Document:

ex10-2.htm

Exhibit 10.2

 

 

CONFIDENTIAL TREATMENT REQUESTED.

INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN

REQUESTED IS OMITTED AND MARKED WITH “****” OR OTHERWISE

CLEARLY INDICATED. AN UNREDACTED VERSION OF THIS DOCUMENT HAS

ALSO BEEN PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION.

 

 

JOINT DEVELOPMENT AND LICENSE AGREEMENT

 

 

Between

 

Laboratoires Mayoly Spindler SAS

 

and

 

Proteabio Europe SAS

 

  

  

  

Contents

 

	Clause 	 Page

 

	
1.

	
DEFINITIONS

	
3

	
2.

	
PURPOSE OF THE AGREEMENT

	
8

	
3.

	
GRANT OF LICENSES AND SUB-LICENSES IN CONNECTION WITH THE DEVELOPMENT PROGRAM

	
8

	
4.

	
CONTRIBUTIONS OF THE PARTIES TO THE DEVELOPMENT PROGRAM

	
11

	
5.

	
PROJECT MANAGEMENT

	
12

	
6.

	
TIMELINES

	
15

	
7.

	
OFF PROJECT LICENSES

	
17

	
8.

	
RIGHT OF WITHDRAWAL

	
20

	
9.

	
ROYALTIES

	
21

	
10.

	
PAYMENTS, RECORDS AND AUDITS

	
23

	
11.

	
CONFIDENTIALITY

	
25

	
12.

	
TECHNOLOGY AND PATENT RIGHTS

	
26

	
13.

	
REPRESENTATIONS, WARRANTIES, COVENANTS

	
30

	
14.

	
INDEMNIFICATION, INSURANCE

	
32

	
15.

	
TERM, TERMINATION

	
32

	
16.

	
GOVERNING LAW AND DISPUTE RESOLUTION

	
34

	
17.

	
MISCELLANEOUS

	
34

 

	
EXHIBIT A – ASSIGNED TERRITORIES

	
37

	
EXHIBIT B – CORE PROGRAM

	
38

	
EXHIBIT C – PROGRAM BUDGET FOR THE PERIOD 2009 – 2019

	
39

	
EXHIBIT D – RESTRICTED ENTITIES

	
40

	
EXHIBIT E – FORM OF BALANCE STATEMENT OF SHARED COSTS

	
41

	
EXHIBIT F – DEDUCTION OF DEVELOPMENT COSTS (EXAMPLE)

	
42

	
EXHIBIT G – RECIPROCAL LICENSE AGREEMENT

	
43

  

  

  

This Joint Development and License Agreement (the "Agreement") becomes effective as of 1 January 2014 (the "Effective Date"), by and between:

 

Laboratoires Mayoly Spindler ("LMS"), a corporation created and organized under French laws, identified at the SIREN under number 709 807 408 RCS Versailles, having its registered office at 6 avenue de ('Europe, 78401 Chatou, France,

 

And

 

Proteabio Europe ("Protea"), a corporation created and organized under French laws, identified at the SIREN under number 508 757 630 RCS Nîmes, having its registered office at 290 chemin de Saint Dionisy- Jardin des Entreprises, 30980 Langlade, France,

 

Each of LMS and Protea are referred to herein as a "Party" and collectively as the "Parties".

 

 

RECITALS

 

	
A.

	
LMS, Protea and Protea Biosciences, Inc. entered into a Joint Research and Development Agreement dated March 22, 2010.

 

	
B.

	
LMS, Protea and Protea Biosciences Inc. have decided to change the allocation of costs regarding the Development Program (as defined hereafter) pursuant to which Protea will make the majority Investment in this program, subject to Protea holding the rights to manage this program. This change impacts multiple aspects of the contractual relationship between the Parties.

 

	
C.

	
In this context, LMS, Protea and Protea Biosciences, Inc. desire to terminate, in its entirety, the March 22, 2010 Joint Research and Development Agreement and replace it in its entirety with this Agreement which shall set out the terms and conditions of the Development Program and clarify the terms under which Protea benefits from license rights to carry out separate development, manufacturing and marketing activities in relation to human pharmaceutical medicine or nutraceutical products utilizing the Active Ingredient (as defined hereafter).

 

NOW, THEREFORE, the Parties agree as follows:

 

	
1.

	
Definitions

 

"Active Ingredient" means any lipase produced by the “yarrowia lipolytica recombinant strain with 6 copies of the lip2 gene permitting to overexpress the acid resistant Yarrovia Lipolitica LIP2 lipase.”  This strain has been deposited in 2005 at CNCM (Collection Nationale de Culture de Microorganismes) under the reference number 1-3542.

 

"Affiliate" is to be interpreted as follows:

 

	
  

	
-

	
an "Affiliate" of LMS is any corporation or other entity that is controlled, directly or indirectly, by Scorpius SAS, with its registered office located at 55 rue Jouffroy d’Abbans, 75017 PARIS, and registered under number 384 617 692 RCS Paris; and

 

	
  

	
-

	
an "Affiliate" of Protea means any corporation or other entity which, directly or indirectly:

 

(a)      controls Protea, or

 

(b)      is controlled by the corporation or other entity referred to in (a) above

 

A corporation or other entity shall be regarded as in control of another corporation or entity if it owns or directly or indirectly controls more than 50% of the voting securities or other ownership interest of the other corporation or entity, or if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the corporation or other entity.

 

  

3

  

 

"API" means the active pharmaceutical ingredient.

 

"Applicable Laws" means any laws, treaties, statutes, ordinances, judgments, decrees, directives, rules, injunctions, writs, regulations, binding arbitration rulings, orders, judicial or administrative interpretations or authorization of, any Government Authority relevant to the manufacture, distribution, promotion, marketing, handling, storage and/or sale of the Product or a Side Product, and to any other matters set forth in this Agreement.

 

"Assigned Tasks" means the tasks assigned to each Party under the Development Program, as may be amended from time to time by the Review Committee.

 

"Assigned Territory" means the geographical area assigned for the development, use, manufacturing and Commercialization of the Product and the Side Product, as set forth in Exhibit A, which identifies:

 

	
  

	
(a)

	
the Assigned Territory assigned exclusively to a Party, namely "Protea Assigned Territory" and "LMS Assigned Territory"; and

 

	
  

	
(b)

	
the Joint Assigned Territory.

 

"Background" means Technology, Patents and Patent Rights owned or Controlled by a Party as of the Effective Date.  For the avoidance of doubt, “Foreground” generated under the March 22, 2010 Joint Research and Development Agreement is deemed to be Foreground (and not Background) under this Agreement.

 

"Caller Request" has the meaning given in Section 12.4.2(c).

 

"Commercialization" and "Commercialize" mean any and all activities, excluding development and manufacturing, necessary or desirable to realize commercial sales of a Product or Side Product in accordance with Applicable Laws, including using, distributing, importing, transporting, customs clearance, export, warehousing, packing, handling and delivering to customers, as well as offering for sale and sales, marketing, promoting and reimbursement related activities, including booking sales.

 

"Confidential Information" has the meaning given in Section 11.1.

 

"Control" or "Controlled" means, with respect to any intellectual property right or other tangible or intangible property, that a Party or one of its Affiliates owns or has a license or sublicense to such item or right, and has the ability to grant access, license or sublicense in or to such right without violating the terms of any agreement or other arrangement with any Third Party.

 

"Core Program" means the core elements setting out the framework for the Development Program and identified in Exhibit B.

 

“Cost of Goods Sold” or “COGS” means the direct and indirect costs, which are reasonable and necessary, incurred in manufacturing the Product or the Side Product (as applicable) for sale in the relevant Assigned Territory, in accordance with generally accepted accounting principles (“GAAP”) applied and consistent with general industry practice.

 

"Development Program" means the development by the Parties (non-clinical, pharmaceutical and clinical development) of the Active Ingredient in various pharmaceutical dosage forms for the Field in order to obtain the necessary Marketing Authorizations for the Product in the Assigned Territories.

 

"EU MA" has the meaning given in Section 6.2.

 

"Field" means the treatment of a patient population suffering from exocrine pancreatic insufficiency in chronic pancreatitis and/or cystic fibrosis.

 

"Force Majeure Event" has the meaning given in Section 17.2.2.

 

  

4

  

 

"Foreground" means any Technology and Patent Rights that are discovered, made or conceived as a result of the carrying out of the Development Program and which are not Sideground.

 

"Government Authority" means any governmental department, commission, entity, board, bureau, agency, administration, court or other instrumentality of any country in each of the Assigned Territories, including federal, state, district or commonwealth thereof, any foreign government or any jurisdiction, municipality or other political subdivision thereof.

 

“Gross Profit Margin” means the remainder, if any, that results from Net Sales in the relevant Assigned Territory minus Cost of Goods Sold.

 

"Gross Sales" means, with respect to a Party, the invoice value of sales of Products or Side Products (as applicable, and excluding freight, insurance costs, taxes, duties and levies) by such Party, its Affiliates or sublicensees of such Party or of its Affiliates, to a customer (such as a wholesaler or retailer). Sale to an Affiliate of a Party, or a sublicensee of a Party or of its Affiliates shall not constitute a Gross Sale.

 

"Intellectual Property" means all patents (including the Patents), copyrights, trademarks, service marks, service names, or trade names, including any applications or registrations for any of the foregoing, or extensions, renewals, continuations, continuations in part, divisionals, reexaminations, or re-issues thereof, or amendments or modifications thereto, brandmarks, brand names, trade dress, labels, logos, know-how (including the Know-How), show-how, technical and non-technical information, trade secrets, formulae, techniques, sketches, drawings, models, inventions, designs, specifications, processes, apparatus, equipment, databases, research, experimental work, development, pharmacology and clinical data, software programs and applications, software source documents, third-party licenses, and any similar type of proprietary intellectual property right vesting in the owner and/or licensee thereof pursuant to the Applicable Laws or regulations of any relevant jurisdiction or under any applicable license or contract, whether now existing or hereafter created, together with all modifications, enhancements and improvements thereto.

 

"Know-How" means any and all methods, devices, technology, trade secrets, inventions, compositions, designs, formulae, know-how, show-how, technical and training manuals and documentation and other information, including processes and analytical methodologies used in development, testing, analysis and manufacture, and medical, clinical and toxicological testing as well as other scientific data, which is related to, made, developed, conceived, and/or used in connection with the Development Program, the Active Ingredient, the Product, or any ingredient thereof, and/or the formulation, development, registration, manufacture, packaging, labeling, import, export, receipt, shipment, storage, use, pricing or sale of the Product.

 

"LMS IP" means any Background and Sideground owned and/or Controlled by LMS (other than the Patent(s)).

 

"Major EU Country" has the meaning given in Section 6.2.

 

"Marketing Authorization" means the technical, medical and scientific licenses, registrations, authorizations and/or approvals for the manufacture and/or marketing of the Product, or a Side Product, granted by any relevant Governmental Authority in any Assigned Territory.

 

"Needed" in respect of a license granted hereunder means "technically essential" and a license is "Needed" if, without the grant of such right:

 

	
  

	
(a)

	
carrying out the obligations assigned to the recipient Party under this Agreement would be impossible, significantly delayed, or require significant additional financial or human resources; or

 

	
  

	
(b)

	
the use of its own Foreground by the recipient Party would be technically or/and legally impossible.

 

  

5

  

 

“Net Sales” means, with respect to a Party (i.e. "Protea Net Sales" or  "LMS Net Sales"), such Party's Gross Sales less all normal and customary discounts (such as trade, quantity, cash or other discounts), rebates, refunds, credits, wholesaler allowances, shelf stock adjustments, chargebacks, returns, and any other gross to net allowances consistent with GAAP.

 

"Off Project Product License" has the meaning given in 12.4.2(c).

 

"Patent(s)" means any patent granted in any portion of the Assigned Territories that claim the benefit of priority of any of the following applications filed by LMS and/or Institut National de la Recherche Agronomique ("INRA") and Centre National de la Recherche (“CNRS”):

 

	
  

	
(c)

	
International patent application number PCT/FR2006/001352, entitled "Method for producing  lipase, transformed Yarrowia lipolytica," capable of producing said lipase and their uses," and published under WO 2007/144475;

 

	
  

	
(d)

	
International patent application number PCT/FR00/001148, entitled "Cloning and expressing an acid-resistant extracellular lipase of Yarrowia lipolytica," and published under WO 01/83773;

 

	
  

	
(e)

	
International patent application number PCT/FR99/02079, entitled "Method for non-homologous transformation of Yarrowia lipolytica"; and

 

	
  

	
(f)

	
French Application Serial No. 9810900 filed on September 1, 1998, in France.

 

The Parties acknowledge that patents issuing from national stage applications based on PCT/FR2006/001352 and PCT/FR00/01148 are dependent on the patents issued to INRA and CNRS entitled, "Method for non-homologous transformation of Yarrowia lipolytica," filed on September 1, 1998, in France, and issuing from national stage applications based on application number PCT/FR99/02079.

 

On February 2, 2006, LMS and INRA TRANSFERT, as representative for INRA and CNRS, signed a reciprocal license agreement entitled "Accord d'exploitation et de licences croisées" (hereafter the "Reciprocal License Agreement," a copy of which is attached hereto at Exhibit G). LMS and INRA/CNRS patents are defined in the reciprocal license agreement as "INRA-CNRS/LMS Technology."

 

The Parties acknowledge that PCT/FR2006/001352 is a continuation of the "INRA-CNRS/LMS Technology" and that LMS must comply with the terms of the Reciprocal License Agreement.

 

By a letter signed on 6 June, 2014, INRA TRANSFERT has agreed to the sublicenses granted to Protea by LMS under the present Agreement, and in particular under Sections 3.1, 7.1 and 12.4.

 

"Patent Period" means the life of any patent(s) owned, licensed or controlled by LMS that was granted from a national stage application based on pct/fr2006/001352. For purposes of clarity, the Patent Period shall end, on a country by country basis, after such patent(s) and/or any supplementary protection certificate relating to such patent(s), have expired or otherwise been declared invalid and/or unenforceable by a court, tribunal, or other agency of competent jurisdiction in each of the countries where the patent was applied for and/or granted.

 

"Patent Rights" means patents, patent applications, certificates of invention, or applications for certificates of invention, together with any extensions, registrations, confirmations, reissues, divisions, continuations or continuations-in-part, re-examinations, renewals, and foreign counterparts thereof.

 

"Product" means any human pharmaceutical medicine or nutraceutical product in the Field and utilizing the Active Ingredient.

 

“Program Budget” has the meaning given in Section 4.2.1(a).

 

"Protea IP" means Background and Sideground owned and/or Controlled by Protea.

 

  

6

  

 

"Reciprocal License Agreement" has the meaning given in the definition of "Patent(s)".

 

"Sideground" means Technology and Patent Rights made or conceived as a result of projects carried out separately from the Development Program after the Effective Date, regardless of whether they are a consequence (including improvement) of work carried out under the Development Program.

 

"Side Product" means any human pharmaceutical medicine or nutraceutical product, outside the Field, utilizing the Active Ingredient.

 

"Shared Costs" means those costs that will be subject to the contribution provisions set forth in Section 4.2. Such costs shall include only the following costs and charges, net any and all grants or subsidies related to any of the foregoing expenses, including, for example, French Crédit d'Impôt Recherche and any other equivalent grant (be it in the USA or in France):

 

	
  

	
-

	
all external expenses related to the Development Program, including:

 

	
  

	
o

	
costs and expenses associated with conducting development activities;

 

	
  

	
o

	
expenses for all clinical, pre-clinical and pharmaceutical activities (including production of API and formulation);

 

	
  

	
o

	
consulting expenses and vendor costs directly related to the Development Program;

 

	
  

	
o

	
intellectual property expenses paid in connection for the filing and prosecution of patents stemming from patent applications filed after the Effective Date, except expenses incurred as from entering into national examination phase;

 

	
  

	
o

	
license fees paid in connection with any patents owned and/or controlled by Third Parties for which a license or other authorization is necessary for the development (with the exception of any royalties, fees and expenses incurred by LMS in connection with the Patents);

 

	
  

	
o

	
costs associated with external dedicated personnel directly involved in the Development Program;

 

	
  

	
o

	
legal costs (other than expenses relating to intellectual property referred to above) involved in carrying out the Development Program, up to 20,000€, excl. tax, per year;

 

	
  

	
o

	
insurance expenses involved in carrying out the Development Program; and

 

	
  

	
-

	
any other items contemplated in the Program Budget.

 

"Stage 1", and "Stage 2" have the meaning given in Section 6.2.

 

"Technology" means inventions, trade secrets, Know-How, data and Intellectual Property, of any kind, including any proprietary materials (such as the “yarrowia lipolytica recombinant strain with 6 copies of the lip2 gene permitting to overexpress the acid resistant Yarrovia Lipolitica LIP2 lipase”), compounds, reagents, techniques, analytical methodology, or processes that are not included in Patent Rights.

 

“Term” means the period running until expiry of the legal protection of the Technology and Patent Rights licensed under this Agreement by each Party to the others, i.e. the latest of any of the following dates: the date of expiry of (i) the Patent Period, (ii) the duration of any other patent licensed under this Agreement, or (iii) the duration of the legal protection of any intellectual property right licensed under this Agreement or (iv) any data exclusivity period applicable to data licensed by a Party to another under this Agreement.

 

"Third Party" means any entity other than Protea, LMS, or their Affiliates.

 

"Withdrawal" has the meaning given in Section 8.1.

 

  

7

  

 

	
1.2

	
In this Agreement:

 

	
  

	
(a)

	
reference to Sections or Exhibits are to the sections and exhibits of this Agreement;

 

	
  

	
(b)

	
all references to the words 'include' and 'including' shall be construed without limitation;

 

	
  

	
(c)

	
a reference to writing or written includes faxes and e-mail;

 

	
  

	
(d)

	
"day" means calendar day, "month" means a calendar month, "year" means a period of 365 days except in the case of a leap year which shall mean a period of 366 days;

 

	
  

	
(e)

	
any standards, regulations, codes stated in any part of this Agreement shall be interpreted as the latest version, on the Effective Date, of the said standard, regulation, code etc., unless stated otherwise.

 

	
2.

	
Purpose of the Agreement

 

The subject matter of this Agreement is:

 

	
  

	
(a)

	
with regard to the Development Program, to:

 

	
  

	
(i)

	
determine the Parties' respective rights and obligations with regard to the carrying out of the Development Program;

 

	
  

	
(ii)

	
organize the management of the Development Program; and

 

	
  

	
(iii)

	
set out the rules applicable to intellectual property rights deriving from the Development Program, and the principles for the manufacturing and marketing of any Product; and

 

	
  

	
(b)

	
with regard to any Products not developed under the Development Program and Side Products, to determine the Parties' respective rights and obligations with regard to the development, the manufacturing and marketing of such Products and Side Products.

 

	
3.

	
Grant of licenses and sub-licenses in connection with the Development Program

 

	
3.1

	
Licenses and sub-licenses granted by LMS

 

	
3.1.1

	
LMS License

 

	
  

	
(a)

	
LMS hereby grants to Protea and its Affiliates an irrevocable right and license to the Patents and any LMS IP:

 

	
  

	
(i)

	
to the extent Needed under the Development Program to develop and use any Products; and

 

	
  

	
(ii)

	
to the extent Needed to manufacture any Products developed under the Development Program; and

 

	
  

	
(iii)

	
to the extent Needed to Commercialize any Products developed under the Development Program;

 

hereafter referred to as the "LMS License".

 

	
  

	
(b)

	
The LMS License shall be:

 

	
  

	
(i)

	
exclusive (even as to LMS) for the Protea Assigned Territory, except that LMS shall be entitled to grant licenses to the Patents and the LMS IP in the Protea Assigned Territory in connection with:

 

	
  

	
(1)

	
pre-clinical, pharmaceutical and manufacturing processes development work contracted with entities located in the Protea

 

  

8

  

 

Assigned Territory. For the avoidance of doubt, LMS cannot license the Patents and the LMS IP to any other entity than Protea to carry out clinical development work in the Protea Assigned Territory in the Field; and

 

	
  

	
(2)

	
manufacturing of Products, developed under the Development Program, contracted with entities located in the Protea Assigned Territory, provided that such Products are manufactured solely for the purpose of being sold outside of the Protea Assigned Territory.

 

	
  

	
(ii)

	
non exclusive for:

 

	
  

	
(1)

	
the Joint Assigned Territory; and

 

	
  

	
(2)

	
the LMS Assigned Territory, but only to the extent permitting Protea to:

 

	
  

	
-

	
carry out pre-clinical, clinical, pharmaceutical and manufacturing processes development work contracted with entities located in the LMS Assigned Territory; and

 

	
  

	
-

	
manufacture Products, developed under the Development Program, contracted with entities located in the LMS Assigned Territory;

 

Protea not having any right to Commercialize the Products, developed under the Development Program, in the LMS Assigned Territory.

 

	
3.1.2

	
Sublicensing rights

 

	
  

	
(a)

	
The rights granted under the LMS Licence may be sub-licensed by Protea to any Third Parties without the need to obtain prior consent from LMS. Protea shall inform LMS of the name of the sub-licensee and the scope of the rights sub-licensed. However, Protea must ask LMS' prior written consent if Protea wishes to sub-license said rights to the LMS restricted entities referred to in Exhibit D. LMS shall be entitled to amend such entities referred to in Exhibit D at any time and at the latest 12 months before the first application for a Marketing Authorization for the Product, developed under the Development Program, is submitted by a Party.

 

	
  

	
(b)

	
Notwithstanding the foregoing, in the event Protea grants the sub-license referred to in the preceding sub-Section, Protea shall ensure that such sub-license does not adversely impact or otherwise restrict LMS' rights under this Agreement.

 

	
3.1.3

	
Miscellaneous

 

Notwithstanding the foregoing, in the event LMS licenses, sub-licenses, or otherwise authorizes the use of the Patents and any LMS IP by a Third Party, LMS shall ensure that such Third-Party license, sub-license or other authorization does not adversely impact or otherwise restrict Protea's rights under this Agreement.

 

	
3.2

	
Licenses and sub-licenses granted by Protea

 

	
3.2.1

	
Protea License

 

	
  

	
(a)

	
Protea hereby grants to LMS and its Affiliates an irrevocable right and license to any Protea IP:

 

	
  

	
(i)

	
to the extent Needed under the Development Program to develop and use any Products; and

 

  

9

  

 

	
  

	
(ii)

	
to the extent Needed to manufacture any Products developed under the Development Program; and

 

	
  

	
(iii)

	
to the extent Needed to Commercialize any Products developed under the Development Program;

 

hereafter referred to as the "Protea License".

 

	
  

	
(b)

	
The Protea License shall be:

 

	
  

	
(i)

	
exclusive (even as to Protea) for the LMS Assigned Territory, except that Protea shall be entitled to grant licenses to the Protea IP in the LMS Assigned Territory in connection with:

 

	
  

	
(1)

	
pre-clinical, clinical, pharmaceutical and manufacturing processes development work contracted with entities located in the LMS Assigned Territory; and

 

	
  

	
(2)

	
manufacturing of Products, developed under the Development Program, contracted with entities located in the LMS Assigned Territory.

 

	
  

	
(ii)

	
non exclusive for:

 

	
  

	
(1)

	
the Joint Assigned Territory; and

 

	
  

	
(2)

	
the Protea Assigned Territory, but only to the extent permitting LMS to:

 

	
  

	
-

	
carry out pre-clinical, pharmaceutical and manufacturing processes development work contracted with entities located in the Protea Assigned Territory. For the avoidance of doubt, LMS cannot use the Protea IP to carry out clinical development work in the Protea Assigned Territory in the Field; and

 

	
  

	
-

	
manufacture of Products, developed under the Development Program, contracted with entities located in the Protea Assigned Territory, provided that such Products are manufactured solely for the purpose of being sold outside of the Protea Assigned Territory;

 

LMS not having any right to Commercialize the Products, developed under the Development Program, in the Protea Assigned Territory.

 

	
3.2.2

	
Sublicensing rights

 

	
  

	
(a)

	
The licenses granted under the Protea License may be sub-licensed by LMS to any Third Parties without the need to obtain prior consent from Protea. LMS shall inform Protea of the name of the sub-licensee and the scope of the rights sub-licensed. However, LMS must ask Protea's prior written consent if LMS wishes to sub-license said rights to the Protea restricted entities referred to in Exhibit D. Protea shall be entitled to amend such entities referred to in Exhibit D at any time and at the latest 12 months before the first application for a Marketing Authorization for the Product, developed under the Development Program, is submitted by a Party.

 

	
  

	
(b)

	
Notwithstanding the foregoing, in the event LMS grants the sub-license referred to in the preceding sub-Section, LMS shall ensure that such sub-license does not adversely impact or otherwise restrict Protea's rights under this Agreement.

 

  

10

  

 

	
3.2.3

	
Miscellaneous

 

Notwithstanding the foregoing, in the event Protea licenses, sub-licenses, or otherwise authorizes the use of any Protea IP by a Third Party, Protea shall ensure that such Third-Party license, sub-license or other authorization does not adversely impact or otherwise restrict LMS's rights under this Agreement.

 

	
3.3

	
Restrictions

 

In the event a Third Party is engaged in activities in a country of the Assigned Territory which is subject to an exclusive license granted by one Party to the other pursuant to this Section 3, then such other Party shall take whatever action is necessary to stop the violation by such Third Party. If that Party (the "Defaulting Party") fails to take such action in such country, then another Party (the "Intervening Party") may undertake action to stop the Third Party. In such event, the Defaulting Party shall reimburse the Intervening Party for all costs and expenditures incurred in protecting the Territory from the Third Party. Such amounts may be deducted by Intervening Party from the payments it must make pursuant to this Agreement, if applicable. A violation of this Section shall be considered a material breach of this Agreement.

 

	
4.

	
Contributions of the Parties to the Development Program

 

	
4.1

	
Contributions

 

Each Party shall use its best efforts to ensure the success of the Development Program. Each Party commits to (i) implement its Assigned Tasks approved by the Review Committee and devote sufficient personnel and facilities required for the performance of its obligations and responsibilities hereunder, (ii) make available appropriately qualified personnel to conduct, supervise, analyze and report on the results obtained in the furtherance of the Development Program, and (iii) provide and expend such scientific, technical and other resources as are necessary to conduct the Development Program.

 

	
4.2

	
Responsibility of costs

 

	
4.2.1

	
As from the Effective Date, Protea shall incur 70% of all Shared Costs and LMS shall incur 30% of all Shared Costs as follows:

 

	
  

	
(a)

	
Exhibit C sets out one single total budgeted amount per year, up to a total of 30,331,000€ at the end of the project, (the "Program Budget") as forecasted at the date of signature of the Agreement. The Parties acknowledge that budget overruns may occur, but in such case the burden of such overruns will be allocated between the Parties as set out in sub-Sections 4.2.1(b) to 4.2.1(f) below;

 

	
  

	
(b)

	
for any budget overrun of up to 20%, Protea and LMS shall respectively bear its share of the costs, i.e. 30% for LMS and 70% for Protea (the "Overrun Share"), within the year in which such 20% (or less) overrun occurs;

 

	
  

	
(c)

	
for any budget overrun above 20% and up to 30%, Protea shall pay the overrun amount between 20% and 30%, and LMS shall reimburse to Protea its own share (i.e. 30%) of the overrun over 2 consecutive years (spread in equal amounts over both years) as from the date an EU MA is granted to LMS for any Major EU Country (the "LMS Reportable Overrun Share"). Such reimbursement shall not be offset with any other costs LMS may have incurred in its Assigned Territory;

 

	
  

	
(d)

	
for any budget overrun above 30%, Protea shall bear the amount exceeding 30%;

 

	
  

	
(e)

	
the budget overrun is assessed on the basis of the total yearly amounts set out in Exhibit C;

 

	
  

	
(f)

	
for the avoidance of doubt, the Shared Costs and any budget overrun are taken into account in the expenses referred to in Sections 9.4.1.

 

  

11

  

 

	
4.2.2

	
In order to comply with the above provision, no later than the 15th of each month, each Party shall send to the other Party the detailed balance statement of all Shared Costs in the form set out in the template statement attached as Exhibit E for the preceding calendar month incurred by that Party. A summary statement shall be discussed and reviewed during the first Review Committee meeting each semester or, if required by either Party, during a specific Review Committee meeting held for the purpose of examining each Party's summary statements. Protea and LMS shall issue an invoice of all Shared Costs for the applicable month owed respectively by LMS and Protea based on the allocation set forth in Section 4.2.1. Each Party shall send to the other Party copies of the original invoices listed in the invoice. Whichever Party has financed less than that for which it is responsible based on an accounting of the Shared Costs invoices for that month, and consistent with the allocation of Shared Costs set forth above in Section 4.2.1, shall pay the balance of the costs owed to the other Party within 45 days of the date of invoice. No later than the 15th of February, an invoice covering the preceding calendar year shall be established by each Party to reflect the actual Shared Costs incurred by each Party during such year, and taking in particular into account the Crédit d'Impôt Recherche received by each Party for such year which reduces the actual burden of such costs for such Party.

 

	
5.

	
Project management

 

The management of the Development Program shall be organized with a Coordinator, a Management Committee and a Review Committee.

 

	
5.1

	
Coordinator

 

	
5.1.1

	
Appointment

 

Promptly after the date of signature of the Agreement, Protea shall appoint a Coordinator to serve as a Program Manager.

 

	
5.1.2

	
Duties

 

The Coordinator shall monitor the compliance by each Party with its obligations under this Agreement and act as an effective intermediary between the Parties. In this regard, the Coordinator shall carry out the following tasks, including the following:

 

	
  

	
(a)

	
receiving the financial contributions of each Party provided for herein and allocating such contributions as directed by the Review Committee;

 

	
  

	
(b)

	
maintaining the records and financial accounts relative to the financial contributions of each Party;

 

	
  

	
(c)

	
responsibility for the communication between the Parties, including the exchange of information related to the Parties' Technology and Patent Rights;

 

	
  

	
(d)

	
coordinating the day-to-day activities of the Parties;

 

	
  

	
(e)

	
convening meetings with the Management Committee and the Review Committee as provided for herein.

 

The Coordinator shall not act beyond the scope of his duties as provided above. He shall not be entitled to enter into any agreements or make any commitments on behalf of either Party or all Parties without their prior written consent.

 

  

12

  

 

	
5.2

	
Management Committee

 

	
5.2.1

	
Composition and Management Committee meetings

 

Within 30 days from the date of signature of the Agreement, Protea and LMS shall designate their respective Program Manager who shall comprise the Management Committee. Each Program Manager shall, to the extent possible, be assigned to the Development Program until completion. Each Program Manager shall be responsible for communicating all Development Program instructions and information to the Coordinator and will be available on a regular basis for consultation during the course of the Development Program.

 

	
5.2.2

	
Meetings

 

The Management Committee shall meet every two months unless the Coordinator calls for any special meeting. The Coordinator shall distribute the minutes of each meeting to all members of the Management Committee within 20 days following each meeting. Such minutes are deemed accepted by a Party if such Party does not object to their content within 10 days from receiving them.

 

	
5.2.3

	
Duties of the Management Committee

 

The Management Committee shall be responsible for:

 

	
  

	
(a)

	
preparing a detailed schedule of the Assigned Tasks to be performed by each Party, refining and adapting the Development Program budget, the initial version of which is attached as Exhibit C, and analyzing any other anticipated detailed financial expenses to be incurred;

 

	
  

	
(b)

	
scheduling and addressing all aspects of the pharmaceutical, clinical and non-clinical development activities associated with the Development Program, including addressing and procuring the vendors, consultants and Third Parties utilized by each Party in connection with each Party's obligations under the Development Program;

 

	
  

	
(c)

	
organizing all logistics and material support for the performance of the Development Program, it being provided that clinical trials undertaken in connection with the Development Program shall be initiated and performed under the direction and/or supervision of Protea (without Protea being necessarily the sponsor of such studies from a regulatory standpoint), if and to the extent instructed by Protea;

 

	
  

	
(d)

	
following up on the Parties' contributions and the payment of any grants and/or any other public aid, if applicable;

 

	
  

	
(e)

	
monitoring the implementation of the Development Program schedule and the Program Budget;

 

	
  

	
(f)

	
submitting, on a quarterly basis, a scientific, technical and financial progress report on the implementation of the Development Program to the Review Committee.

 

	
5.3

	
Review Committee

 

	
5.3.1

	
Composition and Review Committee meetings

 

The Review Committee shall consist of a minimum of 6 members. Such committee shall be comprised as follows:

 

	
  

	
(a)

	
LMS' President or his nominee, LMS' Program Manager, and such other person(s) designated by LMS or the LMS Program Manager;

 

	
  

	
(b)

	
Protea's President or his nominee, Protea's Program Manager, and such other person(s) designated by Protea.

 

  

13

  

 

	
5.3.2

	
Meetings

 

The Review Committee will meet at least twice a year to review the progress of the Development Program. Either Party may call a special meeting if it deems appropriate at any time subject to a prior notice of 20 days. The chairman for each meeting of the Review Committee shall alternate between a representative of LMS and a representative of Protea, with the initial chairman of the Review Committee being appointed by Protea. The chairman of the Review Committee shall be responsible for providing an agenda for each meeting at least 10 days in advance of such meeting and shall prepare written minutes to all members of the Review Committee within 20 days after the relevant meeting. Such minutes are deemed accepted by a Party if such Party does not object to their content within 15 days from receiving them.

 

	
5.3.3

	
Duties

 

The Review Committee shall provide the strategic direction of the Development Program and shall make all decisions required for the implementation of the Development Program of a strategic, financial and/or contractual nature, including:

 

	
  

	
(a)

	
pharmaceutical, clinical and non-clinical development activities, including on any strategies in this respect and on the regulatory aspects relating to such strategies;

 

	
  

	
(b)

	
amendments to the Development Program schedule;

 

	
  

	
(c)

	
amendments to the contributions of the Parties, including their Assigned Tasks and the Program Budget, subject to Section 5.3.4(b)(i)(1);

 

	
  

	
(d)

	
the progress of the Parties’ completing their Assigned Tasks;

 

	
  

	
(e)

	
the organization of the Product manufacturing activities during the Development Program;

 

	
  

	
(f)

	
filing of patents in the name of Protea, or of any other appropriate mode of protection considering the nature of the Foreground in question;

 

	
  

	
(g)

	
attempting to resolve any disagreements arising during Management Committee meetings; and

 

	
  

	
(h)

	
deciding upon other strategic, marketing, manufacturing, regulatory, and development matters relating to the Development Program.

 

	
5.3.4

	
Decisions

 

	
  

	
(a)

	
Protea and LMS shall respectively have one vote in all decisions made by the Review Committee.

 

	
  

	
(b)

	
Should the Review Committee fail to agree on any matter, then Protea shall take the final decision. However:

 

	
  

	
(i)

	
if the disagreement relates to changing the Core Program or to marketing activities before the Development Program ends (e.g. communicating at congresses (in compliance with Applicable Laws) on products in the pipeline). In such case, if the disagreement relates to:

 

	
  

	
(1)

	
changing the Core Program, no change can be made to the Core Program without the Parties' prior written consent.

 

	
  

	
(2)

	
marketing activities before the Development Program ends, then the Parties shall make sure that their marketing activities (a) are strictly limited to their respective Assigned Territory (e.g. no such activities will be carried out in international congresses targeting both Parties'

 

  

14

  

 

Assigned Territories) and (b) do not detrimentally affect the Intellectual Property of the other Party.

 

	
  

	
(ii)

	
each Party (and not the Review Committee) will solely decide on:

 

	
  

	
(1)

	
who will be the holder of the Marketing Authorization in its Assigned Territory;

 

	
  

	
(2)

	
if and how to submit applications for the Marketing Authorizations for the Product, developed under the Development Program, in its Assigned Territory. The Parties shall consult with each other on the regulatory strategies for obtaining Marketing Authorizations for the Product, developed under the Development Program, and the relevant Governmental Authorities in each of the Joint Assigned Territories, in a coordinated and consistent manner;

 

	
  

	
(3)

	
on the organization of the Product manufacturing activities in its Assigned Territory after the Development Program has ended;

 

	
  

	
(4)

	
on the marketing and promotional activities in its Assigned Territory after the Development Program has ended;

 

	
  

	
(iii)

	
there will not be any Commercialization in the Joint Assigned Territories if the Parties have not reached an agreement on this matter.

 

	
5.4

	
Locations of committee meetings

 

The location of meetings as provided for herein will be on a rotating basis between the LMS facilities in Chatou, France, and Protea's facilities in Langlade, France. Each Party shall bear its own costs in relation thereto.

 

	
6.

	
Timelines

 

	
6.1

	
As soon as reasonably practical following the date of signature of the Agreement, the Management Committee shall meet to consult LMS on the status of the Development Program. Protea shall then draft a document(s) detailing the respective Assigned Tasks of the Parties on the basis of the Core Program. Protea shall be responsible for the drafting and content of the timelines and assignment of responsibilities between the Parties.

 

	
6.2

	
The Development activities conducted under the Development Program shall be divided in two stages, as set forth below:

 

	
  

	
(a)

	
Stage 1 shall begin upon the Effective Date and encompass the activities carried out until the receipt of the draft of the first Phase II clinical study report in chronic pancreatitis or cystic fibrosis indication pursuant to the Development Program. Protea shall send to LMS the copy of that report as soon as possible once Protea has received it (the "Stage 1 Report Notice"), and the Parties shall use their best efforts to meet within the 60-day period following the Stage 1 Report Notice to discuss whether to proceed to Stage 2 (the "Next Stage Assessment Period"). Stage 1 shall be completed on the date of the Stage 1 Report Notice.

 

	
  

	
(b)

	
Stage 2 shall begin at the earliest of the following dates: the date at which the Parties decide in writing to proceed to Stage 2 (for instance, following the meeting referred to in sub-Section 6.2(a)) or the date at which the Next Stage Assessment Period expires. Stage 2 shall be completed once the following conditions are fulfilled:

 

	
  

	
(i)

	
the US FDA approves one or more of the following for both indications of the Product:  a new drug application ("NDA"), a supplemental NDA, a biologics license application (“BLA”), or a supplemental BLA (together the “US MA”) or delivers its approval for the marketing of a nutraceutical form of the Product developed under the Development Program; and

 

  

15

  

 

	
  

	
(ii)

	
either (1) a marketing authorization is granted, for both indications of the Product, by (1a) the European Medecines Agency pursuant to the centralized authorization procedure or by (1b) a competent Major EU Country national authority pursuant to a national, mutual recognition or decentralized authorization procedure (the marketing authorizations in 1a and 1b being referred to, each, as the "EU MA", and a “Major EU Country” means any of the following countries: UK, France or Germany), or (2) an approval for marketing is granted, or a declaration for marketing is made, or marketing of the Product is carried out, in a Major EU Country in relation to a nutraceutical form of the Product developed under the Development Program.

 

	
6.3

	
LMS shall file the relevant applications in accordance with good industry practice to obtain the Marketing Authorization for the Major EU Countries for both indications of the Product at the latest 12 months following the US MA being granted (the "LMS Filing Commitment").

 

	
6.4

	
Stage 2 shall be deemed completed in any event and regardless of whether an EU MA has been granted or not, if the following conditions are fulfilled:

 

	
  

	
(a)

	
the US MA is granted; and

 

	
  

	
(b)

	
either:

 

	
  

	
(i)

	
LMS has not complied with the LMS Filing Commitment; or

 

	
  

	
(ii)

	
3 years have elapsed after the date upon which LMS complied with the LMS Filing Commitment.

 

	
6.5

	
Upon Stage 2 being completed:

 

	
  

	
(a)

	
the Development Program shall be deemed to end, each Party being released of its obligations with respect to the carrying out of the Development Program;

 

	
  

	
(b)

	
Section 3 shall continue to apply;

 

	
  

	
(c)

	
Sections 4 and 5 shall no more apply (except as regards the provisions of 4.2.1(f), the amounts payable by LMS under Section 4.2.1(c), and subject to any accrued amounts due by either Party to the other pursuant to Section 4);

 

	
  

	
(d)

	
each Party shall notify to the other the person that it appoints as its representative with responsibility for the management of the Agreement until its expiry or termination. Either Party may change its representative by notice in writing to the other Party. Throughout the remaining term of the Agreement, such representatives shall communicate regularly and hold periodic meetings for the purposes of reporting on, assessing and properly managing this Agreement, in particular as regards marketing and promotional activities on the Product which the Parties shall endeavor to be consistent in the Assigned Territories while adapting such activities to the relevant markets.

 

  

16

  

 

	
7.

	
Off project licenses

 

	
7.1

	
Off Project License granted by LMS

 

	
7.1.1

	
LMS Off Project License

 

	
  

	
(a)

	
LMS grants to Protea and its Affiliates an irrevocable right and license to:

 

	
  

	
(i)

	
any LMS IP which is licensed under Section 3.1. For the avoidance of doubt, the LMS IP licensed under this Section 7.1.1 is the same as the LMS IP which is licensed under the LMS License, and does not extend to LMS IP which (1) may be developed separately by LMS and which (2) is not Needed (2a) under the Development Program to develop and use any Products, or (2b) to manufacture any Products developed under the Development Program, or (2c) to Commercialize any Products developed under the Development Program. Protea may have access to such separately developed LMS IP under the conditions set out in Section 12.4; and

 

	
  

	
(ii)

	
the Patents;

 

to develop and use, manufacture and Commercialize:

 

	
  

	
(iii)

	
any Side Products; and

 

	
  

	
(iv)

	
any Products;

 

hereafter referred to as the "LMS Off Project License".

 

	
  

	
(b)

	
The LMS Off Project License cannot be used to develop, manufacture and Commercialize:

 

	
  

	
(i)

	
Side Products, unless:

 

	
  

	
(1)

	
Stage 1 has been completed; or

 

	
  

	
(1)

	
the Development Program ends, either due to (1) a decision of the Parties during Stage 1, (2) a breach of LMS, or (3) a Force Majeure Event;

 

	
  

	
(ii)

	
Products, unless the Development Program ends with Stage 2 not being completed due to (1) a decision of the Parties to end the Development Program without prohibiting a Party from continuing a separate development of Products, (2) a breach of LMS, (3) LMS' withdrawal, or (4) a Force Majeure Event.

 

	
  

	
(c)

	
The LMS Off Project License shall be:

 

	
  

	
(i)

	
exclusive (even as to LMS) for the Protea Assigned Territory, except that LMS shall be entitled to grant licenses to the Patents and the LMS IP in the Protea Assigned Territory in connection with:

 

	
  

	
(1)

	
pre-clinical, pharmaceutical and manufacturing processes development work contracted with entities located in the Protea Assigned Territory. However, LMS cannot license the Patents and the LMS IP to any other entity than Protea to carry out clinical development work in the Protea Assigned Territory in relation to Side Products and Products; and

	
  

	
(2)

	
manufacturing of Side Products and Products contracted with entities located in the Protea Assigned Territory, provided that such Side Products and Products are manufactured solely for the purpose of being sold outside of the Protea Assigned Territory.

 

  

17

  

 

	
  

	
(ii)

	
non exclusive for:

 

	
  

	
(1)

	
the Joint Assigned Territory; and

 

	
  

	
(2)

	
the LMS Assigned Territory, but only to the extent permitting Protea to:

 

	
  

	
-

	
carry out pre-clinical, pharmaceutical and manufacturing processes development work contracted with entities located in the LMS Assigned Territory. However, Protea cannot use the Patents and the LMS IP to carry out clinical development work in the LMS Assigned Territory in relation to Side Products and Products; and

 

	
  

	
-

	
manufacture Side Products and Products contracted with entities located in the LMS Assigned Territory, provided that such Side Products and Products are manufactured solely for the purpose of being sold outside of the LMS Assigned Territory;

 

Protea not having any right to Commercialize Side Products and Products in the LMS Assigned Territory,

 

	
7.1.2

	
Sublicensing rights

 

	
  

	
(a)

	
The rights granted under the LMS Off Project License may be sub-licensed by Protea to any Third Parties without the need to obtain prior consent from LMS. Protea shall inform LMS of the name of the sub-licensee and the scope of the rights sub-licensed. However, Protea must ask LMS' prior written consent if Protea wishes to sub-license said rights to the LMS restricted entities referred to in Exhibit D.

 

	
  

	
(b)

	
Notwithstanding the foregoing, in the event Protea grants the sub-license referred to in the preceding sub-Section, Protea shall ensure that such sub-license does not adversely impact or otherwise restrict LMS' rights under this Agreement.

 

	
7.1.3

	
Miscellaneous

 

Notwithstanding the foregoing, in the event LMS licenses, sub-licenses, or otherwise authorizes the use of the Patents and any LMS IP by a Third Party, LMS shall ensure that such Third-Party license, sub-license or other authorization does not adversely impact or otherwise restrict Protea's rights under this Agreement.

 

	
7.2

	
Off Project License granted by Protea

 

	
7.2.1

	
Protea Off Project License

 

	
  

	
(a)

	
Protea grants to LMS and its Affiliates an irrevocable right and license to any Protea IP, which is licensed under Section 3.2, to develop and use, manufacture and Commercialize:

 

	
  

	
(i)

	
any Side Products; and

 

	
  

	
(ii)

	
any Products;

 

hereafter referred to as the "Protea Off Project License". For the avoidance of doubt, the Protea IP licensed under this Section 7.2.1 is the same as the Protea IP which is licensed under the Protea License, and does not extend to Protea IP which (1) may be developed separately by Protea and which (2) is not Needed (2a) under the Development Program to develop and use any Products, or (2b) to manufacture any Products developed under the Development Program, or (2c) to Commercialize any Products developed under the Development Program. LMS may have access to such separately developed Protea IP under the conditions set out in Section 12.4.

 

  

18

  

 

	
  

	
(b)

	
The Protea Off Project License cannot be used to develop, manufacture and Commercialize:

 

	
  

	
(i)

	
Side Products, unless:

 

	
  

	
(1)

	
Stage 1 has been completed; or

 

	
  

	
(2)

	
the Development Program ends, either due to (1) a decision of the Parties during Stage 1, (2) a breach of Protea, or (3) a Force Majeure Event;

 

	
  

	
(ii)

	
Products, unless the Development Program ends with Stage 2 not being completed due to (1) a decision of the Parties to end the Development Program without prohibiting a Party from continuing a separate development of Products, (2) a breach of Protea, (3) Protea's withdrawal, or (4) a Force Majeure Event.

 

	
  

	
(c)

	
The Protea Off Project License shall be:

 

	
  

	
(i)

	
exclusive (even as to Protea) for the LMS Assigned Territory, except that Protea shall be entitled to grant licenses to the Protea IP in the LMS Assigned Territory in connection with:

 

	
  

	
(1)

	
pre-clinical, pharmaceutical and manufacturing processes development work contracted with entities located in the LMS Assigned Territory. However, Protea cannot license the Protea IP to any other entity than LMS to carry out clinical development work in the LMS Assigned Territory in relation to Side Products and Products; and

 

	
  

	
(2)

	
manufacturing of Side Products and Products contracted with entities located in the LMS Assigned Territory, provided that such Side Products and Products are manufactured solely for the purpose of being sold outside of the LMS Assigned Territory.

 

	
  

	
(ii)

	
non exclusive for:

 

	
  

	
(1)

	
the Joint Assigned Territory; and

 

	
  

	
(2)

	
the Protea Assigned Territory, but only to the extent permitting LMS to:

 

	
  

	
-

	
carry out pre-clinical, pharmaceutical and manufacturing processes development work contracted with entities located in the Protea Assigned Territory. However, LMS cannot use the Protea IP to carry out clinical development work in the Protea Assigned Territory in relation to Side Products and Products; and

 

	
  

	
-

	
manufacture of Side Products and Products contracted with entities located in the Protea Assigned Territory, provided that such Side Products and Products are manufactured solely for the purpose of being sold outside of the Protea Assigned Territory.

 

LMS not having any right to Commercialize Side Products and Products in the Protea Assigned Territory.

 

	
7.2.2

	
Sublicensing rights

 

	
  

	
(a)

	
The rights granted under the Protea Off Project License may be sub-licensed by LMS to any Third Parties without the need to obtain prior consent from Protea. LMS shall inform Protea of the name of the sub-licensee and the scope of the rights sub-licensed. However, LMS must ask Protea's prior written consent if LMS wishes to sub-license said rights to the Protea restricted entities referred to in Exhibit D.

 

  

19

  

 

 

	
  

	
(b)

	
Notwithstanding the foregoing, in the event LMS grants the sub-license referred to in the preceding sub-Section, LMS shall ensure that such sub-license does not adversely impact or otherwise restrict Protea's rights under this Agreement.

 

	
7.2.3

	
Miscellaneous

 

Notwithstanding the foregoing, in the event Protea licenses, sub-licenses, or otherwise authorizes the use of any Protea IP by a Third Party, Protea shall ensure that such Third-Party license, sub-license or other authorization does not adversely impact or otherwise restrict LMS' rights under this Agreement.

 

	
8.

	
Right of Withdrawal

 

	
8.1

	
Right of Withdrawal

 

Either Party may withdraw from the Development Program with 3 months prior written notice to the other Party (a "Withdrawal") at any time and for any reason after completion of Stage 1.

 

	
8.2

	
Consequences of Withdrawal

 

	
8.2.1

	
In case of Withdrawal by Protea, Protea shall:

 

	
  

	
(a)

	
not be entitled to continue the Development Program alone or with any Third Party(ies);

 

	
  

	
(b)

	
continue to benefit from the LMS Off Project License, and be entitled to carry out or continue any other ongoing development program alone or with any Third Party(ies) in connection with any Side Product, under the terms provided in Section 7.1.

 

	
8.2.2

	
In case of Withdrawal by LMS, LMS shall:

 

	
  

	
(a)

	
not be entitled to continue the Development Program alone or with any Third Party(ies);

 

	
  

	
(b)

	
continue to benefit from the Protea Off Project License, and be entitled to carry out or continue any other ongoing development program alone or with any Third Party(ies) in connection with any Side Product, under the terms provided in Section 7.2.

 

	
8.2.3

	
In case of Withdrawal by either Party:

 

	
  

	
(a)

	
each Party shall continue to fund any work under the Development Program which was decided to be carried out prior to the Withdrawal, and which is ongoing at the time of Withdrawal, until completion of such work;

 

	
  

	
(b)

	
any clinical trials ongoing at the time of Withdrawal shall continue up until their completion, and the terms of the Agreement governing the carrying out of such trials, including provisions relating to Shared Costs as well as ownership and licensing of Technology and Patent Rights stemming from such trials, shall continue to apply to such trials, as if the Withdrawal had not occurred, until these trials are completed; and

 

	
  

	
(c)

	
subject to the other provisions of this Section 8, the Development Program shall be deemed to end and Sections 3 to 6 shall no more apply, each Party being released of its obligations with respect to the carrying out of the Development Program.

 

	
8.2.4

	
Notwithstanding any provision to the contrary in this Agreement, in the event of a Withdrawal, the Parties shall cooperate for the orderly termination of their participation to the Development Program. In particular, any Party which exercises its right of Withdrawal shall:

 

	
  

	
(a)

	
provide to the other Party up-to-date copies of its materials (such as data and documentation) relating to the Development Program that are available and relevant; and

 

  

20

  

 

	
  

	
(b)

	
execute and deliver to the other Party any such instruments as may be requested by the other Party;

 

for enabling such other Party to pursue separately, alone or with a third party, the development of Products upon termination of the Development Program, to the extent permitted under this Agreement.

 

	
9.

	
Royalties

 

	
9.1

	
Royalties payable for Net Sales of Products if a US MA is granted during the Development Program

 

If a US MA is granted to Protea during the Development Program:

 

	
  

	
(a)

	
Protea shall pay to LMS a royalty calculated on the Protea Net Sales of Products, as follows:

 

	
  

	
(i)

	
[*****]% up to EUR[*****];

 

	
  

	
(ii)

	
[*****]% between [*****] and EUR[*****]; and

 

	
  

	
(iii)

	
[*****]% above EUR[*****]0.

 

	
  

	
(b)

	
LMS shall not pay any royalties to Protea in relation to LMS Net Sales of Products.

 

	
9.2

	
Royalties payable for Net Sales of Products if a US MA is not granted during the Development Program

 

	
9.2.1

	
If a US MA is not granted during the Development Program, but thereafter a Marketing Authorization for the Product is granted to Protea:

 

	
  

	
(a)

	
if LMS issues a Caller Request under Section 12.4 for a license regarding such Product:

 

	
  

	
(i)

	
LMS shall pay to Protea:

 

	
  

	
(1)

	
at the start of the applicable Off Project Product License, a one-time payment of 30% of the costs incurred by Protea in the development of such Product minus the Shared Costs paid by LMS under the Development Program; and

 

	
  

	
(2)

	
a royalty of [*****]% calculated on the annual LMS Net Sales of Products; and

 

	
  

	
(ii)

	
Protea shall not pay any royalties to LMS in relation to Protea Net Sales of Products.

 

	
  

	
(b)

	
if LMS does not issue a Caller Request under Section 12.4 for a license regarding such Product, Protea shall pay to LMS a royalty calculated on the annual Protea Net Sales of Products as follows:

 

	
  

	
(i)

	
[*****]% up to EUR[*****];

 

	
  

	
(ii)

	
[*****]% between EUR[*****] and EUR[*****]; and

 

	
  

	
(iii)

	
[*****]% above EUR[*****].

 

	
9.2.2

	
If the Development Program has ended, without Stage 2 being completed, but thereafter a Marketing Authorization for the Product is granted to LMS:

 

	
  

	
(a)

	
if Protea issues a Caller Request under Section 12.4 for a license regarding such Product:

 

  

21

  

 

	
  

	
(i)

	
Protea shall pay to LMS:

 

	
  

	
(1)

	
at the start of the applicable Off Project Product License, a one-time payment of 70% of the costs incurred by LMS in the development of such Product minus the Shared Costs paid by Protea under the Development Program;

 

	
  

	
(2)

	
a royalty of [*****]% calculated on the annual Protea Net Sales of Products; and

 

	
  

	
(ii)

	
LMS shall not pay any royalties to Protea in relation to LMS Net Sales of Products.

 

	
  

	
(b)

	
if Protea does not issue a Caller Request under Section 12.4 for a license regarding such Product, LMS shall not pay any royalties to Protea in relation to LMS Net Sales of Products.

 

	
9.3

	
Royalties payable for Net Sales of Side Products

 

	
9.3.1

	
If a Marketing Authorization for a Side Product is granted to Protea:

 

	
  

	
(a)

	
if LMS issues a Caller Request under Section 12.4 for a license regarding such Side Product:

 

	
  

	
(i)

	
LMS shall pay to Protea:

 

	
  

	
(1)

	
at the start of the applicable Off Project Product License, a one-time payment of 30% of the costs incurred by Protea in the development of such Side Product; and

 

	
  

	
(2)

	
a royalty of [*****]% calculated on the annual LMS Net Sales of such Side Product; and

 

	
  

	
(ii)

	
Protea shall not pay any royalties to LMS in relation to Protea Net Sales of such Side Product.

 

	
  

	
(b)

	
if LMS does not issue a Caller Request under Section 12.4 for a license regarding such Side Product, then if said Marketing Authorization was granted to Protea:

 

	
  

	
(i)

	
after a US MA is granted to Protea during the Development Program, the royalty set out in Section 9.1(a) shall be calculated on the basis of the Protea Net Sales of Products and of such Side Product (the aggregate amount of such Net Sales being taken into account to determine whether the royalty percentage thresholds set out in that Section are reached); or

 

	
  

	
(ii)

	
before a US MA is granted to Protea during the Development Program, Protea shall pay to LMS a royalty of 15% calculated on the annual Protea Net Sales of such Side Product.

 

	
9.3.2

	
If a Marketing Authorization for a Side Product is granted to LMS:

 

	
  

	
(a)

	
if Protea issues a Caller Request under Section 12.4 for a license regarding such Side Product:

 

	
  

	
(i)

	
Protea shall pay to LMS:

 

	
  

	
(1)

	
at the start of the applicable Off Project Product License, a one-time payment of 70% of the costs incurred by LMS in the development of such Side Product; and

 

	
  

	
(2)

	
a royalty of [*****]% calculated on the annual Protea Net Sales of such Side Product; and

 

  

22

  

 

	
  

	
(ii)

	
LMS shall not pay any royalties to Protea in relation to LMS Net Sales of such Side Product.

 

	
  

	
(b)

	
if Protea does not issue a Caller Request under Section 12.4 for a license regarding such Side Product, then if said Marketing Authorization was granted to LMS:

 

	
  

	
(i)

	
after a EU MA is granted to LMS during the Development Program, LMS shall not pay any royalties to Protea in relation to LMS Net Sales of such Side Product.

 

	
  

	
(ii)

	
before a EU MA is granted to LMS during the Development Program, LMS shall pay to Protea a royalty of 15% calculated on the annual LMS Net Sales of such Side Product.

 

	
9.4

	
Deduction of development costs

 

	
9.4.1

	
The royalties payable by a Party in relation to Net Sales of Products shall not begin to accrue until after all expenses incurred by such Party with respect to the Development Program since 2009 (including all costs incurred in the framework of the Development Program in connection with (1) obtaining, or trying to obtain, Marketing Authorizations in such Party's Assigned Territory for the Product, and (2) any intellectual property expenses), have been covered by the Gross Profit Margin earned further to said Net Sales. Exhibit F sets out an example of calculation reflecting the provisions set out in this paragraph.

 

	
9.4.2

	
A Party's obligation to pay royalties set out in this Section 9 in relation to Net Sales of Products, or Side Products (as applicable), in a given country shall end after the Patent Rights applicable to such Products, or Side Products (as applicable), have expired, or otherwise been declared invalid and/or unenforceable by a court, tribunal, or other agency of competent jurisdiction, in such country. For the avoidance of doubt, the preceding sentence does not apply to one-time payments which are in any case payable as set out in this Section 9.

 

	
9.5

	
One-time payment

 

Upon issuance of a first US MA, Protea shall pay a one-time payment to LMS in the amount of [*****]€.

 

	
10.

	
Payments, records and audits

 

	
10.1

	
Payment, reports

 

Once a Party (the "Owing Party") has started Commercialization of Products and/or Side Products that may be subject to royalties payable by such Party pursuant to Section 9, at the end of the month immediately following the end of each calendar quarter, such Party shall provide to the other Party a report setting forth the Net Sales achieved during such calendar quarter. The Party to whom royalties are payable pursuant to Section 9 shall then issue an invoice for the royalties determined in accordance with Section 9. The Owing Party shall pay such invoice within 45 days, end of the month.

 

	
10.2

	
Exchange rate, manner and place of payment

 

All payments hereunder shall be payable in euros. All payments owed under this Agreement shall be made by wire transfer to a bank and account designated in writing by the receiving Party, unless otherwise specified in writing by the receiving Party.

 

	
10.3

	
Late payments

 

If a Party fails to pay any sums provided for in this Agreement when due, the other Party shall be entitled to (i) late payment interest at the rate of 3 times the French legal interest rate, and to (ii) lump compensation of 40 euros for recovery costs incurred due to the failing Party's late payment.

 

  

23

  

 

	
10.4

	
Payment default

 

If a Party fails to pay any undisputed sums provided for in this Agreement when due, and still does not pay such sums, after the other Party has sent a further notice to the failing Party requesting payment, within 15 calendar days from the notice, then such failure to pay shall be automatically considered as a material breach of the Agreement.

 

	
10.5

	
Records and Audits

 

Each Party shall keep for a period covering at least the preceding 3 years complete and accurate records pertaining to the development and sale or other disposition of Products and Side Products in sufficient detail to permit any other Party and INRA TRANSFERT to confirm the accuracy of all payments due hereunder. Each Party shall have the right to cause an independent, certified public accountant reasonably acceptable to the other Party to audit such records, no more than once annually, for the purpose of verifying any amounts payable. Such audits may be exercised during normal business hours upon reasonable prior written notice. As a condition to such examination, such independent accountant shall execute a written agreement, satisfactory to the audited Party, obligating such accountant to maintain in strict confidence all information disclosed to such accountant pursuant to the examination.  Notwithstanding the foregoing, the accountant shall be permitted to issue a written statement to the Parties to the effect that they have reviewed the books and records of the audited Party and either (a) that the amounts of the payments made to the Party conducting the audit are in conformity with the books and records and the applicable provisions of this Agreement, or (b) that adjustments of specified amounts should be made. Prompt adjustments shall be made by the Parties to reflect the results of such audit. The Party conducting the audit shall bear the full cost of such audit, unless such audit discloses an underpayment of more than 10% from the amounts actually due, in which case the audited Party shall bear the reasonable costs of such audit.

 

	
10.6

	
Taxes

 

All taxes levied on account of the royalties and other payments accruing to the receiving Party under this Agreement shall be paid by the receiving Party for its own account, including taxes levied thereon as income to the receiving Party. If provision is made in law or regulation for withholding, such tax shall be deducted by the Party paying the royalties and other payments from the sums otherwise payable by it hereunder for payment to the proper taxing authority and a receipt of payment of the tax secured and promptly delivered to the other Party. Each Party agrees to assist any other Party in claiming exemption from such deductions or withholdings under any double taxation or similar agreement or treaty from time to time in force.

 

	
10.7

	
Access to records/information

 

To the extent possible, without jeopardizing any past, current or future rights in or to any Technology and Patent Rights, the Parties shall grant to the other Party unrestricted access on a need-to-know basis for the purposes of the licenses set out in Sections 3 and 7, without additional charge, cost or expense, to any and all Technology and Patent Rights in its possession and/or under its Control to compile and file applications for Marketing Authorization, and marketing and sales information. Each Party shall provide free of charge any and all assistance that the other Party may reasonably request in order for the other Party to perform their obligations under this Agreement and to enable the other Party to manufacture (or have manufactured), market, sell and distribute the Product and Side Products in their exclusive Assigned Territory.

 

  

24

  

 

	
11.

	
Confidentiality

 

	
11.1

	
Confidential Information

 

"Confidential Information" means any confidential or proprietary information of a Party, including any materials or any information related to the Technology, and/or Patent Rights of such Party, and any information relating to any compound, research project, work in process, future development, scientific engineering, manufacturing, marketing, business plan, financial or personnel matter of such Party, its present or future products, sales, suppliers, customers, employees, investors or business, whether in oral, written, graphic or electronic form.

 

Notwithstanding the foregoing, Confidential Information shall not include any information that the receiving Party can prove:

 

	
  

	
(a)

	
is now, or hereafter becomes, through no act or failure to act on the part of the receiving Party, generally known or publicly available;

 

	
  

	
(b)

	
is known by the receiving Party at the time of receiving such information, as evidenced by its records;

 

	
  

	
(c)

	
is hereafter furnished to the receiving Party by a Third Party, as a matter of right and without restriction on disclosure;

 

	
  

	
(d)

	
is independently developed by the receiving Party, as evidenced by its records, without knowledge of, and without the aid, application or use of, the Confidential Information of the disclosing Party; or

 

	
  

	
(e)

	
is the subject of a written permission to disclose provided by the disclosing Party.

 

	
11.2

	
Confidentiality Obligations

 

Each Party hereto will maintain in confidence all Confidential Information of any other Party, unless or until such information falls within the exceptions set forth above through no fault of the receiving Party. No Party shall disclose to a Third Party Confidential Information of the other Party without the express written consent of such other Party, except as required by law or as provided herein and except that (i) such consent shall not be required to a Party's accountants, attorneys and other professional advisors, and (ii) such consent shall not be unreasonably withheld for disclosure to actual or prospective investors or lenders. Each Party will obtain prior agreement from its employees, agents or consultants to whom disclosure of any other Party's Confidential Information (each, a "Representative") is to be made to hold in confidence and not make use of such information for any purpose other than those permitted by this Agreement. Each Party will use at least the same standard of care as it uses to protect its own Confidential Information to ensure that such employees, agents or consultants do not disclose or make any unauthorized use of such Confidential Information. Each Party will promptly notify the other upon discovery of any unauthorized use or disclosure of the Confidential Information and will be responsible for any breach of this Section by its Representatives.

 

	
11.3

	
Authorized Disclosure

 

To the extent consistent with the terms of this Agreement, each Party may disclose the other Party’s Confidential Information to the extent such disclosure is reasonably necessary in filing or prosecuting patent applications (subject to Section 12), filing an application for Marketing Authorization or responding to any request from any Government Authority, prosecuting or defending litigation or complying with applicable law or governmental regulations, or with the disclosing Party’s pre-existing contractual obligations (such as those undertaken towards other co-owners of Patents and their representatives (i.e. INRA, CNRS and INRA Transfert)), provided that if a Party is required to make any such disclosure of the Confidential Information such Party shall use its best efforts to (i) so notify the other Party, and (ii) secure confidential treatment of such information required to be disclosed.

 

  

25

  

 

	
11.4

	
Confidentiality of the Agreement and of the Project

 

	
11.4.1

	
The terms of this Agreement and Confidential Information resulting from the performance of the Project shall be considered Confidential Information of the Parties, and each Party agrees not to disclose such Confidential Information of the Parties to any Third Party without the consent of the other Party, except that such consent shall not be required for disclosure to actual or prospective investors or lenders or to a Party's accountants, attorneys and other professional advisors or disclosure required by any applicable stock exchange rules. In addition, such Confidential Information of the Parties may be disclosed to actual or potential Third Party licensees and sub-licensees, actual or potential acquirers or acquirees, and actual or prospective investors or lenders, provided such recipients are bound by confidentiality obligations at least as strict as are set forth herein.

 

	
11.4.2

	
Subject to the preceding paragraph:

 

	
  

	
(a)

	
a Party may, with the prior written consent of the other Party, issue a limited press release or similar public announcement of this Agreement; and

 

	
  

	
(b)

	
no press release shall include the financial details of the transaction unless the other Party expressly consent to such disclosure, which they may withhold in their sole discretion.

 

	
12.

	
Technology and Patent Rights

 

	
12.1

	
Ownership

 

	
12.1.1

	
Each Party shall retain ownership and Control of its Background and Sideground.

 

	
12.1.2

	
All rights to Foreground shall be owned and Controlled by Protea in an initial phase, and then shared between the Parties as provided in Section 12.1.6.

 

	
12.1.3

	
Each of LMS and Protea represents and agrees that all employees and others acting on its behalf, including Third Parties, in performing its obligations under this Agreement shall be obligated to assign to Protea (with no obstacles to a further assignment to LMS under Section 12.1.6) all Foreground that are discovered, made or conceived by such employee or other person, including Third Parties. In the case of non-employees working for other companies or institutions on behalf of LMS or Protea, LMS and Protea, as applicable, shall use commercially reasonable and diligent efforts to obtain the right and title for all Foreground for Protea (with no obstacles to a further assignment to LMS under Section 12.1.6) that are discovered, made or conceived by such non-employees in performing their obligations on behalf of LMS or Protea under this Agreement, or obtain licenses to the same as applicable, in accordance with the policies of said company or institution. LMS and Protea agree to use commercially reasonable and diligent efforts to enforce such agreements (including, where appropriate, by legal action) considering, among other things, the commercial value of such Foreground.

 

	
12.1.4

	
Each Party agrees to execute and deliver any such instruments of transfer and assignment as may be requested by the other Party to ensure enforcement of the provisions of this Section 12.

 

	
12.1.5

	
The Review Committee shall decide on the filing of patents on the Foreground in the name of Protea, or of any other appropriate mode of protection considering the nature of the Foreground in question.

 

	
12.1.6

	
After application of Section 12.1.5 (and subject to Section 12.1.7):

 

	
  

	
(a)

	
Protea shall proceed with filing of any patents in its name, as decided by the Review Committee. Protea undertakes to state the names of the inventors in its patent application. If and when such Patent Rights are granted and when patent applications enter into national examination phase, Protea shall assign to LMS such rights to the extent granted for the LMS Assigned Territory on a royalty-free basis; and

 

  

26

  

 

	
  

	
(b)

	
with respect to Foreground that is not subject to Patent Rights, Protea shall assign to LMS such rights for the LMS Assigned Territory.

 

	
12.1.7

	
In case the Development Program ends before Stage 2 is completed:

 

	
  

	
(a)

	
without prejudice to Section 8.2.4:

 

	
  

	
(i)

	
the Parties shall within 60 days from the end of the Development Program (the "Inventory Period"):

 

	
  

	
(1)

	
make an inventory of all Foreground; and

 

	
  

	
(2)

	
mutually disclose and give access to each other to all information that they may possess in relation to such Foreground and which is relevant to the other Party’s Assigned Territory.

 

	
  

	
(ii)

	
within 60 days from the end of the Inventory Period (the "Filing Notice Period"), each Party (the "Filing Party") shall notify to the other Party the Foreground for which it will seek Patent Rights in its Assigned Territory (the "Filing Notice"). For any Foreground for which the Filing Party has not sent a Filing Notice, the other Party (the "Counterfiling Party") shall have the right to seek Patent Rights in said Assigned Territory, provided that the Counterfiling Party notifies such intent to seek Patent Rights within 60 days from the end of the Filing Notice Period (the "Counterfiling Notice"). Failing such notice, the Filing Party shall solely decide on the appropriate mode of protection, considering the nature of the Foreground in question, in its exclusive Assigned Territory.

 

	
  

	
(iii)

	
if a Party has sent a Filing Notice or a Counterfiling Notice, as applicable, and has not carried out the applicable filing within 6 months of the notice, then the Counterfiling Party (where the Filing Party has not carried out the applicable filing) or the Filing Party (where the Counterfiling Party has not carried out the applicable filing), as applicable, shall solely decide on the appropriate mode of protection, considering the nature of the Foreground in question, in the Assigned Territory subject to the said Filing Notice or Counterfiling Notice.

 

	
  

	
(iv)

	
If, pursuant to the above provisions, the Counterfiling Party, with respect to the applicable Assigned Territory:

 

	
  

	
(1)

	
has carried out the applicable filing within said 6 months of the Counterfiling Notice; or

 

	
  

	
(2)

	
is the Party which solely decides on the appropriate mode of protection of the Foreground;

 

then, notwithstanding any other provisions of this Agreement, such Counterfiling Party shall be free to carry out development, use, manufacturing and Commercialization activities relating to such Foreground, or grant a license to one or more Third Parties to carry out such activities, in such Assigned Territory.

 

	
  

	
(b)

	
Protea shall follow through any pending patent application up to the national examination stage and shall execute and deliver to LMS any instruments of transfer and assignment as may be requested by LMS to vest fully in LMS any Foreground in its exclusive Assigned Territory. LMS shall send to Protea a Filing Notice with respect to said patent application and Foreground, and sub-Sections (a)(ii) to (a)(iv) above shall apply mutatis mutandis.

 

	
  

	
(c)

	
Each Party shall have the right to freely use all non-patentable Foreground, subject (i) to the restrictions applicable under any licenses relating to Background and Sideground granted under this Agreement, and (ii) to sub-Sections (a) and (b) above.

 

  

27

  

 

Furthermore, any non-patentable Foreground cannot be disclosed by a Party to any Third Party for any use in the other Party's Assigned Territory, except where such disclosure is made by a Counterfiling Party exercising its rights under sub-Sections (a)(iv) and (b) above. The Party disclosing such information and data shall (i) require any Third Party recipient to explicitly commit to comply with such restrictions of use, and (ii) be jointly and severally liable for any breach by such Third Party of such restriction of use.

 

	
12.1.8

	
For any Joint Assigned Territory, at such time as the Parties deem appropriate, the Parties shall meet and develop an agreement(s) that addresses all aspects of strategies for protecting Foreground in the Joint Assigned Territories, in a coordinated and consistent manner.

 

	
12.2

	
Cooperation between the Parties

 

Without prejudice to any other obligations set out in this Agreement, the Parties shall cooperate, at their own cost, in case of any claims brought by Third Parties with respect to the Technology and Patent Rights granted under this Agreement. In particular, in case of a claim by a Third Party challenging the rights of a Party under this Agreement, the other Party shall use their best efforts to provide assistance to such Party, notably by participating to any court hearings or gathering relevant information in their possession, in order to facilitate defense against said Third Party claim.

 

	
12.3

	
Use

 

Each Party shall be free to use and practice its Background and Sideground in any manner not inconsistent with the terms of this Agreement without the consent of the other Party and without an obligation to notify the other Party of such intended use or to pay royalties or other compensation to the other Party by reason of such use.

 

	
12.4

	
Right of first refusal for Off Project Products

 

	
  

	
12.4.1

	
Additional definitions

 

For the purposes of this Section:

 

	
  

	
(a)

	
"Caller" has the meaning set out in Section 12.4.2;

 

	
  

	
(b)

	
"Licensor" has the meaning set out in Section 12.4.2;

 

	
  

	
(c)

	
"Off Project Product" means a Product not developed under the Development Program or a Side Product.

 

	
  

	
(d)

	
“Off Project IP” means:

 

	
  

	
(i)

	
where the Caller is LMS, Protea IP which is developed by Protea using LMS IP, the Patents and/or Foreground, and which relates to an Off Project Product;

 

	
  

	
(ii)

	
where the Caller is Protea, LMS IP which is developed by LMS using Protea IP and/or Foreground, and which relates to an Off Project Product.

 

	
  

	
12.4.2

	
Mechanics of right of first refusal

 

Each Party ("Caller") shall have the right to obtain a license from the other Party ("Licensor") on Off Project IP in accordance with the terms and conditions set out below:

 

	
  

	
(a)

	
Licensor shall notify Caller no later than 90 days after any development program relating to an Off Project Product of Licensor has reached a Phase III clinical trial;

 

	
  

	
(b)

	
Licensor shall notify Caller no later than 30 days after the Marketing Authorization for the Off Project Product is granted to Licensor (the "Call Notice");

 

  

28

  

 

	
  

	
(c)

	
Caller shall then have the right, within 30 days of the receipt of the Call Notice, to request (the "Caller Request") Licensor to grant a license on the Licensor's Off Project IP related to such Off Project Product for the marketing of the Off Project Product in Caller's Assigned Territory (the "Off Project Product License");

 

	
  

	
(d)

	
Upon receiving a valid Caller Request, Licensor shall draft the agreement governing the Off Project Product License, and such agreement (the "Off Project License Agreement"):

 

	
  

	
(i)

	
shall contain terms substantially similar to the following terms of this Agreement:

 

	
  

	
(1)

	
as regards the terms of use of the Off Project IP: Section 7.1 if the Caller is Protea and Section 7.2 if the Caller is LMS;

 

	
  

	
(2)

	
as regards terms of payment, records and audits: Section 10;

 

	
  

	
(3)

	
as regards confidentiality: Section 11;

 

	
  

	
(4)

	
as regards representations and warranties: Section 13;

 

	
  

	
(5)

	
as regards indemnification and insurance: Section 14;

 

	
  

	
(6)

	
as regards termination: Sections 15.2.3, 15.3 and 15.5;

 

	
  

	
(7)

	
as regards governing law and dispute resolution: Section 16;

 

	
  

	
(8)

	
as regards miscellaneous provisions: Section 17.

 

	
  

	
(ii)

	
shall incorporate by reference the provisions on royalties set out in Section 9, which shall govern the royalties payable under the Off Project Product License depending on the circumstances in which the Off Project Product License is granted;

 

For example, pursuant to Section 9.3.1(a), if LMS is Caller and the Off Project Product is a Side Product, then under the Off Project Product License (1) LMS shall pay to Protea (1a) at the start of such Off Project Product License, a one-time payment of 30% of the costs incurred by Protea in the development of such Side Product, and (1b) a royalty of 15% calculated on the annual LMS Net Sales of such Side Product; and (ii) Protea shall not pay any royalties to LMS in relation to Protea Net Sales of such Side Product.

 

	
  

	
(iii)

	
shall be entered into for the duration of the legal protection of the rights on the Off Project IP;

 

	
  

	
(iv)

	
shall provide that Caller shall use its best efforts to optimize the sales of the Off Project Product and, in particular, carry out all activities required to market the Off Project Product to the best of its abilities and to a standard which is not less than the standard that Caller applies to its best products, which standard shall in no event be less than good industry practice.

 

	
  

	
(e)

	
Licensor shall send the Off Project License Agreement to Caller within 30 days of the Caller Request. Licensor and Caller shall then discuss and finalize the provisions of the Off Project License Agreement so as to enter into the Off Project License Agreement within 90 days of the Caller Request. The Parties expressly agree that if they fail to enter into such agreement, the Off Project Product License shall nevertheless apply in the terms set out in Section 12.4.2(d).

 

	
  

	
(f)

	
If Caller does not notify the Caller Request to Licensor within 30 days from the receipt of the Call Notice then, notwithstanding any other provisions of this Agreement, Licensor shall be free to carry out development, use, manufacturing and Commercialization activities relating to the Off Project Product, or grant a license to

 

  

29

  

 

one or more Third Parties to carry out such activities, in the Caller's Assigned Territory and in the Joint Territory. In such case, Licensor’s Net Sales relating to the Off Project Product in such Assigned Territory and Joint Territory shall be subject to royalties calculated in accordance with the rates set out in sub-Sections 9.1(a)(i) to 9.1(a)(iii) (such Net Sales being added up to any other Net Sales being taken into account to determine whether the royalty percentage thresholds set out in those sub-Sections are reached).

 

	
  

	
12.4.3

	
Exceptions

 

A Party shall not be entitled to be Caller under this Section 12.4 if the Development Program has been terminated because of such Party's breach.

 

	
13.

	
Representations, warranties, covenants

 

	
13.1

	
Corporate power

 

Each Party hereby represents and warrants that it is duly organized, validly existing and in good standing under the laws of the country, state or jurisdiction of its incorporation or formation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof.

 

	
13.2

	
Due authorization

 

Each Party hereby represents and warrants that such Party is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder.

 

	
13.3

	
Binding agreement

 

Each Party hereby represents and warrants that this Agreement is a legal and valid obligation binding upon it and is enforceable in accordance with its terms. The execution, delivery and performance of this Agreement by such Party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a Party or by which it may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having authority over it.

 

	
13.4

	
LMS warranties and representations

 

	
13.4.1

	
LMS represents and warrants that, to the best of its knowledge, information, and belief, on the Effective Date the development, manufacture, marketing, promotion, use, sale, offer for sale, importation or Commercialization of the Active Ingredient, API and/or Product and/or Side Product, by or on behalf of Protea or its Affiliates, any licensee or sub-licensee of Protea or of its Affiliates, or any Third Party authorized to act on behalf of or for Protea:

 

	
  

	
(a)

	
does not constitute infringement of the INRA-CNRS/LMS Technology or any patents issued purporting to cover the INRA-CNRS/LMS Technology by virtue of its sub-license to Protea for the same; and

 

	
  

	
(b)

	
does not constitute infringement of any Technology or Patent Rights owned, licensed or Controlled by any Third Party.

 

  

30

  

 

	
13.4.2

	
LMS represents and warrants that:

 

	
  

	
(a)

	
it possesses the right and interest to use the INRA-CNRS/LMS Technology and to develop, manufacture, sell, offer for sale, market, import and Commercialize products made with and/or from INRA-CNRS/LMS Technology;

 

	
  

	
(b)

	
it has the right and interest necessary to sub-license the INRA-CNRS/LMS Technology and any patents purporting to cover the INRA-CNRS/LMS Technology to Protea;

 

	
  

	
(c)

	
LMS has the right to enter into the obligations set forth in this Agreement and to grant the rights, licenses and sub-licenses set forth herein; and

 

	
  

	
(d)

	
LMS shall at all times comply with the terms and conditions of the Reciprocal License Agreement.

 

	
13.5

	
Step-in right with regard to INRA/CNRS licenses

 

	
13.5.1

	
LMS warrants and represents that it will immediately notify Protea of any revisions to the Reciprocal License Agreement and that no revisions will be made to such agreement without first consulting with Protea. In the event of any claimed breaches, or risk of a claim, under the Reciprocal License Agreement, LMS shall immediately notify Protea of any such claim or risk, cure such breach or take measures to remove such risk, and keep Protea informed of the ongoing status of the measures taken to cure said breach or remove said risk. LMS shall consider and discuss with Protea any issues that Protea may raise with LMS as regards the Reciprocal License Agreement, including any preventive measures that may be needed to cure or anticipate any such issues. LMS shall not oppose, in case of said risk of a claim, that INRA TRANSFERT, INRA and/or CNRS, and Protea, discuss such risk in full transparency with LMS. If LMS fails to cure any claimed breaches under the Reciprocal License Agreement, LMS will permit Protea to act on its behalf and LMS will provide its cooperation, as requested by Protea. Where Protea elects to cure said breach, Protea will have the right to exercise a step-in right by stepping into the shoes of LMS in the Reciprocal License Agreement solely for the purposes of providing said cure (the "Step In").

 

	
13.5.2

	
If Protea has exercised its Step-In right referred to in Section 13.5.1 in relation to the Reciprocal License Agreement:

 

	
  

	
(a)

	
Protea shall not be entitled to claim from LMS any indemnification for any alleged infringement, having its cause in events occurring during and to the extent related to such Step In, of the INRA-CNRS/LMS Technology or any patents issued purporting to cover the INRA-CNRS/LMS Technology by virtue of its sub-license to Protea for the same; and

 

	
  

	
(b)

	
Protea will assume any liability arising from such Step In;

 

provided that such infringement and liability do not arise from a failure by LMS to comply with this Agreement or from a breach of any representations and warranties of LMS under this Agreement.

 

	
13.5.3

	
Throughout the Term, LMS shall provide Protea with an annual statement, at the end of each calendar year, setting out:

 

	
  

	
(a)

	
the amounts paid by LMS under the Reciprocal License Agreement;

 

	
  

	
(b)

	
any particular details on issues encountered in the performance of the Reciprocal License Agreement; and

 

	
  

	
(c)

	
an assessment with regards to any potential issues that may arise and which may need to be addressed to secure the continuity of the rights granted under the Reciprocal License Agreement.

 

  

31

  

 

	
13.6

	
Disclaimer of Warranties

 

Except as expressly set forth in this Agreement, neither Party makes any representation or warranty to the other Party of any kind, including any warranty for non-infringement or fitness for particular purpose.

 

	
14.

	
Indemnification, insurance

 

	
14.1

	
Each Party (the "Indemnifying Party") shall indemnify, hold harmless and defend any other Party (the "Indemnified Party") against any and all Third Party claims resulting from the Indemnifying Party's breach of a representation, warranty or any obligations under this Agreement.

 

	
14.2

	
All claims for indemnification shall be asserted and resolved as follows:

 

	
  

	
(a)

	
upon receipt or notification of any claim for which an Indemnifying Party would be liable to an Indemnified Party hereunder, the Indemnified Party shall with reasonable promptness notify the Indemnifying Party of such claim, including a copy of the claim made if the claim was made in writing, specifying the nature of such claim and relevant facts known to the Indemnified Party (the "Claim Notice").

 

	
  

	
(b)

	
the Indemnifying Party shall have the sole right to defend, control and manage by appropriate proceedings with counsel of the Indemnifying Party's choice, or settle or otherwise resolve such claim.

 

	
  

	
(c)

	
if the Indemnified Party desires to hire additional counsel of its choice, the Indemnified Party may do so at the Indemnified Party's sole cost and expense. Upon a determination of an Indemnifying Party's liability under this Section, that Indemnifying Party shall reimburse the Indemnified Party for all indemnifiable costs and expenses incurred by the Indemnified Party.

 

	
14.3

	
The Indemnified Party's failure to give reasonably prompt notice to the Indemnifying Party of any actual, threatened or possible claim or demand which may give rise to a right of indemnification hereunder shall not relieve the Indemnifying Party of any liability which the Indemnifying Party may have to the Indemnified Party unless the failure to give such notice materially and adversely prejudiced the Indemnifying Party.

 

	
14.4

	
Each Party represents and warrants that it is covered and will continue to be covered by a comprehensive general liability insurance program that covers all of such Party's activities and obligations hereunder, including adequate products liability coverage in accordance with industry standards.  Each Party shall provide the other with written notice at least 15 days prior to any cancellation or material change in such insurance program.

 

	
15.

	
Term, termination

 

	
15.1

	
Term

 

	
15.1.1

	
This Agreement shall commence on the Effective Date and shall continue for the duration of the Term.

 

	
15.1.2

	
Subject to the other provisions of this Agreement on termination, the Agreement shall continue to apply until the end of the Term even if the Development Program ends.

 

	
15.1.3

	
The Parties benefit only from the termination rights expressly set out under this Agreement, and waive any other right that they may have to judicially request termination of this Agreement (résolution judiciaire).

 

  

32

  

 

	
15.2

	
Termination for material breach

 

	
15.2.1

	
Each Party may terminate the Agreement if any other Party commits a material breach of any of its obligations under the Agreement, and fails to remedy such breach (if such breach is capable of remedy) within a period of 90 days after being notified in writing to do so, without prejudice to any other rights the terminating Party may have.

 

	
15.2.2

	
Each Party may terminate the Development Program if any other Party commits a material breach of any of its obligations under the Development Program, and fails to remedy such breach (if such breach is capable of remedy) within a period of 90 days after being notified in writing to do so, without prejudice to any other rights the terminating Party may have. In case of such termination of the Development Program, notwithstanding any other provisions of this Agreement:

 

	
  

	
(a)

	
the non-breaching Party shall be free to carry out development, use, manufacturing and Commercialization activities relating to the Product and Side Products, or grant a license to one or more Third Parties to carry out such activities, in the breaching Party's Assigned Territory and in the Joint Territory; and

 

	
  

	
(b)

	
the non-breaching Party’s Net Sales relating to the sales of such Product and Side Products shall be subject to royalties calculated in accordance with the rates set out in sub-Sections 9.1(a)(i) to 9.1(a)(iii) (the aggregate amount of such Net Sales being added up to any other Net Sales being taken into account to determine whether the royalty percentage thresholds set out in those sub-Sections are reached).

 

	
15.2.3

	
Each Party may terminate a license granted hereunder if any other Party commits a material breach in connection with such license, and fails to remedy such breach (if such breach is capable of remedy) within a period of 90 days after being notified in writing to do so, without prejudice to any other rights the terminating Party may have. In case of such termination, notwithstanding any other provisions of this Agreement:

 

	
  

	
(a)

	
the non-breaching Party shall be free to carry out development, use, manufacturing and Commercialization activities relating to the element which is the subject matter of the license (for example, Protea IP, LMS IP or the Patents), or grant a license to one or more Third Parties to carry out such activities, in the breaching Party's Assigned Territory and in the Joint Territory; and

 

	
  

	
(b)

	
the non-breaching Party’s Net Sales relating to the sales of Product and Side Products developed, used, manufactured and/or Commercialized using the above mentioned element, shall be subject to royalties calculated in accordance with the rates set out in sub-Sections 9.1(a)(i) to 9.1(a)(iii) (the aggregate amount of such Net Sales being added up to any other Net Sales being taken into account to determine whether the royalty percentage thresholds set out in those sub-Sections are reached).

 

	
15.3

	
Termination for insolvency

 

Protea shall have the right, subject to mandatory public policy rules and at its option, to terminate this Agreement, the Development Program or a license granted hereunder, immediately by written notice to the other Party, in the event LMS institutes or becomes subject to any action or any legal procedure or any other step taken with a view to (i) it being subject to pre-insolvency relief or found insolvent or (ii) it benefiting from any other relief affecting creditors' rights, (iii) its winding-up, liquidation or dissolution, or (iv) any event or proceedings (by whatever name known) which has an effect equivalent or similar to the events listed in (i) to (iii). If Protea is subject to the above events or proceedings, LMS shall have the right to exercise the same termination right, the above provisions being applicable mutatis mutandis.

 

  

33

  

 

	
15.4

	
Termination decided by the Review Committee

 

The Review Committee may decide to terminate the Agreement if the Review Committee fails to agree on a decision relating to the conduct of the Development Program. However, such decision to terminate requires that all the members of the Review Committee vote in favor of such termination. Such termination decision may be made at any time during the Term.

 

	
15.5

	
Consequences of termination

 

	
15.5.1

	
Within 30 days following the termination of this Agreement, for whatever cause, each Party shall return to the other Party, or destroy, upon the written request of the other Party, any and all Confidential Information of the other Party in its possession, except as may be useful or desirable to continue to exercise the rights and fulfill its obligations.

 

	
15.5.2

	
It is expressly agreed that any royalties accrued up to the date of any termination of this Agreement will be due and payable within 45 days, end of the month following such termination.

 

	
16.

	
Governing law and dispute resolution

 

	
16.1

	
Governing law

 

This Agreement shall be governed by the laws of France.

 

	
16.2

	
Dispute resolution

 

	
16.2.1

	
All disputes arising out of or in connection with this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules.

 

	
16.2.2

	
The place of arbitration shall be in Paris, France. The arbitration shall be conducted in English.

 

	
16.2.3

	
The Parties shall hold confidential the arbitration proceedings and the arbitral award, subject to any mandatory disclosures required by law, regulations and stock exchange rules. Notwithstanding the foregoing, each Party shall have the right to pursue an action in a court of competent jurisdiction to obtain any urgent decision to preserve the status quo during the resolution of any dispute under this provision.

 

	
17.

	
Miscellaneous

 

	
17.1

	
Assignment

 

No Party may assign this Agreement to any Third Party without the other Party’s prior written consent, which shall not be unreasonably withheld, except that each Party is entitled to assign its rights hereunder to actual or prospective investors or lenders, exclusively as a security for any financing project, provided such Party gives written notice of such assignment to the other Party. Subject to the preceding sentence, for the avoidance of doubt, no Party shall have the right to assign its rights (cession de créance) or delegate any of its obligations (délégation) relating to the development work during the Development Program without the other Party’s prior written consent, but each Party shall have the right to freely subcontract, under its own responsibility, development work during the Development Program.

 

	
17.2

	
Force majeure

 

	
17.2.1

	
No Party shall be liable for any failure to comply this Agreement so long as, and to the extent to which, such compliance is prevented due to a Force Majeure Event. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of a Force Majeure Event:

 

	
  

	
(a)

	
notify the other Party of the nature and extent of such Force Majeure Event; and

 

  

34

  

 

	
  

	
(b)

	
use all best efforts to remove any such causes and resume performance as soon as feasible.

 

	
17.2.2

	
For the purposes of this Section, a "Force Majeure Event" means a force majeure event as defined under the law governing this Agreement as well as an event beyond the reasonable control of a Party including war, fire, storm, flood, drought, earthquake, explosion, accident, sabotage, riots, strikes, lockouts, equipment or machinery failure, raw material or equipment shortages, interruption of power or water supply, transportation embargoes or delays, or regulations or injunctions of central or local government branches or agencies thereof.

 

	
17.2.3

	
The time for performance in the event of a Force Majeure Event shall be extended for a period equal to the time lost by reason of such event provided, however, that the continuation of a Force Majeure Event shall not entitle any Party to terminate this Agreement. The continuation, for a 90-period, of a Force Majeure Event preventing a Party to perform its obligations under the Development Program entitles any Party to terminate the Development Program.

 

	
17.3

	
Waiver

 

The waiver from time to time by a Party of any right or failure to exercise any remedy shall not operate or be construed as a continuing waiver of the same right or remedy or of any other of such Party's rights or remedies provided under this Agreement.

 

	
17.4

	
Severability

 

In case any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

	
17.5

	
Independent Contractors

 

It is expressly agreed that Protea and LMS shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency of any kind. No Party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party.

 

	
17.6

	
Notices

 

	
17.6.1

	
Without prejudice to the specific means of notices provided elsewhere in the Agreement, any notice made under the Agreement must be in writing, in English, at the addresses set out below, and sent by recorded delivery with a request for notification of receipt, by fax, by express delivery (e.g., DHL, FedEx, UPS) or delivered by hand., addressed as follows:

 

	
  

	
(a)

	
If to Protea:

	
Proteabio Europe 

290 chemin de Saint Dionisy-Jardin des Entreprises 

30980 Landlade, France 

To the attention of the President

 

	
  

	
(b)

	
If to LMS:

	
Laboratoires Mayoly Spindler 

6 avenue de l’Europe 

78401 Chatou, France 

To the attention of the President

With a copy to the Legal Department

 

  

35

  

 

	
17.6.2

	
The notice shall be deemed to have been validly made:

 

	
  

	
(a)

	
with respect to a recorded delivery with a request for notification of receipt, on the date on which the notice is first presented to the recipient;

 

	
  

	
(b)

	
with respect to a delivery by hand or an express delivery, on the date of signature of the receipt;

 

	
  

	
(c)

	
with respect to a fax, on the date and at the time that the notification of receipt is sent by the recipient.

 

	
17.7

	
Entire Agreement

 

This Agreement sets forth all of the agreements between the Parties hereto with respect to the subject matter hereof. There are no agreements with respect to the subject matter hereof between the Parties other than as set forth herein. Except as expressly set forth in this Agreement, no subsequent modification to this Agreement shall be binding upon the Parties hereto unless reduced to writing and signed by the respective authorized officers of the Parties. This Agreement supersedes and terminates all prior agreements between the Parties with respect to the subject matter.

 

	
17.8

	
Third Parties

 

The Parties acknowledge that provisions of the Agreement confer benefits on Affiliates of each Party (in particular as regards licences granted to Affiliates under this Agreement) who have declared that they wish to benefit from the Agreement (stipulation pour autrui) and that, consequently, neither Party shall be entitled to revoke such provisions.

 

	
17.9

	
Liability

 

	
17.9.1

	
Protea and LMS each represent themselves to be professionals of the same specialty and consider the terms limiting their respective liability under the Agreement to be reasonable and a fair allocation of risk bearing in mind the nature of the contract and royalties payable.

 

	
17.9.2

	
Each Party’s liability under this Agreement shall be limited to 200,000€. This limitation of liability does not apply to any liability incurred by LMS in connection with a breach of its representations and warranties under Sections 13.4 and 13.5.

 

In [x] originals

 

 

	
PROTEABIO EUROPE SAS

 

	
LABORATOIRES MAYOLY SPINDLER SAS

	
By:   /s/ Daniel Dupret                                                                

	
By:   /s/ Jean Nicolas Vernin                                                                   

	
Name:  Daniel Dupret

	
Name:  Jean Nicolas Vernin

	
Title:   President

	
Title:   President

	
Date: 12 June 2014

	
Date: 12 June 2014

	  	  
	  	  
	  	  

 

 

36ex10-3.htm

Exhibit 10.3

 

AZURRX BIOPHARMA, INC.

 

AMENDED AND RESTATED

 

2014 OMNIBUS EQUITY INCENTIVE PLAN

 

  

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AZURRX BIOPHARMA, INC.

AMENDED AND RESTATED

2014 OMNIBUS EQUITY INCENTIVE PLAN

 

ARTICLE I

 

PURPOSE

 

The purpose of this AzurRx BioPharma, Inc. Amended and Restated 2014 Omnibus Equity Incentive Plan (the “Plan”) is to benefit AzurRx BioPharma, Inc., a Delaware corporation (the “Company”) and its shareholders, by assisting the Company and its subsidiaries to attract, retain and provide incentives to key management employees, directors, and consultants of the Company and its Affiliates, and to align the interests of such service providers with those of the Company’s shareholders.  Accordingly, the Plan provides for the granting of Non-qualified Stock Options, Incentive Stock Options, Restricted Stock Awards, Restricted Stock Unit Awards, Stock Appreciation Rights, Performance Stock Awards, Performance Unit Awards, Unrestricted Stock Awards, Distribution Equivalent Rights or any combination of the foregoing.

 

ARTICLE II

 

DEFINITIONS

 

The following definitions shall be applicable throughout the Plan unless the context otherwise requires:

 

2.1           “Affiliate” shall mean any corporation which, with respect to the Company, is a “subsidiary corporation” within the meaning of Section 424(f) of the Code or other entity in which the Company has a controlling interest in such entity or another entity which is part of a chain of entities in which the Company or each entity has a controlling interest in another entity in the unbroken chain of entities ending with the applicable entity.

 

2.2           “Award” shall mean, individually or collectively, any Option, Restricted Stock Award, Restricted Stock Unit Award, Performance Stock Award, Performance Unit Award, Stock Appreciation Right, Distribution Equivalent Right or Unrestricted Stock Award.

 

2.3           “Award Agreement” shall mean a written agreement between the Company and the Holder with respect to an Award, setting forth the terms and conditions of the Award, as amended.

 

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

 

2.5           “Base Value” shall have the meaning given to such term in Section 14.2.

 

  

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2.6           “Cause” shall mean (i) if the Holder is a party to an employment or service agreement with the Company or an Affiliate which agreement defines “Cause” (or a similar term), “Cause” shall have the same meaning as provided for in such agreement, or (ii) for a Holder who is not a party to such an agreement, “Cause” shall mean termination by the Company or an Affiliate of the employment (or other service relationship) of the Holder by reason of the Holder’s (A) intentional failure to perform reasonably assigned duties, (B) dishonesty or willful misconduct in the performance of the Holder’s duties, (C) involvement in a transaction which is materially adverse to the Company or an Affiliate, (D) breach of fiduciary duty involving personal profit, (E) willful violation of any law, rule, regulation or court order (other than misdemeanor traffic violations and misdemeanors not involving misuse or misappropriation of money or property), (F) commission of an act of fraud or intentional misappropriation or conversion of any asset or opportunity of the Company or an Affiliate, or (G) material breach of any provision of the Plan or the Holder’s Award Agreement or any other written agreement between the Holder and the Company or an Affiliate, in each case as determined in good faith by the Board, the determination of which shall be final, conclusive and binding on all parties.

 

2.7           “Change of Control” shall mean:  (i) for a Holder who is a party to an employment or consulting agreement with the Company or an Affiliate which agreement defines “Change of Control” (or a similar term), “Change of Control” shall have the same meaning as provided for in such agreement, or (ii) for a Holder who is not a party to such an agreement, “Change of Control” shall mean the satisfaction of any one or more of the following conditions (and the “Change of Control” shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied):

 

(a)           Any person (as such term is used in paragraphs 13(d) and 14(d)(2) of the Exchange Act, hereinafter in this definition, “Person”), other than the Company or an Affiliate or an employee benefit plan of the Company or an Affiliate, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities;

 

(b)           The closing of a merger, consolidation or other business combination (a “Business Combination”) other than a Business Combination in which holders of the Shares immediately prior to the Business Combination have substantially the same proportionate ownership of the common stock or ordinary shares, as applicable, of the surviving corporation immediately after the Business Combination as immediately before;

 

(c)           The closing of an agreement for the sale or disposition of all or substantially all (50% or more) of the Company’s assets to any entity that is not an Affiliate;

 

  

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(d)           The approval by the holders of Shares of a plan of complete liquidation of the Company, other than a merger of the Company into any subsidiary or a liquidation as a result of which persons who were shareholders of the Company immediately prior to such liquidation have substantially the same proportionate ownership of shares of common stock or ordinary shares, as applicable, of the surviving corporation immediately after such liquidation as immediately before; or

 

(e)           Within any twenty-four (24) month period, the Incumbent Directors shall cease to constitute at least a majority of the Board or the board of directors of any successor to the Company; provided, however, that any director elected to the Board, or nominated for election, by a majority of the Incumbent Directors then still in office, shall be deemed to be an Incumbent Director for purposes of this paragraph (e), but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, entity or “group” other than the Board (including, but not limited to, any such assumption that results from paragraphs (a), (b), (c), or (d) of this definition).

 

2.8           “Code” shall mean the United States of America Internal Revenue Code of 1986, as amended.  Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to any section and any regulation under such section.

 

2.9           “Committee” shall mean a committee comprised of not less than two (2) members of the Board who are selected by the Board as provided in Section 4.1.

 

2.10           “Company” shall have the meaning given to such term in the introductory paragraph, including any successor thereto.

 

2.11           “Consultant” shall mean any non-Employee (individual or entity) advisor to the Company or an Affiliate who or which has contracted directly with the Company or an Affiliate to render bona fide consulting or advisory services thereto.

 

2.12           “Director” shall mean a member of the Board or a member of the board of directors of an Affiliate, in either case, who is not an Employee.

 

2.13           “Distribution Equivalent Right” shall mean an Award granted under Article XIII of the Plan which entitles the Holder to receive bookkeeping credits, cash payments and/or Share distributions equal in amount to the distributions that would have been made to the Holder had the Holder held a specified number of Shares during the period the Holder held the Distribution Equivalent Right.

 

2.14           “Distribution Equivalent Right Award Agreement” shall mean a written agreement between the Company and a Holder with respect to a Distribution Equivalent Right Award.

 

  

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2.15            “Effective Date” shall mean May 12, 2014.

 

2.16           “Employee” shall mean any employee, including any officer, of the Company or an Affiliate.

 

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

 

2.18           “Fair Market Value” shall mean, as of any specified date, the closing sales price of the Shares for such date (or, in the event that the Shares are not traded on such date, on the immediately preceding trading date) on the Nasdaq Stock Market or a domestic or foreign national securities exchange (including London’s Alternative Investment Market) on which the Shares may be listed, as reported in The Wall Street Journal or The Financial Times.  If the Shares are not listed on the Nasdaq Stock Market or on a national securities exchange, but are quoted on the OTC Bulletin Board or by the National Quotation Bureau, the Fair Market Value of the Shares shall be the mean of the highest bid and lowest asked prices per Share for such date.  If the Shares are not quoted or listed as set forth above, Fair Market Value shall be determined by the Board in good faith by any fair and reasonable means (which means may be set forth with greater specificity in the applicable Award Agreement).  The Fair Market Value of property other than Shares shall be determined by the Board in good faith by any fair and reasonable means consistent with the requirements of applicable law.

 

2.19           “Family Member” of an individual shall mean any child, stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the Holder’s household (other than a tenant or employee of the Holder), a trust in which such persons have more than fifty percent (50%) of the beneficial interest, a foundation in which such persons (or the Holder) control the management of assets, and any other entity in which such persons (or the Holder) own more than fifty percent (50%) of the voting interests.

 

2.20           “Holder” shall mean an Employee, Director or Consultant who has been granted an Award or any such individual’s beneficiary, estate or representative, who has acquired such Award in accordance with the terms of the Plan, as applicable.

 

2.21            “Incentive Stock Option” shall mean an Option which is intended by the Committee to constitute an “incentive stock option” and conforms to the applicable provisions of Section 422 of the Code.

 

2.22           “Incumbent Director” shall mean, with respect to any period of time specified under the Plan for purposes of determining whether or not a Change of Control has occurred, the individuals who were members of the Board at the beginning of such period.

 

  

-5-

  

 

2.23           “Non-qualified Stock Option” shall mean an Option which is not an Incentive Stock Option or which is designated as an Incentive Stock Option but does not meet the applicable requirements of Section 422 of the Code.

 

2.24           “Option” shall mean an Award granted under Article VII of the Plan of an option to purchase Shares and shall include both Incentive Stock Options and Non-qualified Stock Options.

 

2.25           “Option Agreement” shall mean a written agreement between the Company and a Holder with respect to an Option.

 

2.26           “Performance Criteria” shall mean the criteria selected by the Committee for purposes of establishing the Performance Goal(s) for a Holder for a Performance Period.

 

2.27           “Performance Goals” shall mean, for a Performance Period, the written goal or goals established by the Committee for the Performance Period based upon the Performance Criteria, which may be related to the performance of the Holder, the Company or an Affiliate.

 

2.28           “Performance Period” shall mean one or more periods of time, which may be of varying and overlapping durations, selected by the Committee, over which the attainment of the Performance Goals shall be measured for purposes of determining a Holder’s right to, and the payment of, a Qualified Performance-Based Award.

 

2.29           “Performance Stock Award” or “Performance Stock” shall mean an Award granted under Article XII of the Plan under which, upon the satisfaction of predetermined Performance Goals, Shares are paid to the Holder.

 

2.30           “Performance Stock Agreement” shall mean a written agreement between the Company and a Holder with respect to a Performance Stock Award.

 

2.31           “Performance Unit” shall mean a Unit awarded to a Holder pursuant to a Performance Unit Award.

 

2.32           “Performance Unit Award” shall mean an Award granted under Article XI of the Plan under which, upon the satisfaction of predetermined Performance Goals, a cash payment shall be made to the Holder, based on the number of Units awarded to the Holder.

 

2.33           “Performance Unit Agreement” shall mean a written agreement between the Company and a Holder with respect to a Performance Unit Award.

 

2.34           “Plan” shall mean this AzurRx BioPharma, Inc. Amended and Restated 2014 Omnibus Equity Incentive Plan, as amended from time to time, together with each of the Award Agreements utilized hereunder.

 

  

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2.35           “Qualified Performance-Based Award” shall mean an Award that is intended to qualify as “performance-based” compensation under Section 162(m) of the Code.

 

2.36           “Restricted Stock Award” and “Restricted Stock” shall mean an Award granted under Article VIII of the Plan of Shares, the transferability of which by the Holder is subject to Restrictions.

 

2.37           “Restricted Stock Agreement” shall mean a written agreement between the Company and a Holder with respect to a Restricted Stock Award.

 

2.38           “Restricted Stock Unit Award” and “RSUs” shall refer to an Award granted under Article X of the Plan under which, upon the satisfaction of predetermined individual service-related vesting requirements, a cash payment shall be made to the Holder, based on the number of Units awarded to the Holder.

 

2.39           “Restricted Stock Unit Agreement” shall mean a written agreement between the Company and a Holder with respect to a Restricted Stock Award.

 

2.40            “Restriction Period” shall mean the period of time for which Shares subject to a Restricted Stock Award shall be subject to Restrictions, as set forth in the applicable Restricted Stock Agreement.

 

2.41           “Restrictions” shall mean the forfeiture, transfer and/or other restrictions applicable to Shares awarded to an Employee, Director or Consultant under the Plan pursuant to a Restricted Stock Award and set forth in a Restricted Stock Agreement.

 

2.42           “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, as such may be amended from time to time, and any successor rule, regulation or statute fulfilling the same or a substantially similar function.

 

2.43           “Shares” or “Stock” shall mean the shares of the Company’s common stock, par value $0.0001 per share.

 

2.44           “Stock Appreciation Right” or “SAR” shall mean an Award granted under Article XIV of the Plan of a right, granted alone or in connection with a related Option, to receive a payment equal to the increase in value of a specified number of Shares between the date of Award and the date of exercise.

 

2.45           “Stock Appreciation Right Agreement” shall mean a written agreement between the Company and a Holder with respect to a Stock Appreciation Right.

 

2.46           “Tandem Stock Appreciation Right” shall mean a Stock Appreciation Right granted in connection with a related Option, the exercise of some or all of which results in termination of the entitlement to purchase some or all of the Shares under the related Option, all as set forth in Article XIV.

 

  

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2.47            “Ten Percent Shareholder” shall mean an Employee who, at the time an Option is granted to him or her, owns shares possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or of any parent corporation or subsidiary corporation thereof (both as defined in Section 424 of the Code), within the meaning of Section 422(b)(6) of the Code.

 

2.48           “Termination of Service”  shall mean a termination of a Holder’s employment with, or status as a Director or Consultant of, the Company or an Affiliate, as applicable, for any reason, including, without limitation, Total and Permanent Disability or death, except as provided in Section 6.4.  In the event Termination of Service shall constitute a payment event with respect to any Award subject to Code Section 409A, Termination of Service shall only be deemed to occur upon a “separation from service” as such term is defined under Code Section 409A and applicable authorities.

 

2.49           “Total and Permanent Disability” of an individual shall mean the inability of such individual to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, within the meaning of Section 22(e)(3) of the Code.

 

2.50           “Unit” shall mean a bookkeeping unit, which represents such monetary amount as shall be designated by the Committee in each Performance Unit Agreement, or represents one Share for purposes of each Restricted Stock Unit Award.

 

2.51           “Unrestricted Stock Award” shall mean an Award granted under Article IX of the Plan of Shares which are not subject to Restrictions.

 

2.52           “Unrestricted Stock Agreement” shall mean a written agreement between the Company and a Holder with respect to an Unrestricted Stock Award.

 

ARTICLE III

 

EFFECTIVE DATE OF PLAN

 

The Plan shall be effective as of the Effective Date.

 

  

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ARTICLE IV

 

ADMINISTRATION

 

4.1           Composition of Committee. The Plan shall be administered by the Board until such time that the Committee is appointed by the Board, and shall at all times thereafter be administered by the Committee.  If necessary, in the Board’s discretion, to comply with Rule 16b-3 under the Exchange Act and Section 162(m) of the Code, the Committee shall consist solely of three (3) or more Directors who are each (i) “outside directors” within the meaning of Section 162(m) of the Code (“Outside Directors”), (ii) “non-employee directors” within the meaning of Rule 16b-3 (“Non-Employee Directors”) and (iii) “independent” for purposes of any applicable listing requirements; provided, however, that the Board or the Committee may delegate to a committee of one or more members of the Board who are not (x) Outside Directors, the authority to grant Awards to eligible persons who are not (A) then “covered employees” within the meaning of Section 162(m) of the Code and are not expected to be “covered employees” at the time of recognition of income resulting from such Award, or (B) persons with respect to whom the Company wishes to comply with the requirements of Section 162(m) of the Code, and/or (y) Non-Employee Directors, the authority to grant Awards to eligible persons who are not then subject to the requirements of Section 16 of the Exchange Act.  If a member of the Committee shall be eligible to receive an Award under the Plan, such Committee member shall have no authority hereunder with respect to his or her own Award.

 

4.2           Powers. Subject to the provisions of the Plan, the Committee shall have the sole authority, in its discretion, to make all determinations under the Plan, including but not limited to determining which Employees, Directors or Consultants shall receive an Award, the time or times when an Award shall be made (the date of grant of an Award shall be the date on which the Award is awarded by the Committee), what type of Award shall be granted, the term of an Award, the date or dates on which an Award vests (including acceleration of vesting), the form of any payment to be made pursuant to an Award, the terms and conditions of an Award (including the forfeiture of the Award (and/or any financial gain) if the Holder of the Award violates any applicable restrictive covenant thereof), the Restrictions under a Restricted Stock Award and the number of Shares which may be issued under an Award, Performance Goals applicable to any Award and certification of the achievement of such goals, and the waiver of any Restrictions or Performance Goals, subject to compliance with applicable laws, all as may be applicable.  In making such determinations the Committee may take into account the nature of the services rendered by the respective Employees, Directors and Consultants, their present and potential contribution to the Company’s (or the Affiliate’s) success and such other factors as the Committee in its discretion may deem relevant.

 

  

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4.3           Additional Powers. The Committee shall have such additional powers as are delegated to it under the other provisions of the Plan.  Subject to the express provisions of the Plan, the Committee is authorized to construe the Plan and the respective Award Agreements executed hereunder, to prescribe such rules and regulations relating to the Plan as it may deem advisable to carry out the intent of the Plan, to determine the terms, restrictions and provisions of each Award and to make all other determinations necessary or advisable for administering the Plan.  The Committee may correct any defect or supply any omission or reconcile any inconsistency in any Award Agreement in the manner and to the extent the Committee shall deem necessary, appropriate or expedient to carry it into effect.  The determinations of the Committee on the matters referred to in this Article IV shall be conclusive and binding on the Company and all Holders.

 

4.4           Committee Action. Subject to compliance with all applicable laws, action by the Committee shall require the consent of a majority of the members of the Committee, expressed either orally at a meeting of the Committee or in writing in the absence of a meeting.  No member of the Committee shall have any liability for any good faith action, inaction or determination in connection with the Plan.

 

ARTICLE V

 

SHARES SUBJECT TO PLAN AND LIMITATIONS THEREON

 

5.1           Authorized Shares and Award Limits. The Committee may from time to time grant Awards to one or more Employees, Directors and/or Consultants determined by it to be eligible for participation in the Plan in accordance with the provisions of Article VI.  Subject to Article XV, the aggregate number of Shares that may be issued under the Plan shall not exceed ten percent (10%) of the issued and outstanding shares of the Company’s common stock on an as converted basis (the “As Converted Shares”) on a rolling basis. For calculation purposes, the As Converted Shares shall include all shares of the Company’s common stock and all shares of the Company’s common stock issuable upon the conversion of outstanding preferred stock and other convertible securities, but shall not include any shares of common stock issuable upon the exercise of options and other convertible securities issued pursuant to the Plan. The number of authorized shares of common stock reserved for issuance under the Plan shall automatically be increased concurrently with the Company’s issuance of fully paid and non- assessable shares of As Converted Shares.  Shares shall be deemed to have been issued under the Plan solely to the extent actually issued and delivered pursuant to an Award.  To the extent that an Award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its Holder terminate, any Shares subject to such Award shall again be available for the grant of a new Award.  Notwithstanding any provision in the Plan to the contrary, the maximum number of Shares that may be subject to Awards of Options under Article VII and/or Stock Appreciation Rights under Article XIV, in either or both cases granted to any one person during any calendar year, shall be 300,000 Shares (subject to adjustment in the same manner as provided in Article XV with respect to Shares subject to Awards then outstanding). The limitation set forth in the preceding sentence shall be applied in a manner which shall permit compensation generated in connection with the exercise of Options or Stock Appreciation Rights to constitute “performance-based” compensation for purposes of Section 162(m) of the Code, including, but not limited to, counting against such maximum number of Shares, to the extent required under Section 162(m) of the Code, any Shares subject to Options or Stock Appreciation Rights that are canceled or re-priced.

 

  

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ARTICLE VI

 

ELIGIBILITY AND TERMINATION OF SERVICE

 

6.1           Eligibility. Awards made under the Plan may be granted solely to individuals or entities who, at the time of grant, are Employees, Directors or Consultants.  An Award may be granted on more than one occasion to the same Employee, Director or Consultant, and, subject to the limitations set forth in the Plan, such Award may include, a Non-qualified Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, an Unrestricted Stock Award, a Distribution Equivalent Right Award, a Performance Stock Award, a Performance Unit Award, a Stock Appreciation Right, a Tandem Stock Appreciation Right, or any combination thereof, and solely for Employees, an Incentive Stock Option.

 

6.2           Termination of Service.  Except to the extent inconsistent with the terms of the applicable Award Agreement and/or the provisions of Sections 6.3 or 6.4, the following terms and conditions shall apply with respect to a Holder’s Termination of Service with the Company or an Affiliate, as applicable:

 

(i)           The Holder’s rights, if any, to exercise any then exercisable Options and/or Stock Appreciation Rights shall terminate:

 

(A)           If such termination is for a reason other than the Holder’s Total and Permanent Disability or death, ninety (90) days after the date of such Termination of Service;

 

(B)           If such termination is on account of the Holder’s Total and Permanent Disability, one (1) year after the date of such Termination of Service; or

 

(C)           If such termination is on account of the Holder’s death, one (1) year after the date of the Holder’s death.

 

Upon such applicable date the Holder (and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in or with respect to any such Options and Stock Appreciation Rights. Notwithstanding the forgoing, the Committee, in its sole discretion, may provide for a different time period in the Award Agreement, or may extend the time period, following a Termination of Service, during which the Holder has the right to exercise any vested Non-qualified Stock Option or Stock Appreciation Right, which time period may not extend beyond the expiration date of the Award term.

 

  

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(ii)           In the event of a Holder’s Termination of Service for any reason prior to the actual or deemed satisfaction and/or lapse of the Restrictions, vesting requirements, terms and conditions applicable to a Restricted Stock Award and/or Restricted Stock Unit Award, such Restricted Stock and/or RSUs shall immediately be canceled, and the Holder (and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Stock and/or RSUs.  Notwithstanding the immediately preceding sentence, the Committee, in its sole discretion, may determine, prior to or within thirty (30) days after the date of such Termination of Service that all or a portion of any such Holder’s Restricted Stock and/or RSUs shall not be so canceled and forfeited.

 

6.3           Special Termination Rule. Except to the extent inconsistent with the terms of the applicable Award Agreement, and notwithstanding anything to the contrary contained in this Article VI, if a Holder’s employment with, or status as a Director of, the Company or an Affiliate shall terminate, and if, within ninety (90) days of such termination, such Holder shall become a Consultant, such Holder’s rights with respect to any Award or portion thereof granted thereto prior to the date of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been a Consultant for the entire period during which such Award or portion thereof had been outstanding.  Should the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her employment or Director status had terminated until such time as his or her Consultant status shall terminate, in which case his or her Award, as it may have been reduced in connection with the Holder’s becoming a Consultant, shall be treated pursuant to the provisions of Section 6.2, provided, however, that any such Award which is intended to be an Incentive Stock Option shall, upon the Holder’s no longer being an Employee, automatically convert to a Non-qualified Stock Option.  Should a Holder’s status as a Consultant terminate, and if, within ninety (90) days of such termination, such Holder shall become an Employee or a Director, such Holder’s rights with respect to any Award or portion thereof granted thereto prior to the date of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been an Employee or a Director, as applicable, for the entire period during which such Award or portion thereof had been outstanding, and, should the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her Consultant status had terminated until such time as his or her employment with the Company or an Affiliate, or his or her Director status, as applicable, shall terminate, in which case his or her Award shall be treated pursuant to the provisions of Section 6.2.

 

6.4           Termination for Cause.Notwithstanding anything in this Article VI or elsewhere in the Plan to the contrary, and unless a Holder’s Award Agreement specifically provides otherwise, in the event of a Holder’s Termination for Cause, all of such Holder’s then outstanding Awards shall expire immediately and be forfeited in their entirety upon such termination.

 

  

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ARTICLE VII

 

OPTIONS

 

7.1           Option Period. The term of each Option shall be as specified in the Option Agreement; provided, however, that except as set forth in Section 7.3, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant.

 

7.2           Limitations on Exercise of Option.  An Option shall be exercisable in whole or in such installments and at such times as specified in the Option Agreement.

 

7.3           Special Limitations on Incentive Stock Options.  To the extent that the aggregate Fair Market Value (determined at the time the respective Incentive Stock Option is granted) of Shares with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calendar year under all plans of the Company and any parent corporation or subsidiary corporation thereof (both as defined in Section 424 of the Code) which provide for the grant of Incentive Stock Options exceeds One Hundred Thousand Dollars ($100,000) (or such other individual limit as may be in effect under the Code on the date of grant), the portion of such Incentive Stock Options that exceeds such threshold shall be treated as Non-qualified Stock Options.  The Committee shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements, which of a Holder’s Options, which were intended by the Committee to be Incentive Stock Options when granted to the Holder, will not constitute Incentive Stock Options because of such limitation, and shall notify the Holder of such determination as soon as practicable after such determination.  No Incentive Stock Option shall be granted to an Employee if, at the time the Incentive Stock Option is granted, such Employee is a Ten Percent Shareholder, unless (i) at the time such Incentive Stock Option is granted the Option price is at least one hundred ten percent (110%) of the Fair Market Value of the Shares subject to the Incentive Stock Option, and (ii) such Incentive Stock Option by its terms is not exercisable after the expiration of five (5) years from the date of grant.  No Incentive Stock Option shall be granted more than ten (10) years from the earlier of the Effective Date or date on which the Plan is approved by the Company’s shareholders.  The designation by the Committee of an Option as an Incentive Stock Option shall not guarantee the Holder that the Option will satisfy the applicable requirements for “incentive stock option” status under Section 422 of the Code.

 

  

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7.4           Option Agreement. Each Option shall be evidenced by an Option Agreement in such form and containing such provisions not inconsistent with the provisions of the Plan as the Committee from time to time shall approve, including, but not limited to, provisions intended to qualify an Option as an Incentive Stock Option. An Option Agreement may provide for the payment of the Option price, in whole or in part, by the delivery of a number of Shares (plus cash if necessary) that have been owned by the Holder for at least six (6) months and having a Fair Market Value equal to such Option price, or such other forms or methods as the Committee may determine from time to time, in each case, subject to such rules and regulations as may be adopted by the Committee. Each Option Agreement shall, solely to the extent inconsistent with the provisions of Sections 6.2, 6.3, and 6.4, as applicable, specify the effect of Termination of Service on the exercisability of the Option.  Moreover, without limiting the generality of the foregoing, a Non-qualified Stock Option Agreement may provide for a “cashless exercise” of the Option, in whole or in part, by (a) establishing procedures whereby the Holder, by a properly-executed written notice, directs (i) an immediate market sale or margin loan as to all or a part of Shares to which he is entitled to receive upon exercise of the Option, pursuant to an extension of credit by the Company to the Holder of the Option price, (ii) the delivery of the Shares from the Company directly to a brokerage firm and (iii) the delivery of the Option price from sale or margin loan proceeds from the brokerage firm directly to the Company, or (b) reducing the number of Shares to be issued upon exercise of the Option by the number of such Shares having an aggregate Fair Market Value equal to the Option price (or portion thereof to be so paid) as of the date of the Option’s exercise.  An Option Agreement may also include provisions relating to:  (i) subject to the provisions hereof, accelerated vesting of Options, including but not limited to, upon the occurrence of a Change of Control, (ii) tax matters (including provisions covering any applicable Employee wage withholding requirements and requiring additional “gross-up” payments to Holders to meet any excise taxes or other additional income tax liability imposed as a result of a payment made upon a Change of Control resulting from the operation of the Plan or of such Option Agreement) and (iii) any other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine.  The terms and conditions of the respective Option Agreements need not be identical.

 

7.5           Option Price and Payment.  The price at which an Share may be purchased upon exercise of an Option shall be determined by the Committee; provided, however, that such Option price (i) shall not be less than the Fair Market Value of an Share on the date such Option is granted (or 110% of Fair Market Value for an Incentive Stock Option held by Ten Percent Shareholder, as provided in Section 7.3), and (ii) shall be subject to adjustment as provided in Article XV.  The Option or portion thereof may be exercised by delivery of an irrevocable notice of exercise to the Company.  The Option price for the Option or portion thereof shall be paid in full in the manner prescribed by the Committee as set forth in the Plan and the applicable Option Agreement, which manner, with the consent of the Committee, may include the withholding of Shares otherwise issuable in connection with the exercise of the Option.  Separate share certificates shall be issued by the Company for those Shares acquired pursuant to the exercise of an Incentive Stock Option and for those Shares acquired pursuant to the exercise of a Non-qualified Stock Option.

 

  

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7.6           Shareholder Rights and Privileges.  The Holder of an Option shall be entitled to all the privileges and rights of a shareholder of the Company solely with respect to such Shares as have been purchased under the Option and for which share certificates have been registered in the Holder’s name.

 

7.7           Options and Rights in Substitution for Stock or Options Granted by Other Corporations.  Options may be granted under the Plan from time to time in substitution for stock options held by individuals employed by entities who become Employees, Directors or Consultants as a result of a merger or consolidation of the employing entity with the Company or any Affiliate, or the acquisition by the Company or an Affiliate of the assets of the employing entity, or the acquisition by the Company or an Affiliate of stock or shares of the employing entity with the result that such employing entity becomes an Affiliate.

 

7.8           Prohibition Against Re-Pricing.  Except to the extent (i) approved in advance by holders of a majority of the shares of the Company entitled to vote generally in the election of directors, or (ii) as a result of any Change of Control or any adjustment as provided in Article XV, the Committee shall not have the power or authority to reduce, whether through amendment or otherwise, the exercise price under any outstanding Option or Stock Appreciation Right, or to grant any new Award or make any payment of cash in substitution for or upon the cancellation of Options and/or Stock Appreciation Rights previously granted.

 

ARTICLE VIII

 

RESTRICTED STOCK AWARDS

 

8.1           Award.  A Restricted Stock Award shall constitute an Award of Shares to the Holder as of the date of the Award which are subject to a “substantial risk of forfeiture” as defined under Section 83 of the Code during the specified Restriction Period.  At the time a Restricted Stock Award is made, the Committee shall establish the Restriction Period applicable to such Award.  Each Restricted Stock Award may have a different Restriction Period, in the discretion of the Committee.  The Restriction Period applicable to a particular Restricted Stock Award shall not be changed except as permitted by Section 8.2.

 

8.2           Terms and Conditions.  At the time any Award is made under this Article VIII, the Company and the Holder shall enter into a Restricted Stock Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.  Shares awarded pursuant to a Restricted Stock Award shall be represented by a share certificate registered in the name of the Holder of such Restricted Stock Award.  If provided for under the Restricted Stock Agreement, the Holder shall have the right to vote Shares subject thereto and to enjoy all other shareholder rights, including the entitlement to receive dividends on the Shares during the Restriction Period, except that (i) the Holder shall not be entitled to delivery of the share certificate until the Restriction Period shall have expired, (ii) the Company shall retain custody of the share certificate during the Restriction Period (with a share power endorsed by the Holder in blank), (iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the Shares during the Restriction Period and (iv) a breach of the terms and conditions established by the Committee pursuant to the Restricted Stock Agreement shall cause a forfeiture of the Restricted Stock Award.  At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Restricted Stock Awards, including, but not limited to, rules pertaining to the effect of Termination of Service prior to expiration of the Restriction Period.  Such additional terms, conditions or restrictions shall, to the extent inconsistent with the provisions of Sections 6.2, 6.3 and 6.4, as applicable, be set forth in a Restricted Stock Agreement made in conjunction with the Award.  Such Restricted Stock Agreement may also include provisions relating to:  (i) subject to the provisions hereof, accelerated vesting of Awards, including but not limited to accelerated vesting upon the occurrence of a Change of Control, (ii) tax matters (including provisions covering any applicable Employee wage withholding requirements and requiring additional “gross-up” payments to Holders to meet any excise taxes or other additional income tax liability imposed as a result of a payment made in connection with a Change of Control resulting from the operation of the Plan or of such Restricted Stock Agreement) and (iii) any other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine.  The terms and conditions of the respective Restricted Stock Agreements need not be identical.  All Shares delivered to a Holder as part of a Restricted Stock Award shall be delivered and reported by the Company or the Affiliate, as applicable, to the Holder at the time of vesting.

 

8.3           Payment for Restricted Stock.  The Committee shall determine the amount and form of any payment from a Holder for Shares received pursuant to a Restricted Stock Award, if any, provided that in the absence of such a determination, a Holder shall not be required to make any payment for Shares received pursuant to a Restricted Stock Award, except to the extent otherwise required by law.

 

  

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ARTICLE IX

 

UNRESTRICTED STOCK AWARDS

 

9.1           Award.  Shares may be awarded (or sold) to Employees, Directors or Consultants under the Plan which are not subject to Restrictions of any kind, in consideration for past services rendered thereby to the Company or an Affiliate or for other valid consideration.

 

9.2           Terms and Conditions.  At the time any Award is made under this Article IX, the Company and the Holder shall enter into an Unrestricted Stock Agreement setting forth each of the matters contemplated hereby and such other matters as the Committee may determine to be appropriate.

 

9.3           Payment for Unrestricted Stock.  The Committee shall determine the amount and form of any payment from a Holder for Shares received pursuant to an Unrestricted Stock Award, if any, provided that in the absence of such a determination, a Holder shall not be required to make any payment for Shares received pursuant to an Unrestricted Stock Award, except to the extent otherwise required by law.

 

ARTICLE X

 

RESTRICTED STOCK UNIT AWARDS

 

10.1           Award.  A Restricted Stock Unit Award shall constitute a promise to grant Shares (or cash equal to the Fair Market Value of Shares) to the Holder at the end of a specified Restriction Period.  At the time a Restricted Stock Unit Award is made, the Committee shall establish the Restriction Period applicable to such Award.  Each Restricted Stock Unit Award may have a different Restriction Period, in the discretion of the Committee.  A Restricted Stock Unit shall not constitute an equity interest in the Company and shall not entitle the Holder to voting rights, dividends or any other rights associated with ownership of Shares prior to the time the Holder shall receive a distribution of Shares pursuant to Section 10.3.

 

10.2           Terms and Conditions.  At the time any Award is made under this Article X, the Company and the Holder shall enter into a Restricted Stock Unit Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.  The Restricted Stock Unit Agreement shall set forth the individual service-based vesting requirement which the Holder would be required to satisfy before the Holder would become entitled to distribution pursuant to Section 10.3 and the number of Units awarded to the Holder.  Such conditions shall be sufficient to constitute a “substantial risk of forfeiture” as such term is defined under Section 409A of the Code.  At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Restricted Stock Unit Awards in the Restricted Stock Unit Agreement, including, but not limited to, rules pertaining to the effect of Termination of Service prior to expiration of the applicable vesting period.  The terms and conditions of the respective Restricted Stock Unit Agreements need not be identical.

 

  

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10.3           Distributions of Shares.  The Holder of a Restricted Stock Unit shall be entitled to receive a cash payment equal to the Fair Market Value of one Share, as determined in the sole discretion of the Committee and as set forth in the Restricted Stock Unit Agreement, for each Restricted Stock Unit subject to such Restricted Stock Unit Award, if the Holder satisfies the applicable vesting requirement.  Such distribution shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the calendar year in which the Restricted Stock Unit first becomes vested (i.e., no longer subject to a “substantial risk of forfeiture”).

 

ARTICLE XI

 

PERFORMANCE UNIT AWARDS

 

11.1           Award.  A Performance Unit Award shall constitute an Award under which, upon the satisfaction of predetermined individual and/or Company (and/or Affiliate) Performance Goals based on selected Performance Criteria, a cash payment shall be made to the Holder, based on the number of Units awarded to the Holder.  At the time a Performance Unit Award is made, the Committee shall establish the Performance Period and applicable Performance Goals.  Each Performance Unit Award may have different Performance Goals, in the discretion of the Committee.  A Performance Unit Award shall not constitute an equity interest in the Company and shall not entitle the Holder to voting rights, dividends or any other rights associated with ownership of Shares.

 

11.2           Terms and Conditions.  At the time any Award is made under this Article XI, the Company and the Holder shall enter into a Performance Unit Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.  The Committee shall set forth in the applicable Performance Unit Agreement the Performance Period, Performance Criteria and Performance Goals which the Holder and/or the Company would be required to satisfy before the Holder would become entitled to payment pursuant to Section 11.3, the number of Units awarded to the Holder and the dollar value or formula assigned to each such Unit.  Such payment shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code.  At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Performance Unit Awards, including, but not limited to, rules pertaining to the effect of Termination of Service prior to expiration of the applicable performance period.  The terms and conditions of the respective Performance Unit Agreements need not be identical.

 

11.3           Payments.  The Holder of a Performance Unit shall be entitled to receive a cash payment equal to the dollar value assigned to such Unit under the applicable Performance Unit Agreement if the Holder and/or the Company satisfy (or partially satisfy, if applicable under the applicable Performance Unit Agreement) the Performance Goals set forth in such Performance Unit Agreement.  If necessary to satisfy the requirements of Code Section 162(m), if applicable, the achievement of such Performance Goals shall be certified in writing by the Committee prior to any payment.  All payments shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the Company’s fiscal year to which such performance goals and objectives relate.

  

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ARTICLE XII

 

PERFORMANCE STOCK AWARDS

 

12.1           Award.  A Performance Stock Award shall constitute a promise to grant Shares (or cash equal to the Fair Market Value of Shares) to the Holder at the end of a specified Performance Period subject to achievement of specified Performance Goals.  At the time a Performance Stock Award is made, the Committee shall establish the Performance Period and applicable Performance Goals based on selected Performance Criteria.  Each Performance Stock Award may have different Performance Goals, in the discretion of the Committee.  A Performance Stock Award shall not constitute an equity interest in the Company and shall not entitle the Holder to voting rights, dividends or any other rights associated with ownership of Shares unless and until the Holder shall receive a distribution of Shares pursuant to Section 11.3.

 

12.2           Terms and Conditions.  At the time any Award is made under this Article XII, the Company and the Holder shall enter into a Performance Stock Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.  The Committee shall set forth in the applicable Performance Stock Agreement the Performance Period, selected Performance Criteria and Performance Goals which the Holder and/or the Company would be required to satisfy before the Holder would become entitled to the receipt of Shares pursuant to such Holder’s Performance Stock Award and the number of Shares subject to such Performance Stock Award.  Such distribution shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code.  If such Performance Goals are achieved, the distribution of Shares (or the payment of cash, as determined in the sole discretion of the Committee), shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the Company’s fiscal year to which such goals and objectives relate.  At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Performance Stock Awards, including, but not limited to, rules pertaining to the effect of the Holder’s Termination of Service prior to the expiration of the applicable performance period.  The terms and conditions of the respective Performance Stock Agreements need not be identical.

 

12.3           Distributions of Shares.  The Holder of a Performance Stock Award shall be entitled to receive a cash payment equal to the Fair Market Value of a Share, or one Share, as determined in the sole discretion of the Committee, for each Performance Stock Award subject to such Performance Stock Agreement, if the Holder satisfies the applicable vesting requirement.  If necessary to satisfy the requirements of Code Section 162(m), if applicable, the achievement of such Performance Goals shall be certified in writing by the Committee prior to any payment.  Such distribution shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the Company’s fiscal year to which such performance goals and objectives relate.

 

  

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ARTICLE XIII

 

DISTRIBUTION EQUIVALENT RIGHTS

 

13.1           Award.  A Distribution Equivalent Right shall entitle the Holder to receive bookkeeping credits, cash payments and/or Share distributions equal in amount to the distributions that would have been made to the Holder had the Holder held a specified number of Shares during the specified period of the Award.

 

13.2           Terms and Conditions.  At the time any Award is made under this Article XIII, the Company and the Holder shall enter into a Distribution Equivalent Rights Award Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.  The Committee shall set forth in the applicable Distribution Equivalent Rights Award Agreement the terms and conditions, if any, including whether the Holder is to receive credits currently in cash, is to have such credits reinvested (at Fair Market Value determined as of the date of reinvestment) in additional Shares or is to be entitled to choose among such alternatives.  Such receipt shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code and, if such Award becomes vested, the distribution of such cash or Shares shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the Company’s fiscal year in which the Holder’s interest in the Award vests.  Distribution Equivalent Rights Awards may be settled in cash or in Shares, as set forth in the applicable Distribution Equivalent Rights Award Agreement.  A Distribution Equivalent Rights Award may, but need not be, awarded in tandem with another Award (other than an Option or a SAR), whereby, if so awarded, such Distribution Equivalent Rights Award shall expire, terminate or be forfeited by the Holder, as applicable, under the same conditions as under such other Award.

 

13.3           Interest Equivalents.  The Distribution Equivalent Rights Award Agreement for a Distribution Equivalent Rights Award may provide for the crediting of interest on a Distribution Rights Award to be settled in cash at a future date (but in no event later than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the Company’s fiscal year in which such interest is credited and vested), at a rate set forth in the applicable Distribution Equivalent Rights Award Agreement, on the amount of cash payable thereunder.

 

ARTICLE XIV

 

STOCK APPRECIATION RIGHTS

 

14.1           Award.  A Stock Appreciation Right shall constitute a right, granted alone or in connection with a related Option, to receive a payment equal to the increase in value of a specified number of Shares between the date of Award and the date of exercise.

 

  

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14.2           Terms and Conditions.  At the time any Award is made under this Article XIV, the Company and the Holder shall enter into a Stock Appreciation Right Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.  The Committee shall set forth in the applicable Stock Appreciation Right Agreement the terms and conditions of the Stock Appreciation Right, including (i) the base value (the “Base Value”) for the Stock Appreciation Right, which shall be not less than the Fair Market Value of an Share on the date of grant of the Stock Appreciation Right, (ii) the number of Shares subject to the Stock Appreciation Right, (iii) the period during which the Stock Appreciation Right may be exercised; provided, however, that no Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of its grant, and (iv) any other special rules and/or requirements which the Committee imposes upon the Stock Appreciation Right.  Upon the exercise of some or all of the portion of a Stock Appreciation Right, the Holder shall receive a payment from the Company, in cash or in the form of Shares having an equivalent Fair Market Value or in a combination of both, as determined in the sole discretion of the Committee, equal to the product of:

 

(a)           The excess of (i) the Fair Market Value of an Share on the date of exercise, over (ii) the Base Value, multiplied by,

 

(b)           The number of Shares with respect to which the Stock Appreciation Right is exercised.

 

14.3           Tandem Stock Appreciation Rights.  If the Committee grants a Stock Appreciation Right which is intended to be a Tandem Stock Appreciation Right, the Tandem Stock Appreciation Right shall be granted at the same time as the related Option, and the following special rules shall apply:

 

(a)           The Base Value shall be equal to or greater than the per Share exercise price under the related Option;

 

(b)           The Tandem Stock Appreciation Right may be exercised for all or part of the Shares which are subject to the related Option, but solely upon the surrender by the Holder of the Holder’s right to exercise the equivalent portion of the related Option (and when a Share is purchased under the related Option, an equivalent portion of the related Tandem Stock Appreciation Right shall be canceled);

 

(c)           The Tandem Stock Appreciation Right shall expire no later than the date of the expiration of the related Option;

 

(d)           The value of the payment with respect to the Tandem Stock Appreciation Right may be no more than one hundred percent (100%) of the difference between the per Share exercise price under the related Option and the Fair Market Value of the Shares subject to the related Option at the time the Tandem Stock Appreciation Right is exercised, multiplied by the number of the Shares with respect to which the Tandem Stock Appreciation Right is exercised; and

 

  

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(e)           The Tandem Stock Appreciation Right may be exercised solely when the Fair Market Value of the Shares subject to the related Option exceeds the per Share exercise price under the related Option.

 

ARTICLE XV

 

RECAPITALIZATION OR REORGANIZATION

 

15.1           Adjustments to Shares.  The shares with respect to which Awards may be granted under the Plan are Shares as presently constituted; provided, however, that if, and whenever, prior to the expiration or distribution to the Holder of Shares underlying an Award theretofore granted, the Company shall effect a subdivision or consolidation of the Shares or the payment of an Share dividend on Shares without receipt of consideration by the Company, the number of Shares with respect to which such Award may thereafter be exercised or satisfied, as applicable, (i) in the event of an increase in the number of outstanding Shares, shall be proportionately increased, and the purchase price per Share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding Shares, shall be proportionately reduced, and the purchase price per Share shall be proportionately increased. Notwithstanding the foregoing or any other provision of this Article XV, any adjustment made with respect to an Award (x) which is an Incentive Stock Option, shall comply with the requirements of Section 424(a) of the Code, and in no event shall any adjustment be made which would render any Incentive Stock Option granted under the Plan to be other than an “incentive stock option” for purposes of Section 422 of the Code, and (y) which is a Non-qualified Stock Option, shall comply with the requirements of Section 409A of the Code, and in no event shall any adjustment be made which would render any Non-qualified Stock Option granted under the Plan to become subject to Section 409A of the Code.

 

15.2           Recapitalization.  If the Company recapitalizes or otherwise changes its capital structure, thereafter upon any exercise or satisfaction, as applicable, of a previously granted Award, the Holder shall be entitled to receive (or entitled to purchase, if applicable) under such Award, in lieu of the number of Shares then covered by such Award, the number and class of shares and securities to which the Holder would have been entitled pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the Holder had been the holder of record of the number of Shares then covered by such Award.

 

  

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15.3           Other Events.  In the event of changes to the outstanding Shares by reason of an extraordinary cash dividend, reorganization, merger, consolidation, combination, split-up, spin-off, exchange or other relevant change in capitalization occurring after the date of the grant of any Award and not otherwise provided for under this Article XV, any outstanding Awards and any Award Agreements evidencing such Awards shall be adjusted by the Board in its discretion in such manner as the Board shall deem equitable or appropriate taking into consideration the applicable accounting and tax consequences, as to the number and price of Shares or other consideration subject to such Awards.  In the event of any adjustment pursuant to Sections 15.1, 15.2 or this Section 15.3, the aggregate number of Shares available under the Plan pursuant to Section 5.1 (and the Code Section 162(m) limit set forth therein) may be appropriately adjusted by the Board, the determination of which shall be conclusive.  In addition, the Committee may make provision for a cash payment to a Holder or a person who has an outstanding Award.  The number of Shares subject to any Award shall be rounded to the nearest whole number.

 

15.4           Powers Not Affected.  The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or of the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change of the Company’s capital structure or business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Shares or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.

 

15.5           No Adjustment for Certain Awards.  Except as hereinabove expressly provided, the issuance by the Company of shares of any class or securities convertible into shares of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect previously granted Awards, and no adjustment by reason thereof shall be made with respect to the number of Shares subject to Awards theretofore granted or the purchase price per Share, if applicable.

 

  

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ARTICLE XVI

 

AMENDMENT AND TERMINATION OF PLAN

 

The Plan shall continue in effect, unless sooner terminated pursuant to this Article XVI, until the tenth (10th) anniversary of the date on which it is adopted by the Board (except as to Awards outstanding on that date).  The Board in its discretion may terminate the Plan at any time with respect to any shares for which Awards have not theretofore been granted; provided, however, that the Plan’s termination shall not materially and adversely impair the rights of a Holder with respect to any Award theretofore granted without the consent of the Holder.  The Board shall have the right to alter or amend the Plan or any part hereof from time to time; provided, however, that without the approval by holders of a majority of the shares of the Company entitled to vote generally in the election of directors, no amendment or modification of the Plan may (i) materially increase the benefits accruing to Holders, (ii) except as otherwise expressly provided in Article XV, materially increase the number of Shares subject to the Plan or the individual Award Agreements specified in Article V, (iii) materially modify the requirements for participation in the Plan, or (iv) amend, modify or suspend Section 7.7 (re-pricing prohibitions) or this Article XVI.  In addition, no change in any Award theretofore granted may be made which would materially and adversely impair the rights of a Holder with respect to such Award without the consent of the Holder (unless such change is required in order to cause the benefits under the Plan to qualify as “performance-based” compensation within the meaning of Section 162(m) of the Code or to exempt the Plan or any Award from Section 409A of the Code).

 

ARTICLE XVII

 

MISCELLANEOUS

 

17.1           No Right to Award.  Neither the adoption of the Plan by the Company nor any action of the Board or the Committee shall be deemed to give an Employee, Director or Consultant any right to an Award except as may be evidenced by an Award Agreement duly executed on behalf of the Company, and then solely to the extent and on the terms and conditions expressly set forth therein.

 

17.2           No Rights Conferred.  Nothing contained in the Plan shall (i) confer upon any Employee any right with respect to continuation of employment with the Company or any Affiliate, (ii) interfere in any way with any right of the Company or any Affiliate to terminate the employment of an Employee at any time, (iii) confer upon any Director any right with respect to continuation of such Director’s membership on the Board, (iv) interfere in any way with any right of the Company or an Affiliate to terminate a Director’s membership on the Board at any time, (v) confer upon any Consultant any right with respect to continuation of his or her consulting engagement with the Company or any Affiliate, or (vi) interfere in any way with any right of the Company or an Affiliate to terminate a Consultant’s consulting engagement with the Company or an Affiliate at any time.

  

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17.3           Other Laws; No Fractional Shares; Withholding.  The Company shall not be obligated by virtue of any provision of the Plan to recognize the exercise of any Award or to otherwise sell or issue Shares in violation of any laws, rules or regulations, and any postponement of the exercise or settlement of any Award under this provision shall not extend the term of such Award.  Neither the Company nor its directors or officers shall have any obligation or liability to a Holder with respect to any Award (or Shares issuable thereunder) (i) that shall lapse because of such postponement, or (ii) for any failure to comply with the requirements of any applicable law, rules or regulations, including but not limited to any failure to comply with the requirements of Section 409A of this Code.  No fractional Shares shall be delivered, nor shall any cash in lieu of fractional Shares be paid.  The Company shall have the right to deduct in cash (whether under this Plan or otherwise) in connection with all Awards any taxes required by law to be withheld and to require any payments required to enable it to satisfy its withholding obligations.  In the case of any Award satisfied in the form of Shares, no Shares shall be issued unless and until arrangements satisfactory to the Company shall have been made to satisfy any tax withholding obligations applicable with respect to such Award.  Subject to such terms and conditions as the Committee may impose, the Company shall have the right to retain, or the Committee may, subject to such terms and conditions as it may establish from time to time, permit Holders to elect to tender, Shares (including Shares issuable in respect of an Award) to satisfy, in whole or in part, the amount required to be withheld.

 

17.4           No Restriction on Corporate Action.  Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate from taking any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any Award made under the Plan.  No Employee, Director, Consultant, beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any such action.

 

17.5           Restrictions on Transfer.  No Award under the Plan or any Award Agreement and no rights or interests herein or therein, shall or may be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Holder except (i) by will or by the laws of descent and distribution, or (ii) where permitted under applicable tax rules, by gift to any Family Member of the Holder, subject to compliance with applicable laws.  An Award may be exercisable during the lifetime of the Holder only by such Holder or by the Holder’s guardian or legal representative unless it has been transferred by gift to a Family Member of the Holder, in which case it shall be exercisable solely by such transferee.  Notwithstanding any such transfer, the Holder shall continue to be subject to the withholding requirements provided for under Section 17.3 hereof.

 

17.6           Beneficiary Designations.  Each Holder may, from time to time, name a beneficiary or beneficiaries (who may be contingent or successive beneficiaries) for purposes of receiving any amount which is payable in connection with an Award under the Plan upon or subsequent to the Holder’s death.  Each such beneficiary designation shall serve to revoke all prior beneficiary designations, be in a form prescribed by the Company and be effective solely when filed by the Holder in writing with the Company during the Holder’s lifetime.  In the absence of any such written beneficiary designation, for purposes of the Plan, a Holder’s beneficiary shall be the Holder’s estate.

 

17.7           Rule 16b-3.  It is intended that the Plan and any Award made to a person subject to Section 16 of the Exchange Act shall meet all of the requirements of Rule 16b-3.  If any provision of the Plan or of any such Award would disqualify the Plan or such Award under, or would otherwise not comply with the requirements of, Rule 16b-3, such provision or Award shall be construed or deemed to have been amended as necessary to conform to the requirements of Rule 16b-3.

 

  

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17.8           Section 162(m).  The following conditions shall apply if it is intended that the requirements of Section 162(m) of the Code be satisfied such that Awards under the Plan which are made to Holders who are “covered employees” (as defined in Section 162(m) of the Code) shall constitute “performance-based” compensation within the meaning of Section 162(m) of the Code:  Any Performance Goal(s) applicable to Qualified Performance-Based Awards shall be objective, shall be established not later than ninety (90) days after the beginning of any applicable Performance Period (or at such other date as may be required or permitted for “performance-based” compensation under Section 162(m) of the Code) and shall otherwise meet the requirements of Section 162(m) of the Code, including the requirement that the outcome of the Performance Goal or Goals be substantially uncertain (as defined in the regulations under Section 162(m) of the Code) at the time established.  The Performance Criteria to be utilized under the Plan to establish Performance Goals shall consist of objective tests based on one or more of the following: earnings or earnings per share, cash flow or cash flow per share, operating cash flow or operating cash flow per share revenue growth, product revenue growth, financial return ratios (such as return on equity, return on investment and/or return on assets), share price performance, shareholder return, equity and/or value, operating income, operating margins, earnings before interest, taxes, depreciation and amortization, earnings, pre- or post-tax income, economic value added (or an equivalent metric), profit returns and margins, credit quality, sales growth, market share, working capital levels, comparisons with various share market indices, year-end cash, debt reduction, assets under management, operating efficiencies, strategic partnerships or transactions (including co-development, co-marketing, profit sharing, joint venture or other similar arrangements), and/or financing and other capital raising transaction.  Performance criteria may be established on a Company-wide basis or with respect to one or more Company business units or divisions or subsidiaries; and either in absolute terms, relative to the performance of one or more similarly situated companies, or relative to the performance of an index covering a peer group of companies.  When establishing Performance Goals for the applicable Performance Period, the Committee may exclude any or all “extraordinary items” as determined under U.S. generally accepted accounting principles including, without limitation, the charges or costs associated with restructurings of the Company, discontinued operations, other unusual or non-recurring items, and the cumulative effects of accounting changes, and as identified in the Company’s financial statements, notes to the Company’s financial statements or management’s discussion and analysis of financial condition and results of operations contained in the Company’s most recent annual report filed with the U.S. Securities and Exchange Commission pursuant to the Exchange Act.  Holders who are “covered employees” (as defined in Section 162(m) of the Code) shall be eligible to receive payment under a Qualified Performance-Based Award which is subject to achievement of a Performance Goal or Goals only if the applicable Performance Goal or Goals are achieved within the applicable Performance Period, as determined by the Committee.  If any provision of the Plan would disqualify the Plan or would not otherwise permit the Plan to comply with Section 162(m) of the Code as so intended, such provision shall be construed or deemed amended to conform to the requirements or provisions of Section 162(m) of the Code.  The Committee may postpone the exercising of Awards, the issuance or delivery of Shares under any Award or any action permitted under the Plan to prevent the Company or any subsidiary from being denied a federal income tax deduction, provided that such deferral satisfies the requirements of Section 409A of the Code.

 

  

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17.9           Section 409A.  Notwithstanding any other provision of the Plan, the Committee shall have no authority to issue an Award under the Plan with terms and/or conditions which would cause such Award to constitute non-qualified “deferred compensation” under Section 409A of the Code unless such Award shall be structured to be exempt from or comply with all requirements of Code Section 409A.  The Plan and all Award Agreements are intended to comply with the requirements of Section 409A of the Code (or to be exempt therefrom) and shall be so interpreted and construed and no amount shall be paid or distributed from the Plan unless and until such payment complies with all requirements of Code Section 409A.  It is the intent of the Company that the provisions of this Agreement and all other plans and programs sponsored by the Company be interpreted to comply in all respects with Code Section 409A, however, the Company shall have no liability to the Holder, or any successor or beneficiary thereof, in the event taxes, penalties or excise taxes may ultimately be determined to be applicable to any payment or benefit received by the Holder or any successor or beneficiary thereof.

 

17.10           Indemnification.  Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred thereby in connection with or resulting from any claim, action, suit, or proceeding to which such person may be made a party or may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid thereby in settlement thereof, with the Company’s approval, or paid thereby in satisfaction of any judgment in any such action, suit, or proceeding against such person; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf.  The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-laws, by contract, as a matter of law, or otherwise.

 

17.11           Other Benefit Plans.  No Award, payment or amount received hereunder shall be taken into account in computing an Employee’s salary or compensation for the purposes of determining any benefits under any pension, retirement, life insurance or other benefit plan of the Company or any Affiliate, unless such other plan specifically provides for the inclusion of such Award, payment or amount received.  Nothing in the Plan shall be construed to limit the right of the Company to establish other plans or to pay compensation to its employees, in cash or property, in a manner which is not expressly authorized under the Plan.

 

17.12           Limits of Liability.  Any liability of the Company with respect to an Award shall be based solely upon the contractual obligations created under the Plan and the Award Agreement.  None of the Company, any member of the Board nor any member of the Committee shall have any liability to any party for any action taken or not taken, in good faith, in connection with or under the Plan.

 

  

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17.13           Governing Law.  Except as otherwise provided herein, the Plan shall be construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law.

 

17.14           Severability of Provisions.  If any provision of the Plan is held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision of the Plan, and the Plan shall be construed and enforced as if such invalid or unenforceable provision had not been included in the Plan.

 

17.15           No Funding.  The Plan shall be unfunded.  The Company shall not be required to establish any special or separate fund or to make any other segregation of funds or assets to ensure the payment of any Award.  Prior to receipt of Shares or a cash distribution pursuant to the terms of an Award, such Award shall represent an unfunded unsecured contractual obligation of the Company and the Holder shall have no greater claim to the Shares underlying such Award or any other assets of the Company or Affiliate than any other unsecured general creditor.

 

17.16           Headings.  Headings used throughout the Plan are for convenience only and shall not be given legal significance.

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