Document:

exv10w1

 

EXHIBIT 10.1

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

SETTLEMENT AND LICENSE AGREEMENT

     This Settlement and License Agreement (the “Agreement”) is entered into as
of the Effective Date defined below in paragraph 1.2, by (i) ENZO LIFE
SCIENCES, INC. (“LIFE SCIENCES”) and ENZO BIOCHEM, INC. (“BIOCHEM” and referred
to collectively herein, with LIFE SCIENCES, as “ENZO”), and (ii) DIGENE
CORPORATION (“DIGENE”).

     WHEREAS, LIFE SCIENCES is the owner of all rights in and to United States
Patent No. 6,221,581 (hereinafter the “‘581 patent”);

     WHEREAS, LIFE SCIENCES is a wholly owned subsidiary corporation of
BIOCHEM;

     WHEREAS, ENZO and DIGENE are currently engaged in litigation involving the
‘581 patent in the United States District Court for the District of Delaware,
in a case entitled Enzo Life Sciences v. Digene Corp., Civil Action No.
02-212-JJF (the “Litigation”);

     WHEREAS, LIFE SCIENCES filed a complaint in the Litigation alleging that
DIGENE has willfully infringed the ‘581 patent by making, selling and/or using
certain products, as identified in the complaint and the Litigation;

     WHEREAS, DIGENE filed an answer and counterclaims in the Litigation
alleging that it does not infringe the ‘581 patent, and further, that the ‘581
patent is invalid and unenforceable;

     WHEREAS, DIGENE filed counterclaims against BIOCHEM in the Litigation
alleging damages from various alleged business torts;

     WHEREAS, BIOCHEM filed an answer to DIGENE’s counterclaims in the
Litigation denying any liability for the business torts alleged by DIGENE;

     WHEREAS, ENZO and DIGENE desire to fully and finally settle and resolve
the Litigation and all claims, counterclaims, and defenses asserted therein and
all issues involved therein, without resort to further litigation, and in
accordance with the provisions of this Agreement; and

     WHEREAS, DIGENE desires to acquire from ENZO a license under the Licensed
Patents, as defined herein below, and clearance under ENZO’s patent portfolio,
as set forth herein and subject to the limitations herein, to make, have made,
use, sell, offer to sell and import Licensed Products, as defined hereinbelow;

     NOW, THEREFORE, in consideration of the premises and promises contained
herein, ENZO and DIGENE (each a “Party” and collectively, the “Parties”) agree
as follows:

 

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Article I: DEFINITIONS

1.1 “Affiliate” of a Party means any corporation, company, firm, partnership or
other entity that directly or indirectly controls, is controlled by or is under
common control with the Party in question. For purposes of this definition,
“control” shall mean the ownership, directly or indirectly, of fifty percent
(50%) or more of the issued share capital or shares of stock entitled to vote
for the election of directors, in the case of a corporation, or fifty percent
(50%) or more of the equity interests in the case of any other entity, or the
legal power to direct or cause the direction of the general management and
policies of the entity in question.

1.2 “Effective Date” of this Agreement shall be as of September 30, 2004 and
upon receipt of the First Payment recited in paragraph 3.1 of this Agreement.

1.3 “Licensed Patents” means U.S. Patent No. 6,221,581 and any and all U.S.
patents that claim priority to any patent application to which the ‘581 patent
claims the benefit of priority, and any foreign (non-U.S.) counterparts of any
of the foregoing U.S. patents.

1.4 “Licensed Products” means all products, including test kits, as well as
systems, reagents, accessories, consumables, devices and instruments intended
for use with same, their methods or means of making, and their methods or means
of use embraced by at least one claim of the Licensed Patents. Licensed
Products include all products that absent the license granted herein would
infringe (or the use of which would infringe) any claim of the ‘581 patent.
Explicitly included as Licensed Products are the DIGENE Hybrid Capture 1,
Hybrid Capture 2, Hybrid Capture 3 and SHARP products identified in Exhibit 1
hereto. DIGENE warrants that the trade name “HYBRID CAPTURE” is a registered
trademark of DIGENE, and the Parties agree that (a) the use of that trade name
in conjunction with the making, having made, using, selling, offering for sale
and/or importation of any product shall not be deemed an admission by DIGENE
that such products are Licensed Products and/or share any one or more of the
attributes of Licensed Products; and (b) the products listed on Exhibit 1 to
this Agreement as of the Effective Date are the only products offered for sale
or sold by DIGENE or its Affiliates as of the Effective Date that are required
to be identified as Licensed Products under this Agreement. The term “Licensed
Products” shall prospectively include any Future Licensed Products, as that
term is used and defined hereinunder.

1.5 “Licensed Territory” means the entire world.

1.6 “Net Sales” means the greater of (1) the gross amount invoiced by DIGENE
and its Affiliates for the sale, transfer, use or other disposition of test
kits referenced in paragraph 1.4 above or (2) ninety-three percent (93%) of the
gross amount invoiced by DIGENE and its Affiliates for the sale, transfer, use
or other disposition of all Licensed Products , less for both (1) or (2),
respectively: (a) usual and customary trade discounts actually taken for the
test kits or all Licensed Products, respectively; (b) forwarding expenses,
freight, taxes, fees, duties, postage and
other similar items routinely actually paid and invoiced by DIGENE or its
Affiliates for the test kits or all Licensed Products, respectively; and (c)
credits actually given for the test kits or all

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Licensed Products, respectively. Net Sales shall be calculated on the price from DIGENE or its
Affiliates to distributors, agents and customers, and not on sales between or
among DIGENE and its Affiliates.. The ninety-three percent (93%) calculation
shall be made on an annual basis and DIGENE shall make the necessary payments,
if any, with the fourth quarter Running Royalties payments as provided in
paragraph 3.7.

1.7 “Bankruptcy Event” means the Party in question becomes insolvent, or
voluntarily or involuntary proceedings by or against such Party are instituted
in bankruptcy or under any insolvency law, or a receiver or custodian is
appointed for such Party, or proceedings are instituted by or against such
Party for corporate reorganization or the dissolution of such Party, which
proceedings, if involuntary, shall not have been dismissed within sixty (60)
days after the date of filing, or such Party makes an assignment for the
benefit of its creditors, or substantially all of the assets of such Party are
seized or attached and not released within sixty (60) days thereafter.

1.8 “Future Licensed Products” means any Licensed Product not covered by
Exhibit 1 which, as of the Effective Date of this Agreement, is not
commercially made, used, sold, offered for sale or imported by DIGENE.

1.9 “Joint Stipulation and Order of Dismissal with Prejudice” means the
stipulation of dismissal of the Litigation, with prejudice, including all
claims, counterclaims and defenses asserted therein as between BIOCHEM, LIFE
SCIENCES and DIGENE, attached hereto as Exhibit 2 and incorporated herein by
reference.

Article II: LICENSE GRANT

2.1 License Grant: ENZO hereby grants DIGENE an irrevocable,
non-exclusive, royalty-bearing license under the Licensed Patents to make, have
made, use, sell, offer to sell or import Licensed Products in the Licensed
Territory.

Article III: PAYMENTS, ROYALTIES AND DISMISSAL OF THE LITIGATION

3.1 First Payment. As consideration for the execution of this Agreement
and the Joint Stipulation and Order of Dismissal with Prejudice, on the date of
execution of this Agreement DIGENE shall pay LIFE SCIENCES, on behalf of ENZO
and in full satisfaction of the payment owed to ENZO under this paragraph 3.1,
a First Payment of U.S. $16,000,000.00 ( sixteen million U.S. dollars) by wire
transfer to the following bank account for LIFE SCIENCES: CITIBANK Account No.
020-047478 and ABA Routing No. 21000089. Of the foregoing amount, DIGENE may
credit U.S. $2,000,000.00 (two million U.S. dollars) against any payments due
to ENZO for either the Running Royalties or the first Additional Guaranteed
Payment under paragraph 3.3 of this Agreement until such credit is fully
applied. Upon filing of the Joint Stipulation and Order of Dismissal with
Prejudice, this First Payment by DIGENE to ENZO shall be irrevocable.

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

3.2 Dismissal of the Litigation. Upon execution of this Agreement, ENZO
and DIGENE shall cause their attorneys to file the Joint Stipulation and Order
of Dismissal with Prejudice, in identical form as Exhibit 2 attached hereto,
and incorporated herein by reference, which shall be executed and filed with
the Court in the Litigation within three (3) days after payment of the First
Payment stated in paragraph 3.1 of this Agreement.

3.3 Additional Guaranteed Payments. As further consideration for the
execution of this Agreement and the Joint Stipulation and Order of Dismissal
with Prejudice, DIGENE shall pay LIFE SCIENCES, on behalf of ENZO, and in full
satisfaction of the payments owed to ENZO under this paragraph 3.3, five
Additional Guaranteed Payments, the first in the amount of U.S. $2,500,000.00
(two million five hundred thousand U.S. dollars), and the remaining four each
in the amount of U.S. $3,500,000.00 (three million five hundred thousand U.S.
dollars) for the annual periods ending September 30, 2005, 2006, 2007, 2008 and
2009. DIGENE shall pay these five Additional Guaranteed Payments as of
September 30 of each of 2005, 2006, 2007, 2008 and 2009 (with payment to be
made by November 14 of each such year), less a credit in the amount of Running
Royalties due and actually paid to LIFE SCIENCES pursuant to paragraph 3.4 of
this Agreement for the preceding one-year period (i.e., October 1, 2004 to
September 30, 2005 for the first annual period and, for each of the four
subsequent annual periods, October 1 of the preceding year to September 30,
2006, 2007, 2008 and 2009 ) with respect to which such Additional Guaranteed
Payment is being made and, solely in the case of the first Additional
Guaranteed Payment due by September 30, 2005, also less the remaining credit,
if any, of the U.S. $2,000,000.00 (two million U.S. dollars) credit described
in paragraph 3.1 of this Agreement. The application of the foregoing credits
(other than the credit specified in paragraph 3.1 of this Agreement) and the
actual payment of the Additional Guaranteed Payments shall be carried out in
accordance with the provisions of paragraph 3.7 of this Agreement, i.e., the
amount, if any, necessary to equal an Additional Guaranteed Payment will be
made with the payment of Running Royalties for the fourth quarter of each of
the five annual periods. The credit set forth in paragraph 3.1 may be taken by
DIGENE as a pre-payment of Running Royalties over the course of the first
annual period running from October 1, 2004 to September 30, 2005, until such
U.S. $2,000,000.00 credit has been fully taken, with the understanding that any
such pre-payment credits taken by DIGENE against Running Royalties due in that
first annual period shall reduce (by the same amount as the credit so taken)
the amount of credit that DIGENE may take against the first Additional
Guaranteed Payment due as of September 30, 2005. DIGENE shall provide ENZO
with a report indicating the portion of the credit taken with each Running
Royalties report provided in such first annual period pursuant to paragraph 7.1
of this Agreement. The Additional Guaranteed Payments are each guaranteed and
irrevocable. In the event that DIGENE becomes subject to a Bankruptcy Event,
LIFE SCIENCES may declare the entire unpaid balance of the Additional
Guaranteed Payments immediately due and payable by providing DIGENE with
written notice of same. Moreover, DIGENE shall be obligated to pay the full
amount of all such unpaid Additional Guaranteed Payments under the schedule set
forth in this paragraph, notwithstanding any prior termination of
this Agreement for any reason, and DIGENE’s obligation to pay same on that
schedule shall survive any such termination of the entire Agreement or any part
thereof.

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

3.4 Running Royalties: In consideration for the license and rights
granted it by ENZO in Article II of this Agreement, DIGENE shall pay LIFE
SCIENCES, on behalf of ENZO and in full satisfaction of the payments owed to
ENZO under this paragraph 3.4, running royalties on Net Sales in the Licensed
Territory (the “Running Royalties”) based on the following Net Sales levels at
the stated rates for each annual period, with the first annual period starting
on October 1, 2004:

	 	 	 	 	 
	The first $100 million
	 	 	*	*%
	The next $50 million
	 	 	*	*%
	The next $100 million
	 	 	*	*%
	All in excess of $250 million
	 	 	*	*%

** The information omitted is confidential and has been filed separately with
the commission pursuant to Rule 24b-2.

In the event the provisions of paragraph 3.6 apply during the term of this
Agreement, the Running Royalties will be calculated based upon the Adjusted
Royalty Rate rather than the rates set forth above.

3.5 All Running Royalties paid by DIGENE for Licensed Products under this
Agreement, and DIGENE’s obligation to pay them, shall be irrevocable, subject
only to the following sentences of this paragraph. DIGENE’s obligation to pay
Running Royalties for Licensed Products shall extend through and until April
24, 2018, and shall only be relieved prior to that date if all of the claims
of the Licensed Patents are determined to be invalid or unenforceable in a
final judgment from which no appeal has been or can be taken, provided that
neither DIGENE nor any of its Affiliates was involved in any respect with any
proceeding that resulted in such an unenforceability of invalidity finding,
except as required by Court order or otherwise required by law. However, even
if all of the claims of the Licensed Patents are determined to be invalid
and/or unenforceable in a final judgment from which no appeal has been or can
be taken, DIGENE’s obligations and duties to pay the First Payment and the
Additional Guaranteed Payments shall survive such a determination, and DIGENE’s
obligations and duties to pay Running Royalties incurred up to the date of that
determination shall likewise survive that determination.

3.6 DIGENE shall be deemed a most favored licensee with respect to the Licensed
Patents, with its most favored treatment being limited to the following
provisions of this paragraph: if ENZO as of or after the Effective Date enters
into a license for one or more of the Licensed Patents with a third party other
than DIGENE, at an effective royalty rate (taking into account all
consideration received for the rights granted) that is less than the effective
Running Royalty rate paid and/or owed by DIGENE under this Agreement at such
time, DIGENE shall be entitled to a reduction in the effective rate of its
Running Royalties to a rate not to exceed any such other licenses (the
“Adjusted Royalty Rate”). In such instances, DIGENE shall be entitled to a
credit against any future Running Royalties in the amount of any such Running
Royalties already paid by DIGENE on sales occurring after the date ENZO entered
into such license with a third party

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

other than DIGENE at the Running Royalty rates set forth in paragraph 3.4, less
the amount that would have been due ENZO in such periods for sales in
accordance with the Adjusted Royalty Rate; provided, however, that nothing in
this paragraph 3.6 or any other part of this Agreement shall impact in any way
the obligations and duties of DIGENE to pay the entire amounts of the First
Payment and the Additional Guaranteed Payments specified in paragraphs 3.1 and
3.3 above.

3.7 Payment of Running Royalties and Additional Guaranteed Payments.
DIGENE shall pay the Running Royalties, at the rates set forth in paragraph 3.4
or at the Adjusted Royalty Rate described in paragraph 3.6, as the case may be,
on a quarterly basis in accordance with the provisions of paragraph 7.1 of this
Agreement. In each twelve month period beginning October 1, 2004 and ending
as of September 30, 2009 for which an Annual Guaranteed Payment is due, DIGENE
shall credit the Running Royalties paid for each of the four quarters in such
annual period against the Annual Guaranteed Payment due as of September 30 for
such annual period. DIGENE will make the payment, if any, necessary to make
the amount of such Running Royalties equal the Annual Guaranteed Payment for
such annual period on the date when the fourth quarter Running Royalties are
paid for such annual period, which date shall be within 45 days after the end
of such fourth quarter as described in paragraph 7.1. In the event that the
Running Royalties in any of the five, twelve month periods beginning on October
1, 2004 and ending on September 30, 2009 exceeds the Additional Guaranteed
Payment due on September 30 of any of the years falling within that time, the
Parties agree that DIGENE is not entitled to a refund of the difference between
the Running Royalties for that annual period and the Additional Guaranteed
Payment for that annual period, which difference shall instead by kept by LIFE
SCIENCES.

3.8 In the event that DIGENE intends in the future to sell or offer for sale
any product that DIGENE contends is a Future Licensed Product, DIGENE shall,
within no less than thirty (30) days prior to the first such sale or offer for
sale of such Future Licensed Product, provide ENZO with notice in writing of
such intent. Such Future Licensed Product shall thereafter be included as a
Licensed Product under this Agreement, and shall thereafter be subject to all
other provisions and limitations of this Agreement, including, without
limitation, application of the Running Royalties at the applicable rates as set
forth herein to the sales of such Future Licensed Product. Any dispute over
whether a given product is a Future Licensed Product shall be resolved in
accordance with the provisions of paragraph 12.2 of this Agreement.

Article IV: WARRANTIES, COVENANTS AND LITIGATION RELEASES

4.1 (a) With regard to the Licensed Products listed on Exhibit 1 of this
Agreement, during the term of this Agreement: (1) ENZO covenants that it will
not assert any claims against or sue DIGENE (or its Affiliates, contract
manufacturers, distributors or customers) with respect to any past matter
(i.e., one occurring prior to the Effective Date of this Agreement) relating to
those Exhibit 1 Licensed Products, and (2) ENZO covenants that it will not
assert any claims against or sue DIGENE (or its Affiliates, contract
manufacturers, distributors or customers) for infringement of any patent owned
or controlled by ENZO on account of the manufacture (by

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

DIGENE, its Affiliates or its contract manufacturers), use, sale, offer for
sale, or importation of any such Licensed Product listed on Exhibit 1; (b)
With regard to any Licensed Product not listed on Exhibit 1 of this Agreement
(including any Future Licensed Product), during the term of this Agreement, and
solely with regard to the Licensed Patents identified herein, ENZO covenants
that it will not assert any claims against or sue DIGENE (or its Affiliates,

contract manufacturers, distributors or customers) for infringement of the
Licensed Patents on account of the manufacture (by DIGENE, its Affiliates or
its contract manufacturers), use, sale, offer for sale, or importation of any
such Licensed Products that are not listed on Exhibit 1; (c) During the term of
this Agreement, solely with regard to any Licensed Product not listed on
Exhibit 1 of this Agreement that is covered by one or more of the same claims,
either literally or under the doctrine of equivalents, in any existing (as of
the Effective Date) ENZO patent or existing (as of the Effective Date) patent
application (or one or more of the same claims in any ENZO patents or
applications claiming priority from any such existing patents or existing
patent applications) that also cover Licensed Products listed on Exhibit 1,
ENZO covenants that it will not assert any claims against or sue DIGENE (or its
Affiliates, contract manufacturers, distributors or customers) for patent
infringement solely with regard to the foregoing same claims in any existing
(as of the Effective Date) ENZO patent or existing (as of the Effective Date)
patent application issuing as a patent (or with regard to the foregoing same
claims in any ENZO patents claiming priority from any such existing patents or
existing patent applications), on account of the manufacture (by DIGENE, its
Affiliates or its contract manufacturers), use, sale, offer for sale, or
importation of any such Licensed Products not listed on Exhibit 1; (d) During
the term of this Agreement, DIGENE covenants that it will not, and its
Affiliates will not, initiate or conduct on its own, or assist or participate
(except as required by Court order or otherwise required by law) with any third
party in initiating, conducting or defending, any court or administrative
proceeding relating to the Licensed Patents; and (e) each of the foregoing
covenants in this paragraph 4.1 shall survive the expiration on April 24, 2018
or earlier termination of this Agreement pursuant to paragraph 6.1 hereof.
DIGENE shall not be obligated to assist ENZO in any such actions taken against
any third parties for infringement of the Licensed Patents or taken by third
parties against any of the Licensed Patents;

4.2 Upon LIFE SCIENCES’ receipt, on behalf of ENZO, of the First Payment
required by paragraph 3.1 of this Agreement, (i) ENZO (and its past,
present and future subsidiaries, parents, officers, directors, legal
representatives, shareholders, predecessors, successors, heirs,
Affiliates, assigns, agents, attorneys, representatives and employees)
shall release DIGENE (and its contract manufacturers, distributors and
customers) and all of DIGENE’s past, present and future subsidiaries,
parents, officers, directors, legal representatives, shareholders,
predecessors, successors, heirs, Affiliates, assigns, agents, attorneys,
representatives and employees from all past claims against such released
parties for all claims asserted or that could have been asserted with
respect to the Licensed Products listed on Exhibit 1, including all
claims that the Licensed Products listed on Exhibit 1 infringe the
Licensed Patents or any other patents owned or controlled by ENZO, and
(ii) DIGENE shall release ENZO and all of ENZO’s past, present and future
subsidiaries, parents, officers, directors, legal representatives,
shareholders, predecessors, successors, heirs, Affiliates, assigns,
agents, attorneys, representatives and

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

employees from all claims asserted or that could have been asserted in
the Litigation, and from all claims arising from the assertion of the
‘581 patent and any other patent owned or controlled by ENZO against
DIGENE with respect to Licensed Products listed on Exhibit 1.

4.3 ENZO represents and warrants to DIGENE as follows:

(a) ENZO has the full and unencumbered right, power and authority
to enter into this Agreement, ENZO has the full and unencumbered
right to grant the license rights granted by ENZO to DIGENE
hereunder, and otherwise to carry out its obligations hereunder and
that, upon execution, this Agreement shall constitute a legal,
valid and binding agreement of ENZO, enforceable in accordance with
its terms.

(b) ENZO owns all right, title, and interest in and to the Licensed
Patents free of any claims of third parties. No third party has
made any claim of ownership of, or interest in, the Licensed
Patents and no basis for such a claim is known to ENZO.

(c) ENZO is the only person with the power to enforce the Licensed
Patents.

(d) ENZO has not licensed or granted to any third party, and shall
not license or grant to any third party during the term of this
Agreement, any rights in or to
the Licensed Patents that are inconsistent with any rights granted
by ENZO to DIGENE hereunder. If ENZO licenses or grants rights
under the Licensed Patents to any other party, ENZO will provide
DIGENE with written notice identifying the name of the party
licensed. DIGENE shall be permitted to review any such license
under appropriate confidentiality terms, to enable it to ensure
compliance with the provisions of this Agreement, including but not
limited to the requirements of paragraph 3.6.

(e) ENZO has not received any written notice or claim, and is not
otherwise aware that any Licensed Product infringes or
misappropriates the proprietary rights of any third party.

(f) There is no action or proceeding pending or, in so far as
ENZO knows, threatened against ENZO before any court, administrative
agency or other tribunal which could impact upon ENZO’s right, power
and authority to enter into this

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Agreement, to grant the license rights granted by ENZO to DIGENE
hereunder, or to otherwise carry out its obligations hereunder.

(g) In the event that ENZO has knowledge or is informed by DIGENE
or a third party that any person is or may be infringing the
Licensed Patents, ENZO shall use its best efforts to cause such
person to cease and desist from any and all infringing activities,
including without limitation filing suit for patent infringement
(including contributory infringement or inducement to infringe)
against such person at ENZO’s sole cost and expense. In the event
that ENZO does not promptly take such action, ENZO hereby assigns to
DIGENE the right to take such action at DIGENE’s sole cost and
expense, with DIGENE retaining any and all recovery including but
not limited to any and all monetary damages, costs and attorneys’
fees recovered. Nothing contained herein shall obligate DIGENE to
take such action.

4.4 DIGENE represents and warrants to ENZO as follows:

(a) DIGENE has the full and unencumbered right, power and
authority to enter into this Agreement and otherwise to carry out
its obligations hereunder and that, upon execution, this Agreement
shall constitute a legal, valid and binding agreement of DIGENE,
enforceable in accordance with its terms.

(b) There is no action or proceeding pending or, in so far as
DIGENE knows, threatened against DIGENE before any court,
administrative agency or other tribunal which could impact upon
DIGENE’s right, power and authority to enter into this Agreement or
to otherwise carry out its obligations hereunder.

(c) DIGENE shall not bind or purport to bind ENZO to any
affirmation, representation or warranty with respect to the Licensed
Patents or the Licensed Products to any third party.

4.6 EXCEPT FOR THE EXPRESS WARRANTIES CONTAINED IN THIS AGREEMENT, THE LICENSED
PATENTS ARE LICENSED TO DIGENE “AS IS.” NEITHER ENZO NOR DIGENE MAKES ANY
OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, IN FACT OR IN LAW,
CONCERNING THE LICENSED PATENTS OR ANY OTHER MATTER COVERED BY THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF TITLE, NON-INFRINGEMENT,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES ARISING BY STATUTE OR OTHERWISE AT LAW OR FROM A
COURSE OF DEALING, USAGE OR TRADE.

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

4.7 EXCEPT FOR THE INDEMNIFICATION OBLIGATIONS OF DIGENE UNDER ARTICLE V,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY HERETO FOR ANY CONSEQUENTIAL,
INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES (INCLUDING LOST
PROFITS, LOST SAVINGS AND PRICE EROSION) SUFFERED OR INCURRED BY SUCH OTHER
PARTY IN CONNECTION WITH THE LICENSED PATENTS, THE LICENSED PRODUCTS, OR ANY
OTHER MATTER COVERED BY THIS AGREEMENT, EVEN IF SUCH OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

4.8 NO IMPLIED OR EXPRESS LICENSE IS BEING GRANTED TO DIGENE (OR ITS
AFFILIATES, CONTRACT MANUFACTURERS, DISTRIBUTORS OR CUSTOMERS) UNDER THIS
AGREEMENT UNDER ANY ENZO PATENT OTHER THAN AS PROVIDED FOR IN THIS AGREEMENT,
INCLUDING, BUT NOT LIMITED TO, PARAGRAPHS 2.1 AND 4.1, SUBJECT TO ALL OF THE
LIMITATIONS OF THIS AGREEMENT, AND NO IMPLIED OR EXPRESS COVENANT NOT TO SUE IS
BEING GRANTED TO DIGENE (OR ITS AFFILIATES, CONTRACT MANUFACTURERS,
DISTRIBUTORS OR CUSTOMERS) FOR ANY ENZO PATENT UNDER THIS AGREEMENT EXCEPT FOR
THE EXPRESS COVENANT NOT TO SUE DIGENE (OR ITS AFFILIATES, CONTRACT
MANUFACTURERS, DISTRIBUTORS OR CUSTOMERS) WITH RESPECT TO THE LICENSED PRODUCTS
LISTED ON EXHIBIT 1 UNDER ANY ENZO PATENT, INCLUDING THE LICENSED PATENTS, AND
THE EXPRESS COVENANT NOT TO SUE DIGENE (OR ITS AFFILIATES, CONTRACT
MANUFACTURERS, DISTRIBUTORS OR CUSTOMERS) WITH RESPECT TO ANY LICENSED PRODUCT
(INCLUDING THOSE NOT LISTED ON EXHIBIT 1) UNDER THE LICENSED PATENTS, BOTH
SUBJECT TO ALL OF THE LIMITATIONS OF THIS AGREEMENT.

4.9 THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THE FOREGOING DISCLAIMERS AND
LIMITATIONS OF LIABILITY REPRESENT BARGAINED FOR ALLOCATIONS OF RISK, AND THAT
THE ECONOMICS, TERMS AND CONDITIONS OF THIS AGREEMENT REFLECT SUCH ALLOCATIONS.

Article V: INDEMNIFICATION

5.1 DIGENE hereby fully indemnifies ENZO and all of its past, present and
future Affiliates, subsidiaries, parents, officers, directors, legal
representatives, shareholders, predecessors, successors, heirs, assigns,
agents, attorneys, representatives and employees (collectively, “ENZO
Indemnitees”) from any past, present or future action or claim for damages of
any sort against any of them, that stems from or relates in any way to DIGENE’s
or any of its Affiliates’ sale or other disposition of any Licensed Product.
In the event that any such action or claim is brought against any of the ENZO
Indemnitees, DIGENE shall assume control of such action or claim and

10

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

agrees to fully defend any of them against that action or claim,
including, but not limited to, paying for all attorneys’ fees (of the attorneys
of DIGENE’s choosing, after consultation with ENZO) and costs necessary to
fully defend that action or claim and fully satisfying any monetary award
entered against any of them relating to that action or claim. No ENZO
Indemnitee shall be entitled to settle or defend any such action or claim.
DIGENE is not obligated to indemnify the ENZO Indemnitees except as expressly
provided for in this paragraph.

5.2 If any action, claim, suit, proceeding or investigation arises as to which
a right of indemnification provided in this Article V applies, the ENZO
Indemnitee in question shall promptly notify DIGENE thereof in writing, and
allow DIGENE, its insurers and any other entity that DIGENE reasonably deems
necessary or appropriate under the circumstances to assume direction and
control of the defense against such action, claim, suit, proceeding or
investigation, at DIGENE’s sole expense, including the settlement thereof at
the sole option of DIGENE or its insurers. Failure by the ENZO Indemnitee to
so notify DIGENE within a reasonable period of time shall relieve DIGENE from
the obligation to indemnify the ENZO Indemnitee only to the extent that DIGENE
suffers actual prejudice as a result of such failure. Each ENZO Indemnitee
shall fully cooperate with DIGENE and its insurer in the disposition of any
such action, claim, suit, proceeding or investigation with regard to all
reasonable requests for such cooperation.

5.3 DIGENE and ENZO agree to negotiate in good faith a potential agreement to
add ENZO as an additional insured on DIGENE’s product liability insurance
policy.

Article VI: TERM AND TERMINATION

6.1 The term of this Agreement shall begin as of the Effective Date and extend
through and until the earlier of April 24, 2018 or the date by which all of the
claims of the Licensed Patents are determined to be invalid or unenforceable
in a final judgment from which no appeal has been or can be taken, provided
that neither DIGENE nor any of its Affiliates was involved in any respect with
any proceeding that resulted in such an unenforceability of invalidity finding,
except as required by Court order or otherwise required by law. DIGENE shall
be obligated to pay the Additional Guaranteed Payments set forth in paragraph
3.3 of this Agreement, notwithstanding any prior termination of this Agreement.

6.2 This Agreement is irrevocable with respect to the duties, obligations and
rights of each Party as to the Licensed Products, with the express
understanding that (except as set forth in paragraph 4.1 of this Agreement)
nothing in this Agreement, including the irrevocability provisions of this
paragraph, shall preclude ENZO from asserting against DIGENE in the future a
patent that is not a Licensed Patent with regard to a Licensed Product that is
not listed on Exhibit 1 of this Agreement.

Article VII: RECORD KEEPING, PAYMENT AND REPORTS

7.1 DIGENE shall within forty-five (45) days after the end of each calendar
quarter, time being of the essence, send to ENZO a written statement, certified
by DIGENE, showing for such

11

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

calendar quarter the Net Sales and quantities of Licensed Products sold
during the quarter and the calculation of and amount of Running Royalties due.
Such statements shall be accompanied by a payment of the total amount of
Running Royalties due, subject to the provisions of Article III of this
Agreement. Payment shall be made by wire transfer to an account designated by
ENZO in advance of the payment. Any late payment shall accrue interest at the
lower of one and one-half percent (1.5%) per month or the highest rate
permitted by law. If no Running Royalties are due, DIGENE shall nevertheless
render a statement to reflect such fact, along with a detailed written
explanation of why it contends that no Running Royalties are due.

7.2 Receipt or acceptance by ENZO of any report furnished pursuant to this
Agreement or any sums paid hereunder, shall not preclude ENZO from questioning
the correctness thereof at a later date, subject to the time limitations set
forth below in paragraph 7.4.

7.3 DIGENE shall maintain, and cause to be maintained by its Affiliates,
complete and accurate books and records with respect to Net Sales and all
Running Royalties paid or payable by DIGENE under this Agreement, along with
such other reconciliation and other information as may be necessary or
desirable to calculate or verify all Net Sales and the consideration paid or
payable by DIGENE under this Agreement. DIGENE and such Affiliates shall
maintain such books and records in accordance with generally accepted
accounting principles consistently applied and for a period of three (3) years
after the submission of each report required to be submitted by DIGENE to ENZO
under this Agreement; provided, however, that if there is a good faith dispute
between the Parties continuing at the end of any such three (3) year period
with respect to such books or records, then the time period hereunder to
maintain such books and records under dispute shall be extended until such time
as the dispute is finally resolved.

7.4 ENZO shall have the right, through an independent accountant selected by it
and acceptable to and approved by DIGENE (which approval shall not be
unreasonably withheld or delayed), to have access to the relevant books and
records of DIGENE and its Affiliates during reasonable business hours, subject
to the records maintenance requirements set forth in paragraph 7.3, on thirty
(30) days prior written notice, for the purpose of verifying, inspecting or
auditing, at the sole expense of ENZO (except as provided for in paragraph 7.5
below), the Net Sales and the Running Royalties provided for pursuant to this
Agreement for any of the preceding two (2) years, but this right may not be
exercised more than once in any calendar year, and once exercised with respect
to any period, the books and records for such period cannot be reviewed again
except upon written request made by ENZO to DIGENE setting forth a reasonable
business basis for requiring such a subsequent review, as to which request
DIGENE shall not unreasonably withhold its consent. Said independent
representatives shall solicit or receive only information relating to or
necessary or desirable to verify or audit the accuracy of the information
reported and the payments made or due under this Agreement. DIGENE shall be
entitled to withhold approval of an accountant which ENZO nominates unless the
accountant agrees to sign a confidentiality agreement with DIGENE which shall
obligate such accountant to hold the information he or she receives from DIGENE
in confidence, except for disclosure to ENZO of information necessary to
establish the accuracy of the reports and amounts paid or

12

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

payable to ENZO. Such audit rights shall survive for three (3) years after the
expiration or termination of this Agreement.

7.5 Any underpayment determined pursuant to paragraph 7.4 above shall be paid
within thirty (30) days after the delivery of a detailed written accountants’
report to DIGENE and ENZO if neither DIGENE nor ENZO disputes the report. If
the Parties cannot agree with the accountants’ report following a good faith
attempt to reach such agreement within thirty (30) days, then any such disputed
matter shall be submitted to and determined by an independent accounting firm
acceptable to the Parties, which determination shall be final and binding,
absent
manifest error. The fees and expenses of any such independent accounting firm
incurred in resolving such disputed matter shall be shared equally by DIGENE
and ENZO. In the event of any such underpayment by seven percent (7%) or
more, DIGENE shall also at the same time reimburse ENZO for the out-of-pocket
costs of the verification, inspection or audit conducted, plus interest at the
lower of one and one-half percent (1.5%) per month or the highest rate
permitted by law. Any overpayment shall be credited to the next payment due
from DIGENE. If no further payments from DIGENE will be due then a refund of
any such overpayment will be made within thirty (30) days after the delivery of
a detailed written accountants’ report to DIGENE and ENZO.

7.6 The provisions of this Article VII shall survive the expiration or sooner
termination of this Agreement.

Article VIII: NOTICES

8.1 All notices or other communications required or permitted hereunder shall
be in writing and shall be delivered personally, by facsimile, with delivery
confirmed electronically, or sent by certified, registered or express air mail,
postage prepaid, or by reputable overnight courier, and shall be deemed given
when so delivered personally, or by facsimile, or by overnight courier, or if
mailed, three days after the date of mailing, to the address of the Party set
forth below or to such other address as any Party hereto shall notify the other
Party hereto from time to time. However, the Parties further agree that each
Party shall provide the other Party with notice of execution of this Agreement
(along with a copy of the executed Agreement) by facsimile or same-day hand
delivery, with confirmation to follow by any of the other foregoing methods.

13

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

	 	 	 
	Notice to ENZO:

	 	Enzo Biochem, Inc.
	

	 	527 Madison Avenue. 9th Floor
	

	 	New York, New York 10022-4304
	

	 	Attention: Dr. Elazar Rabbani
	

	 	Fax: (212) 583-0150
	 
	 	 
	Notice to DIGENE:

	 	Digene Corporation
	

	 	1201 Clopper Road
	

	 	Gaithersburg, Maryland 20878
	

	 	Attention: Chief Executive Officer
	

	 	Fax: (301) 944-7017

Article IX: MISCELLANEOUS

9.1 This Agreement is made under and shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Delaware.

9.2 The paragraph headings contained herein are for reference only; such
headings are not a part of this Agreement, nor shall they in any way affect the
interpretation thereof.

9.3 The express or implied waiver by any Party of any right or breach of any
provision of this Agreement shall not constitute a continuing waiver of the
same or other provisions of this Agreement.

9.4 The Parties to this Agreement agree that it is the intention of none of
them to violate any public policy, statutes, or common laws. However, if any
sentence, paragraph, clause or combination of the same is held to be in
violation of any state or federal law or otherwise unenforceable by a court
from which no appeal is or can be taken, such sentences, paragraphs, clauses,
or combinations of the same shall be deleted and the remainder of this
Agreement shall remain binding. Promptly following the making of any such
deletion, the Parties shall meet and use their best efforts to mutually agree
on acceptable language to be added to this Agreement in replacement of the
deleted language, which replacement language shall be crafted to come as close
as possible to having the same economic effect as the deleted language which it
replaces.

9.5 Subject to the terms and conditions herein provided, each of the Parties
hereto shall use its best efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby. In the event that at any time
after this Agreement has become effective, any further action is necessary to
carry out its purposes, ENZO
and DIGENE or the proper directors or officers of either, as the case may be,
shall take all such action without any further consideration therefor.

9.6 This Agreement and the Joint Stipulation and Order of Dismissal with
Prejudice are the final and complete understanding of the Parties with respect
to the subject matter hereof,

14

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

superseding all prior agreements, understandings and discussions relating
thereto. Any modifications or renewal of this Agreement shall be in writing
signed by the Parties hereto.

9.7 The Parties to this Agreement may not assign this Agreement in whole or in
part without the other Party’s prior written consent, except that without such
consent either Party may assign this Agreement to an entity under common
control with, controlled by or which comes into the control of either Party, or
to a third party which succeeds to all or substantially all of its business to
which this Agreement relates. Any and all other assignments or attempted
assignments by either party shall be null and void ab initio and shall be
without any legal effect.

9.8 This Agreement may be signed by the Parties in separate counterparts, each
of which (including a facsimile copy thereof) when so executed shall be deemed
an original, and all of which when taken together shall constitute the original
Agreement.

9.9 No Party shall originate any publicity, news release or other public
announcement, written or oral, relating to this Agreement (including, without
limitation, the terms hereof), without the prior written approval of the other
Party, which shall not be unreasonably withheld, except (after prior written
notice to the other Party) as otherwise required by law or regulation,
including, without limitation, the Securities Act of 1933, as amended ( the
“Securities Act”), and the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the rules and regulations of the Securities and Exchange
Commission (the “SEC”) thereunder, but only to the extent necessary to meet the
Party’s disclosure obligations thereunder. Neither Party shall object if the
other Party makes disclosures in its filings with the SEC regarding this
Agreement to satisfy such SEC disclosure obligations, pursuant to the
disclosing Party’s good faith belief that it has an obligation to do so.
Moreover, nothing in this paragraph or any other part of the Agreement shall
preclude either Party from making a public statement (without obtaining prior
written consent of the other Party), including a press or news release, limited
to the statement that the Litigation has been settled and a license under the
patent-in-suit was granted by ENZO to DIGENE under that settlement or which
otherwise becomes publicly available as a consequence of the aforementioned
required SEC filings. After the initial publication of such publicity, news
release or other public announcement, each of the Parties shall be entitled to
redisclose such approved information in subsequent publicity, news releases,
other public announcements or filings made with the SEC under the Securities
Act or the Exchange Act without first obtaining the written approval of the
other Party. Should any dispute, controversy or disagreement arise concerning
any content of any such publicity, the disputed language shall not be included
in any
such publicity or otherwise publicly disclosed in any manner unless otherwise
required by law or regulation.

9.10 This Agreement shall not constitute an agreement on the part of DIGENE to
permit ENZO or any of its Affiliates to use any trademarks, service marks, or
trade names of DIGENE. This Agreement shall not constitute an agreement on the
part of ENZO to permit DIGENE or any of its Affiliates to use any trademarks,
service marks, or trade names of ENZO, except as required to comply with
Article X hereof.

15

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Article X: MARKING

10.1 DIGENE shall mark all Licensed Products in a manner sufficient to satisfy
the marking requirements of 35 U.S.C. § 287(a) or any other provisions of U.S.
or foreign law. The Parties will work in good faith to negotiate a reasonable
period of time for DIGENE to exhaust existing inventories and modify its
Licensed Products’ labeling, which shall be no less than six months and only
upon approval of the United States Food and Drug Administration to the extent
such approval is required.

Article XI: CONFIDENTIALITY

11.1 The Parties agree that each of them shall employ its best efforts to keep
the material terms of this Agreement, including, but not limited to, the
Running Royalty rates set forth in Article III of this Agreement confidential
and not disclose them to any third party, including by each seeking from the
SEC permission to maintain such royalty rates as confidential.

Article XII: DISPUTE RESOLUTION

12.1 Except as otherwise indicated in paragraph 7.4 and paragraph 12.2 hereof,
if any dispute, controversy or difference arises between the Parties out of, or
in connection with, this Agreement, or for the breach thereof, the Parties
shall promptly meet and attempt in good faith to resolve such dispute on a
mutually agreeable basis. If such dispute, controversy or difference is not
resolved or otherwise settled by the Parties within sixty (60) days after one
Party has given the other Party written notice of said dispute, controversy or
difference, it shall be resolved by litigation in the U.S. District Court for
the District of Delaware, which Court the Parties shall stipulate and seek to
have retain jurisdiction over the enforcement of this Agreement through
provision in the Joint Stipulation of and Order of Dismissal with Prejudice
referenced in this Agreement.

12.2 In the event that any dispute, controversy or difference arises between
the Parties out of, or in connection with, this Agreement with respect to
whether a product offered for sale by DIGENE as of the Effective Date, or not
presently offered for sale by DIGENE as of the
Effective Date, but which DIGENE offers for sale for the first time at any date
subsequent to the Effective Date of this Agreement, is subject to the terms of
this Agreement, the Parties shall promptly meet and attempt in good faith to
resolve such dispute on a mutually agreeable basis. If such dispute,
controversy or difference is not resolved or otherwise settled by the Parties
within sixty (60) days after one Party has given the other Party written notice
of said dispute, controversy or difference, it shall be resolved by binding
arbitration before a panel of three independent arbitrators in accordance with
the procedures of the rules governing patent disputes of the American
Arbitration Association. The venue for any such arbitration proceeding shall
be Wilmington, Delaware. Within sixty (60) days after the Effective Date, the
Parties will mutually agree to procedures governing any such arbitration
proceeding and include such procedures as an amendment to this Agreement.

16

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

     IN WITNESS WHEREOF, the Parties hereto have caused this Settlement and
License Agreement to be executed on October 13, 2004.

ENZO LIFE SCIENCES, INC.

ENZO BIOCHEM, INC.

By: /s/ Elazar Rabbani

Name: Elazar Rabbani

Title: CEO

DIGENE CORPORATION

By: /s/ Evan Jones

Name: Evan Jones

Title: CEO

17

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXHIBIT 1

     Licensed Products under this Exhibit 1 to the Agreement are the DIGENE
Hybrid Capture 1, Hybrid Capture 2, Hybrid Capture 3 and SHARP products that
were accused of infringement in the Litigation (as that term is defined in the
Agreement) and all products that DIGENE or its Affiliates have, as of the
Effective Date of the Agreement, offered for sale or sold, including test kits,
as well as systems, reagents, accessories, consumables, devices and instruments
intended for use with same, their methods or means of making, and their methods
or means of use embraced by at least one claim of the Licensed Patents.

18

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXHIBIT 2

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

	 	 	 	 	 
	ENZO LIFE SCIENCES, INC.,	 	 
	 
	 	 	 	 
	

	 	Plaintiff/	 	 
	

	 	Counterclaim Defendant,	 	 
	 
	 	 	 	 
	v.	 	 
	 
	 	 	 	 
	DIGENE CORPORATION,	 	 
	 
	 	 	 	 
	

	 	Defendant/
	 	Civil Action No. 02-212-JJF
	

	 	Counterclaim-Plaintiff,	 	 
	 
	 	 	 	 
	v.	 	 
	 
	 	 	 	 
	ENZO BIOCHEM, INC.,	 	 
	 
	 	 	 	 
	

	 	Counterclaim Defendant.	 	 

JOINT STIPULATION AND ORDER OF DISMISSAL WITH PREJUDICE

     Plaintiff-Counterclaim Defendant Enzo Life Sciences, Inc.,
Defendant-Counterclaim-Plaintiff Digene Corporation and Additional Counterclaim
Defendant Enzo Biochem, Inc. have agreed to settle all claims arising out of
the pleadings in this action, and all actions that could have been raised known
or unknown with respect to the accused products, on terms including
entry of the following Joint Stipulation and Order of Dismissal with
Prejudice and a combined Settlement and License Agreement. Therefore, it is
hereby stipulated by the parties and,

19

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

     ORDERED, ADJUDGED and DECREED that:

	 	1.	 	This Court has jurisdiction over the subject matter of this
action and over the parties. Venue is proper in this district.
	 
	 	2.	 	All claims, counterclaims and defenses brought or raised by
any party in this action are dismissed, with prejudice.
	 
	 	3.	 	Each party shall bear its own costs and attorney fees for this action.
	 
	 	4.	 	This Court retains jurisdiction over the subject matter of
this action and the parties hereto for the purpose of any
proceedings to enforce this Joint Stipulation and Order of Dismissal
with Prejudice and the Settlement and License Agreement referenced
herein.
	 
	 	5.	 	The parties hereto waive all right to appeal from, or obtain review of,
this Joint Stipulation And Order of Dismissal with Prejudice.

	 	 	 	 	 
	

	 	 	 	IT IS SO ORDERED:
	 
	 	 	 	 
	Date:
	 	 	 	 
	

	 	
 
	 	
 
	

	 	 	 	United States District Judge

20

 

THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

STIPULATED AND AGREED TO:

	 	 	 
	Dated:
October      , 2004

	 	Dated: October
     , 2004
	 
	 	 
	YOUNG, CONAWAY, STARGATT & TAYLOR, LLP

	 	MORRIS, JAMES, HITCHENS & WILLIAMS LLP
	 
	 	 
	
 

	 	
 
	Josy W. Ingersoll (No. 1088)

	 	Richard D. Kirk (No. 922)
	The Brandywine Building

	 	222 Delaware Avenue, 10th Floor
	1000 West Street, 17th Floor

	 	P.O. Box 2306
	P.O. Box 391

	 	Wilmington, Delaware 19899
	Wilmington, Delaware 19899-0391

	 	(302) 888-6800
	(302) 571-6672
	 	 
	Attorneys for:

	 	Attorneys for Defendant/Counterclaim
	Plaintiff/Counterclaim Defendant Enzo

	 	Plaintiff Digene Corporation
	Life Sciences, Inc., and Additional
	 	 
	Counterclaim Defendant, Enzo Biochem, Inc.
	 	 
	 	 	 
	Of
Counsel:

	 	Of Counsel:
	KENYON & KENYON

	 	PATTON BOGGS LLP
	Richard L. DeLucia

	 	Marc R. Labgold, Ph.D.
	Paul M. Richter, Jr.

	 	Richard J. Oparil
	One Broadway

	 	Kevin M. Bell
	New York, New York 10004

	 	8484 Westpark Drive
	(212) 425-7200

	 	McLean, Virginia 22102
	

	 	(703) 744-8000

21exv4w1

 

Exhibit 4.1

DIGENE CORPORATION

AMENDED AND RESTATED 1999 INCENTIVE PLAN

Article I

Purpose

     The purpose of the 1999 Incentive Plan (the “Plan”) is to enable Digene
Corporation (the “Company”) to offer Employees of the Company and its
Subsidiaries equity interests in the Company and options to acquire equity
interests in the Company, thereby helping to attract, retain and reward such
persons and strengthen the mutuality of interests between such persons and the
Company’s stockholders.

Article II

Definitions

     For purposes of the Plan, the following terms shall have the following
meanings:

     2.1 “Award” shall mean an award under the Plan of a Stock Option,
Restricted Stock, Unrestricted Stock or Performance Shares.

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

     2.3 “Change of Control” shall mean (a) the reorganization, consolidation
or merger of the Company or any of its Subsidiaries holding or controlling a
majority of the assets relating to the business of the Company, with or into
any third party (other than a Subsidiary); (b) the assignment, sale, transfer,
lease or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole; or (c) the acquisition by any
third party or group of third parties acting in concert, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission (“SEC”) under the Securities Exchange Act of 1934, as amended) of
shares of voting stock of the Company, the result of which in the case of any
transaction described in clauses (a), (b) and (c) above is that immediately
after the transaction the stockholders of the Company immediately before the
transaction, other than the acquiror, own less than fifty percent (50%) of the
combined voting power of the outstanding voting securities entitled to vote
generally in the election of directors of the surviving or resulting
corporation in a transaction specified in clause (a) above, the acquiror in a
transaction specified in clause (b) above, or the Company or the acquiror in a
transaction specified in clause (c) above.

     2.4 “Code” shall mean the Internal Revenue Code of 1986, as amended.

     2.5 “Committee” shall mean the Compensation Committee of the Board, or any
other committee of the Board designated by the Board to administer this Plan,
with any such Committee consisting of two or more members of the Board;
provided, that if the Compensation Committee or any other such committee does
not meet the applicable independence requirements of Rule 16b-3(d) promulgated
under the Securities Exchange Act of 1934, or NASDAQ, for

 

 

Awards to Reporting Persons the term “Committee” shall mean the Board and
for purposes of all Awards granted to the Chief Executive Officer of the
Company under this Plan the term “Committee” shall mean the independent members
of the Board.

     2.6 “Common Stock” shall mean the Common Stock, par value $0.01 per share,
of the Company.

     2.7 “Date of Grant” shall mean the date designated by the Committee as the
date as of which the Committee grants an Award, which shall not be earlier than
the date on which the Committee approves the granting of such Award.

     2.8 “Disability” shall mean a disability that results in a Participant’s
Termination of Employment with the Company or a Subsidiary, as determined
pursuant to standard Company procedures.

     2.9 “Effective Date” shall mean the date on which the Plan was originally
adopted by the Board.

     2.10 “Employee” shall mean any person engaged or proposed to be engaged as
an officer or employee of the Company or one of its Subsidiaries; provided,
however, that in the case of an Incentive Stock Option, the term “Employee”
shall mean any employee of the Company or of a “subsidiary corporation” (within
the meaning of Section 424(f) of the Code) of the Company.

     2.11 “Fair Market Value” for purposes of the Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean with respect to the Common Stock on any day, (i) the
closing sales price (or other exchange-designated daily sales price) on the
immediately preceding business day of a share of Common Stock as reported on
the principal securities exchange on which shares of Common Stock are then
listed or admitted to trading, or (ii) if not so reported, the closing sales
price (or other Nasdaq-designated daily sales price) on the immediately
preceding business day of a share of Common Stock as published in the Nasdaq
National Market Issues report in the Eastern Edition of The Wall Street
Journal, or (iii) if not so reported, the average of the closing (or other
designated) bid and asked prices on the immediately preceding business day as
reported on the Nasdaq National Market System, or (iv) if not so reported, as
furnished by any member of the National Association of Securities Dealers, Inc.
selected by the Committee. In the event that the price of a share of Common
Stock shall not be so reported or furnished, the Fair Market Value of a share
of Common Stock shall be determined by the Committee in good faith. A
“business day” is any day, other than Saturday or Sunday, on which the relevant
market is open for trading.

     2.12 “Incentive Stock Option” shall mean any Stock Option awarded under
the Plan to an Employee that is intended to be and designated as an “Incentive
Stock Option” within the meaning of Section 422 of the Code.

     2.13 “Non-Qualified Stock Option” shall mean any Stock Option granted
under the Plan that is not an Incentive Stock Option.

     2.14 “Participant” shall mean an Employee to whom an Award has been
granted.

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     2.15 “Performance Goal” shall mean objective financial or operating goals
and measures established by the Committee in accordance with Section 162(m) of
the Code. Such Performance Goals for any Performance Shares Award must be
established in writing not later than ninety (90) days after the commencement
of a Performance Period; provided that the outcome of each Performance Goal is
substantially uncertain at the time the Performance Goal is established. Such
Performance Goals may relate to identified business units, or the Company or
any Subsidiary and be based upon such performance criteria or combination of
factors as the Committee may deem appropriate, including, but not limited to,
specified levels of earnings per share, return on investment, return on
stockholders’ equity, sales, costs or other objective measures related to the
Company’s performance.

     2.16 “Performance Period” shall mean the period of time selected by the
Committee during which the achievement of Performance Goals is measured for
purposes of determining the extent to which an applicable Performance Shares
Award has been earned or will vest.

     2.17 “Performance Shares” shall mean an Award, granted pursuant to Article
VII of this Plan, of the contingent right to receive a designated number of
shares of Common Stock, payable in Common Stock, cash, or a combination of both
(depending on the medium of payment selected by the Committee), at the end of a
specified Performance Period if specified Performance Goals are achieved. Such
rights are subject to forfeiture or reduction if the applicable Performance
Goals are not met within the applicable Performance Period.

     2.18 “Performance Shares Award” shall mean an Award of Performance Shares.

     2.19 “Performance Shares Award Commitment” shall mean the written
commitment delivered by the Company to the Participant evidencing a Performance
Shares Award and setting forth such terms and conditions of the Award as may be
deemed appropriate by the Committee. The Performance Shares Award Commitment
shall be in a form approved by the Committee, and once executed, shall be
deemed amended from time to time to include such additional terms and
conditions as the Committee may specify after the execution in the exercise of
its powers under the Plan.

     2.20 “Restricted Stock” shall mean an Award granted pursuant to Section
8.1 hereof, subject to such restrictions as the Committee may determine, as
evidenced in a Restricted Stock Agreement. Shares of Common Stock shall cease
to be Restricted Stock when, in accordance with the terms of the Restricted
Stock Agreement, they become transferable and free of risk of forfeiture.

     2.21 “Restricted Stock Agreement” shall mean the agreement evidencing the
grant of Restricted Stock to an Employee pursuant to this Plan.

     2.22 “Restriction Period” shall have the meaning set forth in Section
8.2(c).

     2.23 “Stock Option” or “Option” shall mean any option to purchase shares
of Common Stock granted pursuant to Article VI hereof.

     2.24 “Subsidiary” shall mean any subsidiary of the Company, 50% or more of
the voting stock of which is owned, directly or indirectly, by the Company,
that is currently existing

3

 

as of the Effective Date or formed or acquired by the Company while any
Award is outstanding under the Plan.

     2.25 “Termination of Employment” shall mean a termination of employment
with the Company and all of its Subsidiaries for reasons other than a military
or personal leave of absence granted by the Company or any Subsidiary.

     2.26 “Unrestricted Stock” shall mean Common Stock granted under Section
8.3 hereof.

     2.27 “Unrestricted Stock Agreement” shall mean the agreement evidencing
the grant of Unrestricted Stock to an Employee pursuant to this Plan.

Article III

Administration

     3.1 The Committee. The Plan shall be administered and interpreted by the
Committee.

     3.2 Awards. The Committee shall have full authority to grant, pursuant to
the terms of the Plan, Stock Options, Restricted Stock, Unrestricted Stock or
Performance Shares to persons eligible under Article V. In particular, the
Committee shall have the authority:

          (a) to select the persons to whom Stock Options, Restricted Stock,
Unrestricted Stock or Performance Shares may from time to time be granted;

          (b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock, Unrestricted Stock or
Performance Shares, or any combination thereof, are to be granted to one or
more persons eligible to receive Awards under Article V;

          (c) to determine the number of shares of Common Stock to be covered by
each Award granted hereunder; and

          (d) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any Award granted hereunder (including, but not limited to, the
option price, the option term, and provisions relating to any restriction or
limitation, any vesting schedule or acceleration, any performance guidelines or
criteria or any forfeiture restrictions or waiver provisions of the Award),
and any conditions (in addition to those contained in this Plan) on the
exercisability of all or any part of an Option or on the transferability or
forfeitability of Restricted Stock. Notwithstanding any such conditions, the
Committee may, in its discretion at any time, accelerate the time at which any
Option may be exercised or the time at which Restricted Stock may become
transferable or nonforfeitable.

     3.3 Guidelines. Subject to Article IX hereof, the Committee shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and any Award
granted under the Plan (and any agreements relating thereto); and to otherwise
supervise the administration of the Plan. The express grant in the Plan of any
specific power to

4

 

the Committee shall not be construed as limiting any other power or
authority of the Committee. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any Award in the
manner and to the extent it shall deem necessary or advisable to carry out the
purposes of the Plan. Notwithstanding the foregoing, no action of the
Committee under this Section 3.3 shall impair the rights of any Participant
without the Participant’s consent, unless otherwise required by law.

     A majority of the entire Committee shall constitute a quorum, and the
action of a majority of the members present at any meeting at which a quorum is
present shall be deemed the action of the Committee. In addition, any decision
or determination reduced to writing and signed by all of the members of the
Committee shall be fully as effective as if it had been made by a majority vote
at a meeting duly called and held. Subject to the provisions of this Plan and
the Company’s Bylaws, and to any terms and conditions prescribed by the Board,
the Committee may make such additional rules and regulations for the conduct of
its business as it shall deem advisable. The Committee shall hold meetings at
such times and places as it may determine.

     3.4 Decisions Final. Any decision, interpretation or other action made or
taken in good faith by the Committee arising out of or in connection with the
Plan shall be final, binding and conclusive on the Company, all Participants
and their respective heirs, executors, administrators, successors and assigns.

Article IV

Share Limitation

     4.1 Shares. The maximum aggregate number of shares of Common Stock that
may be issued under the Plan is 4,900,000 (subject to increase or decrease
pursuant to Section 4.3), which may be either authorized and unissued shares of
Common Stock or authorized and issued shares of Common Stock reacquired by the
Company. If any Option granted under the Plan shall expire, terminate or be
canceled for any reason without having been exercised in full, the number of
shares of Common Stock not purchased under such Option shall again be available
for the purposes of the Plan. Further, if any Performance Shares are unearned
or forfeited, or shares of Restricted Stock are forfeited, the shares subject
to the portion of such Award unearned or forfeited, as the case may be, shall
again be available under the Plan.

     4.2 Individual Limit. No Employee may be granted Awards covering more
than 500,000 shares of Common Stock (subject to increase or decrease pursuant
to Section 4.3) during any calendar year.

     4.3 Changes. In the event of any merger, reorganization, consolidation,
recapitalization, dividend (other than a regular cash dividend), stock split,
or other change in corporate structure affecting the Common Stock, such
substitution or adjustment shall be made in the maximum aggregate number of
shares which may be issued under the Plan, the maximum number of shares with
respect to which Awards may be granted to any individual during any year, the
number and option price of shares subject to outstanding Options, and the
number of shares subject to other outstanding Awards, as may be determined to
be appropriate by the Committee, in its sole discretion, provided that the
number of shares subject to any Award shall always be a whole number.

5

 

Article V

Eligibility

     5.1 Awards to Employees. All officers and other Employees of the Company
and its Subsidiaries are eligible to be granted Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock, Unrestricted Stock or
Performance Shares under the Plan. A Director who is an Employee of the
Company or a Subsidiary shall be eligible to receive Awards pursuant to this
Article V.

Article VI

Stock Options

     6.1 Options. Each Stock Option granted under the Plan shall be either an
Incentive Stock Option or a Non-Qualified Stock Option.

     6.2 Grants. The Committee shall have the authority to grant to any person
eligible under Section 5.1 one or more Incentive Stock Options, Non-Qualified
Stock Options, or both types of Stock Options. To the extent that any Stock
Option does not qualify as an Incentive Stock Option (whether because of its
provisions or the time or manner of its exercise or otherwise), such Stock
Option or the portion thereof which does not qualify as an Incentive Stock
Option shall constitute a separate Non-Qualified Stock Option.

     6.3 Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under Section
422 of the Code, or, without the consent of the Participants affected, to
disqualify any Incentive Stock Option under such Section 422 of the Code.

     6.4 Terms of Options. Options granted under the Plan shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:

          (a) Stock Option Certificate. Each Stock Option shall be evidenced by,
and subject to the terms of, a Stock Option Certificate evidencing the Stock
Option grant. The Stock Option Certificate shall specify whether the Option is
an Incentive Stock Option or a Non-Qualified Stock Option, the number of shares
of Common Stock subject to the Stock Option, the option price, the option term,
and the other terms and conditions applicable to the Stock Option.

          (b) Option Price. Subject to subsection (m) below, the option price per
share of Common Stock purchasable upon exercise of a Stock Option shall be
determined by the Committee at the time of grant, but, if the Stock Option is
intended to be an Incentive Stock Option, shall be not less than 100% of the
Fair Market Value of the Common Stock on the Date of Grant.

          (c) Option Term. Subject to subsection (m) below, the term of each Stock
Option shall be fixed by the Committee at the time of grant, but no Stock
Option shall be exercisable more than ten years after the date it is granted.

6

 

          (d) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at the time of grant; provided, however, that the Committee may waive
any installment exercise or waiting period provisions, in whole or in part, at
any time after the Date of Grant, based on such factors as the Committee shall
deem appropriate in its sole discretion.

          (e) Method of Exercise. Subject to such installment exercise and waiting
period provisions as may be imposed by the Committee, Stock Options may be
exercised in whole or in part at any time during the option term by delivering
to the Company written notice of exercise specifying the number of shares of
Common Stock to be purchased and the option price therefor. The notice of
exercise shall be accompanied by payment in full of the option price and, if
requested, by the representation described in Section 11.2. Payment of the
option price may be made (i) in cash or by check payable to the Company, (ii)
unless otherwise determined by the Committee on or after the Date of Grant, in
shares of Common Stock duly owned by the Participant (and for which the
Participant has good title free and clear of any liens and encumbrances) or
(iii) in the case of an Option that is not an Incentive Stock Option, unless
otherwise determined by the Committee on or after the Date of Grant, by
reduction in the number of shares of Common Stock issuable upon such exercise,
based, in each case, on the Fair Market Value of the Common Stock on the date
of exercise. Upon satisfaction of the conditions provided herein, a stock
certificate representing the number of shares of Common Stock to which the
Participant is entitled shall be issued and delivered to the Participant,
subject to Section 11.3. For the purpose of assisting a Participant to
exercise an Option, the Company may, in the discretion of the Board, make loans
to the Participant or guarantee loans made by third parties to the Participant,
in either case on such terms and conditions as the Board may authorize.
Nothing contained in this Plan shall prevent or prohibit a Participant from
exercising his or her Options under a broker-facilitated cashless exercise
transaction.

          (f) Death. Unless otherwise determined by the Committee on or after the
Date of Grant, in the event of a Participant’s Termination of Employment by
reason of death, any Stock Option held by such Participant which was
exercisable on the date of death may thereafter be exercised by the legal
representative of the Participant’s estate until the earlier of one year after
the date of death or the expiration of the stated term of such Stock Option,
and any Stock Option not exercisable on the date of death shall be forfeited.

          (g) Disability. Unless otherwise determined by the Committee on or after
the Date of Grant, in the event of a Participant’s Termination of Employment by
reason of Disability, any Stock Option held by such Participant which was
exercisable on the date of such Termination of Employment may thereafter be
exercised by the Participant until the earlier of one year after such date or
the expiration of the stated term of such Stock Option, and any Stock Option
not exercisable on the date of such Termination of Employment shall be
forfeited. If the Participant dies during such one-year period, any
unexercised Stock Options held by the Participant at the time of death may
thereafter be exercised by the legal representative of the Participant’s estate
until the earlier of one year after the date of the Participant’s death or the
expiration of the stated term of such Stock Option. If an Incentive Stock
Option is exercised after the expiration of the exercise period that applies
for purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.

7

 

          (h) Termination of Employment. Subject to Section 11.4, in the event of a
Participant’s Termination of Employment by reason of retirement or for any
reason other than death or Disability, all Stock Options held by such
Participant that were exercisable on the date of such Termination of Employment
may be exercised by the Participant at any time within three (3) months after
his or her Termination of Employment; provided, however, that if the Committee
shall determine that the Employee’s employment was terminated for conduct that
in the judgment of the Committee involves dishonesty or action by the Employee
that is detrimental to the best interest of the Company, all Stock Options held
by the Employee on the date of such Termination of Employment shall be
forfeited. Notwithstanding anything to the contrary in this Subsection, a
Stock Option shall not terminate upon a Participant’s Termination of Employment
if at the time thereof the Participant serves as a Director of the Company or
its successor, in which event the Stock Option shall terminate if the
Participant ceases to be a Director of the Company or its successor and the
Participant may at any time within three months after ceasing to be a Director
exercise his or her Stock Option, but only to the extent that the Stock Option
was exercisable by him or her on the date on which he or she ceased to be a
Director.

          (i) Change of Control. Notwithstanding the provisions of Section 4.3, in
the event of a Change of Control, all outstanding Stock Options shall
immediately become fully exercisable, and upon payment by the Participant of
the option price (and, if requested, delivery of the representation described
in Section 11.2), a stock certificate representing the Common Stock covered
thereby shall be issued and delivered to the Participant. This Section 6.4(i)
shall apply to any outstanding Stock Options which are Incentive Stock Options
to the extent permitted by Code Section 422(d), and any outstanding Incentive
Stock Options in excess thereof shall, immediately upon the occurrence of such
a Change of Control be treated for all purposes of the Plan as Non-Qualified
Stock Options and shall be immediately exercisable as set forth in this Section
6.4(i).

          (j) Merger and Other Fundamental Transactions. In the event the Company
is succeeded by another company in a reorganization, merger, consolidation,
acquisition of property or stock, separation or liquidation, the successor
company shall assume all of the outstanding Options granted under this Plan or
shall substitute new options for them, which shall provide that each
Participant, at the same cost, shall be entitled upon the exercise of each such
option to receive such securities as the Board of Directors (or equivalent
governing body) of the succeeding, resulting or other company shall determine
to be equivalent, as nearly as practicable, to the nearest whole number and
class of shares of stock or other securities to which the Participant would
have been entitled under the terms of the agreement governing the
reorganization, merger, consolidation, acquisition of property or stock,
separation or liquidation as if, immediately prior to such event, the
Participant had been the holder of record of the number of shares of Common
Stock which were then subject to the outstanding Option granted under this
Plan.

          (k) Non-Transferability of Options. No Stock Option shall be transferable
by the Participant otherwise than by will or by the laws of descent and
distribution, to the extent consistent with the terms of the Plan and the
Option, and all Stock Options shall be exercisable, during the Participant’s
lifetime, only by the Participant.

          (l) Incentive Stock Option Limitations. To the extent that the aggregate
Fair Market Value (determined as of the Date of Grant) of the Common Stock with
respect to which

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Incentive Stock Options are exercisable for the first time by the
Participant during any calendar year under the Plan and/or any other stock
option plan of the Company or any subsidiary or parent corporation (each within
the meaning of Section 424 of the Code) exceeds $100,000, such Options shall be
treated as Options which are not Incentive Stock Options.

          (m) Ten-Percent Stockholder Rule. Notwithstanding any other provision of
the Plan to the contrary, no Incentive Stock Option shall be granted to any
person who, immediately prior to the grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or any subsidiary or parent corporation (each within the meaning of
Section 424 of the Code), unless the option price is at least 110% of the Fair
Market Value of the Common Stock on the Date of Grant and the Option, by its
terms, expires no later than five years after the Date of Grant.

     Should the foregoing provisions not be necessary in order for the Stock
Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Committee may amend the Plan accordingly, without
the necessity of obtaining the approval of the stockholders of the Company.

     6.5 Rights as Stockholder. A Participant shall not be deemed to be the
holder of Common Stock, or to have any of the rights of a holder of Common
Stock, with respect to shares subject to the Option, unless and until the
Option is exercised and a stock certificate representing such shares of Common
Stock is issued to the Participant.

Article VII

Performance Shares

     7.1 Award of Performance Shares. The Committee shall have the authority
to award Performance Shares to any person eligible under Section 5.1. The
Committee shall determine the eligible Employees to whom, and the time or times
at which, Performance Shares shall be awarded, the number of Performance Shares
to be awarded to any Employee, the duration of the Performance Period with
respect to each Performance Shares Award, the medium of payment upon vesting
and the other terms and conditions of the Performance Shares Award, including
those set forth in Section 7.2.

     7.2 Terms and Conditions. Performance Shares awarded pursuant to this
Article VII shall be subject to the following terms and conditions and such
other terms and conditions, not inconsistent with the terms of this Plan, as
the Committee shall deem desirable:

          (a) Performance Period. At the time of a Performance Shares Award, the
Committee, in its sole discretion, shall establish a Performance Period of not
less than (1) year nor more than five (5) years, commencing on the Date of
Grant of the Performance Shares Award.

          (b) Performance Goals. A Performance Shares Award will vest and be earned
based on the attainment of one or more identified Performance Goals determined
by the Committee. The Performance Goals (although their measurement, including
adjustments, if any, as permitted under Subsection 7.2(c), will not occur until
after the expiration of the applicable Performance Period) must be met during
the continuance of the Participant’s employment with

9

 

the Company or any Subsidiary, prior to the expiration of the applicable
Performance Period. Performance Goals may vary among Participants and among
Performance Shares Awards to a Participant.

          (c) Revisions for Significant Events. When circumstances occur
(including, but not limited to, unusual or nonrecurring events, changes in tax
laws or accounting principles or practices) that cause any Performance Goal to
be inappropriate in the judgment of the Committee, the Committee may make such
changes as it deems equitable in recognition of any unforeseen events or
changes in circumstances or changed business or economic conditions, as long as
any such changes are consistent with Section 162(m) of the Code.

          (d) Performance Shares Award Commitment. Each Performance Shares Award
shall be evidenced by, and subject to the terms of, a Performance Shares Award
Commitment. The Performance Shares Award Commitment shall specify the number
of shares of Common Stock subject to the Performance Shares Award, the medium
of payment, the applicable Performance Period and the other terms and
conditions applicable to such Performance Shares Award.

          (e) Changes. If any change is made in the Common Stock by reason of any
merger, consolidation, reorganization, recapitalization, stock dividend, split
up, combination of shares, exchange of shares, change in corporate structure,
or otherwise, the Committee shall be entitled to determine the impact of such
event on outstanding Performance Shares Awards, and to make adjustments to each
Performance Shares Award to the extent necessary to provide that the
Participant receive, to the extent possible, equivalent rights under such
Performance Shares Award after consummation of such event.

          (f) Achievement of Performance Goals. Within a period of time determined
by the Committee, but not to exceed 90 days after the end of a Performance
Period, the Committee will determine if the applicable Performance Goals were
met with respect to applicable Performance Shares Awards. If the Committee
certifies in writing, after the expiration of the Performance Period, that the
Performance Goals specified in a Performance Shares Award Commitment and all
other material terms of the Award have been satisfied, the Performance Shares
Award shall be vested and earned in accordance with such Committee
certification.

          (g) Payment of Performance Shares Awards. Payment of a vested, earned
Performance Shares Award shall be made either in shares of Common Stock, or in
cash, or in some combination thereof, as determined by the Committee. The
medium of payment shall be set forth in the Committee’s resolution granting the
Performance Shares Award and in the Performance Shares Award Commitment with
the Participant. For an earned Performance Shares Award, or portion thereof,
to be settled through the issuance of shares of Common Stock, the number of
shares delivered shall be equal to the number of applicable Performance Shares
earned. The holder may elect to reduce this amount by the number of shares of
Common Stock which have, on the date the Performance Shares Award is settled, a
Fair Market Value equal to the applicable federal, state and local withholding
tax due on the receipt of the Common Stock, in lieu of making a cash payment
equal to the amount of such withholding tax due. For an earned Performance
Shares Award, or portion thereof, to be settled in cash, the amount of cash
paid shall be equal to the number of applicable Performance Shares earned
multiplied by the Fair

10

 

Market Value of a share of Common Stock on such date following the lapse
of the Performance Period and the satisfaction of any other applicable
conditions established by the Committee at the time of grant, that the
Participant first becomes entitled to receive such payment. Such amount will
be reduced by applicable federal, state and local withholding tax due. For any
earned Performance Shares Award paid in cash, the shares of Common Stock
designated in the Performance Shares Award shall be deemed to have been issued
for purposes of Section 4.1 hereof.

     7.3 Death or Disability. Subject to the provisions of this Plan and the
Performance Shares Award Commitment, in the event of the death or Disability of
a Participant, the Participant or the Participant’s estate, as the case may be,
shall be entitled to receive, at the expiration of the Performance Period, a
percentage of Performance Shares that is equal to the percentage of the
Performance Period that had elapsed as of the date of death or date on which
such Disability commenced (as determined by the Committee in its sole
discretion); provided that the Committee, in its sole discretion, determines
that the conditions specified in the Performance Shares Awards Commitment have
been satisfied. Payment of such portion of the Performance Shares Award shall
be made to the Participant or the Participant’s estate, as the case may be, in
accordance with this Article VII.

     7.4 Change of Control. At the time a Performance Shares Award is made by
the Committee, the Committee shall be entitled, notwithstanding the provisions
of Section 4.3, to provide for different terms and provisions in the event of a
Change in Control, including, but not limited to, the authority to provide for
the settlement of a Performance Shares Award, regardless of whether the
applicable Performance Period has expired or whether the applicable Performance
Goals have been met.

     7.5 Termination of Employment. Subject to Sections 7.4 and 11.4, in the
event of a Participant’s Termination of Employment by reason of retirement or
for any reason other than death or Disability, all Performance Shares Awards
held by such Participant that were earned on the date of such Termination of
Employment will be paid to the Participant; provided, however, that if the
Committee shall determine that the Employee’s employment was terminated for
conduct that in the judgment of the Committee involves dishonesty or action by
the Employee that is detrimental to the best interest of the Company, all
earned but unpaid Performance Shares held by the Employee on the date of such
Termination of Employment shall be forfeited. Notwithstanding anything to the
contrary in this Subsection, a Performance Shares Award shall not terminate
upon a Participant’s Termination of Employment if at the time thereof the
Participant serves as a Director of the Company or its successor, in which
event the Performance Shares Awards shall terminate if the Participant ceases
to be a Director of the Company or its successor, and any earned Performance
Shares Award will be then paid in accordance with this Subsection.

Article VIII

Restricted and Unrestricted Stock

     8.1 Awards of Restricted Stock. The Committee shall have the authority to
grant to any person eligible under Section 5.1 one or more Restricted Stock
Awards. The Committee shall determine the eligible Employees to whom, and the
time or times at which, grants of

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Restricted Stock will be made, the number of shares to be awarded, the
time or times within which such Awards may be subject to forfeiture, the
vesting schedule and rights to acceleration thereof, and the other terms and
conditions of the Awards in addition to those set forth in Section 8.2.

     8.2 Terms and Conditions. Restricted Stock shall be subject to the
following terms and conditions and such other terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:

          (a) Restricted Stock Agreement. Each Restricted Stock Award shall be
evidenced by, and subject to the terms of, a Restricted Stock Agreement
executed by the Company and the Participant. The Restricted Stock Agreement
shall specify the number of shares of Common Stock subject to the Award, the
time or times within which such Restricted Stock is subject to forfeiture and
the other terms, conditions and restrictions applicable to such Award.

          (b) Stock Certificate. Subject to Section 11.3, when the restrictions
applicable to a Restricted Stock Award, or any portion thereof, lapse, a stock
certificate representing the number of shares of Common Stock covered by such
Restricted Stock Award, or portion thereof, shall be issued and delivered to
the Participant. A Participant shall not be deemed to be the holder of Common
Stock, or to have any of the rights of a holder of Common Stock, with respect
to shares of Restricted Stock subject to the Award, unless and until the
forfeiture restrictions lapse and a stock certificate representing such shares
of Common Stock is issued to the Participant.

          (c) Restriction Period. Subject to the provisions of the Plan and the
Restricted Stock Agreement, shares of Restricted Stock will be forfeited to the
Company in the event of a Participant’s Termination of Employment during a
period (not to exceed five years) set by the Committee commencing with the date
of such Award (the “Restriction Period”). Subject to the provisions of the
Plan, the Committee, in its sole discretion, may provide for the lapse of such
restrictions in installments and may waive such restrictions, in whole or in
part, at any time, based on such factors as the Committee shall deem
appropriate in its sole discretion.

          (d) Termination of Employment. Subject to Section 11.4, in the event of a
Participant’s Termination of Employment prior to the expiration of the
Restriction Period, then he or she shall forfeit all of his or her Restricted
Stock with respect to which the Restriction Period has not yet expired;
provided, however, that the terms of the Restricted Stock Agreement, in the
discretion of the Committee and pursuant to such terms and conditions as it may
impose, may provide: (i) that, if such Employee’s employment is terminated for
any reason other than conduct that in the judgment of the Committee involves
dishonesty or action by the Employee that is detrimental to the best interests
of the Company, then the Restricted Stock or any related compensation deferral
or a portion thereof shall not be forfeited; (ii) that, if such Employee’s
employment is terminated on account of Disability, then the Employee shall not
forfeit his or her Restricted Stock or any related compensation deferral or a
portion thereof; and (iii) that, if such Employee dies while employed by the
Company or any of its Subsidiaries, then his or her Restricted Stock or any
related compensation deferral or a portion thereof is not forfeited.

12

 

          (e) Changes. If any change is made in the Common Stock by reason of any
merger, consolidation, reorganization, recapitalization, stock dividend, split
up, combination of shares, exchange of shares, change in corporate structure,
or otherwise, then any shares or other securities of the Company or succeeding,
resulting or other company to be received by the Employee under the Restricted
Stock Agreement shall be subject to the same restrictions applicable to the
Restricted Stock.

     8.3 Unrestricted Stock. The Committee shall have the authority to grant
to any person eligible under Section 5.1 one or more Unrestricted Stock Awards.
Each Employee who is awarded Unrestricted Stock shall receive an Unrestricted
Stock Agreement from the Company in a form specified by the Committee and
containing the terms and conditions of the award and such other matters,
consistent with this Plan, as the Committee, in its sole discretion, shall
determine at the time the Award is made. Such conditions may include, but
shall not be limited to, the deferral of a percentage of the Employee’s annual
cash compensation, not including dividends paid on the Unrestricted Stock, if
any, to be applied toward the purchase of Unrestricted Stock upon such terms
and conditions, including such discounts, as may be set forth in the
Unrestricted Stock Agreement. Upon the issuance of Unrestricted Stock to an
Employee hereunder, the Employee shall have the entire beneficial ownership and
all the rights and privileges of a stockholder with respect to the Unrestricted
Stock awarded to him or her, including the right to receive dividends and the
right to vote such Unrestricted Stock. Subject to Section 11.3, each Employee
who is awarded Unrestricted Stock may, but need not, be issued a stock
certificate in respect of such shares of Unrestricted Stock.

Article IX

Termination or Amendment

     9.1 Termination or Amendment of Plan. The Committee may at any time
amend, discontinue or terminate the Plan or any part thereof (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article XI) or amend any Award previously
granted, prospectively or retroactively (subject to Article IV); provided,
however, that, unless otherwise required by law, the rights of a Participant
with respect to Awards granted prior to such amendment, discontinuance or
termination may not be impaired without the consent of such Participant and,
provided further that, the Company will seek the approval of the Company’s
stockholders for any amendment if such approval is necessary to comply with the
Code, Federal or state securities laws or any other applicable laws or
regulations, including the Marketplace Rules of the National Association of
Securities Dealers, Inc.

Article X

Unfunded Plan

     10.1 Unfunded Plan. The Plan is intended to constitute an “unfunded” plan
for incentive compensation. With respect to any payment not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.

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Article XI

General Provisions

     11.1 Nonassignment. Except as otherwise provided in the Plan, any Award
granted hereunder and the rights and privileges conferred thereby shall not be
sold, transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of an Award, right or privilege contrary to
the provisions hereof, or upon the levy of any attachment or similar process
thereon, such Award and the rights and privileges conferred hereby shall
immediately terminate and the Award shall immediately be forfeited to the
Company.

     11.2 Legend. The Committee may require each person acquiring shares
pursuant to an Award to represent to the Company in writing that the
Participant is acquiring the shares without a view to distribution thereof.
The stock certificates representing such shares may include any legend which
the Committee deems appropriate to reflect any restrictions on transfer.

     All certificates representing shares of Common Stock delivered under the
Plan shall be subject to such stock transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange or
stock market upon which the Common Stock is then listed or traded, any
applicable Federal or state securities law, and any applicable corporate law,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

     11.3 Uncertificated Shares. Each Employee who exercises an Option to
acquire Common Stock, is issued Common Stock upon the vesting of a Performance
Shares Award or is awarded Restricted Stock or Unrestricted Stock may, but need
not, be issued a stock certificate in respect of the Common Stock so acquired.
A “book entry” (i.e., a computerized or manual entry) shall be made in the
records of the Company to evidence the issuance of shares of Common Stock to an
Employee where no certificate is issued in the name of the Employee. Such
Company records, absent manifest error, shall be binding on Employees. In all
instances where the date of issuance of shares may be deemed significant but no
certificate is issued in accordance with this Section 11.3, the date of the
book entry shall be the relevant date for such purposes.

     11.4 Forfeiture for Competition. If a Participant in this Plan provides
services to a competitor of the Company or any of its subsidiaries, whether as
an employee, officer, director, independent contractor, consultant, agent or
otherwise, such services being of a nature that can reasonably be expected to
involve the skills and experience used or developed by the Participant while an
Employee, and the Committee determines, in its sole discretion, that the
provision of such services constitutes a breach of the Participant’s
non-compete agreement with the Company, then that Participant’s rights to any
Awards hereunder shall automatically be forfeited.

     11.5 Other Plans. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.

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     11.6 No Right to Employment. Neither the Plan nor the grant of any Award
hereunder shall give any Participant or other Employee any right with respect
to continuance of employment by the Company or any Subsidiary, nor shall the
Plan impose any limitation on the right of the Company or any Subsidiary by
which a Participant is employed to terminate such Participant’s employment at
any time.

     11.7 Withholding of Taxes. The Company shall have the right to reduce the
number of shares of Common Stock otherwise deliverable pursuant to an Award
under this Plan by an amount that would have a Fair Market Value equal to the
minimum amount of all Federal, state and local taxes required to be withheld,
or to deduct the amount of such taxes from any cash payment otherwise to be
made to the Participant. In connection with such withholding, the Committee
may make such arrangements as are consistent with the Plan as it may deem
appropriate.

     11.8 Listing and Other Conditions.

          (a) If the Common Stock is listed on a national securities exchange or The
Nasdaq Stock Market, the issuance of any shares of Common Stock pursuant to an
Award shall be conditioned upon such shares being listed on such exchange or
The Nasdaq Stock Market. The Company shall have no obligation to issue any
shares of Common Stock unless and until such shares are so listed, and the
right to exercise any Option or vest in any Restricted Stock shall be suspended
until such listing has been effected.

          (b) If at any time counsel to the Company shall be of the opinion that any
sale or delivery of shares of Common Stock pursuant to an Award is or may in
the circumstances be unlawful or result in the imposition of excise taxes under
the statutes, rules or regulations of any applicable jurisdiction, the Company
shall have no obligation to make such sale or delivery, or to make any
application or to effect or to maintain any qualification or registration under
the Securities Act of 1933, as amended, or otherwise with respect to shares of
Common Stock or Awards, and the right to exercise any Option or vest in any
Restricted Stock shall be suspended until, in the opinion of such counsel, such
sale or delivery shall be lawful or shall not result in the imposition of
excise taxes.

          (c) Upon termination of any period of suspension under this Section 11.8,
any Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such
suspension and as to shares which would otherwise have become available during
the period of such suspension, but no such suspension shall extend the term of
any Option.

     11.9 Governing Law. The Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Delaware, without regard to the conflict of laws principles thereof.

     11.10 Construction. Wherever any words are used in the Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they
were also used in the plural form in all cases where they would so apply.

15

 

     11.11 Liability of the Board and the Committee. No member of the Board or
the Committee nor any Employee of the Company or any of its subsidiaries shall
be liable for any act or action hereunder, whether of omission or commission,
by any other member or Employee or by any agent to whom duties in connection
with the administration of the Plan have been delegated or, except in
circumstances involving bad faith, gross negligence or fraud, for anything done
or omitted to be done by himself.

     11.12 Other Benefits. No payment pursuant to an Award shall be deemed
compensation for purposes of computing benefits under any retirement plan of
the Company or any Subsidiary nor affect any benefits under any other benefit
plan now or hereafter in effect under which the availability or amount of
benefits is related to the level of compensation.

     11.13 Costs. The Company shall bear all expenses incurred in
administering the Plan, including expenses related to the issuance of Common
Stock pursuant to Awards.

     11.14 Severability. If any part of the Plan shall be determined to be
invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall continue
in full force and effect.

     11.15 Successors. The Plan shall be binding upon and inure to the benefit
of any successor or successors of the Company.

     11.16 Headings. Article and section headings contained in the Plan are
included for convenience only and are not to be used in construing or
interpreting the Plan.

Article XII

Term of Plan

     12.1 Effective Date. The Plan shall be effective as of the Effective
Date, but the grant of any Award hereunder is subject to the express condition
that the Plan be approved by the stockholders of the Company within 12 months
after the Effective Date.

     12.2 Termination Date. Unless sooner terminated, the Plan shall terminate
ten years after the Effective Date and no Awards may be granted thereafter.
Termination of the Plan shall not affect Awards granted before such date.

As originally adopted by the Board by unanimous written consent dated September
14, 1999 and approved by the stockholders at the Annual Meeting held on October
28, 1999.

As revised by the Board by unanimous written consent dated September 21, 2000
and approved by the stockholders at the Annual Meeting held on October 26, 2000
- the first sentence of Section 4.1 was amended to increase the maximum
aggregate number of shares of Common Stock that may be issued under the Plan
from 1,000,000 to 2,000,000.

As revised by the Board at its October 26, 2000 meeting to clarify the “Change
of Control” definition.

As revised by the Board by unanimous written consent dated September 5, 2001
and approved by the stockholders at the Annual Meeting held on October 25, 2001
- the first sentence of Section 4.1 was amended

16

 

to increase the maximum aggregate number of shares of Common Stock that may be
issued under the Plan from 2,000,000 to 3,000,000.

As revised by the Board at its meeting held February 19, 2002 — sentence was
added to the end of Section 6.4(h), “Termination of Employment”, regarding
termination of options if optionee continues as a Director.

As revised by the Board at its meeting held September 12, 2002 and approved by
the stockholders at the Annual Meeting held on October 24, 2002 — the first
sentence of Section 4.1 was amended to increase the maximum aggregate number of
shares of Common Stock that may be issued under the Plan from 3,000,000 to
4,000,000.

As revised by the Board at its meeting held September 5, 2003 and approved by
the stockholders at the Annual Meeting held on October 30, 2003 — the first
sentence of Section 4.1 was amended to increase the maximum aggregate number of
shares of Common Stock that may be issued under the Plan from 4,000,000 to
4,900,000.

As revised by the Board at its meeting held October 30, 2003 to remove the
provisions vesting sole authority in the Board to grant Awards to Reporting
Persons and to amend the definition of Committee.

As revised by the Board at its meeting held September 9, 2004 and approved by
the stockholders at the Annual Meeting held on October 27, 2004 to include
provisions providing for the grant of Performance Shares under the Plan.

17

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