Document:

exv10w5

Exhibit 10.5

POWER INTEGRATIONS, INC.

NONSTATUTORY STOCK OPTION AGREEMENT

FOR OUTSIDE DIRECTORS

(INITIAL OPTION)

     THIS NONSTATUTORY STOCK OPTION AGREEMENT FOR OUTSIDE DIRECTORS
(INITIAL OPTION) (the “Option
Agreement”) is made and entered into as of                  
   
                    , by and between
Power Integrations, Inc. and                     
                     (the “Optionee”).

     The Company has granted to the Optionee an option to purchase certain shares of Stock pursuant
to the Directors Compensation Program under the 2007 Equity Incentive Plan upon the terms and
conditions set forth in this Option Agreement (the “Option”). In the event of any conflict between
the provisions of the Option Agreement and those of the Plan, the provisions of the Option
Agreement shall control.

	1.	 	Definitions and Construction.

     1.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:

          (a) “Date of Option Grant” means                                         .

          (b) “Number of Option Shares” means twenty-four thousand (24,000) shares of Stock, as adjusted
from time to time pursuant to Section 9.

          (c) “Exercise Price” means $                      per share of Stock, as adjusted from time to
time pursuant to Section 9.

          (d) “Initial Exercise Date” means the Initial Vesting Date.

          (e) “Initial Vesting Date” means the date occurring one (1) year after the Date of Option
Grant.

 

 

                    
(f) “Vested Ratio” means, on any relevant date, the ratio determined as follows:

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Vested Ratio
	 	 	 	 	Prior to Initial Vesting Date
	 	 	0	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	On Initial Vesting Date, provided the Optionee’s
Service has not terminated prior to such date
	 	 	1/3	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	Plus
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	For each full month of the Optionee’s continuous
Service from the Initial Vesting Date until the
Vested Ratio equals 1/1, an additional
	 	 	1/36	 

                    (g) “Option Expiration Date” means the date ten (10) years after the Date of Option Grant.

                    (h) “Board” means the Board of Directors of the Company. If one or more Committees have been
appointed by the Board to administer the Plan, “Board” shall also mean such Committee(s).

                    (i) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.

                    (j) “Committee” means a committee of the Board duly appointed to administer the Plan and
having such powers as shall be specified by the Board. Unless the powers of the Committee have
been specifically limited, the Committee shall have all of the powers of the Board granted in the
Plan, including, without limitation, the power to amend or terminate the Plan at any time, subject
to the terms of the Plan and any applicable limitations imposed by law.

                    (k) “Company” means Power Integrations, Inc., a Delaware corporation, or any successor
corporation thereto.

                    (l) “Consultant” means any person, including an advisor, engaged by a Participating Company to
render services other than as an Employee or a Director.

                    (m) “Director” means a member of the Board or of the board of directors of any other
Participating Company.

                    (n) “Disability” means the permanent and total disability of the Optionee within the meaning
of Section 22(e)(3) of the Code.

 

 

                    (o) “Employee” means any person treated as an employee (including an officer or a Director who
is also treated as an employee) in the records of a Participating Company; provided, however, that
neither service as a Director nor payment of a director’s fee shall be sufficient to constitute
employment for purposes of the Plan.

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

                    (q) “Fair Market Value” means, as of any date, the value of a share of Stock or other property
as determined by the Board, in its sole discretion, or by the Company, in its sole discretion, if
such determination is expressly allocated to the Company herein, subject to the following:

                         (i) If, on such date, there is a public market for the Stock, the Fair Market Value of a share
of Stock shall be the closing sale price of a share of Stock (or the mean of the closing bid and
asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq
National Market, the Nasdaq Small-Cap Market or such other national or regional securities exchange
or market system constituting the primary market for the Stock, as reported in the Wall Street
Journal or such other source as the Company deems reliable. If the relevant date does not fall
on a day on which the Stock has traded on such securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which the Stock was so
traded prior to the relevant date, or such other appropriate day as shall be determined by the
Board, in its sole discretion.

                         (ii) If, on such date, there is no public market for the Stock, the Fair Market Value of a
share of Stock shall be as determined by the Board without regard to any restriction other than a
restriction which, by its terms, will never lapse.

                    (r) “Parent Corporation” means any present or future “parent corporation” of the Company, as
defined in Section 424(e) of the Code.

                    (s) “Participating Company” means the Company or any Parent Corporation or Subsidiary
Corporation.

                    (t) “Participating Company Group” means, at any point in time, all corporations collectively
which are then Participating Companies.

                    (u) “Plan” means the Power Integrations, Inc. 2007 Equity Incentive Plan.

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

                    (w) “Service” means the Optionee’s service with the Participating Company Group, whether in
the capacity of an Employee, a Director or a Consultant. The Optionee’s Service shall not be
deemed to have terminated merely because of a change in the capacity in which the Optionee renders
Service to the Participating Company Group or a change

 

 

in the Participating Company for which the Optionee renders such Service, provided that there
is no interruption or termination of the Optionee’s Service. The Optionee’s Service shall be
deemed to have terminated either upon an actual termination of Service or upon the corporation for
which the Optionee performs Service ceasing to be a Participating Company.

                    (x) “Stock” means the common stock of the Company, as adjusted from time to time in accordance
with Section 9.

                    (y) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the
Company, as defined in Section 424(f) of the Code.

          1.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Option Agreement. Except when
otherwise indicated by the context, the singular shall include the plural, the plural shall include
the singular, and the term “or” shall include the conjunctive as well as the disjunctive.

     2. Tax Status of the Option. This Option is intended to be a nonstatutory stock
option and shall not be treated as an incentive stock option within the meaning of Section 422(b)
of the Code.

     3. Administration. All questions of interpretation concerning this Option Agreement
shall be determined by the Board, including any duly appointed Committee of the Board. All
determinations by the Board shall be final and binding upon all persons having an interest in the
Option. Any officer of a Participating Company shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, or election which is the responsibility of
or which is allocated to the Company herein, provided the officer has apparent authority with
respect to such matter, right, obligation, or election.

     4. Exercise of the Option.

          4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable
on and after the Initial Exercise Date and prior to the termination of the Option (as provided in
Section 6) in an amount not to exceed the Number of Option Shares multiplied by the Vested Ratio
less the number of shares previously acquired upon exercise of the Option. In no event shall the
Option be exercisable for more shares than the Number of Option Shares.

          4.2 Method of Exercise. Exercise of the Option shall be by written notice to the Company
which must state the election to exercise the Option, the number of whole shares of Stock for which
the Option is being exercised and such other representations and agreements as to the Optionee’s
investment intent with respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, by confirmed facsimile
transmission, or by such other means as the Company may permit, to the Chief Financial Officer of
the Company, or other authorized representative of the Participating Company Group, prior to the
termination of the Option as set forth in Section 6, accompanied by

 

 

full payment of the aggregate Exercise Price for the number of shares of Stock being
purchased. The Option shall be deemed to be exercised upon receipt by the Company of such written
notice and the aggregate Exercise Price.

          4.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of Stock owned by the Optionee having a Fair Market Value not less than the aggregate
Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by any
combination of the foregoing.

               (b) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company of shares of Stock to the extent such tender of Stock would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption of the Company’s
stock. The Option may not be exercised by tender to the Company of shares of Stock unless such
shares either have been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

               (c) Cashless Exercise. A “Cashless Exercise” means the assignment in a form acceptable to the
Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock
acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal Reserve System). The
Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion,
to decline to approve or terminate any such program or procedure.

          4.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Optionee agrees to make adequate provision for any sums
required to satisfy the federal, state, local and foreign tax withholding obligations of the
Participating Company Group, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the Option, or (iii) the
lapsing of any restriction with respect to any shares acquired upon exercise of the Option.

          4.5 Certificate Registration. Except in the event the Exercise Price is paid by means of a
Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the Optionee.

          4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all
applicable requirements of federal, state or foreign law with respect to such securities. The
Option may not be exercised if the issuance of shares of Stock upon exercise

 

 

would constitute a violation of any applicable federal, state or foreign securities laws or
other law or regulations or the requirements of any stock exchange or market system upon which the
Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration
statement under the Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel
to the Company, the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the Securities Act. THE
OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE
SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN
THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to
the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the Option, the Company
may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.

          4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise of the Option.

     5. Nontransferability of the Option. The Option may be exercised during the lifetime
of the Optionee only by the Optionee or the Optionee’s guardian or legal representative and may not
be assigned or transferred in any manner except by will or by the laws of descent and distribution.
Following the death of the Optionee, the Option, to the extent provided in Section 7, may be
exercised by the Optionee’s legal representative or by any person empowered to do so under the
deceased Optionee’s will or under the then applicable laws of descent and distribution.

     6. Termination of the Option. The Option shall terminate and may no longer be
exercised on the first to occur of (a) the Option Expiration Date, (b) the last date for exercising
the Option following termination of the Optionee’s Service as described in Section 7, or (c) a
Change in Control to the extent provided in Section 8.

     7. Effect of Termination of Service.

          7.1 Option Exercisability.

                    (a) Disability. If the Optionee’s Service with the Participating Company Group is terminated
because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on
the date on which the Optionee’s Service terminated, may be exercised by the Optionee (or the
Optionee’s guardian or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Optionee’s Service terminated, but in any event no later than
the Option Expiration Date.

 

 

                    (b) Death. If the Optionee’s Service with the Participating Company Group is terminated
because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the
date on which the Optionee’s Service terminated, may be exercised by the Optionee’s legal
representative or other person who acquired the right to exercise the Option by reason of the
Optionee’s death at any time prior to the expiration of twelve (12) months after the date on which
the Optionee’s Service terminated, but in any event no later than the Option Expiration Date. The
Optionee’s Service shall be deemed to have terminated on account of death if the Optionee dies
within three (3) months after the Optionee’s termination of Service.

                    (c) Other Termination of Service. If the Optionee’s Service with the Participating Company
Group terminates for any reason, except Disability or death, the Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee within three (3) months after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date.

          7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of
the Option within the applicable time periods set forth in Section 7.1 is prevented by the
provisions of Section 4.6, the Option shall remain exercisable until three (3) months after the
date the Optionee is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

          7.3 Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale,
within the applicable time periods set forth in Section 7.1, of shares acquired upon the exercise
of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the
Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which a sale of such shares by the Optionee would no longer be subject to such suit,
(ii) the one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or
(iii) the Option Expiration Date.

     8. Ownership Change and Change in Control.

          8.1 Definitions.

                    (a) An “Ownership Change Event” shall be deemed to have occurred if any of the following
occurs with respect to the Company:

                         (i) the direct or indirect sale or exchange in a single or series of related transactions by
the shareholders of the Company of more than fifty percent (50%) of the voting stock of the
Company;

                         (ii) a merger or consolidation in which the Company is a party;

                         (iii) the sale, exchange, or transfer of all or substantially all of the assets of the
Company; or

 

 

                         (iv) a liquidation or dissolution of the Company.

                    (b) A “Change in Control” shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, the “Transaction”) wherein the shareholders of the Company
immediately before the Transaction do not retain immediately after the Transaction, in
substantially the same proportions as their ownership of shares of the Company’s voting stock
immediately before the Transaction, direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding voting stock of the Company or
the corporation or corporations to which the assets of the Company were transferred (the
"Transferee Corporation(s)”), as the case may be. For purposes of the preceding sentence, indirect
beneficial ownership shall include, without limitation, an interest resulting from ownership of the
voting stock of one or more corporations which, as a result of the Transaction, own the Company or
the Transferee Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether multiple sales or
exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive.

          8.2 Effect of Change in Control on Option. In the event of a Change in Control, any
unexercised portion of the Option shall be immediately exercisable and vested in full as of the
date ten (10) days prior to the date of the Change in Control. Any exercise of the Option that was
permissible solely by reason of this Section 8.2 shall be conditioned upon the consummation of the
Change in Control. In addition, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the “Acquiring Corporation”), may either assume the
Company’s rights and obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiring Corporation’s stock. The Option shall terminate and cease to
be outstanding effective as of the date of the Change in Control to the extent that the Option is
neither assumed or substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control. Notwithstanding the foregoing,
shares acquired upon exercise of the Option prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of this Option Agreement except as otherwise provided herein.
Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the
Option immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a
Change in Control is the surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the provisions of
Section 1504(b) of the Code, the Option shall not terminate.

     9. Adjustments for Changes in Capital Structure. In the event of any stock dividend,
stock split, reverse stock split, recapitalization, combination, reclassification, or similar
change in the capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Price and class of shares of stock subject to the Option. If a majority of the
shares which are of the same class as the shares that are subject to the Option are exchanged for,

 

 

converted into, or otherwise become (whether or not pursuant to an Ownership Change Event)
shares of another corporation (the “New Shares”), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such amendment, the
Number of Option Shares and the Exercise Price shall be adjusted in a fair and equitable manner, as
determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional
share resulting from an adjustment pursuant to this Section 9 shall be rounded down to the nearest
whole number, and in no event may the Exercise Price be decreased to an amount less than the par
value, if any, of the stock subject to the Option.

     10. Rights as a Shareholder. The Optionee shall have no rights as a shareholder with
respect to any shares covered by the Option until the date of the issuance of a certificate for the
shares for which the Option has been exercised (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made
for dividends, distributions or other rights for which the record date is prior to the date such
certificate is issued, except as provided in Section 9.

     11. Legends. The Company may at any time place legends referencing any applicable
federal, state or foreign securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of
the Company, promptly present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out the provisions of
this Section.

     12. Binding Effect. Subject to the restrictions on transfer set forth herein, this
Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their
respective heirs, executors, administrators, successors and assigns.

     13. Termination or Amendment. The Board may terminate or amend the Plan or the Option
at any time; provided, however, that no such termination or amendment may adversely affect the
Option or any unexercised portion hereof without the consent of the Optionee unless such
termination or amendment is necessary to comply with any applicable law, regulation or rule. No
amendment or addition to this Option Agreement shall be effective unless in writing.

     14. Integrated Agreement. This Option Agreement constitutes the entire understanding
and agreement of the Optionee and the Participating Company Group with respect to the subject
matter contained herein, and there are no agreements, understandings, restrictions,
representations, or warranties among the Optionee and the Participating Company Group with respect
to such subject matter other than those as set forth or provided for herein. To the extent
contemplated herein, the provisions of this Option Agreement shall survive any exercise of the
Option and shall remain in full force and effect.

 

 

     15. Applicable Law. This Option Agreement shall be governed by the laws of the State
of Delaware as such laws are applied to agreements between Delaware residents entered into and to
be performed entirely within the State of Delaware.

	 	 	 	 	 	 	 
	 	 	 	 	POWER INTEGRATIONS, INC.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 

     The Optionee represents that the Optionee is familiar with the terms and provisions of this
Option Agreement and hereby accepts the Option subject to all of the terms and provisions thereof.
The Optionee hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions arising under this Option Agreement.

	 	 	 	 	 	 	 
	 	 	 	 	OPTIONEE
	 
	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 

 

 

POWER INTEGRATIONS, INC.

NONSTATUTORY STOCK OPTION AGREEMENT

FOR OUTSIDE DIRECTORS

(ANNUAL OPTION)

     THIS NONSTATUTORY STOCK OPTION AGREEMENT FOR OUTSIDE DIRECTORS (ANNUAL OPTION) (the “Option
Agreement”) is made and entered into as of the Date of Option Grant, by and between Power
Integrations, Inc. and ___(the “Optionee”).

     The Company has granted to the Optionee an option to purchase certain shares of Stock,
pursuant to the Directors Compensation Program under the 2007 Equity Incentive Plan upon the terms
and conditions set forth in this Option Agreement (the “Option”). In the event of any conflict
between the provisions of the Option Agreement and those of the Plan, the provisions of the Option
Agreement shall control.

1. Definitions and Construction.

          1.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:

                    (a) “Date of Option Grant” means                                          , 20___.

                    (b) “Number of Option Shares” means eight thousand (8,000) shares of Stock, as adjusted from
time to time pursuant to Section 9.

                    (c) “Exercise Price” means $                      per share of Stock, as adjusted from time to
time pursuant to Section 9.

                    (d) “Initial Exercise Date” means the Initial Vesting Date.

                    (e) “Initial Vesting Date” means the date occurring twenty-five (25) months after the Date of
Option Grant.

 

 

                    (f) “Vested Ratio” means, on any relevant date, the ratio determined as follows:

	 	 	 	 	 	 	 
	 	 	 	 	Vested Ratio
	 	 	Prior to Initial Vesting Date

	 	 	0	 
	 	 	 
	 	 	 	 
	 	 	On Initial Vesting Date, provided the Optionee’s
Service has not terminated prior to such date

	 	 	1/12	 
	 	 	 
	 	 	 	 
	 	 	Plus
	 	 	 	 
	 	 	 
	 	 	 	 
	 	 	For each full month of the Optionee’s continuous
Service from the Initial Vesting Date until the
Vested Ratio equals 1/1, an additional

	 	 	1/12	 

                    (g) “Option Expiration Date” means the date ten (10) years after the Date of Option Grant.

                    (h) “Board” means the Board of Directors of the Company. If one or more Committees have been
appointed by the Board to administer the Plan, “Board” shall also mean such Committee(s).

                    (i) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.

                    (j) “Committee” means a committee of the Board duly appointed to administer the Plan and
having such powers as shall be specified by the Board. Unless the powers of the Committee have
been specifically limited, the Committee shall have all of the powers of the Board granted in the
Plan, including, without limitation, the power to amend or terminate the Plan at any time, subject
to the terms of the Plan and any applicable limitations imposed by law.

                    (k) “Company” means Power Integrations, Inc., a Delaware corporation, or any successor
corporation thereto.

                    (l) “Consultant” means any person, including an advisor, engaged by a Participating Company to
render services other than as an Employee or a Director.

                    (m) “Director” means a member of the Board or of the board of directors of any other
Participating Company.

                    (n) “Disability” means the permanent and total disability of the Optionee within the meaning
of Section 22(e)(3) of the Code.

 

 

                    (o) “Employee” means any person treated as an employee (including an officer or a Director who
is also treated as an employee) in the records of a Participating Company; provided, however, that
neither service as a Director nor payment of a director’s fee shall be sufficient to constitute
employment for purposes of the Plan.

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

                    (q) “Fair Market Value” means, as of any date, the value of a share of Stock or other property
as determined by the Board, in its sole discretion, or by the Company, in its sole discretion, if
such determination is expressly allocated to the Company herein, subject to the following:

                         (i) If, on such date, there is a public market for the Stock, the Fair Market Value of a share
of Stock shall be the closing sale price of a share of Stock (or the mean of the closing bid and
asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq
National Market, the Nasdaq Small-Cap Market or such other national or regional securities exchange
or market system constituting the primary market for the Stock, as reported in the Wall Street
Journal or such other source as the Company deems reliable. If the relevant date does not fall
on a day on which the Stock has traded on such securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which the Stock was so
traded prior to the relevant date, or such other appropriate day as shall be determined by the
Board, in its sole discretion.

                         (ii) If, on such date, there is no public market for the Stock, the Fair Market Value of a
share of Stock shall be as determined by the Board without regard to any restriction other than a
restriction which, by its terms, will never lapse.

                    (r) “Parent Corporation” means any present or future “parent corporation” of the Company, as
defined in Section 424(e) of the Code.

                    (s) “Participating Company” means the Company or any Parent Corporation or Subsidiary
Corporation.

                    (t) “Participating Company Group” means, at any point in time, all corporations collectively
which are then Participating Companies.

                    (u) “Plan” means the Power Integrations, Inc. 2007 Equity Incentive Plan.

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

                    (w) “Service” means the Optionee’s service with the Participating Company Group, whether in
the capacity of an Employee, a Director or a Consultant. The Optionee’s Service shall not be
deemed to have terminated merely because of a change in the capacity in which the Optionee renders
Service to the Participating Company Group or a change

 

 

in the Participating Company for which the Optionee renders such Service, provided that there
is no interruption or termination of the Optionee’s Service. The Optionee’s Service shall be
deemed to have terminated either upon an actual termination of Service or upon the corporation for
which the Optionee performs Service ceasing to be a Participating Company.

                    (x) “Stock” means the common stock of the Company, as adjusted from time to time in accordance
with Section 9.

                    (y) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the
Company, as defined in Section 424(f) of the Code.

          1.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Option Agreement. Except when
otherwise indicated by the context, the singular shall include the plural, the plural shall include
the singular, and the term “or” shall include the conjunctive as well as the disjunctive.

     2. Tax Status of the Option. This Option is intended to be a nonstatutory stock
option and shall not be treated as an incentive stock option within the meaning of Section 422(b)
of the Code.

     3. Administration. All questions of interpretation concerning this Option Agreement
shall be determined by the Board, including any duly appointed Committee of the Board. All
determinations by the Board shall be final and binding upon all persons having an interest in the
Option. Any officer of a Participating Company shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, or election which is the responsibility of
or which is allocated to the Company herein, provided the officer has apparent authority with
respect to such matter, right, obligation, or election.

     4. Exercise of the Option.

          4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable
on and after the Initial Exercise Date (provided the Optionee’s Service has not terminated prior to
such date) and prior to the termination of the Option (as provided in Section 6) in an amount not
to exceed the Number of Option Shares multiplied by the Vested Ratio less the number of shares
previously acquired upon exercise of the Option. In no event shall the Option be exercisable for
more shares than the Number of Option Shares.

          4.2 Method of Exercise. Exercise of the Option shall be by written notice to the Company
which must state the election to exercise the Option, the number of whole shares of Stock for which
the Option is being exercised and such other representations and agreements as to the Optionee’s
investment intent with respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, by confirmed facsimile
transmission, or by such other means as the Company may permit, to the Chief Financial Officer of
the Company, or other authorized representative of the Participating

 

 

Company Group, prior to the termination of the Option as set forth in Section 6, accompanied
by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased.
The Option shall be deemed to be exercised upon receipt by the Company of such written notice and
the aggregate Exercise Price.

          4.3 Payment of Exercise Price.

                    (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of Stock owned by the Optionee having a Fair Market Value not less than the aggregate
Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by any
combination of the foregoing.

                    (b) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company of shares of Stock to the extent such tender of Stock would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption of the Company’s
stock. The Option may not be exercised by tender to the Company of shares of Stock unless such
shares either have been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

                    (c) Cashless Exercise. A “Cashless Exercise” means the assignment in a form acceptable to the
Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock
acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal Reserve System). The
Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion,
to decline to approve or terminate any such program or procedure.

          4.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Optionee agrees to make adequate provision for any sums
required to satisfy the federal, state, local and foreign tax withholding obligations of the
Participating Company Group, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the Option, or (iii) the
lapsing of any restriction with respect to any shares acquired upon exercise of the Option.

          4.5 Certificate Registration. Except in the event the Exercise Price is paid by means of a
Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the Optionee.

          4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all
applicable requirements of federal, state or foreign law with respect to such

 

 

securities. The Option may not be exercised if the issuance of shares of Stock upon exercise
would constitute a violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, the Option may not be exercised unless (i) a registration
statement under the Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel
to the Company, the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the Securities Act. THE
OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE
SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN
THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to
the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the Option, the Company
may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.

          4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise of the Option.

     5. Nontransferability of the Option. The Option may be exercised during the lifetime
of the Optionee only by the Optionee or the Optionee’s guardian or legal representative and may not
be assigned or transferred in any manner except by will or by the laws of descent and distribution.
Following the death of the Optionee, the Option, to the extent provided in Section 7, may be
exercised by the Optionee’s legal representative or by any person empowered to do so under the
deceased Optionee’s will or under the then applicable laws of descent and distribution.

     6. Termination of the Option. The Option shall terminate and may no longer be
exercised on the first to occur of (a) the Option Expiration Date, (b) the last date for exercising
the Option following termination of the Optionee’s Service as described in Section 7, or (c) a
Change in Control to the extent provided in Section 8.

     7. Effect of Termination of Service.

          7.1 Option Exercisability.

                    (a) Disability. If the Optionee’s Service with the Participating Company Group is terminated
because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on
the date on which the Optionee’s Service terminated, may be exercised by the Optionee (or the
Optionee’s guardian or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Optionee’s Service terminated, but in any event no later than
the Option Expiration Date.

 

 

                    (b) Death. If the Optionee’s Service with the Participating Company Group is terminated
because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the
date on which the Optionee’s Service terminated, may be exercised by the Optionee’s legal
representative or other person who acquired the right to exercise the Option by reason of the
Optionee’s death at any time prior to the expiration of twelve (12) months after the date on which
the Optionee’s Service terminated, but in any event no later than the Option Expiration Date. The
Optionee’s Service shall be deemed to have terminated on account of death if the Optionee dies
within three (3) months after the Optionee’s termination of Service.

                    (c) Other Termination of Service. If the Optionee’s Service with the Participating Company
Group terminates for any reason, except Disability or death, the Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee within three (3) months after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date.

          7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of
the Option within the applicable time periods set forth in Section 7.1 is prevented by the
provisions of Section 4.6, the Option shall remain exercisable until three (3) months after the
date the Optionee is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

          7.3 Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale,
within the applicable time periods set forth in Section 7.1, of shares acquired upon the exercise
of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the
Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which a sale of such shares by the Optionee would no longer be subject to such suit,
(ii) the one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or
(iii) the Option Expiration Date.

     8. Ownership Change and Change in Control.

          8.1 Definitions.

                    (a) An “Ownership Change Event” shall be deemed to have occurred if any of the following
occurs with respect to the Company:

                         (i) the direct or indirect sale or exchange in a single or series of related transactions by
the stockholders of the Company of more than fifty percent (50%) of the voting stock of the
Company;

                         (ii) a merger or consolidation in which the Company is a party;

                         (iii) the sale, exchange, or transfer of all or substantially all of the assets of the
Company; or

 

 

                         (iv) a liquidation or dissolution of the Company.

                    (b) A “Change in Control” shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, the “Transaction”) wherein the stockholders of the Company
immediately before the Transaction do not retain immediately after the Transaction, in
substantially the same proportions as their ownership of shares of the Company’s voting stock
immediately before the Transaction, direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding voting stock of the Company or
the corporation or corporations to which the assets of the Company were transferred (the
“Transferee Corporation(s)”), as the case may be. For purposes of the preceding sentence, indirect
beneficial ownership shall include, without limitation, an interest resulting from ownership of the
voting stock of one or more corporations which, as a result of the Transaction, own the Company or
the Transferee Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether multiple sales or
exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive.

          8.2 Effect of Change in Control on Option. In the event of a Change in Control, any
unexercised portion of the Option shall be immediately exercisable and vested in full as of the
date ten (10) days prior to the date of the Change in Control. Any exercise of the Option that was
permissible solely by reason of this Section 8.2 shall be conditioned upon the consummation of the
Change in Control. In addition, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the “Acquiring Corporation”), may either assume the
Company’s rights and obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiring Corporation’s stock. The Option shall terminate and cease to
be outstanding effective as of the date of the Change in Control to the extent that the Option is
neither assumed or substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control. Notwithstanding the foregoing,
shares acquired upon exercise of the Option prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of this Option Agreement except as otherwise provided herein.
Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the
Option immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a
Change in Control is the surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the provisions of
Section 1504(b) of the Code, the Option shall not terminate.

     9. Adjustments for Changes in Capital Structure. In the event of any stock dividend,
stock split, reverse stock split, recapitalization, combination, reclassification, or similar
change in the capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Price and class of shares of stock subject to the Option. If a majority of the

 

 

shares which are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event)
shares of another corporation (the “New Shares”), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such amendment, the
Number of Option Shares and the Exercise Price shall be adjusted in a fair and equitable manner, as
determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional
share resulting from an adjustment pursuant to this Section 9 shall be rounded down to the nearest
whole number, and in no event may the Exercise Price be decreased to an amount less than the par
value, if any, of the stock subject to the Option.

     10. Rights as a Stockholder. The Optionee shall have no rights as a stockholder with
respect to any shares covered by the Option until the date of the issuance of a certificate for the
shares for which the Option has been exercised (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made
for dividends, distributions or other rights for which the record date is prior to the date such
certificate is issued, except as provided in Section 9.

     11. Legends. The Company may at any time place legends referencing any applicable
federal, state or foreign securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of
the Company, promptly present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out the provisions of
this Section.

     12. Binding Effect. Subject to the restrictions on transfer set forth herein, this
Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their
respective heirs, executors, administrators, successors and assigns.

     13. Termination or Amendment. The Board may terminate or amend the Plan or the Option
at any time; provided, however, that no such termination or amendment may adversely affect the
Option or any unexercised portion hereof without the consent of the Optionee unless such
termination or amendment is necessary to comply with any applicable law, regulation or rule. No
amendment or addition to this Option Agreement shall be effective unless in writing.

     14. Integrated Agreement. This Option Agreement constitutes the entire understanding
and agreement of the Optionee and the Participating Company Group with respect to the subject
matter contained herein, and there are no agreements, understandings, restrictions,
representations, or warranties among the Optionee and the Participating Company Group with respect
to such subject matter other than those as set forth or provided for herein. To the extent
contemplated herein, the provisions of this Option Agreement shall survive any exercise of the
Option and shall remain in full force and effect.

 

 

     15. Applicable Law. This Option Agreement shall be governed by the laws of the State
of Delaware as such laws are applied to agreements between Delaware residents entered into and to
be performed entirely within the State of Delaware.

	 	 	 	 	 	 	 
	 	 	 	 	POWER INTEGRATIONS, INC.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 

     The Optionee represents that the Optionee is familiar with the terms and provisions of this
Option Agreement and hereby accepts the Option subject to all of the terms and provisions thereof.
The Optionee hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions arising under this Option Agreement.

	 	 	 	 	 	 	 
	 	 	 	 	OPTIONEE
	 
	 	 	 	 	 	 
	Date:exv10w5

Exhibit 10.5

Confidential Treatment Requested — Redacted Copy

CONFIDENTIAL TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED IS OMITTED AND NOTED WITH “***.” AN UNREDACTED VERSION OF THIS
DOCUMENT HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION.

CLINICAL SUPPLY AGREEMENT

     This CLINICAL SUPPLY AGREEMENT (this “Agreement”) is entered into as of the 15th day of
August, 2008 (“Effective Date”), by and between Cook Pharmica LLC a Delaware Limited Liability
Company with offices at 1300 South Patterson Drive, Bloomington, Indiana 47403 (“COOK”) and
HALOZYME, INC. a California corporation with an office at 11388 Sorrento Valley Road, San Diego, CA
92121 (“CLIENT”). In this Agreement, COOK and CLIENT each may be referred to individually as a
“Party” and together as “Parties.”

RECITALS

     WHEREAS, COOK is in the business of manufacturing and testing biological products; and

     WHEREAS, CLIENT is the proprietor of a certain enzyme known as rHuPH20; and

     WHEREAS, COOK has expertise in the production of monoclonal antibodies and recombinant
proteins for therapeutic use using cell lines; and

     WHEREAS, subject to the terms and conditions set forth in this Agreement, CLIENT wishes to
have COOK manufacture for CLIENT a clinical stage biological Product (hereinafter defined); and

     WHEREAS, subject to the terms and conditions set forth in this Agreement, COOK wishes to
manufacture Product for CLIENT.

     NOW, THEREFORE, the Parties hereto, intending to be legally bound, hereby agree as follows:

1. Definitions. For purposes of this Agreement, the following terms will have the meanings set
forth below:

     1.1 “Affiliates” means, with respect to any Person, another Person that, directly or
indirectly, controls, is controlled by or is under common control with such Person. The term
“control” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. The direct or indirect ownership of at least fifty percent
(50%) or, if smaller, the maximum allowed by applicable law, of the voting securities of a business
entity or of an interest in the assets, profits or earnings of a Person shall be deemed to
constitute “control” of the Person.

     1.2 “Applicable Laws” means all ordinances, rules and regulations of any kind whatsoever of
any governmental or regulatory authority, including, without limitation, the FDCA, that are
applicable with respect to the context in which the term is used.

Page 1 of 22

 

Confidential Treatment Requested — Redacted Copy

     1.3 “Audit” means an audit pursuant to which CLIENT or their appointed representatives (such
representatives to be reasonably acceptable to COOK) may (a) review the processes, procedures and
documents of COOK that are used or maintained by COOK to provide the Services, (b) assess COOK’s
compliance with CGMP, Applicable Laws and quality assurance standards associated with performing
the Services, and (c) discuss any related issues with COOK’ personnel and management involved in
performing the Services.

     1.4 “Cell Line” means ***.

     1.5 “CGMP” means Current Good Manufacturing Practices and General Biologics Products Standards
as promulgated under the FDCA.

     1.6 “CLIENT Information” means all confidential and proprietary technical information not in
the public domain relating to the Cell Line, the Process and the Product, from time to time
supplied by CLIENT to COOK, or arranged by CLIENT to be supplied by a third party (such as a prior
manufacturer) to COOK. The CLIENT Information shall be the Confidential Information of CLIENT.

     1.7 “CLIENT Intellectual Property Rights” means all patent and other intellectual property
rights owned or controlled by CLIENT, other than those patents and patent applications subject to
Section 9.4, that claim, cover, or are otherwise related to or useful for the Process, a Product or
any other technology provided by CLIENT hereunder.

     1.8 “CLIENT Materials” means the materials supplied by CLIENT to COOK as outlined in the
signed and accepted Project Plan.

     1.9 “CLIENT Tests” means the tests to be carried out on the Product immediately following
receipt of the Product by CLIENT as determined by CLIENT in its sole discretion.

     1.10 “Confidential Information” means all confidential or proprietary information of a Party
that the other Party receives or learns under this Agreement. Confidential Information shall
include without limitation the manufacturing processes transferred to, used by or improved by COOK
under this Agreement.

     Confidential Information shall not include any information to the extent that it:

          (a) is now, or hereafter becomes, through no act or failure to act on the part of the
receiving Party in breach of Article 7, generally known or available;

          (b) is known by the receiving Party at the time of receiving such information, as shown by
written records predating such receipt;

          (c) is furnished after the Effective Date to the receiving Party by a third party, without
breach of and not subject to any obligation of confidentiality; or

 

			
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Confidential Treatment Requested — Redacted Copy

          (d) is independently developed by the receiving Party without use of or reference to
Confidential Information of the other Party, as shown by independent written records,
contemporaneous with such development.

     The Parties agree that the material financial, commercial, scientific and technical terms of
the Agreement will be considered Confidential Information of both Parties. Notwithstanding the
foregoing, either Party may disclose such terms to bona fide potential corporate partners,
potential investors or merger or acquisition partners, and to financial underwriters and legal and
financial advisors, provided that all such disclosures shall be made only to such Parties under
commercially reasonable obligations of confidentiality equivalent to the obligations set forth in
Article 7.

     1.11 “COOK Intellectual Property Rights” means all patent and other intellectual property
rights owned or controlled by COOK, including without limitation, COOK Know-How other than those
patents or patent applications covered by Section 9.4, that claim or cover any method, process,
know-how, trade secret or other technology that COOK incorporates or uses in the course of
performing the Services (other than a Project Invention) that is necessary or useful to utilize any
method, process or other work product developed or refined in the course of the Services.

     1.12 “COOK Know-How” means unpatented and/or unpatentable technical information, including
ideas, concepts, inventions, discoveries, data, designs, formulas, specifications, procedures for
experiments and tests and other protocols, results of experimentation and testing, cell culture and
purification techniques, and assay protocols owned by COOK as of the Effective Date which may be
necessary for the performance of the Services. All COOK Know-How shall be Confidential Information
of COOK.

     1.13 “Damages” means any and all costs, losses, claims, actions, liabilities, fines,
penalties, costs and expenses, court costs, and fees and disbursements of counsel, consultants and
expert witnesses incurred by a Party hereto (including interest which may be imposed in connection
therewith).

     1.14 “FDA” means the United States Food and Drug Administration, any comparable agency in any
Foreign Jurisdiction, and any successor agency or entity to any of the foregoing that may be
established hereafter.

     1.15 “FDCA” means the Federal Food, Drug and Cosmetic Act (21 U.S.C. (S).301 et seq.).

     1.16 “Field” shall mean hyaluronidase enzymes, including without limitation, the Product,
CLIENT Materials, practice of the Process, any improvements, modifications or derivatives thereof,
as well as all uses thereof and/or methods of manufacture therefor.

     1.17 “Foreign Jurisdiction” means any jurisdiction, not governed by the United States or any
political subdivision thereof, as agreed upon by the Parties.

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Confidential Treatment Requested — Redacted Copy

     1.18 “IND” means an Investigation New Drug application or any comparable application required
by a Foreign Jurisdiction filed for the Product by CLIENT with the FDA and all subsequent
submissions, supplements or amendments related thereto.

     1.19 “Inventions” means all innovations, inventions, improvements, original works of
authorship, developments, concepts, know-how or trade secrets, whether or not patentable, that, are
created or conceived and reduced to practice during the term of this Agreement and that arise out
of the activities contemplated hereunder.

     1.20 “Master Batch Records” means the document that contains the instructions for
manufacturing the Product, and the related Product Specifications. Prior to the initiation of the
first CGMP manufacturing run, the Master Batch Record shall be approved by CLIENT in writing.
CLIENT’s written approval of the Master Batch Record is also an acknowledgement that CLIENT adopts
the Master Batch Record as its own specification in accordance with Section 6.7 of this agreement.
Any changes or additions to the Master Batch Record after initial approval by CLIENT shall be made
by the written agreement of COOK and CLIENT.

     1.21 “NDA” means New Drug Application or any comparable application required by a Foreign
Jurisdiction filed for the Product by CLIENT with the FDA and all subsequent submissions,
supplements or amendments related thereto.

     1.22 “Person” means a natural person, a corporation, a partnership, a trust, a joint venture,
a limited liability company, any governmental authority or any other entity or organization.

     1.23 “Price” means the price(s) specified in the signed and accepted Project Plan attached
hereto.

     1.24 “Process” means the process for the production of the Product from the Cell Line using
the Master Batch Records, including any improvements thereto from time to time made as a result of
the Services.

     1.25 “Process Development Agreement” means that certain Process Development Agreement entered
into between the Parties and dated April 3, 2008.

     1.26 “Product” means the rHuPH20 Enzyme derived from the Cell Line manufactured by COOK
utilizing the Process.

     1.27 “Product Specifications” means the product specifications listed under the column
“Acceptance Criteria” as set forth in the Master Batch Records.

     1.28 “Project Inventions” means any Invention arising out of or relating to the Services
performed by COOK under this Agreement and/or the use of CLIENT Materials. For the avoidance of
doubt, a Project Invention shall include Inventions made solely by employees of COOK, CLIENT or
jointly by such employees.

     1.29 “Project Plan” means the binding addendum to this Agreement to be signed by both Parties
setting forth the the proposed scope of work for the manufacture of Product. Any

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Confidential Treatment Requested — Redacted Copy

changes or additions to the Project Plan shall be made by written agreement of COOK and
CLIENT.

     1.30 “Services” means all or any part of the services, including the manufacture of Product
for sale to CLIENT, to be provided by COOK (or any permitted subcontractor) for the benefit of
CLIENT pursuant to this Agreement as further described in the signed and accepted Project Plan.

     1.31 “Termination Fee” means, with respect to each manufacturing run that is cancelled by
CLIENT, or this Agreement is otherwise terminated, within ***  of the scheduled
run date, a sum equal to the total batch price of all such manufacturing runs which were not
produced, as outlined in the Project Plan. With respect to any such cancelled or otherwise
terminated manufacturing runs, Cook shall use commercially reasonable efforts to sell the
applicable manufacturing capacity to its other customers and some portion, or all, of the
Termination Fee may be refunded to CLIENT in the event that Cook is able to sell the manufacturing
capacity that corresponds to such manufacturing runs that were cancelled. For the avoidance of
doubt, no Termination Fee accrues with respect to a manufacturing run that is cancelled or
otherwise terminated more than *** prior to the scheduled run date.

     1.32 “Terms of Payment” means the terms of payment specified in Section 5.

     1.33 “Testing Laboratories” means any third party instructed by COOK to carry out tests on the
Cell Line or the Product.

     1.34 “United States” means the fifty (50) states, the District of Columbia and all of the
territories of the United States of America.

     1.35 “Quality Agreement” means the written agreement, signed by both Parties, that sets forth
the safety, quality control, and quality assurance aspects of the manufacture and supply of the
Product. The Quality Agreement shall be executed by both Parties prior to the initiation of the
first batch of Product.

2. SUPPLY BY CLIENT.

     2.1 Prior to or immediately following the Effective Date of this Agreement CLIENT shall supply
to COOK, certain CLIENT Information necessary for COOK to perform the Services, as determined by
CLIENT in its sole discretion, together with full details of any known hazards relating to CLIENT
Materials with respect to their storage and use. COOK shall not use the CLIENT Materials or CLIENT
Information (or any part thereof) for any other purpose without the prior written consent of
CLIENT. Following review of this CLIENT Information and details, CLIENT shall provide the CLIENT
Materials to COOK at COOK’s request when COOK has satisfactorily determined that CLIENT Materials
do not pose a hazard to COOK. CLIENT shall render all reasonable assistance to COOK in making such
determination. All

 

			
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property rights in the CLIENT Intellectual Property Rights, CLIENT Information and/or CLIENT
Materials supplied to COOK shall remain solely vested in CLIENT, except as set forth in Section
9.3(b).

     2.2 COOK shall:

          2.2.1 at all times use all reasonable efforts to keep the CLIENT Materials secure and safe
from loss or damage but in no case in a lesser manner than COOK stores material of similar nature;

          2.2.2 not transfer to a third party any part of the CLIENT Materials or the Product, except to
a permitted subcontractor or for the purpose of any tests at the Testing Laboratories, provided,
that, CLIENT is given prior notification or if CLIENT has given prior written consent to such
transfer; and

          2.2.3 provide that any such subcontractor and Testing Laboratories are subject to obligations
of confidence, restrictions on use and ownership of resulting intellectual property materially in
the form of, and no less restrictive than, those obligations of confidence, restrictions on use and
ownership of resulting intellectual property imposed on COOK under this Agreement.

     2.3 CLIENT warrants to COOK that CLIENT is and shall at all times throughout the duration of
this Agreement remain entitled to supply the CLIENT Materials and Client Intellectual Property
Rights to COOK for the performance of the Services.

     2.4 CLIENT warrants that, to CLIENT’s knowledge, the use by COOK of CLIENT Materials and
Client Intellectual Property Rights for the Services and the Product produced thereby will not
infringe or is not alleged to infringe any rights (including, without limitation, any intellectual
or other proprietary rights) vested in any third party.

     2.5 CLIENT shall indemnify, defend and hold harmless COOK against any loss, damage, costs and
expenses of any nature (including court costs and legal and other fees incurred by COOK or ordered
as payable by COOK), whether or not foreseeable or in the contemplation of COOK or CLIENT, that
COOK may suffer as a result of any third party claims, suits or actions arising out of or
incidental to (a) any breach of the warranties given in Sections 2.4 and 2.5 above, (b) any breach
of any covenants herein by CLIENT, (c) the distribution or use of the Product by CLIENT, except to
the extent such loss, damage, costs and expenses are caused by COOK’s gross negligence or willful
misconduct or breach of any term of this Agreement, or (d) any claims by third parties alleging
COOK’s use of the Cell Line, CLIENT Materials or Client Intellectual Property Rights, in each case
strictly in accordance with the terms of the Project Plan, infringes any rights (including, without
limitation, any intellectual or other proprietary rights) vested in any third party (whether or not
CLIENT knew or should have known about such alleged infringement) except to the extent COOK
infringes any rights of any third parties by application of its production techniques while
performing the Services unless such application or production technique has been developed as part
of the Services. For the purposes of Sections 2.6 and 2.7, the term, production technique(s), is
limited to all and any physical arrangement and use of plant, equipment and processes in the
provision of Services.

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     2.6 COOK shall indemnify, defend and hold harmless CLIENT against any loss, damage, costs and
expenses of any nature (including court costs and legal and other fees incurred by CLIENT or
ordered as payable by CLIENT), whether or not foreseeable or in the contemplation of CLIENT or
COOK, that CLIENT may suffer as a result of any third party claims, suits or actions arising from
COOK’s breach of any representation, warranty or covenant in this Agreement except to the extent
the loss or damage is a result of (a) CLIENT’s gross negligence or willful misconduct or (b) COOK’s
use of an application or production technique that has been developed as part of the Services for
CLIENT or is supplied by CLIENT. For the avoidance of doubt where COOK’s application or production
techniques, existed prior to the Effective Date, are not developed as part of the Services hereto
and whether or not included in the Master Batch Records, then they are covered by COOK’s
undertaking of indemnity and hold harmless.

     2.7 A Party (the “Indemnitee”) that intends to claim indemnification under this Section 2 or
under Section 6.6 shall promptly notify the other Party (the “Indemnitor”) of any claim, demand,
action or other proceeding for which the Indemnitee intends to claim such indemnification. The
Indemnitor shall have the right to participate in, and to the extent the Indemnitor so desires, to
assume the defense thereof with counsel selected by the Indemnitor; provided, however, that the
Indemnitee shall have the right to retain its own counsel, with the fees and expenses to be paid by
the Indemnitor, if representation of the Indemnitee by the counsel retained by the Indemnitor would
be inappropriate due to actual or potential differing interests between the Indemnitee and any
other Party represented by such counsel in such proceeding. The indemnity obligations under this
Section 2 or under Section 6.6 shall not apply to amounts paid in settlement of any claim, demand,
action or other proceeding if such settlement is effected without the prior express written consent
of the Indemnitor, which consent shall not be unreasonably withheld or delayed. The failure to
deliver notice to the Indemnitor within a reasonable time after notice of any such claim or demand,
or the commencement of any such action or other proceeding, if prejudicial to its ability to defend
such claim, demand, action or other proceeding, shall relieve such Indemnitor of any liability to
the Indemnitee under this Section 2 or under Section 6.6 with respect thereto, but the omission so
to deliver notice to the Indemnitor shall not relieve it of any liability that it may have to the
Indemnitee otherwise than under this Section 2 or under Section 6.6. The Indemnitor may not settle
or otherwise consent to an adverse judgment in any such claim, demand, action or other proceeding
that diminishes the rights or interests of the Indemnitee without the prior express written consent
of the Indemnitee, which consent shall not be unreasonably withheld or delayed. The Indemnitee,
its employees and agents shall reasonably cooperate with the Indemnitor and its legal
representatives in the investigation and defense of any claim, demand, action or other proceeding
covered by this Section 2 or under Section 6.6.

     2.8 Notwithstanding the above, COOK shall be at liberty to use CLIENT Information as it sees
fit in providing the Services subject to nondisclosure pursuant to Article 7.

     2.9 The obligations of each Party under this Article 2 shall survive the termination of this
Agreement for whatever reason.

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3. Provision of the Services

     3.1 COOK shall provide sufficient manufacturing capacity and diligently perform the Services
as provided in the signed and accepted Project Plan (Appendix A) and shall use all reasonable
commercial efforts to achieve the estimated schedules and amounts of Product. Furthermore, COOK
shall keep CLIENT regularly informed of any changes to the estimated schedules for performance of
the Services and provide regular reports, in a form agreed by the Parties.

     3.2 COOK shall manufacture all Product under this Agreement pursuant to the Master Batch
Records, the Product Specifications, and in accordance with CGMP and all applicable laws and
regulations.

     3.3 COOK shall keep and maintain all data, information and records regarding the manufacture
of the Product, including, without limitation, analytical and manufacturing documentation and
quality control information as set forth in the Quality Agreement.

     3.4 Except as set forth in Section 8, due to the unpredictable nature of the biological
processes involved in the Services, the schedules set down for the performance of the Services
(including, without limitation, the dates for production and delivery of Product) set out in the
signed and accepted Project Plan are good faith estimates only.

     3.5 Unless otherwise agreed, COOK shall package and label Product for delivery in accordance
with its standard operating procedures, and as authorized and directed by a completed shipment
request form (as defined in the Project Plan). It shall be the responsibility of CLIENT to provide
prior written notice to COOK of any special packaging and labeling requirements for Product. If
additional costs and expenses would be incurred by COOK in complying with such special
requirements, a revised proposal would be generated to encompass the change in scope and additional
costs would be borne by CLIENT.

     3.6 Joint Communication on Manufacturing: COOK and CLIENT shall communicate and cooperate on
a regular basis during the provision of Services herein and in the event that the Parties observe
the need for a regular and active committee, such body shall be established and meet regularly to
discuss and communicate the progress of the Services.

     3.7 Person in Plant: CLIENT shall be allowed to have, at its cost, a maximum of two (2)
employees of CLIENT at the COOK facility, escorted by COOK personnel, with reasonable access to the
facility used for the performance of the Services for the purpose of observing, reporting on, and
consulting as to such Services. COOK will reasonably cooperate in enabling (e.g., providing
necessary training to allow for compliance with COOK procedures) such employees of CLIENT to carry
out their responsibilities and will make adequate temporary desk space and other reasonable
resources available to these employees during the periods they are working at the facility.
Notwithstanding the confidentiality provisions of this agreement, CLIENT acknowledges that certain
portions of the facility will not be accessible at times due to the confidential requirements of
COOK’s other customers. COOK will try to reasonably accommodate CLIENT’s requests for access to
such areas, but CLIENT acknowledges that COOK, with respect to granting of requests for such
access, has contractual obligations for the

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protection of other customer’s information. CLIENT will carry adequate workers compensation
insurance for each of its employees at the COOK facility, and provide a waiver of subrogation to
COOK for claims made not as a result of COOK’s gross negligence or willful misconduct.

     3.8 COOK shall provide CLIENT, as outlined in the Project Plan, with all documents CLIENT
reasonably requests regarding COOK’s performance of the Services and conducting the Process of
manufacturing the Product; provided, however, in the event that CLIENT requests any documentation
beyond that which COOK is expressly required to maintain pursuant to this Agreement, or which is
otherwise already prepared by COOK and related to the Products or the Process, a revised proposal
would be generated to encompass the change in scope and additional costs would be borne by CLIENT.

     3.9 Once per annum, or more frequently to conduct ‘for cause’ Audits to address Product
quality or safety problems discovered through Product quality issues, or as otherwise needed to
ensure issues identified in a previous Audit have been rectified, and in each case with adequate
notice, CLIENT shall have the right to have CLIENT representatives (including licensees and
collaborators of CLIENT to whom CLIENT is obligated to supply Product) Audit COOK’s manufacturing
facilities during normal business hours. Notwithstanding the foregoing notice period, for purposes
of confidentiality, safety and to avoid the possibility of contamination, if a third party’s
product is being produced during the time that CLIENT intends to conduct an Audit, such Audit may
be reasonably delayed upon prior written notice to CLIENT. The form, participants and procedures
of the Audit shall be subject to COOK’s reasonable approval. The number of Audits shall be
reasonable in number and shall in no event unduly interfere with the conduct of Cook’s business
operations. The number of Audits shall be reasonable in number and shall in no event unduly
interfere with the conduct of Cook’s business operations. When conducting an Audit, CLIENT and as
applicable, each of CLIENT’s representatives will: (a) be subject to a nondisclosure obligation
comparable in scope to Article 7, (b) follow such security and facility access procedures as are
reasonably designated by COOK, (c) be accompanied by a COOK representative, (d) not enter areas of
any COOK facility at times when any third party’s products are being manufactured to assure
protection of COOK’s or third party confidential information; provided, however, that COOK will
attempt to reasonably accommodate requests for access to any portion of COOK’s facility that
relates to the manufacture of Product during the period of a planned Audit, and (e) use good faith
efforts to avoid disrupting COOK’s operations. In addition to an Audit, COOK agrees to reasonably
cooperate with all regulatory authorities and shall submit to reasonable Product-specific
inspections by such authorities (“Regulatory Inspection”).

4. CLIENT Tests and Return Procedures

     4.1 Except where CLIENT has accepted COOK Product tests and provided written notice to COOK of
such acceptance, promptly following delivery of Product (in any event within fifteen (15) days), or
a sample of Product (if such sample is requested by CLIENT), CLIENT shall carry out CLIENT Tests.
If CLIENT Tests show that the Product fails to meet Product Specifications, CLIENT shall give COOK
written notice thereof as soon as practicable but in no case later than thirty (30) days from the
date CLIENT takes delivery of the Product (or sample of the Product, if applicable) and shall
return such Product (or sample) to COOK’s premises for further testing. In the absence of such
written notice Product shall be deemed to have been

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accepted by CLIENT as meeting Product Specifications. If COOK agrees that Product is
Nonconforming Product (as defined below), then it shall at CLIENT’s discretion replace such Product
at its own cost and expense, subject to Section 4.3. “Nonconforming Product” means any Product
that has been delivered to CLIENT but fails to meet Product Specifications, and such failure is not
due (in whole or in part) to (a) material acts or omissions of CLIENT, (b) the inherent nature of
the biological product and processes to the extent outside the reasonable control of COOK, or (c)
any third party after delivery of such Product to CLIENT.

     FOR THE AVOIDANCE OF DOUBT, WHERE THE SPECIFICATION HAS NOT BEEN AGREED BY THE PARTIES HERETO
COOK SHALL BE OBLIGED ONLY TO USE ITS REASONABLE ENDEAVOURS TO PRODUCE PRODUCT THAT MEETS DRAFT
PRODUCT SPECIFICATIONS.

     4.2 If there is any dispute concerning whether Product is Nonconforming Product, such dispute
shall be referred for decision to an independent expert (acting as an expert and not as an
arbitrator) to be appointed by agreement between COOK and CLIENT.

          4.2.1 The costs of such independent expert shall be borne by the Parties equally; provided
that the Party that is determined to be incorrect in the dispute shall be responsible for all such
costs and shall indemnify the correct Party for its share of the costs incurred. The decision of
such independent expert shall be in writing and shall be binding on both COOK and CLIENT.

     4.3 In the event Product is determined to be Nonconforming Product (whether by agreement of
COOK pursuant to Section 4.1 or by an independent expert pursuant to Section 4.2), COOK shall
replace the Nonconforming Product with Product that conforms to the Product Specifications at its
own cost and expense and shall use commercially reasonable efforts to replace such Product as soon
as reasonably practicable given any contractually obligated capacity constraints.

     4.4 In the event that the Parties hereto agree that a shipment or batch of Product fails to
meet Product Specifications, the entire shipment or batch of Product that failed to meet Product
Specifications shall either be returned to COOK or destroyed, at COOK’s option.

     4.5 The provisions of this Article 4 shall be the sole remedies available to CLIENT in respect
of replacement of Product that fails to meet Product Specifications.

5. Price and Terms of Payment/Insurance

     5.1 CLIENT shall pay the Price for Services rendered by COOK in accordance with the signed and
accepted Project Plan.

     Each of CLIENT and COOK shall during the term of this Agreement maintain in full force and
effect insurance coverage adequate in scope for: (a) as to COOK, the Services performed by it, and
(b) as to CLIENT, the development, marketing and commercialization of Products (including products
liability coverage).

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     COOK shall generate monthly invoices for all fees and cost reimbursements. Billings for
engineering and CGMP production batches will be submitted after the completion and COOK quality
release of each batch. Invoices for cost reimbursement will include appropriate documentation of
costs incurred. Unless otherwise indicated in writing by COOK, all prices and charges are
exclusive of any applicable taxes, levies, import duties and fees of whatever nature imposed by or
under the authority of any government or public authority, which shall be paid by CLIENT (other
than taxes on COOK’s net income). CLIENT shall pay invoices within thirty (30) days of invoice
date. Payment shall be made without deduction, deferment, set-off, lien or counterclaim of any
nature. If any inconsistencies or mistakes are discovered in an invoice, the Parties shall make
immediate adjustment, by reimbursement or credit, as applicable. Invoices that remain unpaid more
than fifteen (15) days beyond the scheduled payment due date may be subject to an interest charge
equal to one and a half percent (1.5%) per month, calculated from the scheduled payment due date
forward; provided that in no event shall such annual rate exceed the maximum interest rate
permitted by law in regard to such payments. Such payments when made shall be accompanied by all
interest so accrued. Payments may either be made by check or wire transfer of immediately
available funds to the following account:

ABA (routing): ***

Account: ***

Account Title: ***

Cook Pharmica LLC

1300 South Patterson Drive

PO Box 970

Bloomington, Indiana 47402

Attention: Accounting Dept.

6. Warranty and Limitation of Liability

     6.1 Each Party represents and warrants that:

          6.1.1 It is a corporation (in the case of CLIENT) or a limited liability company (in the case
of COOK) duly organized, validly existing and in good standing under the laws of the state in which
it is incorporated or organized, as applicable and the full corporate or company power and
authority and the legal right to own and operate its property and assets to carry on its business
as it is now being conducted and as contemplated in this Agreement.

          6.1.2 As of the date of this Agreement (a) it has the corporate or company power and authority
and the legal right to enter into this Agreement and perform its obligations hereunder; and (b)
this Agreement has been duly executed and delivered on behalf of such Party,
and constitutes a legal, valid and binding obligation of such Party and is enforceable against
it in accordance with its terms.

 

			
	***	 	Portions of this page have been omitted pursuant to
a request for Confidential Treatment filed separately with the Commission.

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     6.2 COOK warrants that:

          6.2.1 the Services shall be performed in accordance with Section 3.1; and

          6.2.2 the Product when made available at COOK’s shipping docks shall meet Product
Specifications, except where the Product Specifications has not been agreed between the Parties
hereto in which case COOK shall be obliged only to use its reasonable commercial efforts to produce
Product that meets draft Product Specifications; and

          6.2.3 the Product delivered to CLIENT pursuant to this Agreement shall conform to the Product
Specifications and that such Product shall (a) be free from defects in material and workmanship,
(b) be manufactured in accordance with CGMP and Applicable Laws and (c) be manufactured in
accordance with the Master Batch Records as agreed and accepted in the Project Plan.

     6.3 Section 6.2 is in lieu of all conditions, representations and warranties and statements in
respect of the Services and/or the Product warranties whether expressed or implied by statute,
custom of the trade or otherwise (including but without limitation any such condition, warranty or
statement relating to the description or quality of the Product, its fitness for a particular
purpose or use under any conditions whether or not known to COOK) and any such condition, warranty
or statement is hereby excluded. COOK MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PRODUCT AND/OR THE SERVICES. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE
HEREBY DISCLAIMED BY COOK.

     6.4 Without prejudice or modification to the terms of Sections 6.1 and 6.2, and specifically
excluding COOK’s liability arising under Section 2.7, or Articles 7 or 9, the liability of COOK to
CLIENT, its permitted assigns and successors in interest, for any loss suffered by CLIENT or its
permitted assigns and successors in interest, arising as a direct result of a breach of this
Agreement, or of any other liability, including without limitation, misrepresentation and
negligence (whether active, passive or imputed), arising out of this Agreement and Services
provided thereunder, including without limitation the production and/or supply of the Product,
shall be limited to the payment of damages which shall not exceed in US Dollars THE PRICE FOR
SERVICES PAID BY CLIENT UNDER THE AGREEMENT; provided, however, if and to the extent such damages
are caused by COOK’s willful or intentional breach of this Agreement or willful or intentional
misconduct in the performance of the Services, then the damage limitation in this Section 6.4 shall
not apply.

     6.5 Neither Party shall in any event be liable for the following loss or damage howsoever
caused (even if foreseeable or in the contemplation of COOK or CLIENT):

          6.5.1 loss of profits, business or revenue suffered by the other Party or any other person who
may be subrogated to, or assigned rights in the loss or damage; or

          6.5.2 special, indirect or consequential loss, whether suffered by the other Party or any
other person.

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     6.6 CLIENT shall indemnify, defend and hold harmless and maintain COOK indemnified and held
harmless against all Damages in respect of:

          6.6.1 any product liability in respect of Product provided to CLIENT hereunder, except for
COOK’s obligations to indemnify in Section 2.7 above; and

          6.6.2 any negligent (active, passive or imputed), gross negligence or intentional act or
omission of CLIENT in relation to the use, processing, storage or sale of the Product provided to
CLIENT hereunder.

     CLIENT represents and warrants that unless already expressly agreed in a written and executed
document immediately prior to the initiation of the first CGMP manufacturing run, CLIENT will adopt
the Master Batch Records as its own specification. Any changes or additions to the Master Batch
Records shall be made with the written approval of CLIENT.

     The obligations of CLIENT under this Article 6 shall survive the termination for whatever
reason of this Agreement.

7. Confidentiality

     7.1 Confidential Information. Except as expressly provided herein, the Parties agree that,
for the term of this Agreement and for fifteen (15) years thereafter, each of them shall keep
completely confidential and shall not publish or otherwise disclose and shall not use for any
purpose except for the purposes contemplated by this Agreement (including without limitation to
exercise the rights set forth herein) any Confidential Information of the other Party. Any
information developed in the performance of the Services (regardless of whether solely or jointly
developed) that relates solely to the Field and is not reasonably understood or anticipated by the
Parties to have relevance outside the Field, is CLIENT Confidential Information for the purposes of
this Article 7, and is included within the scope of the license grant to CLIENT under Section
9.4(b).

     7.2 Permitted Use and Disclosures. The receiving Party may use or disclose Confidential
Information to the extent such use or disclosure is reasonably necessary in complying with any
applicable law, regulation or court order or in conducting clinical trials; provided that if the
receiving Party is required to make any such disclosure of Confidential Information, other than
pursuant to a confidentiality agreement, it will give reasonable advance notice to the disclosing
Party of such disclosure and will use its reasonable efforts to secure confidential treatment of
such Confidential Information prior to its disclosure (whether through protective orders, requests
for confidential treatment or otherwise).

     7.3 Confidential Terms. Except as expressly provided herein, each Party agrees not to
disclose any terms of this Agreement to any third party without the consent of the other Party;
provided that disclosures may be made as required by securities or other applicable laws or
regulations, or court order, or as reasonably necessary to actual or prospective business partners
pursuant to a confidentiality agreement with terms at least as stringent as those in this
Agreement, or to a Party’s accountants, attorneys and other professional advisors owing a
contractual or other duty of confidentiality to such Party. Upon the reasonable written request of
the disclosing Party, the receiving Party shall promptly return or destroy, and certify the same in

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writing, all Confidential Information of the other Party; provided that the receiving Party may
retain one (1) copy of any such Confidential Information in its files for purposes of maintaining
appropriate records of its activities in connection with this Agreement.

     7.4 Use of Name. Neither Party shall use the name or trademarks of the other Party, except to
the extent that a Party is permitted to use the Confidential Information of the other Party or
required to do so pursuant to this Article 7, without the prior written consent of such other
Party, such consent not to be unreasonably withheld, provided, however, that CLIENT may use COOK’s
name and logo when referring to the use of COOK’s process development or contract manufacturing
services and COOK may use CLIENT’s name and logo when referring to participants in its process
development or contract manufacturing program.

8. Termination

     8.1 If it becomes apparent to either COOK or CLIENT at any stage in the provision of the
Services that it will not be possible to complete the Services for technical reasons due solely to
the uncertainty of the biological processes involved that are outside the reasonable control of
COOK and independent from those reasons attributable to the fault or non-performance of either
Party, the Parties will use good faith commercially reasonable efforts for up to a sixty (60) day
period to mutually resolve such problems. If, after using the foregoing level of effort, the
Parties are unable to resolve such problems within the sixty (60) day period, COOK and CLIENT shall
each have the right to terminate this Agreement upon written notice to the other Party. In the
event of such termination, CLIENT will reimburse COOK for all reasonable and appropriate costs
under this Agreement incurred by COOK to the effective date of termination for services performed,
for reasonable commitments that cannot be cancelled, for reasonable resources and materials on hand
that cannot be reallocated, the Termination Fee and for all other reasonable costs that COOK incurs
in transferring the technology to CLIENT as requested by CLIENT in writing.

     8.2 Notwithstanding anything in this Agreement to the contrary, if the Process Development
Agreement entered into between COOK and CLIENT is terminated by either party for failure to
successfully complete the process development services described therein for reasons other than a
breach by CLIENT, then no Termination Fee shall be owing by CLIENT under this Agreement.

     8.3 CLIENT shall be entitled to terminate this Agreement at any time for any reason with
written notice to COOK at least one hundred twenty (120) days prior to such termination. For any
termination under this Section 8.2 CLIENT shall be responsible to pay to COOK the Termination Fee.
In addition, CLIENT will reimburse COOK for all reasonable and appropriate costs under this
Agreement incurred by COOK to the effective date of termination for services performed, for
reasonable commitments that cannot be cancelled, and for reasonable resources and materials on hand
that cannot be reallocated, and for all other costs that COOK incurs in transferring the technology
to CLIENT as requested by CLIENT in writing.

     8.4 COOK and CLIENT may each terminate this Agreement by notice in writing to the other upon
the occurrence of any of the following events:

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          8.4.1 if the other commits a breach of this Agreement which (in the case of a breach capable
of remedy) is not remedied within thirty (30) days of the receipt by the other of written notice
identifying the breach with specificity and requiring its remedy; provided, however, if the breach
is as a result of nonpayment of any amounts owing, the breaching Party must remedy the breach
within fifteen (15) days after receiving such written notice; or

          8.4.2 if the other ceases for any reason to carry on business or convenes a meeting of its
creditors or has a receiver or manager appointed in respect of all or any part of its assets or is
the subject of an application for an administration order or of any proposal for a voluntary
arrangement or enters into liquidation (whether compulsorily or voluntarily) or undergoes any
analogous act or proceedings under foreign law; provided, however, either Party may merge with or
into another equity pursuant to which the obligations of this Agreement will be assumed or effect
the sale of all its assets or substantially all of its assets pursuant to which the acquiring party
will assume such Party’s obligations under this Agreement without notice to or waiver by the other
Party; and

          8.4.3 if the Product meets the specifications of the Master Batch Records but fails clinical
trials, or if the CLIENT abandons the Product for whatever reason. In these cases, in addition to
being responsible to pay COOK the Termination Fee, CLIENT is responsible to pay for reimbursement
of all reasonable and appropriate costs under this Agreement incurred by COOK to the effective date
of termination for services performed, for reasonable commitments that cannot be cancelled, and for
reasonable resources and materials on hand that cannot be reallocated, and for all other costs that
COOK incurs in transferring the technology to CLIENT as requested by CLIENT in writing.

     If this Agreement is terminated due to CLIENT’s breach (which CLIENT fails to cure as
described in Section 8.3.1), then CLIENT, in addition to the Termination Fee, shall be responsible
for reimbursement of all reasonable and appropriate costs under this Agreement incurred by COOK to
the effective date of termination for services performed, for reasonable commitments that cannot be
cancelled, and for reasonable resources and materials on hand that cannot be reallocated, and for
all other costs that COOK incurs in transferring the technology to CLIENT as requested by CLIENT in
writing.

     8.5 Unless terminated earlier pursuant to Sections 8.1 through 8.3, this Agreement shall
terminate upon CLIENT’s completion of the Services as outlined in the Project Plan.

     8.6 Upon the termination of this Agreement for whatever reason:

          8.6.1 COOK shall promptly return all CLIENT Information to CLIENT and shall dispose of or
return to CLIENT all CLIENT Materials, and any materials therefrom, as directed by CLIENT;

          8.6.2 CLIENT shall promptly return to COOK all COOK Know-How it has received from COOK except
that CLIENT may retain one (1) copy and use such COOK Know-
How pursuant to the licenses granted under Section 9 of this Agreement and/or under the
Process Development Agreement;

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          8.6.3 Except as provided for above, CLIENT shall not have any continuing rights under this
Agreement to use or exploit the COOK Know-How in any way whatsoever in the case of termination for
non-payment or other breach, or for production by CLIENT or production by a third party. If CLIENT
determines to manufacture or have manufactured by a third party the Products, COOK will give CLIENT
and/or such third party all reasonably necessary information and cooperation to enable CLIENT to
manufacture Products in connection with the Master Batch Records and in conformance with the
Product Specifications. CLIENT shall pay any and all of COOK’s reasonable costs and expenses in
connection with such cooperation including compensating COOK at a COOK designated hourly rate to
the extent COOK is required to dedicate time and resources to such cooperation.

          8.6.4 Except for the licenses granted under Section 9, COOK thereafter will not be restricted
under this Agreement from any use or exploitation of the COOK Intellectual Property Rights in any
way whatsoever; and

          8.6.5 COOK and CLIENT shall do all such acts and things and shall sign and execute all such
deeds and documents as the other may reasonably require to evidence compliance with this Section
8.5.

     8.7 Termination of this Agreement for whatever reason shall not affect the accrued rights of
either COOK or CLIENT arising under or out of this Agreement and Section 3.10, and Articles 2, 4,
5, 6, 7, 8, 9, 10, 11, 12 and any definitions in Article 1 required to interpret such surviving
provisions, and all provisions which are expressly to survive this Agreement or have a continuing
obligation shall remain in full force and effect.

9. Intellectual Property.

     9.1 Disclosure. Each Party shall disclose to the other Party any and all Inventions made
pursuant to the activities undertaken relating to this Agreement at least quarterly or as may
otherwise be agreed to in writing by the Parties.

     9.2 COOK Intellectual Property Rights. COOK shall solely own all right, title and interest in
and to the COOK Intellectual Property Rights. COOK hereby grants to CLIENT under the COOK
Intellectual Property Rights a perpetual, worldwide, royalty-free, paid-up, non-exclusive license,
to practice, use and modify the COOK Intellectual Property Rights as necessary or useful for
CLIENT, directly or through multiple tiers of third parties, to make, use, sell, offer for sale or
import Product (or any modification or derivative of the Product). The grant provided for by this
Section 9.2 shall include the right, as is reasonably necessary for CLIENT to exercise the rights
granted pursuant to this Section 9.2 to grant, on terms and conditions equivalent to those provided
for herein, through multiple tiers of third parties, non-royalty bearing sublicenses. CLIENT has
no rights under and shall not use, without COOK’s prior written consent, the COOK Intellectual
Property Rights for any other purpose.

     9.3 CLIENT Intellectual Property Rights.

          (a) CLIENT shall solely own all right, title and interest in and to the CLIENT Intellectual
Property Rights.

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          (b) During the term of this Agreement, CLIENT hereby grants to COOK a worldwide,
non-exclusive, royalty-free, paid-up, non-transferable (except for assignments pursuant to Section
10.1) license, or as applicable sublicense, under the CLIENT Intellectual Property Rights to use
the CLIENT Materials and CLIENT Information solely for the purpose of performing its obligations
under this Agreement. COOK shall not, without CLIENT’s prior written consent, (i) use the Process
for any purpose other than Services as contemplated herein, or (ii) seek to patent any Project
Invention other than as specifically permitted under Section 9.4 below.

     9.4 Project Inventions.

          (a) All Project Inventions shall be jointly owned by COOK and CLIENT. COOK shall have the
primary responsibility to file, prosecute and maintain any patents or patent applications claiming
or covering any Project Invention directed to subject matter that is primarily outside the Field.
CLIENT shall have the primary responsibility to file, prosecute and maintain any patents or patent
applications claiming any Project Inventions directed to subject matter that is primarily within
the Field. Each Party will use commercially reasonable and diligent efforts to disclose to the
other Party any Inventions as to which this Section 9.4 may apply and will provide prior notice and
an opportunity to comment on any proposed patent application to be filed by such Party. The
Parties will cooperate with each other with respect to the coordination of the filing, prosecution
and maintenance of patent applications or patents in each Party’s respective areas of
responsibility. In the event there is a disagreement with respect to whether a Project Invention
is primarily within or without the Field, the matter shall be referred to a mutually acceptable
neutral and independent patent attorney who shall definitively determine the matter. Each Party
shall bear the expense of activities relating to its own filing, prosecution and maintenance of any
patent or patent applications provided for by this Section 9.4. If either Party elects not to
file, prosecute or continue to maintain any patent application or patent covering a Project
Invention, it shall give thirty (30) days prior notice thereof to the other Party who, subject to
the other provisions of this Agreement and at their own expense, shall be free to undertake the
filing, prosecution and maintenance of any such patent or patent application. Each Party shall
execute all writings or take such acts, at the other Party’s expense, as may be reasonably required
for either Party to fully enjoy the rights and licenses granted pursuant to this Section 9.4.

          (b) With respect to its undivided interest in the Project Inventions, COOK hereby grants to
CLIENT, without any obligation of an accounting, in the Field, a perpetual, worldwide,
royalty-free, paid-up, exclusive license, with the right to grant sublicenses, to make, have made,
use, sell, offer for sale or import any composition of matter or article of manufacture. For the
avoidance of doubt, such license shall expressly include the right to bring infringement actions
against any third party and any recoveries, settlements, damages and/or license fees or royalties
arising therefrom shall be the sole and exclusive right and property of CLIENT. For the
avoidance of doubt, the grant of license provided for by Section 9.4(b) shall include any
patent, patent application or other intellectual property right governed by this Section 9.4(b).

          (c) With respect to its undivided fifty (50%) percent interest in the Project Inventions and
subject to the license grant provided to COOK in this Section 9.4(c), CLIENT hereby grants to COOK,
without any obligation of an accounting, outside the Field, a perpetual,

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worldwide, royalty-free,
paid-up, exclusive license, with the right to grant sublicenses, to make, have made, use, sell,
offer for sale or import any composition of matter or article of manufacture. Notwithstanding the
forgoing, CLIENT shall retain, and COOK hereby grants to CLIENT, a perpetual, worldwide,
royalty-free, paid-up, license, outside the Field, to make, have made, use, sell, offer for sale or
import any composition of matter or article of manufacture developed and/or sold by or on behalf of
CLIENT. CLIENT shall be permitted to grant sublicenses under the grant and retained right provided
for by the prior sentence of this Section 9.4(c) solely as is reasonably necessary for CLIENT, its
sublicensees and/or development or marketing partners to make or have made any composition of
matter or article of manufacture properly the subject of the grant of the license at a third party
manufacturing site, including, without limitation, a contract manufacturing facility. For the
avoidance of doubt, the grant provided to CLIENT pursuant to this Section 9.4(c) is not intended to
permit CLIENT or its sublicensees and/or development or marketing partners to operate a contract
manufacturing or process development business. Within the scope of each Party’s rights to the
Project Inventions provided for by this Section 9.4(c), each Party shall have the right to bring
infringement actions against any third party for actual or threatened damages suffered by such
Party arising from such infringement and any recoveries, settlements, damages and/or license fees
or royalties arising therefrom shall be the sole and exclusive right and property of the Party
initiating such action.

     9.5 No Implied Licenses. Except as expressly set forth in this Agreement, nothing contained
in this Agreement shall be construed as granting, by implication, estoppel or otherwise, any
licenses or rights under any patents or other intellectual property rights. Only licenses and
rights granted expressly herein shall be of legal force and effect.

10. Force Majeure

     10.1 Neither Party shall be deemed to be in default nor be liable for loss, damage, or delay
in performance, when and to the extent due to causes beyond its reasonable control including
without limitation from fire, strike, labor difficulties, insurrection or riot, embargo, or
inability to obtain materials from usual sources, or any other/unforeseeable cause or causes beyond
the reasonable control and without the fault or negligence of the Party so affected, or from
defects or delays in the performance of its suppliers or subcontractors due to any of the foregoing
enumerated causes (each a “Force Majeure”). If either Party is prevented or delayed in the
performance of any of its obligations under this Agreement by Force Majeure and shall give written
notice thereof to the other Party specifying the matters constituting Force Majeure together with
such evidence as the affected Party reasonably can give and specifying the period for which it is
estimated that such prevention or delay will continue, the affected Party shall be excused from the
performance or the punctual performance of such obligations as the case may be from the date of
such notice for so long as such cause of prevention or delay shall continue, provided that within
sixty (60) days from the date of such notice, the affected Party shall provide the other Party with
written notice of the anticipated date of resumption of performance. If an
event of Force Majeure continues and causes the affected Party to delay its performance of its
obligations for more than sixty (60) days, then the other Party shall have the right upon written
notice to terminate this Agreement without any liability to the other Party.

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11. Governing Law, Jurisdiction and Enforceability

     11.1 This Agreement shall be governed and interpreted, and all rights and obligations of the
Parties shall be determined, in accordance with the laws of the State of New York and the United
States of America without regard to principles of conflicts of law.

     11.2 No failure or delay on the part of either COOK or CLIENT to exercise or enforce any
rights conferred on it by this Agreement shall be construed or operate as a waiver thereof nor
shall any single or partial exercise of any right, power or privilege or further exercise thereof
operate so as to bar the exercise or enforcement thereof at any time or times thereafter of any
other right.

12. Miscellaneous

     12.1 Assignment. Neither Party may assign this Agreement without the prior written consent of
the other Party, which consent will not be unreasonably withheld. Notwithstanding the foregoing,
either Party may, without the prior consent of the other Party, assign this Agreement to its
parent, affiliate or successor, or to an entity acquiring all or substantially all of the product
line, business operations or assets of the assigning Party to which this Agreement pertains.

     12.2 Publicity. The text of any press release or other communication to be published by or in
the media concerning the subject matter of this Agreement shall require the prior written approval
of COOK and CLIENT.

     12.3 Notices. Any consent, notice or report required or permitted to be given or made under
this Agreement by one of the Parties hereto to the other shall be in writing, delivered personally
or by facsimile (and promptly confirmed by personal delivery, first class air mail or courier),
first class air mail or courier, postage prepaid (where applicable), addressed to such other Party
at its address indicated below, or to such other address as the addressee shall have last furnished
in writing to the address or in accordance with this Section 9.3 and (except as otherwise provided
in this Agreement) shall be effective upon receipt by the addressee.

If to Cook Pharmica LLC:

Cook Pharmica LLC

1300 South Patterson Drive

Bloomington, Indiana 47403

Attention: Tedd M. Green

Vice President of Business Operations, CFO

If to CLIENT:

Halozyme, Inc.

11388 Sorrento Valley Road

San Diego, California 92121

Attention: William J. Fallon

Vice President, Manufacturing and Operations

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     12.4 Headings. All section headings and numbering contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement and shall not affect in any way
the meaning or interpretation of this Agreement.

     12.5 Illegality; Unenforceability. In the event that any provision of this Agreement shall be
determined to be illegal or unenforceable, that provision will be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and
enforceable.

     12.6 Waiver. No waiver of any rights shall be effective unless consented to in writing by the
Party to be charged and the waiver of any breach or default shall not constitute a waiver of any
other right hereunder or any subsequent breach or default.

     12.7 Independent Contractors. COOK and CLIENT each acknowledge that they shall be independent
contractors and that the relationship between the two Parties shall not constitute a partnership,
joint venture, agency or any type of fiduciary relationship. Neither Cook nor CLIENT shall have
the authority to make any statements, representations or commitments of any kind, or to take any
action, which shall be binding on the other Party, without the prior consent of the other Party to
do so.

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

     12.9 Severability and Invalidity. Each Party hereby agrees that it does not intend to violate
any public policy, statutory or common laws, rules, regulations, treaty or decision of any
government agency or executive body thereof of any country or community or association of
countries. Should one or more provisions of this Agreement be or become invalid, the Parties
hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which
valid provisions in their economic effect are sufficiently similar to the invalid provisions that
it can be reasonably assumed that the Parties would have entered into this Agreement with such
provisions. In case such provisions cannot be agreed upon, the invalidity of one or several
provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the
invalid provisions are of such essential importance to this Agreement that it is to be reasonably
assumed that the Parties would not have entered into this Agreement without the invalid provisions.

     12.10 Entire Agreement. This Agreement constitutes the entire and exclusive agreement between
the Parties with respect to the subject matter hereof (manufacture of clinical stage product) and
supersedes and cancels all previous discussions, agreements, representations, commitments and
writing in respect thereof. No amendment or addition to this Agreement shall
be effective unless reduced to writing and executed by the authorized representatives of the
Parties.

     12.11 Exporter of Record. CLIENT shall be the exporter of record for any active
pharmaceutical ingredient shipped out of the United States in connection with this Agreement.
CLIENT warrants that all shipments of active pharmaceutical ingredient exported from the

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United
States will be made in compliance with all export laws and regulations and all applicable import
laws and regulations of the country of importation. CLIENT shall be responsible for obtaining any
licenses or government authorization(s) necessary for exportation from the United States.
CLIENT’s designated carrier and freight forwarder shall solely be CLIENT’s agent. CLIENT shall
select and pay the freight forwarder and such designated shall solely be responsible for preparing
and filing any relevant declarations or other documents required for the export. CLIENT shall bear
all costs and expenses associated with this Section 12.11.

     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 	 
	COOK PHARMICA LLC	 	HALOZYME, INC.
	 
	 	 	 	 	 	 
	By:  

	/s/ Tedd M. Green
	 	By:  
	/s/ William J. Fallon
	 	 
	 	 	 
	 	Name: 

	Tedd M. Green
	 	 	Name: 
	William J. Fallon
	 	Title: 

	Vice President of
Business Operations, CFO
	 	 	Title: 
	Vice President of Manufacturing
and Operations
	 	Date:
    August 15, 2008
	 	 	Date: August 15, 2008
	 

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PROJECT PLAN (APPENDIX A)

TO BE PROVIDED

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