Document:

exv10w1

 

Exhibit 10.1

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

	 	 	 
	 

	 	Nortel Networks Amended Agreement No.011174 (10) 
	 

	 	Nortel Networks Original Agreement No. 011174 

AMENDMENT NO. 10

to

DEVELOPMENT AND PURCHASE AND SALE AGREEMENT

FOR

CDMA HIGH DATA RATE (IxEV-DO) PRODUCTS

Amendment No. 10 by and between Nortel Networks Inc. (“NNI”) and Airvana Inc. (“AIRVANA”)
(“Amendment No. 10”).

WHEREAS, NNI and AIRVANA entered into a Development and Purchase and Sale Agreement for CDMA
High Data Rate (IxEV-DO) Products dated October 1, 2001, Agreement No. 011174, as amended
(“Agreement”); and

WHEREAS, NNI and AIRVANA wish to amend the Agreement further;

NOW, THEREFORE, in consideration of the premises and the promises set forth herein, NNI and
AIRVANA agree as follows, effective as of September 28th, 2007 (“Effective Date”)
unless otherwise set forth below:

	1.	 	Appendix A (4) is deleted in its entirety and replaced with new Appendix A (5)
attached to and incorporated in this Amendment as Attachment 1.

	2.	 	[**] executive credits: Subject to the terms of this Section 2, Airvana will provide
the following purchase credits in the [**] calendar year provided that applicable
quarterly billings meet or exceed the respective billing thresholds.

	 	A.	 	[**]: Provided that all sales, as reported to Airvana,
in the [**] calendar quarter [**] meet or exceed the following purchase
total thresholds, Airvana will provide Nortel with US dollar purchase
credits in the [**] calendar quarter. Such credits, if earned, will be
deducted from the Airvana invoice in respect of the September royalty
report.

Credit Table [**]

	 	 	 
	 	 	Calendar
	Billing Threshold Met	 	Quarter
	or Exceeded in	 	Credit
	Calendar Quarter	 	[**]
	$[**]
	 	$[**]
	$[**]
	 	$[**]
	$[**]
	 	$[**]

	 	B.	 	[**]: Provided that all sales, as reported to Airvana,
in the [**] calendar quarter [**] meet or exceed the $[**] threshold,
Nortel will be entitled to a $[**] credit which, if earned, will be
deducted from the Airvana invoice in respect of the [**] royalty report and
any invoice issued thereafter up to one hundred percent (100%) of each such
invoice until the credit is exhausted.
	 
	 	C.	 	Make Up Credit: If Nortel meets or exceeds the [**]
$[**] billing threshold under Section 2A above, and provided that all
sales , as reported to Airvana in the [**] calendar quarter [**] meet or
exceed the following purchase total thresholds, Airvana will provide
Nortel with US dollar purchase credits in the [**] calendar quarter up to a
maximum total credit under this Section 2 of $[**] and subject to further
limitations set forth herein, which, if earned, will be deducted from the
Airvana invoice in respect of the [**] royalty report and any invoice
issued thereafter up to one hundred percent (100%) of each such invoice
until the credit is exhausted. For greater certainty, the credits set
forth in this Section 2C, if applicable, are additional to the credits
provided under Sections 2A and Section 2B above, but in no event shall the
total purchase credits under Sections 2A, 2B, and 2C exceed $[**].

Page 1 of 14

 

Additional Credit Table [**]

	 	 	 
	 	 	Calendar
	Billing Threshold Met	 	Quarter
	or Exceeded in	 	Credit
	Calendar Quarter	 	[**]
	$[**]
	 	$[**]
	$[**]
	 	$[**]
	$[**]
	 	$[**]

	 	 	The determination of whether the quarterly billing threshold has been met for such quarter
will include all sales reported to Airvana in the applicable calendar quarter.
	 
	 	 	The purchase credits set forth in this Section 2 are subject to the following additional
terms:

	 	1.	 	Any subsequent net adjustment, by audit or otherwise, that increase
prior quarter Nortel royalty reports will not retroactively count towards any
quarterly billing threshold target.
	 
	 	2.	 	Any subsequent net adjustments, by audit or otherwise, that decrease
prior quarter Nortel royalty reports that would have placed Nortel in a lower
purchase credit level but for such reporting error (i.e. the difference defined as
the “Unearned Credit”) will result in the cancellation of such Unearned Credit (if
not already applied to the relevant Airvana invoice) or a cash refund to Airvana
in the amount of the Unearned Credit (if already applied on a relevant Airvana
invoice)
	 
	 	3.	 	For purposes of calculating the billing threshold in any calendar
quarter, billings shall mean amounts invoiced in respect to such calendar quarter
based upon Nortel royalty reports and Nortel Orders for maintenance and other
services, excluding any credits earned in accordance with this Amendment No. 10
and such invoice shall include prices of all Products sold or licensed by Nortel
less any specially negotiated discounts not accounted for in such invoice.

	3.	 	If Nortel fails to achieve greater than or equal to [**] unit sales in [**],
Airvana will provide Nortel with purchase credits in the [**] calendar year, on a per
calendar quarter basis, based on Nortel meeting or exceeding the following billings total
thresholds for such quarters and related U.S. dollar credits as set forth in the credit
table below; and, if Nortel fails to achieve greater than or equal to [**]  unit sales
in [**], Airvana will provide Nortel with purchase credits in the [**] calendar year, on
a per calendar quarter basis, based on Nortel meeting or exceeding the following billings
total thresholds for such quarters and related U.S. dollar credits as set forth in the
credit table below.

Credit Table 

	 	 	 	 	 
	 	 	Calendar	 	Calendar
	Billing Threshold Met	 	Quarter	 	Quarter
	or Exceeded in	 	Credit	 	Credit
	Calendar Quarter	 	[**]	 	[**]
	$[**]
	 	$[**]	 	$[**]
	$[**]
	 	$[**]	 	$[**]
	$[**]
	 	$[**]	 	$[**]
	$[**]
	 	$[**]	 	$[**]
	$[**]
	 	$[**]	 	$[**]

	 	 	 	For avoidance of doubt, the maximum amount of credit that may accrue in [**] is $[**]
and the maximum amount of credit that may accrue in [**] is $[**].

Page 2 of 14

 

	 	 	 	The determination of whether the quarterly billing threshold has been met for such
quarter will include all sales reported to Airvana in the applicable calendar
quarter. For clarity such quarterly periods in calendar years [**] and [**] are as
follows:

	 	 	 	 
	 	Nortel Sales Period

	 	Reported to Airvana
	 	December (prior year), January, February

	 	January, February, March
	 	March, April, May

	 	April, May, June
	 	June, July, August

	 	July, August, September
	 	September, October, November

	 	October, November, December

	 	 	 	The quarterly credit, if earned, will be deducted from the Airvana invoice in
respect of the third calendar month royalty report of any such quarterly period and
any invoices issued thereafter up to one hundred percent (100%) of each such invoice
until the credit is exhausted.
	 
	 	 	 	The purchase credits set forth in this Section 3 are subject to the following
additional terms:

	 	1.	 	Any subsequent net adjustment, by audit or otherwise, that
increase prior quarter Nortel royalty reports will not retroactively count
towards any quarterly billing threshold target.
	 
	 	2.	 	Any subsequent net adjustments, by audit or otherwise, that
decrease prior quarter Nortel royalty reports that would have placed Nortel
in a lower purchase credit level but for such reporting error (i.e. the
difference defined as the “Unearned Credit”) will result in the cancellation
of such Unearned Credit (if not already applied to the relevant Airvana
invoice) or a cash refund to Airvana in the amount of the Unearned Credit (if
already applied on a relevant Airvana invoice).
	 
	 	3.	 	For purposes of calculating the billing threshold in any
calendar quarter, billings shall mean amounts invoiced in respect to such
calendar quarter based upon Nortel royalty reports and Nortel Orders for
maintenance and other services, excluding any credits earned in accordance
with this Amendment No. 10 and such invoice shall include prices of all
Products sold or licensed by Nortel less any specially negotiated discounts
not accounted for in such invoice.

	 	 	 	For purposes of quantifying the [**]  figure, only royalty bearing units
shall be included.

	4.	 	[**] discounts: Through [**], Airvana will provide a [**]% discount on [**] sales up
to a maximum of [**] instances [**], provided that if any discount instances remain unused
by [**], no more than [**] discount instances may be used per calendar quarter in [**] and
[**]. Such discount shall apply to all [**] licenses sold commencing [**].

	5.	 	Software Upgrades: The parties agree that Software Upgrades (i.e., Airvana Releases
4.0, 5.0, 6.0, etc.) purchased under the Agreement will not [**] of the underlying DOM,
RNC and EMS Products. The fees Airvana charges for maintenance and support services on the
underlying DOM, RNC and EMS Products extend the Warranty Period for up to [**] following
the expiration date of the initial Warranty Period or any subsequent annual maintenance
period for such Products. The parties agree that there will be [**]. The parties further
agree that if Nortel has a customer that is not under an annual maintenance and support
agreement and such customer purchases a Software Upgrade from Nortel, the parties agree to
discuss a solution in the event that such Software Upgrade fails to operate in accordance
with its associated specifications.

	6.	 	Development Hardware: Based on the mutual agreement of the parties, using Nortel’s
standard equipment loan terms and conditions, Nortel agrees to i) provide a reasonable
amount of [**] hardware or ii.) pay to Airvana the cost of such hardware, which cost the
parties will agree upon in advance. A copy of Nortel’s equipment loan agreement is
attached to and incorporated in this Amendment No. 10 as Attachment 2.

	7.	 	Price discounts – additional conditions: If a) Nortel [**] or b) and the [**] or
c) a Nortel [**], then upon any such occurrence [**] this Amendment No. 10 will [**]
Nortel, and the [**] shall apply.

	8.	 	Unless otherwise prohibited by a customer confidentiality agreement, the parties
agree to review reasonable information relating to Nortel’s customer installed base,
including information relating to DOMs, EMS licenses, RNCs and associated cards, and any
other Product based on available Nortel information. Thereafter, if not otherwise
prohibited by customer confidentiality agreements, such information relating to Nortel’s
installed

Page 3 of 14

 

	 	 	customer base shall be updated upon Airvana’s request but no more frequently than once per
calendar quarter using similar methodologies and relevant Nortel information.

	9.	 	The parties agree to good faiths efforts to evaluate improved licensing and reporting
mechanisms and to use reasonable efforts to implement a mutually agreed to solution.

	10.	 	[**]: Airvana agrees to review in good faith [**] opportunities requested by Nortel.
Additional discounts, if any, shall be as mutually agreed in writing by the parties on a
case by case basis.

	11.	 	The parties agree that the basis for establishing the content of future software
releases will be a targeted release effort of [**] man weeks based on Release 6.0
methodology of which [**]% will be Airvana specified robustness or maintenance content.

	12.	 	Nortel will accept Products for deployment in customer networks (“Product
Acceptance”), based on either of the two following circumstances applying to the Products:

a.) Nortel’s declaring Channel Ready the product bundle that includes the applicable
Airvana Products based on Airvana’s compliance to the feature requirement
specifications and Nortel confirms in writing to Airvana such Product Acceptance; or

b.) Upon the parties entering into a written agreement (i) identifying
non-conformities to the feature requirement specifications; (ii) detailing a
technical solution to the non-conformities to be implemented by Airvana or Nortel’s
acceptance of a commercial resolution, and (iii) Nortel’s subsequent declaration that
the product bundle that includes the applicable non-conforming Airvana Products is
Channel Ready.

For greater certainty Nortel will not declare Channel Ready products that include an
Airvana Product in the absence of Product Acceptance of such Product. For the
purposes of this section Channel Ready shall mean, the determination by Nortel of the
acceptability of an applicable bundle of products for deployment.

	13.	 	For greater certainty, the pricing set forth in Appendix A(5) is only applicable to
transactions occurring after the Effective Date and such pricing does not supersede any
special pricing previously agreed between the parties.

	14.	 	Section 9.2 (f) Case Severity Definition and Closure Policy (Production Hardware and
Software), is deleted in its entirety and replaced by the following new Section 9.2(f).

	 	9.2	 	(f) Case Severity Definition and Closure Policy (Production Hardware and
Software): For production Hardware and Software, the classifications using the
following definitions as the guideline follow:

Critical (E1): Actual outage of equipment which, depending on product, could mean
failure to process calls, loss of service to end customers, or similar. Immediate and
continuous effort is required until the service level has been restored to pre-incident
operation. As these are business imperative faults, they may require considerable
re-deployment of resource by both Nortel and the customer, and management awareness is
required by both sides in order to progress. Upon resolution of an E1 issue, the E1 is
closed and an E3 is opened to follow up (see below explanation.)

E2: Potential outage of equipment, such as loss of resilience, imminent failure of
cards, fatal errors, etc. Immediate and continuous effort is required until the service
level has been restored to pre-incident operation. As these are business imperative
faults, they may require considerable re-deployment of resource by both Nortel and the
customer, and management awareness is required by both sides in order to progress.
Upon resolution of an E2 issue, the E2 is closed and an E4 is opened to follow up (see
below explanation.)

E1/E2 CRITERIA

[**].

BUSINESS CRITICAL: Although this issue is defined as being non-emergency, it must be
handled with the highest priority. Business Critical issues receive focused management
and resource attention. These issues are treated as critical by agreement between the
customer and Nortel at a management level, and include loss of revenue, or other
special cases such as the requirement to route calls via other operators, although no
actual outage occurs

Page 4 of 14

 

MAJOR: Service affecting Issues. This category includes any software errors or hardware
troubles which effect service or possibly affects the customer’s ability to collect
revenue but cannot be classified as either Emergency or Critical.

E3: Root cause analysis or preventative work, following from an E1 fault.

MINOR: Non-service affecting condition. This category includes hardware and software
difficulties that are not E1/E2/Critical and primarily relate to minor hardware faults
or errors in documentation, which do not lead to mis-operation of equipment.

E4: Root cause analysis or preventative work, following from an E2 fault.

	15.	 	Section 9.2 (g) Escalation Procedure, is hereby deleted in its entirety and replace
by a new section 9.2 (g) below:

9.2 (g) Escalation Procedure: During the work day at Airvana, resources shall
ordinarily be available to answer a call; however, there could be times when a
support call could go to voice mail. The call back time target if a call goes to
voice mail is [**]. Failure of Airvana Technical Support to respond within [**]
of a voicemail message will be escalated to the following Airvana managers, in
order of escalation:

1.) Darryl Wickens, Support Manager Technical Support

           Phone: [**]

           Mobile: [**]

2.) John Cinicolo, Director of Technical Services

           Phone: [**]

           Mobile: [**]

3.) Luis Pajares, VP of Sales and Technical Services

          Phone: [**]

          Mobile: [**]

4.) Randy Battat, President and CEO

          Phone: [**]

          Mobile: [**]

	16.	 	Section 9.2(h) Target time to resolve within receipt of initial fault report, is
hereby deleted in its entirety and replace a new Sections 9.2 (h) below:

9.2 (h) Issue resolution:

i.) For customers covered under a maintenance and support plan, AIRVANA shall use
reasonable commercial efforts to repair Product that fails to materially comply to
the specifications. The parties will meet within 30 days and mutually agree on a
resolution plan in connection with such Product repair. Failure to agree on a
resolution plan will be considered a failure to materially support Nortel’s support
requirements under Appendix C Section 10B(a)

ii.) Target time to resolve within receipt of initial fault report: AIRVANA shall
use Reasonable Efforts to provide resolution in accordance with the table below:

Table Customer Care Case Responsiveness Requirements

	 	 	 	 	 	 	 
	Emergency Cases	 	Percentage	 	Service Restored (outage start to system recovery)
	E1
	 	 	[**] 	%	 	in [**]
	E1
	 	 	[**]	%	 	in [**]
	E2
	 	 	[**]	%	 	in [**]

Page 5 of 14

 

	 	 	 	 	 	 	 
	Software Cases	 	Percentage	 	RCA Identified	 	Resolved
	E3

	 	[**]%
	 	< [**]
	 	< [**]
	BC

	 	[**]%
	 	< [**]
	 	< [**]
	MJ

	 	[**]%
	 	< [**]
	 	< [**]
	MN

	 	[**]%
	 	 	 	< [**] to identify fix
plan for future release

	 	 	 	 	 	 	 
	Non Software Cases	 	Percentage	 	 	 	Resolved
	E3, BC, MJ, MN

	 	[**]%
	 	n/a
	 	< [**]

 

Notes:

	 	•	 	Software cases are those which require a software fix
	 
	 	•	 	Minor software fixes are normally to be addressed in future releases only. Target release is the next release
and is to be based on fix complexity and release capacity
	 
	 	•	 	All measurements are in calendar days
	 
	 	•	 	All measurements include resolution time shared between Nortel TAS, Nortel ER, VO and Airvana
	 
	 	•	 	Targets listed above wrt Airvana response targets are as clarified below in 15.5.3.2 item 6.
	 
	 	•	 	Time is measured from the actual instance of a customer occurrence
	 
	 	•	 	For fixes delivered in the current release, EVDO corrective content is normally delivered as a patch load on a
monthly schedule. To determine resolved dates of software corrective content, Airvana will provide details of when the
software solution is submitted in a patch stream.  The requirement is that solution has been coded and unit tested by
Airvana.  The build number for the specific software solution
will need to be updated in [**]
to determine resolution date. The actual closure of the case will be done after customer has validated the solution.
Airvana will continue to track when the fix solution was identified (Solution Defined Date) prior to coding/testing
since coding/testing dates will be driven by monthly patch load schedules and/or customer priority
	 
	 	•	 	For fixes to be delivered in a future release stream, Airvana will provide a committed release stream for the
fix in [**] to determine resolution date.  The fix must be coded and fully validated by CuR of
the future release.  The case will be updated with the fix/build_id when it becomes available. The case will remain
open pending delivery of the release and actual closure of the case will be done after the customer has validated the
solution.

	17.	 	In all other respects the Agreement, as amended, remains unchanged.

IN WITNESS WHEREOF, the parties have caused this Amendment No. 10 to be signed by their duly
authorized representatives as of the Effective Date, although actually signed by the parties on
the dates set forth below their respective signatures.

	 	 	 	 	 	 	 	 	 	 	 
	AIRVANA, INC.	 	 	 	NORTEL NETWORKS INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Jeffrey D. Glidden
	 	 	 	By:	 	/s/ Glenn Laxdal	 	 
	 

	 	 

(Signature)
	 	 	 	 	 	 

(Signature)
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name:

	 	Jeffrey D. Glidden
	 	 	 	Name:	 	Glenn Laxdal	 	 
	 

	 	 

(Print)
	 	 	 	 	 	 

(Print)
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	VP & CEO
	 	 	 	Title:	 	VP CDMA Product Mgt.	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:

	 	9/28/2007
	 	 	 	Date:	 	9/28/07	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

Page 6 of 14

 

ATTACHMENT 1

APPENDIX A (5)

PRODUCTS (HARDWARE AND SOFTWARE), AND SERVICES; PRICES AND FEES

HARDWARE

	 	 	 	 	 	 	 
	 	 	Airvana	 	 	 	 
	 	 	Order	 	Nortel Networks Price for	 	 
	Hardware Name	 	Number	 	Hardware	 	Notes
	 

	 	 
	 	 
	 	No H/W required

SOFTWARE

	 	 	 	 	 	 	 
	Software Name (Software	 	 	 	 	 	 
	may be delivered	 	 	 	 	 	 
	separately from the	 	Airvana	 	 	 	 
	Hardware or embedded in	 	Order	 	Nortel Networks Price for	 	 
	the Hardware)	 	Number	 	Software	 	Notes
	[**]

	 	TBD
	 	[**]
	 	[**]
	[**]

	 	 	 	[**]
	 	[**]

Page 7 of 14

 

	 	 	 	 	 	 	 
	Software Name (Software	 	 	 	 	 	 
	may be delivered	 	 	 	 	 	 
	separately from the	 	Airvana	 	 	 	 
	Hardware or embedded in	 	Order	 	Nortel Networks Price for	 	 
	the Hardware)	 	Number	 	Software	 	Notes
	[**]

	 	 	 	[**]
	 	[**]
	[**]

	 	TBD
	 	[**]
	 	[**]
	[**]

	 	 	 	[**]
	 	[**]
	[**]

	 	TBD
	 	[**]
	 	[**]
	[**]

	 	TBD
	 	[**]
	 	[**]
	 
	 	 	 	 	 	 
	[**]

	 	TBD
	 	[**]
	 	[**]

Page 8 of 14

 

	 	 	 	 	 	 	 
	Software Name (Software	 	 	 	 	 	 
	may be delivered	 	 	 	 	 	 
	separately from the	 	Airvana	 	 	 	 
	Hardware or embedded in	 	Order	 	Nortel Networks Price for	 	 
	the Hardware)	 	Number	 	Software	 	Notes
	[**]

	 	 	 	[**]	 	[**]

	 
	 	 	 	 	 	 
	[**]

	 	 	 	[**]
	 	[**]
	[**]

	 	TBD
	 	[**]
	 	[**]
	[**]

	 	 	 	[**]
	 	[**]
	[**]

	 	 	 	[**]
	 	[**]

[**].[**]

Page 9 of 14

 

POST-WARRANTY SUPPORT SERVICES

	 	 	 	 	 	 	 
	 	 	Airvana	 	 	 	 
	Support Service by	 	Order	 	Nortel Networks Price	 	 
	Product or Software	 	Number	 	per year	 	Notes
	[**]

	 	TBD
	 	[**]
	 	[**]
	[**]

	 	TBD
	 	[**]
	 	[**]
	[**]

	 	TBD
	 	[**]
	 	[**]

	 	 	 	 	 
	Other Support Service	 	Nortel Networks Price	 	Notes
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]

TRAINING COURSES

	 	 	 	 	 	 	 	 	 
	Course	 	Course	 	 	 	 
	Number	 	Length	 	Course Title / Description	 	Pre-requisites
	101

	 	2 days
	 	Introduction to 1xEV-DO Network Concepts

Primary Audience: First and second line support

Contents: Classroom only. This course covers
basics of the TCP/IP protocol, IP routing
protocols, Data Link Protocols, basic CDMA
protocol operation, and the 1xEV-DO protocol.
	 	None

	 
	 	 	 	 	 	 	 	 
	201

	 	5 days
	 	Basic 1xEV-DO – Concepts and Operation

Primary Audience: First and second line
support and technical field personnel, network
planners
	 	101 or equivalent

	 

	 	 	 	Contents: Classroom and lab. This course
covers the 1xEV-DO system, airlink, signaling
and applications in detail; hands-on work with
the DOM, RNC & ANM, and basic network
troubleshooting, OMs & logging.	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	301

	 	4 days
	 	Advanced 1xEV-DO – Concepts and Operation

Audience: First and second line support,
technical field personnel, network planners
	 	 	201	 
	 

	 	 	 	Contents: Classroom and lab. This course
covers advanced topics including RF
optimization, network optimization,
performance analysis, detailed throughput
performance troubleshooting.	 	 	 	 

Page 10 of 14

 

Pricing Table

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Total Cost / Number of Students	 	 	 	 
	Course	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Number /	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Course Title	 	Location	 	6	 	7	 	8	 	9	 	10	 	11	 	12
	101 Introduction to 1xEV-DO
	 	Airvana/Chelmsford
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	Network Concepts

	 	Customer/US & Canada
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 
	 	Customer/International
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 
	201 Basic 1xEV-DO
— 
	 	Airvana/Chelmsford
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	Concepts and Operation

	 	Customer/US & Canada
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 

	 	Customer/International
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 
	301 Advanced
1xEV-DO —
	 	Airvana/Chelmsford
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	Concepts and Operation

	 	Customer/US & Canada
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 

	 	Customer/International
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]
	 	[**]

 

			
	[**]	 	 

Cancellation policy:

The following cancellation policy shall apply:

	a)	 	Reschedule 14+ days, no charge 1st time only, then considered a cancellation as
below.
	 
	b)	 	Cancel 14-29 days before delivery date, [**]% of services charged.
	 
	c)	 	Cancel 7-13 days before delivery date, [**]% of services charged.
	 
	d)	 	Cancel 0-6 days before delivery date, [**]% of services charged.

Page 11 of 14

 

ATTACHMENT 2

EQUIPMENT ON LOAN AGREEMENT

This Equipment On Loan Agreement (the “Loan Agreement”) is made between Nortel Networks Inc.
(“Nortel Networks”) and Airvana, Inc. (“Airvana”) (each individually referred to as a “Party” and
collectively referred to as the “Parties”) as of the 1st day of August, 2007 and sets forth the
provisions under which Nortel Networks will i.) temporarily provide AIRVANA with EMS ATCA Hardware
or ii.) pay to AIRVANA the cost of such EMS ATCA Hardware, which cost the parties will agree upon
in advance (“Loaned Products”). Installation of the Loaned Products shall be at AIRVAVA’s site
in Chelmsford, Mass. (“Locations”).

WHEREAS, Nortel Networks and Airvana are parties to the Development and Purchase and Sale Agreement
for CDMA High Data Rate (IxEV-DO) Products dated October 1, 2001, Agreement No. 011174, as amended,
(“Agreement”) which provides for the purchase/license and sale of AIRVANA’s products or services;
and

NOW, THERFORE, in consideration of the premises and mutual covenants and agreements herein set
forth, the Parties agree as follows:

	1.	 	Nortel Networks agrees to provide for the period beginning on the date Airvana receives the
Loaned Products and ending on December 31st, 2009 (“Term”). The Term may be
extended by mutual written agreement between the parties.
	 
	2.	 	AIRVANA agrees to return the Loaned Products, upon expiration of this Loan Agreement or upon
Nortel Networks’ request. The Loaned Products shall be returned in the same condition as
originally provided by Nortel Networks, except for normal wear and tear.
	 
	3.	 	In the event AIRVANA fails to return the Loaned Products to Nortel Networks within 30 days of
Nortel Networks’ request or expiration of the Loan Agreement, Nortel Networks shall invoice
AIRVANA for the total price of such Loaned Products and AIRVANA agrees to pay such invoice
upon receipt in which case AIRVANA shall be deemed to have purchased the Loaned Products
pursuant to the terms of the Agreement.
	 
	4.	 	AIRVANA Requirements

Page 12 of 14

 

	 	 	AIRVANA agrees to provide (a) sufficient, free and safe access and a suitable physical and
operating environment meeting Nortel Networks’ specified requirements to permit the timely
installation and safe operation of the Loaned Products; (b) access to the Loaned Products
as requested by Nortel Networks; and (c) adequate security to protect the Loaned Products
from theft, damage or misuse and to use reasonable care in the use of the Loaned Products.
AIRVANA agrees that (i) the Loaned Products will be used solely for the development and
support of Nortel Networks products; (ii) it will not make any alterations or
modifications to the Loaned Products without Nortel Networks prior consent; (iii) it will
not move the Loaned Products to another location without Nortel Networks prior consent; and
(iv) it will not transfer any interest in the Loaned Products or cause or permit any lien
to be placed on the Loaned Products.
	 
	 	 	AIRVANA agrees, at their expense, to properly maintain (including preventive and remedial
maintenance) the Loaned Product. Any required 3rd party Software, including
updates and upgrades required for the Loaned Product will be at AIRVANA’s expense.
	 
	5.	 	Title and Risk of Loss
	 
	 	 	During the Term, Nortel Networks is the owner of and retains title to the Loaned Products.
AIRVANA shall not sell or lease the Loaned Products or allow any third party liens or
encumbrances to attach to the Loaned Products, or remove the Loaned Products from the
Locations without the prior written consent of Nortel Networks. Risk of loss for the
Loaned Products shall pass from Nortel Networks to AIRVANA while the Loaned Products are
inAIRVANA custody and/or control.
	 
	6.	 	Warranty and Limitation of Liability

Nortel Networks provides the Loaned Products on an “AS IS” BASIS WITHOUT WARRANTIES OF ANY KIND.
Nortel Networks makes no warranties written or oral, statutory, express or implied with respect to
the Loaned Products, including but not limited to the implied warranties or conditions of
merchantability or fitness for a particular purpose or against infringement. In no event shall
Nortel Networks or its agents or suppliers be liable to AIRVANA for any actual direct damages
regardless of the cause and whether arising in contract, tort or otherwise. This limitation will
not apply to claims for damages for bodily injury (including death) and damage to real property and
tangible personal property for which Nortel Networks is legally liable. IN NO EVENT SHALL NORTEL
NETWORKS OR ITS AGENTS OR SUPPLIERS BE LIABLE FOR ANY OF THE FOLLOWING: A) DAMAGES BASED ON ANY
THIRD PARTY CLAIM EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS SECTION; B) LOSS OF, OR DAMAGE TO,
AIRVANA’S RECORDS, FILES OR DATA; OR C) INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS OR LOST SAVINGS), EVEN IF NORTEL NETWORKS IS INFORMED OF THEIR
POSSIBILITY.

	7.	 	Software License

Page 13 of 14

 

	 	 	With respect to software owned or licensed by Nortel Networks and provided hereunder
(“Software”), Nortel Networks grants AIRVANA a nonexclusive license to use such Software in
conjunction with the Loaned Products during the Term. AIRVANA will ensure that anyone who
uses the Software does so only in compliance with the terms of this Loan Agreement and
AIRVANA will not (a) use, copy, modify, transfer or distribute the Software except as
expressly authorized; (b) reverse assemble, reverse compile, reverse engineer or otherwise
translate the Software; (c) create derivative works or modifications unless expressly
authorized; or (d) sublicense, rent or lease the Software. Upon termination or expiration
of this Loan Agreement, AIRVANA will promptly return the Software to Nortel Networks or
certify its destruction. The Software, and any documentation relating to the Software or
the Loaned Products, shall be treated as Confidential Information of Nortel Networks in
accordance with the Agreement.
	 
	8.	 	General

(a) AIRVANA agrees not to assign, or otherwise transfer this Loan Agreement or AIRVANA’s rights
under it, or delegate AIRVANA’s obligations, without Nortel Networks’ prior written consent, and
any attempt to do so is void. AIRVANA agrees to comply with all applicable laws including all
applicable export and import laws and regulations. Neither AIRVANA nor Nortel Networks will bring
a legal action under this Loan Agreement more than two years after the cause of action arose, nor
is either party responsible for failure to fulfill any obligations due to causes beyond its
control. If any provision of this Loan Agreement, or portions thereof, is held to be invalid or
unenforceable, the remainder of this Loan Agreement will remain in
full force and effect.

(b) The terms and conditions of this Loan Agreement, including any Attachment(s) signed by Nortel
Networks and AIRVANA referencing this Loan Agreement and attached hereto, form the complete and
exclusive agreement between AIRVANA and Nortel Networks and replaces any prior oral or written
communications regarding the subject matter hereof. Any changes to this Loan Agreement must be made
by mutual agreement in writing. All AIRVANA’s rights and all of Nortel Networks’ obligations are
valid only in the country in which the Loaned Products were supplied; the laws of the State of New
York govern this Loan Agreement, exclusive of its conflict of laws provisions; and nothing in this
Loan Agreement affects any statutory rights of consumers that cannot be waived or limited by
contract.

(c) Both AIRVANA’s and Nortel Networks’ obligations under this Loan Agreement which by their nature
would continue beyond expiration of this Loan Agreement, shall survive such expiration of the Loan
Agreement.

IN WITNESS WHEREOF Nortel and Airvana have caused the Agreement to be executed by their duly
authorized representatives as of the Effective Date.

	 	 	 	 	 	 	 	 	 
	Airvana, Inc.	 	 	 	Nortel Networks Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Jeffrey D. Glidden
	 	 	 	By:
	 	/s/ Glenn Laxdal
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	Jeffrey D. Glidden
	 	 	 	Name:
	 	Glenn Laxdal
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	VP & CFO
	 	 	 	Title:
	 	VP CDMA Product Mgt.
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date:

	 	9/28/2007
	 	 	 	Date:
	 	9/28/2007
	 

	 	 
	 	 	 	 	 	 

Page 14 of 14exv10w1

 

EXHIBIT 10.1

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into effective as of August 20, 2007
(the “Effective Date”) by and between Bentley Pharmaceuticals. Inc., a Delaware corporation (the
“Employer”), and James R. Murphy (the “Employee”).

RECITALS

     The Employer desires to employ the Employee, and the Employee desires to be employed by the
Employer, all upon the terms and provisions and subject to the conditions set forth in this
Agreement.

WITNESSETH

     NOW THEREFORE, in consideration of the foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to be legally bound as follows:

1. Employment. The Employer hereby employs the Employee, and the Employee hereby accepts such
employment, as Chairman and Chief Executive Officer of the Employer upon the terms and subject to
the conditions set forth in this Agreement. The Employee shall perform such functions as are
consistent with these positions under the supervision of the Board of Directors of the Employer.
The Employee shall, without any compensation in addition to that which is specifically provided in
this Agreement, serve in such further offices or positions with Employer or any subsidiary or
affiliate of Employer (collectively, the “Employer Group”) as shall from time to time be reasonably
requested by the Board of Directors of Employer.

2. Term. Subject to the termination provisions hereinafter contained, the term of this Agreement
shall be for an initial term commencing on the Effective Date and terminating on December 31, 2008.
This Agreement shall thereafter be automatically renewed for successive one (1) year terms, unless
the Employee’s employment with the Employer has been terminated, as hereinafter provided, or unless
either party shall have given the other party notice at least one year before the then applicable
date of expiration that this Agreement will terminate as of its then applicable date of expiration.
The initial term of this Agreement, and any extension thereof pursuant to this paragraph, are
referred to as the “Term”.

3. Compensation, Reimbursement, Etc.

	 	a.	 	Base Salary. Commencing on the Effective Date, the Employer shall pay to the
Employee as compensation for all services rendered by the Employee a base salary of
$56,059.92 per month (the “Monthly Base Salary”), payable in accordance with the
Employer’s regular payroll practices, plus annual bonuses on a calendar year basis as
determined by the Compensation Committee of the Board of Directors (the “Compensation
Committee”), subject to Sections 3(d) and 3(e). If an increase in Monthly Base Salary
is determined for a calendar year after January 1 and before May 31 of that year, the
increase shall be retroactive to the

1

 

	 	b.	 	beginning of that year. Annual review of the Employee’s Monthly Base Salary will be on a calendar year basis, and the results of such review will be provided to the Employee no later than May of the following year.

	 	c.	 	Expense Reimbursement. The Employer shall reimburse the Employee on a
semi-monthly basis for all reasonable expenses incurred by the Employee in the
performance of his duties under this Agreement; provided however, that the Employee
shall have previously furnished to the Employer an itemized account, satisfactory to
the Employer, in substantiation of such expenditures.

	 	d.	 	Benefits. The Employee shall be entitled to health and other benefits on the
same terms and conditions as the Employer has made available to other senior executives
of Employer, including without limitation participation in the Employer’s health plans
and a supplemental executive health insurance policy issued by Boston Mutual or a
comparable carrier. The Employer agrees to maintain (i) life insurance and disability
coverage on the Employee in an amount equivalent to 24 times the Monthly Base Salary,
which insurance will be payable to the Employee’s estate or beneficiaries (as the
Employee may designate) upon the Employee’s death or to the Employee in the event of
disability as provided in Section 7(b) hereof, as well as (ii) an additional term life
insurance policy in the amount of $1,000,000.

	 	e.	 	Bonuses. The Employee shall be eligible for a bonus each year of the Term,
payable in cash, common stock and/or other equity awards as determined by the
Compensation Committee. Such annual bonus will be awarded for each year as soon as
practicable after March 15, but not later than June 30, of the following year.

	 	f.	 	Annual Review. The Employee shall be reviewed by the Compensation Committee on
an annual (calendar year) basis.

	 	g.	 	Equity Awards. The Employee will be eligible for periodic equity awards
(“Equity Awards”) under the Employer’s 2005 Equity and Incentive Plan or another plan
as determined by the Compensation Committee of the Board of Directors (collectively,
the “Plan”), which shall include annual Equity Awards having a value of not less than
50,000 stock options under the Plan, the value of which shall be determined based upon
the fair value of such Equity Awards as of the date of grant, as determined by the
Compensation Committee.

4. Duties. The Employee is engaged as Chairman and Chief Executive Officer of the Employer. In
addition, the Employee shall have such other duties and hold such offices as may from time to time
be reasonably assigned to him by the Board of Directors of the Employer.

5. Extent of Services. During the Term, the Employee shall devote his full time, energy and
attention to the benefit and business of the Employer and its affiliates and shall not be employed
by another entity, either directly or as a consultant to or in any other capacity, except as
approved in advance by the Employer’s Board of Directors; provided, however, that no such

2

 

approval
shall be required to serve as a director, officer or trustee of any trade association or of any
civic or charitable organization so long as such service does not significantly interfere with the
Employee’s performance of his duties at the Employer.

6. Vacation. The Employee may take a maximum of four weeks of vacation each calendar year, at
times to be determined in a manner most convenient to the business of the Employer. A maximum of
one week of unused vacation may be carried over from one calendar year to the next.

7. Termination Following Death or Incapacity.

	 	a.	 	Death. All rights of the Employee under this Agreement shall terminate upon
death (other than rights accrued prior thereto). All Equity Awards shall be
exercisable for a period of twelve (12) months from death, in accordance with the Plan.
The Employer shall pay to the estate of the Employee any unpaid salary and other
benefits due as well as reimbursable expenses accrued and owing to the Employee at the
time of his death. The Employer shall have no additional financial obligation under
this Agreement to the Employee or his estate beyond the term-life insurance benefit
described in Section 3(c) above.

	 	b.	 	Disability.

	 	i.	 	During any period of disability, illness or incapacity during
the Term which renders the Employee at least temporarily unable to perform the
services required under this Agreement, the Employee shall receive his salary
payable under Section 3 of this Agreement, less any benefits received by him
under any insurance carried by or provided by the Employer; provided however,
all rights of the Employee under this Agreement (other than rights already
accrued) shall terminate as provided below upon the Employee’s permanent
disability (as defined below).
	 
	 	ii.	 	The term “permanent disability” as used in this Agreement shall
mean the inability of the Employee, as determined by the Board of Directors of
the Employer, by reason of physical or mental disability to perform the duties
required of him under this Agreement after a period of: (a) 120 consecutive
days of such disability; or (b) disability for at least six months during any
twelve month period. Upon such determination, the Board of Directors may
terminate the Employee’s employment under this Agreement upon ten (10) days
prior written notice. In the event of permanent disability all Equity Awards
shall vest, and be exercisable for a period of time, in accordance with their
respective terms and the terms of the Plan.
	 
	 	iii.	 	If any determination of the Board of Directors with respect to
permanent disability is disputed by the Employee, the parties hereto agree to
abide by the decision of a panel of three physicians. The Employee and
Employer shall each appoint one member, and the third member of the panel shall
be

3

 

	 	 	 	appointed by the other two physicians. If the physicians appointed by the
parties have not agreed upon the third physician within fifteen (15) days,
either party may petition the New Hampshire Medical Society to appoint a third
physician. The Employee agrees to make himself available for and to submit to
reasonable examinations by such physicians as may be directed by the Employer.
Failure to submit to any such exam shall constitute a material breach of this
Agreement. In the event such a panel is convened, the party whose position is
not sustained will bear all the associated costs.

8. Other Terminations.

	 	a.	 	Without Cause.

	 	i.	 	Either the Employee or the Employer may terminate the
Employee’s employment hereunder at any time upon written notice.
	 
	 	ii.	 	If the Employee gives written notice pursuant to paragraph (i)
above, the Employer shall have the right to either (a) relieve the Employee, in
whole or in part, of his duties under this Agreement or (b) to accelerate the
date of termination of employment to coincide with the date on which the
written notice is received.
	 
	 	iii.	 	Notwithstanding any provisions hereof to the contrary, the
Employer may terminate Employee’s employment hereunder without cause at any
time. If the Employer terminates the Employee’s Employment pursuant to the
provisions of this section 8(a), it shall pay to the Employee as a severance
benefit, in cash, an amount equal to (a) twelve months of the Employee’s
Monthly Base Salary plus (b) the higher of the bonus target for the current
year or the bonus paid for the prior year, which amount shall be due and
payable in a lump sum within not more than ten (10) days after such termination
or such later date as the Employee delivers the release contemplated by Section
18. Additionally, the vesting of Equity Awards shall be accelerated on a pro
rata basis determined by the number of completed months of service during the
then current annual vesting period, the vested portions of such Equity Awards
shall be exercisable for the period of time indicated in the terms of the
Equity Award, and all other vesting of Equity Awards shall cease unless
otherwise determined by the Compensation Committee.

	 	b.	 	For Cause.

	 	i.	 	The Employer may terminate the Employee’s employment hereunder
without notice (a) upon the Employee’s breach of any material provision of this
Agreement, or (b) for other “good cause” (as defined below).
	 
	 	ii.	 	The term “good cause” as used in this Agreement shall mean:
(a) any breach by Employee of any of Employee’s fiduciary duties to Employer or

4

 

	 	 	 	material obligations under this Agreement (other than as a result of incapacity
due to physical or mental illness), in each case if such breach is not cured
within ten (10) days after written notice thereof to Employee by Employer, (b)
conviction of a felony or a crime involving moral turpitude or other commission
of any act or omission of Employee involving, fraud, embezzlement, theft,
substance abuse or sexual misconduct with respect to the Employer or any of its
subsidiaries or any of their employees, vendors, suppliers or customers, (c)
Employee’s substantial neglect of duties or failure to follow an explicit,
lawful directive of the Board of Directors of Employer, provided that such act
of neglect or failure is not cured within ten (10) days after written notice
thereof to Employee by Employer, (d) the Employee’s willful, knowing or
deliberate misappropriation of funds or assets of Employer or one of its
subsidiaries for personal use, or (e) the Employee’s willful, knowing or
deliberate misconduct in the performance of Employee’s duties.
	 
	 	iii.	 	If the Employee’s employment is terminated pursuant to Section
8(b), the Employer shall pay to the Employee any unpaid salary and other
benefits and reimbursable expenses accrued and owing to the Employee in
accordance with law, but in any event within not more than ten (10) days after
such termination. Such payment shall be in full and complete discharge of any
and all liabilities or obligations of the Employer to the employee hereunder.
The Employee shall be entitled to no further benefits under this Agreement
other than extension of health benefits as required by law, at the Employee’s
expense. All Equity Awards shall cease vesting in accordance with the terms
thereof and the Plan.

	 	c.	 	Whenever the Employee’s employment is terminated under this Agreement, the
Employee shall immediately resign, in a signed writing in such form as the Employer may
reasonably request, from all offices and any other positions he shall hold with the
Employer or any parent corporation and any subsidiaries or divisions of the Employer or
any such parent corporation. If Employee fails to deliver any such resignation
immediately, Employee may be removed from any such office or position without further
cause.

9. Termination of Employment Upon Change in Control.

	 	a.	 	For purposes hereof, a “Change in Control” shall be deemed to have occurred if:

	 	i.	 	there has occurred a “change in control” as such term is used
in Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as in effect as of the date hereof (hereinafter referred
to as the “1934 Act”);
	 
	 	ii.	 	if there has occurred a change in “control” as the term
“control” is defined in Rule 12b-2 promulgated under the 1934 Act;

5

 

	 	iii.	 	when any person (as such term is defined in Section 3(a)(9) and
13(d)(3) of the 1934 Act, a “Person”), during the Term, becomes a beneficial
owner, directly or indirectly, of securities of the Employer representing 20%
or more of the Employer’s then outstanding securities having the right to vote
on the election of directors if such person did not have 20% or more of the
Employer’s then outstanding securities at the commencement of the Term; or if a
Person having more than 20% of the Employer’s then outstanding securities
increases his or its holdings by more than 15% of the Employer’s then
outstanding securities during the Term;
	 
	 	iv.	 	if the stockholders of the Employer approve a plan of complete
liquidation or dissolution of the Employer, or a merger or consolidation (a) in
which the voting securities of the Employer outstanding immediately prior
thereto do not represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50.1% of the combined
voting securities of the Employer or such surviving entity outstanding
immediately after such merger or consolidation or (b) in which no Person
acquires 30% or more of the combined voting power of the Employer’s then
outstanding securities; or
	 
	 	v.	 	if during any period of twenty-four (24) consecutive months
(not including any period prior to the date of this Agreement), individuals who
at the beginning of such period constitute the Board and any new director
(other than a director designated by a person who has entered into an agreement
with the Employer to effect a transaction described in paragraphs i, ii or iii
of this section 9(a)) whose election by the Board or nomination for election by
the stockholders of the Employer was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved by the stockholders, cease for any reason to constitute
a majority thereof; provided, however, in no event shall any mere action (other
than sales or purchases of the Employer’s outstanding securities) by Michael
McGovern and the Employer be deemed to be a Change in Control.

	 	b.	 	The Employee may terminate his employment at any time within 12 months after a
Change in Control and any of the following events has occurred:

	 	i.	 	A material diminution of the Employee’s authority, duties, or
responsibilities,
	 
	 	ii.	 	a material breach of Employer’s obligations pursuant to this
Agreement;
	 
	 	iii.	 	the Employer requires Employee to move Employee’s primary place
of employment to a location more than 30 miles from Employer’s primary

6

 

	 	 	 	place of
business before the Change in Control (other than temporary relocation or
business travel in the ordinary course); or
	 
	 	iv.	 	a material diminution in the Employee’s Monthly Base Salary
without the prior written consent of the Employee;

	 	provided that in the case of clause i. through iv. such event or condition continues
uncured for 30 days after Employee gives Employer notice of such event or condition
within 90 days of its initial existence.
	 
	 	An election by the Employee to terminate his employment following a Change in
Control for any of the reasons set forth above shall not be deemed a voluntary
termination of employment by the Employee for the purpose of interpreting the
provisions of this Agreement or any of the Employer’s employee benefit plans and
arrangements. The Employee’s continued employment with the Employer for any period
of time during the Term of this Agreement after a Change in Control shall not be
considered a waiver of any right he may have to terminate his employment to the
extent permitted under this Section 9(b).
	 
	 	If the Employer terminates the Employee without cause pursuant to Section 8(a)
hereof within twelve (12) months after a Change in Control has occurred, such
termination shall be deemed an election by the Employee to terminate his employment
pursuant to this Section 9(b) and Employee shall have the right to the compensation
set forth in Section 9(c) instead of the compensation set forth in Section 8(a). In
addition, in the event of such termination, the Employee shall continue to have the
obligations provided for in Sections 11 and 12 hereof.

	 	c.	 	If the Employee’s employment with the Employer is terminated under Section 9(b)
hereof,

	 	i.	 	the Employee shall be paid in a lump sum, within 30 days of
termination of employment, in cash, severance pay in an amount equal to (a)
twenty-four (24) times his Monthly Base Salary plus (b) two (2) times the
average of his bonuses (if any) paid to him for the two prior calendar years;
	 
	 	ii.	 	all stock options and other Equity Awards under the Plan held
by the Employee immediately prior to the effective date of the Change in
Control shall immediately vest and become fully exercisable for the period of
time indicated in the terms of the option or other Equity Award;
	 
	 	iii.	 	health benefits as provided in Section 3(c) shall continue for
up to two years from the date of termination, including reimbursement of COBRA
payments to the extent no longer covered under the Employer’s plans; provided,
however, that benefits will be subject to mitigation to the extent of
comparable benefits at a new job; and

7

 

	 	iv.	 	life insurance benefits may be continued for up to two years
from the date of termination at the option of the Employee and at the
Employer’s expense.

	 	 	 	The lump sum severance payment described in clause (i) of this Section 9(c) is
hereinafter referred to as the “Termination Compensation.” The amount of the
Termination Compensation shall be determined, at the expense of the Employer, by its
regular outside certified public accountants. Upon payment of the Termination
Compensation and any other accrued compensation, this Agreement shall terminate
(except for the Employee’s obligations pursuant to Sections 10, 11, 12, 13 and 14
hereof and the continuing obligations to provide the benefits set forth in clauses
(ii) – (iv) of this Section 9(c) in accordance with the terms thereof) and be of no
further force or effect.

	 	d.	 	After a Change in Control has occurred, the Employer shall honor the Employee’s
exercise of the Employee’s outstanding stock options and any other Equity Awards in
accordance with the terms thereof and this Employment Agreement. After a Change in
Control has occurred and the Employee’s employment is terminated as a result thereof,
the Employee (or his designated beneficiary or personal representative(s) shall also
receive, except to the extent already paid pursuant to Section 9(c)(i) hereof or
otherwise, the sums the Employee would otherwise have received (whether under this
Agreement, by law or otherwise) by reason of termination of employment as if a Change
in Control had not occurred.

	 	e.	 	The Employee shall not be required to mitigate the payment of the Termination
Compensation or other benefits or payments by seeking other employment. To the extent
that the Employee shall, after the Term of this Agreement, receive compensation from
any other employment, the payment of Termination Compensation or other benefits or
payments shall not be adjusted (except as set forth in Section 9(c)(iii)).

10. Disclosure, Proprietary Rights. The Employee agrees that during the Term of his employment by
the Employer, he will disclose only to the Employer all ideas, methods, plans, formulas, processes,
trade secrets, developments, or improvements known by him which relate directly or indirectly to
the business of the Employer, including any lines of business, acquired by the Employee during his
employment by the Employer; provided, that nothing in this Section 10 shall be construed as
requiring any such communication where the idea, plan, method or development is lawfully protected
from disclosure, including but not limited to trade secrets of third parties. For purposes of the
Agreement, the term “the business of the Employer” shall include, without limitation, the
following: the design, development, obtaining regulatory approval, production, manufacturing,
marketing, and licensing of prescription and non-prescription drugs, medical devices, and methods
for the diagnosis, evaluation, treatment or correction of any disease, injury, illness or other
medical or health condition and such other lines of business as the Employer shall engage in during
the Term hereof. The parties further agree that any inventions, formulas, trade secrets, ideas, or
secret processes which shall arise from any disclosure made by the Employee pursuant to this
paragraph, whether or not patentable, shall be and remain the sole property of the Employer.

8

 

11. Confidentiality. As a condition to Employee’s employment by the Employer, Employee shall
execute and deliver to the Employer the Employer’s Confidentiality Agreement in the form attached
hereto as Exhibit A (the “Employee Agreement”), which sets forth, among other things, Employee’s
obligations with respect to the Employer’s confidential and proprietary information.

12. Non-Competition. If the Employee is terminated for good cause the Employee covenants that he
will not engage, directly or indirectly, alone or in conjunction with others, as an agent,
employee, investor, director, shareholder or partner in any business which provides products,
information and/or services to the public which are competitive with those provided by the Employer
Group; provided, however, that the ownership by the Employee of 5% or less of the issued and
outstanding shares of any class of securities which is traded on a national securities exchange or,
in the over the counter market shall not constitute a breach of the provisions of this section.
The Employee will not on his own behalf or on behalf of any other business enterprise, directly or
indirectly, solicit or induce any creditor, customer, client, supplier, officer, employee or agent
of the Employer Group to sever his/her or its relationship with or leave the employ of the Employer
Group. The covenants in this Section 12 shall continue in full force and effect throughout the
Term hereof and for a one year period subsequent to the termination hereof.

13. Conflict of Interest and Other Policies. The Employee shall devote his full time, energy and
attention to the benefit and business of the employer and its affiliates and shall not be employed
by another entity, except as permitted in Section 5. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 10, 11, 12, 13 and 14 are
essential elements of this Agreement, and that but for the agreement of the Employee to comply with
such covenants, the Employer would not have entered into this Agreement. Notwithstanding anything
to the contrary in this Agreement, the terms and provisions of Sections 11, 12, 13 and 14 of this
Agreement, together with any definitions used in such terms and provisions, shall survive the
termination or expiration of this Agreement. The existence of any claim or cause of action of the
Employee against the Employer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Employer of such covenants. The Employee shall be
subject to the Employer’s policies applicable to its executives generally.

14. Specific Performance. The Employee agrees that damages at law will be insufficient remedy to
the Employer if the employee violates the terms of Sections 10, 11, 12 or 13 of this Agreement and
that the Employer shall be entitled, upon application to a court of competent jurisdiction, to
obtain injunctive relief to enforce the provisions of such Sections, which injunctive or other
equitable relief shall be in addition to any other rights or remedies available to the Employer,
and the Employee agrees that he will not raise and hereby waives any objection or defense that
there is an adequate remedy at law.

15. Compliance with Other Agreements. The Employee represents and warrants that the execution of
this Agreement by him and his performance of his obligation hereunder will not conflict with,
result in the breach of any provision of, terminate, or constitute a default under any agreement to
which the Employee is or may be bound.

9

 

16. Waiver of Breach. The waiver by the Employer of a breach of any of the provisions of this
Agreement by the Employee shall not be construed as a waiver of any subsequent breach by the
Employee.

17. D&O Insurance; Indemnification. The Employer hereby agrees to maintain in full force and
effect for the duration of this Agreement, Director’s and Officer’s Liability Insurance of at least
$5,000,000 and to indemnify and hold harmless the Employee to the full extent permitted by law for
acts performed by him in carrying out his duties and responsibilities in accordance with this
Agreement.

18. Release. In the event of the termination of the Employee’s employment with the Employer,
Employee shall execute a release that is substantially in the form attached hereto as Exhibit B
(the “Release”) or that is the standard form of release that the Employer has in place at the time
of such termination. If Employee declines or refuses to execute the Release at such time, Employer
shall have no obligation to make any future payments to Employee which would otherwise be owed to
Employee under the terms of this Agreement.

19. Binding Effect, Assignment. The rights and obligations of the Employer under this Agreement
shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer.
This Agreement is a personal employment contract and the rights, obligations and interests of the
Employee hereunder may not be sold or assigned or hypothecated. Whenever in this Agreement
reference is made to any party, such reference shall be deemed to include the successors, assigns,
heirs, and legal representatives of such party, and without limiting the generality of the
foregoing, all representations, warranties, covenants and other agreements made by or on behalf of
the Employee in this Agreement shall inure to the benefit of the successors and assigns of the
Employer; provided, however, that nothing herein shall be deemed to authorize or permit the
Employee to assign any of his rights or obligations under this Agreement to any other person
(whether or not a family member or other affiliate of the Employee, other than as specifically
provided in this Agreement), and the Employee covenants and agrees that he shall not make any such
assignments.

20. Modification, Amendment, Etc. Each and every modification and amendment of this Agreement
shall be in writing and signed by all of the parties hereto, and each and every waiver of, or
consent to any departure from, any representation, warranty, covenant or other term or provision of
this Agreement shall be in writing and signed by each affected party hereto.

21. Notice. Any notice required or permitted to be given under this Agreement shall be sufficient
if in writing and if sent by certified or registered mail, first class, return receipt requested,
to the Employer, at its executive offices as set forth in its filings with the Securities and
Exchange Commission and, to the Employee, at his address as set forth on the current employment
records of the Employer.

22. Severability. It is agreed by the Employer and Employee that if any portion of the provisions
set forth in this Agreement are held to be unreasonable, arbitrary or against public policy, then
that portion of such covenants shall be considered divisible both as to time and geographical area.
The Employer and Employee agree that if any court of competent jurisdiction determines the
specific time period or the specified geographical area applicable to this

10

 

Agreement to be
unreasonable, arbitrary or against public policy, then a lesser time period or geographical area
which is determined to be reasonable, non-arbitrary and not against public policy may be enforced
against the Employee. The Employer and Employee agree that the foregoing covenants are appropriate
and reasonable when considered in light of the nature and extent of the business conducted by the
Employer.

23. Entire Agreement. This Agreement contains the entire agreement between the Employer and the
Employee and supersedes all prior agreements and understandings, oral or written, with respect to
the subject matter hereof, including without limitation the Employment Agreement dated as of
January 1, 2002 between the Employer and the Employee.

24. Headings. The headings contained in this agreement are for reference purposes only and shall
not affect the meaning or interpretation of the Agreement.

25. Governing Law; Forum. This Agreement shall be construed and enforced in accordance with the
laws of the State of New Hampshire. Any action brought pursuant to this Agreement or in relation
to its breach may be heard by any court of competent jurisdiction having jurisdiction thereof.
The parties hereby expressly consent to the personal jurisdiction of the state and federal courts
located in New Hampshire for any lawsuit filed arising from or relating to this Agreement and
expressly waive any and all objections to venue, including, without limitation, the inconvenience
of such forum.

26. Counterparts. This Agreement may be executed in two counterpart copies of the entire document
or of signature pages to the document, each of which may be executed by one or more of the parties
hereto, but all of which when taken together, shall constitute a single agreement binding upon all
of the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first
written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Employer:

	 	 	 	Employee:	 	 
	BENTLEY PHARMACEUTICALS, INC.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	By: /s/ Richard P. Lindsay

	 	 	 	/s/ James R. Murphy	 	 
	 

	 	 	 	 	 	 
	Name: Richard P. Lindsay

	 	 	 	James R. Murphy, individually	 	 
	Title: VP, CFO, Secretary & Treasurer
	 	 	 	 	 	 

11

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