Document:

ex10_37.htm

    
      

    

    Exhibit 10.37

    
      Aurora
Gold Corporation

      

      2007
Incentive Stock Option Plan

      1.
Purposes of the Plan.

      

      The
purposes of the Aurora Gold Corporation 2007 Incentive Stock Option Plan (the
“Plan) are to (i) attract and retain the best available personnel for
positions of responsibility within Aurora Gold Corporation (the “Company”), (ii) provide
incentives, in the form of Options (as hereinafter defined) to Advisors, Directors, Employees, and Consultants (as each such term
is hereinafter defined) of the Company, (iii) provide Advisors,
Directors,  Employees, and Consultants of the Company with an
opportunity to acquire a proprietary interest in the Company to encourage their
continued provision of services to the Company, and to provide such persons with
incentives and rewards for superior performance more directly linked to the
profitability of the Company’s business and increases in stockholder value, and
(iv) generally to promote the success of the Company’s business and the
interests of the Company and all of its stockholders, through the grant of such
Options.

      

      2.
Definitions.

      

      As used
herein, the following definitions shall apply:

      

       “Board” shall mean the Board of
Directors of the Company.

      

       “Change of Control” means a
change in ownership or control of the Company effected through any of the
following transactions:

      

      (a) the
direct or indirect acquisition by any person or related group of persons (other
than by the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than 50% of the total combined voting power of the Company’s
outstanding securities pursuant to a tender or exchange offer made directly to
the Company’s stockholders, or other transaction, in each case which the Board
does not recommend such stockholders to accept; or

      

      (b) a
change in the composition of the Board over a period of 24 consecutive months or
less such that a majority of the Board members (rounded up to the next whole
number) ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (i) have been Board
members continuously since the beginning of such period or (ii) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (i) who were
still in office at the time such election or nomination was approved by the
Board; or (c) a Corporate Transaction as defined below.

      

      “Code” shall mean the Internal
Revenue Code of 1986, as amended from time to time, and the rules and
regulations promulgated thereunder.

      

      “Committee” shall mean the
Committee, if any, appointed by the Board in accordance with Section 4.1 of the Plan,
if one is appointed.

      
        
           

        

        
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      “Company” shall mean Aurora
Gold Corporation, a Delaware corporation, and shall include any parent or
subsidiary corporation of the Company as defined in Sections 424(e) and (f),
respectively, of the Code.

      

      “Consultants” and “Advisors” shall include any
third party (and/or employees or principals thereof) retained or engaged by the
Company to provide ongoing consulting services to the Company pursuant to a
written contract, including any consulting company wholly owned by such person;
provided that such consultant: (a) possess technical, business, management,
or legal expertise of value to the Company or an affiliate; (b) spends a
significant amount of time and attention on the business and affairs of the
Company; and (c) has a relationship with the Company or an affiliate that
enables the individual to have knowledge concerning the business and affairs of
the Company.

      

      “Corporate Transaction” means
any of the following stockholder-approved transactions to which the Company is a
party:

      

      (a) a
merger or consolidation in which the Company is not the surviving entity, except
for a transaction the principal purpose of which is to change the state in which
the Company is incorporated;

      

      (b) the
sale, transfer or other disposition of all or substantially all of the assets of
the Company in complete liquidation or dissolution of the Company;
or

      

      (c) any
reverse merger in which the Company is the surviving entity but in which
securities possessing more than 50% of the total combined voting power of the
Company’s outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
merger.

      

      “Date of Grant” means the date
specified by the Board or the Committee on which a grant of Options shall become
effective.

      

      “Disability” shall mean the
inability of an Optionee to perform his or her duties and responsibilities for a
period of 60 consecutive days or an aggregate period of 120 days in any two year
period.

      

      “Director” shall mean a member
of the Board.

      

      “Effective Date” shall have the
meaning ascribed thereto in Section 6.

      

      “Employee” shall mean any
employee or Officer of the Company. For purposes of Section 7 hereof, the
term “Employee” shall also include Advisers, Directors, Consultants and
Advisors.

      

      “Exchange Act” shall mean the
United States Securities Exchange Act of 1934, as amended.

      

      “Fair Market Value” shall mean,
with respect to the date a given Option is granted or exercised, the value of
the Shares determined by the Board or the Committee in such manner as it may
deem equitable for Plan purposes, but no less than is required by applicable
laws or regulations; provided, however, that where there is a public market for
the Shares, the Fair Market Value per share shall be the average of the closing
bid and asked prices of the Shares on the Date of Grant, as reported by
Bloomberg, L.P. (“Bloomberg”), (or, if not so
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation System—Small Cap or National Markets or the National
Association of Security Dealers Over the Counter Bulletin
Board).

      
        
           

        

        
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      “Non-Employee Directors” shall
have the meaning ascribed thereto in Rule 16b-3.

      

      “Non-qualified Stock Option”
means an Option that is not intended to qualify as a Tax-qualified Option (as
defined in the Code) and granted pursuant to the Plan.

      

      “Officer” shall mean any
officer of the Company.

      

      “Option” means the right to
purchase Shares from the Company upon the exercise of a Non-qualified Stock
Option or a Tax-qualified Option granted pursuant to this Plan.

      

      “Option Agreement” shall mean
the written agreement between the Company and the Participant relating to
Options granted under this Plan.

      

      “Option Price” means the
purchase price payable upon the exercise of an Option.

      

      “Optioned Stock” shall mean the
Shares subject to an Option.

      

      “Option Term” shall have the
meaning ascribed to it in Section 7.3.

      

      “Optionee” shall mean an
Employee, Director, Consultant or Advisor of the Company who has been granted
one or more Options.

      

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

      

      “Participant” means a person
who is selected by the Board or a Committee to receive benefits under this Plan
and (i) is at that time an Advisor Employee, Officer, Director, or
Consultant, to the Company, or (ii) has agreed to commence serving in any
such capacity.

      

      “Plan” shall mean this Aurora
Gold Corporation 2007 Incentive Plan, as amended from time to time in accordance
with the terms hereof.

      

      “Relationship Status” means a
Participant’s status as an Advisor, Consultant, Director or Employee of the
Company.

      
        
           

        

        
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      “Rule 16b-3” means Rule 16b-3,
as promulgated and amended from time to time by the Securities and Exchange
Commission under the Exchange Act, or any successor rule to the same
effect.

      

      “Securities Act” shall mean the
United States Securities Act of 1933, as amended.

      

      “Section 409A” shall have the
meaning ascribed thereto in
Section 14.15.

      

      “Shares” shall mean
(i) shares of the Common Stock, $.001 par value, of the Company described
in the Company’s Certificate of Incorporation, as the same may be further
amended or restated from time to time, and (ii) any security into which
shares of the Common Stock may be converted by reason of any transaction or
event of the type referred to in Section 8 of this Plan,
in each case as the same may be adjusted pursuant to Section 8 of this
Plan.

      

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

      

      “Tax Date” shall mean the date
an Optionee is required to pay the Company an amount with respect to tax
withholding obligations in connection with the exercise of an
Option.

      

      “Tax-qualified Option” shall
mean an Option granted hereunder the terms of which are intended to qualify for
tax treatment under specified provisions of the Code.

      

      “Termination Date” shall have
the meaning ascribed thereto in Section 11.

      

      3.
Shares Subject to the Plan.

      

      Subject
to the provisions of Section 8 of the Plan,
the maximum aggregate number of Shares which may be optioned and sold or
otherwise awarded under the Plan is ten percent (10%) of the total Shares
outstanding from time to time, less the number of Shares underlying unexercised
Options on the Effective Date. Any Shares available for grants and awards at the
end of any calendar year shall be carried over and shall be available for grants
and awards in the subsequent calendar year. For the purposes of this Section 3:

      

      3.1 Treatment of Shares Under an Expired
Option. Upon expiration, forfeiture or cancellation of any Option granted
under this Plan, or settlement of an Option in cash in lieu of Shares or in a
manner such that all or some of the Shares covered by an Option are not issued
to a Participant, any Shares that were covered by such Option shall again be
available for issuance or transfer hereunder.

      

      3.2 Treatment of Shares Under an
Exercised Option. Shares covered by any
Option granted under this Plan shall be deemed to have been issued, and shall
cease to be available for future issuance in respect of any other Option granted
hereunder, at the earlier of the time when they are actually issued upon
exercise or the time when dividends or dividend equivalents are paid
thereon.

      
        
           

        

        
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      4.
Administration of the Plan.

      

      4.1 Procedure.

      

      (a)       The
entire Board shall administer the Plan; provided, however, that the Board may
appoint a Committee consisting solely of two (2) or more “Non-Employee Directors” to
administer the Plan on behalf of the Board, in accordance with Rule
16b-3.

      

      (b)       Once
appointed, the Committee shall continue to serve until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause),
appoint new members in substitution therefor, and fill vacancies however caused;
provided, however, that at no time may any person serve on the Committee if that
person’s membership would cause the Committee not to satisfy the requirements of
Rule 16b-3.

      

      (c)       A
majority of the Committee shall constitute a quorum, and the acts of the members
of the Committee who are present at any meeting thereof at which a quorum is
present, or acts unanimously approved by the members of the Committee in
writing, shall be the acts of the Committee.

      

      (d) Any
reference herein to the Board shall, where appropriate, encompass a Committee
appointed to administer the Plan in accordance with this Section 4.

      

      4.2 Power of the Board or the
Committee.

      

      (a)
Subject to the provisions of the Plan, the Board shall have the authority, in
its discretion: (i) to grant Options to Participants; (ii) to
determine, upon review of relevant information and in accordance with Section 2 of the Plan,
the Fair Market Value of the Shares; (iii) to determine the Option Price
per share of Options to be granted, which Option Price shall be determined in
accordance with Section 7.4 of the Plan;
(iv) to determine the number of Shares to be represented by each Option;
(v) to determine the Participants to whom, and the time or times at which,
Options and Cash Awards shall be granted; (vi) to interpret the Plan;
(vii) to prescribe, amend and rescind rules and regulations relating to the
Plan; (viii) to determine the terms and provisions of each Option granted
(which need not be identical) and, with the consent of the Optionee thereof,
modify or amend such Option; (ix) to accelerate or defer (with the consent
of the Optionee) the exercise date of any Option; (x) to authorize any
person to execute on behalf of the Company any instrument required to effectuate
the grant of an Option previously granted by the Board; (xi) to accept or
reject the election made by an Optionee pursuant to Section 7.5 of the Plan;
(xii) to impose such additional conditions, as it deems advisable, as to
the vesting and exercise of any Options granted pursuant to the Plan, including,
but not limited to, performance criteria, and (xiii) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.

      
        
           

        

        
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      (b) The
Board or a Committee may delegate to an Officer of the Company the authority to
make decisions pursuant to this Plan, provided that no such delegation may be
made that would cause any award or other transaction under the Plan to cease to
be exempt from Section 16(b) of the Exchange Act. A Committee may authorize
any one or more of its members or any Officer of the Company to execute and
deliver documents on behalf of the Committee.

      

      4.3 Effect of Board or Committee
Decisions. All decisions and
determinations and the interpretation and construction by the Board or a
Committee of any provision of this Plan or any agreement, notification or
document evidencing the grant of Options or Cash Awards and any determination by
the Board or a Committee pursuant to any provision of this Plan or any such
agreement, notification or document, shall be final, binding and conclusive with
respect to all Participants and/or Optionees and any other holders of any Option
granted under the Plan. No member of the Board or a Committee shall be liable
for any such action taken or determination made in good faith.

      

      5.
Eligibility.

      

      Consistent
with the Plan’s purposes, Options and Cash Awards may be granted only to such
Directors, Officers, Employees, Consultants and Advisors of the Company as
determined by the Board or a Committee. Subject to the terms of the Plan, a
Director, Officer, Employee, Consultant or Advisor who has been granted an
Option may, if he or she is otherwise eligible, be granted an additional Option.
Tax-qualified Options may be granted only to those Participants who meet the
requirements applicable under Section 422 of the Code. Qualified Cash
Awards may be granted only to such Employees of the Company as determined by the
Board or a Committee.

      

      6.
Board Approval; Effective Date.

      

      Subject
to the approval of the Company’s stockholders at the 2007 Annual Meeting of
Stockholders, the Plan, as amended and restated herein, shall take effect on
June 1, 2007 (the “Effective Date”). No Option
may be granted after the Termination Date as hereinafter defined.

      

      7.
Options.

      

      The Board
or the Committee may from time to time authorize grants to Participants of
Options to purchase Shares upon such terms and conditions as the Board or the
Committee may determine in accordance with the following
provisions:

      

      7.1  Options to be Granted;
Terms.

      

      (a)
Options granted pursuant to this Section 7 may be
Non-qualified Stock Options, Tax-qualified Options, or combinations of both. The
Board or the Committee shall determine the specific terms of
Options.

      
        
           

        

        
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      (b) Each
grant shall specify the period or periods of continuous employment, or
continuous engagement of the consulting or advisory services, of the Optionee by
the Company or any Subsidiary, or such other conditions as the Board or the
Committee may provide, that are necessary before the Options or instalments
thereof shall become exercisable.

      

      (c) The
granting of Tax-qualified Options to Participants who directly or indirectly
beneficially own 10% or more of the Company’s issued and outstanding Shares or
who is an affiliate of such person must be approved by the requisite vote of
stockholders in accordance with applicable securities and tax regulatory
requirements.

      

      7.2  Number of Shares Subject to Options;
Maximum Limit. Each grant shall specify
the number of Shares to which it pertains. Successive grants may be made to the
same Optionee regardless of whether any Options previously granted to the
Optionee remain unexercised. Notwithstanding anything to the
contrary contained in the Plan, no Participant may be granted, during any
calendar year, Options that are exercisable for more than 1,000,000
Shares.

      

      7.3  Term of Option; Earlier
Termination. The term (the “Option Term”) of each Option
shall not exceed ten (10) years from the Date of Grant, provided that no
grant shall be effective until the Company and the Participant have executed and
delivered an Option Agreement. In the case of a Tax-qualified Option granted to
a Participant who, at the time the Tax-qualified Option is granted, owns ten
percent (10%) or more of the Common Stock as such amount is calculated
under Section 422(b)(6) of the Code (“Ten Percent Stockholder”), the
term of the Tax-qualified Option shall be five (5) years from the Date of
Grant thereof or such shorter time as may be provided in the Option
Agreement.

      

      7.4  Exercise Price.

       

      (a) Each
grant shall specify an Option Price per Share for the Shares to be issued
pursuant to exercise of an Option, which shall be determined by the Board or the
Committee and shall be no less than the Fair Market Value per Share on the Date
of Grant. Notwithstanding the foregoing, in the case of a Tax-qualified Option
granted to a Participant who, at the time of the grant of such Tax-qualified
Option, is a Ten Percent Stockholder, the per Share exercise price shall be no
less than one hundred ten percent (110%) of the Fair Market Value per Share
on the Date of Grant.

      

      (b) With
respect to Tax-qualified Options, the aggregate Fair Market Value (determined as
of the respective Date or Dates of Grant) of Shares for which one or more
options granted to any Optionee under this Plan may for the first time become
exercisable as Tax-qualified Options under the federal tax laws during any one
calendar year (under all employee benefit plans of the Company) shall not exceed
$100,000. To the extent that the Optionee holds two or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Tax-qualified Options shall
be applied on the basis of the order in which such options are granted. Should
the number of Shares for which any Tax-qualified Option first becomes
exercisable in any calendar year exceed the applicable $100,000 limitation, then
that Option may nevertheless be exercised in such calendar year for the excess
number of Shares as a Non-qualified Stock Option under the applicable federal
tax laws.

      
        
           

        

        
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      7.5 Payment for
Shares.   The Option Price of an exercised Option and any taxes
attributable to the delivery of Shares under the Plan or portion thereof, shall
be paid as follows:

      

      (a) Forms of Payment. Each grant
shall specify the form of consideration to be paid in satisfaction of the Option
Price and the manner of payment of such consideration, which may include
(i) cash in the form of United States currency or check or other cash
equivalent acceptable to the Company, (ii) non-forfeitable, unrestricted
Shares, which are already owned by the Optionee, (iii) any other legal
consideration that the Board or the Committee may deem appropriate, including
without limitation any form of consideration authorized pursuant to this Section 7 on such basis as the Board
or the Committee may determine in accordance with this Plan, or (iv) any
combination of the foregoing.

      

      (b) Deferred Payment. Any grant may allow for
deferred payment of the Option Price through a sale and remittance procedure by
which an Optionee shall provide concurrent irrevocable written instructions to
(i) a Company-designated brokerage firm to effect the immediate sale of the
purchased Shares and remit to the Company, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Option Price
payable for the purchased Shares, and (ii) the Company to deliver the
certificates for the purchased Shares directly to such brokerage firm to
complete the sale transaction.

      

      (c) Tender of Shares. The Board or
Committee shall determine acceptable methods for tendering Shares as payment
upon exercise of an Option and may impose such limitations and prohibitions on
the use of Shares to exercise an Option as it deems appropriate.

      

      7.6 Rights as a Stockholder. 
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of an Option. No adjustment will be made for a
dividend or the right thereto for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 8 of the
Plan.

       

      
        
           

        

        
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      7.7 Exercise of
Option.

      

      (a) Procedure for
Exercise.

      

      (i) Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board or the Committee, including performance
criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan. Unless otherwise determined by the
Board at the time of grant, an Option may be exercised in whole or in
part.

      

      (ii) An
Option shall be deemed to be exercised on the date the Company receives the
proceeds of a sale of Shares in connection with a broker-assisted exercise
pursuant to Section 7.5 hereof, or
otherwise, when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as authorized by
the Board, consist of any consideration and method of payment allowable under
Section 7.5 of the
Plan.

      

      (iii)
Exercise of an Option in any manner shall result in a decrease in the number of
Shares which thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

      

      (b) Termination of Optionee’s
Relationship Status. Unless otherwise provided in an Option Agreement, if
a Participant’s Relationship Status is terminated by the Company, for cause,
then the Option, to the extent not exercised, shall terminate on the date on
which the Optionee receives notice that his Relationship Status has been
terminated by the Company. If the termination of an Optionee’s Relationship
Status is voluntary, without cause, or occurs due to retirement with the consent
of the Board, then Optionee may after the date such termination, exercise his or
her Option at any time within one (1) month after the date his Relationship
Status is terminated, but only to the extent that he was entitled to exercise it
on the date of such termination. To the extent that the Optionee was not
entitled to exercise the Option at the date of such termination, or if the
Optionee does not exercise such Option (which he was entitled to exercise)
within the time specified herein, the Option shall terminate.

      

      (c) Disability. Unless otherwise
provided in the Option Agreement, notwithstanding the provisions of Section 7.7(b) above, in
the event an Optionee is unable to continue his or her Relationship Status with
the Company as a result of his or her disability, the Optionee may exercise his
Option at any time within one (1) month after the date of termination, but
only to the extent the Optionee was entitled to exercise it at the date of such
termination. To the extent that the Optionee was not entitled to exercise the
Option at the date of termination, or if the Optionee does not exercise such
Option (which he was entitled to exercise) within the time specified herein, the
Option shall terminate.

      

      (d) Death. Unless otherwise
provided in the Option Agreement, notwithstanding the provisions of Section 7.7(b) above, if
an Optionee dies during the term of the Option and at the time of his death his
Relationship Status had not been otherwise terminated, the Option may be
exercised at any time within one (1) month following the date of death by
the Optionee’s executor or other legal representative or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that the Optionee was entitled to exercise the Option on the date of
death, or if the Optionee’s estate, or person who acquired the right to exercise
the Option by bequest or inheritance, does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.

      
        
           

        

        
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      7.8 
Incentive Stock
Options—Disposition of Shares. In the case of an Incentive Stock Option,
a Participant who disposes of Common Stock acquired upon exercise of such
Incentive Stock Option by sale or exchange (i) within two (2) years
after the Date of Grant of the Option, or (ii) within one (1) year
after the exercise of the Option, shall notify the Company of such disposition
and the amount realized upon such disposition.

      

      7.9 Option Agreement. Each grant
of an Option shall be evidenced by an Option Agreement, which shall be executed
on behalf of the Company by any Officer thereof and delivered to and accepted by
the Optionee and shall contain such terms and provisions as the Board or the
Committee may determine consistent with this Plan.

      

      8.
Adjustments Upon Changes in Capitalization or Merger.

      

      Subject
to any required action by the stockholders of the Company, the number of Shares
covered by each outstanding Option, the maximum number of Options that any one
Participant may be granted in a calendar year, and the number of Shares which
have been authorized for issuance under the Plan but as to which no Options have
yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as Shares covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Shares, or any other increase
or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.” Such adjustment shall be made by the Board or
the Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof, shall be made with
respect to the number Shares subject to an Option or the Option Price
thereof.

      

      In the
event of the proposed dissolution or liquidation of the Company, all Options
will terminate immediately prior to the consummation of such proposed action
unless otherwise provided by the Board. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as of
a date fixed by the Board and give each holder the right to exercise his or her
Option as to all or any part thereof, including Shares as to which the Option
would not otherwise be exercisable. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Option shall be assumed or an equivalent
Option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the holder shall have the right to exercise the Option as to all of the
Shares, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
the holder that the Option shall be fully exercisable for a period of sixty
(60) days from the date of such notice (but not later than the expiration
of the term of the Option), and the Option will terminate upon the expiration of
such period.

      
        
           

        

        
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      9.
Transferability.

      

      Except to
the extent otherwise expressly provided in the Plan or an Option Agreement, the
right to acquire Shares or other assets under the Plan may not be assigned,
encumbered or otherwise transferred by an Optionee and any attempt by an
Optionee to do so will be null and void. Subject to the approval of the
Committee, in its sole discretion, an Option may be transferred by the Optionee
to (i) the children or grandchildren of the Optionee (“Immediate Family Members”),
(ii) a trust or trusts for the exclusive benefit of such Immediate Family
Members or (iii) a partnership or partnerships in which such Immediate
Family Members have at least 99% of the equity, profit and loss interests.
Except as provided in the preceding sentence, transfers of Options shall be
prohibited except pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, as amended,
or the rules thereunder or equivalent laws of the Optionee’s jurisdiction of
residence, or by will or the laws of descent and distribution. No transfer shall
be effective unless and until written notice of such transfer is provided to the
Committee, in the form and manner prescribed by the Committee. Following
transfer, any such Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, and, except as
otherwise provided herein, the term Optionee shall be deemed to refer to the
transferee. Following the death of the Optionee, only the Optionee’s executor or
the personal representative of the Optionee’s estate (or by the Optionee’s
transferee, in the event of a permitted transfer) may exercise the Option, and
only to the extent that the Option was exercisable on the date of the Optionee’s
death.

      

      10.
Time of Granting of Options.

      

      The Date
of Grant of an Option shall, for all purposes, be the date on which the Board or
Committee makes the determination granting such Option. Notice of the
determination shall be given to each Participant to whom an Option is so granted
within a reasonable time after the date of such grant.

      

      11.
Amendment and Termination of the Plan.

      

      11.1 The
Board may amend Plan from time to time in such respects as the Board may deem
advisable or otherwise terminate the Plan.

      

      11.2 Any
such amendment or termination of the Plan shall not affect Options or Cash
Awards already granted and such awards shall remain in full force and effect as
if this Plan had not been amended or terminated, unless mutually agreed
otherwise between the Participant and the Board, which agreement must be in
writing and signed by the Participant and the Company.

      

      11.3
Notwithstanding the foregoing, this Plan shall terminate upon the earlier of
(i) May 31,
2017 or such earlier date as the Board shall determine, or (ii) the
date on which all Options available for issuance in the last year of the Plan
shall have been granted and have been fully exercised (the “Termination Date”). Upon
termination of the Plan, no further Options or Cash Awards may be granted
pursuant to the Plan, but all such awards granted prior thereto and still
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the applicable award agreement evidencing such
award.

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      12.
Withholding Taxes.

      

      The
Company is authorized to withhold income taxes as required under applicable laws
or regulations. To the extent that the Company is required to withhold federal,
state, local or foreign taxes in connection with any payment made or benefit
realized by an Optionee or other person under this Plan, and the amounts
available to the Company for the withholding are insufficient, it shall be a
condition to the receipt of any such payment or the realization of any such
benefit that the Optionee or such other person make arrangements satisfactory to
the Company for payment of the balance of any taxes required to be withheld. At
the discretion of the Board or the Committee, any such arrangements may without
limitation include relinquishment of a portion of any such payment or benefit or
the surrender of outstanding Shares. The Company and any Optionee or such other
person may also make similar arrangements with respect to the payment of any
taxes with respect to which withholding is not required.

       

      13.
Corporate Transaction or Change of Control.

      

      The Board
or the Committee shall have the right in its sole discretion to include with
respect to any award granted to a Participant hereunder provisions accelerating
the benefits of the award in the event of a Corporate Transaction or Change of
Control, which acceleration rights may be granted in connection with an award
pursuant to the agreement evidencing the same or at any time after an award has
been granted to a Participant.

      

      14.
Miscellaneous Provisions.

      

      14.1
Plan Expense. Any
expenses of administering this Plan shall be borne by the Company.

      

      14.2
Construction of
Plan. The
place of administration of the Plan shall be in Coolum Beach, Queensland,
Australia or such other cities as the Board of Directors may designate, and the
validity, construction, interpretation, administration and effect of the Plan
and of its rules and regulations, and rights relating to the Plan, shall be
determined in accordance with the laws of the State of Delaware and the laws of
the United States of America applicable therein without regard to conflict of
law principles and, where applicable, in accordance with the Code.

      

      14.3
Other Compensation. The
Board or the Committee may condition the grant of any award or combination of
awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Company or a Subsidiary to the
Participant.

      

      14.4
Continuation of Employment or
Services. This Plan shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or any
Subsidiary and shall not interfere in any way with any right that the Company or
any Subsidiary would otherwise have to terminate any Participant’s employment or
other service at any time. Nothing contained in the Plan shall prevent the
Company or any Subsidiary from adopting other or additional compensation
arrangements for its Employees.

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      14.5
Certain Terminations of
Employment or Consulting Services, Hardship and Approved Leaves of
Absence. Notwithstanding any other provision of this Plan to the
contrary, in the event of termination of employment or consulting services by
reason of death, disability, normal retirement, early retirement with the
consent of the Company, termination of employment or consulting services to
enter public or military service with the consent of the Company or leave of
absence approved by the Company, or in the event of hardship or other special
circumstances identified by the Board or the Committee, of a Participant who
holds an award that is not immediately and fully vested and/or exercisable, the
Board or the Committee may take any action that it deems to be equitable under
the circumstances or in the best interest of the Company, including without
limitation waiving or modifying any limitation or requirement with respect to
any award under this Plan.

      

      14.6
Binding Effect. The
provisions of the Plan and the applicable award agreements shall inure to the
benefit of, and be binding upon, the Company and its successors or assigns, and
the Participants, their legal representatives, their heirs or legacies and their
permitted assignees.

      

      14.7
Exchange Act Compliance.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provisions of the Plan or action by the Board or the Committee fails to so
comply, they shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Board or the Committee.

      

      14.8
Conditions upon Issuance of
Shares.

      

      Shares
shall not be issued pursuant to the exercise of an Option unless the exercise of
such Option and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the, applicable securities regulations in an other
jurisdiction (including, but not limited to, the jurisdiction in which an
Optionee resides), and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

      

      (a) As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased or otherwise acquired only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company such a representation is required by any of
the aforementioned relevant provisions of law.

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

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

      

      14.9
Fractional Shares. The Company shall not be
required to issue any fractional Shares pursuant to this Plan. The Board or the
Committee may provide for the elimination of fractions or for the settlement
thereof in cash.

      

      14.10
Reservation of Shares.
The Company will at all times reserve and keep available such number of Shares
as shall be sufficient to satisfy the requirements of the Plan.

      

      14.11
Indemnification. In
addition to such other rights of indemnification as they may have as members of
the Board, the members of the Board and of the Committee shall be indemnified by
the Company against all costs and expenses reasonably incurred by them in
connection with any action, suit or proceeding to which they or any of them may
be party by reason of any action taken or failure to act under or in connection
with the Plan or any Option or Cash Award, and against all amounts paid by them
in settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except a judgment based upon a finding
of bad faith; provided that upon the institution of any such action, suit or
proceeding a Board member or Committee member shall, in writing, give the
Company notice thereof and an opportunity, at its own expense, to handle and
defend the same before such Board member or Committee member undertakes to
handle and defend it on his own behalf

      

      14.12
Gender. For purposes of
this Plan, words used in the masculine gender shall include the feminine and
neuter, and the singular shall include the plural and vice versa, as
appropriate.

      

      14.13
Use of Proceeds. Any cash proceeds
received by the Company from the sale of Shares under the Plan shall be used for
general corporate purposes.

      

      14.14
Regulatory
Approvals.

      

      (a)       The
implementation of the Plan, the granting of any awards under the Plan and the
issuance of any Shares shall be subject to the Company’s procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the awards granted under it and the Shares issued pursuant to
it.

      

      (b)       No
Shares or other assets shall be issued or delivered under this Plan unless and
until there shall have been compliance with all applicable requirements of
federal, provincial and applicable foreign securities laws. Certificates for
Shares issued upon exercise of an Option shall bear such legend or legends as
the Exchanges, the Board or the Committee, as the case may be, in their sole
discretion, determine to be necessary or appropriate to prevent a violation of,
or to perfect an exemption from, the registration requirements  of the
Securities Act or to implement the provisions of any requirements of the
Securities Act or to implement the provisions of any agreements between Company
and the Eligible Participant with respect to such Shares or to comply with the
requirements of the Exchanges.

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      14.15
Section 409A of the
Code. Notwithstanding anything in this Plan to the contrary, if any Plan
provision or award under the Plan would result in the imposition of an
applicable tax under Section 409A of the Code and related regulations and
Treasury pronouncements (“Section 409A”), that Plan
provision or award will be reformed to avoid imposition of the applicable tax
and no action taken to comply with Section 409A shall be
deemed to adversely affect the Participant’s rights to an award.

      

      14.16
Other Tax Matters.
Reference herein to the Code and any described tax consequences related to the
Plan or the granting or exercise of an award hereunder pertain only to those
persons (including the Company) subject to the tax laws of the United States of
America or any state or territory thereof.

       

      

        15exhibit1033.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    CO-PROMOTION
AGREEMENT

    

    This
CO-PROMOTION AGREEMENT (this “Agreement”) effective as of the [___] day of
December, 2007 (“Effective Date”)
between AURIGA LABORATORIES,
INC., a corporation organized and existing under the laws of the State of
Delaware and having its principal office at 10635 Santa Monica Blvd, Suite 120,
Los Angeles, CA (“Auriga”), and MIDDLEBROOK PHARMACEUTICALS INC._
a corporation organized and existing under the laws of the State of
Delaware and having its principal office at 20425 Seneca Meadows Parkway,
Germantown, MD (“MiddleBrook”). Auriga
and MiddleBrook may be referred to individually as a “Party” and
collectively as “Parties”.

    

    W I T N E
S S E T H:

    

    WHEREAS,
MiddleBrook has the exclusive right to market the Product (as hereinafter
defined) in the Territory (as hereinafter defined);

    

    WHEREAS,
Auriga employs a professional sales force (“Sales Force”) that
currently calls on PCPs (as hereinafter defined) in order to promote products
within the Territory;

    

    WHEREAS,
MiddleBrook desires to enhance its marketing of the Product in the Territory by
enlisting the support and participation of Auriga and its Sales Force to market
the Product to PCPs; and

    

    WHEREAS,
the Parties desire to enter into this Co-Promotion Agreement with respect to the
Product in the Territory.

    

    NOW,
THEREFORE, Auriga and MiddleBrook agree that the following terms and conditions
shall apply with respect to the promotion of the Product to PCPs:

    

    1. DEFINITIONS

    

    The
following capitalized terms, when used in this Agreement, shall have the
meanings given to them below:

     

    “Affiliate” shall mean
any corporation or other business entity that directly or indirectly controls,
is controlled by, or is under common control with a Party. Control means
ownership or other beneficial interest in fifty percent (50%) or more of the
voting stock or other voting interest of a corporation or other business
entity.

    

    “Baseline TRx Extended
Units”***.

    

    “Detailing” or “Detail” shall mean an
in person visit by a professional sales representative who is part of the Sales
Force to a PCP who is legally entitled to prescribe the Product, which visit is
for the purpose of making a presentation about the Product (which may, or may
not, be in conjunction with making a presentation about Auriga products as well)
and where key attributes and characteristics of the Product are verbally
presented to the PCP along with Marketing Materials.

    

    “Co-Promotion Fee”
shall mean have the meaning set forth in Section 2.4.

    

    “FDA” shall mean the
United States Food and Drug Administration.

    

    “FD&C” shall mean
the United States Food Drug and Cosmetics Act found in Title 21, Chapter 9 of
the United States Code.

    

    “Good Manufacturing
Practices” shall have the meaning set forth in 21 C.F.R.
110.

    

    “IMS” shall mean [the
pharmaceutical marketing intelligence company IMS Health Inc.]

    

    “IMS National Prescription
Audit” shall mean [IMS’ National Prescription Audit Plus Services that
tallies the national prescriptions of all pharmaceutical products sold from
retail pharmacies].

    

    “Marketing Plan” shall
mean a plan for marketing and Detailing of the Product, including monthly
Product sales forecasts for the Territory and a marketing budget which may be
prepared by MiddleBrook.

    

    “Net Sales” shall mean
* * *.

    

    “PCP” shall mean
doctors of medicine or osteopathy with a primary practice office location in the
Territory, which includes Physicians classified by IMS as Family Practice,
Primary Care Physicians, General Medicine or Internal Medicine, and shall also
include nurse practitioners, physician assistants, and other mid-level
practitioners who may prescribe Product within their scope of practice, either
through collaborative practice arrangements with doctors of medicine or
osteopathy or otherwise and who fall into the above IMS
classifications.

    

    “PDMA” shall mean the
Prescription Drug Marketing Act of 1987.

    

    “Performance Metric”
shall have the meaning set forth in Schedule 1.

    

    “Product” shall mean
MiddleBrook's product known as * * *.

    

    “Promotional Expenses”
shall mean actual direct costs for promotional items and Samples ordered from
MiddleBrook by Auriga for use in the promotion of the Product.

    

    “Residual Fee” shall
have the meaning  set forth in Section 2.4 (b).

    

    “Sample”
shall mean a Unit of Product Packaged as a sample that is not intended to be
sold and is intended to promote the same of such Product.

    

    “Territory” shall mean
the United States of America, including its territories and
possessions.

    

    “Third Party” shall
mean a party other than Auriga or MiddleBrook or their respective
Affiliates.

    

    “Trademark” shall mean
the trademark “Keflex”.

    

    “TRx Extended Units”
shall mean total prescription extended units of Product in the Territory as
reported by IMS National Prescription Audit.

    

    “Unit” shall mean a
unit of TRx Extended Units.

    

    “Wholesale Acquisition
Cost” or “WAC” shall mean
MiddleBrook’s list price per Unit for the Product to wholesalers or direct
purchasers in the Territory, before deductions for prompt pay or other
discounts, rebates or reductions in price, the most recent month for, which the
information is available, as reported in the wholesale price guides or other
publications of drug or biological pricing data.

    

    2. CO-PROMOTION

    

    2.1.
Co-Promoter.

    

    (a) MiddleBrook
hereby appoints Auriga as the co-promoter of the Product for purposes of
Auriga’s promotion of the Product through its Sales Force to
PCPs.  Auriga accepts such appointment and agrees to promote the
Product through the Sales Force only to PCPs in a manner consistent with this
Agreement and the directions of MiddleBrook for the Product. Neither Party shall
authorize any Third Party to promote the Product to PCPs.  MiddleBrook
represents and warrants to Auriga that as of the Effective Date, no Third Party
is authorized to promote the Product to PCPs. Auriga, through the Sales Force,
shall have the co-exclusive right, along with Middlebrook, to promote the
Product to PCPs.

    

    (b) At
Auriga’s sole cost and expense, Auriga agrees to use diligent efforts at a level
equal to the highest industry standards to market and promote the Product
through the Sales Force to PCPs, all in a manner similar to the promotion of
Auriga manufactured products. Without limiting the foregoing, Auriga agrees: (1)
to establish and maintain a commercially reasonable and sufficient number of,
employed sales representatives to comprise the Sales Force whose responsibility
includes Detailing the Product to PCPs; (2) to train such Sales Force with
respect to the proper and acceptable Detailing of the Product using the training
materials provided by MiddleBrook pursuant to Section 2.2(a)(iii) below),
and (3) to use such Sales Force to actively promote the Product in accordance
with the Performance Metrics detailed in Schedule 1. MiddleBrook reserves and
retains the right to promote the Product to PCPs within the Territory, provided,
that (i) all such promotion shall be solely at MiddleBrook’s cost and
expense, and (ii) all amounts generated from sales resulting from such
promotion shall be included as Net Sales for purposes of determining Auriga’s
compensation, unless otherwise agreed to beforehand by the
Parties.  Auriga sales representatives shall at all times while
marketing and promoting the Product to PCPs, be subject to MiddleBrook’s
policies and procedures (if any) related to the marketing and promotion of the
Product (“MiddleBrook
Policies”) which have been provided to Auriga. At all times, Auriga’s
sales representatives shall also be subject to Auriga’s policies and procedures
(if any) related to the marketing and promotion of Auriga’s products; to the
extent that Auriga policies and procedures are inconsistent with MiddleBrook’s
then current policies and procedures (if any) related to the marketing and
promotion of the Product which have been provided to Auriga, the policy or
procedure which is more restrictive shall apply in connection with the
Product.

    

    (c) The
Parties agree that the commercial launch date of the Product by Auriga shall be
on or before thirty (30) days from the Effective Date.

    

    (d) *
* *.

    

    (e) Auriga
represents and warrants that it shall, and shall require that its Sales Force:
(1) at all times comply with any and all laws, rules, regulations, PDMA
guidelines and/or professional requirements applicable to the sale and marketing
of pharmaceutical products generally and the Product specifically; (2) at all
times provide services under this Agreement in a professional, ethical and
competent manner; (3) not make any misleading statements, claims or warranties
that are inconsistent with the FDA labeling for the Product approved at the time
such statements, claims or warranties are made; and (4) not disparage or present
in a negative light the Product, the Trademark and/or MiddleBrook. MiddleBrook
represents and warrants that it: (i) shall at all times comply with any and all
laws, rules, regulations, PDMA guidelines and/or professional requirements
applicable to the manufacture and sale of pharmaceutical products generally and
the Product specifically; (ii) shall at all times provide services under this
Agreement in a professional, ethical and competent manner; and (iii) shall not
disparage or present in a negative light Auriga.

    

    (f) Auriga
shall promote the Product only under and by use of the Trademark and shall not
use any other trademark(s) in the promotion of the Product without the prior
written approval of MiddleBrook. Auriga represents that it shall use the
Trademark (and any other trademark(s), if any, used by Auriga as approved by
MiddleBrook) only in a manner consistent with MiddleBrook’s trademark usage
guidelines communicated to Auriga. Auriga shall permit MiddleBrook, at
MiddleBrook’s expense and upon reasonable notice, to review and audit Auriga’s
usage of the Trademark (or any other trademark(s), if any, used by Auriga as
approved by MiddleBrook).

    

    (g) Auriga
shall be responsible for promotion of the Product in accordance with the
Marketing Plan, or as otherwise communicated to Auriga by MiddleBrook, and only
through the use of sales, promotional, Samples, advertising and/or similar
materials (the “Marketing Materials”)
provided by MiddleBrook.  MiddleBrook shall be entitled to deduct
Promotional Expenses from future Co-Promotion Fee payments to Auriga
hereunder.  Auriga agrees that it will not make any changes to any FDA
approved promotional materials or Samples without MiddleBrook’s prior written
consent, such consent not to be unreasonably withheld or delayed. Where
necessary, MiddleBrook shall be responsible for securing any legal or regulatory
approvals required for any Marketing Materials.

    

    (h) Each
Party, at its sole cost and expense, shall obtain and at all times maintain in
full force and effect all necessary licenses, permits and/or other
authorizations or approvals, as required by law, regulation, ordinance or
statute as may be necessary to allow and permit it to undertake and carry out
its duties and obligations as set forth in this Agreement.

    

    (i) *
* *.

    

    (j)
MiddleBrook will provide access to its sales training team to train the Auriga
Sales Force.  Additionally, MiddleBrook will participate in the
setting up of the initial training modules and will provide Auriga all available
training materials to assist in the completion of a sales training
module.  All training materials will be approved by MiddleBrook prior
to use by the Auriga field sales team.

    

    (k)
Auriga shall not sell or distribute the Products, place journal or other
advertisements for the Product, issue press releases regarding the Product
(however Auriga May refer to the Product in a non-promotional manner in its
corporate press releases, financial statements, annual and quarterly reports and
filings with the Securities and Exchange Commission or other regulatory bodies,
as provided in the License Agreement), conduct opinion leader development
activity in connection with the Product, establish advisory boards concerning
the Product, participate in or conduct peer selling activity concerning the
Product, enter into or discuss with customers or potential customers (including,
without limitation, managed care organizations) contracts for the sale of or
discounts or rebates on the sale of Product or conduct other general marketing
activities (other than the Detailing of the Product to the extent expressly
permitted by this Agreement) with respect to the Product. These shall be among
the activities for which MiddleBrook shall remain solely
responsible.

    

    2.2.
Sale and Manufacture
of the Product.

    

    (a) During
the Term of this Agreement, MiddleBrook shall be responsible for:

    

    (i) Manufacturing,
packaging, labeling, shipping, warehousing and distributing the Product in the
Territory, or having the forgoing effected by its licensors, licensees,
Affiliates or Third Parties.

    

    (ii) Accepting
of orders, invoicing customers and the collecting of receivables resulting from
sales of the Product in the Territory.

    

    (iii) Development
of training materials with respect to the Product, which it shall make available
to Auriga for training Auriga’s Sales Force assigned to the
Product.

    

    (iv) Providing
customer service activities, medical information services (including response to
medical inquiries) and regulatory filings and activities.

    

    (b) All
Product returned to Auriga shall be shipped by Auriga to the nearest facility of
MiddleBrook or its designee.  Auriga shall incur no liability in the
handling or expense of such returns, provided such return to Auriga is not the
result of any action of Auriga.

    

    (c) All
sales of the Product in the Territory shall be invoiced by MiddleBrook, and
Auriga shall be paid its compensation as specified hereunder on all sales of the
Product in the Territory, whether made by MiddleBrook, Auriga or any other party
unless otherwise agreed to beforehand by the Parties.

    

    (d) All
terms of sale including, without limitation, policies concerning pricing, credit
terms, cash discounts and returns and allowances shall be set by MiddleBrook
consistent with MiddleBrook’s normal internal selling practices; provided,
however, that the foregoing shall not permit MiddleBrook to set any pricing
terms with respect to Product Samples sold to Auriga which are inconsistent with
the terms of this Agreement.

    

    (e) All
customer orders for the Product shall be received and executed by MiddleBrook or
its designee. If Auriga receives any such orders it shall refer such to
MiddleBrook. MiddleBrook, or its designee, shall use reasonable efforts to fill
Product orders.  It is recognized by the Parties that Auriga may from
time to time receive orders for the Product directly from Third
Parties.  In such event, Auriga promptly shall advise the customer
that Auriga is not authorized to accept orders for the Product, but that Auriga
will forward the order to MiddleBrook for acceptance or rejection at
MiddleBrook’s sole discretion.  Immediately thereafter, Auriga shall
transmit said orders and purchase order numbers promptly to MiddleBrook for
acceptance or rejection at MiddleBrook’s sole discretion.  MiddleBrook
shall assume all shipping and handling charges with respect to such
orders.

    

    (f) Each
Party shall promptly notify the other Party of any event(s) or occurrence that
materially affect(s) or which reasonably appear could materially affect the
marketing and sale of the Product in the Territory, including, not by way of
limitation, any and all governmental inquiries or requests for information
relating to the Product. MiddleBrook shall have the sole authority to handle all
governmental inquiries or requests for information about the content and
chemical properties concerning the Product and Auriga shall, upon the request
and at the sole cost and expense of MiddleBrook unless the inquiry is related to
Auriga’s responsibilities, including without limitation Detailing, under this
Agreement, provide MiddleBrook assistance in responding to any such governmental
inquiries or requests for information.

    

    (g) Without
limiting the generality of Section 2.2(f) above, Auriga shall give
MiddleBrook notice of any Product complaint, including but not limited to any
“Adverse Drug
Experience” (as defined in 21 CFR 314.80 or any successor provision
thereto) about which Auriga obtains information, in accordance with the
following procedure:

    

    (i) Information
concerning any Adverse Drug Experience or any clinical complaint associated with
the Product shall be reported to MiddleBrook’s designated medical liaison by
telefax within twenty-four (24) hours and by hard copy in writing within three
(3) days after initial receipt of such information;

    

    (ii) Auriga’s
report to MiddleBrook under Section 2.2(g)(i) shall contain (a) the
date the report was received by Auriga; (b) the name of the reporter;
(c) the address and telephone number of the reporter; (d) how, when and
where the “occurrence” took place; (e) the names and addresses of any injured
persons and witnesses; (f) the nature and location of any injury or damage
arising out of the “occurrence”; and (g) an indication of the adverse drug
experience.

    

    (iii) All
other non-clinical Product complaints not covered by (i) above shall be
reported to MiddleBrook in writing at least once each month.

    

    (h) MiddleBrook
shall be responsible to respond to any patient having an Adverse Drug Experience
and to respond to any regulatory agencies with respect to technical and medical
complaints regarding the Product.

    

    (i) Auriga
shall refer all medical information requests to MiddleBrook and shall provide
assistance as requested by MiddleBrook in responding to such
requests.

    

    (j) MiddleBrook
shall have the authority and responsibility to: (1) investigate all Adverse Drug
Experiences and non-clinical complaints associated with the Product, including
those reported to MiddleBrook by Auriga, and (2) as required or otherwise
appropriate, to report such information to the FDA. In addition, so long as
Auriga is a co-promoter of the Product, MiddleBrook shall provide Auriga with a
summary of all Adverse Drug Experiences and clinical complaints received by
MiddleBrook, during each calendar quarter and all material comments of the FDA
with respect thereto within thirty (30) days after the end of such calendar
quarter.

    

    (k)  For
all Adverse Drug Experiences or other information reportable to MiddleBrook,
Auriga and its employees, representatives and agents will not make any statement
or give any opinion (written or verbal) to anyone that could be construed as an
admission of fault on MiddleBrook’s part or a promise that MiddleBrook will
compensate anyone.  Auriga, its employees, representatives and agents
may only promise to report the Adverse Drug Experience or other information
reportable to MiddleBrook and follow the appropriate procedures as outlined
herein.

    

    (l) MiddleBrook
shall: (i) manufacture the Product or cause the same to be manufactured in
conformance with all applicable federal, state and local statutes, ordinances
and regulations, (including, without limitation, the FD&C and the
regulations thereunder such as current Good Manufacturing Practices), as the
same may be amended from time to time, (ii) not ship Product which at the
time of shipment is known by MiddleBrook to be adulterated or misbranded within
the meaning of the FD&C, and (iii) not ship Product which at the time
of shipment is known by MiddleBrook to be a product which would violate any
section of the FD&C if introduced into interstate commerce.

    

    (m) Subject
to Section 2.2(d), MiddleBrook agrees that it shall conduct all price
negotiations in good faith and on an arms length basis.

    

    (n) If
in the view of either Party there is a change in market conditions which affects
the economics of this Agreement, both Parties will discuss modifications to this
Agreement to address such changed market conditions. However, neither Party
shall be obligated to agree to such modifications to the terms of this
Agreement. If the Parties are unable to reach an agreement as to modifications
to the terms of this Agreement within thirty (30) days of the Parties
beginning discussions under this Section 2.2(m), either Party may terminate this
Agreement upon ten (10) days written notice to the other
Party.

    

    (o) MiddleBrook
shall furnish and make available, as reasonably requested by Auriga, all readily
available information on the efficacy and safety of the Product, as may
reasonably be necessary to assist Auriga in its promotion and marketing of the
Product in the Territory.

    

    (p) If
any employee of Auriga, receives notice of Product tampering or notice of
information concerning any incident that causes any Product or its labeling to
be mistaken for, the employee of Auriga shall immediately contact MiddleBrook’s
product complaint hotline by phone at 1 (877) 363-8080 (or such person(s),
address(es) and phone numbers(a) as MiddleBrook may designate from time to time
by written notice to Auriga).

    

    (p) *
* *.

    

    2.3.
Dispute
Resolution.

    

    Should
the Parties fail through good faith efforts to agree on a matter or resolve any
dispute, the matter or dispute shall be referred to the President of MiddleBrook
and the President of Auriga for their good faith efforts at a resolution. This
Section shall in no way be construed so as to limit any of the rights the
Parties may whether contained within this Agreement or otherwise.

    

    2.4.
Reporting and
Payment.

    

    (a)* * *.

    

    

    (b) *
* *

    

     (c) All
sums due under this Agreement shall be payable in U.S. Dollars by federal funds
wire transfer or by check as instructed in writing by the Party to receive such
payment from time to time. Auriga shall be solely responsible for all taxes that
may be due to any governmental authority in connection with the payments made to
it by MiddleBrook hereunder.  All amounts due under
Section 2.4(a) shall be paid in calendar quarterly payments within
forty-five (45) days following the end of each respective calendar quarter;
provided, however, that in the event this Agreement terminates at a time other
than as of the end of a calendar quarter, amounts due under Section 2.4(a)
for such partial period ending on the date of termination shall be pro-rated and
paid within forty-five (45) days following termination. All amounts due
under Section 2.4(b) shall be paid within forty-five (45) days
following the end of each respective three (3) month period. With each such
payment, MiddleBrook shall deliver to Auriga a full and accurate accounting to
include at least the following information:

    

    (i) *
* *

    (ii) *
* *

    

    (d) *
* *.

    

    (e) * *
*.

    

    2.5.
MiddleBrook shall promptly notify Auriga in writing of any facts relating to the
advisability of a recall, destruction or withholding from the market of the
Product anywhere in the world (collectively, “Recall(s)”). If at
any time: (a) any governmental or regulatory authority issues a request,
directive or order for a Recall; (b) a court of competent jurisdiction
orders a Recall; or (c) MiddleBrook determines, (except in emergency
situations in which there is insufficient time for such consultation), that a
Recall is necessary or advisable, MiddleBrook shall take all appropriate
corrective actions, at MiddleBrook’s expense, to effect the Recall; however, if
any Product Recalls, returns or market withdrawals are caused solely by the
actions or inactions of Auriga which constitute a breach of the terms of this
Agreement or a violation by Auriga of any applicable laws, regulations or rules,
then Auriga shall bear all reasonable costs (including the reasonable costs of
MiddleBrook) associated with any Recalls, returns or market withdrawals
resulting from such actions or inactions by Auriga. Auriga shall provide
MiddleBrook with cooperation, in connection with and shall respect any Recall,
returns or market withdrawals, as reasonably requested MiddleBrook.  
Auriga shall make available to MiddleBrook upon request, all pertinent records
of Auriga which MiddleBrook may reasonably request to assist MiddleBrook in
effecting any recall.

    

    3. INDEMNITY

    

    3.1.
(a) MiddleBrook shall defend, indemnify and hold harmless Auriga and its
directors, officers, agents and employees, from and against any and all
liability, loss, damages and expenses (including attorneys’ fees) as the result
of Third Party claims, demands, costs or judgments which may be made or
instituted against any of them arising out of (i) any negligent act or
omission or willful misconduct of MiddleBrook or any of its officers, directors,
agents or employees with respect to Product, (ii) any violation of approved
labeling or any applicable statute or regulation with respect to Product, or
breach of this Agreement or any representation or warranty hereunder, by
MiddleBrook or any of its officers, directors, agents or employees,
(iii) the manufacture, possession, packaging, distribution, use, testing,
sale or other disposition of the Product, (iv) any claim for patent or
trademark infringement in connection with any disposition of the Product, or (v)
any breach of this Agreement or any representation or warranty hereunder by
MiddleBrook or any of its officers, directors, agents or employees. MiddleBrook
shall not be obligated to indemnify an indemnified party to the extent that any
claims against an indemnified party result solely from (i) any negligent
act or omission or willful misconduct of Auriga or any of its officers,
directors, agents, or employees with respect to the Product, (ii) any violation
of approved labeling or any applicable statute or regulation by Auriga with
respect to Product (provided that Auriga shall not be deemed to be in violation
of this provision by using promotional materials provided or approved by
MiddleBrook), (iii) any breach of this Agreement or any representation or
warranty hereunder, by Auriga or any of its officers, directors, agents, or
employees with respect to the Product, (iv) marketing of the Product or any
other action with respect to Product by Auriga or any of its officers,
directors, agents or employees, in each case which is not in compliance with
applicable law, rules or regulation, (provided that Auriga shall not be deemed
to be in violation of this provision for using promotional materials provided or
approved by MiddleBrook), or (v) any claim warranty or representation by
Auriga or any of its officers, directors, agents or employees with respect to
Product which has not been approved by MiddleBrook. MiddleBrook shall have the
exclusive right to control the defense of any action which is to be indemnified
in whole by MiddleBrook hereunder, including the right to select counsel
reasonably acceptable to Auriga to defend Auriga, and to settle any claim,
provided that, without the written consent of Auriga (which shall not be
unreasonably withheld or delayed), MiddleBrook shall not agree to settle any
claim against Auriga. The provisions of this paragraph shall survive and remain
in full force and effect after any termination, expiration or cancellation of
this Agreement and MiddleBrook’s obligation hereunder shall apply whether or not
such claims are rightfully brought.

    

    (b) Auriga
shall defend, indemnify and hold harmless MiddleBrook and its respective
directors, officers, agents and employees, from and against any and all
liability, loss, damages and expenses (including attorneys’ fees) as the result
of Third Party claims, demands, costs or judgments which may be made or
instituted against any of them arising out of (i) any negligent act or
omission or willful misconduct of Auriga or any of its officers, directors,
agents or employees with respect to the Product, (ii) any violation of
approved labeling or any applicable statute or regulation by Auriga with respect
to Product (provided that Auriga shall not be deemed to be in violation of this
provision by using promotional materials provided or approved by MiddleBrook),
(iii) any breach of this Agreement or any representation or warranty
hereunder, by Auriga or any of its officers, directors, agents or employees with
respect to the Product, (iv) the marketing of the Product, or any other
action by Auriga or any of its officers, directors, agents or employees, with
respect to Product in each case which is not in compliance with applicable law,
rules or regulation (provided that Auriga shall not be deemed to be in violation
of this provision by using promotional materials provided or approved by
MiddleBrook), or (v) any claim, warranty or representation of Auriga or any
of its officers, directors, agents or employees, with respect to Product which
has not been approved by MiddleBrook. Auriga shall not be obligated to indemnify
an indemnified party to the extent that MiddleBrook is obligated to provide
indemnity as described in paragraph 3.1(a) above. Auriga shall have the
exclusive right to control the defense of any action which is to be indemnified
in whole by Auriga hereunder, including the right to select counsel reasonably
acceptable to MiddleBrook to defend MiddleBrook, and to settle any claim,
provided that, without the written consent of MiddleBrook (which shall not be
unreasonably withheld or delayed), Auriga shall not agree to settle any claim
against MiddleBrook. The provisions of this paragraph shall survive and remain
in full force and effect after any termination, expiration or cancellation of
this Agreement and Auriga’s obligation hereunder shall apply whether or not such
claims are rightfully brought.

    

    3.2. A
person or entity that intends to claim indemnification under this Article 3
(the “Indemnitee”) shall
promptly notify the other Party (the “Indemnitor”) of any
loss, claim, damage, liability or action in respect of which the Indemnitee
intends to claim such indemnification, and the Indemnitor, after it determines
that indemnification is required of it, shall assume the defense thereof with
counsel mutually satisfactory to the Parties; provided, however, that an
Indemnitee shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitor if Indemnitor does not assume the defense,
or if representation of such Indemnitee by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other person represented by such counsel in such
proceedings. The indemnity agreement in this Article shall not apply to amounts
paid in settlement of any loss, claim, damage, liability or action if such
settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld or delayed unreasonably. The failure to deliver notice to
the Indemnitor within a reasonable time after the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article, but the
omission so to deliver notice to the Indemnitor will not relieve it of any
liability that it may have to any Indemnitee otherwise than under this Article.
The Indemnitee under this Article, its employees and agents, shall cooperate
fully with the Indemnitor and its legal representatives in the investigations of
any action, claim or liability covered by this indemnification. In the event
that each Party claims indemnity from the other and one Party is finally held
liable to indemnify the other, the Indemnitor shall additionally be liable to
pay the reasonable legal costs and attorneys’ fees incurred by the Indemnitee in
establishing its claim for indemnity.

    

    4. TERM AND
TERMINATION

    

    4.1.
Except if sooner terminated as provided herein, this Agreement shall be
effective as of the date hereof and shall continue for a period of two
(2) years from the Effective Date (the “Initial Term”). The
Agreement shall be renewed for an additional two (2) year term (each the
“Renewal Term”,
and together with the Initial Term, the “Term”) should the Parties mutually
consent to such a renewal in writing.

      

    4.2.
Expiration or termination of this Agreement shall not relieve the Parties of any
obligation accruing prior to such expiration or termination nor preclude either
Party from pursuing all rights and remedies it may have hereunder or at law or
in equity with respect to any breach of this Agreement nor prejudice either
Party’s right to obtain performance of any obligation provided for in this
Agreement which expressly survives expiration or termination. The provisions of
Article 3 and Sections 2.4(b), 2.4(c), 4.2, 4.5, 5.8, 5.12, 5.13, and
5.16 shall survive the expiration or termination of this Agreement as well as
any other provision which by its intent is meant to survive expiration or
termination of this Agreement.

    

    4.3.
Notwithstanding any other provision of this Agreement, either Party may
terminate this Agreement by notice in writing to the other if (a) the other
commits a material breach of this Agreement which (i) in the case of a
breach capable of a remedy, shall not have been remedied within sixty
(60) days of the receipt by the other of written notice identifying the
breach and requiring its remedy and (ii) continues to exist at the time of
notice of termination, and (b) for any reason, upon ninety (90) days’ prior
notice.

    

    4.4 * *
*.

    

    4.5. Upon
expiration or termination of this Agreement, Auriga shall have no further rights
whatsoever in the Product in the Territory, including but not limited to any
rights to co-promote the Product. Further, in the event that this Agreement is
terminated by MiddleBrook pursuant to Section 4.3(a) or 4.4 above, Auriga shall
have no rights whatsoever to the payments set forth in Section 2.4(b)
above.

    

    4.6.
Notwithstanding any other provision of this Agreement, MiddleBrook may suspend
or terminate sale of Product if the FDA takes any action the result of which is
to prohibit or restrict the manufacture or sale or introduction into interstate
commerce of the Product. Such termination or suspension shall not be deemed a
termination of this Agreement. MiddleBrook shall promptly notify Auriga of any
such action by the FDA.

    

    4.7.
Either Party may terminate this Agreement if the other Party shall (i)
voluntarily enter into any form of bankruptcy or insolvency proceedings; (ii) if
any form of bankruptcy or insolvency proceedings shall be brought involuntarily
against the other Party and such proceedings shall remain undismissed, unstayed
or unvacated for a period of 60 consecutive days; (iii) is adjudicated bankrupt
or compounds with or makes any arrangement with or makes a general assignment
for the benefit of its creditors; (iv) compulsorily or voluntarily enters into
liquidation, except for the purposes of a bona fide reconstruction or
amalgamation and with the prior written approval of the other Party; or (v) the
Party has a receiver or manager appointed over the whole or a substantial part
of its undertakings or assets.

    

    4.8.  Upon
expiration or termination of this Agreement, Auriga will cooperate with
MiddleBrook in the collection and return to MiddleBrook of all promotional items
and literature, Samples, and other sales or sales training materials in the
possession of Auriga and/or any member if the Auriga sales team

    

    5. MISCELLANEOUS

    

    5.1.
Insurance.

    

    (a) ***.

    

    (b) Each
Party shall, at its own expense, obtain insurance (in the case of MiddleBrook
additional insurance) covering those types or risks, and in such amounts, as are
customary in the industry (including, without limitation, in the case of Auriga,
Workers Compensation and Auto Liability coverage), and shall maintain such
policies in full force and effect throughout the Initial or any Renewal Term of
this Agreement.  Each Party shall provide to the other proof of such
insurance no later than ten (10) days after the Effective Date.  Each such
certificate shall provide for no less than thirty (30) days prior written notice
to the other Party of any lapse, cancellation or termination of such
insurance.  Each Party named as an additional insured as herein
described shall be entitled to a copy of the then prevailing certificate of
insurance at any time, upon request.

    

    5.2.
Independent
Contractor. The relationship between MiddleBrook and Auriga is that of
independent contractors. MiddleBrook and Auriga are not joint venturers,
partners, principal and agent, master and servant, employer or employee, and
have no relationship other than as independent contracting parties. MiddleBrook
shall have no power to bind or obligate Auriga in any manner. Likewise, Auriga
shall have no power to bind or obligate MiddleBrook in any manner. Neither Party
shall have any responsibility for the hiring, firing, compensation or employee’s
benefits of the other Party’s employees or agents

    

    5.3.
Nonassignability.
This Agreement may not be assigned or otherwise transferred by either Party
without the consent of the other Party; provided, however, that either Party
may, without such consent, assign this Agreement and its rights and obligations
hereunder to its Affiliate(s), Kef Pharmaceuticals, Inc., a Delaware
corporation, or in connection with the transfer or sale of all or substantially
all of its business to which this Agreement relates, or in the event of its
merger or consolidation or change in control or similar transaction. Any
purported assignment in violation of the preceding sentences shall be void. Any
permitted assignee shall assume all obligations of its assignor under this
Agreement, provided that such assigning Party shall remain primarily liable
hereunder in the case of an assignment to an Affiliate.

    

    5.4.
Modification.
This Agreement constitutes the entire agreement among the Parties with respect
to the subject matter hereof and supersedes all prior agreements,
understandings, and discussions, whether oral or written of the Parties with
respect to the subject matter hereof. Any modification of this Agreement shall
be effective only when in writing and signed by the Parties and specifically
states that it is an amendment to this Agreement.

    

    5.5.
Notices. Any
notices expressly provided for under this Agreement shall be in writing, shall
be given either manually or by mail, facsimile message, telegram, telex or other
written means, and shall be deemed sufficiently given if and when received by
the Party to be notified at its address set forth below, or if and when mailed
by certified or registered mail, postage prepaid, addressed to the Party at such
address stated below. Either Party may, by notice to the other Party, change its
address for receiving such notices.

      

    
      	
              If
      To Auriga:

            	
              Auriga
      Laboratories, Inc.

            
	 
      	
              10635
      Santa Monica Blvd. #120

            
	 
      	
              Los
      Angeles, CA 90025

            
	 
      	
              Attn:
      Phil Pesin

            
	 
      	
              Telephone
      No.: (310) 461-3600

            
	 
      	
              Fax
      No.: (310) 806-4161

            
	 
      	 
      
	
              Copy
      to:

            	
              Auriga
      Laboratories, Inc.

            
	 
      	
              10635
      Santa Monica Blvd., #120

            
	 
      	
              Los
      Angeles, California  90025

            
	 
      	
              Attention:  Sharyn
      G. Alcaraz, Corporate Counsel

            
	 
      	
              Telephone:  (310)
      461-3600

            
	 
      	
              Fax:  (310)
      806-4161

            
	 
      	 
      
	
              If
      To MiddleBrook:

            	
              MiddleBrook
      Pharmaceuticals, Inc.

            
	 
      	
              20425
      Seneca Meadows Parkway

            
	 
      	
              Germantown,
      MD 20876

            
	 
      	
              Attn:
      Edward Rudnic, Ph. D., President and CEO

            
	 
      	
              Telephone
      No.: 301-944-6600

            
	 
      	
              Fax
      No.: 301-944-6700

            
	
               

              Copy
      to: 

            	
               

              Dewey
      & LeBoeuf LLP

              Attn:
      Stanton J. Lovenworth

              1301
      Avenue of the Americas:

              New
      York, NY, 10019

              (212)
      259-8000

              (212)
      259-6333

            

    

    

    5.6.
Severability.
If any provision(s) of this Agreement are or become invalid, are ruled illegal
by any court of competent jurisdiction or are deemed unenforceable under then
current applicable law from time to time in effect during the term hereof, it is
the intention of the Parties that the remainder of this Agreement shall not be
affected thereby provided that a Party’s rights under this Agreement are not
materially affected. It is further the intention of the Parties that in lieu of
each such provision which is invalid, illegal, or unenforceable, there be
substituted or added as part of this Agreement a provision which shall be as
similar as possible in economic and business objectives as intended by the
Parties to such invalid, illegal or unenforceable provision, but shall be valid,
legal and enforceable. In the event a Party’s rights are materially affected as
a result of a change in this Agreement under this Section, such Party may
terminate this Agreement.

    

    5.7.
Public
Announcements. MiddleBrook and Auriga each agrees not to disclose any
terms or conditions of this Agreement to any Third Party or to make any public
statement about this Agreement or wherein the name of the other Party is used
without the prior written consent of the other Party (which shall not be
unreasonably withheld or delayed), except as is required by applicable law, rule
or regulation; provided (i) that if this Agreement is required to be filed
as part of any public document the filing Party shall, to the fullest extent
permitted under such law, rule or regulation, request that confidential
treatment be afforded to this Agreement; or (ii) that either Party may
allow a Third Party to review this Agreement as part of an overall due diligence
examination of such Party in connection with any potential financing,
acquisition, disposition or other business combination; provided that such Third
Party is under obligation of confidentiality. In the event of a disclosure
permitted under this Section, the disclosing Party shall nonetheless provide the
non-disclosing Party with notice of such disclosure prior to disclosure, and
will, to the extent reasonably possible, provide the non-disclosing Party with
an opportunity to correct same. A Party shall not be required to provide the
other Party with a disclosure which has been previously provided to a
Party.

    

    5.8.
Applicable Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York without regard to choice of law principles.

    

    5.9.
Force Majeure.
Neither Party shall be held liable or responsible to the other Party nor be
deemed to have defaulted under or breached this Agreement for failure or delay
in fulfilling or performing any term of this Agreement other than a payment
provision when such failure or delay is caused by or results from causes beyond
the reasonable control of the affected Party including but not limited to fire,
floods, embargoes, war, acts of war (whether war be declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other Party. Upon the occurrence of such event,
the affected Party shall give prompt written notice of such event to the other
Party.

    

    5.10.
Waiver. Any
delay in enforcing a Party’s rights under this Agreement or any waiver as to a
particular default or other matter shall not constitute a waiver of a Party’s
right to the future enforcement of its rights under this Agreement, excepting
only as to an expressed written and signed waiver as to a particular matter for
a particular period of time.

    

    5.11.
Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

    

    5.12.
Nondisclosure
Obligations.

    

    (a) During
the term of this Agreement, it is contemplated that a Party will disclose to the
other Party proprietary and confidential technology, specifications, technical
information and the like which are owned or controlled by a Party (“Confidential
Information”). The receiving Party agrees to retain the disclosing
Party’s Confidential Information in confidence and not release any such
Confidential Information to a Third Party without the prior written consent of
the disclosing Party and to use the disclosing Party’s Confidential Information
only for the purposes of this Agreement. The obligations of confidentiality will
not apply to Confidential Information which:

    

    (i) was known to the receiving
Party or generally known to the public prior to its disclosure
hereunder;

    

    (ii) subsequently becomes known
to the public by some means other than a breach of this Agreement;

    

    (iii) is subsequently disclosed
to the receiving Party by a Third Party having a lawful right to make such
disclosure;

    

    (iv) is required by law or bona
fide legal process to be released, provided, however, that the receiving Party
takes all reasonable steps to restrict and maintain the confidentiality of such
Confidential Information and provides reasonable notice to the disclosing Party
prior to any such Confidential Information being released; or

    

    (v) is approved for release by
the Parties.

    

    (b) Upon
termination or expiration of this Agreement, each Party shall return to the
other Party all tangible forms of Confidential Information furnished by the
other Party, including all copies thereof and all memoranda of oral disclosure,
except that each Party may retain one copy in the files of its legal counsel to
ensure compliance with any legal obligations.

    

    (c) This
Section 5.12 shall survive until the tenth anniversary of the termination
or expiration of this Agreement.

    

    5.13.
Non-Compete. *
* *

    

    5.14.
Representations and
Warranties.

    

    (a) As of
the Effective Date, each Party hereby represents, warrants, and covenants to the
other Party hereto as follows:

    

    (i)           it
is a corporation or entity duly organized and validly existing under the laws of
the state or other jurisdiction of its incorporation or formation;

    

    (ii)           the
execution, delivery and performance of this Agreement by such Party has been
duly authorized by all requisite corporate action and does not require any
shareholder action or approval;

    (iii)           it
has the power and authority to execute and deliver this Agreement and to perform
its obligations hereunder;

    

    (iv)           the
execution, delivery and performance by such Party of this Agreement and its
compliance with the terms and provisions hereof does not and will not conflict
with or result in a breach of any of the terms and provisions of or constitute a
default under (i) a loan agreement, guaranty, financing agreement, agreement
affecting a product or other agreement or instrument binding or affecting it or
its property; (ii) the provisions of its charter or operative documents or
bylaws; or (iii) any order, writ, injunction or decree of any court or
governmental authority entered against it or by which any of its property is
bound;

    

    (v)           it
shall at all times comply with all applicable laws and regulations relating to
its activities under this Agreement; and

    

    (b) As of
the Effective Date MiddleBrook represents and warrants to Auriga that to the
best of MiddleBrook’s knowledge, the manufacture, use, sale or offer to sell the
Product in the Territory by MiddleBrook or Auriga and the terms of this
Agreement do not infringe or violate any granted patent or any contract to which
MiddleBrook is a party. MiddleBrook further represents and warrants to Auriga
that MiddleBrook has the exclusive right to market the Product in the
Territory.

    

    5.15.
No Grant of
License. Nothing contained herein shall be deemed to grant Auriga either
expressly or impliedly, a license or other right, title or interest in any
patent, trademark, trade name, logo, the Trademark or any other similar property
of MiddleBrook, except as may be necessary for Auriga to co-promote the Product
in the Territory as provided hereunder.

    

    5.16.
No Consequential
Damages. Except for a Party’s obligations under Article 3, neither
Party shall be liable to the other for any consequential, special, incidental or
indirect damages.

    

    6. Exclusivity.  *
* *

    

    IN
WITNESS WHEREOF, this Agreement has been duly executed effective on the date
first above written.

    
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
              MIDDLEBROOK
      PHARMACEUTICALS, ____________

            	 
      	
              AURIGA
      LABORATORIES, INC.

            
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
              By:

            	 
      	 
      	 
      	
              By:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
               Edward
      M. Rudnic, Ph.D.

            	 
      	 
      	 
      	
              Philip
      S. Pesin

            
	 
      	 
      	
              President
      and Chief Executive Officer

            	 
      	 
      	 
      	
              Chief
      Executive Officer

            

    

     

     

     

    
      
        
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    SCHEDULE
1

    

    PERFORMANCE
METRICS

    

    The term
“Performance
Metrics” shall mean the following:

    

    
      	
              ·  

            	
              * *
      *

            

    

    

    
      
        
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          NY1  1150105v4

        

         

      

      
         

        
          

        

      

      
         

      

    

    

    

     

    
      
        
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