Document:

exv10w85

Exhibit 10.85

1

Supply Agreement

	 	 	 	 	 	 
	 	Client Name:
	 	 	QUESTCOR	 
	 	Agreement Effective Date:
	 	 	01/21/2010	 
	 

1111 South Palm Street

Baltimore, MD 21230

(Ph) 410-843-51100

(Fax) 410-843-4414

 

			
	1	 	[***]: Certain confidential information contained in this document marked
with [***] has been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

PROJECT PROPOSAL

Contact Information:

	 	 	 	 	 	 	 
	TO

	 	Dave Medeiros
	 	FROM
	 	Greg Mino
	 

	 	SVP, Manufacturing
	 	 	 	Director, BD & PM
	 

	 	Questcor Pharmaceuticals, Inc.
	 	 	 	Cangene bioPharma, Inc.
	 

	 	3260 Whipple Road
	 	 	 	1111 South Paca Street
	 

	 	Union City, CA 94587
	 	 	 	Baltimore, MD 21230
	 

	 	DMedeiros@questcor.com
	 	 	 	mingog@cblinc.com
	 

	 	Ph: (510) 400-0772
	 	 	 	Ph: 410- 843-5005 x 2088
	 

	 	Fax: (510) 400-0715
	 	 	 	Fax: 410-843-4414

Product info:

	 	 	 
	Product Name

	 	HP Acthar Gel
	Presentation

	 	Vial/liquid presentation
	Regulatory Status

	 	Commercial

General Assumptions:

     Cangene bioPharma will:

	 	1	 	Provide processing and laboratory equipment for each manufacturing run.
	 
	 	2	 	Perform all work under approved Cangene bioPharma SOP’s and/or protocols.
	 
	 	3	 	Ensure that all product contact equipment is either virgin, product
dedicated, or released as clean by validated cGMP methods.
	 
	 	4	 	Perform validation work as listed within this proposal, which will, in
general, precede the sterile fill.
	 
	 	5	 	Fill product gravimetrically with density data obtained during development.
	 
	 	6	 	Write a Cangene bioPharma batch record, which is developed from
information provided by the Client.
	 
	 	7	 	Provide Client with a copy of the completed Batch Production Record,
including a Certificate of Analysis.

     QUESTCOR will provide the following:

	 	1	 	Provide to Cangene bioPharma the Signed Proposal Acceptance Sheet
prior to project commencement (commencement activities include
development of timeline, ordering of any project-related materials or
development of protocols/batch records).
	 
	 	2	 	Provide all pertinent product information such that Cangene bioPharma
can assure employee safety. For small molecules and polymers, Cangene
bioPharma requires the chemical structure of the API. For peptides,
proteins or nucleic acids, Cangene bioPharma is looking for suitable
chemical characterization data. For biologicals, safety documentation
must include testing for viral markers and validation of viral
clearance steps in the manufacture of API.
	 
	 	3	 	Provide those items as agreed upon and which may include container and
closures, pre-released bulk product, MSDS, Certificate of Analysis,
label text, assay methods, reference standard and other documentation.
	 
	 	4	 	Approve the batch record by signature.
	 
	 	5	 	Secure any necessary approvals for the use of the product.
	 
	 	6	 	Perform all additional testing necessary for release of the product
not performed by Cangene bioPharma.

2

 

Agreement purpose:

THIS SUPPLY AGREEMENT (the “Agreement”) is entered into as of the effective date, by and between
Questcor Pharmaceuticals, Inc., having an address at 3260 Whipple Road, Union City, CA 94587 and
Cangene bioPharma, INC., a Maryland corporation having an address at 1111 South Paca Street,
Baltimore, MD 21230, with respect to the following:

RECITALS

	 	A.	 	Questcor is in the business of developing and commercializing drug products.
	 
	 	B.	 	Cangene bioPharma is in the business of formulating, sterilizing, filling, and
packaging liquid injectable drug products.
	 
	 	C.	 	Questcor and Cangene bioPharma desire to enter into this Agreement in order to
establish the terms and conditions under which Cangene bioPharma will formulate, fill,
and package for Questcor the various Products included in the Product Descriptions at
Exhibit A hereto.

NOW THEREFORE, in consideration of the premises and the mutual promises and covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

The policies, terms and conditions detailed in this agreement and on the second page of the
acceptance page will be in effect for the duration of this agreement and these terms and conditions
will take precedence over any specified in other documentation including Questcor’s.

ARTICLE II

The term of this Agreement shall commence on the effective date and continue until notice of no
less than twelve (12) months is given by either Questcor or Cangene bioPharma to the other.

Cangene bioPharma will continue to provide the same manufacturing services, if notice of
termination is given by Cangene bioPharma, until Questcor transfers the manufacturing to an
alternative site and manufacturing at the alternative site is approved by the FDA or until three
(3) years from the date of the notice of termination, whichever is shorter.

ARTICLE III

Cangene bioPharma shall prepare and maintain the Master Batch Record for the fill of the product at
Cangene bioPharma. This Master Batch Record will be approved by Questcor and will detail required
processing steps and indicate responsibilities for supply of materials.

3

 

ARTICLE IV

Commencing January 1, 2011 and on an annual basis thereafter, the price for the Product may be
increased by way of written notification from Cangene bioPharma to Questcor. [***]†

 

			
	[***]	 	CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION

4

 

Project Activities:

Equipment & Materials

Project Specific Direct Expenses

Due to the variable scope of projects at Cangene bioPharma, it is necessary to
recover project material costs [***]

Laboratory Support Activities

Manufacturing Support Activities

Engineering Run

While Cangene bioPharma has extensive expertise aseptically filling vials,
every fill has unique and significant nuances that are best addressed with
formal operator training. An obvious difference between fills is the product
and the product’s handling characteristics. Somewhat less obvious is the
container that holds the product and the fittings and specific manipulations
required for each fill. For nearly every product that Cangene bioPharma fills
the instructions for sterilization, including the mechanics for setup of the
sterilization, are unique. Often there is an accompanying formulation or
associated temperature control for which operator training is an issue.

Beyond sterilization, Cangene bioPharma routinely operates multiple pieces of
filling equipment, each with a wide variety of change parts. The total number
of combinations is just large enough that very few set-ups are counted as
routine. Besides operator training, other reasons for performing an
engineering run include assurance that the proper pump has been chosen and that
the pump speeds are consistent with the number of units to be filled. In
addition Cangene bioPharma operators will obtain equipment settings that can be
added to the batch record.

Engineering runs must, of course, be performed in the fill room with the actual
equipment and operators expected for the fill. However, a major reason for the
work is to obtain appropriate data for accurately writing the batch record. As
a consequence, the run will not be performed with a batch record but rather
with a protocol and in some cases with two or more protocols. Actual product
may be needed depending upon the specific study objectives. In other cases, it
will be possible to utilize a simulant (placebo) and obtain suitable results.

Documentation Support Activities

Master Batch Record Revision

Cangene bioPharma will revise an existing master batch record previously
generated at Cangene bioPharma and approved by Cangene bioPharma and the
client. All changes will be recorded in the change history in accordance with
cGMPs.

5

 

For each master batch record revised by Cangene bioPharma for a client, it is
expected that clients will have input to the master batch record prior to the
start of the revision process. Such input may come from a formal technical
transfer package provided to Cangene bioPharma, a client meeting, phone
conversations with the client, or other written or verbal communication. In
addition, after the first formal client review, it is expected that Cangene
bioPharma will make one round of corrections and changes at no charge, at which
time the proposed batch record will be sent to the client for final signature
indicating approval. Excluding corrections of information previously
transmitted, any additional client requested changes to the batch record will
be charged to the client at Cangene bioPharma’s hourly rate.

Other Documentation

Cangene bioPharma will develop other specifications, SOPs, testing standards,
or protocols as required to execute client requested activities. For these
items, Cangene bioPharma will provide a cost estimate for the work required for
approval by the client prior to commencing any work.

[***]‡

Manufacturing Activities

Fill Price

The price is based on a clean room day charge composed of a fixed and variable
portion, plus per unit packaging costs as detailed below

	a)	 	Purchase and GMP receipt of excipients, components, other materials
	 
	b)	 	Sufficient trained operators using [***] clean room and necessary ancillary
equipment and facilities [***] for the express purpose of manufacturing client
product according to a batch record that has been pre-determined and agreed to
by Cangene bioPharma and the client.
	 
	c)	 	A [***] room and trained [***] personnel [***] as may be required by the
agreed batch record and inclusive of the filling time overlap.
	 
	d)	 	Standby, on call laboratory personnel to perform in process QC testing.
	 
	e)	 	Environmental monitoring before, during and after the fill and trained
environmental personnel.
	 
	f)	 	Post process cleaning and metrology overhead such as equipment maintenance,
calibration, and sterile filter integrity testing.
	 
	g)	 	Visual inspection of [***].
	 
	h)	 	Finished product analytical testing that is performed at Cangene bioPharma.
	 
	i)	 	Sterility Testing
	 
	j)	 	Quality assurance review of all GMP paperwork.
	 
	k)	 	One copy of the completed batch record on file at Cangene bioPharma,
including all associated CofA’s, environmental reporting, and analytical and
microbiological results.

QA/Regulatory Requirements & Support

Investigations

In the case that testing reveals out-of-specification results or exceptional
results, the Client will be notified and an investigation will be completed.
All work (including the time-spent reviewing the investigation with management
and quality assurance personnel) associated with the investigations, which are
not deemed to be a Cangene bioPharma error, will be invoiced at an hourly rate

 

			
	[***]	 	CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION

6

 

Regulatory Affairs Support

Regulatory Affairs and Quality Assurance personnel will be available to support the
preparation of the FDA submission and to support the submission during the review process via
telephone, mail or in person. Specific work that may be charged to the client as regulatory
support includes the following.

	•	 	Meetings with government (US or foreign) authorities, whether in person or by phone.
	 
	•	 	Preparation of documents in anticipation of a pre-Approval Inspection (PAI).
	 
	•	 	Audits of Cangene bioPharma by or on the behalf of the client in excess of one per
year.
	 
	•	 	All audit correspondence beyond the initial response, including client requested
revisions to Cangene bioPharma’s audit response.
	 
	•	 	Letters of reference from Cangene bioPharma or Cangene bioPharma’s vendors that are
requested by the client. (e.g. Master file reference letters, rubber or glass component vendor
letters)
	 
	•	 	Documentation provided to regulatory authorities on behalf of the client. (e.g. GMP
compliance and Debarment letters)
	 
	•	 	All correspondence and documentation generated for or on the behalf of the client.
	 
	•	 	Annual product reviews for commercial products, as required by the controlling
regulatory authority.
	 
	•	 	All time used for collecting and photocopying client documentation. One copy of a
complete batch record is exempted from support charges.

7

 

Pricing Page:

Equipment & Materials

	 	 	 	 	 	 	 	 	 
	Qty	 	Activity	 	Deliverable	 	Price	 	Estimated Total
	(***§)

	 	Project Specific
Direct Expenses

(invoiced with each
fill)
	 	Invoice
	 	[***]
	 	[***]

Laboratory Support Activities

Cangene bioPharma will notify N/A should testing yield aberrant or
out-of-specification data. All work (including time spent reviewing the
investigation with Laboratory management and quality assurance personnel)
associated with Laboratory investigations that are not deemed laboratory error
will be charged to N/A at the hourly rate. N/A also agrees to pay for any
retests that confirm the original test results including marginal pass/fail
results. Cangene bioPharma will revise transfer protocols and/or final reports
once at no additional charge upon N/A request. Additional revisions to
protocols or final reports will be conducted at the hourly rate. N/A will not
be charged for revisions required due to Cangene bioPharma error.

Manufacturing Support Activities

	 	 	 	 	 	 	 	 	 
	Qty	 	Activity	 	Deliverable	 	Price	 	Estimated Total
	[***]	 	Engineering Run *

- If required

	 	Report
	 	[***]
	 	[***]

 

			
	*	 	Unanticipated results may result in the need for additional Engineering runs or other studies.

Documentation Support Activities

	 	 	 	 	 	 	 	 	 
	Qty	 	Activity	 	Deliverable	 	Price	 	Estimated Total
	[***]

	 	Master Batch Record Revision
	 	Master Batch Record
	 	[***]
	 	[***]
	[***]

	 	Other Documentation
	 	TBD
	 	[***]
	 	[***]

Manufacturing Activities

	 	 	 	 	 	 	 	 	 
	Qty	 	Activity	 	Deliverable	 	Price	 	Estimated Total
	[***]	 	Fill Price — [***]

[***]

	 	Batch Record
	 	[***]
	 	[***]

QA/Regulatory Requirements & Support

	 	 	 	 	 	 	 	 	 
	Qty	 	Activity	 	Deliverable	 	Price	 	Estimated Total
	[***]

	 	Investigations
	 	Report
	 	[***]
	 	[***]
	[***]

	 	Regulatory Affairs Support
	 	Support
	 	[***]
	 	[***]

 

			
	[***]	 	CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY
WITH THE COMMISSION

8

 

Terms: Purchase Orders for any work under this agreement are to be issued.

	 	•	 	(*****). at shipment of executed batch record, [***]
	 
	 	•	 	Qualification/Validation Studies will be invoiced when each report is sent to
the client completed or for signature (if required), [***]
	 
	 	•	 	[***]
	 
	 	•	 	Cangene bioPharma’s Cancellation and Terms and Conditions policies apply.
	 
	 	•	 	Hazardous or medical waste will be manifested and discarded as required by state
and federal laws. [***]

Cangene bioPharma Scheduling Policy

In order for Cangene bioPharma to provide Clients with a meaningful expected schedule, and reduce
the chance of Clients being subjected to cancellation fees, Cangene bioPharma adheres to this
policy. This policy allows predictability in timing of fills and a much higher level of assurance
of an on-time delivery of product.

	 	•	 	Clients will provide to Cangene bioPharma a [***] forecast [***].
	 
	 	•	 	Clients will provide [***] materials identified as being client supplied materials to
Cangene bioPharma with proper documentation [***] in advance of a fill.
	 
	 	•	 	Clients shall supply a Purchase Order for batches to be filled [***].
	 
	 	•	 	Cangene bioPharma requires that an approved master batch record for the fill along with
any other project specific materials be in place prior to a firm fill date being assigned.

Once the above conditions are met, Cangene bioPharma will provide the client a fill date [***].

 

			
	[***]	 	CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY
WITH THE COMMISSION

9

 

	 	 	[***]

Cangene bioPharma Cancellation Policy

	1.	 	Clean room [***] will not be assigned without a valid purchase order.
	 
	2.	 	All purchase orders must be accompanied by the requisite prepayment.
	 
	3.	 	If a fill is CANCELLED, the fee schedule in effect at the time of the cancellation will
apply. [***]
	 
	4.	 	If the project or a project vignette is terminated by the client, all hours obligated against
the project will be billed [***]. Additionally, an early project termination fee [***]
applies to project cancellation.
	 
	5.	 	Once a fill is cancelled, a new quote and purchase order will be required to renew the order.

Cangene bioPharma Document Approval Policy

In order for Cangene bioPharma to provide clients with meaningful schedules and timely closeout of
reports, deviations, executed batch records, etc., Cangene bioPharma adheres to this policy. This
policy allows for predictability in the timing of the approval of master batch records, reports,
deviations and other documentation and encourages clients to provide thorough and timely feedback
during document approval.

Clients will have the following time periods for review and comment for the documents below once
sent by Cangene bioPharma. After that time period, Cangene bioPharma may opt to close the document
by noting that the client did not respond within the required timeframe

	 	•	 	Master Batch Records: [***]
	 
	 	•	 	(Routine Validation or Laboratory Reports: [***]
	 
	 	•	 	Technical Transfer and Process Validation Reports: [***]

10

 

	 	•	 	Deviations: [***] (Failure to return deviations promptly will affect executed batch
release times)
	 
	 	•	 	Investigations: [***]

For master batch records specifically, [***] of master batch record approval changes by the client
is included in the cost of developing the initial master batch record. Changes to batch records or
requested planned variances after this initial review by the client will be billed at the current
rate for documentation changes. Changes generated by Cangene bioPharma will not be billed to the
client. By signing the Master Batch Record, clients are agreeing that the manufacturing process in
the record is what they expect to occur. For this reason, Cangene bioPharma expects clients to pay
particular attention to the most vital areas of the record, including but not limited to
specifications, formulation calculations and steps, in-process and final product testing and fill
target parameters, Cangene bioPharma will not be liable for errors in lots filled in accordance
with client approved master production records as a result of incorrect or omitted client-and
product-specific information.

Cangene bioPharma Project Completion Policy

In order for Cangene bioPharma to provide Clients with a satisfactory experience and allow Cangene
bioPharma to properly allocate resources, Cangene bioPharma adheres to this policy. This policy
allows for Cangene bioPharma to maintain its focus on active projects while giving appropriate
support to clients whose projects have been completed.

Clients at Cangene bioPharma authorize work through signing quotes, contracts, or change orders.
In order to bring closure to the process, the project will be considered closed one month after the
last report or batch record is sent to the client. Requests for information, regulatory support or
additional work after this point require Cangene bioPharma to identify the scope of the request and
issue a new quote, contract, or change order to cover the request.

This policy will ensure that clients at Cangene bioPharma will receive the proper amount of
attention while their projects are being completed.

Cangene bioPharma Inventory Return Policy

In order for Cangene bioPharma to provide Clients with a satisfactory experience and allow Cangene
bioPharma to properly allocate resources, Cangene bioPharma adheres to this policy. This policy
allows for Cangene bioPharma to maintain its focus on active projects.

Clients frequently send material to Cangene bioPharma for developmental or GMP use. These
materials are given a period of [***]†† (unless a shorter length is specified by the
client) before they are designated as “aged material.” Clients with “aged material” will be
contacted by project management with a request for disposition of the material. The material will
be disposed of or returned to the client at the client’s expense. [***]. If no instructions are
received, the material will be returned to the client. Additionally, if a client becomes inactive
(no purchase orders or projected schedule of fills at Cangene bioPharma) [***], the client will be
contacted by project management requesting disposition instructions as above.

This policy will ensure that Cangene bioPharma has sufficient space to maintain inventory for
active projects.

 

			
	[***]	 	CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY
WITH THE COMMISSION

11

 

PROPOSAL ACCEPTANCE SHEET

Completion of this Acceptance Sheet signifies client acceptance of Cangene bioPharma and Questcor
Supply Agreement, dated 01/21/2010, including the terms and conditions listed on the next page.
These terms and conditions will take precedence over any specified in the customer’s documentation.

All invoicing is to be sent directly to:

	 	 	 	 	 	 	 	 	 	 	 
	Accounts Payable	 	 	 	Optional additional Addressee:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	Name:	 	 	 	 
	Telephone No.:

	 	 

	 	 	 	Address: 	 	 

	 	 
	 

	 	 

	 	 	 	 	 
	 	 
	Address:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

Supply Agreement Approval Signatures:

	 	 	 	 	 	 	 
	Questcor Pharmaceuticals, Inc.

	 	 	 	Cangene bioPharma, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	Signature

	 	 	 	Signature	 	 
	 
	 	 	 	 	 	 
		 
	 	 	General Manager	 	 
	 
Title

	 	 	 	Title	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Vicki Wolff-Long	 	 
	 
Name (type or print)

	 	 	 	Name	 	 
	 
	 	 	 	 	 	 
	 
	 
Date

	 	 	 	 
Date	 	 

12

 

Cangene bioPharma, INC.

Terms and Conditions Precedent w the Acceptance of a Purchase Order

	1.	 	Cangene bioPharma will be responsible for dutifully performing instructions according to a
batch record, which has been jointly agreed to by the Customer and Cangene bioPharma. The
customer acknowledges that the work to be performed by Cangene bioPharma is experimental in
nature and portions of the work may not have been fully validated within generally accepted
standards of the pharmaceutical industry. As such, Cangene bioPharma will not be responsible
for unexpected results that can be attributed to a process or procedure either supplied by, or
requested by the Customer, that has not been fully validated.
	 
	2.	 	All documentation and submissions to regulatory authorities in support of the Customer’s
product are the responsibility of the Customer. No documentation will be provided by Cangene
bioPharma except as specifically contracted between the Customer and Cangene bioPharma.
	 
	3.	 	Cangene bioPharma makes no representation or warranties regarding the suitability of the
Customer’s product for any purpose whatsoever, or for the efficacy of such product.
	 
	4.	 	The Customer is solely responsible for providing complete and accurate scientific data to
Cangene bioPharma regarding Customer’s product and Customer’s requirements for formulation,
fill and finish of Customer’s product.
	 
	5.	 	In accepting its obligations under the terms of the Purchase Order, Cangene bioPharma has
relied upon the accuracy, completeness and correctness of the data and information provided by
the Customer in developing the project, any associated time line and the estimated or fixed
cost for the project. It is understood by the Customer that additional charges may be billed
to the Customer in the event that any data or information provided by the customer proves to
be incorrect, incomplete or in error and as a result requires more effort by Cangene bioPharma
than anticipated in the original project proposal.
	 
	6.	 	The Customer warrants to Cangene bioPharma that all substances delivered by Customer to
Cangene bioPharma will be free of hazardous or toxic material and that no specific safe
handling instructions are applicable to any such substance or materials, except as disclosed
to Cangene bioPharma in writing by Customer in sufficient time for review by Cangene bioPharma
and prior to delivery to Cangene bioPharma.
	 
	7.	 	The Customer represents and warrants to Cangene bioPharma that all finished product delivered
by Cangene bioPharma to Customer will be held and/or used or disposed of by Customer in a safe
and responsible manner, and in accordance with all applicable laws, rules and regulations.
	 
	8.	 	Prepayment fees (not including Commencement/Project initiation fees), where applicable, are
refundable less charges under Cangene bioPharma’s Cancellation and Postponement Policy and/or
the expenses incurred by Cangene bioPharma prior to the cancellation or postponement. Other
payments including Commencement/Project Initiation fees are non-refundable.
	 
	9.	 	The specific work to be invoiced by Cangene bioPharma is set forth in the quote. The
Customer acknowledges that the quote may be inadequate due to unforeseen circumstances which
increase the amount of work required to complete the project. Cangene bioPharma will notify
the customer immediately if the costs to complete the project exceed the proposed budget. No
additional work involving charges in excess of the project quote will commence without
customer approval.
	 
	10.	 	The Customer acknowledges and agrees that Cangene bioPharma’s liability to Customer is
limited to the value of the amounts invoiced by Cangene bioPharma and that Cangene bioPharma’s
obligations to Customer are limited to performance by Cangene bioPharma of services
(formulation, sterilization, fill and finish) in accordance with the master batch record and
applicable Good Manufacturing Practices (GMP’s). Accordingly, except to the extent of value
of the work invoiced, notwithstanding. Cangene bioPharma’s negligence or failure to perform
in accordance with applicable GMP’s and the batch record, Cangene bioPharma shall have no
responsibility or obligation to Customer for Customer’s pharmaceutical product delivered to
Cangene bioPharma, or for any delay encountered by Customer in its product development or
product approval process, resulting from Cangene bioPharma’s actions or inactions.
	 
	11.	 	In the course of performing its obligation under the terms of the Purchase Order, Cangene
bioPharma may purchase materials in anticipation of events identified by the Quotation to
which the Purchase Order has authorized work or by Customer signed change orders to the same.
Should those materials become unusable to the project as a consequence of delays in or changes
to the project, including but not limited to postponement or cancellation, and whether such
delays or changes can be attributed to the actions or inactions of Cangene bioPharma, the cost
of such materials will be invoiced to the customer and the customer agrees to pay to Cangene
bioPharma the amounts so invoiced.
	 
	12.	 	The arrangement between Cangene bioPharma and Customer is one of service provider and
Customer. No joint venture, partnership or agency is to be created or deemed as between
Cangene bioPharma and Customer.
	 
	13.	 	The Customer agrees to indemnify and hold Cangene bioPharma and its employees and agents
harmless from any claim or liability, including attorney’s fees, incurred or made against
Cangene bioPharma arising out of or relating to any breach of any representation or warranty
made by Customer to Cangene bioPharma hereunder, or otherwise, including, without limitation,
any claim or liability asserted by any participant in any clinical trial of Customer’s
product.
	 
	14.	 	Cangene bioPharma shall not be liable for the replacement or for the cost or value of any
Active Ingredient, Materials or production equipment supplied to Cangene bioPharma by the
Customer including but not limited to any Active Ingredient Materials or production equipment
lost or damaged or incorporated into any rejected or nonconforming batch of product.

13exv10w4

Exhibit 10.4

CARDIAC SCIENCE CORPORATION

2002 STOCK INCENTIVE PLAN

SECTION 1. PURPOSE

     The purpose of the Cardiac Science Corporation 2002 Stock Incentive Plan (the “Plan”) is to
enhance the long-term shareholder value of Cardiac Science Corporation, a Delaware corporation (the
“Company”), by offering opportunities to selected persons to participate in the Company’s growth
and success, and to encourage them to remain in the service of the Company or a Related Company (as
defined in Section 2) and to acquire and maintain stock ownership in the Company.

SECTION 2. DEFINITIONS

     In the Plan:

     “Award” means any Option or Stock Award.

     “Board” means the Board of Directors of the Company.

     “Cause,” unless otherwise defined in the instrument evidencing the Award or in a written
employment or services agreement between the Company or a Related Company and the Participant,
means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or
trade secrets, or conviction or confession of a crime punishable by law (except minor violations),
in each case as determined by the Plan Administrator, and its determination shall be conclusive and
binding.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     “Common Stock” means the common stock, par value $0.001 per share, of the Company.

     “Company Transaction,” unless otherwise defined in the instrument evidencing the Award or in a
written employment or services agreement between the Participant and the Company or a Related
Company, means consummation of either

     (a) a merger or consolidation of the Company with or into any other company, entity or person
or

     (b) a sale, lease, exchange or other transfer in one transaction or a series of related
transactions undertaken with a common purpose of all or substantially all the Company’s then
outstanding securities or all or substantially all the Company’s assets;

provided, however, that a Company Transaction shall not include a Related Party Transaction.

1

 

     “Disability” unless otherwise defined by the Plan Administrator or in the instrument
evidencing the Award or in a written employment or services agreement between the Participant and
the Company or a Related Company, means a mental or physical impairment of the Participant that is
expected to result in death or that has lasted or is expected to last for a continuous period of 12
months or more and that causes the Participant to be unable, in the opinion of the Plan
Administrator, to perform his or her duties for the Company or a Related Company and to be engaged
in any substantial gainful activity.

     “Early Retirement” means Termination of Service prior to Retirement on terms and conditions
approved by the Plan Administrator.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Fair Market Value” means the per share value of the Common Stock as established in good faith
by the Plan Administrator or, if the Common Stock is (a) listed on the Nasdaq National Market, the
closing sales price for the Common Stock as reported by that market for regular session trading for
a single trading day, or (b) listed on the New York Stock Exchange or the American Stock Exchange,
the closing sales price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for regular session trading for a single trading day. If
there is no such reported price for the Common Stock for the date in question, then such price on
the last preceding date for which such price exists shall be determinative of Fair Market Value.

     “Grant Date” means the date on which the Plan Administrator completes the corporate action
authorizing the grant of an Award or such later date specified by the Plan Administrator provided
that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.

     “Incentive Stock Option” means an Option granted with the intention that it qualify as an
“incentive stock option” as that term is defined in Section 422 of the Code.

     “Nonqualified Stock Option” means an Option other than an Incentive Stock Option.

     “Option” means the right to purchase Common Stock granted under Section 7.

     “Option Expiration Date” has the meaning set forth in Section 7.6.

     “Option Term” has the meaning set forth in Section 7.3.

     “Participant” means the person to whom an Award is granted.

     “Plan Administrator” has the meaning set forth in Section 3.1.

     “Related Company” means any entity that, directly or indirectly, is in control of or is
controlled by, the Company.

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     “Related Party Transaction” means (a) a merger or consolidation of the Company in which the
holders of the outstanding voting securities of the Company immediately prior to the merger or
consolidation hold at least a majority of the outstanding voting securities of the Successor
Company immediately after the merger or consolidation; (b) a sale, lease, exchange or other
transfer of the Company’s assets to a majority-owned subsidiary company; (c) a transaction
undertaken for the principal purpose of restructuring the capital of the Company, including but not
limited to, reincorporating the Company in a different jurisdiction or creating a holding company;
or (d) a corporate dissolution or liquidation.

     “Retirement,” unless otherwise defined by the Plan Administrator from time to time for
purposes of the Plan, means Termination of Service on or after the date the individual reaches
“normal retirement age” as that term is defined in Section 411(a)(8) of the Code.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Stock Award” means an Award of shares of Common Stock or units denominated in Common Stock
granted under Section 9, the rights of ownership of which may be subject to restrictions prescribed
by the Plan Administrator.

     “Successor Company” means the surviving company, the successor company or its parent, as
applicable, in connection with a Company Transaction.

     “Termination of Service” means a termination of employment or service relationship with the
Company or a Related Company for any reason, whether voluntary or involuntary, including death,
Disability, Early Retirement or Retirement, as determined by the Plan Administrator in its sole
discretion. Any question as to whether and when there has been a Termination of Service for the
purposes of an Award and the cause of such Termination of Service shall be determined by the Plan
Administrator and its determination shall be final. Transfer of the Participant’s employment or
service relationship between Related Companies, or between the Company and any Related Company,
shall not be considered a Termination of Service for purposes of an Award, but unless the Plan
Administrator determines otherwise, a Termination of Service shall be deemed to occur if the
Participant’s employment or service relationship is with an entity that has ceased to be a Related
Company.

     “Vesting Commencement Date” means the Grant Date or such other date selected by the Plan
Administrator as the date from which the Option begins to vest for purposes of Section 7.4.

SECTION 3. ADMINISTRATION

3.1 Plan Administrator

     The Plan shall be administered by the Board and/or a committee or committees (which term
includes subcommittees) appointed by, and consisting of two or more members

3

 

of, the Board (a “Plan
Administrator”). If and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, the Board shall consider in selecting the members of any committee acting as Plan
Administrator, with respect to any persons subject or likely to become subject to Section 16 of the
Exchange Act, the provisions regarding (a) “outside directors” as contemplated by Section 162(m) of
the Code and (b) “nonemployee directors” as contemplated by Rule 16b-3 under the Exchange Act.
Notwithstanding the foregoing, the Board may delegate the responsibility for administering the Plan
with respect to designated classes of eligible persons to different committees consisting of one or
more members of the Board, subject to such limitations as the Board deems appropriate. Committee
members shall serve for such term as the Board may determine, subject to removal by the Board at
any time. To the extent consistent with applicable law, the Board may authorize one or more
officers of the Company to grant Awards to designated classes of eligible persons, within the
limits specifically prescribed by the Board.

3.2 Administration and Interpretation by Plan Administrator

     Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator
shall have exclusive authority, in its discretion, to determine all matters relating to Awards
under the Plan, including selecting the persons to be granted Awards, determining the type of
Awards, the number of shares of Common Stock subject to an Award, and all terms, conditions,
restrictions and limitations, if any, of an Award, and approving the forms of agreement for use
under the Plan. The Plan Administrator shall also have exclusive authority to interpret the Plan
and the terms of any instrument evidencing the Award and may from time to time adopt and change
rules and regulations of general application for the Plan’s administration. The Plan
Administrator’s interpretation of the Plan and its rules and regulations, and all actions taken and
determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding
on all parties involved or affected. The Plan Administrator may delegate ministerial duties to
such of the Company’s officers as it so determines. For purposes of determining the effect on an
Award of a Company-approved leave of absence or a Participant’s working less than full time, the
human resources director or other person performing that function may be deemed the Plan
Administrator.

SECTION 4. STOCK SUBJECT TO THE PLAN

4.1 Authorized Number of Shares

     Subject to adjustment from time to time as provided in Section 12.1, the maximum number of
shares of Common Stock available for issuance under the Plan shall be:

     (a) 87,709 shares; plus

     (b) an annual increase to be added as of the first day of each fiscal year of the Company
equal to the least of (i) 526,260 shares and (ii) 3% of the outstanding Common Stock of
the Company as of the end of the Company’s immediately preceding fiscal year on a

4

 

fully diluted basis (assuming exercise of all outstanding options and warrants and conversion of all
outstanding convertible securities) and (iii) a lesser amount determined by the Board; provided
that any shares from any such increases in previous years that are not actually issued shall
continue to be available for issuance under the Plan; plus

     (c) any authorized shares (i) not issued or subject to outstanding awards under the Company’s
1998 Equity Incentive Plan (the “Prior Plan”) on the date the initial registration of the Common
Stock under 12(b) or 12(g) of the Exchange Act first becomes effective and (ii) any shares subject
to outstanding awards under the Prior Plan on such date that thereafter cease to be subject to such
awards (other than by reason of exercise or settlement of the awards to the extent they are
exercised for or settled in vested and nonforfeitable shares), up to an aggregate maximum of
1,132,570 shares.

     Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now
held or subsequently acquired by the Company.

4.2 Reuse of Shares

     Any shares of Common Stock that have been made subject to an Award that are not issued under
the Plan upon exercise or settlement of the Award shall again be available for issuance in
connection with future grants of Awards under the Plan. In addition, if shares issued under the
Plan are reacquired by the Company pursuant to any forfeiture provision, such shares shall again be
available for the purposes of the Plan. Notwithstanding the foregoing, the maximum number of
shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate
share number stated in Section 4.1, subject to adjustment from time to time as provided in Section
12.1.

SECTION 5. ELIGIBILITY

     An Award may be granted to any officer, director or employee of the Company or a Related
Company that the Plan Administrator from time to time selects. An Award may also be granted to any
consultant, advisor or independent contractor who provides services to the Company or any Related
Company, so long as such Participant (a) renders bona fide services that are not in connection with
the offer and sale of the Company’s securities in a capital-raising transaction and (b) does not
directly or indirectly promote or maintain a market for the Company’s securities.

SECTION 6. AWARDS

6.1 Form and Grant of Awards

     The Plan Administrator shall have the authority, in its sole discretion, to determine the type
or types of Awards to be granted under the Plan. Awards may be granted singly or in combination.

5

 

6.2 Settlement of Awards

     The Company may settle Awards through the delivery of shares of Common Stock, the granting of
replacement Awards or any combination thereof as the Plan Administrator shall determine. Any Award
settlement may be subject to such conditions, restrictions and contingencies as the Plan
Administrator shall determine. The Plan Administrator may permit or require the deferral of any
Award payment, subject to such rules and procedures as it may establish, which may include
provisions for the payment or crediting of interest, or dividend equivalents, including converting
such credits into deferred stock equivalents.

6.3 Acquired Company Awards

     Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awards
under the Plan in substitution for awards issued under other plans, or assume under the Plan awards
issued under other plans, if the other plans are or were plans of other acquired entities
(“Acquired Entities”) (or the parent of an Acquired Entity) and the new Award is substituted, or
the old award is assumed, by reason of a merger, consolidation, acquisition of property or stock,
reorganization or liquidation (the “Acquisition Transaction”). In the event that a written
agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and
said agreement sets forth the terms and conditions of the substitution for or assumption of
outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the
action of the Plan Administrator without any further action by the Plan Administrator, except as
may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
awards shall be deemed to be Participants.

SECTION 7. AWARDS OF OPTIONS

7.1 Grant of Options

     The Plan Administrator shall have the authority, in its sole discretion, to grant Options
designated as Incentive Stock Options or as Nonqualified Stock Options.

7.2 Option Exercise Price

     The exercise price for shares purchased under an Option shall be as determined by the Plan
Administrator, but shall not be less than the minimum exercise price required by Section 8.3 with
respect to Incentive Stock Options.

7.3 Term of Options

     Subject to earlier termination in accordance with the terms of the Plan and the instrument
evidencing the Option, the maximum term of an Option (the “Option Term”) shall be as established
for that Option by the Plan Administrator or, if not so established, shall be ten years from the
Grant Date. For Incentive Stock Options, the Option Term shall be as specified in Section 8.4.

6

 

7.4 Exercise of Options

     The Plan Administrator shall establish and set forth in each instrument that evidences an
Option the time at which, or the installments in which, the Option shall vest and become
exercisable, any of which provisions may be waived or modified by the Plan Administrator at any
time. If not so established in the instrument evidencing the Option, the Option shall vest and
become exercisable according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:

	 	 	 	 	 
	Period of Participant’s Continuous
Employment or Service With the Company
or Its Related Companies From the Vesting
Commencement Date

	 	Portion of Total Option
That Is Vested and Exercisable

	 
	 	 	 	 
	After twelve (12) months

	 	1/4th

	 
	 	 	 	 
	Each additional one-month period of
continuous service completed thereafter

	 	An additional 1/36th
of the remaining shares

	 
	 	 	 	 
	After four (4) years

	 	100% 		

     The Plan Administrator, in its sole discretion, may adjust the vesting schedule of an Option
held by a Participant who works less than “full time” as that term is defined by the Plan
Administrator or who takes a Company-approved leave of absence.

     To the extent an Option has vested and become exercisable, the Option may be exercised in
whole or from time to time in part by delivery to the Company of a written stock option exercise
agreement or notice, in a form and in accordance with procedures established by the Plan
Administrator, setting forth the number of shares with respect to which the Option is being
exercised, the restrictions imposed on the shares purchased under such exercise agreement, if any,
and such representations and agreements as may be required by
the Plan Administrator, accompanied by payment in full as described in Section 7.5. An Option
may be exercised only for whole shares and may not be exercised for less than a reasonable number
of shares at any one time, as determined by the Plan Administrator.

7.5 Payment of Exercise Price

     The exercise price for shares purchased under an Option shall be paid in full to the Company
by delivery of consideration equal to the product of the Option exercise price and the number of
shares purchased. Such consideration must be paid before the Company will issue the shares being
purchased and must be in a form or a combination of forms acceptable to the Plan Administrator for
that purchase, which forms may include:

     (a) cash;

     (b) check;

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     (c) tendering (either actually or, if the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, by attestation) shares of Common Stock already owned by the Participant
for at least six months (or any shorter period necessary to avoid a charge to the Company’s
earnings for financial reporting purposes) that on the day prior to the exercise date have a Fair
Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

     (d) if the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act,
delivery of a properly executed exercise notice, together with irrevocable instructions to a
brokerage firm designated by the Company to deliver promptly to the Company the aggregate amount of
sale or loan proceeds to pay the Option exercise price and any withholding tax obligations that may
arise in connection with the exercise, all in accordance with the regulations of the Federal
Reserve Board; or

     (e) such other consideration as the Plan Administrator may permit.

     In addition, to assist a Participant (including a Participant who is an officer or a director
of the Company) in acquiring shares of Common Stock pursuant to an Award granted under the Plan,
the Plan Administrator, in its sole discretion, may authorize, either at the Grant Date or at any
time before the acquisition of Common Stock pursuant to the Award, (i) the payment by a Participant
of the purchase price of the Common Stock by a promissory note or (ii) the guarantee by the Company
of a loan obtained by the Participant from a third party. Such notes or loans must be full
recourse to the extent necessary to avoid charges to the Company’s earnings for financial reporting
purposes and bear a marked rate of interest. Subject to the foregoing, the Plan Administrator
shall in its sole discretion specify the terms of any loans or loan guarantees, including the
interest rate and terms of and security for repayment.

7.6 Post-Termination Exercises

     The Plan Administrator shall establish and set forth in each instrument that evidences an
Option whether the Option shall continue to be exercisable, and the terms and conditions of such
exercise, if a Participant ceases to be employed by, or to provide services to, the Company or a
Related Company, which provisions may be waived or modified by the Plan Administrator at any time.
If not so established in the instrument evidencing the Option, the Option shall be exercisable
according to the following terms and conditions, which may be waived or modified by the Plan
Administrator at any time:

     (a) Any portion of an Option that is not vested and exercisable on the date of a Participant’s
Termination of Service shall expire on such date.

     (b) Any portion of an Option that is vested and exercisable on the date of a Participant’s
Termination of Service shall expire on the earliest to occur of

8

 

          (i) if the Participant’s Termination of Service occurs for reasons other than Cause,
Disability or death, the date which is three months after such Termination of Service;

          (ii) if the Participant’s Termination of Service occurs by reason of Disability or death, the
one-year anniversary of such Termination of Service; and

          (iii) the last day of the Option Term (the “Option Expiration Date”).

     Notwithstanding the foregoing, if a Participant dies after his or her Termination of Service
but while an Option is otherwise exercisable, the portion of the Option that is vested and
exercisable on the date of such Termination of Service shall expire upon the earlier to occur of
(y) the Option Expiration Date and (z) the one-year anniversary of the date of death, unless the
Plan Administrator determines otherwise.

     Also notwithstanding the foregoing, in case a Participant’s Termination of Service occurs for
Cause, all Options granted to the Participant shall automatically expire upon first notification to
the Participant of such termination, unless the Plan Administrator determines otherwise. If a
Participant’s employment or service relationship with the Company is suspended pending an
investigation of whether the Participant shall be terminated for Cause, all the Participant’s
rights under any Option shall likewise be suspended during the period of investigation. If any
facts that would constitute termination for Cause are discovered after a Participant’s Termination
of Service, any Option then held by the Participant may be immediately terminated by the Plan
Administrator, in its sole discretion.

     (c) A Participant’s change in status from an employee to a consultant, advisor or independent
contractor or a change in status from a consultant, advisor or independent contractor to an
employee, shall not be considered a Termination of Service for purposes of this Section 7.

     (d) The effect of a Company-approved leave of absence on the application of this Section 7
shall be determined by the Plan Administrator, in its sole discretion.

SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS

     Notwithstanding any other provisions of the Plan, and to the extent required by Section 422 of
the Code, Incentive Stock Options shall be subject to the following additional terms and
conditions:

8.1 Dollar Limitation

     To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common
Stock with respect to which a Participant’s Incentive Stock Options become exercisable for the
first time during any calendar year (under the Plan and all other stock option plans of the Company
and its parent and subsidiary corporations) exceeds $100,000, such portion in excess of $100,000
shall be treated as a Nonqualified Stock Option. In the

9

 

event the Participant holds two or more
such Options that become exercisable for the first time in the same calendar year, such limitation
shall be applied on the basis of the order in which such Options are granted.

8.2 Eligible Employees

     Individuals who are not employees of the Company or one of its parent or subsidiary
corporations may not be granted Incentive Stock Options.

8.3 Exercise Price

     The exercise price of an Incentive Stock Option shall be at least 100% of the Fair Market
Value of the Common Stock on the Grant Date, and in the case of an Incentive Stock Option granted
to a Participant who owns more than 10% of the total combined voting power of all classes of the
stock of the Company or of its parent or subsidiary corporations (a “Ten Percent Shareholder”),
shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date. The
determination of more than 10% ownership shall be made in accordance with Section 422 of the Code.

8.4 Option Term

     Subject to earlier termination in accordance with the terms of the Plan and the instrument
evidencing the Option, the Option Term of an Incentive Stock Option shall not exceed ten years, and
in the case of an Incentive Stock Option granted to a Ten Percent Shareholder, shall not exceed
five years.

8.5 Exercisability

     An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax
treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of
the Option) (a) more than three months after the date of a Participant’s Termination of Service if
termination was for reasons other than death or Disability, (b) more than one year after the date
of a Participant’s Termination of Service if termination was by reason of Disability, or (c) after
the Participant has been on leave of absence for more than 90 days, unless the Participant’s
reemployment rights are guaranteed by statute or contract.

8.6 Taxation of Incentive Stock Options

     In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422
of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive Stock
Option for two years after the Grant Date and one year after the date of exercise.

     A Participant may be subject to the alternative minimum tax at the time of exercise of an
Incentive Stock Option. The Participant shall give the Company prompt notice of any

10

 

disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of such
holding periods.

8.7 Promissory Notes

     The amount of any promissory note delivered pursuant to Section 7.5 in connection with an
Incentive Stock Option shall bear interest at a rate specified by the Plan Administrator, but in no
case less than the rate required to avoid imputation of interest (taking into account any
exceptions to the imputed interest rules) for federal income tax purposes.

8.8 Code Definitions

     For the purposes of this Section 8, “parent corporation” and “subsidiary corporation” shall
have the meanings attributed to those terms for purposes of Section 422 of the Code.

SECTION 9. STOCK AWARDS

9.1 Grant of Stock Awards

     The Plan Administrator is authorized to make Awards of Common Stock or Awards denominated in
units of Common Stock on such terms and conditions and subject to such repurchase or forfeiture
restrictions, if any (which may be based on continuous service with the Company or the achievement
of performance goals, where such goals may be stated in absolute terms or relative to comparison
companies), as the Plan Administrator shall determine, in its sole discretion, which terms,
conditions and restrictions shall be set forth in
the instrument evidencing the Award. The terms, conditions and restrictions that the Plan
Administrator shall have the power to determine shall include, without limitation, the manner in
which shares subject to Stock Awards are held during the periods they are subject to restrictions
and the circumstances under which repurchase or forfeiture of the Stock Award shall occur by reason
of a Participant’s Termination of Service.

9.2 Issuance of Shares

     Upon the satisfaction of any terms, conditions and restrictions prescribed in respect to a
Stock Award, or upon a Participant’s release from any terms, conditions and restrictions of a Stock
Award, as determined by the Plan Administrator, the Company shall release, as soon as practicable,
to the Participant or, in the case of the Participant’s death, to the personal representative of
the Participant’s estate or as the appropriate court directs, the appropriate number of shares of
Common Stock.

9.3 Waiver of Restrictions

     Notwithstanding any other provisions of the Plan, the Plan Administrator may, in its sole
discretion, waive the repurchase or forfeiture period and any other terms, conditions or

11

 

restrictions on any Stock Award under such circumstances and subject to such terms and conditions
as the Plan Administrator shall deem appropriate.

SECTION 10. WITHHOLDING

     The Company may require the Participant to pay to the Company the amount of any taxes that the
Company is required by applicable federal, state, local or foreign law to withhold with respect to
the grant, vesting or exercise of an Award. The Company shall not be required to issue any shares
of Common Stock under the Plan until such obligations are satisfied.

     The Plan Administrator may permit or require a Participant to satisfy all or part of his or
her tax withholding obligations by (a) paying cash to the Company, (b) having the Company withhold
from any cash amounts otherwise due or to become due from the Company to the Participant, or (c)
having the Company withhold a number of shares of Common Stock that would otherwise be issued to
the Participant (or become vested in the case of Stock Awards) having a value equal to the tax
withholding obligations, or (d) surrendering a number of shares of Common Stock the Participant
already owns having a value equal to the tax withholding obligations. The value of the shares so
withheld may not exceed the employer’s minimum required tax withholding rate, and the value of the
shares so tendered may not exceed such rate to the extent the Participant has owned the tendered
shares for less than six months if such limitation is necessary to avoid a charge to the Company
for financial reporting purposes.

SECTION 11. ASSIGNABILITY

     No Award or interest in an Award may be assigned, pledged or transferred by the Participant or
made subject to attachment or similar proceedings otherwise than by will or by the applicable laws
of descent and distribution, except to the extent a Participant designates a beneficiary on a
Company-approved form who may exercise the Award or receive payment under the Award after the
Participant’s death. During a Participant’s lifetime, an Award may be exercised only by the
Participant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code,
the Plan Administrator, in its sole discretion, may permit a Participant to assign or transfer an
Award; provided, however, that an Award so assigned or transferred shall be subject to all the
terms and conditions of the Plan and those contained in the instrument evidencing the Award.

SECTION 12. ADJUSTMENTS

12.1 Adjustment of Shares

     In the event, at any time or from time to time after board approval of the Plan, a stock
dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, distribution to shareholders other than a normal cash dividend, or other change in
the Company’s corporate or capital structure results in (a) the outstanding shares of

12

 

Common Stock,
or any securities exchanged therefor or received in their place, being exchanged for a different
number or kind of securities of the Company or of any other company or (b) new, different or
additional securities of the Company or of any other company being received by the holders of
shares of Common Stock of the Company, then the Plan Administrator shall make proportional
adjustments in (i) the maximum number and kind of securities subject to the Plan and issuable as
Incentive Stock Options as set forth in Section 4 and (ii) the number and kind of securities that
are subject to any outstanding Award and the per share price of such securities, without any change
in the aggregate price to be paid therefor. The determination by the Plan Administrator as to the
terms of any of the foregoing adjustments shall be conclusive and binding. Notwithstanding the
foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be
governed by this Section 12.1 but shall be governed by Sections 12.2 and 12.3, respectively.

12.2 Dissolution or Liquidation

     To the extent not previously exercised or settled, and unless otherwise determined by the Plan
Administrator in its sole discretion, Options and Stock Awards denominated in units shall terminate
immediately prior to the dissolution or liquidation of the Company. To the extent a forfeiture
provision or repurchase right applicable to an Award has not been waived by the Plan Administrator,
the Award shall be forfeited immediately prior to the consummation of the dissolution or
liquidation.

12.3 Company Transaction

     12.3.1 Options

     In the event of a Company Transaction, except as otherwise provided in the instrument
evidencing an Option or in a written employment or services agreement between a Participant and the
Company or a Related Company,

     (a) Except as provided in subsection (b) below, each outstanding Option shall be assumed or an
equivalent option or right substituted by the Successor Company.

     (b) If in connection with a Company Transaction the Successor Company refuses to assume or
substitute for an Option, then each such outstanding Option shall become fully vested and
exercisable with respect to 100% of the unvested portion of the Option. In such case, the Plan
Administrator shall notify the Participant in writing or electronically that the unvested portion
of the Option specified above shall be fully vested and exercisable for a specified time period.
At the expiration of the time period, the Option shall terminate, provided that the Company
Transaction has occurred.

     (c) For the purposes of this Section 12.3, the Option shall be considered assumed or
substituted for if following the Company Transaction the option or right confers the right to
purchase or receive, for each share of Common Stock subject to the Option immediately prior to the
Company Transaction, the consideration (whether stock, cash, or other securities

13

 

or property)
received in the Company Transaction by holders of Common Stock for each share held on the effective
date of the transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares); provided, however,
that if such consideration received in the Company Transaction is not solely common stock of the
Successor Company, the Plan Administrator may, with the consent of the Successor Company, provide
for the consideration to be received upon the exercise of the Option, for each share of Common
Stock subject thereto, to be solely common stock of the Successor Company substantially equal in
fair market value to the per share consideration received by holders of Common Stock in the Company
Transaction. The determination of such substantial equality of value of consideration shall be
made by the Plan Administrator, and its determination shall be conclusive and binding.

     (d) All Options shall terminate and cease to remain outstanding immediately following the
Company Transaction, except to the extent assumed by the Successor Company.

     12.3.2 Stock Awards

     In the event of a Company Transaction, except as otherwise provided in the instrument
evidencing the Award and unless otherwise provided in a written employment or services agreement
between a Participant and the Company or a Related Company, the vesting of shares subject to Stock
Awards shall accelerate, and the forfeiture provisions to
which such shares are subject shall lapse, if and to the same extent that the vesting of
outstanding Options accelerates in connection with the Company Transaction. If unvested Options
are to be assumed or substituted by a Successor Company without acceleration upon the occurrence of
a Company Transaction, the repurchase or forfeiture provisions to which such Stock Awards are
subject shall continue with respect to shares of the Successor Company that may be issued in
exchange for such shares.

12.4 Further Adjustment of Awards

     Subject to Sections 12.2 and 12.3, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization, liquidation,
dissolution or change of control of the Company, as defined by the Plan Administrator, to take such
further action as it determines to be necessary or advisable with respect to Awards. Such
authorized action may include (but shall not be limited to) establishing, amending or waiving the
type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier,
later, extended or additional time for exercise, lifting restrictions and other modifications, and
the Plan Administrator may take such actions with respect to all Participants, to certain
categories of Participants or only to individual Participants. The Plan Administrator may take
such action before or after granting Awards to which the action relates and before or after any
public announcement with respect to such sale, merger, consolidation, reorganization, liquidation,
dissolution or change of control that is the reason for such action.

14

 

12.5 Limitations

     The grant of Awards shall in no way affect the Company’s right to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or assets.

12.6 Fractional Shares

     In the event of any adjustment in the number of shares covered by any Award, each such Award
shall cover only the number of full shares resulting from such adjustment.

SECTION 13. [RESERVED]

SECTION 14. AMENDMENT AND TERMINATION

14.1 Amendment, Suspension or Termination of Plan

     The Board may amend, suspend or terminate the Plan or any portion of the Plan at any time and
in such respects as it shall deem advisable; provided, however, that to the extent required for
compliance with Section 422 of the Code or any applicable law or regulation,
shareholder approval shall be required for any amendment that would (a) increase the total
number of shares available for issuance under the Plan, (b) modify the class of employees eligible
to receive Options, or (c) otherwise require shareholder approval under any applicable law or
regulation. Any amendment made to the Plan that would constitute a “modification” to Incentive
Stock Options outstanding on the date of such amendment shall not, without the consent of the
Participant, be applicable to such outstanding Incentive Stock Options but shall have prospective
effect only.

14.2 Term of Plan

     Unless sooner terminated as provided herein, the Plan shall terminate ten years after the
earlier of the Plan’s adoption by the Board and approval by the shareholders.

14.3 Consent of Participant

     The suspension, amendment or termination of the Plan or a portion thereof or the amendment of
an outstanding Award shall not, without the Participant’s consent, materially adversely affect any
rights under any Award theretofore granted to the Participant under the Plan. Any change or
adjustment to an outstanding Incentive Stock Option shall not, without the consent of the
Participant, be made in a manner so as to constitute a “modification” that would cause such
Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option.
Notwithstanding the foregoing, any adjustments made pursuant to Sections 12.1 through 12.3 shall
not be subject to these restrictions.

15

 

SECTION 15. GENERAL

15.1 Evidence of Awards

     Awards granted under the Plan shall be evidenced by a written instrument that shall contain
such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable
and that are not inconsistent with the Plan.

15.2 No Individual Rights

     Nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an
employment contract or confer or be deemed to confer on any Participant any right to continue in
the employ of, or to continue any other relationship with, the Company or any Related Company or
limit in any way the right of the Company or any Related Company to terminate a Participant’s
employment or other relationship at any time, with or without Cause.

15.3 Issuance of Shares

     Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue
or deliver any shares of Common Stock under the Plan or make any other
distribution of benefits under the Plan unless, in the opinion of the Company’s counsel, such
issuance, delivery or distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act or the laws of any state or foreign
jurisdiction), and the applicable requirements of any securities exchange or similar entity.

     The Company shall be under no obligation to any Participant to register for offering or resale
or to qualify for exemption under the Securities Act, or to register or qualify under the laws of
any state or foreign jurisdiction, any shares of Common Stock, security or interest in a security
paid or issued under, or created by, the Plan, or to continue in effect any such registrations or
qualifications if made. The Company may issue certificates for shares with such legends and
subject to such restrictions on transfer and stop-transfer instructions as counsel for the Company
deems necessary or desirable for compliance by the Company with federal, state and foreign
securities laws.

     To the extent the Plan or any instrument evidencing an Award provides for issuance of stock
certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a
noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of
any stock exchange.

15.4 No Rights as a Shareholder

     No Option or Stock Award denominated in units shall entitle the Participant to any cash
dividend, voting or other right of a shareholder unless and until the date of issuance under the
Plan of the shares that are the subject of such Award.

16

 

15.5 Compliance With Laws and Regulations

     Notwithstanding anything in the Plan to the contrary, the Plan Administrator, in its sole
discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision
of the Plan to Participants who are officers or directors subject to Section 16 of the Exchange Act
without so restricting, limiting or conditioning the Plan with respect to other Participants.
Additionally, in interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as
an “incentive stock option” within the meaning of Section 422 of the Code.

15.6 Participants in Other Countries

     The Plan Administrator shall have the authority to adopt such modifications, procedures and
subplans as may be necessary or desirable to comply with provisions of the laws of other countries
in which the Company or any Related Company may operate to ensure the viability of the benefits
from Awards granted to Participants employed in such countries and to meet the objectives of the
Plan.

15.7 No Trust or Fund

     The Plan is intended to constitute an “unfunded” plan. Nothing contained herein shall require
the Company to segregate any monies or other property, or shares of Common Stock, or to create any
trusts, or to make any special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than those of a general
unsecured creditor of the Company.

15.8 Severability

     If any provision of the Plan or any Award is determined to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award
under any law deemed applicable by the Plan Administrator, such provision shall be construed or
deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended
without, in the Plan Administrator’s determination, materially altering the intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the
remainder of the Plan and any such Award shall remain in full force and effect.

15.9 Choice of Law

     The Plan and all determinations made and actions taken pursuant hereto, to the extent not
otherwise governed by the laws of the United States, shall be governed by the laws of the state of
California without giving effect to principles of conflicts of law.

17

 

SECTION 16. EFFECTIVE DATE

     The effective date is the date on which the Plan is adopted by the Board. If the shareholders
of the Company do not approve the Plan within 12 months after the Board’s adoption of the Plan, any
Incentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options.

18

 

PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS

SUMMARY PAGE

	 	 	 	 	 	 	 
	Date of Board	 	 	 	Section/Effect	 	Date of Shareholder
	Action	 	Action	 	of Amendment	 	Approval
	 
	 	 	 	 	 	 
	February 21, 2002

	 	Initial Plan Adoption
	 	 	 	February 21, 2002
	 
	 	 	 	 	 	 
	September 1, 2005

	 	Amendment of Plan
	 	Plan amended
effective at
effective time of
the assumption of
the Plan by Cardiac
Science Corporation
to reflect the
assumption and
eliminate
inoperative
provisions
	 	Not required

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