Document:

EXHIBIT 10.4

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is made as of the September 12, 2014 (the “Effective Date”), by and between Citius Pharmaceuticals, Inc. (the “Employer”), and Leonard L. Mazur (the “Executive”). In consideration of the mutual covenants contained in this Agreement, the Employer and the Executive agree as follows:

 

1. Employment. The Employer agrees to employ the Executive and the Executive agrees to be employed by the Employer on the terms and conditions set forth in this Agreement.

 

2. Term. The initial term (the “Initial Term”) of this Agreement shall begin as of the Effective Date and shall continue for three (3) years, until the third anniversary of the Effective Date, unless sooner terminated by either party as set forth below. Effective upon the expiration of the Initial Term and of each Renewal Term (as defined below), if any, the term of this Agreement shall automatically renew for successive periods of one-year (each, a “Renewal Term”) unless the Employer gives written notice to the Executive at least ninety (90) days prior to the end of the Initial Term or at least ninety (90) days prior to the end of any Renewal Term that the term of the Agreement shall not be further extended. As used in this Agreement, the “Term” shall refer to the Initial Term and any Renewal Term.

 

3. Capacity. The Executive shall serve as the Chief Executive Officer of the Employer. During the Term, the Employer shall also nominate and/or re-nominate, as applicable, the Executive to serve on its Board (as defined below). The Executive shall also serve the Employer in such other or additional offices as the Executive may be reasonably requested to serve by the Employer’s Board of Directors (the “Board”), provided that such other or additional offices are consistent with the Executive’s position as Chief Executive Officer and the terms of Section 6 below. In such capacity or capacities, the Executive shall perform such services and duties in connection with the business, affairs and operations of the Employer and consistent with his position(s) and the terms of Section 6 below as may be reasonably assigned or delegated to the Executive from time to time by the Board; provided, however, it is understood and agreed that, in the event of a dispute between the Employer and Akrimax (as defined in Section 6 below and/or Prezamax (as defined in Section 6 below), the Executive shall not be required to provide any services to the Employer related to such dispute.

 

4. Compensation and Benefits. The regular compensation and benefits payable to the Executive under this Agreement shall be as follows:

 

(a) Salary. For all services rendered by the Executive under this Agreement, the Employer shall pay the Executive a salary (the “Salary”) at the annual rate of two hundred and fifty thousand dollars ($250,000). The Salary shall be payable in periodic installments in accordance with the Employer’s usual practice for its senior executives.

 

(b) Bonus. If the Employer is successful in raising two million dollars ($2,000,000) in equity financing for the Employer during the Term (beginning after the Effective Date), the Employer shall pay the Executive a bonus in the gross amount of one hundred and twenty thousand dollars ($120,000) by no later than seventy-five (75) days following the closing date of such equity financing. In the event of a termination of the Executive’s employment with the Employer by the Employer without Cause (defined in Section 7(a) below) or by the Executive for Good Reason (defined in Section 7(b) below) within thirty (30) days prior to the closing of such equity financing, and subject to the Executive’s execution and nonrevocation of the Release (defined in Section 8(c) below), the Employer shall pay the Executive the bonus described in the prior sentence, according to the time set forth in the prior sentence.

 

	 
	
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(c) Regular Benefits. The Executive shall also be entitled to participate in any medical insurance plans, life insurance plans, disability income plans, retirement plans, vacation and other paid time off plans and policies, expense reimbursement plans and policies and other benefit plans and policies, which the Employer may from time to time establish and have in effect for all or most of its senior executives. Such participation shall be subject to the terms of the applicable plan documents and policies, and applicable law. Nothing contained in this Agreement shall be construed to create any obligation on the part of the Employer to establish any such plan or to maintain the effectiveness of any such plan which may be in effect from time to time. The Executive shall be entitled to four (4) weeks of paid vacation each calendar year, which vacation shall be taken in accordance with the Employer’s vacation plans and policies.

 

(d) Equity Grants.

 

(i) On the Effective Date, the Employer will grant the Executive an option to purchase 3,300,000 shares of common stock of the Employer, at a price equal to the fair market value of a Share on the date of grant (the “Option”). The Option shall vest according to the following schedule:

 

(A) 1,300,000 of the Shares subject to the Option will vest on the Effective Date of the Transaction; and 

 

(B) 500,000 of the Shares subject to the Option will vest on each of the dates which are 12, 18, 24 and 36 months after the Effective Date.

 

(ii) If application of the vesting percentages causes a fractional Share or Unit, such fractional Share shall be rounded down to the nearest whole Share or Unit for each vesting date except for the last vesting date, on which the Option shall become exercisable for the full remainder of the Shares.

 

(iii) Notwithstanding anything to the contrary, upon a Change of Control (as defined in Section 8), all options granted to the Executive by the Employer, including, but not limited to the Option, shall immediately accelerate and become exercisable or non-forfeitable as of the consummation of such Change of Control.

 

(iv) The Option will granted pursuant to and subject to the terms and conditions established in the Citius Pharmaceuticals, Inc. 2014 Stock Incentive Plan, a copy of which is attached hereto as Exhibit A (“Stock Incentive Plan”) and the award agreement (the “Option Award Agreement”) in the form attached hereto as Exhibit B.

 

(v) Subject to the terms of this Section 4(d), the Executive shall also be entitled to any other rights and benefits with respect to option awards, to the extent and upon the terms provided in the employee option plan or any agreement or other instrument attendant thereto pursuant to which such options were granted.

 

	 
	
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(e) Taxation of Payments and Benefits. The Employer shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement to the extent that it reasonably and in good faith believes that it is required to make such deductions, withholdings and tax reports. Payments under this Agreement shall be in amounts net of any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Employer to make any payments to compensate the Executive for any adverse tax effect associated with any payments or benefits or for any deduction or withholding from any payment or benefit.

 

(f) Exclusivity of Salary and Benefits. The Executive shall not be entitled to any payments or benefits other than those provided under this Agreement, or as otherwise agreed between the Executive and the Employer.

 

5. Principal Place of Business. Executive shall perform services under this Agreement in the Employer’s office space located in New Jersey, USA. At all times during the Term of this Agreement, Employer shall provide Executive with appropriate and reasonable administrative support for the performance of his services under this Agreement.

 

6. Extent of Service. During the Executive’s employment under this Agreement, the Executive shall, subject to the direction and supervision of the Board, devote the Executive’s best efforts and business judgment, skill and knowledge to the advancement of the Employer’s interests and to the discharge of the Executive’s duties and responsibilities under this Agreement; provided, however, that the Executive may engage in the Permitted Activities (as defined below) both during and outside of regular business hours, provided that such Permitted Activities during regular business hours do not impair the Executive’s ability to fulfill the Executive’s duties and responsibilities under this Agreement. “Permitted Activities” means (a) serving on the board of directors or similar governing body (and any committee thereof) of IntelliCell Biosciences (“IntelliCell”), Leonard Meron Biosciences (“Meron”), Akrimax Pharmaceuticals (“Akrimax”), Prenzamax LLC (“Prenzamax”), Rouses Point Pharmaceuticals, LLC (“Rouses”), Novellus, Inc. (“Novellus”), their respective subsidiaries and any of their respective successors and assigns (together, the “Excluded Businesses”), (b) serving as interim Chief Executive Officer of Novellus, (c) continuing to have an equity interest in and/or investing in the Excluded Businesses, and (d) activities in connection with the operations or affairs of the Excluded Businesses. During the Executive’s employment under this Agreement, the Executive shall not engage in any other competing business activity, except for such other business activities as may be previously approved by the Board; provided, however, for the avoidance of doubt, the Permitted Activities shall in no event be deemed a “competing business activity” In addition to the express understanding that Executive may engage in the Permitted Activities, nothing in this Agreement shall be construed as preventing the Executive from:

 

(a) investing the Executive’s assets in any company or other entity in a manner not prohibited by Section 9(d) and in such form or manner as shall not require any activities on the Executive’s part in connection with the operations or affairs of the companies or other entities in which such investments are made or otherwise impair the Executive’s ability to fulfill the Executive’s duties and responsibilities under this Agreement; or

 

(b) engaging in religious, charitable or other community or non-profit activities that do not impair the Executive’s ability to fulfill the Executive’s duties and responsibilities under this Agreement.

 

	 
	
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7. Termination. The Executive’s employment under this Agreement shall terminate under the following circumstances.

 

(a) Termination by the Employer for Cause. The Executive’s employment under this Agreement may be terminated for Cause without further liability (other than to pay or provide the Accrued Benefits) on the part of the Employer effective immediately upon a vote of the Board and written notice to the Executive. Only the following shall constitute “Cause” for such termination:

 

(i) any act of fraud, dishonesty or gross willful misconduct that is demonstrated to have caused material harm to the Employer, as reasonably determined in good faith by the Board;

 

(ii) the indictment of the Executive for the Executive’s commission of a (x) felony or (y) misdemeanor involving moral turpitude or fraud.

 

(iii) failure of the Executive to make a good faith effort to perform the Executive’s material duties and responsibilities lawfully assigned or delegated by the Board under this Agreement, which failure continues uncured (in the reasonable judgment of the Board, acting in good faith) for more than thirty (30) days after written notice describing the particulars of such alleged failure is given to the Executive by the Board; or

 

(iv) a material and willful breach by the Executive of any of the Executive’s material obligations under this Agreement, which breach continues uncured (in the reasonable judgment of the Board acting in good faith) for more than thirty (30) days, after written notice describing the particulars of such alleged breach is given to the Executive by the Board.

 

For purposes of this definition of “Cause,” no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Employer.

 

	 
	
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(b) Termination by the Executive for Good Reason. Subject to the payment of Termination Benefits pursuant to Section 8(c) or Section 8(d), as applicable, the Executive’s employment under this Agreement may be terminated by the Executive for Good Reason, provided that the Executive first provides written notice (“Good Reason Notice”) to the Board not later than forty-five (45) days following the initial occurrence of the act or failure to act that constitutes Good Reason setting forth the act or failure to act that constitutes Good Reason. The Employer shall have a period of thirty (30) days in which it may correct the act or failure to act that constitutes the grounds for Good Reason as set forth in the Executive’s Good Reason Notice (the “Good Reason Cure Period”). If the Employer does not correct the act or failure to act, the Executive must terminate his employment for Good Reason within thirty (30) days after the end of the Good Reason Cure Period, in order for the termination to be considered a Good Reason termination. Good Reason shall mean the occurrence of one or more of the following, without the Executive’s consent:

 

(i) a reduction of the Executive’s Salary, other than a reduction of the Executive’s Salary by a percentage that is not greater than 10% in connection with a general reduction in base compensation that affects all of the Employer’s executives in substantially the same proportions;

 

(ii) a material diminution in the Executive’s authority, responsibilities or duties;

 

(iii) a material relocation of the geographic location at which the Executive must perform services for the Employer, which, for purposes of this Agreement, means the relocation of the geographic location at which the Executive must perform services for the Employer to a location more than fifty (50) miles from such geographic location prior to the relocation (“Relocation”);

 

(iv) the Executive is not elected or re-elected, as applicable, to serve on the Board; or

 

(v) a material breach by the Employer of this Agreement, including, but not limited to Section 13 below.

 

(c) Termination by the Employer Without Cause. Subject to the payment of Termination Benefits pursuant to Section 8(c) or Section 8(d), as applicable, the Executive’s employment under this Agreement may be terminated by the Employer without Cause upon at least thirty (30) days advance written notice to the Executive.

 

(d) Voluntary Termination by the Executive without Good Reason. The Executive’s employment may be terminated by the Executive voluntarily without Good Reason upon at least thirty (30) days advance written notice to the Employer.

 

(e) Death. The Executive’s employment with the Employer shall terminate upon his death.

 

	 
	
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(f) Disability. If the Executive shall incur a “Disability” so as to be unable to perform the essential functions of the Executive’s then existing position or positions under this Agreement, with or without reasonable accommodation, the Board may relieve him from any responsibilities during the period of such Disability. Notwithstanding any such removal or reassignment, the Executive shall continue to receive the Executive’s full Salary (less any Disability pay or sick pay benefits to which the Executive may be entitled under the Employer’s plans or policies) and benefits under Section 5 of this Agreement (except to the extent that the Executive may be ineligible for one or more such benefits under applicable plan terms) for up to ninety (90) or more consecutive days or one hundred eighty (180) days in the aggregate during any consecutive twelve (12) month period, and the Executive’s employment may be terminated by the Employer on account of Disability at any time thereafter. For purposes of this Agreement, “Disability” shall mean the Executive is eligible to receive long-term disability benefits under the Employer’s long-term disability plan, provided, however, that if the Employer does not maintain a long-term disability plan, “Disability” shall mean a medical determination by physician(s) selected by the Employer to whom the Executive or the Executive’s guardian has no reasonable objections that due to the Executive’s illness or other physical or mental disability, the Executive was or will be unable to substantially perform the essential functions of the Executive’s employment under this Agreement, with or without reasonable accommodation, for a period of ninety (90) or more consecutive days or for one hundred eighty (180) days in the aggregate during any consecutive twelve (12) month period. Nothing in this Section 7(g) shall be construed to waive the Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.

 

8. Compensation Upon Termination.

 

(a) Termination Generally. If the Executive’s employment with the Employer is terminated for any reason, the Employer shall pay or provide to the Executive (or to his authorized representative or estate) any earned but unpaid Salary (which earned, but unpaid Salary shall be paid on or before the time required by law, but in no event more than sixty (60) days after the last day of the Executive’s employment), unpaid expense reimbursements (which unpaid expense reimbursements shall be paid on or before the time required by law, but in no event more than sixty (60) days after the last day of the Executive employment), accrued but unused vacation (which accrued but unused vacation shall be paid on or before the time required by law, but in no event more than sixty (60) days after the last day of the Executive’s employment), any bonus Executive has earned under Section 4(b) of the Agreement (which bonus shall be paid according to the time set forth in Section 4(b) above), and any vested benefits the Executive may have under any employee benefit plan of the Employer (which benefits shall be paid and/or provided in accordance with the terms of the applicable plan) (the “Accrued Benefit”).

 

(b) Voluntary Termination without Good Reason. If the Executive elects voluntarily to terminate his employment without Good Reason in accordance with Section 7(b), the Employer shall have no further obligation to the Executive other than to pay and/or provide his Accrued Benefit through the date of termination (which Accrued Benefit will be paid and/or provided in accordance with Section 8(a) above).

 

(c) Termination by the Employer Without Cause or by the Executive for Good Reason. In the event of a termination of the Executive’s employment with the Employer by the Employer without Cause or by the Executive for Good Reason, and subject to the Executive’s execution and non-revocation of a release of any and all legal claims in the form annexed hereto as Exhibit C (the “Release”), in addition to the Accrued Benefit, the Employer shall provide to the Executive the following termination benefits (“Termination Benefits”):

 

(i) continuation of the Executive’s Salary at the highest annual rate applicable within the four (4) months preceding the date of termination;

 

	 
	
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(ii) provided the Executive timely elects continued coverage under any of Employer’s group health, dental, vision or prescription drug plan benefits in which he participates on the date of his termination of employment to the extent authorized by and consistent with 29 U.S.C. § 1161 et seq. (commonly known as “COBRA”), monthly reimbursement for COBRA premiums paid by the Executive for such continued coverage, less the amount that the Executive would be required to contribute for such coverage if the Executive were an active employee of the Employer;

 

(iii) immediate vesting in any options that would have vested at the next immediate vesting event following the date the Executive’s employment is terminated, provided, however, that the Executive must continue to comply with his obligations under this Agreement to be eligible for such vesting, including, without limitation, his post-employment obligations set forth in Section 9 below.

 

The Termination Benefits set forth in Sections 8(c)(i) and (ii) above shall continue effective for six (6) months after the date of termination (the “Termination Benefits Period”). The Salary continuation payments under Section 8(c)(i) will be paid in installments in accordance with the Employer’s regular payroll practices, commencing with the first regular payroll date on or following sixty (60) days following the date of the Executive’s termination of employment, and the first payment will include any payments not yet paid during the period between the date of termination of employment and the date of the first payment.

 

(d) Termination by the Employer Without Cause or by the Executive for Good Reason and Within Ninety (90) Days Prior to a Change of Control or Within Two Years Following a Change of Control. Notwithstanding the foregoing, in the event of a termination of the Executive’s employment with the Employer by the Employer without Cause or by the Executive for Good Reason and within ninety (90) days prior to a Change of Control or within two (2) years following a Change of Control, and subject to the Executive’s execution and non-revocation of the Release, the Executive will receive (in addition to the Accrued Benefit) all of the payments and benefits as set forth in Section 8(c), except that the Termination Benefits Period shall be twelve (12) months instead of six (6) months, and any such options shall immediately vest and be exercisable in full and, in the event of a termination on or within two (2) years following a Change of Control, the Salary continuation payments under Section 8(c)(i) shall be paid in a lump sum no later than sixty (60) days following the termination of the Executive’s employment.

 

(e) Termination by the Employer with Cause. If the Executive’s employment is terminated by the Employer with Cause, the Employer shall have no further obligation to the Executive other than payment of his Accrued Benefit.

 

	 
	
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(f) Additional Limitation.

 

(i) In the event that it shall be determined that any benefit or payment in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive under this Agreement, or any other plan, arrangement, or agreement with the Employer (the “Payments”) would constitute a “parachute payment” within the meaning of Section 280G of the Code and (but for this sentence) be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the aggregate present value of the Payments under this Agreement, and such other plan, arrangement or agreement with the Employer, shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” shall be either (A) the largest portion of the Payments that would result in no portion of the Payments being subject to the Excise Tax or (B) the largest portion, up to and including the total, of the Payments, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax, results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payments notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payments equal the Reduced Amount, the Employer shall reduce the Payments by first reducing or eliminating any cash payments (with the Payments to be made furthest in the future being reduced first), then by reducing or eliminating accelerated vesting of stock options or similar awards, and then by reducing or eliminating any other remaining Payments, provided that with each category the reduction shall be done on a basis resulting in the highest amount retained by the Executive; and provided, further, that to the extent permitted by Section 409A of the Code and Sections 280G and 4999 of the Code, if a different reduction procedure would be permitted without violating Section 409A of the Code or losing the benefit of the reduction under Sections 280G and 4999 of the Code, the Executive may designate a different order of reduction.

 

(ii)  All determinations to be made under this Section 8(f) shall be made by an independent certified public accounting firm selected by the Employer and approved by the Executive (the “Accounting Firm”), which shall provide its determinations and any supporting calculations both to the Employer and the Executive within ten (10) days following the Change of Control. For purposes of this Section 8(f), the Accounting Firm shall take into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the Executive’s actual marginal tax rate). Any determinations by the Accounting Firm in accordance with this Section 8(f) shall be binding upon the Employer and the Executive. All of the fees and expenses of the Accounting Firm in performing the determinations referred to in this Section 8(f) shall be borne solely by the Employer.

 

(iii) Notwithstanding anything herein to the contrary, for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if the Executive is a “specified employee” of a publicly held corporation at his termination date, the postponement provisions of Section 409A of the Code, as described in Section 18(a) below, shall apply, if applicable. Additionally, notwithstanding anything herein to the contrary, in no event shall the timing of the Executive’s execution of the Release, directly or indirectly, result in the Executive designating the calendar year of payment, and if a payment that is subject to execution of the Release could be made in more than one taxable year, payment shall be made in the later taxable year. The Employer’s liability for Salary continuation pursuant to Section 8(c)(i) shall be reduced by the amount of any severance actually paid to the Executive pursuant to any severance pay plan of the Employer. Nothing in Section 8(c) or Section 8(d) shall be construed to affect the Executive’s right to receive COBRA continuation entirely at the Executive’s own cost to the extent that the Executive may continue to be entitled to COBRA continuation after the Executive’s right to reimbursements under Section 8(c)(ii) or Section 8(d) ceases.

 

	 
	
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(iv) As used in this Agreement, “Change of Control” means (x) a change in ownership of the Employer under clause (A) below or (y) a change in the ownership of a substantial portion of the assets of the Employer under clause (B) below:

 

(A) Change in the Ownership of the Employer. A change in the ownership of the Employer shall occur on the date that any one person, or more than one person acting as a group (as defined in clause (C) below), acquires ownership of capital stock of the Employer that, together with capital stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the capital stock of the Employer. However, if any one person or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the capital stock of the Employer, the acquisition of additional capital stock by the same person or persons shall not be considered to be a change in the ownership of the Employer. An increase in the percentage of capital stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Employer acquires capital stock in the Employer in exchange for property will be treated as an acquisition of stock for purposes of this paragraph.

 

(B) Change in the Ownership of a Substantial Portion of the Employer’s Assets. A change in the ownership of a substantial portion of the Employer’s assets shall occur on the date that any one person, or more than one person acting as a group (as defined in clause (C) below), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Employer that have a total gross fair market value equal to or more than 80 percent of the total gross fair market value of all of the assets of the Employer immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Employer, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. There is no Change of Control under this clause (B) when there is a transfer to an entity that is controlled by the shareholders of the Employer immediately after the transfer, as provided below in this clause (B). A transfer of assets by the Employer is not treated as a change in the ownership of such assets if the assets are transferred to (1) a shareholder of the Employer (immediately before the asset transfer) in exchange for or with respect to its capital stock, (2) an entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the Employer, (3) a person, or more than one person acting as a group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding capital stock of the Employer, or (4) an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in clause (B)(3) of this paragraph. For purposes of this clause (B), a person's status is determined immediately after the transfer of the assets.

 

	 
	
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(C) Persons Acting as a Group. For purposes of clauses (A) and (B) above, persons will not be considered to be acting as a group solely because they purchase or own capital stock or purchase assets of the Employer at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets or capital stock, or similar business transaction with the Employer. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of assets or capital stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. For purposes of this paragraph, the term “corporation” shall have the meaning assigned such term under Treasury Regulation section 1.280G-1, Q&A-45.

 

(D) Each of clauses (A) through (C) above shall be construed and interpreted consistent with the requirements of Section 409A and any Treasury Regulations or other guidance issued thereunder. For the avoidance of doubt, the Transaction or a similar financing or recapitalization, including a financing or recapitalization that results in any person or entity acquiring a majority interest of the Employer’s outstanding equity, shall not be a “Change of Control” for purposes of this Agreement.

 

9. Confidential Information, Noncompetition and Cooperation.

 

(a) Confidential Information. As used in this Agreement, “Confidential Information” means information belonging to the Employer which is of value to the Employer in the course of conducting its business and is maintained as confidential by the Employer and the disclosure of which could result in a competitive or other disadvantage to the Employer. Confidential Information includes, without limitation, financial information, reports, and forecasts; inventions, improvements and other intellectual property; trade secrets; know-how; designs, processes or formulae; software; market or sales information or plans; customer lists; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by the management of the Employer. Confidential Information includes information developed by the Executive in the course of the Executive’s employment by the Employer, as well as other information to which the Executive may have access in connection with the Executive’s employment. Confidential Information also includes the confidential information of others with which the Employer has a business relationship. Notwithstanding the foregoing, Confidential Information does not include: (i) information in the public domain unless due to breach of the Executive’s duties under Section 9(b); (ii) information known to the Executive prior to such information being disclosed to the Executive in connection with his employment hereunder; (iii) is disclosed to the Executive at any time other than in the course of the Executive’s performance of his duties as an employee of Employer, by any third party not bound at the time of the disclosure directly or indirectly, by any confidentiality agreement with Employer.

 

	 
	
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(b) Confidentiality. The Executive understands and agrees that the Executive’s employment creates a relationship of confidence and trust between the Executive and the Employer with respect to all Confidential Information. At all times, both during the Executive’s employment with the Employer and after its termination, the Executive will keep in confidence and trust all such Confidential Information, and will not use or disclose any such Confidential Information without the written consent of the Employer, except (i) as may be necessary in the ordinary course of performing the Executive’s duties to the Employer, (ii) to enforce any rights or defend any claims hereunder or under any other agreement to which the Executive is a party, provided that such disclosure is relevant to the enforcement of such rights or defense of such claims and is only disclosed to the extent necessary in the formal proceedings related thereto, or (iii) when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Employer or by any administrative or legislative body (including a committee thereof) with jurisdiction to order the Executive to divulge, disclose or make accessible such information, provided that the Executive shall give prompt written notice to the Employer of such requirement, disclose no more information than is so required, and reasonably cooperate with any attempt by the Employer to obtain a protective order or similar treatment.

 

(c) Documents, Records, etc. All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, which are furnished to the Executive by the Employer or are produced by the Executive in connection with the Executive’s employment will be and remain the sole property of the Employer. The Executive will return to the Employer all such materials and property as and when requested by the Employer. In any event, the Executive will return all such materials and property immediately upon termination of the Executive’s employment for any reason. The Executive will not retain with the Executive any such material or property or any copies thereof after such termination.

 

(d) Noncompetition and Nonsolicitation. 

 

(i) During the term of the Executive’s employment with the Employer hereunder and for nine (9) months thereafter, the Executive will not, directly or indirectly, whether as owner, partner, shareholder, consultant, agent, employee, co-venturer or otherwise, engage, participate, assist or invest in any Competing Business (as defined below in this Section 9(d) below).

 

(ii) During the term of the Executive’s employment with the Employer and for two (2) years thereafter, the Executive will not, directly or indirectly, whether as owner, partner, shareholder, consultant, agent, employee, co-venturer or otherwise; (A) attempt to employ, recruit or otherwise solicit, induce or influence any person to leave employment with the Employer (other than terminations of employment of employees undertaken in the course of the Executive’s employment with the Employer and/or in the Executive’s capacity as a member of the Board); and (B) solicit or encourage any customer or supplier to terminate or otherwise modify adversely its business relationship with the Employer; provided, that neither (1) the general advertisement for employees or service providers (i.e., not targeted toward any of the Employer’s employees) nor (2) the Executive being named as an reference for an employee of the Employer and responding to ordinary course inquiries made of the Executive by prospective employers or service recipients of such employee in connection with such reference so long as the reference is for employment with an employer that does not engaging a Competing Business with Employer, shall be deemed a violation of this Section 9(d)(ii). Further, for the avoidance of doubt, nothing in this Section 9(d)(ii) shall be deemed to prohibit senior level general solicitations in connection with any activities that are not prohibited by Section 9(d)(i) above shall not be deemed a violation of this Section 9(d)(ii).

 

	 
	
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The Executive understands that the restrictions set forth in this Section 9(d) are intended to protect the Employer’s interest in its Confidential Information and established employee, customer and supplier relationships and goodwill, and agrees that such restrictions are reasonable and appropriate for this purpose. For purposes of this Agreement, the term “Competing Business” shall mean a biopharmaceuticals business conducted anywhere in the United States which is focused on therapies for obesity, or topical therapies for hemorrhoids and/or other anal rectal diseases or disorders, or on other therapeutic categories to be identified and added to Addendum A to this Agreement from time to time during the employment of the Executive; provided, however, in no event shall any of the Excluded Businesses be deemed a Competing Business, and provided further, however, that any other therapeutic categories identified and added to Addendum A of this Agreement shall relate to therapeutic categories with respect to which the Employer is actively conducting business or which are actively under development by the Employer. Notwithstanding the foregoing, the Executive may own up to one percent (1%) of the outstanding stock of a publicly held corporation which constitutes or is affiliated with a Competing Business.

 

(e) Third-Party Agreements and Rights. The Executive hereby confirms that the Executive is not bound by the terms of any non-competition and/or non-solicitation agreement with any previous employer, other current employer or other party which prohibits or materially limits the performance by the Executive of his duties to Employer hereunder. The Executive represents to the Employer that the Executive’s execution of this Agreement, the Executive’s employment with the Employer and the performance of the Executive’s proposed duties for the Employer will not violate any obligations the Executive may have to any such previous employer, other current employer or other party. In the Executive’s work for the Employer, the Executive will not disclose or make use of any information in violation of any agreements with or rights of any such previous employer, current employer or other party, and the Executive will not bring to the premises of the Employer any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment, concurrent employment or other party.

 

(f) Litigation and Regulatory Cooperation. During and after the Executive’s employment, the Executive shall reasonably cooperate with the Employer in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Employer which relate to events or occurrences that transpired while the Executive was employed by the Employer. The Executive’s cooperation in connection with such claims or actions shall include, but not be limited to, being reasonably available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Employer at mutually convenient times. During and after the Executive’s employment, the Executive also shall reasonably cooperate with the Employer in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Employer. The Employer shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this Section 9(f), including Executive’s attorneys’ fees to the extent the Executive reasonably determines that the Executive should be represented by his own counsel.

 

	 
	
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(g) Injunction. The Executive agrees that it would be difficult to measure any damages caused to the Employer which might result from any breach by the Executive of the promises set forth in this Section 9, and that in any event money damages would be an inadequate remedy for any such breach. Accordingly, subject to Section 10 of this Agreement, the Executive agrees that if the Executive breaches, or proposes to breach, any portion of this Agreement, the Employer shall be entitled, in addition to all other remedies that it may have, to seek an injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the Employer.

 

10. Arbitration of Disputes. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of the Executive’s employment or the termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association (“AAA”) in Boston, Massachusetts in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than the Executive or the Employer may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 10 shall be specifically enforceable. Notwithstanding the foregoing, this Section 10 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate, provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 10. The Employer shall bear the cost of all arbitration fees, but each party shall be responsible for its own attorneys’ fees.

 

11. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 10 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.

 

	 
	
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12. Integration. This Agreement, the Stock Incentive Plan and the Option Award Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements between the parties with respect to any related subject matter.

 

13. Indemnification; Liability Insurance. The Employer shall indemnify and hold Executive harmless to the fullest extent permitted by the laws of the Employer’s state of organization or incorporation in effect at the time against and in respect of any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including advancement of reasonable attorney’s fees), losses, and damages resulting from the Executive’s performance of the Executive’s duties and obligations with the Employer. Executive will be entitled to be covered, both during and, while potential liability exists, by the insurance policies the Employer may elect to maintain generally for the benefit of officers and directors of the Employer against all costs, charges and expenses incurred in connection with any action, suit or proceeding to which the Executive may be made a party by reason of being an officer or director of the Employer in the same amount and to the same extent as the Employer covers its other officers and directors. Without limitation of the foregoing, the Employer agrees to continue and maintain a directors’ and officers’ liability insurance policy covering the Executive in an amount, and on terms and conditions (including without limitation, with respect to scope, exclusions, sub-amounts and deductibles), no less favorable to him than (x) the coverage the Employer provides other senior executives and directors from time to time or, if greater, (y) the coverage provided to senior executives and directors on the Effective Date. These obligations shall survive the termination of Executive’s employment with the Employer.

 

14. Assignment; Successors and Assigns, etc. Except as otherwise set forth in this Section 14, neither the Employer nor the Executive may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other party. Notwithstanding the foregoing, the Employer may assign its rights under this Agreement without the consent of the Executive to a successor in the event that the Employer shall effect a reorganization, consolidate with or merge into any other corporation, partnership, organization or other entity, or transfer all of substantially all of its properties or assets to any other corporation, partnership, organization or other entity and such successor shall assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession had taken place. As used in this Agreement, “Employer” shall mean the Employer and any such successor which assumes and agrees to perform the duties and obligations of the Employer under this Agreement by operation of law or otherwise. This Agreement shall inure to the benefit of and be binding upon the Employer and the Executive, their respective successors, executors, administrators, heirs and permitted assigns.

 

15. Enforceability. If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

	 
	
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16. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

 

17. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, to the Executive at the last address the Executive has filed in writing with the Employer or, in the case of the Employer, at its main offices, attention of the Board, and shall be effective on the date of delivery in person or by courier or three (3) days after the date mailed.

 

18. Section 409A.

 

(a) This Agreement is intended to comply with Section 409A of the Code and its corresponding regulations, or an exemption, and payments may only be made under this Agreement upon an event and in a manner permitted by Section 409A of the Code, to the extent applicable. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A of the Code, or to the extent any provision in this Agreement must be modified to comply with Section 409A of the Code, such provision shall be read in such a manner so that no payment due to the Executive shall be subject to an “additional tax” within the meaning of Section 409A(a)(1)(B) of the Code. Severance benefits under the Agreement are intended to be exempt from Section 409A of the Code under the “short-term deferral” exception, to the maximum extent applicable, and then under the “separation pay” exception, to the maximum extent applicable. Notwithstanding anything in this Agreement to the contrary, if required by Section 409A of the Code, if the Executive is considered a “specified employee” for purposes of Section 409A of the Code and if payment of any amounts under this Agreement is required to be delayed for a period of six (6) months after separation from service pursuant to Section 409A of the Code, payment of such amounts shall be delayed as required by Section 409A of the Code, and the accumulated amounts shall be paid in a lump sum payment within ten (10) days after the end of the six (6) month period. If the Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of Section 409A of the Code shall be paid to the personal representative of the Executive’s estate within sixty (60) days after the date of the Executive’s death.

 

(b) To the extent required to comply with Section 409A of the Code, any Termination Benefits or other payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” as defined under Section 409A of the Code. For purposes of Section 409A of the Code, each payment hereunder shall be treated as a separate payment and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. In no event may the Executive, directly or indirectly, designate the calendar year of a payment. All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code.

 

	 
	
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19. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Employer.

 

20. Governing Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles of such Commonwealth. With respect to any disputes concerning federal law, such disputes shall be determined in accordance with the law as it would be interpreted and applied by the United States Court of Appeals for the First Circuit.

 

21. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

 

IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Employer, by its duly authorized member, and by the Executive, as of the Effective Date.

 

 

	LEONARD MAZUR 	 	 	CITIUS PHARMACEUTICALS, INC. 	 
	 			 	
	 			 	
	/s/ Leonard Mazur	 	 	/s/ Leonard Mazur	 
	Leonard Mazur	 		By: Leonard Mazur	 
				Chief Executive Officer	

 

 

-16-Exhibit 4.2

 

(Face of Security)

 

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.  THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO BARCLAYS BANK PLC, OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

BY PURCHASING THIS SECURITY, THE HOLDER AGREES TO CHARACTERIZE THIS SECURITY FOR ALL U.S. FEDERAL INCOME TAX PURPOSES AS PROVIDED IN SECTION 10 ON THE FACE OF THIS SECURITY.

 

 

	
CUSIP No. 06740L519
    	
 
    	
ISIN: US06740L5194
    

 

 

BARCLAYS BANK PLC

 

GLOBAL MEDIUM-TERM NOTES, SERIES A

 

 

iPath® US Treasury 2-year Bear ETN
  due August 13, 2020

 

The following terms apply to this Security.  Capitalized terms that are not defined the first time they are used in this Security shall have the meanings indicated elsewhere in this Security.

 

Face Amount:  $[_____] equal to [_____] Securities at $50 per Security

 

Index: Barclays 2Y US Treasury Futures Targeted Exposure IndexTM

 

Inception Date:  August 9, 2010

 

Original Issue Date:  August 12, 2010

 

Interest Rate:  The principal of this Security shall not bear interest.

 

Denomination:  $50

 

Payment at Maturity:  On the Maturity Date, unless such Securities were previously redeemed on a Redemption Date as provided under “Early Redemption”, the Company shall redeem this Security by paying to the Holder a cash payment per Security equal to the Closing Indicative Note Value on the Final Valuation Date.

 

Closing Indicative Note Value:  The Closing Indicative Note Value for each Security on the Inception Date will equal $50.  On each subsequent calendar day until the Maturity Date or an Early Redemption

Date with respect to such Security, the Closing Indicative Note Value for such Security will equal (1) the Closing Indicative Note Value on the immediately preceding calendar day plus (2) the Daily Index Performance Amount plus (3) the Daily Interest minus (4) the Daily Investor Fee; provided that if such calculation results in a negative value, the Closing Indicative Note Value will be $0.  If the Securities undergo a split or reverse split, the Closing Indicative Note Value will be adjusted accordingly.

 

Daily Index Performance Amount:  The Daily Index Performance Amount for each Security on the Inception Date and on any calendar day that is not an Index Business Day will equal $0.  On any other Index Business Day, the Daily Index Performance Amount for each Security will equal (1) the product of (a) the Index Multiplier times (b) the difference of (i) the closing level of the Index on such Index Business Day minus (ii) the closing level of the Index on the immediately preceding Index Business Day minus (2) the Index Rolling Cost on such Index Business Day.

 

(Face of Security continued on next page)

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Index Multiplier:  -$0.10

 

Index Rolling Cost:  On any calendar day that is not a Roll Day, the Index Rolling Cost for each Security will equal $0.  On any Roll Day, the Index Rolling Cost for each Security will equal $0.005.

 

Daily Interest:  The Daily Interest for each Security on the Inception Date will equal $0.  On each subsequent calendar day until the Maturity Date or an Early Redemption Date with respect to such Security, the Daily Interest for such Security will equal (1) the Closing Indicative Note Value on the immediately preceding calendar day times (2) the T-Bill rate divided by (3) 360.

 

T-Bill Rate:  The T-Bill Rate will equal the most recent weekly investment rate for 28-day U.S. Treasury bills effective on the preceding Business Day in New York City as published on Bloomberg under the ticker symbol “USB4WIR”.

 

Daily Investor Fee:  The Daily Investor Fee for each Security on the Inception Date will equal $0.  On each subsequent calendar day until the Maturity Date or an Early Redemption Date with respect to such Security, the Daily Investor Fee for such Security will equal (1) the Closing Indicative Note Value on the immediately preceding calendar day times (2) the Fee Rate divided by (3) 365.

 

Fee Rate:  0.75%.

 

Early Redemption:  The Holder may, subject to the notification requirements provided under Section 5 hereof, require the Company to redeem the Holder’s Securities in whole or in part on any Early Redemption Date during the term of the Securities (“Holder Redemption”).  If the Holder requires the Company to redeem the Holder’s Securities on any Early

Redemption Date, the Holder will receive a cash payment per Security equal to the applicable Closing Indicative Note Value on the applicable Valuation Date.  The Company shall not be required to redeem fewer than 50,000 Securities at one time, provided that the Company may from time to time in its sole discretion reduce, in part or in whole, this minimum redemption amount on a consistent basis for all Holders who hold Securities at the time the reduction becomes effective.

 

Calculation Agent:  Barclays Bank PLC

 

Defeasance:  Neither full defeasance nor covenant defeasance applies to this Security.

 

Listing:  The NASDAQ Stock Market (“NASDAQ”).

 

(Face of Security)

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OTHER TERMS:

 

All terms used in this Security that are not defined in this Security but are defined in the Indenture referred to on the reverse of this Security shall have the meanings assigned to them in the Indenture.  Section headings on the face of this Security are for convenience only and shall not affect the construction of this Security.

 

“Business Day” means a Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in New York City or London generally are authorized or obligated by law, regulation or executive order to close..

 

“Default Amount” means, on any day, an amount in U.S. dollars, as determined by the Calculation Agent in its sole discretion, equal to the cost of having a Qualified Financial Institution (selected as provided below) expressly assume the due and punctual payment of the principal of this Security, and the performance or observance of every covenant hereof and of the Indenture on the part of the Company to be performed or observed with respect to this Security (or to undertake other obligations providing substantially equivalent economic value to the Holder of this Security as the Company’s obligations hereunder).  Such cost will equal (i) the lowest amount that a Qualified Financial Institution would charge to effect such assumption (or undertaking) plus (ii) the reasonable expenses (including reasonable attorneys’ fees) incurred by the Holder of this Security in preparing any documentation necessary for such assumption (or undertaking).  During the Default Quotation Period, each Holder of this Security and the Company may request a Qualified Financial Institution to provide a quotation of the amount it would charge to effect such assumption (or undertaking).  If either party obtains a quotation, it must notify the other party in writing of the quotation.  The amount referred to in clause (i) of this paragraph will equal the lowest (or, if there is only one, the only) quotation so obtained, and as to which notice is so given, during the Default Quotation Period; provided that, with respect to any quotation, the party not obtaining the quotation may object, on reasonable and significant grounds, to the effectuation of such assumption (or undertaking) by the Qualified Financial Institution providing such quotation and notify the other party in writing of such grounds within two Business Days after the last day of the Default Quotation Period, in which case that quotation will be disregarded in determining the Default Amount.  The “Default Quotation Period” shall be the period beginning on the day the Default Amount first becomes due and ending on the third Business Day after such due date, unless no such quotation is obtained, or unless every such quotation so obtained is objected to within five Business Days after such due date as provided above, in which case the Default Quotation Period will continue until the third Business Day after the first Business Day on which prompt notice of a quotation is given as provided above, unless such quotation is objected to as provided above within five Business Days after such first Business Day, in which case, the Default Quotation Period will continue as provided in this sentence. Notwithstanding the foregoing, if the Default Quotation Period (and the subsequent two Business Day objection period) has not ended prior to the Final Valuation Date, then the Default Amount will equal the Face Amount.

 

“Early Redemption Date” means the third Business Day following each Valuation Date, other than the Final Valuation Date.  The final Early Redemption Date will be the third Business Day following the Valuation Date that is immediately prior to the Final Valuation Date.

 

-4-

 

“Final Valuation Date” means August 10, 2020, or if such date is not a Trading Day, the next succeeding Trading Day; provided, however, that if the Calculation Agent determines that a Market Disruption Event occurs or is continuing on such date, the Final Valuation Date will be the first following Trading Day on which the Calculation Agent determines that a Market Disruption Event does not occur and is not continuing, provided that in no event will the Final Valuation Date be postponed by more than five Trading Days.

 

“Index Business Day” means a day on which the Chicago Board of Trade (“CBOT”) is open for business.

 

“Index Component” means, with respect to the Securities, the 2-year Treasury futures contracts underlying the Index, as traded on CBOT, as described in the Prospectus.

 

“Index Owner” means Barclays Bank PLC, as owner of the intellectual property and licensing rights relating to the Index.

 

“Index Sponsor” means Barclays Risk Analytics and Index Solutions Limited (BRAIS), a wholly-owned subsidiary of Barclays, or any successor thereto.

 

“Market Disruption Event” means, with respect to the Securities, in the opinion of the Calculation Agent and determined in its sole discretion:  (i) a material limitation, suspension or disruption in the trading of any Index Component which results in a failure by the trading facility on which the relevant contract is traded to report a daily contract reference price (the price of the relevant contract that is used as a reference or benchmark by market participants); (ii) the daily contract reference price for any Index Component has increased or decreased from the previous day’s daily contract reference price by the maximum amount permitted under the applicable rules or procedures of the relevant trading facility; (iii) failure by the Index Sponsor to publish the closing value of the Index or of the applicable trading facility or other price source to announce or publish the daily contract reference price for one of more Index Components; (iv) any other event, if the Calculation Agent determines in its sole discretion that the event materially interferes with the ability of Barclays Bank PLC or the ability of any affiliates of Barclays Bank PLC to unwind all or a material portion of a hedge with respect to the Securities that Barclays Bank PLC or any of its affiliates have effected or may effect.  The following events will not be Market Disruption Events: (a) a limitation on the hours or numbers of days of trading on a trading facility on which any Index Component is traded, but only if the limitation results from an announced change in the regular business hours of the relevant market; or (b) a decision by a trading facility to permanently discontinue trading in any Index Component.

 

“Maturity Date” means August 13, 2020, provided that if such date is not a Business Day, the Maturity Date will be the next succeeding Business Day; provided, however, that if the fifth Business Day preceding August 13, 2020 does not qualify as the Final Valuation Date referred to above, then the Maturity Date will be the fifth Business Day following the Final Valuation Date.

 

“Qualified Financial Institution” means, at any time, a financial institution organized under the laws of any jurisdiction in the United States of America or Europe that at such time has outstanding debt obligations with a stated maturity of one year or less from the 

 

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date of issue and rated A-1 or higher by Standard & Poor’s, a division of The McGraw Hill Companies, Inc., Ratings Group (or any successor) or P-1 or higher by Moody’s Investors Service, Inc. (or any successor) or, in either case, such other comparable rating, if any, then used by such rating agency.

 

“Roll Day” means each of the three Index business Days before the last Index Business Day in each of the months of February, May, August and November in any given year.

 

“Successor Index” means any substitute index approved by the Calculation Agent as a Successor Index pursuant to Section 3 hereof.

 

“Trading Day” means a trading day for the Securities on which (i) it is an Index Business Day, (ii) trading is generally conducted on NASDAQ and (iii) it is a Business Day in New York City, in each case as determined by the Calculation Agent in its sole discretion.

 

“Valuation Date” means each Business Day from August 9, 2010 to August 10, 2020, inclusive (subject to the occurrence of a Market Disruption Event), or if such date is not a Trading Day, the next succeeding Trading Day, not to exceed five Business Days.

 

 

Promise to Pay at Maturity or Upon Early Redemption

 

Barclays Bank PLC, a public limited company duly organized and existing under the laws of England and Wales (herein called the “Company,” which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay (or cause to be paid) to Cede & Co., as nominee for The Depository Trust Company, or registered assigns, the amount as calculated and provided under (i) “Early Redemption” and elsewhere on the face this Security on the applicable Early Redemption Date, in the case of any Securities in respect of the which the Holder exercises such Holder’s right to require the Company to redeem such Holder’s Securities prior to the Early Maturity Date, or in the case the Company exercises its right to redeem the Securities under “Issuer Redemption”, or (ii) “Payment at Maturity” and elsewhere on the face of this Security on the Maturity Date, in the case of all other Securities.

 

Payment of Interest

 

The principal of this Security shall not bear interest.

 

Discontinuance or Modification of the Index; Market Disruption Event

 

If the Index Sponsor discontinues publication of the Index and it or any other person or entity publishes an index that the Calculation Agent determines is comparable to the discontinued Index and approves as a Successor Index, then the Calculation Agent will determine the value of the Index on the applicable Valuation Date and the amount payable on the Maturity Date or any Redemption Date by reference to such Successor Index.

 

-6-

 

If the Calculation Agent determines that the publication of the Index is discontinued and that there is no Successor Index, or that the closing value of the Index is not available because of a Market Disruption Event or for any other reason, on any Valuation Date, or if for any other reason the Index is not available to the Company or the Calculation Agent on any Valuation Date, the Calculation Agent will determine the amount payable by a computation methodology that the Calculation Agent determines will as closely as reasonably possible replicate the Index.

 

If the Calculation Agent determines that the Index, the Index Components or the method of calculating the Index has been changed at any time in any respect, including, without limitation, any addition, deletion or substitution and any reweighting or rebalancing of the Index Components, and whether the change is made by the Index Sponsor under its existing policies or following a modification of those policies, is due to the publication of a Successor Index, is due to events affecting one or more of the Index Components, or is due to any other reason, then the Calculation Agent will be permitted (but shall not be required) to make such adjustments to the Index or method of calculating the Index as it believes are appropriate to ensure that the value of the Index used to determine the amount payable on the Maturity Date or on an Early Redemption Date is equitable.

 

The Calculation Agent shall have the right to postpone a Valuation Date, and thus the determination of the value of the Index, if the Calculation Agent determines that, on such Valuation Date, a Market Disruption Event occurs or is continuing in respect of any Index Component.  If such a postponement occurs, the Index Components unaffected by the Market Disruption Event shall be determined on the scheduled Valuation Date and the Calculation Agent shall determine the value of the affected Index Component by using the closing value of the Index Component on the first Trading Day after that day on which no Market Disruption Event occurs or is continuing with respect to the Index Component.  In no event, however, may the Calculation Agent postpone a Valuation Date by more than five Trading Days.

 

In the event that a Valuation Date is postponed until the fifth Trading Day following the scheduled Valuation Date, but a Market Disruption Event occurs and is continuing on such day, that day shall nevertheless be a Valuation Date, and the Calculation Agent shall determine the value of the Index on such day by a good faith estimate of the value of the Index that would have prevailed in the absence of a Market Disruption Event.

 

The Calculation Agent shall have the right to make all determinations and adjustments with respect to the Index in its sole discretion.

 

Payment at Maturity or Upon Early Redemption

 

The payment of this Security that becomes due and payable on the Maturity Date or on an Early Redemption Date, as the case may be, shall be the cash amount that must be paid to redeem this Security as provided above under “Payment at Maturity” and “Early Redemption”, respectively.  The payment of this Security that becomes due and payable upon acceleration of the Maturity Date hereof after an Event of Default has occurred pursuant to the Indenture shall be the Default Amount.  When the principal referred to in either of the two preceding sentences has been paid as provided herein (or such payment has been made 

 

-7-

 

available), the principal of this Security shall be deemed to have been paid in full, whether or not this Security shall have been surrendered for payment or cancellation.  References to the payment at maturity or upon early redemption of this Security on any day shall be deemed to mean the payment of cash that is payable on such day as provided in this Security.  Notwithstanding the foregoing, solely for the purpose of determining whether any consent, waiver, notice or other action to be given or taken by Holders of Securities pursuant to the Indenture has been given or taken by Holders of Outstanding Securities in the requisite aggregate principal amount, the principal amount of this Security will be deemed to equal the Face Amount.  This Security shall cease to be Outstanding as provided in the definition of such term in the Indenture when the principal of this Security shall be deemed to have been paid in full as provided above.

 

In the event that payment at maturity is deferred beyond August 13, 2020, penalty interest will not accrue or be payable with respect to that deferred payment.

 

Redemption Mechanics

 

Subject to the minimum redemption amount provided under “Early Redemption”, the Holder may require the Company to redeem the Holder’s Securities on any Early Redemption Date during the term of the Securities provided that such Holder (i) delivers a notice of holder redemption to the Company via electronic mail by no later than 4:00 p.m. New York time on the Business Day prior to the applicable Valuation Date; (ii) delivers a signed confirmation of holder redemption to the Company via facsimile by no later than 5:00 p.m. New York time on the same day; (iii) instructs the Holder’s DTC custodian to book a delivery versus payment trade with respect to the Holder’s Securities on the applicable Valuation Date at a price per Security equal to the applicable Closing Indicative Note Value, facing Barclays DTC 5101; and (iv) causes the Holder’s DTC custodian to deliver the trade as booked for settlement via DTC at or prior to 10:00 a.m. New York time on the applicable Early Redemption Date, which shall be the third Business Day following the applicable Valuation Date (other than the Final Valuation Date).  The final Early Redemption Date shall be the third Business Day following the Valuation Date that is immediately prior to the Final Valuation Date.

 

Role of Calculation Agent

 

The Calculation Agent will be solely responsible for all determinations and calculations regarding the value of the Securities, including at maturity or upon early redemption; Market Disruption Events; Business Days; Trading Days; the Daily Index Performance Amount, the Investor Fee; the Default Amount; the Closing Indicative Note Value of the Securities on any Valuation Date, the closing value of the Index on the Inception Date and on any Valuation Date; the Maturity Date; Early Redemption Dates; the amount payable on the Securities and all such other matters as may be specified elsewhere herein as matters to be determined by the Calculation Agent. The Calculation Agent shall make all such determinations and calculations in its sole discretion, and absent manifest error, all determinations of the Calculation Agent shall be final and binding on the Company, the Holder and all other Persons having an interest in this Security, without liability on the part of the Calculation Agent.

 

-8-

 

The Company shall take such action as shall be necessary to ensure that there is, at all relevant times, a financial institution serving as the Calculation Agent hereunder.  The Company may, in its sole discretion at any time and from time to time, upon written notice to the Trustee, but without notice to the Holder of this Security, terminate the appointment of any Person serving as the Calculation Agent and appoint another Person (including any Affiliate of the Company) to serve as the Calculation Agent.  Insofar as this Security provides for the Calculation Agent to determine the value of the Index on any date or other information from any institution or other source, the Calculation Agent may do so from any source or sources of the kind contemplated or otherwise permitted hereby notwithstanding that any one or more of such sources are the Calculation Agent, Affiliates of the Calculation Agent or Affiliates of the Company.

 

Payment

 

Payment of any amount payable on this Security will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.  Payment will be made to an account designated by the Holder (in writing to the Company and the Trustee on or before the applicable Valuation Date) and acceptable to the Company or, if no such account is designated and acceptable as aforesaid, at the office or agency of the Company maintained for that purpose in The City of New York, provided, however, that payment on the Maturity Date or any Early Redemption Date shall be made only upon surrender of this Security at such office or agency (unless the Company waives surrender).  Notwithstanding the foregoing, if this Security is a Global Security, any payment may be made pursuant to the Applicable Procedures of the Depositary as permitted in said Indenture.

 

Reverse of this Security

 

Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

 

Certificate of Authentication

 

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

Prospectus

 

Reference is made to (i) the Prospectus related to the Securities, dated July 19, 2013, (ii) the Prospectus Supplement, dated July 19, 2013 and (iii) the Pricing Supplement, dated [_____], (together, the “Prospectus”).  The terms and conditions of this Security as fully set forth in the Prospectus are hereby incorporated by reference in their entirety into this Security and binding upon the parties hereto.  In the event of a conflict between the terms of the Prospectus and the terms of this Security, the Prospectus will control and if the Prospectus provides for a specific United States tax characterization, by purchasing a Security, you agree (in the absence of 

 

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a change in law, an administrative determination or a judicial ruling to the contrary) to be bound for United States federal income tax purposes to such tax characterization.  Copies of the Prospectus are available from the Company or any underwriter or any dealer participating in the offering by calling toll free, 1-888-227-2275 (extension 2-3430).

 

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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

 

	
 
    	
BARCLAYS BANK PLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

This is one of the Securities of the series designated herein and referred to in the Indenture.

 

Dated:

 

	
 
    	
THE BANK OF NEW YORK   MELLON
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

(Reverse of Security)

 

This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”) issued and to be issued in one or more series under an Indenture, dated as of September 16, 2004 (herein called the “Indenture,” which term shall have the meaning assigned to it in such instrument), between the Company and The Bank of New York Mellon, as Trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered.  Insofar as the provisions of the Indenture may conflict with the provisions set forth on the face of this Security, the latter shall control for purposes of this Security.

 

This Security is one of the series designated on the face hereof.  References herein to “this series” mean the series designated on the face hereof.

 

Payments under the Securities will be made without deduction or withholding for, or on account of, any and all present or future income, stamp and other taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“Taxes”) now or hereafter imposed, levied, collected, withheld or assessed by or on behalf of the United Kingdom or any political subdivision or authority thereof or therein having the power to tax (each a “Taxing Jurisdiction”), unless such deduction or withholding is required by law.  If any such Taxes are at any time required by a Taxing Jurisdiction to be deducted or withheld, the Company will, subject to the exceptions and limitations set forth in Section 10.04 of the Indenture, pay such additional amounts of the principal of such Security and any other amounts payable on such Security (“Additional Amounts”) as may be necessary in order that the net amounts paid to the Holder of any Security, after such deduction or withholding, shall equal the amounts of the principal of such Security and any other amounts payable on such Security which would have been payable in respect of such Security had no such deduction or withholding been required.

 

If at any time the Company determines that as a result of a change in or amendment to the laws or regulations of a Taxing Jurisdiction (including any treaty to which such Taxing Jurisdiction is a party), or a change in an official application or interpretation of such laws or regulations (including a decision of any court or tribunal), either generally or in relation to any particular Securities, which change, amendment, application or interpretation becomes effective on or after the Original Issue Date in making any payment of, or in respect of, the principal amount of the Securities, the Company would be required to pay any Additional Amounts with respect thereto, then the Securities will be redeemable upon not less than 35 nor more than 60 days’ notice by mail, at any time thereafter, in whole but not in part, at the election of the Company as provided in the Indenture at a redemption price equal to the principal amount thereof.

 

(Reverse of Security continued on next page)

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The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of all series to be affected (considered together as one class for this purpose).  The Indenture also contains provisions (i) permitting the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of all series to be affected under the Indenture (considered together as one class for this purpose), on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and (ii) permitting the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of any series to be affected under the Indenture (with each such series considered separately for this purpose), on behalf of the Holders of all Securities of such series, to waive certain past defaults under the Indenture and their consequences.  Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

 

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have any right to institute any proceeding, judicial or otherwise, with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in aggregate principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity.  The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof on or after the respective due dates expressed herein.

 

(Reverse of Security continued on next page)

-13-

 

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of this Security as herein provided.

 

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Senior Debt Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of this Security is payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Senior Debt Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing.  Thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

This Security, and any other Securities of this series and of like tenor, are issuable only in registered form without coupons in denominations of any multiple of $50.  As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

 

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

 

This Security and the Indenture shall be governed by and construed in accordance with the laws of the State of New York.

 

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