Document:

Exhibit 10.53

 

 

July 10, 2015

 

WCW (Willie) Chiang

 

Dear Willie:

 

Pursuant to our discussions, the following shall set forth the employment agreement (this “Agreement”) between Plains All American GP LLC (the “Company”) and WCW (Willie) Chiang (“Executive”).

 

1.                                      Title and Position. (a) Executive’s title and position will be Executive Vice President and Chief Operating Officer - U.S. of the Company with primary responsibility for all U.S. operational and commercial activities with the responsibilities attendant to such position transitioned to Executive over an approximate one year period in stages.  Executive will be a member of the Executive Committee and will report to the President and Chief Operating Officer (“COO”).

 

(b)  The Company has offered, and Executive has accepted, employment as contemplated hereunder with the expectation that he will be offered the top executive leadership position (excluding the position of Chairman, the “Executive Promotion”) of the Company no later than the last day (such date being referred to as the “Reference Date”) of the fortieth (40th) full calendar month following the Commencement Date as defined in Section 6 below, with a corresponding employment agreement and compensation package that is commensurate with the Chief Executive Officer title, scope and responsibilities and similar in terms and content to the employment agreement that is currently in place for the incumbent CEO (excluding any portions thereof that relate to such incumbent’s role as Chairman).  Executive acknowledges that such promotion will be contingent on the evaluation of his performance and is not guaranteed; however, the  provisions below are intended to protect Executive against certain events (all references below to “outstanding LTIPs and Class B Units” shall refer to LTIPs and Class B Units issued pursuant to the grants described in Sections 2(c) and (d) below):

 

(i)                                     Termination by the Company Other than for Cause — In the event Executive has not received the Executive Promotion and is terminated by the Company other than for Cause (as defined in the LTIP Grant and Class B Agreement described in Sections 2(c) and 2(d) below) prior to the Reference Date, Executive shall immediately vest in all outstanding LTIPs and Class B Units (both Restricted Units and earned Units).

 

(ii)                            Resignation by Executive — If (a) Executive has not received the Executive Promotion by the Reference Date, Executive may, within a period beginning on the Reference Date and ending 90 days thereafter, tender his resignation to the Company, or (b) Executive has not received the Executive Promotion and terminates his employment

 

333 Clay Street, Suite 1600 · Houston, Texas  77002 · 713/646-4100 or 800-564-3036

 

 

for Good Reason (as defined in the Class B Agreement referenced in Section 2(d) below) prior to the Reference Date, then in either such case Executive shall immediately vest in all outstanding LTIPs and Class B Units (both Restricted Units and “earned” Units).  The right set forth in clause (a) immediately preceding will not be affected by a termination of Executive’s employment during the 90 day period described therein by the Company other than for Cause.

 

(iii)                         Change of Control — In the event of a Change of Control (as defined in either the LTIP Grant and Class B Agreement described in paragraphs 2(c) and 2(d) below) prior to the Reference Date and in connection therewith Executive is not designated to receive the Executive Promotion, Executive may, within a period of 90 days following the Change of Control, terminate his employment whereupon Executive shall immediately vest in all outstanding LTIPs and Class B Units (both Restricted Units and “earned” Units).

 

(iv)                        Death or Disability.  If prior to the second anniversary of the Commencement Date (A) Executive dies or Executive’s employment is terminated as a result of Executive’s “disability” (a physical or mental infirmity that impairs Executive’s ability substantially to perform his duties for a period of eighteen months or that the Company otherwise determines constitutes a “disability”), and (B) at such time the number of Class B Units that have become “earned” Units (and thus will become vested Units pursuant to the terms of the Class B Agreement) is less than 500,000, Executive shall immediately vest in such number of additional Class B Units as may be necessary to cause the total number of vested Class B Units of Executive as a result of the occurrence of the event described in clause (A) immediately preceding to equal 500,000.

 

(v)                           Termination by Executive — If Executive’s employment is terminated before or after the Reference Date for any reason other than as described in clauses (i), (ii), (iii) and (iv) above, earning and vesting of any outstanding LTIPs and Class B Units shall be governed by the applicable LTIP Grant letter and the Class B Agreement, respectively.

 

2.                                      Compensation.  Executive’s compensation will include:

 

a.                                      Base Salary. A monthly salary of $20,833.33, payable semi-monthly in cash for so long as Executive is employed by the Company. This amount may be increased by the Company from time to time, but may not be decreased from this base level, or any future increased level, without Executive’s express written approval.

 

b.                                      Bonus. Executive will participate in the Company’s annual discretionary bonus program. The amount of bonus recommended to the Board annually with respect to Executive will be dependent upon the Chief Executive Officer’s (“CEO”) and COO’s assessments of both Executive’s individual contributions throughout the year and the overall partnership performance.  With respect to calendar years 2015, 2016 and 2017, Executive’s annual bonuses will not be less than $500,000 with respect to

 

 

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calendar year 2015 (no further proration for the fact of employment during less than the entire calendar year) and $1.25 million with respect to calendar years 2016 and 2017 (the “Minimum Annual Bonuses”).  The Minimum Annual Bonuses shall be paid in cash on the date that the annual bonus payments are made to the other senior executive participants in the annual discretionary bonus program. The Company’s obligation to pay a Minimum Annual Bonus with respect to a given calendar year is contingent upon (i) Executive’s remaining employed by the Company through the date on which the applicable Minimum Annual Bonus payment is due and (ii) continued compliance with the terms of the Confidentiality Agreement, as defined in Section 5 below.

 

c.                                       LTIP Grant. On the Commencement Date (as defined in Section 6 below), Executive will receive an initial grant of 120,000 Phantom Units  under the Company’s Long-Term Incentive Plan (LTIP) that vest upon the achievement of both performance and minimum service benchmarks as follows:

 

	
 
    	
 
    	
Performance
    	
 
    	
Minimum
    
	
Vest
    	
 
    	
Qtrly distribution (Annual Rate)
    	
 
    	
Service
    
	
40
    	
%
    	
$0.725/unit ($2.90/unit)
    	
 
    	
3rd yr.   Anniv.*
    
	
30
    	
%
    	
$0.7625/unit ($3.05/unit)
    	
 
    	
4th yr.   Anniv.*
    
	
30
    	
%
    	
$0.8125/unit ($3.25/unit)
    	
 
    	
5th yr.   Anniv.*
    

 

* vesting will occur on the first distribution date following the applicable anniversary

 

The LTIP Grant will include distribution equivalent rights (DERs) that will vest as follows:  (i) 40% upon distribution by the Plains All American Pipeline, L.P. (the “Partnership”) of a quarterly distribution of $0.725, (ii) 30% upon distribution by the Partnership of a quarterly distribution of $0.7625, and (iii) 30% upon distribution by the Partnership of a quarterly distribution of $0.8125.

 

The full terms of Executive’s initial grant of Phantom Units are set forth in the form of LTIP Grant letter that is attached hereto as Exhibit A (the “LTIP Grant”).

 

d.                                      Class B Units. On the Commencement Date, Executive will receive an initial grant of 1,000,000 Class B units in Plains AAP, L.P. pursuant to a Class B Restricted Units Agreement in the form attached hereto as Exhibit B (the “Class B Agreement”).  The Class B Units granted to Executive thereunder will become “earned” units and “vested” units as follows:

 

	
 
    	
 
    	
PAA Performance Benchmark
    	
 
    	
Earning and
    
	
Earn
    	
 
    	
Qtrly distribution (Annual Rate)
    	
 
    	
Vesting
    
	
25
    	
%
    	
$0.725/unit ($2.90/unit)
    	
 
    	
(1)
    
	
25
    	
%
    	
$0.7875/unit ($3.15/unit)
    	
 
    	
(1)
    
	
25
    	
%
    	
$0.825/unit ($3.30/unit)
    	
 
    	
(1)
    
	
25
    	
%
    	
$0.875/unit ($3.50/unit)
    	
 
    	
(1)
    

 

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(1)                           Each tranche of units described will become “earned” (i.e., eligible to begin receiving distributions) upon achievement of the respective performance benchmarks set forth above. Earned units will become vested units as provided in the Class B Agreement, as modified by this Employment Letter.  A “Restricted Unit” is, as of any date, a granted unit that is neither an “earned” unit nor a “vested” unit.

 

3.                                      Expense Reimbursement. Company shall reimburse Executive for all reasonable business expenses, including travel and entertainment, and membership dues at one country club or athletic club.

 

4.                                      Benefits. Executive shall receive and be entitled to other employment benefits, including: (a) five weeks paid vacation, (b) up to 10 days sick leave with pay, (c) participation in the Company’s 401(K) Plan, and (d) all health and welfare benefits, including insurance, provided to other senior executives of the Company, on the same basis and terms as other senior executives of the Company.

 

5.                                      Confidentiality and Non-Solicitation. Executive and the Company shall execute a Confidential Information and Non-Solicitation Agreement (the “Confidentiality Agreement”) substantially in the form of Exhibit “C” attached hereto. The rights and obligations set forth in the Confidentiality Agreement shall survive the termination of this Agreement.

 

6.                                      Commencement of Employment; Term and Termination. This Agreement will become effective on the date hereof and the employment of Executive will commence on August 24, 2015 (the “Commencement Date”).  Either party may terminate Executive’s employment at any time.  However, notwithstanding the foregoing, termination of Executive’s employment shall not affect the obligations of the Company under the Agreement that arose prior to, or as a result of, such termination, including any such obligations under sections 1, 2 and 5 that create post-employment duties and rights.

 

7.                                 Certain Representations of Executive. Executive represents that: (a) his execution of this Agreement will not violate the terms of any agreement to which he is currently bound; and (b) he is not subject to an existing confidentiality, non-compete or similar type agreement that would prevent, limit or otherwise encumber Executive’s ability to perform his job with the Company. Executive undertakes to bring to the Company’s attention any change of job description or other circumstance that would potentially breach any confidentiality and/or non-compete obligation of Executive pursuant to any agreements or understandings with his prior employer or its affiliates.

 

8.                                      Return of Materials.  Upon termination of his employment for any reason, Executive shall promptly return to Company all copies of any Company data, records, or materials of whatever nature or kind, including all materials incorporating the proprietary information of the Company.

 

9.                                      Section 409A.  If the parties determine, or the Internal Revenue Service asserts, that any payments or benefits to be made or provided to Executive hereunder do not comply with Section 409A of the Internal Revenue Code, then the parties agree to amend this Agreement or take such other ations as reasonably necessary or appropriate to comply with Section 409A while preserving the economic agreement of the parties.

 

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10.                               Background Check.  Notwithstanding the foregoing, this Agreement is subject to and contingent upon a satisfactory background check in which information that Executive has provided regarding items such as education, work experience, criminal record and professional credentials will be verified. Executive may be asked to provide additional information or assist in the process if Company encounters any difficulties in the verification of this information. If any of the information is found to be untrue or misrepresented, this offer may be withdrawn, or, if employed, Executive’s employment may be terminated.

 

11.                               Certain Agreements of Executive.  Without amending, modifying or expanding the meaning of “Cause” as defined in the LTIP Grant or the Class B Agreement, as applicable, by accepting this offer, Executive agrees that he shall at all times:

 

a.                   adhere to the Company’s Trading and Risk Management Policies and Procedures,

 

b.                   adhere to the Company’s Code of Business Conduct, and

 

c.                    not misrepresent or conceal information regarding transactions from senior management or any person responsible for the accurate recording and reporting of each transaction.

 

14.                               Executive will not be obligated to seek employment or otherwise mitigate any benefits provided hereunder.  Payments provided hereunder will not be reduced by other compensation earned by Executive from another employer following termination.

 

 

[Signature Page Follows]

 

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If the foregoing meets with your understanding of our agreement, please execute, date and return one original Agreement for our files.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
PLAINS   ALL AMERICAN GP LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Greg L. Armstrong
    
	
 
    	
Name:
    	
Greg   L. Armstrong
    
	
 
    	
Title:
    	
Chairman   and CEO
    
	
 
    	
 
    
	
AGREED   TO AND ACCEPTED
    	
 
    
	
this   10th day of July, 2015
    	
 
    
	
 
    	
 
    
	
/s/   WCW (Willie) Chiang
    	
 
    	
 
    
	
WCW   (Willie) Chiang
    	
 
    
				

 

List of Exhibits:

A — Form of LTIP Grant

B — Form of Class B Agreement

C — Form of Confidentiality Agreement

 

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EXHIBIT A

Form of LTIP Grant

 

 

August 24, 2015

 

WCW (Willie) Chiang

 

 

Re:       Grant of Phantom Units

 

Dear Willie:

 

I am pleased to inform you that you have been granted 120,000 Phantom Units as of the above date pursuant to the Company’s PNG Successor Long-Term Incentive Plan (the “Plan”).  In addition, in tandem with each Phantom Unit, you have been granted a distribution equivalent right (a “DER”). A DER represents the right to receive a cash payment equivalent to the amount, if any, paid in cash distributions on one Common Unit of Plains All American Pipeline, L.P. (“PAA” or the “Partnership”) to the holder of such Common Unit.  The terms and conditions of this grant are as set forth below.

 

1.              Subject to the further provisions of this Agreement, your Phantom Units shall vest (become payable in the form of one Common Unit of PAA for each Phantom Unit) as follows: (i) forty percent (40%) shall vest upon the later to occur of the August 2018 Distribution Date and the date on which the Partnership pays a quarterly distribution of at least $0.725 per unit ($2.90 on an annualized basis); (ii) thirty percent (30%) shall vest upon the later to occur of the August 2019 Distribution Date and the date on which the Partnership pays a quarterly distribution of at least $0.775 per unit ($3.10 on an annualized basis) and (iii) thirty percent (30%) shall vest upon the later to occur of the August 2020 Distribution Date and the date on which the Partnership pays a quarterly distribution of at least $0.825 per unit ($3.30 on an annualized basis). Any remaining Phantom Units that are not vested by the August 2021 Distribution Date, and any tandem DERs associated with such Phantom Units, shall expire on such date.

 

2.              Subject to the further provisions of this Agreement, your DERs shall be payable in cash substantially contemporaneously with each Distribution Date following the date hereof.

 

3.              The number of Phantom Units subject to this award and any distribution level required for vesting under paragraph 1 above shall be proportionately reduced or increased for any split or reverse split, as applicable, of the Units, or any event or transaction having similar effect.

 

4.              Upon vesting of any Phantom Units, an equivalent number of DERs will expire.  Any such DERs shall be payable on such Distribution Date prior to their expiration.

 

5.              Except to the extent modified by either your Employment Letter with the Company dated effective as of July 10, 2015 (the “Employment Letter”) or paragraphs 6 and 7 below, in the event of the termination of your employment with the Company and its Affiliates, all of your then outstanding DERs and Phantom Units shall automatically be forfeited as of the date of termination; provided, however, that if the Company or its Affiliates terminate your employment other than as a result of a Termination for Cause: (i) any unvested Phantom Units

 

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that have satisfied all vesting criteria as of the date of termination but for the passage of time shall be deemed nonforfeitable on the date of termination, and shall vest on the next following Distribution Date; (ii) any DERs associated with the unvested, nonforfeitable Phantom Units described in clause (i) shall not be forfeited on the date of termination, but shall be payable and shall expire in accordance with paragraph 4 above; and (iii) any unvested Phantom Units that have satisfied none of the vesting criteria as of the date of termination, and any tandem DERs associated with such Phantom Units, shall automatically be forfeited as of the date of termination.

 

6.              In the event of termination of your employment with the Company and its Affiliates by reason of your death or your “disability” (a physical or mental infirmity that impairs your ability substantially to perform your duties for a period of eighteen months or that the Company otherwise determines constitutes a “disability”), your then outstanding Phantom Units and tandem DERs shall not be forfeited on such date, and (i) such DERs shall expire in accordance with paragraph 1 or paragraph 4 above, as applicable, and (ii) such Phantom Units shall vest or expire in accordance with paragraph 1 above; provided, however, that such vesting of Phantom Units shall occur either (x) on the date the Partnership pays the quarterly distribution specified in clause (i), (ii) or (iii) of paragraph 1 (and in the proportion indicated therein) without regard to any requirement for further passage of time or (y) if the relevant quarterly distribution has been paid prior to the date of termination, on the next following Distribution Date.  As soon as administratively practicable after the vesting of any Phantom Units pursuant to this paragraph 6, payment will be made in cash in an amount equal to the Market Value of the number of Phantom Units vesting.

 

7.              In the event of a Change in Status, all of your then outstanding Phantom Units and tandem DERs shall be deemed 100% nonforfeitable on such date, and such Phantom Units shall vest in full upon the next Distribution Date.

 

8.              Upon payment pursuant to a DER, you agree that the Company may withhold any taxes due from your compensation as required by law.  Upon vesting of a Phantom Unit, you agree that the Company may withhold any taxes due from your compensation as required by law, which (in the sole discretion of the Company) may include withholding a number of Common Units otherwise payable to you.

 

As used herein, (i) the “Company” refers to Plains All American GP LLC; (ii) “Distribution Date” means the day in February, May, August or November in any year (as context dictates) that is 45 days after the end of the most recently completed calendar quarter (or, if not a business day, the closest previous business day); and (iii) “Market Value” means the average of the closing sales prices for a Common Unit on the New York Stock Exchange for the five trading days preceding the then most recent “ex dividend” date for payment of a distribution by the Partnership.

 

The phrase “Change in Status” means (A) the termination of your employment by the Company other than a Termination for Cause, within two and a half months prior to or one year following a Change of Control (the “Protected Period”), or (B) the termination of your employment by you due to the occurrence during the Protected Period, without your written consent, of (i) any material diminution in your authority, duties or responsibilities (taking into account additional authority, responsibilities or duties associated with the initial transition of responsibilities to you, the

 

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overall growth of the Partnership or a promotion or lateral transfer accepted by you), or (ii) any other action or inaction that constitutes a material breach of this Agreement by the Company.  A termination by you shall not be a Change in Status unless (1) you provide written notice to the Company of the condition in (B)(i) or (ii) that would constitute a Change in Status within 90 days of the initial existence of the condition, (2) the Company fails to remedy the condition within the 30-day period following such notice and (3) you terminate your employment within 10 days following the end of such 30-day period.

 

The phrase “Change of Control” means, and shall be deemed to have occurred upon the occurrence of, one or more of the following events: (i) Plains GP Holdings, L.P. (“PAGP”) ceases to retain direct or indirect control of the general partner of the Partnership; (ii) PAGP ceases to beneficially own, directly or indirectly, more than 50% of the membership interest in the Company; (iii) any direct or indirect sale, lease, exchange or other transfer (in one transaction or a series of related transactions and whether by merger or otherwise) of all or substantially all of the assets of the Partnership, PAGP or the Company to one or more Persons who are not affiliates of PAGP (“third party or parties”), other than a transaction in which the Owner Affiliates (as defined below) continue to beneficially own, directly or indirectly, more than 50% of the issued and outstanding voting securities of such third party or parties immediately following such transaction; (iv) (x) a “person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) other than the Owner Affiliates becomes the “beneficial owner” directly or indirectly of 25% or more of the member interest in PAA GP Holdings LLC, a Delaware limited liability company and the general partner of PAGP (“PAGP GP”), and (y) the member interest beneficially owned by such “person” or “group” exceeds the aggregate member interest in PAGP GP beneficially owned, directly or indirectly, by the Owner Affiliates; (v) any Person (other than PAGP or its wholly owned subsidiaries), including any partnership, limited partnership, syndicate or other “person” or “group,” becomes the beneficial owner, directly or indirectly, of 50% or more of the membership interest in the Company or 50% or more of the outstanding limited partnership interests of PAGP; or (vi) any Person (other than PAGP or its wholly owned subsidiaries), including any partnership, limited partnership, syndicate or other “person” or “group,”  becomes the beneficial owner, directly or indirectly, of 50% or more of the membership interest in PAGP GP.

 

As used herein, the term “Owner Affiliates” shall mean KAFU Holdings, L.P. and its affiliates, EMG Investment, LLC and its affiliates, Oxy Holding Company (Pipeline), Inc. and its affiliates, Mark Strome and his affiliates, Windy, LLC and its affiliates, PAA Management, L.P. and its affiliates, PAGP and its affiliates, Jay Chernosky, Kipp PAA Trust, Paul Riddle, Russell Clingman, David Humphreys and Philip Trinder.

 

The phrase “Termination for Cause” shall mean severance of your employment with the Company or its Affiliates based on your (i) substantial failure to perform the duties and responsibilities of your position at an acceptable level as reasonably determined in good faith by the CEO and President-COO of the Company (or if you are the CEO of the Company, by vote of the Board of Directors of the Company excluding you if you are a member thereof) and after written notice specifying such failure in detail and after a reasonable period under the circumstances (determined by the CEO of the Company, or alternatively the Board of Directors, in good faith) such failure has continued without full correction by you, (ii) conviction of or guilty plea to the committing of an act or acts constituting a felony under the laws of the United States or any state thereof or any misdemeanor involving moral turpitude, or (iii) violation of the Company’s Code of Business

 

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Conduct (unless waived in accordance with the terms thereof), in each case with the specific failure or violation described to you in writing.

 

Terms used herein that are not defined herein shall have the meanings set forth in the Plan or, if not defined in the Plan, in the Fourth Amended and Restated Agreement of Limited Partnership of Plains All American Pipeline, L.P., as amended (the “Partnership Agreement”).

 

This award is intended to either (i) qualify as a “short-term deferral” under Section 409A of the Internal Revenue Code of 1986, as amended, or (ii) comply with the provisions of Section 409A.  If it is determined that any payments or benefits to be made or provided under this Agreement do not comply with Section 409A, the parties agree to amend this Agreement or take such other actions as reasonably necessary or appropriate to comply with Section 409A while preserving the economic agreement of the parties.

 

By signing below, you agree that the Phantom Units and DERs granted hereunder are governed by the terms of the Plan.  Copies of the Plan and the Partnership Agreement are available upon request.  In the event any provisions of this award conflict with provisions in the Employment Letter, the Employment Letter shall control.

 

In order for this grant to be effective you must designate a beneficiary that will be entitled to receive any benefits payable under this grant in the event of your death.  Unless you indicate otherwise by checking the appropriate box the named beneficiaries on this form will serve as your beneficiaries for all previous LTIP grants.

 

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Please execute and return a copy of this grant letter to me and retain a copy for your records.

 

 

	
 
    	
PLAINS ALL AMERICAN PIPELINE, L.P.
    
	
 
    	
 
    
	
 
    	
By: PAA GP LLC
    
	
 
    	
By: PLAINS AAP, L.P.
    
	
 
    	
By: PLAINS ALL AMERICAN GP LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Richard K. McGee
    
	
 
    	
Name:
    	
Richard K. McGee
    
	
 
    	
Title:
    	
Executive Vice President & General   Counsel
    

 

Beneficiary Designation

 

	
Primary Beneficiary Name
    	
 
    	
Relationship
    	
 
    	
Percent (Must total 100%)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

	
Secondary Beneficiary Name
    	
 
    	
Relationship
    	
 
    	
Percent (Must total 100%)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

o Check this box only if designation does not apply to prior grants

 

	
/s/ WCW (Willie) Chiang
    	
 
    
	
Signature
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Units:
    	
120,000
    	
 
    
	
 
    	
 
    	
 
    
	
Dated:
    	
8/24/15
    	
 
    

 

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EXHIBIT B

Form of Class B Agreement

 

 

PLAINS AAP, L.P. CLASS B
 RESTRICTED UNITS AGREEMENT

 

This PLAINS AAP, L.P. CLASS B RESTRICTED UNITS AGREEMENT (this “Agreement”) is entered into as of August 24, 2015 (the “Grant Date”) by and between PLAINS AAP, L.P., a Delaware limited partnership (the “Partnership”), and WCW (Willie) Chiang (“Executive”).

 

RECITALS:

 

WHEREAS, to provide an incentive to Executive to enhance the profitability and growth of the Partnership and its Affiliates and to encourage Executive to remain employed by the Partnership or its Affiliates, the Partnership desires to grant to Executive 1,000,000 Class B Units (the “Granted Units”) on the Grant Date, which Granted Units shall have such rights, designations and preferences as are set forth in this Agreement and the Partnership Agreement;

 

WHEREAS, as of the date hereof, the Partnership has 606,050,573 Class A Units outstanding and 52,125,935 Class B Units authorized for issuance (including the Class B Units already issued and those being issued under this Agreement);

 

WHEREAS, the Partnership and Executive desire to enter into this Agreement to evidence certain terms and conditions that relate to the grant, ownership and transfer of the Granted Units; and

 

NOW, THEREFORE, in consideration of the mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partnership and Executive agree as follows:

 

ARTICLE 1
  DEFINITIONS AND CONSTRUCTION

 

1.1          Construction.  Unless the context requires otherwise: (a) the gender (or lack of gender) of all words used in this Agreement includes the masculine, feminine, and neuter; (b) references to Sections refer to sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (d) references to money refer to legal currency of the United States of America; and (e) the word “including” means “including without limitation.”

 

1.2          Definitions.  Capitalized terms used in this Agreement (including Exhibit A attached hereto) that are not defined in this Section 1.2 or in the body of this Agreement shall have the meanings given to them in the Partnership Agreement.

 

“Affiliate” of a person means any person controlling, controlled by, or under common control with such person.  As used herein, the terms “controlling”, “controlled by” and “under common control with” mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any

 

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partnership or other ownership interest, by contract or otherwise) of a person.  For the purposes of the preceding sentence, control shall be deemed to exist when a person possesses, directly or indirectly, through one or more intermediaries (a) in the case of a corporation, more than 50% of the outstanding voting securities thereof; (b) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the voting membership, general partner or equivalent interest therein; or (c) in the case of any other person, more than 50% of the economic or beneficial interest therein.

 

“Applicable Class B Units” means at a particular time, collectively, the Vested Units and the Earned Units then outstanding, and the “Earned Units” and “Vested Units” then outstanding under all Other Class B Restricted Unit Agreements.

 

“Board” means the Board of Directors or governing board or committee of the Company.

 

“Call Event” means, with respect to an Earned Unit, the termination of Executive’s employment with the Company and its Affiliates for any reason prior to December 31, 2022, other than a termination of employment (i) by Executive for a Good Reason or under the circumstances described in Sections 1(b)(ii) or (iii) of the Employment Letter, (ii) by the Company and its Affiliates other than for Cause, including as contemplated by Section 1(b)(i) of the Employment Letter, or (iii) due to death or disability.

 

“Call Option” means the Partnership’s option to repurchase Earned Units upon or following a Call Event, as provided in Exhibit A.

 

“Call Value” of an Earned Unit means:

 

(a)           if the Call Event occurs on or before December 31, 2018, an amount equal to 25% of the product of (i) the closing sales price of PAGP’s Class A shares on the date of the applicable Call Event, or if the Call Event occurs on a date that is not a trading day for PAGP’s Class A shares, the closing sales price on the first preceding day that is a trading day for PAGP’s Class A shares (for purposes of this definition, the “Closing Price”) and (ii) the Conversion Factor ;

 

(b)           if the Call Event occurs after December 31, 2018 but on or before December 31, 2019, an amount equal to 50% of the product of (i) the Closing Price and (ii) the Conversion Factor; or

 

(c)           if the Call Event occurs after December 31, 2019 but on or before December 31, 2022, an amount equal to 75% of the product of (i) the Closing Price and (ii) the Conversion Factor.

 

“Capital Call” means the occurrence of an event that requires the partners to make a cash contribution to the Partnership pursuant to Section 3.1(b) of the Partnership Agreement.

 

“Capital Call Amount” means, with respect to a particular Capital Call, the aggregate amount of the cash contributions required to be made to the Partnership by its partners in connection therewith.

 

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“Cause” means the termination of Executive’s employment with the Partnership and its Affiliates by the Board upon (i) a finding by the CEO and President-COO of the Company (or if Executive is the CEO of the Company, by vote of the Board of Directors of the Company excluding Executive if he is a member thereof) that Executive has substantially failed to perform the duties and responsibilities of his position at an acceptable level and after written notice specifying such failure in detail and after a reasonable period under the circumstances (determined by the CEO of the Company, or alternatively the Board of Directors, in good faith) such failure has continued without full correction by Executive, (ii) Executive’s conviction of or guilty plea to the committing of an act or acts constituting a felony under the laws of the United States or any state thereof or any misdemeanor involving moral turpitude or (iii) Executive’s violation of the Company’s Code of Business Conduct (unless waived in accordance with the terms thereof), provided that Executive is provided written notice of the specific violation thereof.

 

“Change in Control” means the determination by the Board that one of the following events has occurred:

 

(a) The Persons who own member interests in PAA GP Holdings LLC immediately following the closing of the GP IPO, including the IPO Entity, and the respective Affiliates of such Persons (such owners and Affiliates being referred to as the “Owner Affiliates”), cease to own directly or indirectly at least 50% of the membership interests of such entity;

 

(b) (x) a “person” or “group” other than the Owner Affiliates becomes the “beneficial owner” directly or indirectly of 25% or more of the member interest in the general partner of the IPO Entity, and (y) the member interest beneficially owned by such “person” or “group” exceeds the aggregate member interest in the general partner of the IPO Entity beneficially owned, directly or indirectly, by the Owner Affiliates; or

 

(c) A direct or indirect transfer, sale, exchange or other disposition in a single transaction or series of transaction (whether by merger or otherwise) of all or substantially all of the assets of the IPO Entity or the MLP to one or more Persons who are not Affiliates of the IPO Entity (“third party or parties”), other than a transaction in which the Owner Affiliates continue to beneficially own, directly or indirectly, more than 50% of the issued and outstanding voting securities of such third party or parties immediately following such transaction.

 

“Class A Unit” means a Class A common unit of the Partnership.

 

“Class B Unit” means a Class B common unit of the Partnership.

 

“Class B Unit Majority” means the holders of the Applicable Class B Units (as a group), acting at the direction of the holders of at least a majority of the Applicable Class B Units outstanding at such time.

 

“Company” means Plains All American GP LLC, a Delaware limited liability company and the general partner of the Partnership.

 

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“Conversion Factor” means, as of a particular time, a fraction, (a) the numerator of which is the most recent regular quarterly cash distribution paid with respect to any Class B Unit, and (b) the denominator of which is the most recent regular quarterly cash distribution paid with respect to an IPO Entity Class A Unit (excluding for this purpose any special or extraordinary cash distribution paid with respect to an IPO Entity Class A Unit that is funded by indebtedness).

 

“Earned Unit” means, as of any date, a Granted Unit that has become “earned,” as provided in Section 2.2(b).

 

“Employment Letter” means that certain Employment Letter dated July 10, 2015 between Executive and the Company.

 

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

 

“Forfeiture Event” means, with respect to a Restricted Unit, the termination of Executive’s employment with the Company and its Affiliates for any reason other than any of the circumstances described in Section 1(b)(i) —(iv) of the Employment Letter.

 

“Good Reason” means any one of the following acts or omissions by the Partnership or the Company (or any successor thereto):

 

(a)           any material breach by the Partnership of this Agreement;

 

(b)           the failure of any successor to the Partnership to assume this Agreement; or

 

(c)           any material overall reduction in Executive’s authority, responsibilities, or duties (taking into account additional authority,  responsibilities or duties associated with (i) the initial transition of responsibilities to Executive, (ii) the overall growth of the Partnership or MLP or (iii)  a promotion or lateral transfer accepted by Executive).

 

Any such act or omission shall not constitute Good Reason unless (i) Executive gives written notice to the Board that an act or omission constitutes Good Reason within 30 days of the date Executive becomes aware of such act or omission, or reasonably should have become aware of such act or omission, and (ii) the Partnership or the Company fails to remedy the condition within the 30-day period following such notice.

 

“GP IPO” means the initial public offering of Class A shares by the IPO Entity as contemplated by that certain Registration Statement on Form S-1 filed with the Securities and Exchange Commission (Registration No. 333-190227), as amended.

 

“IPO Entity” means Plains GP Holdings, L.P, a Delaware limited partnership.

 

“IPO Entity Class A Unit” means a Class A share of the IPO Entity.

 

“MLP” means Plains All American Pipeline, LP, a Delaware limited partnership.

 

“MLP Quarterly Distribution” means the amount of the quarterly cash distribution made with respect to a common unit of the MLP on the relevant quarterly distribution date for the MLP.

 

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“Other Class B Restricted Unit Agreement” means any Class B Restricted Unit Agreement (other than this Agreement) entered into between the Partnership and any person on terms that are substantially similar to those set forth in this Agreement (other than as to (i) the number of “Granted Units” granted thereunder, which may differ from the number of Granted Units hereunder, (ii) any date set forth in such agreement, which may differ from the corresponding date set forth in this Agreement and (iii) the schedule set forth in Section 2.2(b), which may differ as to “MLP Quarterly Distribution per MLP Common Unit” and/or “Percentage of Initially Granted Units that Become Earned Units”), as such agreement may be amended or restated from time to time.

 

“Partnership Agreement” means that certain Seventh Amended and Restated Agreement of Limited Partnership of Plains AAP, L.P. dated as of the closing date of the GP IPO, as such agreement may be amended or restated from time to time.

 

“Partnership Distribution” means, with respect to a particular fiscal quarter, the product of (i) that portion of the Partnership’s quarterly cash distributions, if any, during such quarter in excess of the Distribution Threshold Amount (as defined in Schedule I) for such quarter, multiplied by (ii) 100% less the percentage (if any) of any such quarterly distributions payable to GP LLC in accordance with the Partnership Agreement; provided, that for purposes of this definition, the amount of a quarterly cash distribution shall exclude any cash distribution paid only with respect to a Class A Unit (and, if applicable, the General Partner) that is funded by indebtedness.

 

“Profits Percentage” means Executive’s share of Partnership Distributions calculated, at the time of the Partnership Distribution, as the percentage obtained by dividing (i) the total number of Executive’s Earned Units and Vested Units at such time by (ii) the sum of (A) the number of Class A Units outstanding at such time and (B) the total number of Applicable Class B Units at such time.

 

“Restricted Unit” means, as of any date, a Granted Unit that is not an Earned Unit or a Vested Unit.

 

“Surrender Obligation” means the obligation to surrender and transfer to the Partnership (i) Restricted Units upon a Forfeiture Event and (ii) Earned Units upon the exercise of a Call Option by the Partnership.

 

“Transfer” means any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation or other encumbrance, or any other disposition (whether voluntary, involuntary or by operation of law other than to the estate of Executive in the event of death), of Restricted Units, Earned Units or Vested Units, including derivative or similar transactions or arrangements whereby a portion or all of the economic interest in, risk of loss or opportunity for gain with respect to, or voting or other rights, of such units are transferred or shifted to another person.

 

“Vested Unit” means (i) an Earned Unit that is no longer subject to the Partnership’s Call Option or (ii) an Earned Unit or a Restricted Unit that becomes a “Vested Unit” pursuant to Section 2.2(c) below or Section 1(b)(i) — (iv) of the Employment Letter.

 

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ARTICLE 2
  GRANT; FORFEITURE OF RESTRICTED UNITS AND EARNED UNITS; 
 DISTRIBUTIONS

 

2.1          Grant.  The Partnership hereby grants to Executive the Granted Units effective as of the Grant Date.  Unless Class A Units are uncertificated, the Partnership shall issue Executive a certificate representing the Granted Units, and such certificate shall bear such legends as provided for in the Partnership Agreement and such additional legends as may be determined by the Board to reflect the Surrender Obligation, the Call Option, and the other terms and conditions of this Agreement and to comply with applicable securities laws.  To insure the availability for delivery of Executive’s Restricted Units upon a Forfeiture Event, Executive hereby appoints the Secretary of the Company, or any other person designated by the Partnership as escrow agent, as Executive’s attorney-in-fact to sell, assign and transfer unto the Partnership such Restricted Units or Earned Units, if any, and upon execution of this Agreement, Executive delivers and deposits with the Secretary of the Company, or such other person designated by the Partnership, the certificates representing the Granted Units, together with the unit assignment duly endorsed in blank, attached hereto as Exhibit B.  The Granted Units and unit assignment shall be held by the Secretary (or any other person designated by the Partnership as escrow agent) in escrow, pursuant to the Joint Escrow Instructions of the Partnership and Executive attached as Exhibit C hereto, until such time as the Surrender Obligation has lapsed with respect to the Granted Units.  Without limiting the Executive’s rights under the Employment Letter to have Restricted Units become Earned Units, upon the lapse of the Surrender Obligation, Earned Units shall become Vested Units.  Once the Surrender Obligation has lapsed with respect to any Granted Unit, unless Class A Units are uncertificated, the Partnership shall issue and deliver to Executive a new certificate or certificates evidencing the ownership of the Vested Units.  Upon issuance of the new certificate evidencing the ownership of the Vested Units, the certificate deposited with the escrow agent shall be marked “Exchanged and Cancelled” and returned to the partnership unit transfer book of the Partnership and the Partnership shall deliver a replacement certificate to the escrow agent to reflect any remaining Restricted Units and Earned Units.  Any new certificate issued to evidence the ownership of Vested Units shall bear such legends as may be determined by the Board to reflect the terms and conditions of this Agreement (other than the Surrender Obligation) and the Partnership Agreement and to comply with applicable securities laws.

 

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2.2          Forfeitures and Calls of Restricted Units and Earned Units.

 

(a)           Forfeiture of Restricted Units.  If a Forfeiture Event occurs, then Executive shall, for no consideration, automatically forfeit to the Partnership as of the date such event occurs all then Restricted Units of Executive on such date, and neither the Executive nor any of his successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such Restricted Units or the certificates representing such Restricted Units; provided, however, if such Forfeiture Event is termination of Executive’s employment by the Company or any of its Affiliates without Cause, then for all purposes of this Agreement, such Forfeiture Event shall be suspended and shall not be deemed to occur until the 180th day after the date of such termination unless, during such 180-day period, (x) Executive shall breach in any material respect any confidentiality obligation to the Company or any of its Affiliates or (y) any of the events described in clause (ii) or (iii) of the definition of “Cause” shall occur, in which case (1) for all purposes of this Agreement, such Forfeiture Event shall be deemed to have occurred on the date of such termination (but after giving effect to any Earned Units becoming Vested Units as a result of such termination) and (2) any Granted Unit which otherwise would have become an Earned Unit or a Vested Unit during such suspension period shall be deemed to be a Restricted Unit for all purposes under this Agreement and, for the avoidance of doubt, shall (together with all other Restricted Units) be forfeited to the Partnership, for no consideration, effective as of such date of termination.

 

(b)           Earned Units.  A percentage of Granted Units shall become Earned Units on the date on which MLP pays a quarterly distribution in accordance with the following schedule:

 

	
MLP Quarterly Distribution
   per MLP Common Unit
    	
 
    	
Cumulative Percentage of Initially Granted
   Units that Become Earned Units
    	
 
    
	
Less than $0.725
    	
 
    	
0
    	
%
    
	
Greater than or   equal to $0.725, but less than $0.7875
    	
 
    	
25.0
    	
%
    
	
Greater than or   equal to $0.7875, but less than $0.825
    	
 
    	
50.0
    	
%
    
	
Greater than or   equal to $0.825, but less than $0.875
    	
 
    	
75.0
    	
%
    
	
$0.875 or   greater
    	
 
    	
100.0
    	
%
    

 

Once a Granted Unit has become an Earned Unit pursuant to the above schedule, the Earned Unit shall remain an Earned Unit thereafter until it either becomes a Vested Unit or is purchased by the Partnership pursuant to the exercise of its Call Option.

 

(c)           Change in Control.  All Earned Units automatically shall become Vested Units upon a Change in Control. If prior to the Change in Control 0% of the Granted Units have become Earned Units, then 25% of the Granted Units automatically shall become Vested Units upon the Change in Control.  If prior to the Change in Control only 25% or 50% of the Granted Units have become Earned Units, then an additional 25% of the Granted Units automatically shall become Vested Units upon the Change in Control.  If prior to the Change in Control only 75% of the Granted Units have become Earned Units, then all remaining Granted Units automatically shall become Vested Units upon the Change in Control.  Unless and except to the extent contemplated

 

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by Section 1(b)(iii) of the Employment Letter or as specifically provided otherwise by the Partnership upon or in connection with such Change in Control, Executive shall, for no consideration, automatically forfeit to the Partnership as of the date such Change in Control occurs all Restricted Units of Executive that do not vest upon such Change in Control as provided herein, and neither Executive nor any of his successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such Restricted Units or the certificates representing such Restricted Units.

 

(d)           Purchase of Earned Units.  The Partnership shall have a Call Option with respect to Earned Units as provided in Section 2 of Exhibit A.

 

2.3          Partnership Distributions.  Executive shall not be entitled to, and shall not receive, any Partnership Distributions with respect to Restricted Units.  Executive shall be entitled to receive his Profits Percentage of any Partnership Distributions made as of the relevant distribution date.  Partnership Distributions, to the extent payable to Executive with respect to an Earned Unit or Vested Unit, shall be paid to Executive at the same time that such Partnership Distributions are paid to holders of Class A Units.

 

2.4          Capital Calls.  In the event of a Capital Call, Executive shall be required to pay to the Partnership his or her allocable share of the associated Capital Call Amount, which allocable share shall be determined in accordance with Section 3.1(b) of the Partnership Agreement.

 

ARTICLE 3
  ACKNOWLEDGEMENT; RESTRICTIONS; ELECTIONS; 
 ANTI-DILUTION PROVISIONS

 

3.1          Acknowledgment; Conflicts.  Executive agrees that the Granted Units shall be subject to the Partnership Agreement.  Executive (a) hereby accepts and adopts, and agrees to be bound by, the terms and provisions of the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of Delaware, as amended or restated, and the Partnership Agreement to the same extent as if Executive had executed the Partnership Agreement and (b) agrees that the Granted Units shall be bound by the terms and conditions of such agreement, including, but not limited to, the transfer restrictions, if any, set forth therein, provided however, that in the event of any conflict between the provisions of such agreement and the provisions of this Agreement, the provisions of this Agreement as modified by the Employment Letter shall govern.

 

3.2          Company Acts.  Subject to the anti-dilution provisions set forth in Section 3.5, the existence of the Restricted Units, Earned Units or Vested Units shall not affect in any way the right or power of the Board or the holders of Class A Units to make or authorize any adjustment, recapitalization, reorganization or other change in the Partnership’s capital structure or its business, any merger, consolidation, equity exchange or other business combination of the Partnership with or into any other entity (and, where necessary or appropriate (as determined by the Board in good faith), the conversion or exchange of Class A Units and Class B Units into other securities or interests in the Partnership or any other entity in connection therewith, provided that the relative economic rights and preferences of the Class A Units and the Class B Units are affected proportionately, taking into account their current terms), any issue of debt or equity

 

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securities, the dissolution or liquidation of the Partnership or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other act or proceeding.

 

3.3          Transfer Restrictions; Call Options.  The Restricted Units and Earned Units shall be subject to the Transfer restrictions, Call Options and other terms and conditions set forth or described in Exhibit A attached hereto, as applicable.  Vested Units shall be subject only to the provisions of Sections 1, 3 and 4(b) of Exhibit A.  Executive agrees that Executive will, at any time and from time to time as requested by the Partnership, execute and deliver to the Partnership such other documents and instruments, if any, as the Board, in its discretion, may require to evidence Executive’s agreement to be bound by the terms of Exhibit A.  The terms and conditions of Exhibit A shall survive the termination of this Agreement.  The restrictions set forth in Exhibit A shall not apply to the transfer of Restricted Units or Earned Units pursuant to a plan of reorganization of the Partnership, but the Class A Units, securities or other property received in exchange therefor shall also become subject to the Transfer restrictions, Call Options and Surrender Obligation to the same extent as the Restricted Units, Earned Units and Vested Units exchanged therefor and the certificates, if any, representing such Class A Units, securities or other property shall be legended to show such restrictions.

 

3.4          Tax Withholding; §83(b) Election.

 

(a)           To the extent that the receipt of the Restricted Units, Earned Units, Vested Units, the lapse of the Surrender Obligations, or any other event pursuant to this Agreement results in compensation income or wages to Executive for federal, state or local tax purposes, Executive shall deliver to the Partnership at the time of such receipt, lapse or event, as the case may be, such amount of money as the Partnership may require to meet its minimum withholding obligation under applicable tax laws, and if Executive fails to do so, the Partnership is authorized to withhold from any cash or other remuneration (including withholding and cancelling any Restricted Units, Earned Units or Vested Units distributable to Executive under this Agreement) then or thereafter payable to Executive any tax required to be withheld by reason of such resulting compensation income or wages.

 

(b)           Within 30 days after the date of issuance of the Restricted Units, Executive shall make an election authorized by section 83(b) of the Code with respect to such Restricted Units and Executive shall submit to the Partnership a copy of the statement filed by Executive to make such election.  The form of such election shall be in such form as approved by the Partnership and delivered to the Executive following the issuance of the Restricted Units.

 

(c)           Executive acknowledges and agrees that he is not relying upon any written or oral statement or representation of the Partnership, its Affiliates, or any of their respective Executives, directors, officers, attorneys or agents regarding the tax effects associated with the Restricted Units, Earned Units, Vested Units or the execution of this Agreement.  Executive acknowledges and agrees that in deciding to enter into this Agreement, Executive is relying on his own judgment and the judgment of the professionals of his choice with whom he has consulted.

 

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3.5          Anti-Dilution Provisions.

 

(a)           If after the date of this Agreement, the Class A Units shall be changed or proposed to be changed into a different number or class of units by reason of the occurrence of any reclassification, recapitalization, split-up, combination, exchange of shares or similar readjustment, or a unit dividend thereon shall be paid, appropriate proportional adjustments shall be made to the Class B Units, as determined by the Board in good faith.  Notwithstanding the foregoing, no repurchase of Class A Units for fair value (as determined by the Board in good faith) shall require any adjustment under this Section 3.5(a).

 

3.6          Drag-Along Provisions.

 

(a)           [Intentionally Deleted]

 

(b)           In the event of a sale of all or substantially all of the assets or equity of the IPO Entity, then the Board shall have the right to require Executive to transfer all of his Vested Units (including any Granted Units that vest pursuant to Section 2.2(c) hereof) in such transaction in exchange for consideration per transferred Class B Unit that is equal to the Conversion Factor times the consideration to be received per IPO Entity Class A Unit in such transaction.

 

(c)           In connection with any transfer required pursuant to this Section 3.6, Executive shall deliver the certificates representing his Class B Units duly endorsed or accompanied by written instruments of transfer, in form and substance reasonably satisfactory to the Board, free and clear of any liens, together with any other documents reasonably required to be executed in connection with such transaction, as directed by the Board.

 

(d)           Class B Units subject to this Section 3.6 will be included in a proposed sale pursuant hereto and be subject to any agreement with the purchaser in such transaction relating thereto, on the same terms and subject to the same conditions applicable to the Class A Units or IPO Entity Class A Units, as the case may be.  Such terms and conditions shall be determined in the sole discretion of the Board, and shall include (i) the consideration to be paid (including without limitation the form and the aggregate amount thereof) and (ii) the provision of information, representations, warranties, covenants and requisite indemnifications; provided, however, that Executive shall not be required to make any representations and warranties, other than those relating specifically to Executive’s execution and delivery of any transaction agreement (including absence of conflicts), and title to the Class B Units, and any indemnification provided by Executive shall be on a several, not joint, basis and shall be based on (and shall not exceed) Executive’s pro rata share of the aggregate consideration paid in such transaction. For purposes of this Section 3.6 “Executive” includes any Permitted Transferee (as defined in the Partnership Agreement).

 

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ARTICLE 4

GENERAL PROVISIONS

 

4.1          Notices.  For purposes of this Agreement, notices and all other communications provided for herein shall be given in the same manner as indicated in the Partnership Agreement.

 

4.2          Employment Relationship.  For purposes of this Agreement (including Exhibit A attached hereto), Executive shall be considered to be in the employment of the Partnership as long as Executive remains an employee of an Affiliate of the Partnership.  Without limiting the scope of the preceding sentence, it is expressly provided that Executive shall be considered to have terminated employment with the Partnership at the time the entity or other organization that employs Executive is no longer an Affiliate of the Partnership.  Any question as to whether and when there has been a termination of such employment or association, and the cause of such termination, shall be determined by the Board and its determination shall be final.

 

4.3          Entire Agreement; Amendment.  This Agreement, the Partnership Agreement and the Employment Letter constitute the entire agreement, and supersede all previous agreements and discussions relating to the same or similar subject matters between Executive and the Partnership or any Affiliate and constitute the entire agreement between Executive and the Partnership and any Affiliate with respect to the subject matter of this Agreement.  Without limiting the scope of the preceding sentence, except for this Agreement, the Partnership Agreement and the Employment Letter, all prior and contemporaneous understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect.  In the event any provisions of this Agreement conflict with provisions in the Employment Letter, the Employment Letter shall control.  Except as provided below, any modification of this Agreement shall be effective only if it is in writing and signed by both Executive and the Partnership as authorized by the Board.  Notwithstanding the foregoing, the Partnership may unilaterally amend this Agreement in any manner that the Board determines in good faith is necessary or advisable to facilitate the consummation of the GP IPO, such amendment to become effective on the fifth business day after the day on which notice thereof is given to the holders of the Applicable Class B Units then outstanding, unless prior to such fifth business day, the holders of at least 75% of such Applicable Class B Units object in writing to such amendment, in which case such proposed amendment shall not become effective; provided, however, that the holders of the Applicable Class B Units shall not be entitled to object to any such amendment (and such amendment shall automatically become effective regardless of any purported objection by the holders of the Applicable Class B Units) if (i) all Other Class B Restricted Unit Agreements are amended in substantially the same way, (ii) the Class A Units and Class B Units are diluted proportionately (based on relative distributions) by any partnership interests or other equity securities issued to Persons (other than members of the Company (or Affiliates thereof)) in connection therewith and (iii) immediately after giving effect to the GP IPO, the economic interest in the Partnership or its successor or assign or (or the entity the securities or equity interests of which the Class B Units are converted into or exchanged for) represented by the Class B Units (and/or any securities or equity interests into which such Class B Units are converted or exchanged) is not diluted by any partnership interests or other equity securities issued to members of the Company (or any Affiliate thereof) in connection therewith.  For the avoidance of doubt, notwithstanding anything in this Agreement to the contrary, in the event of a GP IPO, the Board shall be entitled (but not required) to make such adjustments as the Board shall determine in good

 

12

 

faith to be equitable, including without limitation causing all or a portion of the Class B Units not to be converted into or exchanged for similar equity interests in the IPO Entity, and to remain outstanding as Class B Units of the Partnership.  Notwithstanding anything in this Agreement to the contrary, if the Board determines that (i) the provisions of section 409A of the Code apply to this Agreement or the Class B Units and that the terms of this Agreement or such units do not, in whole or in part, satisfy the requirements of such section, or (ii) any provision of this Agreement or the effect or operation thereof would produce material adverse tax consequences to Executive, then the Partnership, in the sole discretion of the Board, may unilaterally modify this Agreement in such manner as the Board deems appropriate to comply with such section 409A and any regulations or guidance issued thereunder or to mitigate or avoid such adverse tax consequences.

 

4.4          Binding Effect.  This Agreement shall be binding upon and inure to the benefit of any successors to the Partnership and all permitted transferees of any Transfer made in compliance with Exhibit A and other persons lawfully claiming under Executive.

 

4.5          Governing Law.  This Agreement is governed by and shall be construed in accordance with the laws of the State of Delaware, excluding any conflict-of-laws rule or principle that might refer the governance or the construction of this Agreement to the laws of another jurisdiction.  If any provision of this Agreement or the application thereof to any person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances is not affected thereby and that provision shall be enforced to the greatest extent permitted by law.

 

4.6          Injunctive Relief.  Executive acknowledges that a remedy at law for any breach or attempted breach of this Agreement will be inadequate, agrees that the Partnership may be entitled to specific performance and injunctive and other equitable relief to be implemented by a court of competent jurisdiction in case of any such breach or attempted breach, and further agrees to waive any requirement for the securing or purchasing of any bond in connection with the obtaining of any such injunctive or any other equitable relief.  Executive agrees that the Partnership’s right to injunctive relief will be in addition to any other rights the Partnership may have.

 

[Signature Page Follows]

 

13

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement effective for all purposes as of the Grant Date.

 

	
 
    	
PLAINS AAP, L.P., by its   general partner,
    
	
 
    	
PLAINS ALL AMERICAN GP LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Richard McGee
    
	
 
    	
Name: 
    	
Richard McGee
    
	
 
    	
Title:
    	
Executive Vice   President
    
	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ WCW (Willie) Chiang
    
	
 
    	
WCW (Willie) Chiang
    

 

14

 

EXHIBIT A TO

RESTRICTED UNITS AGREEMENT

 

PROVISIONS RELATING TO TRANSFERS;
 CALL OPTIONS; AND CONVERSIONS

 

Capitalized terms used in this Exhibit that are not defined in this Exhibit shall have the meaning assigned to such terms in the Restricted Units Agreement to which this Exhibit is attached (the “Agreement”).  Unless the context requires otherwise, all references in this Exhibit to Sections refer to the Sections of this Exhibit.

 

1.             No Transfers.  Executive may not Transfer all or any portion of the Restricted Units or any Earned Units, and any attempted Transfer shall be, and is hereby declared, null and void for all purposes; provided, however that Executive shall be entitled to Transfer any Earned Units to a Permitted Transferee (as defined in the Partnership Agreement), by will or the laws of descent and distribution, provided that any such permitted Transfer shall be made in accordance with, and subject to, Section 7.3 of the Partnership Agreement.  In addition to the other restrictions set forth herein, each Restricted Unit, Earned Unit and Vested Unit shall be subject to the restrictions on Transfer (as defined in the Partnership Agreement) set forth in the Partnership Agreement.

 

2.             Partnership Call Option.  Upon the occurrence of a Call Event, the Partnership, at its option (exercisable at any time during the 60-day period following the date of such Call Event), may (but the Partnership shall have no obligation to) purchase all (or any portion elected by the Partnership in its sole discretion) of the Earned Units held by Executive (or by Executive’s estate), for a purchase price per Earned Unit equal to the Call Value at the time of the Call Event.  If the Partnership wishes to exercise the Call Option granted herein, it must provide written notice within such 60-day period to Executive (or his estate) specifying the number of such Earned Units it elects to purchase.  Within 10 days after the exercise of the Call Option by the Partnership, the Executive (or estate) shall deliver the certificates, if any, representing the applicable Earned Units to the Partnership, duly endorsed and together with appropriate assignment and transfer instruments, free and clear of all adverse charges, liens, claims and encumbrances, in consideration for the purchase price specified above paid in the form of a single, lump sum cash payment from the Partnership.  Delivery of the Earned Units and related transfer and assignment instruments by the holder shall constitute a representation to the Partnership that such Earned Units are free and clear of all adverse charges, liens, claims and encumbrances.  If the Partnership does not timely exercise its Call Option, the Earned Units shall become Vested Units at the end of the period for exercising the Call Option.

 

 

3.             Executive Elective Exchange of Vested Units.  Conversion rights attributable to the Granted Units shall be governed by Section 7.10 of the Partnership Agreement.

 

4.             Unit Legend.

 

(a)           In addition to any other legend that may be required by law, each certificate, if any, for Restricted Units and Earned Units shall bear a legend in substantially the following form:

 

THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD UNLESS THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE (AND IN SUCH CASE, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE PARTNERSHIP SHALL HAVE BEEN DELIVERED TO THE PARTNERSHIP TO THE EFFECT THAT SUCH OFFER OR SALE IS NOT REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS).  THE UNITS REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE RESTRICTED UNITS AGREEMENT DATED AS OF AUGUST 24, 2015, AS AMENDED OR RESTATED FROM TIME TO TIME, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE PARTNERSHIP. THE UNITS REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT UNDER CERTAIN CIRCUMSTANCES TO MANDATORY TRANSFER AS SET FORTH IN THE RESTRICTED UNITS AGREEMENT DATED AS OF AUGUST 24, 2015, AS AMENDED OR RESTATED FROM TIME TO TIME, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE PARTNERSHIP.

 

(b)           In addition to any other legend that may be required by law, each certificate, if any, for Vested Units shall bear a legend in substantially the following form:

 

THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD UNLESS THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE (AND IN SUCH CASE, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE

 

 

PARTNERSHIP SHALL HAVE BEEN DELIVERED TO THE PARTNERSHIP TO THE EFFECT THAT SUCH OFFER OR SALE IS NOT REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS). THE UNITS REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT UNDER CERTAIN CIRCUMSTANCES TO MANDATORY TRANSFER AS SET FORTH IN THE RESTRICTED UNITS AGREEMENT DATED AS OF AUGUST 24, 2015, AS AMENDED OR RESTATED FROM TIME TO TIME, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE PARTNERSHIP.

 

 

EXHIBIT B TO

RESTRICTED UNITS AGREEMENT

 

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED, WCW (Willie) Chiang (“Executive”) hereby assigns and transfers unto Plains AAP, L.P., a Delaware limited partnership (the “Partnership”), 1,000,000 Class B common units in the Partnership (the “Class B Units”), standing in his name on the books of said Partnership represented by Certificate No.       herewith, and does hereby irrevocably constitute and appoint                                to transfer the said Class B Units on the books of the within named Partnership with full power of substitution in the premises.

 

This Assignment Separate from Certificate may be used only in accordance with the Class B Restricted Units Agreement (the “Agreement”) between the Partnership and the undersigned dated August 24, 2015.

 

	
Dated:              ,
    	
Signature:
    	
 
    

 

INSTRUCTIONS:  Please do not fill in any blanks other than the signature line.  The purpose of this Assignment Separate from Certificate is to return the Class B Units to the Partnership in the event Executive forfeits any of such Class B Units as set forth in the Agreement, without requiring additional signatures on the part of Executive.  This Assignment Separate from Certificate must be delivered to the Partnership with the above Certificate No.          .

 

 

EXHIBIT C TO

RESTRICTED UNITS AGREEMENT

 

 

JOINT ESCROW INSTRUCTIONS

 

August 24, 2015

 

Plains AAP, L.P.
 333 Clay, Suite 1600
 Houston, Texas 77002

Attention:  Secretary

 

Dear Sir or Madam:

 

As Escrow Agent for both Plains AAP, L.P., a Delaware limited partnership (the “Partnership”), and WCW (Willie) Chiang (“Executive”), holder of 1,000,000 of the Partnership’s Class B common units (the “Class B Units”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Class B Restricted Units Agreement between the Partnership and Executive, dated August 24, 2015, (the “Agreement”), in accordance with the following instructions:

 

1.                                      In the event of a Forfeiture Event (as defined in the Agreement), the Partnership shall give to Executive and to you a written notice specifying the number of Class B Units to be transferred and delivered to the Partnership pursuant to Section 2.2(a) of the Agreement.  Executive and the Partnership hereby irrevocably authorize and direct you to transfer and deliver such Class B Units to the Partnership in accordance with the terms of said notice.

 

2.                                      In connection with the transfer and delivery of Class B Units to the Partnership pursuant to paragraph 1 above, you are directed (a) to date the Assignment Separate From Certificate necessary for the transfer in question, (b) to fill in the number of Class B Units being transferred, and (c) to deliver same, together with the certificate evidencing such Class B Units to be transferred, to the Partnership or its assignee.

 

3.                                      Executive hereby irrevocably authorizes the Partnership to deposit with you any certificates evidencing the Class B Units to be held by you hereunder and any additions and substitutions to said units as set forth in the Agreement.  Executive does hereby irrevocably constitute and appoint you as Executive’s attorney-in-fact and agent for the term of this escrow to execute with respect to such Class B Units all documents necessary or appropriate to make such Class B Units negotiable and to complete any transaction herein contemplated, including but not limited to, the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the Class B Units.

 

4.                                      If at the time of termination of this escrow you should have in your possession any documents, securities or other property belonging to Executive, you shall deliver all of the same to Executive and shall be discharged of all further obligations hereunder.

 

 

5.                                      Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

 

6.                                      You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties.  You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Executive while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

 

7.                                      You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court.  In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

 

8.                                      You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.

 

9.                                      You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.

 

10.                               You shall be entitled to employ such legal counsel and other experts as you may deem necessary and proper to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.

 

11.                               Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Partnership or its general partner, or if you shall resign by written notice to each party.  In the event of any such termination, the Partnership shall appoint a successor Escrow Agent.

 

12.                               If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

 

13.                               It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of

 

 

competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

 

14.                               Notices.  All notices and other communications under these Joint Escrow Instructions shall be in writing and shall be given by facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing or 24 hours after transmission by facsimile to the respective parties named below at the following addresses or at such other addresses as a party may designate by ten day’s advance written notice to each of the other parties hereto:

 

	
If to the Partnership or
    	
 
    
	
to Executive:
    	
As provided in the Partnership Agreement
    
	
 
    	
 
    
	
If to the Escrow Agent:
    	
Plains All American GP LLC
    
	
 
    	
333   Clay
    
	
 
    	
Suite 1600
    
	
 
    	
Houston,   TX 77002
    
	
 
    	
 
    
	
 
    	
Attn: Secretary
    
	
 
    	
Facsimile: 713-646-4313
    

 

15.                               By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.

 

16.                               This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.

 

17.                               These Joint Escrow Instructions shall be governed by the internal substantive laws, but not the choice of law rules, of the State of Delaware.

 

 

	
GRANTEE:
    	
PARTNERSHIP:
    
	
 
    	
 
    
	
 
    	
Plains AAP, L.P.
    
	
 
    	
By: 
    	
Plains All American GP LLC, its
    
	
 
    	
 
    	
 
    	
general partner
    
	
Signature
    	
 
    
	
 
    	
 
    
	
WCW (Willie) Chiang
    	
 
    	
By:
    	
 
    
	
Printed Name
    	
 
    	
 
    	
Richard McGee, Executive Vice President
    
	
 
    	
 
    
	
Residence Address:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
ESCROW AGENT
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Richard McGee, Secretary
    	
 
    
					

 

 

SCHEDULE I TO

 

RESTRICTED UNITS AGREEMENT

 

“Applicable Carryover Amount” means, with respect to a particular fiscal quarter, an amount of the Cumulative Carryover Amount equal to the lesser of (i) the Unapplied Cumulative Carryover Amount for such quarter and (ii) the amount, if any, by which $11 million exceeds the Applicable Debt Service Amount for such quarter.

 

“Applicable Debt Service Amount” means, with respect to any fiscal quarter, the aggregate amount, if any, of principal and interest paid by the Partnership or any of its Subsidiaries in respect of any Distribution Loan or Distribution Loans during such quarter; provided, however, that (i) notwithstanding the foregoing, the “Applicable Debt Service Amount” shall not include that portion of any such payment that is funded with the proceeds of indebtedness incurred by the Partnership or any of its Subsidiaries (it being understood that any such indebtedness shall constitute a Distribution Loan) and (ii) for the avoidance of doubt, any principal or interest payment in respect of any Distribution Loan that is made by any Person other than the Partnership or any of its Subsidiaries shall not constitute “Applicable Debt Service Amount”.

 

“Carryover Amount” means, for any particular fiscal quarter, the aggregate amount by which the Applicable Debt Service Amount for such quarter exceeds $11.0 million.

 

“Distribution Loan” means a loan to the Partnership, the proceeds of which are distributed only with respect to the Class A Units (and, if applicable, the General Partner); provided, that if any proceeds of a loan are used for any purposes other than such a distribution, only the portion of such loan distributed with respect to the Class A Units (and, if applicable, the General Partner) shall be deemed to be a “Distribution Loan.”

 

“Distribution Threshold Amount” means, with respect to any fiscal quarter, the amount by which (a) $11.0 million exceeds (b) the sum of (i) the Applicable Debt Service Amount for such quarter plus (ii) the Applicable Carryover Amount for such quarter.

 

“Cumulative Carryover Amount” means, as of any particular fiscal quarter, an amount equal to the aggregate Carryover Amounts, if any, for all preceding fiscal quarters.

 

“Unapplied Cumulative Carryover Amount” means, as of any particular fiscal quarter, that portion of the Cumulative Carryover Amount, if any, not previously included in the calculation of the Distribution Threshold Amount for any prior quarter.  For the avoidance of doubt, with respect to any fiscal quarter, the aggregate amount of the Cumulative Carryover Amount that has been included in the calculation of the Distribution Threshold Amount for all preceding fiscal quarters shall equal the aggregate Applicable Carryover Amounts for all such fiscal quarters.

 

 

EXHIBIT C

Form of Confidentiality Agreement

 

 

CONFIDENTIAL INFORMATION 
 AND NON-SOLICITATION AGREEMENT

 

This AGREEMENT effective as of the 24th day of August, 2015, between Plains All American GP LLC for itself and on behalf of its affiliates (all referred to as the “Company”), and WCW (Willie) Chiang (the “Employee”).

 

WITNESSETH:

 

WHEREAS, the Company’s business includes the transportation, storage, terminalling, purchase, sale, exchange and trading of liquid hydrocarbons (including crude oil and refined products) as well as natural gas storage and processing and related services, in the United States and Canada, including offshore production, and in Federal Waters in the Gulf of Mexico, (the “Region”); and

 

WHEREAS, the Company’s relationship with its shippers, customers and suppliers is special and unique and is based upon valuable and confidential information concerning the identity of such shippers, customers and suppliers, the decision processes used by such shippers, customers and suppliers, the authority of officers and employees of such shippers, customers and suppliers, the production and sales patterns of such shippers, customers and suppliers, special contract requirements of such shippers, customers and suppliers, the quality of crude oil produced by such shippers, customers and suppliers and marketing alternatives relating thereto trading strategies and practices and other special information concerning such shippers, customers and suppliers, all of which was developed by the Company over time and at substantial expense to the Company, and all of which constitute trade secrets of the Company (“Trade Secrets”); and

 

WHEREAS, a core element of the business model and strategy to optimize the Company’s assets and their operational and financial performance includes the review, analysis, acquisition, integration and operation of assets and entities engaged in the transportation, storage, terminalling, purchase, sale, exchange and trading of liquid hydrocarbons (including crude oil and refined products) as well as natural gas storage and processing and related services, in the Region for which the Company has developed valuable and confidential methods and practices with respect to such review, analysis and integration activities (“Proprietary Practices”); and

 

WHEREAS, on July 10, 2015, the Company entered into an employment letter (the “Employment Agreement”) with and for the benefit of the Employee;

 

NOW, THEREFORE, in consideration of the Company entering into the Employment Agreement, the Employee and the Company agree as follows:

 

1.                                      Confidentiality.  Recognizing that the success of the Company’s business will depend upon the protection of the Trade Secrets and Proprietary Practices and that the Employee now has, and during the course of his employment may develop, Trade Secrets or Proprietary Practices for the benefit of the Company or other information and data of a secret or proprietary nature of the Company that the Company wishes to keep confidential, the Employee agrees that:

 

1

 

(a)                                 The Employee acknowledges that the Company has exclusive property rights to all Trade Secrets and Proprietary Practices. Except as required in the performance of his duties to the Company, the Employee will not at any time during or after the term of his employment, directly or indirectly (i) communicate, disclose or disseminate any Trade Secrets, Proprietary Practices or any other information of a secret, proprietary, confidential or generally undisclosed nature relating to the Company, its customers, business methods and services (“Confidential Information”) to any person other than officers and employees of the Company who are authorized to receive such information or (ii) use any Trade Secrets, Proprietary Practices or Confidential Information other than as may be necessary for the Employee to perform his duties for the Company.

 

(b)                                 With respect to Trade Secrets, Proprietary Practices and other Confidential Information, the Employee’s obligations under paragraph 1(a) shall continue until the earlier of two years after the Employee’s termination of employment (whether during the term of the Employment Agreement or thereafter) with the Company or such information has been made available generally to the public either by the Company or by a third party with the Company’s consent.

 

(c)                                  All documents, records, notebooks, notes, memoranda and similar repositories of, or containing, Trade Secrets, Proprietary Practices or Confidential Information made or compiled by the Employee at any time or made available to him prior to or during the term of his employment by the Company, including any and all copies thereof, shall be the property of the Company, shall be held by the Employee in trust solely for the benefit of the Company, and shall be delivered to the Company by the Employee on the termination of his employment or at any other time on the request of the Company.

 

(d)                                 Without limiting the foregoing, the Employee may, following the termination of his employment with the Company, use the general skills, knowledge and experience that he learned or developed during his employment by the Company.

 

2.                                      Non-solicitation.

 

(a)                                 If the Employee’s employment with the Company is terminated for any reason, then the Employee will not for a period of two years following such termination, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director or in any other individual or representative capacity, purchase, or solicit or assist in the solicitation of (i) assets that have previously been pursued by the Company during the one year period preceding such termination, or (ii) business of the type conducted by the Company with or from any shipper, customer or supplier of any liquid hydrocarbons with which the Company conducted any such transactions during the one year period preceding such termination.

 

(b)                                 If the Employee’s employment with the Company is terminated for any reason, then for a period of two years following such termination the Employee will not, without the prior written consent of the Company, solicit or cause to be solicited any person employed by the Company or its subsidiaries or affiliates at any time during such period or the six months prior to such period. Notwithstanding the foregoing, nothing herein will be

 

2

 

construed to prevent the Employee, following such termination, from interviewing and/or offering employment to an employee of the Company who responds to a published general employment advertisement or to a “non-directed” executive search.

 

(c)                                  This paragraph 2 shall not limit the Employee, following the termination of his Employment with the Company, from engaging in any activity outside of the Region, or from soliciting or assisting in the solicitation of storage or transportation services for crude oil from facilities which were not part of any of the Company’s transactions during the one year period prior to the termination of the Employee’s employment with the Company.

 

3.                                      Ancillary Agreement. The Employee acknowledges and represents to the Company that the agreement in paragraph 2 is ancillary to the agreement in paragraph 1, and the restrictions contained in paragraph 2 do not impose a greater restraint than is necessary to protect the interest of the Company in securing its Trade Secrets and Confidential Information.

 

4.                                      Specific Enforcement; Legal Fees. The Employee acknowledges that a breach of this Agreement is likely to result in irreparable and unreasonable harm to the Company, and that injunctive relief, as well as damages, would be appropriate. In the event of litigation between the parties concerning this Agreement, the prevailing party shall be entitled (in addition to any other relief to which it may be entitled) to an award of costs of court and reasonable attorneys’ fees and expenses incurred in such litigation.

 

5.                                      Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of the heirs, legal representatives, successors and assigns of the parties hereto.

 

6.                                      Prior Agreements; Severability. This Agreement supersedes those provisions of any prior agreement which cover the same subject matters as this Agreement. Wherever there is any conflict between any provision of this Agreement and any statute, law, regulation or judicial precedent, the latter shall prevail, but in such event the provisions of this Agreement thus affected shall be curtailed and limited only to the extent necessary to bring it within the requirement of the law. In the event that any paragraph or clause of this Agreement shall be held by a court of proper jurisdiction to be indefinite, invalid or otherwise unenforceable, the entire Agreement shall not fail on account thereof, but the balance of the Agreement shall continue in full force and effect unless such construction would clearly be contrary to the intention of the parties or would result in an unconscionable injustice.

 

7.                                      Other Activities. Employee shall not engage in any activity during the term hereof which is inimical to the best interest of Company.

 

8.                                      Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Texas applicable to agreements entered into and performed entirely by Texas by residents of Texas.

 

3

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the day and year first above written.

 

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
PLAINS   ALL AMERICAN GP LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Harry N. Pefanis
    
	
 
    	
Name:   
    	
Harry   N. Pefanis
    
	
 
    	
Title:
    	
President   and COO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EMPLOYEE:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   WCW (Willie) Chiang
    
	
 
    	
WCW   (Willie) Chiang
    

 

4Exhibit 4.7

 

THE SYMBOL "[****]" DENOTES PLACES WHERE PORTIONS OF THIS DOCUMENT HAVE
BEEN OMIITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. SUCH MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION

EXCLUSIVE LICENSE AGREEMENT

THIS EXCLUSIVE LICENSE AGREEMENT is made
and entered into as of March, __ 2015 (the “Effective Date”), by and between Apogee Biotechnology Corp., a Pennsylvania
corporation (“Apogee”) and RedHill Biopharma Ltd., an Israeli company (“RedHill”). Apogee
and RedHill each may be referred to herein individually as a “Party,” or collectively as the “Parties”.

 

WHEREAS,
Apogee represents that it is the sole and exclusive
owner of and has the right to grant a license to RedHill in respect of the Licensed Intellectual Property and Technology (as defined
below), all on the terms set forth below;

WHEREAS, Apogee wishes to license to
RedHill all Apogee's rights in and to ABC294640 and [****] (as those terms are defined below)and
all Licensed Intellectual Property and Technology, and RedHill wishes to receive such license from Apogee, to develop and commercialize
products for all indications and for all uses, all on the terms set forth below; and 

WHEREAS, the license to be granted shall
be granted on an exclusive basis as more fully set out below.

NOW THEREFORE, THE PARTIES HERETO AGREE
AS FOLLOWS:

	1.		DEFINITIONS

	1.1		For purposes of this Agreement, the following terms shall have the following meanings:

 

“ABC294640” means the small molecule Sphingosine
Kinases (SK2) inhibitor which is known as ABC294640, in all formulations, doses, forms and combinations.

[****].

“Affiliate” of a person means any other person
that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such
first person. For purposes of this definition only, “control” and, with correlative meanings, the terms “controlled
by” and “under common control with” will mean the possession, directly or indirectly, of the power to direct
the management or policies of an entity, whether through the ownership of fifty percent or more of the voting securities or other
ownership interest of a business entity (or, with respect to a limited partnership or other similar entity, its general partner
or controlling entity) of the other organization or entity or by contract relating to voting rights or corporate governance, or
otherwise.

    	1

     

    

“Bankruptcy Event”
means a company (i) becomes insolvent or admits inability to pay its debts generally as they become due; (ii) becomes subject,
voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law, which is not fully
stayed within [****] days or is not dismissed or vacated within [****]
days after filing; (iii) is dissolved or liquidated or takes any corporate action for such purpose; (iv) makes a general
assignment for the benefit of creditors; or (v) has a receiver, trustee, custodian or similar agent appointed by order of any court
of competent jurisdiction to take charge of or sell any material portion of its property or business.

“Business Day”
means a day that is not a Saturday or Sunday or any other day on which banks in the United States and/or Israel are authorized
or required by law to be closed.

“Combination Product”
means a product which comprises (a) a Product and (b) at least one other active ingredient
or medical device, which, if administered or used independently of such Product, would have a clinical, diagnostic or therapeutic
effect.

“Commercialization
Partner” means a Sublicensee primarily responsible for commercial distribution and/or
commercial promotion of a Product for sale.

“Commercially Reasonably Efforts” means, with
respect to the development, regulatory, manufacturing, licensing and commercialization of ABC294640, the efforts and resources
that are consistent with those utilized by a similarly situated biopharmaceutical company for its own internally discovered technology
of similar commercial potential at a similar stage of development, taking into consideration its safety and efficacy, the cost
to develop, the competitiveness of alternative technology, the nature and extent of their market exclusivity, the likelihood of
regulatory approval, its profitability and all other relevant factors.

“Field of Use” means any and all indications
and uses, including therapeutic, diagnostic and other human and/or animal uses.

“First Commercial Sale” means the first commercial
transaction for which consideration is received by RedHill, its Affiliates or Sublicensees for the sale, use, lease, transfer or
other disposition of a Product to or for the benefit of a third party, after Regulatory Approval has been granted by a Regulatory
Authority responsible for the jurisdiction in which such first commercial transaction takes place; provided, that First Commercial
Sale shall not include a transfer of the Product for testing purposes and/or a sale for experimental, promotional, compassionate
named patient or test market purposes.

“Generic Product” means, with respect to any
Product, any product that (a) is sold by a third party (i.e., other than RedHill or its Affiliates) that is not a Sublicensee
of RedHill, under a Regulatory Approval granted by a Regulatory Authority to a third party; (b) is approved for one or more indications
that are the same (or substantially the same) as one or more of the indications for which the Product is approved; and (c) is
approved in reliance, in whole or in part, on the prior approval (or on safety or efficacy data submitted in support of the prior
approval) of the Product as determined by the applicable Regulatory Authority, including any product authorized for sale in the
U.S. pursuant to Section 505(b)(2) or Section 505(j) of the Act (21 U.S.C. 355(b)(2) and 21 U.S.C. 355(j), respectively),
in the European Union pursuant to a provision of Articles 10, 10a or 10b of Parliament and Council Directive 2001/83/EC as amended
(including an application under Article 6.1 of Parliament and Council Regulation (EC) No 726/2004 that relies for its content on
any such provision), or in any other country or jurisdiction pursuant to all equivalents of such provisions. A product licensed
or produced by RedHill or its Affiliates (i.e., an authorized generic product) will not constitute a Generic Product.

    	2

     

    

“Licensed Know-How” means all right, title
and interest of Apogee and/or its Affiliates in and to technology, assets, intellectual property, trade secrets, inventions and
invention disclosures and know-how whatsoever, including, for the avoidance of doubt, as is necessary and/or useful in any way
whatsoever for the development and/or commercialization of Products in the Field, including ABC294640 and [****]
and all analogs, including, all analogs of ABC294640 and all analogs of [****] and all information
whether patentable or not and physical objects related to Products or such analogs or that are otherwise necessary or useful to
manufacture, have manufactured, and commercialize Products, including product data, product-related results and information, including
clinical data, analytical test results, non-clinical pharmacology and safety data, other R&D data, Regulatory Documentation,
manufacturing and formulation information of a like nature, copies of external service and other contracts and documentation, information
and correspondence relating to the development, marketing approval, marketing, manufacture and other commercialization, all to
the fullest extent known to, generated by, vested in (or licensed to) and/or controlled by Apogee and/or any of its Affiliates
as of the Effective Date including the classes and types of Licensed Know-how listed in Annex B of this Agreement.
For the avoidance of doubt, Licensed Know-How does not include the Patents.

“Licensed Intellectual Property and Technology”
means the Patents and the Licensed Know-How.

“Net Sales” means the gross amounts actually
received by RedHill or its Affiliates in respect of the sale of a Product by RedHill or its Affiliates, less, and following recovery
of, the following items to the extent not already reflected in the gross amounts invoiced (collectively, the “Recognized
Deductions”):

		(i)	allowances or credits granted to and taken by customers (including wholesalers)
including for damaged product, rejections, returns (including as a result of recalls), in respect of inventory management and stocking
allowances and prompt payment and trade, cash and volume discounts;

		(ii)	amounts incurred resulting from government (or any agency thereof) mandated
rebate programs;

		(iii)	freight, transport, packing, postage and insurance charges;

		(iv)	taxes, including value added tax, tariffs or import/export or customs, duties;

		(v)	rebates, charge backs and discounts paid or credited;

		(vi)	bad debts;

		(vii)	reasonable quantities of samples if no amounts are invoiced therefor; and
any other payment which reduces gross revenue and is permitted to be deducted in calculating net sales in accordance with generally
accepted accounting principles.

 

Even if there is overlap between any of the Recognized Deductions,
each individual item shall be deducted only once in the overall Net Sales calculation.

Notwithstanding the foregoing, for the purposes of this definition,
the transfer of a Product by RedHill or one of its Affiliates to another Affiliate of RedHill or to a Sublicensee for resale is
not a sale.

    	3

     

    

For Net Sales of a Product sold or supplied as a “Combination
Product”, the Net Sales of such a Combination Product in a country will be determined by multiplying the Net Sales of such
Combination Product in such country by the fraction of A/A+B, where A is the average unit selling price during the period in respect
of which Net Sales are being calculated of the Product sold separately in that country and B is the total average unit selling
price during the period in respect of which Net Sales are being calculated of the other product or device included in the Combination
Product, when sold separately in that country. If neither the Product nor the other product or device included in the Combination
Product are sold separately during the period in respect of which Net Sales are being calculated, then the Parties shall, considering
the costs incurred by RedHill bringing about the Combination Product, in good faith negotiate the value of the other product or
device included in the Combination Product that are to be deducted from the Net Sales of the Combination Product in determining
the Net Sales of the Product contained in the Combination Product, it being agreed that absent such mutual agreement as to the
proportion of such Combination Product to be attributed to the Product, the Parties shall mutually appoint an independent expert
to determine such proportion.

“Patents” means all U.S. and non-U.S. patents
and patent applications, including those listed in Annex A, and (a) any substitutions, divisions, continuations, continuations-in-part
(but only to the extent that they cover the same invention claimed in the foregoing), reissues, renewals, registrations, confirmations,
re-examinations, extensions, supplementary protection certificates and the like, and any provisional applications, of any such
U.S. and non-U.S. patents or patent applications, (b) any patents issuing from any applications filed after the Effective Date
and that claim priority from any of the aforesaid patents or patent applications or from which any of such patents or patent application
claim priority, in respect of all of which Apogee or any of its Affiliates is as of the date of this Agreement or during the term
of this Agreement becomes owner or controller.

“person” means any natural person, corporation,
firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government
or agency or political subdivision thereof.

“Product(s)” means any product, including ABC294640
and [****], and all analogs, including, all analogs of ABC294640 and all analogs of [****],
in each case in all current and future formulations, doses, forms and combinations whatsoever, for human and animal use, the manufacture,
use, offer for sale, sale or importation of which by RedHill would, absent the License (as defined below), infringe a Valid Claim
in a jurisdiction in the Territory where such a Valid Claim exists.

“Regulatory Approval” means (a) in the United
States approval by the US FDA of an NDA (New Drug Application), or the equivalent application for marketing approval, and satisfaction
of any related applicable US FDA registration and notification requirements (if any) and (b) in a market other than the United
States, approval by regulatory authorities having jurisdiction over such country of a single application or set of applications
equivalent to an NDA and satisfaction of any related applicable regulatory and notification requirements (if any).

“Regulatory Authority” means any applicable
government entity regulating or otherwise exercising authority with respect to the development and commercialization of a Product.

“Regulatory Documentation” means all applications,
registrations, licenses, authorizations and approvals (including all Regulatory Approvals), all correspondence submitted to or
received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory
Authority), all supporting documents and all clinical studies and tests, including the manufacturing batch records for Product
to be assigned, relating to a Product, and all data contained in any of the foregoing, including all regulatory drug lists, advertising
and promotion documents, adverse event files and complaint files.

    	4

     

    

“Regulatory Exclusivity” means, with respect
to any country, an additional market protection, other than Patent protection, granted by a Regulatory Authority in such country
which confers an exclusive commercialization period during which RedHill, its Affiliates or its Sublicensees have the exclusive
right to market, price, and sell a Product in such country through a regulatory exclusivity right, such as new chemical entity
exclusivity, new use or indication exclusivity, new formulation exclusivity, orphan drug exclusivity, pediatric exclusivity, or
any applicable data exclusivity.

“Royalty Term” means the period, on a country
by country and Product by Product basis, commencing on the date of the First Commercial Sale in such country and ending on the
later of:

	(i)		the expiration of the last to expire Patent [****]
that covers a Product in such country, [****]; and

	(ii)		in a country that provides Regulatory Exclusivity for a Product, the expiration of
such Regulatory Exclusivity.

“Sublicense” means a sublicense from
RedHill or its Affiliates to any other person under the License granted pursuant to this Agreement and the term “Sublicensee”
shall be construed accordingly and shall include any Commercialization Partner. Any Sublicense may include the right to grant further
Sublicenses. For the avoidance of doubt, a RedHill Affiliate shall not be considered a Sublicensee.

“Sublicense Consideration” means all
consideration actually received in respect of a Product by RedHill or its Affiliates from Sublicensees, including payments (x)
as upfront or milestone payments in respect of a Sublicense (“Sublicense Milestone Consideration”) and (y) as
royalties on account of sales of a Product effected by such Sublicensees, including, as to Commercialization Partners, purchase
price paid and all other consideration by them to RedHill or its Affiliates for Product (“Sublicense Sales Consideration”),
excluding in all instances, (i) loan proceeds paid to RedHill by a Sublicensee in an arms’-length, full recourse debt financing
to the extent that such loan is not forgiven; and (ii) equity (and conditional equity, such as warrants, convertible debt and the
like) investments in RedHill or any Affiliate thereof by a Sublicensee up to the amount of the fair market value of the equity
purchased on the date of the investment; (iii) patent prosecution costs incurred or which shall be incurred by RedHill; (iv) the
cost and financing of research and/or development activities or services performed or to be performed by RedHill or expended or
to be expended by RedHill; and (v) marketing expenses which have been or shall be expended by RedHill.

“Valid Claim” means a claim of any issued and
unexpired patent included in the Patents whose validity, enforceability, or patentability has not been affected by any of the following:
(a) lapse, abandonment, revocation, dedication to the public, or disclaimer; (b) a holding, finding, or decision of invalidity,
unenforceability, or non-patentability by a court, governmental agency, national or regional patent office, or other appropriate
body that has competent jurisdiction; or (c) admission of invalidity or unenforceability through reissue, disclaimer or otherwise.
If a claim of a pending patent application has not been issued as a claim of an issued patent within five (5) years after the earliest
priority date for such claim, then such claim shall cease to be a Valid Claim unless and until such claim becomes an issued claim
of an issued patent.

    	5

     

    

“Territory” means the entire world.

1.2             
Interpretation. As used in this Agreement, any reference to gender shall include all genders and any reference to
the plural shall include the singular, and the singular shall include the plural. When a reference is made in this Agreement to
a section, such reference shall be to a section of this Agreement, unless otherwise clearly indicated to the contrary. Whenever
the words “include,” “includes” or “including” are used in this Agreement they shall be deemed
to be followed by the words “without limitation.” The words “hereof,” “herein” and “herewith”
and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and annex, article, section, paragraph, exhibit, annex and schedule references are references to the
annex, articles, sections, paragraphs, exhibits, annexes, and schedules of this Agreement, unless otherwise specified. The captions
contained in this Agreement are for convenience only and shall not be deemed a part hereof or affect the interpretation or construction
of any provision hereof.

2.                LICENSE GRANT

2.1             
Scope of License. Subject to the terms and conditions of this Agreement, Apogee hereby grants to RedHill an exclusive
(including as to Apogee itself), worldwide and, subject to the termination rights herein, irrevocable and perpetual, license under
the Licensed Intellectual Property and Technology (the “License”).

2.2             
Sublicenses. The License is Sublicensable (and further Sublicensable, including through multiple tiers) in whole
or in part, to third parties in accordance with the terms of this Agreement. The granting of Sublicenses shall be at RedHill’s
sole and exclusive discretion and RedHill shall have the sole and exclusive power to determine the identity of any Sublicensee,
the applicable licensee fees or royalty rates, if any, and other terms and conditions of any Sublicense. For the avoidance of doubt,
RedHill shall be entitled to conduct or to perform any activity in respect of a Product by means of any third party sub-contractor,
and such conduct, in and of itself, shall not automatically be considered to be a grant of a Sublicense hereunder. RedHill shall
have the right to exercise such License through its Affiliates, provided, however, that RedHill shall remain responsible for the
compliance by its Affiliates with the applicable terms of this Agreement. For the avoidance of doubt, the payment obligations with
respect to RedHill shall apply in the same manner to each Affiliate, and as a result, Net Sales shall include Net Sales by an Affiliate
and the occurrence of any milestone with respect to an Affiliate shall trigger the same milestone payment obligations as would
be applicable if such milestone had occurred with respect to RedHill.

2.3             
Registration. RedHill shall have the right, on its own account and at its own expense, to register as the exclusive
licensee of the rights in and to the Licensed Intellectual Property and Technology for the purpose of developing, manufacturing,
commercializing, making, using, selling, offering for sale and importing Products in the Territory and Apogee shall, at the sole
expense of RedHill, execute all documentation reasonably requested by RedHill and otherwise cooperate with RedHill in order to
ensure such registration.

    	6

     

    

2.4             
Limitations on Other Licenses. During the Term, Apogee shall not, without RedHill’s prior written consent,
grant any rights or licenses or transfer any data or know-how to any third party that conflict with the RedHill’s rights
granted under this Agreement.

3.                 
DATA AND PRODUCT TRANSFER

3.1             
Know-How. Following the Effective Date in accordance with the schedule annexed hereto as Annex C, Apogee will
(i) make reasonably available to RedHill the Licensed Know-How, and (ii) provide to RedHill either hard or electronic copies, with
such medium determined at Apogee’s discretion, of the Licensed Know-How, as shall be reasonably necessary for RedHill to
develop, manufacture and commercialize Products in accordance with the License granted under this Agreement. Following the Effective
Date, Apogee will, at no cost to RedHill, provide RedHill with all additional information under its control relating to Products,
including commercially reasonable assistance in replying to inquiries by RedHill in respect of the information and data provided
and exercise of the License and otherwise in connection with the development of Products.

3.2             
Product. Within [****] Business Days following the Effective Date, Apogee will
transfer to RedHill Ex Works Apogee's plant (Incoterms 2000), at no cost to RedHill other
than reasonable transportation costs approved in advance by RedHill from such Ex Works point, no less than [****]
owned by or in the possession of Apogee. It is expressly agreed that, subject to the relevant provisions of this Agreement regarding
RedHill’s overall control and responsibility for all development activities, but notwithstanding the License granted hereunder,
any remaining portion of [****] (active ingredients and excipients in all forms, both expired
and unexpired, as well as such finished product, both expired and unexpired) in the possession or control of Apogee at the Effective
Date, may be used and are dedicated solely to Apogee's planned [****], provided such [****]
are mutually agreed upon by the Parties, it being understood that RedHill will be the [****].
It is further agreed that in the event Apogee and/or an [****], RedHill agrees to use commercially
reasonable efforts to manufacture and provide [****]. For
the avoidance of doubt, [****].

3.3             
Without derogating from any other obligations of Apogee under this Agreement, Apogee shall provide RedHill with timely ongoing
quarterly reports regarding all studies, [****] and other activities conducted by Apogee with
ABC294640 and [****].

3.4             General
Assistance. Following the Effective Date and throughout the development process, to the extent reasonably necessary for RedHill
to develop, manufacture and commercialize Products in accordance with this Agreement, Apogee will provide RedHill with commercially
reasonable general assistance, cooperation, guidance and the like, including making its employees reasonably available for consultation
and in replying to inquiries by RedHill in respect of the Licensed Know-How provided and reasonable cooperation with RedHill and
support of RedHill's submissions of Product for approval with any and all Regulatory Authorities.

3.5             
Technical Transfer Assistance. To the extent reasonably necessary for RedHill to develop, manufacture and commercialize
Products in accordance with this Agreement, Apogee undertakes to provide reasonable assistance to RedHill in sharing technical
information included within the Licensed Know-How to a contract manufacturing organization chosen by RedHill. For the avoidance
of doubt, RedHill may share all such assistance with its Sublicensees.

    	7

     

    

3.6             
Consideration. In consideration of the agreements of Apogee pursuant to Section 3.4 and Section 3.5, Apogee will
be compensated according to a rate and expense reimbursement budget to be pre-approved (in writing) by RedHill.

4.                 
DILIGENCE

4.1             
Authority; Obligations. Following the Effective Date, RedHill shall have sole authority for the development, regulatory,
manufacturing, licensing and commercialization of Products in the Field in the Territory. Notwithstanding the foregoing, RedHill
will make a good faith, continuous and diligent effort using Commercially Reasonable Efforts to prepare, initiate and complete
the clinical development of ABC294640 in accordance with relevant industry standards, obtain and maintain regulatory approvals
necessary to commercialize ABC294640 for application for at least one indication in a jurisdiction chosen by RedHill in its sole
discretion, and promptly after receipt of such regulatory approval in each applicable market, manufacture, market, promote and
sell such Product in each such market as chosen by RedHill in its sole discretion, all in accordance with relevant industry standards
(the “Diligence Obligation”), all subject to the termination provisions of this Agreement. For the avoidance
of any doubt, the failure to meet the Diligence Obligation due to reasons that are beyond RedHill’s control do not constitute
a breach of the Diligence Obligation. Apogee’s sole and exclusive remedy for a breach of the Diligence Obligation by RedHill
shall be to terminate this Agreement as provided below.

4.2             
No Warranty. For the avoidance of doubt, nothing contained in this Agreement shall be construed as a warranty by
RedHill that any development or any commercialization to be carried out by it in connection with this Agreement will actually achieve
its aims or any other results and RedHill makes no warranties whatsoever as to any results to be achieved in consequence of the
carrying out of any such development. Furthermore, RedHill makes no representation to the effect that the commercialization of
tany Product, or any part thereof, will succeed, or that it shall be able to sell Products in any quantity.

5.                 
REPORTS

5.1             
Until the end of all Royalty Terms, RedHill agrees as follows:

5.1.1Development Reports. To keep Apogee informed
with respect to activities and progress regarding the development, commercialization, sublicensing, and government approvals of
Products. RedHill will provide written semi-annual development reports within [****] days
following the close of each six calendar-month period.

5.1.2First Commercial Sale Report. To report to
Apogee the date of the First Commercial Sale of each Product in the first jurisdiction in which it occurs, together with the name
of the country in which such First Commercial Sale occurred within [****] Business Days following
such First Commercial Sale.

5.1.3Royalty Reports. With respect to each Royalty
payment pursuant to Section 6.3, on a calendar quarterly basis within [****] days following
the end of each March, June, September and December, to deliver to Apogee written reports with respect to the period covered by
the Royalty payment the amount of consideration received from Net Sales, Sublicense Sales Consideration, Sublicense Milestone Consideration,
and Sublicense Sales Consideration received from Commercialization Partners, including the Recognized Deductions applicable in
computing Net Sales and the deductions applicable in computing Sublicense Consideration, and the total Royalties due based on Net
Sales, Sublicense Sale Consideration, Sublicense Milestone Consideration, and Sublicense Sales Consideration received from Commercialization
Partners.

    	8

     

    

5.2             Confidentiality
of Reports. Any and all information, data or reports supplied by RedHill pursuant to the provisions of this Section 5 shall
be treated as RedHill's Confidential Information and subject to the confidentiality obligations set forth in Section 11 of this
Agreement.

5.3             
Final Report. If this Agreement is terminated for any reason during any Royalty Term, RedHill shall deliver a final
report and associated Royalty payment to Apogee within [****] days after such termination.
Except as provided above, following termination, RedHill shall have no further reporting obligations under this Section 5.

6.                 
FINANCIAL PROVISIONS 

6.1             
Up-Front Payment. Within [****] Business Days after the Effective Date and against
receipt of an appropriate invoice from Apogee, RedHill will pay Apogee a non-refundable, up-front, one-time cash license fee of
One Million Five Hundred Thousand US Dollars ($1,500,000).

6.2             
Milestone Payments. RedHill will pay to Apogee the following one-time milestone payments (such payments are
due only once in respect of each milestone event actually achieved and are not payable per Product, per indication, per generation
or per country) after first achievement of each of the applicable milestones in respect of the first Product achieving such milestone,
whether on the part of RedHill or an Affiliate, as follows:

6.2.1[****] days
following the earlier of (i) [****] and (ii) [****]
following the Effective Date: Two Million US Dollars ($2,000,000).

6.2.2Within [****]
days following [****].

6.2.3Within [****]
days following the [****].

6.2.4Within [****]
days following a [****].

6.3             
Royalty Payments. During the Royalty Terms, RedHill will pay Apogee royalties (each a “Royalty”
and collectively, the “Royalties”) as follows:

6.3.1Net Sales.

6.3.1.1A Royalty equal to [****]
of the first [****].

6.3.1.2A Royalty equal to [****]
of [****].

6.3.2Sublicense Sales Consideration.

6.3.2.1A Royalty equal to [****]
of the [****].

6.3.2.2A Royalty equal to [****].

6.3.3Sublicense Milestone Consideration.A
royalty equal [****] RedHill or an Affiliate.

6.3.4Commercialization Partner Sublicense Consideration.
Notwithstanding the terms of subsections 6.3.2 and 6.3.3 above, in the event that RedHill or an Affiliate grants a Sublicense to
a Commercialization Partner during the [****] months following the Effective Date, RedHill
shall pay Apogee a Royalty equal to [****] of all [****]
RedHill or an Affiliate [****]. For the avoidance of doubt, all Sublicense Sales Consideration
subject to this subsection 6.3.4 shall be included in calculating cumulative aggregate Sublicense Sales Consideration for the purposes
of subsection 6.3.2 and 6.3.3 above.

    	9

     

    

6.4             
No Double Payment. For the avoidance of doubt, Royalties shall be payable only once in respect of any sum received
by RedHill; i.e., either (x) as a Royalty on Net Sales pursuant to Section 6.3.1, if the sum received by RedHill was in payment
for a sale of Product by RedHill or its Affiliates; (y) as a Royalty on Sublicense Sales Consideration, pursuant to Section 6.3.2,
if the sum received by RedHill was a royalty paid by a Sublicensee to RedHill in respect of a sale of Product made by such Sublicensee;
or (z) as a Royalty on Sublicense Milestone Consideration, pursuant to Section 6.3.3, if the sum received by RedHill was a Royalty
paid by a Sublicensee to RedHill as an upfront or milestone payment.

6.5             
Royalty Stacking. RedHill may deduct from any Royalty due under this Agreement any royalties RedHill is required
to pay to any third party pursuant to any agreement entered into by RedHill after the date hereof, and that is actually paid by
RedHill to such party, in respect of the use of such third party’s intellectual property rights that may reasonably
be considered to be infringed by the manufacture, use or sale of a Product in its current formulation as of the date hereof.

6.6             
Due Dates for Payment; Late Payments. All payments due pursuant to the provisions of Section 6.3 shall be due and
payable to Apogee on a calendar quarterly basis within [****] days following the end of the
applicable quarter. All payments will be made against receipt of an appropriate invoice from Apogee for same; provided that RedHill
notifies Apogee in writing of the occurrence of the event requiring payment. In the event such payment may require approval of
any governmental authority, RedHill undertakes to file for approval promptly following the Effective Date and to effectuate prompt
payment following receipt of the necessary approval. In addition to any other remedies available to Apogee, any failure by RedHill
to make a payment within [****] days after the date when due shall obligate RedHill to pay
computed interest, the interest period commencing on the due date and ending on the actual payment date, to Apogee at a rate per
annum equal to [****] per month, or the highest rate allowed by applicable law, whichever
is lower.

6.7             Payment
Method. Any amounts due to Apogee under this Agreement will be paid in U.S. dollars, by wire transfer in immediately available
funds to the most recent account designated in writing at least [****] days in advance by
Apogee.

6.8             
Currency; Foreign Payments. If any currency conversion will be required in connection with the calculation of any
payment hereunder, such conversion will be made by using the exchange rate for the purchase of U.S. dollars as published in The
Wall Street Journal, Eastern Edition, on the date of the payment. If at any time legal restrictions prevent the prompt remittance
of any payments in any jurisdiction, RedHill may notify Apogee and make such payments by depositing the amount thereof in local
currency in a bank account or other depository in such country in the name of Apogee or its designee, and RedHill will have no
further obligations under this Agreement with respect thereto.

6.9             
Taxes.  RedHill may deduct from amounts it is required to pay Apogee pursuant to this Agreement an amount
equal to that required by applicable law to be withheld by RedHill for or due on account of any taxes (including VAT to the extent
applicable, but other than taxes imposed on or measured by net income of RedHill) or similar governmental charge imposed by any
jurisdiction based on such payments to Apogee (“Withholding Taxes”) and such payment shall be deemed as payment
to Apogee in accordance with this Agreement. RedHill will provide Apogee a certificate evidencing payment of any Withholding Taxes.

    	10

     

    

6.10         
Continuing Right. Following the expiration of the Royalty Term in any country, RedHill shall be entitled to continue
to exploit the License in the Field in such country with respect to Products without having to pay Royalties or make any other
payment to Apogee in respect of such activities.

7.                 
RECORDS RETENTION AND AUDIT

7.1             
Record Retention. Until the expiry of the Royalty Terms, RedHill will maintain (and will ensure that
its Affiliates maintain) complete and accurate books, records and accounts that fairly reflect Net Sales and Sublicense Consideration
in the relevant jurisdiction, in sufficient detail to confirm the accuracy of Royalty payments made hereunder, which books, records
and accounts will be retained for [****] years after the end of the period to which such books,
records and accounts pertain. For the avoidance of doubt, RedHill has no (a) duty of trust or other fiduciary relationship with
Apogee regarding the maintenance of the records or the calculation and reporting of royalties or (b) obligations to maintain any
records except in accordance with its own document retention policy.

7.2             
Audit. Apogee will have the right, at its own cost, to have an independent certified public accounting firm of nationally
recognized standing, reasonably acceptable to RedHill and who agrees to be bound by a customary undertaking of confidentiality
at least as restrictive as those in this Agreement, have access during RedHill's normal business hours, and upon reasonable prior
written notice, to RedHill’s records as may be reasonably necessary to verify the accuracy of RedHill's Royalty Reports,
for any period ending not more than [****] months prior to the date of such request; provided,
however, that Apogee will not have the right to conduct more than one such audit in any calendar year or more than one such
audit covering any given time period. The accounting firm shall not in any way be compensated (in whole or in part) contingent
on the outcome of the audit. The accounting firm will disclose to Apogee only the results of its audit and not any other information.
Any such audit shall not unreasonably interfere with the business of RedHill. Apogee shall provide to RedHill a copy of the audit
report within [****] days of its receipt thereof. Without derogating from the foregoing, Apogee's
audit rights shall be conducted no later than [****] following the final payment under this
Agreement. The costs of the audit are the responsibility of Apogee provided that in the event that there is a shortfall of more
than [****] in the payment due, and provided such [****]
or more shortfall is resolved if applicable in accordance with section 7.3, the audit costs and all related travel costs up to
a maximum cap of [****] will be covered by RedHill within [****]
days of billing.

7.3             
Payment of Additional Amounts. If the audit report shows that payments made by RedHill are in excess of the required
payment, Apogee shall pay RedHill the excess amount within [****] days after the date it provides
the copy of the audit report to RedHill. If the audit report shows that additional payments are owed by RedHill under this Agreement,
RedHill shall, at its own cost, have an additional [****] to conduct an additional (second)
audit to verify Apogee’s audit results, and, assuming the two audits reconcile, RedHill shall make such additional payments
within [****] days after the date on which such second accounting firm’s written report
is delivered to RedHill. If the results of the two audits do not reconcile, the Parties shall, unless otherwise agreed, appoint
a third independent auditor, who – on basis of the audit results achieved by the first two auditors and such additional investigations
and reviews, which the third auditor may find to be required – shall conduct a third and final audit the result of which
shall be applied by the Parties. The Parties shall equally share the costs of for the third audit to be conducted, unless the third
audit substantially confirms the results of either party's individual audit in which case the audit costs and all related travel
costs of such audit shall be paid by the other party hereto up to a maximum cap of [****].

    	11

     

    

7.4             
Sublicensee Audits. To the extent RedHill or its Affiliates conducts any audit of a Sublicensee, RedHill or its Affiliate
shall promptly provide the contents of such audit report to Apogee to the extent relevant to calculate any payments owing to Apogee
under Section 6 of this Agreement. If an audit report shows that additional payments are owed by a Sublicensee to RedHill or its
Affiliates, RedHill or its Affiliate shall pay all additional amounts owing to Apogee for such additional payments made by Sublicensee
within [****] days after RedHill or its Affiliate receives such payment from the Sublicensee.
If an audit report shows that excess payments were made by a Sublicensee to RedHill or its Affiliates, Apogee shall refund to RedHill
or such Affiliate all amounts paid to Apogee for such excess payments made by Sublicensee within [****]
days after RedHill or its Affiliate makes repayment to the Sublicensee.

7.5             
Confidentiality. Apogee will treat all information subject to review under this Section 7 in accordance with the
confidentiality provisions of Section 11 below.

8.                 
REPRESENTATIONS AND WARRANTIES

8.1             
By Both Parties. Each Party hereby represents, warrants and covenants to the other Party as of the Effective Date
as follows:

8.1.1Such Party (a) has the power and authority and the
legal right to enter into this Agreement and perform its obligations hereunder, and (b) has taken all necessary action on its part
required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement
has been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party
and is enforceable against it in accordance with its terms subject to the effects of bankruptcy, insolvency or other laws of general
application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance
and general principles of equity, whether enforceability is considered a proceeding at law or equity.

8.2.2Such Party has obtained all necessary consents, approvals
and authorizations of all governmental authorities and other parties required to be obtained by such Party in connection with the
execution and delivery of this Agreement and the performance of its obligations hereunder have been obtained.

8.2.3The execution and delivery of this Agreement and
the performance of such Party’s obligations hereunder (a) do not conflict with or violate any requirement of applicable law
or any provision of the articles of incorporation, bylaws or any similar instrument of such Party, as applicable, in any material
way, and (b) do not conflict with, violate, or breach or constitute a default or require any consent not already obtained under,
any contractual obligation or court or administrative order by which such Party is bound.

    	12

     

    

8.2             
By Apogee. Apogee hereby further represents, warrants, and covenants to RedHill as of the Effective
Date as follows:

8.2.1The patents and patent applications identified on
Annex A are all the patents and patent applications owned or controlled by Apogee or any of its Affiliates, or in which Apogee
or any of its Affiliates has a licensable interest. Apogee undertakes that if there are any additional patents or related
rights owned or controlled by Apogee or any of its Affiliates or in which Apogee or any of its Affiliates has a licensable interest,
Apogee or its Affiliates hereby grant a license to RedHill, its Affiliates, and any Sublicensee on the terms
of the License hereunder. 

8.2.2Apogee has the sole legal and/or beneficial title
to and ownership of the Patents and is the record owner of all patent applications and patents that comprise the Patents as is
necessary to fulfill its obligations under this Agreement and to grant the License to RedHill pursuant to this Agreement, and the
Licensed Intellectual Property and Technology is free and clear of any liens, encumbrances, claims or security interests of any
kind (including prior license grants) that would interfere, or the exercise of which would interfere, with RedHill exercising the
licenses or rights granted hereunder.

8.2.3Apogee has not, and during the Term shall
not, grant any rights to the Licensed Intellectual Property and Technology that conflict with the rights granted to RedHill hereunder,
and no third party has any rights whatsoever (including the right to receive royalties or any other compensation) under the Licensed
Intellectual Property and Technology to develop, use, sell, offer for sale or import any Product.

8.2.4To Apogee’s knowledge, the Licensed Know-How
has not been misappropriated and is non-infringing. The exercise by RedHill of the License will not by itself infringe upon the
patent or other intellectual property rights of any third party, and no actions, suits, claims, disputes, or proceedings concerning
the Licensed Intellectual Property and Technology are currently pending or to Apogee’s knowledge have been threatened. Furthermore,
to Apogee’s knowledge, there are no legal actions or proceedings by a third party (including employees or former employees
of Apogee) contesting the ownership or validity of the Licensed Intellectual Property and Technology or ABC294640 or [****]
or any part thereof.  

8.2.5No additional licenses to any patents (including
patents owned or controlled by third parties) or knowhow are required to develop, manufacture, use or sell any Product.

8.2.6Apogee has not brought or threatened any claim against
any third party alleging infringement of any Patent, nor, to its knowledge, is any third party infringing or, to its knowledge,
preparing or threatening to infringe any patent, or practicing any claim of any patent application, comprising a Patent.

8.2.7Apogee has not received written notification of any
interference, opposition, or reexamination proceedings against any of the Patents.

8.2.8Apogee has complied with applicable regulations in
submitting, prosecuting, and maintaining the Patents, in particular the duty of good faith and candor pursuant to U.S. patent law
(including 37 C.F.R. 1.56) and analogous applicable foreign laws.

8.2.9Apogee has no knowledge of any circumstances that would
require a court to conclude that RedHill’s current or planned commercialization of any Product, infringes or will infringe
any valid patent rights of others as of the date hereof.

    	13

     

    

9.                 
LIMITATION OF LIABILITY.

Except in the case of a fraud or willful misrepresentation,
breach of confidentiality obligations and indemnification for payments to third parties under Section 13, in no event shall either
Party be liable to the other or any of its Affiliates for any consequential, incidental, indirect, special, punitive or exemplary
damages (including lost profits, business or goodwill) suffered or incurred by such other Party or its Affiliates, whether based
upon a claim or action of contract, warranty, negligence or tort, or otherwise, arising out of or relating to this Agreement.

10.             
PATENTS

10.1         
Patent Prosecution and Maintenance

10.1.1Prosecution of Patents. 

As between the parties, RedHill undertakes and shall have the first right, at its own expense,
to prosecute and maintain the Patents using counsel of its choice, in the jurisdictions and to the extent that RedHill shall deem
appropriate at its sole discretion. All such filings shall be for the benefit of Apogee and shall identify Apogee as the owner
of the inventions described in the applications. RedHill will provide Apogee with copies of all relevant documentation and will
keep Apogee apprised of status and respond to Apogee’s inquiries in that regard so that Apogee will be informed of the continuing
prosecution. In the event RedHill decides not to file, to abandon, or otherwise elects not to prosecute and maintain any Patents
in any jurisdiction in the Territory, RedHill shall provide Apogee with written notice at least [****]
days prior to the date such abandonment would become effective or the next prosecution and maintenance deadline in the applicable
jurisdiction, whichever is sooner, in order to allow Apogee, in its sole discretion, to continue the prosecution and maintenance
of such Patents without a loss of rights at Apogee’s own expense. If Apogee elects to continue prosecution and maintenance,
RedHill shall execute such documents and perform such acts as Apogee shall reasonably request for Apogee to perform such prosecution
or maintenance.

 

10.1.2RedHill’s Requests. Apogee shall use
reasonable efforts to amend any Patent application to include claims or any other changes reasonably requested by RedHill to protect
any Product contemplated to be sold under this Agreement. Moreover, Apogee will reasonably cooperate in the preparation, filing,
prosecution, and maintenance of the Patents, including, to the extent necessary for such activities, taking commercially reasonable
efforts to do the following: (a) promptly executing all papers and instruments and requiring employees to execute such papers and
instruments as reasonable and appropriate so as to enable RedHill to file, prosecute, and maintain the Patents in any country;
(b) promptly informing RedHill of matters known to Apogee that could reasonably be expected to adversely affect the preparation,
filing, prosecution, or maintenance of any Patents; and (c) providing reasonable access to relevant documents and other evidence,
making its employees available at reasonable business hours. This Section 10.1.2 shall likewise apply to RedHill if Apogee assumes
any of RedHill’s activities pursuant to Section 10.1.1.

 

    	14

     

    

10.2         
Patent Enforcement.

10.2.1Infringement Notice. If Apogee or
RedHill knows or suspects that any Patent is being infringed by a third party’s activities, it will promptly notify the other
Party in writing. In addition, if Apogee or RedHill knows or suspects that any Licensed KnowHow is being misappropriated by a third
party’s activities, it will promptly notify the other Party in writing. Such notices shall specify in reasonable detail the
nature of such actual or suspected infringement or misappropriation.

10.2.2RedHill Enforcement. RedHill will have the
sole, exclusive and first right, but not the obligation, to remove such infringement and/or misappropriation and to control all
litigation to remove such infringement and/or misappropriation, all as RedHill shall deem appropriate in its sole discretion. RedHill
will provide Apogee with copies of all relevant documentation so that Apogee will be informed of the continuing action and may
comment upon such documentation sufficiently in advance of any initial deadline for filing a response, provided, however, that
if Apogee has not commented upon such documentation in a reasonable time for RedHill to sufficiently consider Apogee’s comments
prior to a deadline, or RedHill must act to preserve the action, RedHill will be free to act without consideration of Apogee’s
comments, if any. RedHill shall, subject to recovery under Section 10.2.5, be solely responsible for all costs and expenses of
such litigation undertaken by RedHill. If RedHill does not commence an infringement or misappropriation action within [****]
days after learning of the infringement or misappropriation, Apogee may commence an action against such infringement or misappropriation
pursuant to Section 10.2.3 below.

10.2.3Apogee Enforcement. In the event Apogee does,
at its discretion, undertake any infringement or misappropriation action, Apogee will provide RedHill with copies of all relevant
documentation so that RedHill will be informed of the continuing action and may comment upon such documentation sufficiently in
advance of any initial deadline for filing a response, provided, however, that if RedHill has not commented upon such documentation
in a reasonable time for Apogee to sufficiently consider RedHill’s comments prior to a deadline, or Apogee must act to preserve
the action, Apogee will be free to act without consideration of RedHill’s comments, if any. Apogee shall, subject to recovery
under Section 10.2.5, be solely responsible for all costs and expenses of such litigation undertaken by Apogee. 

10.2.4Co-operation. The Parties will provide reasonable
assistance to each other, including providing access to relevant documents and other evidence, making its employees available at
reasonable business hours, and joining the action to the extent necessary to allow the prosecuting Party to maintain the action.

10.2.5Recovery. Any amounts recovered in connection
with or as a result of any action contemplated by Sections 10.2.2 and 10.2.3, whether by settlement or judgment, will be used to
reimburse the Parties for their reasonable costs and expenses in making such recovery (which amounts will be allocated pro rata
if insufficient to cover the totality of such expenses), and any remainder received by RedHill in excess of the reasonable costs
and expenses in making such recovery will be treated as Net Sales and payments will be due in respect of same pursuant to this
Agreement.

10.3         
Patent License

In the event that either or both of Apogee or RedHill are sued
by a third party alleging that the commercialization of a Product infringes upon any intellectual property rights of such third
party, the Party being so sued shall immediately give the other Party notice of same and the Parties shall thereafter proceed as
provided in Section 13.

Neither Party shall, without the consent of the other Party, which shall
not be unreasonably delayed or withheld, enter into any settlement or compromise or consent to any judgment in respect of any claim
related to rights licensed to RedHill under this Agreement, unless such settlement, compromise or consent includes an unconditional
release of the other Party from all liability arising out of the claim and does not otherwise limit or impair the other Party’s
rights.

    	15

     

    

11.             
CONFIDENTIALITY

11.1         
Disclosure and Use Restriction. The Parties agree that, during the Term of this Agreement and thereafter, each Party
will (a) use the same degree of care to maintain the secrecy of the Confidential Information (as such term is defined below) of
the other Party that it uses to maintain the secrecy of its Confidential Information of like kind, (b) use the Confidential Information
only to accomplish the purpose of this Agreement, and (c) limit internal dissemination of the Confidential Information to its and
its Sublicensees' and Affiliates' respective directors, officers, employees, consultants, representatives or agents, whose duties
justify the need to know such information, and then only provided that such individuals are bound by obligations of confidentiality
and non-use at least as equivalent in scope to those set forth in this Agreement.

11.2         
Confidential Information. “Confidential Information” means all information and know-how and any
tangible embodiments thereof provided by or on behalf of one Party to the other Party either in connection with the discussions
and negotiations pertaining to this Agreement or in the course of performing this Agreement, which may include data; knowledge;
practices; processes; ideas; research plans; engineering designs and drawings; research data; manufacturing processes and techniques;
scientific, manufacturing, marketing and business plans; and financial and personnel matters relating to the disclosing Party or
to its present or future products, sales, suppliers, customers, employees, investors or business. Notwithstanding the foregoing,
information or know-how of a Party shall not be deemed Confidential Information of such Party for purposes of this Agreement if
such information or know-how:

		(i)	was already known to the receiving Party, other than under an obligation
of confidentiality or non-use, at the time of disclosure to such receiving Party as evidenced by written records;

		(ii)	was generally available or known to parties reasonably skilled in the field
to which such information or know-how pertains, or was otherwise part of the public domain, at the time of its disclosure to such
receiving Party as evidenced by written records;

		(iii)	became generally available or known to parties reasonably skilled in the
field to which such information or know-how pertains, or otherwise became part of the public domain, after its disclosure to such
receiving Party other than as a result of an act or omission by the receiving Party in breach of this Agreement;

		(iv)	was disclosed to such receiving Party, other than under an obligation of
confidentiality or non-use, by a third party who had no obligation to the disclosing Party not to disclose such information or
know-how to others; or

		(v)	was independently discovered or developed by such receiving Party, as evidenced
by their written records, without the use of Confidential Information belonging to the disclosing Party and prior to any subsequent
disclosure by the receiving Party.

    	16

     

    

All Licensed Know-How shall be deemed to be Confidential Information
of Apogee; provided that RedHill shall be entitled to disclose and use any Licensed Know-How in the exercise of its rights under
this Agreement on the terms provided in Section 11.3, including clause (iv) thereof.

11.3         
Authorized Disclosure. Notwithstanding the provisions of Section 11.1 above, a Party shall be entitled to disclose
the Confidential Information of the other Party hereto to the extent that such disclosure is:

		(i)  	 	made in response to a valid order of a court of competent jurisdiction; provided,
however, that such Party will first (to the extent practicably possible) have given notice to such other Party and given such
other Party a reasonable opportunity to quash such order and to obtain a protective order requiring that the Confidential Information
and documents that are the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for
the purposes for which the order was issued; and provided further that if a disclosure order is not quashed or a protective
order is not obtained, the Confidential Information disclosed in response to such court or governmental order will be limited to
that information which is legally required to be disclosed in response to such court or governmental order;

		(ii)  	 	otherwise required by law or stock exchange rule; provided, however,
that the disclosing Party will provide such other Party with notice of such disclosure in advance thereof to the extent practicably
possible and to the extent permitted, will redact from such disclosure the other party’s Confidential Information or designate
the same as trade secret;

		(iii)  	 	made by such Party to Regulatory Authorities as necessary for the development
or commercialization of a medicinal product, including any Product, in a country, as required in connection with any filing, application
or request for Regulatory Approval or as required by applicable securities laws and regulations, subject to the limitations in
Section 11.3(ii); or

		(iv)  	 	made by such Party in the course of submitting financial accounts to relevant
authorities as per local statutory requirements or to existing or potential acquirers; existing or potential collaborators; investment
bankers; existing or potential investors, merger candidates, partners, venture capital firms or other financial institutions or
investors for purposes of obtaining financing; or, bona fide strategic potential partners; each of whom prior to disclosure must
be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Agreement.

12.             
PRESS RELEASES 

Press releases or other similar public communication by either Party
relating to the terms of this Agreement (but not, for the avoidance of doubt, unless reference is made to the other Party or the
terms of this Agreement, with respect to activities in exercise of its rights under this Agreement) must be approved in advance
by the other Party, which approval will not be unreasonably withheld or delayed, except for those communications required by applicable
law, regulation or securities exchange rule (including a public offering prospectus), disclosures of information for which consent
has previously been obtained, and information of a similar nature to that which has been previously disclosed publicly with respect
to this Agreement each of which will not require advance approval, but will be provided to the other Party as soon as practicable
after the release or communication thereof. For the avoidance of doubt, the Parties may issue press releases regarding the fact
that this Agreement has been signed and the nature of the Agreement so long as they do not describe the specific provisions hereof
without approval from the other party.

 

    	17

     

    

13.             
INDEMNIFICATION

13.1         
Indemnification of Apogee. RedHill will defend and hold Apogee and its Affiliates, and each of their respective
directors, officers, employees and agents (“Apogee Parties”) harmless, from and against any and all liability,
suits, investigations, claims or demands by a third party to the extent arising from or occurring as a result of or in connection
with (a) the negligence or willful misconduct on the part of RedHill in performing any activity contemplated by this Agreement,
(b) breach by RedHill of any representations, warranties, or covenants set forth in this Agreement, and/or (c) the development,
testing, use, manufacturing, promotion, sale or other disposition of a Product; except to the extent the liability or loss arises
from the (i) negligence or willful misconduct on the part of an Apogee Party; or (ii) breach by Apogee of any representations,
warranties or covenants set forth in this Agreement. RedHill shall, in addition, indemnify Apogee against any losses, damages or
liabilities from such claims (including reasonable attorneys’ fees and expenses) by paying the amount of any judgment awarded
against Apogee in connection with such claims.

13.2         
Indemnification of RedHill. Apogee will defend and hold RedHill, its Affiliates, and their respective directors,
officers, employees and agents (“RedHill Parties”), harmless, from and against any and all liability,
suits, investigations, claims or demands by a third party to the extent arising from or occurring as a result of or in connection
with (a) negligence or willful misconduct on the part of Apogee; or (b) breach by Apogee of any representations, warranties, or
covenants set forth in this Agreement, except to the extent the liability or loss arises from or occurs as a result of or in connection
with (i) negligence or willful misconduct on the part of a RedHill Party; (ii) breach by RedHill of any representations, warranties,
or covenants set forth in this Agreement. Apogee shall, in addition, indemnify RedHill against any losses, damages or liabilities
from such claims (including reasonable attorneys’ fees and expenses) by paying the amount of any judgment awarded against
RedHill in connection with such claims.

13.3         
Conditions to Indemnity. Each Party’s agreement to indemnify and hold the other harmless is conditioned upon
the indemnified Party (i) providing written notice to the indemnifying Party of any claim, demand or action arising out of the
indemnified activities within [****] days after the indemnified Party has knowledge of such
claim, demand or action, (ii) permitting the indemnifying Party to assume full responsibility to investigate, prepare for and defend
against any such claim or demand and not making any admission or otherwise adversely affecting the indemnifying party's interest,
(iii) assisting the indemnifying Party, at the indemnifying Party’s reasonable expense, in the investigation of, preparation
of and defense of any such claim or demand; and (iv) the indemnifying Party not compromising or settling such claim or demand without
the indemnified Party’s prior written consent (such consent shall not be unreasonably withheld or unduly provided), unless
avoiding such settlement prejudices the position of the indemnifying party and/or its insurers or unless such settlement includes
as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified Party a complete release from all
liability in respect of such claim or litigation; provided that, if the Party entitled to indemnification fails to promptly
notify the indemnifying Party pursuant to the foregoing clause (i), the indemnifying Party shall only be relieved of its indemnification
obligation to the extent it is prejudiced by such failure and provided further that the indemnified Party is not obligated to notify
the indemnifying Party of claims, demands and/or actions made directly against the indemnifying Party only. Notwithstanding the
foregoing, if in the reasonable judgment of the indemnified party, such suit or claim involves an issue or matter which could have
a materially adverse effect on the business, operations or assets of the indemnified party, the indemnified party may waive its
rights to indemnity under this Agreement and control the defense or settlement thereof, but in no event shall any such waiver be
construed as a waiver of any indemnification rights such indemnified party may have at law or in equity.

    	18

     

    

14.             
TERM AND TERMINATION

14.1         
Term. Unless earlier terminated in accordance with the provisions of this Article 14, the term of this Agreement
(the “Term”) will become effective on the Effective Date and will continue in full force and effect until terminated
in accordance with the terms hereof.

14.2         
Termination.

14.2.1Termination for Breach. Subject to the limitations
set forth in Sections 6.10 and 14.2.3, failure by a Party to comply with any of its material obligations contained herein will
entitle the Party not in default to give to the defaulting Party notice specifying the nature of the material breach, requiring
the defaulting Party to make good or otherwise cure such material breach, and stating its intention to invoke the provisions of
Section 14.3 if such material breach is not cured. If such material breach is not capable of cure or if such material breach is
capable of cure and is not cured within (a) within [****] days of the date payment is due
for late payments pursuant to Section 6.6, or (b) [****] days after the receipt of such notice
(or, if such material breach is capable of cure but cannot be cured within such [****]-day
period, if the defaulting Party does not commence actions to cure such material breach within such period and thereafter diligently
continue such actions to achieve full compliance as soon thereafter as is reasonably possible, but such material breach is not
cured with an additional [****]-day period), the Party not in default will be entitled, without
limiting any of its other rights conferred on it by this Agreement (except as expressly set forth herein), to terminate this Agreement
by providing written notice to the breaching Party.

14.2.2Voluntary Termination. Subject to
Section 14.3.4 below, RedHill shall be entitled, in its sole discretion, to terminate this Agreement at any time on [****]
days written notice to Apogee, without the need to pay Apogee any compensation in respect of such termination,. In addition, subject
to the limitations set forth in Section 6.10, Apogee shall be entitled, in its sole discretion, to terminate this Agreement in
the event of a Bankruptcy Event with respect to RedHill.

14.2.3 Limited Rights of Termination.
For the avoidance of doubt, it is hereby expressly agreed that outside the scope of Sections 14.2.1 and 15.12 Apogee shall have
no right to terminate this Agreement. For the avoidance of doubt, Apogee shall not be entitled to terminate this Agreement for
any reason whatsoever once all Royalty Terms have expired.

14.3         
Consequences of Termination

14.3.1License. Upon early termination of this Agreement,
all rights granted to RedHill under Section 2.1 will terminate; provided that RedHill shall have a period of [****]
days after the date of termination to sell-off Product, subject to Royalties on such sales being duly paid to Apogee.

    	19

     

    

14.3.2Continuation following Apogee’s Bankruptcy.
The Parties agree that in the event that Apogee becomes insolvent or makes a filing under bankruptcy or similar laws in any jurisdiction,
RedHill shall have the protection afforded to the licensee under the United States Bankruptcy Code, including the protections set
forth in 11 U.S.C §365(n) or its equivalent in any other jurisdiction which allows the licensee, upon rejection of the license
agreement by the debtor-licensor or its representative, the option to either retain the licensee’s rights in the intellectual
property under the existing contract while continuing to pay royalties, or to treat the executory contract as terminated. 

14.3.3Return of Information and Materials. Upon
termination of this Agreement, each Party will promptly return to the other all Confidential Information of the other Party (except
one copy of which may be retained for archival and compliance purposes).

14.3.4 Accrued Rights. Termination or expiration
of this Agreement for any reason will be without prejudice to any rights or financial compensation that will have accrued to the
benefit of a Party prior to such termination or expiration. Such termination or expiration will not relieve a Party from obligations
that are expressly indicated to survive the termination or expiration of this Agreement.

14.3.5Survival. This Section 14.3
and Sections 6, 7, 8, 9, 11, 13 and 15 of this Agreement will survive expiration or termination of this Agreement for any reason.

15.MISCELLANEOUS

15.1         
Assignment. Without the prior written consent of the other Party hereto, neither Party will sell, transfer,
assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement
or any of its rights or duties hereunder; provided, however, that (i) either Party hereto may assign or transfer this Agreement
or any of its rights or obligations hereunder without the consent of the other Party to any Affiliate, or to any third party successor
in interest with which it has merged or consolidated, or to which it has transferred all or substantial part of its assets or stock
to which this Agreement relates. Any purported assignment or transfer in violation of this Section 15.1 will be void ab initio
and of no force or effect.

15.2         
Severability. Should any term or provision of this Agreement be or become invalid or unenforceable or should
this Agreement contain an omission, the validity or enforceability of the remaining terms or provisions shall not be affected.
In such case, subject to the next following sentence, the Parties shall immediately commence to negotiate in good faith in order
to replace the invalid or unenforceable term or provision by such other valid or enforceable term or provision which comes as close
as possible to the original intent and effect of the invalid or unenforceable term or provision, or respectively, to fill the omission
by inserting such term or provision which the Parties would have reasonably agreed to, if they had considered the omission at the
date hereof. In the event that any term or provision as aforesaid is invalid, void or unenforceable by reason of its scope, duration
or area of applicability or some similar limitation as aforesaid, then the court making such determination shall have the power
to reduce the scope, duration, area or applicability of the term or provision so that they shall be enforceable to the maximum
scope, duration, area or applicability permitted by applicable law which shall not exceed those specified in this Agreement or
to replace such term or provision with a term or provision that comes closest to expressing the intention of the invalid or unenforceable
term or provision.

    	20

     

    

15.3         
Governing Law. This Agreement will be governed by and construed in accordance with the laws of England and Wales,
without reference to any rules of conflicts of laws and the courts of London, England shall have exclusive jurisdiction of disputes
regarding this Agreement and the Parties hereby submit to the jurisdiction of such courts.

15.4         
Notices. All notices or other communications that are required or permitted hereunder will be in writing and delivered
personally with acknowledgement of receipt, sent by electronic mail (provided receipt is acknowledged), facsimile (and promptly
confirmed by personal delivery, registered or certified mail or overnight courier as provided herein), sent by nationally-recognized
overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

If to Apogee, to:

Apogee Biotechnology Corp.

1214 Research Blvd.

Suite 2014

Hershey Center for Applied Research

Hummelstown, PA  17036, U.S.A

Fax: + 1 717 531 4758

 

If to RedHill, to:

RedHill Biopharma Ltd.

21 Ha'arba'a Street

Tel-Aviv 64739

Israel

Fax: +972 (3) 541 3144

 

or to such other address as the Party to whom notice is to be
given may have furnished to the other Party in writing in accordance herewith. Any such communication will be deemed to have been
given (i) when delivered, if personally delivered, (ii) on the Business Day (on the receiving end) after dispatch, if sent by nationally-recognized
overnight courier (third Business Day if sent internationally), (iii) on the third Business Day following the date of mailing,
if sent by mail (fifth Business Day if sent internationally) and (iv) on the First Business day (on the receiving end) after being
sent by facsimile or by if sent by electronic mail followed by facsimile. It is understood and agreed that this Section 15.4 is
not intended to govern the day-to-day business communications necessary between the Parties in performing their duties, in due
course, under the terms of this Agreement.

15.5         
Entire Agreement; Modifications. This Agreement sets forth and constitutes the entire agreement and understanding
between the Parties with respect to the subject matter hereof and all prior agreements, understanding, promises and representations,
whether written or oral, with respect thereto are superseded hereby, including the Non-Binding Term Sheet between the Parties dated
December 31, 2014. Each Party confirms that it is not relying on any representations or warranties of the other Party except as
specifically set forth herein. No amendment, modification, release or discharge will be binding upon the Parties unless in writing
and duly executed by authorized representatives of both Parties.

    	21

     

    

15.6         
Relationship of the Parties. It is expressly agreed that the Parties will be independent contractors of one another
and at no time will either Party make commitments or incur any charges or expenses for or on behalf of the other Party. The relationship
between the Parties will not constitute a partnership, joint venture, agency or employer-employee relationship for financial, tax,
legal or other purposes.

15.7         
Waiver. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit
thereof, but no such waiver will be effective unless set forth in a written instrument duly executed by or on behalf of the Party
waiving such term or condition. Any such waiver will not be deemed a waiver of any other right or breach hereunder.

15.8         
Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which will be deemed an original,
but all of which together will constitute one and the same instrument.

15.9         
No Third Party Beneficiaries. The representations, warranties, covenants and agreements set forth in this Agreement
are for the sole benefit of the Parties hereto and their successors and permitted assigns, and they will not be construed as conferring
any rights on any other parties.

15.10     
Expenses. Except as expressly provided herein, each Party shall each bear its own legal, accounting and other expenses
in connection with this Agreement and the transactions contemplated hereby.

15.11     
Further Assurances. Each Party will duly execute and deliver, or cause to be duly executed and delivered, such further
instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents
and instruments, as may be necessary to carry out the provisions and purposes of this Agreement.

15.12     
Force Majeure. Neither party shall be responsible to the other for failure or
delay in performing any of its obligations under this Agreement or for other non-performance hereof but only to the extent that
such delay or non-performance is occasioned by a cause beyond the reasonable control and without fault or negligence of such party,
including earthquake, fire, flood, explosion, discontinuity in the supply of power, court order or governmental interference, act
of God, strike or other labor trouble, act of war or terrorism and provided that such party will inform the other party as soon
as is reasonably practicable and that it will entirely perform its obligations immediately after the relevant cause has ceased
its effect. If any such force majeure event continues for a continuous period of 12 months, the Party whose performance is not
prevented by such event may terminate this Agreement with immediate effect by providing the other Party with written notice. This
Section 14.15 shall not apply to any obligation of a party to make a payment hereunder.

 

 

 

    	22

     

    

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be executed by their duly authorized representatives as of the Effective Date. 

 

 

	Apogee Biotechnology Corp.	RedHill Biopharma Ltd.	 
	 	 	 
	Signature: /s/ Charles D. Smith	Signature: /s/ Dror Ben-Asher 	 
	Name: Charles D. Smith	Name: Dror Ben-Asher	 
	Title: President and CEO	Title: CEO	 
	March 30, 2015	March 30, 2015	 
	 	 	 
	 	 	 
	 	Signature: /s/ Ori Shilo	 
	 	Name: Ori Shilo	 
	 	Title: Deputy CEO, Finance and Operations	 
	 	March 30, 2015	 

 

 

 

 

 

    	23

     

    

ANNEX A

 

PATENTS 

 

[****]

 

 

 

 

 

 

 

 

 

 

 

 

24

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