement or any Stock Option or Restricted Stock Unit agreement,
equity grant agreement, or long-term incentive agreement; or

          v.   the failure of the Company to obtain the assumption in writing of its obligations under this
Agreement by any successor to all or substantially all of its business or assets within 15 days
after any reconstruction, amalgamation, combination, merger, consolidation, sale, liquidation or
similar transaction.

18

 

     i.   “Disability”
shall mean the Executive’s inability, due to physical or mental
incapacity, to substantially perform his duties and responsibilities hereunder for 90 consecutive
days or an aggregate of 120 days in any one year period, as determined by an approved medical
doctor. For this purpose, an approved medical doctor shall mean a medical doctor selected by the
Parties. If the Parties cannot agree on a medical doctor, each Party shall select a medical doctor
and the two doctors shall select a third who shall be the approved medical doctor for this purpose.

     j.   “Effective
Date” shall have the meaning set forth in the preamble to this Agreement.

     k.   “Executive”
shall have the meaning set forth in the preamble to this Agreement, as
modified by Section 15(d).

     l.   “Parties”
shall mean the Company and the Executive.

     m.   “Person”
shall mean any individual, corporation, partnership, limited liability
company, joint venture, trust, estate, board, committee, agency, body, employee benefit plan, or
other person or entity.

     n.   “Pro-Rata
Annual Incentive Award” shall mean an amount equal to the product obtained
by multiplying (x) the greater of (m) the Executive’s target annual incentive award
for the year of termination (which target award shall, for this purpose, be deemed to be no less
than 30% of his annualized Base Salary) and (n) the aggregate annual incentive award he
earned from the Company for the prior year times (y) a fraction, the numerator of which is
the number of days he was employed hereunder during the year of termination and the denominator of
which is 365.

     o.   “Restricted
Stock Units” shall mean any compensatory restricted securities of the
Company or any of its Affiliates; any compensatory share units, phantom securities or analogous
rights granted by or on behalf of the Company or any of its Affiliates; and any security or right
received in respect of any of the foregoing securities or rights.

     p.   “Start
Date” shall have the meaning specified in Section 2.

     q.   “Stock
Option” shall mean any compensatory option to acquire securities of the Company
or of any of its Affiliates; any compensatory stock appreciation right, phantom stock option or
analogous right granted by or on behalf of the Company or any of its Affiliates; and any security
or right received in respect of any of the foregoing options or rights.

     r.   “Term
of Employment” shall mean the period specified in Section 2.

     s.   “Termination
Date” shall mean the date on which the Executive’s employment hereunder
terminates in accordance with this Agreement.

     t.   “Voting
Securities” shall mean issued and outstanding securities of any class or
classes having general voting power, under ordinary circumstances in the absence of contingencies,
to elect one or more members of the Board of the issuer.

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EXHIBIT B

NUCRYST PHARMACEUTICALS CORP.

RESTRICTED STOCK UNIT AWARD AGREEMENT

GRANT of Restricted Stock Units made on August ___, 2007 (the “Grant Date”)

	 	 	 
	TO:
	 	Thomas E. Gardner (the “Participant”)

	 	 	 

	BY:
	 	NUCRYST Pharmaceuticals Corp. (the “Company”)

     WHEREAS, on December 21, 2005, the Board of Directors of the Company (the “Board”) approved
and adopted the Company’s 1998 Equity Incentive Plan (as amended) (the “Plan”) and the Plan was
subsequently approved by the Toronto Stock Exchange; and

     WHEREAS, pursuant to the Plan, awards of Restricted Stock Units may be granted to persons
including executives of the Company and members of the Board;

     WHEREAS, the Participant and the Company are parties to an Employment Agreement, dated as of
August 21, 2007 (the “Employment Agreement”), whereby the Participant has agreed to serve, and the
Company has agreed to engage the Participant, as the Company’s President and CEO and as Chairman of
the Board, subject to the terms of the Employment Agreement; and

     WHEREAS, pursuant to the Employment Agreement and by resolution of the Board made on August ___
2007, the Board granted the Restricted Stock Unit award provided for herein to the Participant in
connection with the Participant’s services to the Company, such grant to be the subject of the
terms set forth herein;

     NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties
hereto agree as follows:

1.     Equity Incentive Plan

The grant by the Company to the Participant of Restricted Stock Units by this Award Agreement is
made pursuant to the terms and conditions of the Plan. This Award Agreement and the terms and
conditions of the grant of Restricted Stock Units are subject in all respects to the terms and
conditions of the Plan, which is made a part of this Award Agreement. The Participant, by
acceptance of this Award Agreement, agrees to be bound by the Plan (and any regulations that may be
established under the Plan) and acknowledges receipt of a copy of the Plan and this Award
Agreement. Terms that are defined in the Plan and not otherwise defined in this Award Agreement
shall have the same meaning when used in this Award Agreement as in the Plan.

2.     Grant of Restricted Stock Units

The
Company grants to the Participant, effective the Grant Date,
_________ Restricted Stock Units
(defined in the Plan and this Award Agreement as “Restricted Stock Units” or individually as a
“Restricted Stock Unit”), subject to the terms and conditions of this Award Agreement and the Plan.

20

 

3.     Vesting and Restrictions

All of the Restricted Stock Units shall be 100% vested as of the Grant Date; provide however that
none of such Restricted Stock Units or the underlying Common Shares may be sold, exchanged,
transferred, pledged, hypothecated, or otherwise disposed of by the Participant, whether
voluntarily, involuntarily, or by operation of law (collectively, “Prohibited Dispositions”) until
the expiration of the Restricted Period and any purported Prohibited Disposition shall be void and
unenforceable against the Company; provided that the designation of a beneficiary shall not
constitute a Prohibited Disposition. The “Restricted Period” shall be the period commencing on the
Grant Date and ending on ending on the date the Participant is no longer a director or an executive
officer of the Company.

4.     Issuance of Common Shares

The Company shall register the name of the Participant as the owner of the Common Shares with
respect to which the Restricted Stock Units relate, subject to the restrictions in this Award
Agreement, and shall notify the person or entity maintaining the stock records of the Company of
this Award Agreement and the terms, conditions, and restrictions applicable to such Common Shares
(hereinafter called the “Restricted Shares”). Any stock certificates evidencing such Restricted
Shares shall remain in the physical custody of the Company or a custodian designated by the Company
until the restrictions described in section 3 of this Award Agreement lapse. After the
restrictions in section 3 of this Award Agreement lapse, and subject to applicable withholding of
taxes, one or more unlegended stock certificates in respect of the Restricted Shares shall be
delivered to the Participant. For the avoidance of doubt, such delivery shall be made as soon as
practicable after the expiration of the Restricted Period.

5.     Rights as a Stockholder; Dividends

The Participant shall be the record owner of the Restricted Shares unless and until such shares are
sold or otherwise disposed of, and as record owner shall be entitled to all rights of a common
stockholder of the Company, including without limitation, voting rights, if any, with respect to
the Restricted Shares.

6.     Restrictive Legend

All stock certificates representing Restricted Shares shall have affixed thereto a legend in
substantially the following form, in addition to any other legends that may be required under
federal or state securities laws:

     TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE
TERMS OF THE RESTRICTED STOCK AWARD AGREEMENT, DATED AUGUST ___, 2007 BETWEEN NUCRYST
PHARMACEUTICALS CORP. AND THOMAS E. GARDNER. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICES OF
NUCRYST PHARMACEUTICALS CORP.

7.     Distributions and Adjustments

	 	(a)	 	If there is any change in the number or character of the Common Shares (through
merger, consolidation, reorganization, recapitalization, stock split, stock dividend,
or otherwise), prior to the conclusion of the Restricted Period, the Participant shall
receive such number and type of securities or other consideration on the same basis and
at the same time as other shareholders, provided that such securities or other
consideration shall be subject to the same Restricted Period, if any, as the Restricted
Shares to which such securities or

21

 

	 	 	 	other consideration relate are subject to, and shall be released from the Restricted
Period at the same time as such Common Shares were to be released.

	 	(b)	 	Any additional Common Shares, any other securities of the Company and any other
property (other than cash dividends) distributed prior to the conclusion of the
Restricted Period with respect to the Restricted Shares shall be subject to the same
restrictions, terms and conditions as apply to such Restricted Shares.

	 	(c)	 	Any cash dividends payable prior to the conclusion of the Restricted Period
with respect to the Restricted Shares shall be paid to, and retained by, the
Participant as though the restrictions did not apply.

	 	(d)	 	Any additional Common Shares, securities and other property distributed with
respect to the Restricted Shares prior to the conclusion of the Restricted Period shall
be promptly deposited with the Company or the custodian designated by the Company to be
held in custody in accordance with section 4 of this Award Agreement and shall have
affixed thereto the same legend as was affixed to the Restricted Shares in accordance
with section 6 of this Award Agreement.

8.     Beneficiary

The Participant may file with the Company a written designation of a beneficiary on such form as
may be prescribed by the Company and may, from time to time, amend or revoke such designation. If
no designated beneficiary survives the Participant, the executor or administrator of the
Participant’s estate shall be deemed to be the Participant’s beneficiary.

9.     General Matters

	 	(a)	 	Restricted Stock Units are not transferable or assignable
	 
	 	(b)	 	This Award Agreement is not an employment contract and nothing in this Award
Agreement shall be deemed to create in any way whatsoever any obligation on the
Participant’s part to continue to work for the Company (or any subsidiary of the
Company), or of the Company (or any subsidiary of the Company) to continue to employ
the Participant.
	 
	 	(c)	 	This Award Agreement, the Employment Agreement and the Plan constitute the
entire agreement between the parties relating to the grant of Restricted Stock Units
herein to the Participant and supersede all prior communications, representations and
negotiations in respect thereto. In the event of any inconsistencies between this
Award Agreement and the Plan, such matters shall be governed by the terms and
provisions of the Plan.
	 
	 	(d)	 	For the grant of the Restricted Stock Units to be effective, this Award
Agreement must be executed by the Participant and returned to the Company.
	 
	 	(e)	 	The Participant acknowledges that the Company may be required to disclose to
the securities regulatory authorities, the Exchange or other regulatory authorities
duly authorized to make such request, the name, address and telephone number of the
Participant and the number of Restricted Stock Units granted. If required by
applicable securities legislation, regulations, rules, policies or orders or by any
securities commission, the Exchange or other regulatory authority, the Participant
will, in a timely

22

 

	 	 	 	manner, execute, deliver, file and otherwise assist the Company in filing, such
reports, undertakings, and other documents with respect to the Restricted Stock
Units as may be required or requested by the Company to enable the Company to comply
with applicable securities legislation, regulations, rules, policies or orders or
the requirements of any securities commission or other regulatory authority or the
Exchange.
	 
	 	(f)	 	Time shall be of the essence in this Award Agreement.
	 
	 	(g)	 	This Award Agreement shall be governed by the laws of the Province of Alberta.
The parties agree that any disputes under this Award Agreement shall be resolved by the
courts of Alberta and each of the parties irrevocably attorn to the non-exclusive
jurisdiction thereof with respect to all such matters and the transactions contemplated
herein.
	 
	 	(h)	 	The Participant acknowledges that neither the Plan or this Award Agreement
restricts the Company’s ability to conduct its business (including, but not limited to,
such decisions as transactions with related parties, new product development efforts,
cancellation of existing products, mergers and acquisitions, or corporate dissolution)
regardless of the effect those decisions may have on the value of Restricted Stock
Units.

The Company and the Participant have executed this Award Agreement on the ___day of August, 2007.

	 	 	 	 	 
	NUCRYST PHARMACEUTICALS CORP.

 	 	 
	By:  	 	 	 
	 	 	 	 
	 	 	 	 
	 
Thomas E. Gardner (Participant) 	 	 

23

 

	 	 	 	 	 

EXHIBIT C

NUCRYST PHARMACEUTICALS CORP.

STOCK OPTION AWARD AGREEMENT

• GRANT of Options made as of ___, 200___(the “Grant Date”)

	 	 	 
	TO:
	 	Thomas E. Gardner (the “Participant”)

	 	 	 

	BY:
	 	NUCRYST Pharmaceuticals Corp. (the “Company”)

     WHEREAS, on December 21, 2005, the Board of Directors of the Company (the “Board”) approved
and adopted the Company’s 1998 Equity Incentive Plan (as amended) (the “Plan”) and the Plan was
subsequently approved by the Toronto Stock Exchange; and

     WHEREAS, pursuant to the Plan, awards of Options may be granted to persons including
executives of the Company and members of the Board;

     WHEREAS, the Participant and the Company are parties to an Employment Agreement, dated as of
August 21, 2007 (the “Employment Agreement”), whereby the Participant has agreed to serve, and the
Company has agreed to engage the Participant, as the Company’s President and CEO and as Chairman of
the Board, subject to the terms of the Employment Agreement; and

     WHEREAS, pursuant to the Employment Agreement and by resolution of the Board made on
______ ___, 200_, the Board approved a grant of Options provided for herein to the
Participant, such grant to be effective the Grant Date and subject to the terms set forth herein;

     NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties
hereto agree as follows:

1.     Equity Incentive Plan

The grant by the Company to the Participant of Options by this Award Agreement is made pursuant to
the terms and conditions of the Plan. This Award Agreement and the terms and conditions of the
grant of Options are subject in all respects to the terms and conditions of the Plan, which is made
a part of this Award Agreement. The Participant, by acceptance of this Award Agreement, agrees to
be bound by the Plan (and any regulations that may be established under the Plan) and acknowledges
receipt of a copy of the Plan and this Award Agreement. Terms that are defined in the Plan and not
otherwise defined in this Award Agreement shall have the same meaning when used in this Award
Agreement as in the Plan.

2.     Grant of Options

The Company grants to the Participant, effective the Grant Date, _________options (defined in
the Plan and this Award Agreement as “Options” or individually as an “Option”) to purchase Common
Shares of the Company (which Common Shares, when purchased by the exercise of Options, are defined
as “Optioned Shares”), subject to the terms and conditions of this Award Agreement and the Plan.
The grant of Options herein is intended to be a grant of non-qualified stock options and shall not
be treated or construed as a grant of an “incentive stock option” as that term is used in Code
Section 422, or any successor provision thereof.

24

 

3.     Option Price

The exercise price of each Option (which is defined in the Plan as the “Option Price”) is $______.

4.     Expiry Date

The Options shall terminate on, and may not be exercised in whole or in part after, 5:00 p.m.
(Edmonton, Alberta, Canada time) on _________[insert here the 10th anniversary of
the Grant Date] (the “Expiry Date”), unless earlier terminated in accordance with the terms of the
Plan or this Award Agreement.

5.     Vesting

Unless otherwise set forth in this Award Agreement, the Options shall vest and shall become
exercisable:

	 	(a)	 	as to 1/3 of the Options on the Grant Date;
	 
	 	(b)	 	as to 1/3 Options on the first anniversary of the Grant Date; and
	 
	 	(c)	 	as to 1/3 Options on the second anniversary of the Grant Date.

6.     Change of Control

Notwithstanding section 5 above, in the event that the Participant’s employment under the
Employment Agreement is terminated prior to the Expiry Date and within 120 days prior to, or within
12 months following, a Change of Control in a termination governed by Section 8(d), 8(e) or 8(g) of
the Employment Agreement (relating to terminations without cause or non-extension of the Employment
Agreement by the Company), the Options shall immediately become fully vested and exercisable as to
all the Optioned Shares and shall remain exercisable until the earlier of (x) one year following
the date on which the Participant’s employment under the Employment Agreement terminates (the
“Termination Date”) and (y) the Expiry Date. “Change of Control” shall have the meaning ascribed
to such term in the Employment Agreement.

7.     Other Accelerated Vesting

Notwithstanding section 5 above, in the event that the Participant’s employment under the
Employment Agreement terminates prior to the Expiry Date due to his death or Disability (as such
term is defined in the Employment Agreement), or in the event that the Participant’s employment
under the Employment Agreement is terminated prior to the Expiry Date in a termination governed by
Section 8(d), 8(e) or 8(g) of the Employment Agreement (relating to terminations without cause or
non-extension of the Employment Agreement by the Company) but not governed by section 6 above, the
Options shall immediately become fully vested and exercisable to the extent that such Options were
then scheduled to become vested or exercisable on or before the first anniversary of the
Termination Date and shall remain exercisable until the earlier of (x) one year following the
Termination Date and (y) the Expiry Date.

8.     Termination

If the Participant ceases to be employed under the Employment Agreement before the Expiry Date,
then except as otherwise provided in sections 6 and 7 above, the vesting of all Options shall stop
immediately upon the Termination Date, and any Options that have vested as at the Termination Date
shall remain in force and can be exercised by the Participant in accordance with the following
provisions:

25

 

	 	(a)	 	If the Termination Date occurs for any reason other than the reasons described
in sections 6 and 7 above, then the Participant will have 30 days after the Termination
Date or until the Expiry Date (whichever is earlier) to exercise all or any portion of
his vested Options.
	 
	 	(b)	 	If the Termination Date occurs by reason of death, Disability or any other
reason described in section 6 or 7 above, then the Participant (or his personal legal
representative) will have one year after the Termination Date or until the Expiry Date
(whichever is earlier) to exercise all or any portion of his vested Options.

At the end of the periods specified above or the Expiry Date, whichever is earlier, all of the
Options shall terminate and be of no further force or effect. “Termination Date” is defined in
section 6 above, and in no event shall any period during which the Participant is in receipt of or
entitled to be in receipt of severance pay serve to extend the Termination Date.

9.     Method of Exercise of Options and Payment

The Options shall be exercised (in accordance with the provisions of this Award Agreement and the
Plan) from time to time by giving notice in writing to the Company and setting forth the number of
Options being exercised. Such notice shall be accompanied by cash or certified check payable to the
Company, or any other form of payment satisfactory to the Company, in the full amount of the
purchase price for the Optioned Shares being purchased (such purchase price being equal to the
number of Options being exercised times the Option Price) plus payment of any applicable federal,
state, provincial or local taxes, or any other taxes which the Company may be obligated to collect
as a result of the issue or transfer of Optioned Shares upon such exercise of the Options. The
Participant shall provide the Company with any additional documents that the Company may require.
As soon as reasonably practicable after the proper exercise of any Options, the Company shall issue
to the Participant a share certificate representing the Optioned Shares acquired.

10.     Certain Adjustments

	 	(a)	 	If there is any change in the number or character of the Common Shares (through
merger, consolidation, reorganization, recapitalization, stock split, stock dividend,
or otherwise) prior to the Participant’s exercise of all of the Options, appropriate
adjustments shall be made in the number or kind of securities subject to this Option,
and/or in the exercise price or other terms and conditions applying to this Option, so
as to avoid dilution or enlargement of the rights of the Participant under this Option
and of the value represented by it.
	 
	 	(b)	 	If the Company is a party to a merger or reorganization with one or
more other corporations, whether or not the Company is the surviving or resulting
entity, or if the Company consolidates with or into one or more other corporations, or
if the Company is liquidated or sells or otherwise disposes of substantially all of
its assets to another corporation (hereinafter referred to as a “Transaction”), in any
case while any Options remain outstanding, (i) after the effective date of the
Transaction this Option shall remain outstanding and shall be exercisable in Common
Shares or, if applicable, shares of such stock or other securities, cash or property
as the holders of Common Shares received pursuant to the terms of the Transaction; and
(ii) the Company’s Board may, in its sole discretion subject to the applicable
provisions of Code section 409A, accelerate the time for exercise of this Option, so
that from and after a date prior to the effective date of the Transaction this Option
shall be exercisable in full.

26

 

11.     General Matters

	 	(a)	 	Options are not transferable or assignable.
	 
	 	(b)	 	This Award Agreement is not an employment contract and nothing in this Award
Agreement shall be deemed to create in any way whatsoever any obligation on the
Participant’s part to continue to work for the Company (or any subsidiary of the
Company), or of the Company (or any subsidiary of the Company) to continue to employ
the Participant.
	 
	 	(c)	 	The Participant acknowledges that the Company may be required to disclose to
the securities regulatory authorities, the Exchange or other regulatory authorities
duly authorized to make such request, the name, address and telephone number of the
Participant and the number of Options granted. If required by applicable securities
legislation, regulations, rules, policies or orders or by any securities commission,
the Exchange or other regulatory authority, the Participant will, in a timely manner,
execute, deliver, file and otherwise assist the Company in filing, such reports,
undertakings, and other documents with respect to the Options as may be required or
requested by the Company to enable the Company to comply with applicable securities
legislation, regulations, rules, policies or orders or the requirements of any
securities commission or other regulatory authority or the Exchange.
	 
	 	(d)	 	This Award Agreement, the Employment Agreement and the Plan constitute the
entire agreement between the parties relating to the grant of Options to the
Participant and supersede all prior communications, representations and negotiations in
respect thereto.
	 
	 	(e)	 	For the grant of the Options to be effective, this Award Agreement must be
executed by the Participant and returned to the Company.
	 
	 	(f)	 	This Award Agreement shall be governed by the laws of the Province of Alberta.
The parties agree that any disputes under this Award Agreement shall be resolved by the
courts of Alberta and each of the parties irrevocably attorn to the non-exclusive
jurisdiction thereof with respect to all such matters and the transactions contemplated
herein.
	 
	 	(g)	 	Time shall be of the essence of this Award Agreement.
	 
	 	(h)	 	The Participant acknowledges that neither the Plan nor this Award Agreement
restricts the Company’s ability to conduct its business (including, but not limited to,
such decisions as transactions with related parties, new product development efforts,
cancellation of existing products, mergers and acquisitions, or corporate dissolution)
regardless of the effect those decisions may have on the value of Options.

27

 

	 	(i)	 	The Participant shall not have any of the rights and privileges of a shareholder of
the Company by virtue of being granted Options.

The Company and the Participant have executed this Award Agreement on the ___day of ___,
200_.

	 	 	 	 	 
	NUCRYST PHARMACEUTICALS CORP.

 	 	 
	By:  	 	 	 
	 	 	 	 
	 	 	 	 
	 
Thomas E. Gardner (Participant) 	 	 

28

 

	 	 	 	 	 

EXHIBIT D

INDEMNITY AGREEMENT

THIS AGREEMENT made as of the 22nd day of August, 2007.

BETWEEN:

NUCRYST Pharmaceuticals Corp.

a corporation incorporated under the laws of Alberta

(the “Corporation”);

OF THE FIRST PART

- and-

Thomas E. Gardner, a businessman

(the “Executive”)

OF THE SECOND PART

WHEREAS:

A.     The Executive is an officer and/or director of the Corporation and/or a subsidiary, or associate
or affiliate (as those terms are defined in the Business Corporations Act (Alberta)) of the
Corporation, or a body corporate of which the Corporation is or was a shareholder or creditor or
any other body corporate of which the Executive is an officer and/or director at the request of the
Corporation (collectively referred to herein as a “Subsidiary”).

B.     The Corporation considers it desirable and in the best interests of the Corporation to enter
into this Agreement to set out the circumstances and manner in which the Executive may be
indemnified in respect of certain liabilities which the Executive may incur as a result of his
acting as a director and/or officer of the Corporation or any Subsidiary;

     NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the Executive serving as a
director and/or officer of the Corporation or any Subsidiary, and the sum of ONE DOLLAR ($1.00)
paid by the Executive to the Corporation (the receipt and sufficiency of which is acknowledged by
the Corporation) and in consideration of the mutual promises and covenants herein contained, the
parties agree as follows:

1.     General Indemnity

1.1     Except in respect of an action by or on behalf of the Corporation or any Subsidiary to procure
a judgement in its favour, the Corporation agrees, to the full extent allowed by law, to indemnify
and hold harmless the Executive, his heirs and legal representatives, from and against any and all
costs, charges, expenses, fees, damages, or liabilities (including legal or other professional
fees), without limitation, and whether incurred alone or jointly with others, which the Executive
may suffer, sustain, incur or be required to pay arising out of or incurred in respect of any
action, suit, proceeding, investigation or claim which may be brought, commenced, made, prosecuted
or threatened against the

29

 

Executive or any of the other directors or officers of the Corporation or any Subsidiary or which
the Executive may be required to participate in or provide evidence in respect of (any of the same
hereinafter being referred to as a ‘Claim’) howsoever arising and whether arising in law, equity or
under statute, regulation or governmental ordinance of any jurisdiction, for or in respect of any
act, deed, matter or thing done, made, permitted or omitted by the Executive arising out of, or in
connection with or incidental to the affairs of the Corporation or any Subsidiary or the exercise
by the Executive of his powers or the performance of his duties as a director or officer of the
Corporation or of any Subsidiary (of which he was in the past, is now, or in the future may become
an officer or director) including, without limitation, any and all costs, charges, expenses, fees,
damages, or liability which the Executive may suffer, sustain or incur or be required to pay in
connection with investigating, initiating, defending, appealing, preparing for, providing evidence
in, instructing and receiving the advice of his own or other counsel, or any amount paid to settle
any claim or satisfy any judgment, fine or penalty, PROVIDED THAT the indemnity provided for herein
will not be available to the extent that it is finally determined by a court of competent
jurisdiction that in so acting:

	 	(a)	 	the Executive was not acting honestly and in good faith with a view
to the best interests of the Corporation or any Subsidiary (as the case may
require); and
	 
	 	(b)	 	in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the Executive did not have reasonable grounds
for believing that his conduct was lawful.

1.2     With the approval of a competent court having jurisdiction, the Corporation shall indemnify the
Executive, his heirs and legal representatives, in respect of an action by or on behalf of the
Corporation or a Subsidiary to procure a judgment in its favour, to which the Executive is made a
party by reason of being or having been a director or officer of the Corporation or any Subsidiary,
from and against all losses, judgments, costs, charges and expenses, including any amount paid to
settle the action or satisfy any judgment, actually or reasonably incurred by him in connection
with or as a result of the said action provided that:

	 	(a)	 	the Executive was acting honestly and in good faith with a view to
the best interests of the Corporation or any Subsidiary; and
	 
	 	(b)	 	in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the Executive had reasonable grounds for
believing that his conduct was lawful.

2.     Specific Indemnity for Statutory Obligations

     Without limiting the generality of the provisions of Section 1 hereof, the Corporation agrees,
to the full extent permitted by law, to indemnify and save the Executive harmless from and against
any and all costs, charges, expenses, fees, and liabilities arising by operation of statute and
incurred by or imposed upon the Executive in relation to the affairs of the Corporation or any
Subsidiary in the Executive’s capacity as director or officer thereof, including but not limited
to, all statutory obligations to creditors, employees, suppliers, contractors, subcontractors, and
any government or any agency or division of any government, whether federal, provincial, state,
regional, or municipal.

3.     Taxation Indemnity

     Without limiting the generality of the provisions of Section 1 hereof, the Corporation agrees
that the payment of any indemnity to or reimbursement of the Executive hereunder shall include any
amount the Executive may be required to pay on account of applicable income or goods or services
taxes

30

 

arising out of the payment of such indemnity or reimbursement, provided however that any amount
required to be paid with respect to such taxes shall be payable by the Corporation only upon such
Executive remitting or being required to remit any amount payable on account of such taxes.

4.     Partial Indemnification

     If the Executive is determined to be entitled under any provisions of this Agreement to
indemnification by the Corporation for some or a portion of the costs, charges, expenses, fees,
damages, or liabilities incurred in respect of any Claim, but not for the total amount thereof, the
Corporation shall nevertheless indemnify the Executive for the portion hereof to which the
Executive is determined by a court of competent jurisdiction to be entitled.

5.     No Presumption as to Absence of Good Faith

     The determination of any Claim by judgment, order, settlement or conviction, or upon a plea of
“nolo contendere” or its equivalent, shall not, of itself, create any presumption for the purposes
of this Agreement that the Executive did not act honestly and in good faith with a view to the best
interests of the Corporation or, in the case of a criminal or administrative action or proceeding,
that he did not have reasonable grounds for believing that his conduct was lawful (unless the
judgment or order of the Court specifically finds otherwise) or that the Executive had committed
willful neglect or gross default.

6.     Determination of Right to Indemnification

     If the payment of an indemnity hereunder requires the approval of a court, under the
provisions of the Business Corporations Act (Alberta) or otherwise, either the Corporation
or the Executive may apply to a court of competent jurisdiction for an order approving such
indemnity by the Corporation of the Executive pursuant to this Agreement.

7.     Pre-payment of Expenses

     Costs, charges, expenses, and fees incurred by the Executive in investigating, defending,
appealing, preparing for, providing evidence in, instructing and receiving the advice of his
counsel in regard to any Claim or other mater for which the Executive may be entitled to an
indemnity or reimbursement hereunder shall, at the request of the Executive, be paid or reimbursed
by the Corporation in advance or forthwith upon such amount being due and payable, it being
understood and agreed that if it is ultimately determined by a court of competent jurisdiction that
the Executive was not entitled to be so indemnified, or was not entitled to be fully so
indemnified, then the Executive shall indemnify and hold harmless the Corporation, for such amount,
or the appropriate portion thereof, so paid or reimbursed.

8.     Other Rights and Remedies Unaffected

     The indemnification and payment provided in this Agreement shall not derogate from or exclude
any rights to which the Executive may be entitled under any provision of the Business Corporations
Act (Alberta) or otherwise at law, the articles or by-laws of the Corporation or any Subsidiary,
this Agreement, any applicable policy of insurance, guarantee or third-party indemnity, any vote of
shareholders of the Corporation, or otherwise, both as to matters arising out of his capacity as a
director and/or officer of the Corporation or a Subsidiary, or as to matters arising out of any
other capacity in which the Executive may act for or on behalf of the Corporation or any
Subsidiary.

31

 

9.     Insurance

     Subject to availability at a reasonable cost to the Corporation, the Corporation shall, at its
cost, purchase and maintain standard directors’ and officers’ liability insurance for the benefit
of the Executive against any liability incurred by him,

9.1     in his capacity as a director or officer of the Corporation, except where the liability
relates to his failure to act honestly and in good faith with a view to the best interests of
the Corporation, or

9.2     in his capacity as a director or officer of a Subsidiary, except where the liability relates
to his failure to act honestly and in good faith with a view to the best interests of that
body corporate.

10.     Notices of the Proceedings

     The Executive shall give reasonable notice, in writing, to the Corporation upon his being
served with any statement of claim, writ, notice of motion, indictment, subpoena, investigation
order, or other document commencing or continuing any Claim involving the Corporation or the
Executive. The Corporation agrees to notify the Executive, in writing, forthwith upon it or any of
its Subsidiaries being served with any statement of claim, writ, notice of motion, indictment,
subpoena, investigation order, or other document commencing or continuing any Claim involving the
Executive.

11.     The Corporation and Executive to Cooperate

     The Corporation and the Executive shall, from time to time, provide such information and
cooperation to the other, as the other may reasonably request, in respect of all matters hereunder.

12.     Effective Timing

     This Agreement shall be deemed to have effect as and from the first date that the Executive
became a director and/or officer of the Corporation or of any Subsidiary.

13.     Extensions, Modifications

     This Agreement is absolute and unconditional and the obligations of the Corporation shall not
be affected, discharged, impaired, mitigated, or released by the extension of time, indulgence or
modification which the Executive may extend or make with any person regarding any Claim against the
Executive in connection with his duty as director or officer of the Corporation or any Subsidiary
or in respect of any liability incurred by him as a director or officer of the Corporation or any
Subsidiary.

14.     Insolvency

     The liability of the Corporation under this Agreement shall not be affected, discharged,
impaired, mitigated, or released by reason of the discharge or release of the Executive in any
bankruptcy, insolvency, receivership, or other similar proceeding of creditors.

32

 

15.     Multiple Proceedings

     No action or proceeding brought or instituted under this Agreement and no recovery pursuant
thereto shall be a bar or defense to any further action or proceeding which may be brought under
this Agreement.

16.     Modification

     No modification of this Agreement shall be valid unless the same is in writing and signed by
the Corporation and the Executive.

17.     Termination

     The obligations of the Corporation shall not terminate or be released upon the Executive
ceasing to act as a director or officer of the Corporation or any Subsidiary at any time or times.
The Corporation’s obligations may be terminated or released only by a written instrument executed
by the Executive.

18.     Notices

     Any notice to be given by one party to the other shall be sufficient if delivered by hand,
deposited in any post office in Canada or the United States, registered, postage prepaid, or sent
by means of electronic transmission, addressed, as the case may be:

	 	(a)	 	to the Corporation at its registered office, which as of the date hereof is:
	 
	 	 	 	NUCRYST Pharmaceuticals Corp.

10102 – 114th Street

Fort Saskatchewan, Alberta

Canada T8L 3W4

Attention: Vice President, General Counsel & Corporate Secretary

Tel: (780) 992-5626

Fax: (780) 992-5601
	 
	 	 	 	with a copy to:
	 
	 	 	 	NUCRYST Pharmaceuticals

50 Audubon Road, Suite B

Wakefield, Massachusetts USA 01880

Attention: President

Fax: (781) 246-6012
	 
	 	(b)	 	to the Executive at his most current address shown in the records of the
Corporation, which as of the date hereof is:
	 
	 
	 	 	 	 

	 
	 	 	 	 

	 	 	 	Tel: ___________________________

33

 

or at such other address of which notice is given by the parties pursuant to the provisions of this
section. Such notice shall be deemed to have been received when delivered, if delivered, and if
mailed, on the fifth business day (exclusive of Saturdays, Sundays and statutory holidays) after
the date of mailing. Any notice sent by means of electronic transmission shall be deemed to have
been given and received on the day it is transmitted, provided that if such day is not a business
day then the notice shall be deemed to have been given and received on the next business day
following. In the case of an interruption of the postal service, all notices or other
communications shall be delivered or sent by means of electronic transmission as provided above.

19.     Governing Law

     This Agreement shall be governed by and construed in accordance with the laws of the Province
of Alberta and all disputes arising under this Agreement shall be referred to and the parties
hereto irrevocably attorn to the jurisdiction of the courts of Alberta. Any rule of construction to
the effect that any ambiguity is to be resolved against the drafting party shall not be applicable
in the interpretation of this Agreement.

20.     Further Assurances

     The Corporation and the Executive agree that they shall do all such further acts, deeds or
things and execute and deliver all such further documents as may be necessary or advisable for the
purpose of assuring and conferring on the Executive the rights hereby created or intended, and of
giving effect to and carrying out the intention or facilitating the performance of the terms of
this Agreement.

21.     Interpretation

     Wherever the singular or masculine are used in this Agreement, the same shall be construed as
meaning the plural or the feminine or body corporate and whenever the plural is used in this
Agreement the same shall be construed as meaning the singular.

22.     Invalid Terms Severable

     If any term, provision, covenant or condition of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, then the offending provision(s) shall
be read down to the extent necessary to make it or them valid and enforceable or, if not capable of
being read down, shall be severed from the balance of this Agreement and the remainder of this
Agreement shall remain in full force and effect and shall in no way be affected, impaired or
invalidated by the offending provisions, provided that the Agreement remains substantially capable
of performance without adversely affecting the rights of the parties.

23.     Binding Effect

     All of the agreements, conditions and terms of this Agreement shall extend to and be binding
upon the Corporation and its successors and assigns, including any entity continuing as a result of
any reorganization of the Corporation (such as amalgamation, merger or arrangement) and shall enure
to the benefit of and may be enforced by the Executive and his heirs, executors, administrators,
and other legal representatives, successors and assigns.

34

 

24.     Independent Legal Advice

     The Executive acknowledges that he has been advised to obtain independent legal advice with
respect to entering into this Agreement, that he has obtained such independent legal advice or has
expressly waived such advice, and that he is entering into this Agreement with full knowledge of
the contents hereof, of his own free will and with full capacity and authority to do so.

25.     Power and Authority of the Corporation

     The Corporation represents and warrants to the Executive that this Agreement, when executed
and delivered by the Corporation, will constitute a legal, valid and binding obligation of the
Corporation and, subject to the provisions of the Business Corporations Act (Alberta) and to any
approval of the Court required thereunder, that this Agreement and the obligations hereunder are
enforceable against the Corporation in accordance with the terms hereof and that the execution and
delivery of this Agreement and the performance thereof by the Corporation has been duly and
properly authorized by all necessary corporate action.

26.     Legal Fees

     Any reference in this Agreement to “fees” shall without limitation include legal fees, and
legal fees shall without limitation include all court costs and expenses and all reasonable legal
fees and disbursements on a solicitor and own client full indemnity basis. If any action is
instituted by the Executive under this Agreement to enforce or interpret any terms hereof then the
Executive shall be entitled to be paid all fees incurred by the Executive with respect to such
action, unless as part of such action, the court of competent jurisdiction determines that the
assertions made by the Executive as a basis for such action are not made in good faith or were
frivolous.

     IN WITNESS WHEREOF the Corporation and the Executive have hereunto set their hands and seals
effective as of the day and year first above written.

	 	 	 	 	 
	NUCRYST PHARMACEUTICALS CORP.

 	 	 
	Per:  	 	 	 
	 	 	 	 
	 	 	 	 
	THOMAS
E. GARDNER	 	 

35ex4_4.htm

    
      
        

      

    

    EXHIBIT
      4.4

    

    Nonqualified
      Stock Option Agreement under

    the
      Orthofix International N.V.

    Amended
      and Restated 2004 Long-Term Incentive Plan

    

    

    This
      Option Agreement (the “Agreement”) is made this
      __________ day of ______ (the “Grant Date”) between
      Orthofix International N.V., a Netherlands Antilles company (the
“Company”), and the person signing this Agreement
      adjacent to the caption “Optionee” on the signature page hereof (the
“Optionee”). Capitalized terms used and not otherwise
      defined herein shall have the meanings attributed thereto in the Orthofix
      International N.V. Amended and Restated 2004 Long-Term Incentive Plan (the
      “Plan”).

    

    WHEREAS,
      pursuant to the Plan, the Company desires to afford the Optionee the opportunity
      to purchase Common Shares on the terms and conditions set forth
      herein;

    

    NOW,
      THEREFORE, in connection with the mutual covenants hereinafter set forth and
      for
      other good and valuable consideration, the parties hereto agree as
      follows:

    

    1.   Grant
      of Option. Subject to the provisions of this Agreement and the Plan, the
      Company hereby grants to the Optionee the right and option (the
“Option”) to purchase __________ Common Shares at an
      exercise price of $__________ per share (the “Exercise
      Price”).

    

    2.   Incorporation
      of Plan. The Optionee acknowledges receipt of the Plan, a copy of which is
      annexed hereto, and represents that he or she is familiar with its terms and
      provisions and hereby accepts this Option subject to all of the terms and
      provisions of the Plan and all interpretations, amendments, rules and
      regulations which may, from time to time, be promulgated and adopted pursuant
      to
      the Plan. The Plan is incorporated herein by reference. In the event of any
      conflict or inconsistency between the Plan and this Agreement, the Plan shall
      govern and this Agreement shall be interpreted to minimize or eliminate any
      such
      conflict or inconsistency.

    

    3.   Nature
      of the Option. The Option shall be a Nonqualified Stock Option.

    

    4.   Vesting.
      Subject to earlier termination in accordance with the Plan or this Agreement
      and
      the terms and conditions herein or therein, the Option shall vest and become
      exercisable with respect to 33 1/3% of the shares covered thereby on each of
      the
      first, second and third anniversaries of the Grant Date; provided, however,
      that
      the exercisability of any portion of the Option relating to a fractional share
      shall be deferred until such time, if any, that such portion can be exercised
      as
      a whole Common Share.

    

    5.   Term.
      The Option shall expire and no longer be exercisable 10 years from the Grant
      Date, subject to earlier termination in accordance with the Plan or this
      Agreement; provided, however: (i) if the termination date falls on a date on
      which the exercise of the Option would violate any applicable federal, state,
      local or foreign law, such termination date shall be extended to 30 days after
      the first date that exercise of the Option would no longer violate any
      applicable federal, state, local or foreign law, and (ii) if the termination
      date falls on a date on which the Optionee is prohibited by Company policy
      in
      effect on such date from engaging in transactions in the Company’s securities,
      such termination date shall be extended to the first date that the Optionee
      is
      permitted to engage in transaction in the Company’s securities under such
      Company policy so long as such extension does not cause the Option to become
      subject to Code Section 409A or violate any other applicable law.

    

    6.   Termination
      of Employment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (a)     General.
      A termination of employment shall be deemed to have occurred if the Optionee
      is
      no longer employed by, or otherwise providing services to, the Company or any
      of
      its Subsidiaries for any reason. The Committee shall have discretion to
      determine whether an authorized leave of absence (as a result of disability
      or
      otherwise) shall constitute a termination of employment for purposes of the
      Plan.

    

    (b)     Termination
      of Employment Other than for Cause, Death or Permanent Disability - Not Pursuant
      to an Employment Agreement. Subject to Section 6(c) below, if the Optionee's
      employment is terminated prior to vesting other than for Cause, death or
      Permanent Disability, the Option shall be considered vested and be immediately
      exercisable as of the date of such termination of employment with respect to
      the
      aggregate number of Common Shares as to which the Option would have been vested
      as of December 31 of the year in which such termination of employment occurs.
      The Optionee shall have the right, subject to the other terms and conditions
      set
      forth in this Agreement and the Plan, to exercise the Option, to the extent
      it
      has vested as of the date of such termination of employment, at any time within
      180 days after the date of such termination of employment, subject to the
      earlier expiration of the Option as provided in Section 5 hereof. To the extent
      the vested portion of the Option is not exercised within such 180 day period,
      the Option shall be cancelled and revert back to the Company and the Optionee
      shall have no further right or interest therein. The unvested portion of any
      Option shall be cancelled and revert back to the Company as of the date of
      the
      Optionee's termination of employment and the Optionee shall have no further
      right or interest therein.

    

    (c)     Termination
      of Employment Other than for Cause, Death or Permanent Disability - Pursuant
      to
      an Employment Agreement. Notwithstanding Section 6(b) above, in the event
      the Optionee's employment is terminated prior to vesting pursuant to an
      Employment Agreement, other than for Cause (which for this purpose shall include
      a resignation by the Optionee for “good reason,” or words of similar meaning,
      under any Employment Agreement), death or Permanent Disability, then the Option
      shall be considered vested in full and be immediately exercisable as of the
      date
      of such termination of employment unless the Employment Agreement expressly
      provides otherwise, in which case the terms of the Employment Agreement shall
      control.  The Optionee shall have the right, subject to the other
      terms and conditions set forth in this Agreement and the Plan, to exercise
      the
      Option until the expiration of the Option as provided in Section 5 hereof.
      To
      the extent the vested portion of the Option is not exercised within such period,
      the Option shall be cancelled and revert back to the Company and the Optionee
      shall have no further right or interest therein.

    

    (d)     Termination
      of Employment for Cause. Subject only to any greater rights in any
      Employment Agreement, if the Optionee's employment with the Company and its
      Subsidiaries is terminated by the Company or any of its Subsidiaries for Cause
      prior to vesting, the unvested portion of the Option shall be cancelled and
      revert back to the Company as of the date of such termination of employment,
      and
      the Optionee shall have no further right or interest therein unless the
      Committee in its sole discretion shall determine otherwise. The Optionee shall
      have the right, subject to the other terms and conditions set forth in this
      Agreement and the Plan, to exercise the Option, to the extent it has vested
      as
      of the date of such termination of employment, at any time within three months
      after the date of such termination, subject to the earlier expiration of the
      Option as provided in Section 5 hereof.

    

    (e)     Termination
      of Employment for Death or Permanent Disability. Subject only to any greater
      rights in any Employment Agreement, if the Optionee's employment with the
      Company and its Subsidiaries terminates by reason of death or Permanent
      Disability, the Option shall automatically vest and become immediately
      exercisable in full as of the date of such termination of
      employment.  The Option shall remain exercisable by the Optionee, a
      Permitted Transferee (as defined in Section 11 hereof), a transferee under
      a
      domestic relations order, or the Optionee's estate, personal representative
      or
      beneficiary, as applicable, at any time within 12 months after the date of
      such
      termination of employment, subject to the earlier expiration of the Option
      as
      provided in Section 5 hereof. To the extent the Option is not exercised within
      such 12 month period, the Option shall be cancelled and revert back to the
      Company and the Optionee, Permitted Transferee, transferee under a domestic
      relations order, or the Optionee’s estate, personal representative or
      beneficiary, as applicable, shall have no further right or interest
      therein.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    7.   Change
      in Control. Upon the occurrence of a Change in Control, the Option shall
      automatically vest and become immediately exercisable in full and shall remain
      exercisable in accordance with the terms of Section 6 hereof, subject to the
      earlier expiration of the Option as provided in Section 5 hereof.

    

    8.   Method
      of Exercising Option.

    

    (a)     Notice
      of Exercise. Subject to the terms and conditions of this Agreement, the
      Option may be exercised by written or electronic notice to the Company, from
      the
      Optionee, a Permitted Transferee, a transferee pursuant to a domestic relations
      order, or following the Optionee’s death, the Optionee’s estate, personal
      representative, or beneficiary, as applicable, and stating the number of Common
      Shares in respect of which the Option is being exercised. Such notice shall
      be
      accompanied by payment of the Exercise Price for all Common Shares purchased
      pursuant to the exercise of such Option. The date of exercise of the Option
      shall be the later of (i) the date on which the Company receives the notice
      of
      exercise or (ii) the date on which the conditions set forth in Sections 8(b)
      and
      8(e) are satisfied. Notwithstanding any other provision of this Agreement,
      the
      Optionee may not exercise the Option and no Common Shares will be issued by
      the
      Company with respect to any attempted exercise when such exercise is prohibited
      by law or any Company policy then in effect. The Option may not be exercised
      at
      any one time as to less than 100 shares (or such number of shares as to which
      the Option is then exercisable if less than 100). In no event shall the Option
      be exercisable for a fractional share.

    

    (b)     Payment.
      Prior to the issuance of the Common Shares pursuant to Section 8(e) hereof
      in
      respect of which all or a portion of the Option shall have been exercised,
      the
      Optionee shall have paid to the Company the Exercise Price for all Common Shares
      purchased pursuant to the exercise of such Option. Payment may be made by
      personal check, bank draft or postal or express money order (such modes of
      payment are collectively referred to as “cash”) payable to the order of the
      Company in U.S. dollars. Payment may also be made in mature Common Shares owned
      by the Optionee, or in any combination of cash or such mature shares as the
      Committee in its sole discretion may approve. The Company may also permit the
      Optionee to pay for such Common Shares by directing the Company to withhold
      Common Shares that would otherwise be received by the Optionee, pursuant to
      such
      rules as the Committee may establish from time to time. In the discretion of
      the
      Committee, and in accordance with rules and procedures established by the
      Committee, the Optionee may be permitted to make a “cashless” exercise of all or
      a portion of the Option.

    

    (c)     Shareholder
      Rights. The Optionee shall have no rights as a shareholder with respect to
      any Common Shares issuable upon exercise of the Option until the Optionee shall
      become the holder of record thereof, and no adjustment shall be made for
      dividends or distributions or other rights in respect of any Common Shares
      for
      which the record date is prior to the date upon which the Optionee shall become
      the holder of record thereof.

    

    (d)     Limitation
      on Exercise. The Option shall not be exercisable unless the offer and sale
      of Common Shares pursuant thereto has been registered under the Securities
      Act
      of 1933, as amended (the “1933 Act”), and qualified
      under applicable state “blue sky” laws or the Company has determined that an
      exemption from registration under the 1933 Act and from qualification under
      such
      state “blue sky” laws is available.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (e)     Issuance
      of Common Shares. Subject to the foregoing conditions, as soon as is
      reasonably practicable after its receipt of a proper notice of exercise and
      payment of the Exercise Price for all Common Shares purchased pursuant to the
      exercise of such Option, the Company shall either: (i) deliver or cause to
      be
      delivered to the Optionee (or a Permitted Transferee, a transferee under a
      domestic relations order, or following the Optionee's death, the Optionee's
      estate, personal representative or beneficiary, as applicable) one or more
      share
      certificates for the appropriate number of Common Shares issued in connection
      with such exercise (less any Common Shares withheld under Section 10 below),
      or
      (ii) cause its third-party recordkeeper to credit an account established and
      maintained in the name of the Optionee (or a Permitted Transferee, a transferee
      under a domestic relations order, or following the Optionee's death, the
      Optionee's estate, personal representative or beneficiary, as applicable) with
      the number of Common Shares issued in connection with such exercise (less any
      Common Shares withheld under Section 10 below); provided, however, that an
      actual share certificate shall be delivered if requested by the Optionee (or
      a
      Permitted Transferee, a transferee under a domestic relations order, or
      following the Optionee's death, the Optionee's estate, personal representative
      or beneficiary, as applicable). Such Common Shares shall be fully paid and
      nonassessable and shall be issued in the name of the Optionee (or a Permitted
      Transferee, a transferee under a domestic relations order, or following the
      Optionee's death, the Optionee's estate, personal representative or beneficiary,
      as applicable).

    

    9.   
      Adjustment of and Changes in Common Shares. In the event of any merger,
      consolidation, recapitalization, reclassification, stock dividend, extraordinary
      dividend, or other event or change in corporate structure affecting the Common
      Shares, the Committee shall make such adjustments, if any, as it deems
      appropriate in the number and class of shares subject to, and the exercise
      price
      of, the Option. The foregoing adjustments shall be determined by the Committee
      in its sole discretion.

    

    10.   
      Tax Withholding. The Company shall have the right, prior to the issuance
      of any Common Shares upon full or partial exercise of the Option (whether by
      the
      Optionee or any Permitted Transferees, a transferee under a domestic relations
      order, or following the Optionee’s death, the Optionee’s estate, personal
      representative, or beneficiary, as applicable), to require the Optionee to
      remit
      to the Company any amount sufficient to satisfy the minimum required federal,
      state or local tax withholding requirements, as well as all applicable
      withholding tax requirements of any other country or jurisdiction. The Company
      may permit the Optionee to satisfy, in whole or in part, such obligation to
      remit taxes, by directing the Company to withhold Common Shares that would
      otherwise be received by the Optionee, pursuant to such rules as the Committee
      may establish from time to time. The Company shall also have the right to deduct
      from all cash payments made pursuant to, or in connection with, the Option,
      the
      minimum federal, state or local taxes required to be withheld with respect
      to
      such payments.

    

    11.   
      Transfers. Unless the Committee determines otherwise after the Grant
      Date, the Option shall not be transferable other than by will or by the laws
      of
      descent and distribution or pursuant to a domestic relations order; provided,
      however, the Option may be transferred to the Optionee's family members or
      to
      one or more trusts or partnerships established in whole or in part for the
      benefit of one or more of such family members (collectively, the “Permitted
      Transferees”). Any Option transferred to a Permitted Transferee shall be further
      transferable only by will or the laws of descent and distribution or, for no
      consideration, to another Permitted Transferee of the Optionee. The Committee
      may in its discretion permit transfers of Options other than those contemplated
      by this Section 11.

    

    12.   
      Option Exercisable Only by the Optionee. During the lifetime of the
      Optionee, an Option shall be exercisable only by the Optionee or by a Permitted
      Transferee to whom such Option has been transferred in accordance with Section
      11.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    13.    
      Prohibition on Repricing.  The Agreement may not be amended to
      (a) reduce the Exercise Price of the Option granted hereunder, nor (b) cancel
      or
      replace the Option  hereunder with an Option having a lower exercise
      price.  

    

    14.    Miscellaneous
      Provisions.

    

    (a)     Notices.
      Any notice required by the terms of this Agreement shall be delivered or made
      electronically, over the Internet or otherwise (with request for assurance
      of
      receipt in a manner typical with respect to communications of that type), or
      given in writing.  Any notice given in writing shall be deemed
      effective upon personal delivery or upon deposit with the United States Postal
      Service, by registered or certified mail, with postage and fees prepaid, and
      shall be addressed to the Company at its principal executive office and to
      the
      Optionee at the address that he or she has most recently provided to the
      Company.   Any notice given electronically shall be deemed
      effective on the date of transmission.

    

    (b)     Headings.
      The headings of sections and subsections are included solely for convenience
      of
      reference and shall not affect the meaning of the provisions of this
      Agreement.

    

    (c)     Counterparts.
      This Agreement may be executed in two or more counterparts, each of which shall
      be deemed to be an original but all of which together will constitute one and
      the same instrument.

    

    (d)     Entire
      Agreement. This Agreement and the Plan constitute the entire agreement
      between the parties hereto with regard to the subject matter hereof. They
      supersede all other agreements, representations or understandings (whether
      oral
      or written and whether express or implied) that relate to the subject matter
      hereof.

    

    (e)     Amendments.
      The Board and the Committee shall have the power to alter or amend the terms
      of
      the Option as set forth herein from time to time, in any manner consistent
      with
      the provisions of Sections 16 and 19 of the Plan, and any alteration or
      amendment of the terms of the Option by the Board or the Committee shall, upon
      adoption, become and be binding on all persons affected thereby without
      requirement for consent or other action with respect thereto by any such person.
      The Committee shall give notice to the Optionee of any such alteration or
      amendment as promptly as practicable after the adoption thereof. The foregoing
      shall not restrict the ability of the Optionee and the Board or the Committee
      by
      mutual written consent to alter or amend the terms of the Option in any manner
      which is consistent with the Plan.

    

    (f)      Binding
      Effect. This Agreement shall be binding upon the heirs, executors,
      administrators and successors of the parties hereto and may only be amended
      by
      written agreement of the parties hereto.

    

    (g)     Governing
      Law. This Agreement shall be governed by, and construed in accordance with,
      the laws of the State of New York, without regard to the choice of law
      provisions thereof.

    

    (h)     No
      Employment or Other Rights. This Option grant does not confer upon the
      Optionee any right to be continued in the employment of, or otherwise provide
      services to, the Company or any Subsidiary or other affiliate thereof, or
      interfere with or limit in any way the right of the Company or any Subsidiary
      or
      other affiliate thereof to terminate such Optionee’s employment at any
      time.

    

    15.     Definitions.
      For purposes of this Agreement, the following capitalized words shall have
      the
      meanings set forth below.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Cause”
      shall mean termination of the Optionee's employment because of the Optionee's
      (i) involvement in fraud, misappropriation or embezzlement related to the
      business or property of the Company, (ii) conviction for, or guilty plea to,
      a
      felony or crime of similar gravity in the jurisdiction in which such conviction
      or guilty plea occurs, (iii) unauthorized disclosure of any trade secrets or
      other confidential information relating to the Company's business and affairs
      (except to the extent such disclosure is required under applicable law), or
      (iv)
      such other circumstances constituting a termination for cause under any
      Employment Agreement.

    

    “Change
      in Control” shall mean:

    

    (i)   the
      acquisition by any individual, entity or group (within the meaning of Section
      13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the
“Exchange Act”)) (a
“Person”) of beneficial ownership
      (within the meaning
      of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either
      (A)
      the then outstanding shares of the Company's common stock (the
“Outstanding Common Stock”) or (B) the combined voting
      power of the then outstanding voting securities of the Company entitled to
      vote
      generally in the election of directors (the “Outstanding Voting
      Securities”);  excluding,  however, the
      following: (1) any acquisition directly from the Company, other than an
      acquisition by virtue of the exercise of a conversion privilege unless the
      security being so converted was itself acquired directly from the Company;
      (2)
      any acquisition by the Company; (3) any acquisition by any employee benefit
      plan
      (or related trust) sponsored or maintained by the Company or any entity
      controlled by the Company; or (4) any acquisition pursuant to a transaction
      which complies with clauses (A), (B) and (C) of subsection (iii) of this
      definition of Change of Control; or

    

    (ii)     a
      change in the composition of the Board such that the individuals who, as of
      the
      date hereof, constitute the Board (such Board shall be hereinafter referred
      to
      as the “Incumbent Board”) cease for any reason to
      constitute at least a majority of the Board; provided,  however, for
      purposes of this paragraph, that any individual who becomes a member of the
      Board subsequent to the date hereof, whose election, or nomination for election
      by the Company's shareholders, was approved by a vote of at least a majority
      of
      those individuals who are members of the Board and who were also members of
      the
      Incumbent Board (or deemed to be such pursuant to this proviso) shall be
      considered as though such individual were a member of the Incumbent Board;
      but  provided further that any such individual whose initial
      assumption of office occurs as a result of either an actual or threatened
      election contest (as such terms are used in Rule 14a-11 of Regulation 14A
      promulgated under the Exchange Act) or other actual or threatened solicitation
      of proxies or consents by or on behalf of a Person other than the Board shall
      not be so considered as a member of the Incumbent Board; or

    

    (iii)    consummation
      of a reorganization, merger or consolidation or sale or other disposition of
      all
      or substantially all of the assets of the Company (“Corporate
      Transaction”);  excluding, however, such a Corporate
      Transaction pursuant to which all of the following conditions are met: (A)
      all
      or substantially all of the individuals and entities who are the beneficial
      owners, respectively, of the Outstanding Common Stock and Outstanding Voting
      Securities immediately prior to such Corporate Transaction will beneficially
      own, directly or indirectly, more than 50% of, respectively, the outstanding
      shares of common stock, and the combined voting power of the then outstanding
      voting securities entitled to vote generally in the election of directors,
      as
      the case may be, of the corporation resulting from such Corporate Transaction
      (including, without limitation, a corporation which as a result of such
      transaction owns the Company or all or substantially all of the Company's assets
      either directly or through one or more subsidiaries) in substantially the same
      proportions as their ownership, immediately prior to such Corporate Transaction,
      of the Outstanding Common Stock and Outstanding Voting Securities, as the case
      may be, (B) no Person (other than the Company, any employee benefit plan (or
      related trust) of the Company or such corporation resulting from such Corporate
      Transaction) will beneficially own, directly or indirectly, 50% or more of,
      respectively, the outstanding shares of common stock of the corporation
      resulting from such Corporate Transaction or the combined voting power of the
      outstanding voting securities of such corporation entitled to vote generally
      in
      the election of directors except to the extent that such ownership existed
      prior
      to the Corporate Transaction, and (C) individuals who were members of the
      Incumbent Board will constitute at least a majority of the members of the board
      of directors of the corporation resulting from such Corporate
      Transaction;

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (iv)    the
      approval by the shareholders of the Company of a complete liquidation or
      dissolution of the Company; or

    

    (v)     any
      similar or other definition contained in any Employment Agreement (even if
      broader than as defined above).

    

    “Committee”
      shall mean the Compensation Committee of the Board or such other committee
      appointed by the Board to administer the Plan

    

    “Employment
      Agreement” shall mean a written employment, change in control or
      change of control agreement between the Optionee and the Company and/or a
      Subsidiary.

     

    “Permanent
      Disability” shall mean termination of the Optionee's employment as
      a result of a physical or mental incapacity which substantially prevents the
      Optionee from performing his or her duties as an employee and that has continued
      for at least 180 days and can reasonably be expected to continue indefinitely.
      Any dispute as to whether or not the Optionee is disabled within the meaning
      of
      the preceding sentence shall be resolved by a physician selected by the
      Committee.

    

    

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      of page intentionally left blank)

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    EXECUTED
      on the date first written above.

    

    

    
      	
              COMPANY:

            	
              ORTHOFIX
                INTERNATIONAL N.V.

            
	 	 
	 	
              By:

            
	 	
              Name:

            
	 	
              Title:

            
	
              OPTIONEE:

            	 
	 	
              By:

            
	 	
              Name:

            
	 	
              Title:

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