Document:

Exhibit 104

		

			Confidential Treatment Requested by Aratana Therapeutics, Inc.

		

		

			 

		

		
			EXHIBIT 10.4
		

		
			CO-PROMOTION AGREEMENT
		

		
			This Co-Promotion Agreement (this “Agreement”), effective as of April 22, 2016 (the “Effective Date”), is entered into by and between Aratana Therapeutics, Inc., a Delaware corporation and having its office at 11400 Tomahawk Creek Parkway, Suite 340, Leawood, KS  66211 (“Aratana”) and Eli Lilly and Company, an Indiana corporation, operating on behalf of its Elanco Animal Health division and having its office at 2500 Innovation Way, Greenfield, Indiana 46140 and its Affiliates (“Elanco”).
		

		
			WITNESSETH THAT:
		

		
			WHEREAS, the Parties entered into the Collaboration, License, Development and Commercialization Agreement effective as of the Effective Date (the “License Agreement”); 
		

		
			WHEREAS, pursuant to the License Agreement, Aratana granted to Elanco a license under certain rights with respect to the Product; and
		

		
			WHEREAS, the Parties have agreed to co-promote the Product in the United States in accordance with the terms and conditions contained in the License Agreement and this Agreement.
		

		
			NOW, THEREFORE,  in consideration of the foregoing preliminary statements and the mutual agreements and covenants set forth herein, the Parties (as defined below) hereby agree as follows:
		

		
			1.DEFINITIONS
		

		
			As used in this Agreement, capitalized terms shall have the meanings set forth in the License Agreement,  and when not found in the License Agreement, shall have the meanings set forth below. 
		

		
			1.1“Aratana Report” means Aratana’s written report setting forth the following information:  (i) the total number of [***] that [***] in the Co-Promotion Territory in a given time period; and (ii) the [***] to [***] or [***], by Aratana in the Co-Promotion Territory in such time period.
		

		
			1.2“Brand Plan” means the branding strategy [***] for the Co-Promotion Territory within [***] days after the Effective Date.  The Brand Plan shall be consistent with this Agreement and contain details surrounding the [***] and [***] and other matters related to the sale and distribution of the Product in the Co-Promotion Territory.  
		

		
			1.3“Commercialization Expense(s)” means all expenses incurred by Elanco in the Co-Promotion Territory in relation to the Product [***] in connection with (i) marketing, advertising, and promoting Product (including [***] and [***], but excluding direct [***]), (ii) Promotional Materials used for training of sales representatives, including distributor sales representatives, and communication with veterinarians and corporate accounts, and (iii) [***] which relate to the 
		
		
 

		

			Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for Confidential Treatment and have been filed separately with the Securities and Exchange Commission.

		

		

			 

		

 

		

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		Product. Commercialization Expenses shall not include Selling Expenses of each Party as described in Section 9.3.  

		
		
			1.4“Date of Launch” means the First Commercial Sale of the Product in the Co-Promotion Territory.
		

		
			1.5“Detail(s) or Detailing” means a person-to-person meeting between a veterinarian or corporate account representative and a professional representative of Aratana or Elanco during which a Presentation of Product is made to such veterinarian or corporate account as the first or second product mentioned.  
		

		
			1.6“Presentation” shall mean that the Elanco or Aratana representative discusses with such veterinarian or corporate account representative the uses and benefits of Product.
		

		
			1.7“Promotional Materials” has the meaning set forth in Section 7.1.  
		

		
			1.8“Elanco Sales Activity Report” means Elanco’s written report setting forth the following information:  (i) sales of the Product in the Co-Promotion Territory [***]; (ii) [***] that promoted Product in the Co-Promotion Territory in such time period; and (iii) [***] to [***] or [***], by Elanco in the Co-Promotion Territory in such time period.
		

		
			1.9“Gross Margin” means [***] of [***].
		

		
			1.10“Policies and Procedures” means a program of sales and promotion policies and procedures developed by Aratana that are substantially in line with Elanco’s policies and procedures, including without limitation, those related to off label promotion, ethical interactions with customers and privacy.  
		

		
			1.11“Progress Report” shall mean the report prepared by Elanco and submitted to the Commercial Coordination Subcommittee for review and comment [***] with respect to Products in the Territory.  The Progress Report shall provide a high level overview of activities conducted [***], and [***] for the [***], including: (i) the [***] supporting the Product, (ii) the [***] for [***], (iii) [***] planned for the Product, (iv) [***] to be made with respect to the Products, (v) the [***] with respect to the Product, and (vi) such other matters as agreed upon by the CCC. 
		

		
			1.12“Region” means the Elanco reporting regions of [***].
		

		
			1.13Sample(s) or Sampling” means quantities of Product given to veterinarians, corporate accounts or other customers for no or minimal consideration in compliance with Applicable Laws, as part of the marketing, advertising and promotion of the Product.
		

		
			1.14“Selling Expenses” has the meaning set forth in Section 9.3.
		

		 

		

			 

		

		

			 

		

		

			Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for Confidential Treatment and have been filed separately with the Securities and Exchange Commission.

		

		

			 

		

		

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			2.CO-PROMOTION RIGHTS 
		

		
			The general licenses granted and the Parties’ related rights and obligations thereto in the Co-Promotion Territory are as set forth in the License Agreement in addition to the following:
		

		
			(i)Aratana shall be the initial NADA holder for the Product, subject to the provisions, including without limitation Elanco’s eventual assumption of Registrations, pursuant to Section 10.1 of the License Agreement;
		

		
			(ii)Elanco shall make and record all sales of Product;
		

		
			(iii)Aratana shall supply all Product to Elanco pursuant to the Supply Agreement, subject to Elanco’s right to assume manufacturing as set forth in Article 8 of the License Agreement;
		

		
			(iv)Elanco shall be responsible for distribution of all Product (other than Samples that Aratana is permitted to distribute pursuant to the Brand Plan); and
		

		
			(v)In accordance with this Agreement, including without limitation Section 6.1(b), and the Brand Plan, Aratana and Elanco (or Elanco's Affiliates and/or Sublicensees) shall promote and market the Product.
		

		
			3.COMMITTEES AND BRAND PLAN
		

		
			3.1Commercial Coordination Subcommittee.    The Commercial Coordination Subcommittee, as referenced in Article 2 of the License Agreement, will coordinate the implementation of the Brand Plan.  
		

		
			3.2Final Decision Making Authority.  In the event of a disagreement between the members of the Commercial Coordination Subcommittee on matters within its jurisdiction and [***] to the [***] and the [***], the ESC member appointed by [***] will take the final decision, as set forth under Article 2 of the License Agreement; provided that in no event may [***] exercise its final decision right to require that [***] that would (i) [***], (ii) [***] or [***], or (iii) [***] of [***].  
		

		
			3.3Brand Plan.  The initial Brand Plan shall be [***] to the Commercial Coordination Subcommittee within [***] days of the Effective Date of this Agreement.  The Brand Plan may be [***] from time to time, consistent with the terms and conditions of this Agreement and the License Agreement.  The Commercial Coordination Subcommittee shall have the right to review and provide comments with respect to the Brand Plan, including any amendments thereto, but [***] shall make all final decisions with respect to the content of the Brand Plan, provided that in 
		
		
 

		

			 

		

		

			 

		

		

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		no event may [***] exercise its final decision right to require that [***] that would (i) require [***], (ii) [***] or [***], or (iii) [***] of [***] or [***].  The Brand Plan will reflect each Party’s then-existing [***], on a [***].  In no event shall the Brand Plan require [***] to acquire [***] in geographic areas in which [***] does not then have them or require [***] to reallocate its [***] to geographic areas in which [***] does not then have them or limit [***]'s ability to contact any particular customers and accounts with respect to any product other than the Product.   

		
		
			3.4Compliance with Policies and Procedures.  The Commercial Coordination Subcommittee shall approve the Policies and Procedures.  All Policies and Procedures shall be consistent with all Applicable Law, and the terms and conditions of this Agreement.  Each Party agrees to comply with their respective policies and procedures and ensure that their personnel are trained on and held accountable for compliance with their respective policies and procedures. 
		

		
			3.5Diligence.  Both Parties shall use Commercially Reasonable Efforts to introduce Product into the commercial market in the Co-Promotion Territory,  consistent with the Brand Plan and prudent business judgment and all Applicable Laws.
		

		
			3.6Communications.  To facilitate efficient communication and data sharing between Elanco and Aratana personnel, Elanco will establish and maintain a secure method of sharing information between the Parties to the extent required for the execution of the Parties’ obligations under this Agreement and in compliance with all Applicable Laws.  The Parties also agree to work together to identify and support hardware, software and services appropriate for the sharing of such information. Any reasonable costs associated with such communication and data sharing shall be borne by [***].  
		

		
			4.OWNERSHIP AND LICENSES OF INVENTIONS AND KNOW-HOW
		

		
			Ownership of Patents, Inventions, Improvements and Trademarks, to the extent not set forth herein, shall be governed by the License Agreement.
		

		
			5.SUPPLY OF PRODUCT
		

		
			Supply of Product in connection with this Agreement and the Parties’ obligations and responsibilities relating thereto shall be governed by the License Agreement and the Supply Agreement.
		

		
			6.MARKETING AND PROMOTION
		

		
			6.1Detailing and Promotional Efforts.
		

		
			(a)Objectives.  Pursuant to the terms of this Agreement, one of the principal objectives of the Parties hereunder is to maximize the value and Net Sales of the Product in the Co-Promotion 
		
		
 

		

			 

		

		

			 

		

		

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		Territory. The Commercial Coordination Subcommittee will coordinate the implementation of the strategies for [***] the Product in the Co-Promotion Territory, including appropriate related expenses.

		
		
			(b)Diligence and Resource Allocation.  Each Party shall use Commercially Reasonable Efforts to [***] Product in the Co-Promotion Territory, and otherwise fulfill all responsibilities assigned to it by the Commercial Coordination Subcommittee.  Each Party shall conduct such activities in compliance with the Brand Plan, such Party’s respective policies and procedures and all Applicable Laws.
		

		
			(c)Aratana Marketing Plans and Creative Materials.  Within [***] business days of the Effective Date, Aratana will provide to Elanco copies of existing marketing plans, art files and other materials created by Aratana and its agencies in preparation for commercial launch of the Product. 
		

		
			6.2Sales Activity and Progress Reports.  For each [***] during the period commencing with the Effective Date and expiring on [***], or such longer period as the Parties may agree to pursuant to Section 9.1(d) below, (a) Elanco shall deliver an Elanco Sales Activity Report to Aratana, (b) Elanco shall deliver a Progress Report to the CCC, and (c) Aratana shall deliver an Aratana Report to Elanco,  no later than [***] weeks after the end of the applicable [***],  unless otherwise agreed to by the Commercial Coordination Subcommittee.  After [***], or such longer period as the Parties may agree to pursuant to Section 9.1(d), such reports shall be provided [***] within [***] days of the end of the [***].  The [***] will be due [***] weeks after [***] or such longer period as the Parties may agree to pursuant to Section 9.1(d), and the [***] will be due within [***] days after [***], or the first anniversary of the date on which any such longer period expires.
		

		
			6.3Trademarks and Logos.  The Parties shall market the Products under the Galliprant® Trademark, subject to Sections 7.4 and 7.5 of the License Agreement, and in accordance with the Product Registration in the Co-Promotion Territory.
		

		
			7.PROMOTIONAL MATERIALS AND SAMPLES
		

		
			7.1Promotional Materials.
		

		
			(a)Creation and Development.  During the Term, Elanco shall create and develop promotional materials for the Product (“Promotional Materials”) for use by Third Parties and for each Party’s respective sales forces. The costs and expenses incurred for creating, developing and producing such Promotional Materials are considered a Commercialization Expense.
		

		
			(b)Ownership of Programs and Promotional Materials.  
		

		 

		

			 

		

		

			 

		

		

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			(i)Created Prior to the Effective Date.  Subject to the assignment of Trademarks from Aratana to Elanco under Section 7.4 of the License Agreement, Elanco and Aratana shall retain all rights, including, without limitation, copyrights and Trademarks, relating to all of their respective existing training program materials (including Promotional Materials and sales training materials) made prior to the Effective Date, in all formats (whether in print, video, audio, digital, computer or other form) for use in sales training (“Existing Works”) as well as any modifications of such Existing Works each may develop in the future which are not specific to the Product. For copyrights for Existing Works that are specific to the Product, Aratana hereby grants to Elanco a nonexclusive license in the Territory under such copyrights to copy, modify and use such Existing Works for the purposes of this Agreement.  
		

		
			(ii)Created On or After the Effective Date.  Ownership of copyrights for training program materials (including Promotional Materials and sales training materials) made on or after the Effective Date for the commercialization of the Product shall be owned by the Party who made the program materials and if jointly made, then jointly by Elanco and Aratana.  Aratana hereby grants to Elanco [***] license in the Territory under copyrights owned solely or jointly by Aratana to copy, modify and use such program materials.  Ownership of all other intellectual property rights arising in the course of activities conducted pursuant to this Agreement shall be determined under the provisions of Article 4.
		

		
			(iii)On the effective date of termination of this Agreement or expiry of its term (the “Termination Date”), if and for so long as Elanco retains the right to commercialize Product in the Territory pursuant to the License Agreement, Aratana will use Commercially Reasonable Efforts to [***] to [***] relating to [***] and the [***], including [***] any [***] to [***] to [***].  In such case, if Applicable Laws prevent or delay the [***] any such [***], [***] will [***], to [***] under [***] and the [***] and [***] to such [***] for the [***] and [***], and will [***] to [***] of such [***] or [***].   However, if after the term of this Agreement, rights to commercialize the Product revert to Aratana under the License Agreement, Elanco will use Commercially Reasonable Efforts to [***] to [***] relating to [***] that are [***], any [***] to [***], and the [***], including [***] any [***] to [***] to [***].  If Applicable Laws prevent or delay the [***] any such [***], [***] will [***], to [***] and [***] under such [***] and the [***] and [***] to such [***] for the [***] and [***], and will [***] to [***] of such [***] or [***].   
		

		 

		

			 

		

		

			 

		

		

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			(c)Neither Party shall produce (other than as concepts for consideration by the other Party), distribute or otherwise use any Promotional Materials to promote or Detail Product that have not been approved in writing by Elanco, other than [***] as of the Effective Date that Elanco has approved in writing.
		

		
			(d)Elanco shall provide Aratana with such quantities of Promotional Materials,  consistent with the applicable Brand Plan and the provisions of this Agreement [***] for use to perform its obligations under this Agreement in accordance with the then current Brand Plan.
		

		
			7.2Samples.
		

		
			(a)Diligence.  Unless Elanco exercises its option to assume responsibility for manufacturing pursuant to Article 8 of the License Agreement, Aratana shall supply [***] Samples necessary to [***] for use in accordance with the then current Brand Plan, the Supply Agreement and this Agreement. If Elanco assumes responsibility for manufacturing pursuant to Section 8.2 of the License Agreement, Elanco shall, during each subsequent year, supply [***] of Samples necessary to [***] for use in accordance with the then current Brand Plan and this Agreement.  For each year during the term of this Agreement, Samples shall be allocated [***] between the Parties as set forth in the Brand Plan.  The Parties shall use Samples strictly in accordance with the then current Brand Plan and shall distribute Samples in full compliance with all Applicable Laws. Each Party shall maintain records with regard to Samples that it uses, as required by Applicable Law and shall allow the other Party to inspect such records on request, upon reasonable advance written notice.  
		

		
			(b)Cost of Samples.  The cost of Samples distributed in the Co-Promotion Territory shall be borne by [***] and included in [***].  
		

		
			(c)Destruction of Samples.  [***] shall be responsible for the destruction of any unused, expired Samples.  [***] shall ship such unused, expired Samples to [***], for destruction.    
		

		
			8.ORDERS AND DELIVERY OF PRODUCT
		

		
			The following provisions under this Article 8 govern the order and delivery of Samples to be utilized in promoting the Product in the Co-Promotion Territory by the Parties: 
		

		
			8.1Orders and Terms of Sale.  Elanco shall have the sole right to (i) fill orders for Product, (ii) control invoicing, order processing and collection of accounts receivable for Product sales, and (iii) record Product sales in its books of account.  The Brand Plan shall include commercial terms and conditions with respect to the sale and distribution of Product, including matters such as the suggested retail price for the Products. 
		

		 

		

			 

		

		

			 

		

		

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			8.2Delivery.  Elanco shall arrange and be solely responsible for shipment, distribution and delivery of the Product (excluding any Samples Aratana will distribute pursuant to the Brand Plan).  
		

		
			8.3Orders Received by Aratana.  Aratana shall [***] and [***] for Product, and shall [***] to [***] as soon as practicable, in accordance with the procedures set forth in the Brand Plan.  
		

		
			8.4Product Returns.  In general the Parties intend that any Product returned by a veterinarian or corporate account or other customer should be returned to Elanco, or its distributor representative, for handling.  If, however, any Product is returned to Aratana, then Aratana shall immediately notify Elanco and ship such Product to the facility designated by Elanco. Elanco shall [***] by [***] Product. Any report of an Adverse Event in connection with such returned Product shall be handled in accordance with the Pharmacovigilance Agreement. 
		

		
			9.REVENUE AND COST OF PRODUCT 
		

		
			9.1Reporting and Calculation of Co-Promotion Payment.
		

		
			(a)Provided Aratana meets its co-promotion obligations under Section 6.1, Elanco shall deliver to Aratana, for each Calendar Quarter, a payment report computing the amount due to Aratana under Sections 9.1(b) and 9.1(c), respectively (the “Co-Promotion Payment”), as follows:  Elanco shall deliver to Aratana within [***] days of the end of each calendar month a payment report computing the amount due to Aratana under Section 9.1 for such calendar month, and for the calendar month of December of each Calendar Year during the term of this Agreement, such report shall include a statement of the [***] of the Co-Promotion Payments due with respect to such [***]. In the event that no Co-Promotion Payments are payable in respect of a given Calendar Quarter, Elanco shall submit a Co-Promotion Payment report so indicating.
		

		
			(b)For Product sold in the Co-Promotion Territory prior to December 31, 2018, or such later date as the Parties may mutually agree upon as set forth in Section 9.1(d), Elanco shall pay Aratana twenty five percent (25%) of the Gross Margin on such sales as consideration for the services rendered by Aratana under this Agreement.
		

		
			(c)In anticipation of the Parties expectation that the services provided by Aratana under this Agreement will diminish after December 31, 2018, or such later date as the Parties may mutually agree upon as set forth in Section 9.1(d), Elanco shall pay Aratana [***] of Net Sales for the services rendered after December 31, 2018 or any such later date the Parties have agreed upon.  Notwithstanding the foregoing, the Commercial Coordination Subcommittee shall make all determinations of the Parties’ obligations to provide services under this Agreement and the Brand Plan.
		

		 

		

			 

		

		

			 

		

		

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			(d)The Parties shall discuss, from time to time prior to December 31, 2018, whether to extend the time period before which Aratana’s services are expected to diminish to a date later than December 31, 2018.  If the Parties mutually agree to extend such time period, then such later date shall replace references to December 31, 2018 in Sections 9.1(b) and (c).  Notwithstanding the foregoing, either Party may elect to retain the December 31, 2018 date without further obligation to the other Party.
		

		
			9.2Payment of Commercialization Expenses.  [***] shall pay all Commercialization Expenses. [***] will not be obligated to incur any Commercialization Expenses unless the Parties otherwise agree in writing. 
		

		
			9.3Exclusion of Selling Expenses.  Each Party shall be solely responsible for all costs and expenses (direct and indirect) incurred in connection with its sales forces for Product (including any contract sale representatives), including, without limitation, all compensation and benefits (including incentive pay and bonuses), travel, petty cash, transportation, training, lodging, meals, telecommunications equipment and support, computer equipment and support, office space and supplies, and all other types of equipment, support, administration and overhead necessary or useful for maintenance of a sales representative in the ordinary course of their employment (“Selling Expenses”).  
		

		
			10.PAYMENT TERMS
		

		
			Co-Promotion Payments shall be made to Aratana in accordance with Section 9.1 within [***] calendar days following the end of each Calendar Quarter.  All other payment terms related to or arising under this Agreement, and the Parties respective rights and obligations with respect thereto, shall be governed by Sections 6.3 through 6.6 of the License Agreement.
		

		
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			11.REGULATORY MATTERS
		

		
			Regulatory matters shall be handled in accordance with Article 10 of the License Agreement.
		

		
			12.COVENANT
		

		
			Each Party agrees that all activities under this Agreement by it or on its behalf, including, but not limited to, training, Detailing, promotional activities, record-keeping, collection of consumer data (if any), and Sampling, will be done in compliance with the appropriate locally-approved package insert and labeling of Product, the applicable Promotional Materials, and all Applicable Laws,  including all privacy and data protection laws and regulations.
		

		 

		

			 

		

		

			 

		

		

			Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for Confidential Treatment and have been filed separately with the Securities and Exchange Commission.

		

		

			 

		

		

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			13.INDEMNIFICATION 
		

		
			Indemnifications of the Parties one to the other related to or arising under this Agreement shall be governed by Article 13 of the License Agreement.
		

		
			14.CONFIDENTIAL INFORMATION AND PUBLIC ANNOUNCEMENTS
		

		
			The Parties’ obligations relating to confidential information, publications, publicity or other public announcements concerning the Product related to or arising under this Agreement shall be governed by Article 12 of the License Agreement. 
		

		
			15.TERM AND TERMINATION
		

		
			15.1Term.  The term of this Agreement shall commence on the Effective Date and shall remain in effect until December 31, 2028, unless earlier terminated as provided in Sections 15.2 through 15.5 or extended by mutual written agreement of the Parties.  
		

		
			15.2Termination by Aratana.  Aratana may terminate this Agreement at will upon ninety (90)  days’  prior written notice. 
		

		
			15.3Termination by Elanco.  Elanco may terminate this Agreement with [***] days prior written notice in the event that Elanco substantially stops marketing the Product in the U.S.  For purposes of this section, “substantially stops marketing the Product in the U.S.” means [***] is [***] or otherwise [***]; provided, however, that [***] will [***] if the [***] is that [***] with a [***] for [***].
		

		
			15.4Automatic Early Termination.  In case of early termination of the License Agreement, this Agreement shall be automatically terminated without requirement for any further act or notice.    
		

		
			15.5Termination for Uncured Material Breach.  In the event that either Party shall breach any material provision set forth in this Agreement, the other Party may, at its option, terminate this Agreement by giving written notice to the defaulting Party specifying said breach and its intention to terminate and,  unless said breach shall be rectified by the defaulting Party within [***] calendar days after said notice is given, this Agreement shall terminate [***] calendar days after said notice is given to the defaulting Party.  
		

		
			15.6Effect of Termination.  Upon expiration or termination of this Agreement, Elanco shall be obligated to pay any accrued and unpaid amounts otherwise payable to Aratana under this Agreement.  If this Agreement is terminated, whether at will, for material breach by a Party or otherwise, such termination shall not have any impact on the License Agreement, which shall continue in full force and effect.
		

		 

		

			 

		

		

			 

		

		

			Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for Confidential Treatment and have been filed separately with the Securities and Exchange Commission.

		

		

			 

		

		

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			15.7Survival of Certain Rights and Obligations.  The following provisions shall survive the expiry of the Term or termination of this Agreement: Articles 4, 10,  13, 14 and 16, and Sections 7.1(b), 7.2(c), 15.6 and 15.7 hereof. 
		

		
			16.MISCELLANEOUS PROVISIONS
		

		
			16.1Integration.  Sections 17.1 through 17.11, and 17.13 through 17.16, of the License Agreement are integrated into this Agreement as if set forth herein.  
		

		
			16.2Entire Agreement.  This Agreement, together with the License Agreement, the Supply Agreement, the Quality Agreement and the Pharmacovigilance Agreement, and any exhibits hereto and thereto, set forth the entire agreement and understanding between the Parties as to the subject matter hereof and merge all prior discussions and negotiations between them, and neither of the Parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set forth on or subsequent to the date hereof in writing and signed by a proper and duly authorized officer or representative of the Party to be bound thereby.  
		

		
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		IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized representative as of the Effective Date.
		

		
			ARATANA THERAPEUTICS, INC.
		

		
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			By:/s/ Steven St. Peter
		

		
			Name:Steven St. Peter, M.D.
		

		
			Title:President & CEO
		

		
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			ELI LILLY AND COMPANY THROUGH ITS ELANCO ANIMAL HEALTH DIVISION
		

		
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			By:/s/ John C. Lechleiter
		

		
			Name:John C. Lechleiter, PhD
		

		
			Title:Chairman, President and CEO
		

		
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			Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for Confidential Treatment and have been filed separately with the Securities and Exchange Commission.

		

		

			 

		

		

			12Exhibit

Exhibit 10.1
RADIAN GROUP INC.
2014 EQUITY COMPENSATION PLAN
PERFORMANCE-BASED RESTRICTED STOCK UNIT GRANT

TERMS AND CONDITIONS

These Terms and Conditions (“Terms and Conditions”) are part of the Performance-Based Restricted Stock Unit Grant made as of May 11, 2016 (the “Grant Date”), by Radian Group Inc., a Delaware corporation (the “Company”), to S.A. Ibrahim, an employee of the Company (the “Grantee”).
RECITALS
WHEREAS, the Radian Group Inc. 2014 Equity Compensation Plan (the “Plan”) permits the grant of Restricted Stock Units in accordance with the terms and provisions of the Plan;
WHEREAS, the Company desires to grant Restricted Stock Units to the Grantee, and the Grantee desires to accept such Restricted Stock Units, on the terms and conditions set forth herein and in the Plan; 
WHEREAS, the Restricted Stock Units granted pursuant to these Terms and Conditions shall vest based on the attainment of performance goals related to total shareholder return (“TSR”), LTI Book Value per Share (as defined below), and continued employment; and  
WHEREAS, the applicable provisions of the Plan are incorporated into these Terms and Conditions by reference, including the definitions of terms contained in the Plan (unless such terms are otherwise defined herein).
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:
		
	1.
	Grant of Performance-Based Restricted Stock Units.

(a)    Grant of Restricted Stock Units.  The Company hereby awards to the Grantee a target award of 261,520 Restricted Stock Units (hereinafter, the “Target Award”), which consists of the TSR Target Award and the BV Target Award described below, subject to the vesting and other conditions of these Terms and Conditions. 
(b)    TSR Target Award and BV Target Award.  Payment of the Restricted Stock Units will be based on achievement of the performance goals set forth herein and continued employment as follows:
(i)    Fifty percent of the Target Award (the “TSR Target Award”) will be based on attainment of the performance goals set forth in Schedule A (the “TSR Performance Goals”) and continued employment.
(ii)    Fifty percent of the Target Award (the “BV Target Award”) will be based on attainment of the performance goals set forth in Schedule B (the “BV Performance Goals”) and continued employment.  
2.    Vesting.
(a)    General Vesting Terms.  Except as set forth in Sections 2(c) and 2(d) below, the Grantee shall vest in a number of Restricted Stock Units with respect to the TSR Target Award (the “TSR Component”) and the BV Target Award (the “BV Component”) based on the attainment of the TSR Performance Goals and BV Performance Goals, respectively, as of the end of the applicable performance period, provided that in each case the Grantee remains employed by the Company or a Subsidiary through May 11, 2019 (the “Vesting Date”).   The performance period with respect to the TSR Component is the period beginning on May 11, 2016 and ending on May 11, 2019 (the “TSR Performance Period”) and the performance period with respect to the BV Component is the period beginning on March 31, 2016 and ending on March 31, 2019 (the “BV Performance Period”).  Except as specifically provided below in this Section 2, no Restricted Stock Units will vest for any reason prior to the Vesting Date, and in the event of a termination of the Grantee’s employment prior to the Vesting Date, the Grantee will forfeit to the Company all Restricted Stock Units that have not yet vested as of the termination date.  Except as 

provided in Sections 2(c) and 2(d) below, if the TSR Performance Goals are not attained at the end of the TSR Performance Period, the Restricted Stock Units with respect to TSR Component will be immediately forfeited and if the BV Performance Goals are not attained at the end of the BV Performance Period, the Restricted Stock Units with respect to the BV Component will be immediately forfeited. 
(b)    Retirement.  
(i)    If the Grantee terminates employment prior to the Vesting Date on account of the Grantee’s Retirement, the Grantee will not forfeit the Restricted Stock Units upon Retirement, and the Restricted Stock Units will continue to vest based on the attainment of the TSR Performance Goals and the BV Performance Goals, except as provided in Sections 2(c) and 2(d) below.  
(ii)    For purposes of these Terms and Conditions, “Retirement” shall mean the Grantee’s separation from service without Cause, other than on account of death or Disability (as defined below), (A) following the Grantee’s attainment of age 65 and completion of five years of service with the Company or a Subsidiary, or (B) following the Grantee’s attainment of age 55 and completion of 10 years of service with the Company or a Subsidiary.
(iii)    For purposes of these Terms and Conditions, “Cause” shall have the meaning given that term in the Grantee’s Employment Agreement with the Company dated as of November 12, 2014 (the “Employment Agreement”).
(c)    Death or Disability.  In the event of the Grantee’s death or Disability while employed by the Company or a Subsidiary prior to the Vesting Date, the Grantee’s Restricted Stock Units will automatically vest at the Target Award level on the date of the Grantee’s death or Disability, as applicable.  If, following the Grantee’s termination of employment due to Retirement, the Grantee dies prior to the Vesting Date, the Grantee’s Restricted Stock Units will automatically vest at the Target Award level on the date of the Grantee’s death.  For purposes of these Terms and Conditions, the term “Disability” shall have the meaning given that term in the Grantee’s Employment Agreement.
(d)    Change of Control. 
(i)    If a Change of Control occurs prior to the Vesting Date, the Restricted Stock Units will vest at the Target Award level on the Vesting Date, provided that, except as set forth in subsections (ii), (iv) and (v) below, the Grantee remains employed by the Company or a Subsidiary through the Vesting Date.  In no event shall vesting occur after the end of the Performance Period.   
(ii)    Notwithstanding the foregoing, if, prior to the Vesting Date, a Change of Control occurs and the Grantee’s employment with the Company and its Subsidiaries is terminated by the Company or a Subsidiary without Cause, or the Grantee terminates employment for Good Reason (as defined in, and determined under, the Employment Agreement), and the Grantee’s date of termination of employment (or in the event of the Grantee’s termination for Good Reason, the event giving rise to Good Reason) occurs during the period beginning on the date that is 90 days before the Change of Control and ending on the date that is one year following the Change of Control, the unvested Restricted Stock Units will automatically vest at the Target Award level as of the Grantee’s date of termination of employment (or, if later, on the date of the Change of Control).  
(iii)    Notwithstanding the foregoing, if the Grantee’s employment terminates on account of Retirement before a Change of Control, and a Change of Control subsequently occurs prior to the Vesting Date, the outstanding Restricted Stock Units will vest at the Target Award level on the Vesting Date (or on the Grantee’s date of death, if earlier).   
(iv)    Notwithstanding the foregoing, if the Grantee’s employment terminates on account of Retirement on or after a Change of Control, the Restricted Stock Units will vest at the Target Award level on the Grantee’s Retirement date.
(e)    Cause.  In the event the Grantee’s employment is terminated by the Company or a Subsidiary for Cause, all outstanding Restricted Stock Units held by the Grantee shall immediately terminate and be of no further force or effect.
(f)    Other Termination.  Except as provided in Sections 2(b), 2(c), 2(d) and 2(e), in the event of a termination of employment, the Grantee will forfeit all unvested Restricted Stock Units.  Except as provided in Section 2(b) or 2(d), no Restricted Stock Units will vest after the Grantee’s employment with the Company or a Subsidiary has terminated for any reason.

3.    Restricted Stock Units Account.
The Company shall establish a bookkeeping account on its records for the Grantee and shall credit the Grantee’s Restricted Stock Units to the bookkeeping account.
4.    Conversion of Restricted Stock Units.  
(a)    Except as otherwise provided in this Section 4, if the Restricted Stock Units vest in accordance with these Terms and Conditions, the Grantee shall be entitled to receive payment of the vested Restricted Stock Units within 90 days after the one-year anniversary of the Vesting Date (the one year anniversary of the Vesting Date is referred to as the “Distribution Date”).
(b)    The vested Restricted Stock Units shall be paid earlier than the Distribution Date in the following circumstances:
(i)    If (A) the Restricted Stock Units vest in accordance with Section 2(c) (the Grantee’s death or Disability), or (B) the Grantee dies or incurs a Disability after the Vesting Date but before the Distribution Date, the vested Restricted Stock Units shall be paid within 90 days after the date of the Grantee’s death or Disability, as applicable. 
(ii)    If a Change of Control occurs after the Vesting Date but before the Distribution Date, the vested Restricted Stock Units shall be paid within 90 days after the date of the Change of Control.
(iii)    If a Change of Control occurs and the Grantee’s employment terminates upon or within one year after the Change of Control in accordance with Section 2(d)(ii), the vested Restricted Stock Units shall be paid within 90 days after the Grantee’s termination of employment.  
(iv)    If a Change of Control occurs and the Grantee’s employment terminates within 90 days prior to the Change of Control in accordance with Section 2(d)(ii), and the Grantee subsequently dies prior to the Vesting Date, the vested Restricted Stock Units shall be paid within 90 days after the date of the Grantee’s death.
(v)    If the Restricted Stock Units vest in accordance with Section 2(d)(v) (Retirement on or after a Change of Control), the vested Restricted Stock Units shall be paid within 90 days after the Grantee’s Retirement date; provided that, if required by section 409A of the Code, if the Retirement date does not occur within two years after the Change of Control, payment will be made within 90 days after the Distribution Date.
(vi)    Notwithstanding subsections (ii), (iii) and (v), if the Change of Control is not a “change in control event” under section 409A of the Code, and if required by section 409A of the Code, payment will not be made on the dates described in subsections (ii), (iii) and (v) and, instead, will be made within 90 days after the Distribution Date. 
(c)    On the applicable payment date, each vested Restricted Stock Unit credited to the Grantee’s account shall be settled in whole shares of Common Stock of the Company equal to the number of vested Restricted Stock Units, subject to (i) the limitation of subsection (d) below, (ii) compliance with the six-month delay described in Section 16 below, if applicable, and (iii) the payment of any federal, state, local or foreign withholding taxes as described in Section 12 below, and subject to compliance with the restrictive covenants in Section 6 below.  The obligation of the Company to distribute shares upon vesting shall be subject to the rights of the Company as set forth in the Plan and to all applicable laws, rules, regulations, and such approvals by governmental agencies as may be deemed appropriate by the Committee, including as set forth in Section 14 below.
(d)    Notwithstanding anything in these Terms and Conditions to the contrary, in no event shall the fair market value (as defined in the Plan) of the vested Restricted Stock Units to be distributed with respect to the TSR Component exceed $72.96 ($12.16 multiplied by 600%) multiplied by the TSR Target Award, measured as of the Valuation Date (as defined below).  If the fair market value of the vested Restricted Stock Units with respect to the TSR Component would exceed this amount, the number of shares of the Company’s Common Stock to be distributed to the Grantee shall be limited to the amount calculated as follows:
		
	•
	$72.96 multiplied by the TSR Target Award,

		
	•
	Divided by the fair market value of a share of the Company’s Common Stock on the Valuation Date.

For this purpose, the “Valuation Date” is the Vesting Date for Restricted Stock Units that are payable on or after the Vesting Date.  If the Restricted Stock Units are payable before the Vesting Date, the “Valuation Date” is the Grantee’s applicable payment date under this Section 4 (termination date, date of Disability, date of death, or Change of Control, as applicable).  
(e)    For the avoidance of doubt, the Grantee will forfeit all Restricted Stock Units if the Grantee’s employment is terminated for Cause prior to the Distribution Date or other applicable payment date under this Section 4.
5.    Certain Corporate Changes. 
If any change is made to the Common Stock (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, or exchange of shares or any other change in capital structure made without receipt of consideration), then unless such event or change results in the termination of all the Restricted Stock Units granted under these Terms and Conditions, the Committee shall adjust, as provided in the Plan, the number and class of shares underlying the Restricted Stock Units held by the Grantee, the maximum number of shares for which the Restricted Stock Units may vest, the share price or class of Common Stock for purposes of the TSR Performance Goals, and the BV Performance Goals as appropriate to reflect the effect of such event or change in the Company’s capital structure in such a way as to preserve the value of the Restricted Stock Units.  Any adjustment that occurs under the terms of this Section 5 or the Plan will not change the timing or form of payment with respect to any Restricted Stock Units except in accordance with section 409A of the Code.
6.    Restrictive Covenants. 
(a)    In consideration of this Restricted Stock Unit grant, the Grantee agrees to comply with the restrictive covenants and agreements set forth in Section 16 (“Restrictive Covenants”) of the Employment Agreement, all other written restrictive covenants and agreements with the Company, and all confidentiality obligations with respect to the Company under the Company’s Code of Conduct and Ethics, including without limitation non-competition, non-solicitation and confidentiality restrictions (collectively, the “Restrictive Covenants”).
(b)    Nothing in these Terms and Conditions or in the Employment Agreement, including any restrictions on the use of “Confidential Information” and “Trade Secrets” (as defined in the Employment Agreement), shall prohibit or restrict the Grantee from initiating communications directly with, or responding to any inquiry from, or providing testimony before, the Equal Employment Opportunity Commission, the Department of Justice, the Securities and Exchange Commission, or any other federal, state, or local regulatory authority.  To the extent permitted by law, upon receipt of any subpoena, court order, or other legal process compelling the disclosure of Confidential Information and Trade Secrets, the Grantee agrees to give prompt written notice to the Company so as to permit the Company to protect its interests in confidentiality to the fullest extent possible.
(c)    The Grantee acknowledges and agrees that in the event the Grantee breaches any of the Restrictive Covenants:
(i)    The Committee may in its discretion determine that the Grantee shall forfeit the outstanding Restricted Stock Units (without regard to whether the Restricted Stock Units have vested, except as to the vested shares where forfeiture of vested shares is expressly prohibited by law), and the outstanding Restricted Stock Units shall immediately terminate, and
(ii)    The Committee may in its discretion require the Grantee to return to the Company any shares of Common Stock received in settlement of the Restricted Stock Units; provided, that if the Grantee has disposed of any shares of Common Stock received upon settlement of the Restricted Stock Units, then the Committee may require the Grantee to pay to the Company, in cash, the fair market value of such shares of Common Stock as of the date of disposition.  The Committee shall exercise the right of recoupment provided in this subsection (c)(ii) within 180 days after the Committee’s discovery of the Grantee’s breach of any of the Restrictive Covenants.
(d)    If any portion of the covenants or agreements contained in this Section 6, the specific forfeiture provisions related to vested shares, or the application thereof, is construed to be invalid or unenforceable, the other portions of such covenants or agreements or the application thereof shall not be affected and shall be given full force and effect without regard to the invalid or unenforceable portions to the fullest extent possible.  If any covenant or agreement in this Section 6 is held to be unenforceable because of the duration thereof or the scope thereof, then the court making such determination shall have the power to reduce the duration and limit the scope thereof, and the covenant or agreement shall then be enforceable in its reduced 

form.  The covenants and agreements contained in this Section 6 shall survive the termination of the Grantee’s employment with the Company or any of its Affiliates and shall survive the termination of these Terms and Conditions.
7.    No Stockholder Rights.  
The Grantee has no voting rights and no rights to receive dividends or dividend equivalents or other ownership rights and privileges of a stockholder with respect to the shares of Common Stock subject to the Restricted Stock Units.  
8.    Retention Rights.
Neither the award of Restricted Stock Units, nor any other action taken with respect to the Restricted Stock Units, shall confer upon the Grantee any right to continue in the employ or service of the Company or an Affiliate or shall interfere in any way with the right of the Company or an Affiliate to terminate Grantee’s employment or service at any time. 
9.    Cancellation or Amendment.  
This award may be canceled or amended by the Committee, in whole or in part, in accordance with the applicable terms of the Plan.
10.    Notice.  
Any notice to the Company provided for in these Terms and Conditions shall be addressed to it in care of the Corporate Secretary of the Company, 1601 Market Street, Philadelphia, Pennsylvania 19103-2197, and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll system of the Company or an Affiliate thereof, or to such other address as the Grantee may designate to the Company in writing.  Any notice provided for hereunder shall be delivered by hand, sent by telecopy or electronic mail, or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage and registry fee prepaid in the United States mail, or other mail delivery service.  Notice to the Company shall be deemed effective upon receipt.  By receipt of these Terms and Conditions, the Grantee hereby consents to the delivery of information (including without limitation, information required to be delivered to the Grantee pursuant to the applicable securities laws) regarding the Company, the Plan, and the Restricted Stock Units via the Company’s electronic mail system or other electronic delivery system.
11.    Incorporation of Plan by Reference.  
These Terms and Conditions are made pursuant to the terms of the Plan, the terms of which are incorporated herein by reference, and shall in all respects be interpreted in accordance therewith. The decisions of the Committee shall be conclusive upon any question arising hereunder.  The Grantee’s receipt of the Restricted Stock Units awarded under these Terms and Conditions constitutes such Grantee’s acknowledgment that all decisions and determinations of the Committee with respect to the Plan, these Terms and Conditions, and/or the Restricted Stock Units shall be final and binding on the Grantee, his beneficiaries, and any other person having or claiming an interest in such Restricted Stock Units.  The settlement of any award with respect to Restricted Stock Units is subject to the provisions of the Plan and to interpretations, regulations, and determinations concerning the Plan as established from time to time by the Committee in accordance with the provisions of the Plan.  A copy of the Plan will be furnished to each Grantee upon request.  Additional copies may be obtained from the Corporate Secretary of the Company, 1601 Market Street, Philadelphia, Pennsylvania 19103-2197.
12.    Income Taxes; Withholding Taxes.  
The Grantee is solely responsible for the satisfaction of all taxes and penalties that may arise in connection with the Restricted Stock Units pursuant to these Terms and Conditions.  At the time of taxation, the Company shall have the right to deduct from other compensation or from amounts payable with respect to the Restricted Stock Units, including by withholding shares of the Company’s Common Stock, an amount equal to the federal (including FICA), state, local and foreign income and payroll taxes and other amounts as may be required by law to be withheld with respect to the Restricted Stock Units, provided that any share withholding shall not exceed the Grantee’s minimum applicable withholding tax rate for federal (including FICA), state, local, and foreign tax liabilities.  Without limiting the foregoing, upon vesting of the Restricted Stock Units, the Company may withhold shares subject to the vested Restricted Stock Units to cover the minimum applicable withholding for FICA tax and related income tax liabilities. 

13.    Governing Law.  
The validity, construction, interpretation, and effect of this instrument shall exclusively be governed by, and determined in accordance with, the applicable laws of the State of Delaware, excluding any conflicts or choice of law rule or principle.  The Grantee irrevocably and unconditionally (a) agrees that any legal proceeding arising out of these Terms and Conditions may be brought only in the United States District Court for the Eastern District of Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Philadelphia County, Pennsylvania, (b) consents to the sole and exclusive jurisdiction and venue of such court in any such proceeding, and (c) waives any objection to the laying of venue of any such proceeding in any such court.  The Grantee also irrevocably and unconditionally consents to the service of any process, pleadings, notices, or other papers.   
14.    Grant Subject to Applicable Laws and Company Policies.  
These Terms and Conditions shall be subject to any required approvals by any governmental or regulatory agencies.  This award of Restricted Stock Units shall also be subject to any applicable clawback or recoupment policies, share trading policies, and other policies that may be implemented by the Board from time to time in accordance with applicable law.  Notwithstanding anything in these Terms and Conditions to the contrary, the Plan, these Terms and Conditions, and the Restricted Stock Units awarded hereunder shall be subject to all applicable laws, including any laws, regulations, restrictions, or governmental guidance that becomes applicable in the event of the Company’s participation in any governmental programs, and the Committee reserves the right to modify these Terms and Conditions and the Restricted Stock Units as necessary to conform to any restrictions imposed by any such laws, regulations, restrictions, or governmental guidance or to conform to any applicable clawback or recoupment policies, share trading policies, and other policies that may be implemented by the Board from time to time.  As a condition of participating in the Plan, and by the Grantee’s acceptance of the Restricted Stock Units, the Grantee is deemed to have agreed to any such modifications that may be imposed by the Committee, and agrees to sign such waivers or acknowledgments as the Committee may deem necessary or appropriate with respect to such modifications.
15.    Assignment.  
These Terms and Conditions shall bind and inure to the benefit of the successors and assignees of the Company.  The Grantee may not sell, assign, transfer, pledge, or otherwise dispose of the Restricted Stock Units, except to a Successor Grantee in the event of the Grantee’s death.
16.    Section 409A.  
This award of Restricted Stock Units is intended to comply with the applicable requirements of section 409A of the Code and shall be administered in accordance with section 409A of the Code.  Notwithstanding anything in these Terms and Conditions to the contrary, if the Restricted Stock Units constitute “deferred compensation” under section 409A of the Code and the Restricted Stock Units become vested and settled upon the Grantee’s termination of employment, payment with respect to the Restricted Stock Units shall be delayed for a period of six months after the Grantee’s termination of employment if the Grantee is a “specified employee” as defined under section 409A of the Code (as determined by the Committee) and if required pursuant to section 409A of the Code.  If payment is delayed, the shares of Common Stock of the Company shall be distributed within 30 days of the date that is the six-month anniversary of the Grantee’s termination of employment.  If the Grantee dies during the six-month delay, the shares shall be distributed in accordance with the Grantee’s will or under the applicable laws of descent and distribution.  Notwithstanding any provision to the contrary herein, payments made with respect to this award of Restricted Stock Units may only be made in a manner and upon an event permitted by section 409A of the Code, and all payments to be made upon a termination of employment hereunder may only be made upon a “separation from service” as defined under section 409A of the Code.  To the extent that any provision of these Terms and Conditions would cause a conflict with the requirements of section 409A of the Code, or would cause the administration of the Restricted Stock Units to fail to satisfy the requirements of section 409A of the Code, such provision shall be deemed null and void to the extent permitted by applicable law.  In no event shall a Grantee, directly or indirectly, designate the calendar year of payment.
17.    Notice of Immunity for Confidential Disclosure of a Trade Secret to an Attorney, the Government or in a Court Filing in Particular Circumstances.
The Grantee is hereby notified that these Terms and Conditions are entered into pursuant to the United States Federal Trade Secrets law.  In addition to other provisions, federal law provides certain protections to individuals who disclose a trade secret to their attorney, a court, or a government official in certain, confidential circumstances.  Specifically, federal law provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret under either of the following conditions:

(a)    Where the disclosure is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or
(b)    Where the disclosure is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.  See 18 U.S.C. § 1833(b)(1)).
Federal law also provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.  See 18 U.S.C. § 1833(b)(2).
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute and attest this instrument, and the Grantee has placed his signature hereon, effective as of the Grant Date set forth above.

RADIAN GROUP INC.
By: /s/  Anita Scott
Name: Anita Scott
Title: SVP, Chief Human Resources Officer
I hereby accept this award of Restricted Stock Units and (a) acknowledge receipt of the Plan incorporated herein, (b) acknowledge that I have read the Award Summary delivered in connection with this grant of Restricted Stock Units and these Terms and Conditions and understand the terms and conditions of them, (c) accept the award of the Restricted Stock Units described in these Terms and Conditions, (d) agree to be bound by the terms of the Plan and these Terms and Conditions, and (e) agree that all decisions and determinations of the Committee with respect to the Restricted Stock Units shall be final and binding.

Agreed to and Accepted By Grantee:

Signature: /s/ S.A. Ibrahim

Print Name: S.A. Ibrahim

Date: July 15, 2016

Schedule A
TSR Performance Goals
1.Calculation of TSR.  Vesting of the Restricted Stock Units with respect to the TSR Component will be based on the following performance results: (i) the relative total shareholder return (“TSR”) for the TSR Performance Period beginning on May 11, 2016 and ending on May 11, 2019, which means the Company’s TSR relative to the median TSR of the TSR Peer Group (as defined in Section 2(d) below), as set forth in Section 2 below, and (ii) the Company’s TSR for the TSR Performance Period (“Company Absolute TSR”), as set forth in Section 3 below.  At the end of the TSR Performance Period, the TSR for the Company, and for each company in the TSR Peer Group, shall be calculated by dividing the Closing Average Share Value (as defined below) by the Opening Average Share Value (as defined below).
(a)The term “Closing Average Share Value” means the average value of the common stock, including Accumulated Shares, for the 20 trading days ending on the last day of the TSR Performance Period (i.e., the 20 trading days ending on and including May 11, 2019), which shall be calculated as follows: (i) determine the closing price of the common stock on each trading date during the 20-day period, (ii) multiply each closing price by the Accumulated Shares as of that trading date, and (iii) average the amounts so determined for the 20-day period.
(b)The term “Opening Average Share Value” means the average value of the common stock, including Accumulated Shares, for the 20 trading days ending on the first day of the TSR Performance Period (i.e., the 20 trading days ending on and including May 11, 2016), which shall be calculated as follows: (i) determine the closing price of the common stock on each trading day during the 20-day period, (ii) multiply each closing price by the Accumulated Shares as of that trading date, and (ii) average the amounts so determined for the 20-day period.  The Opening Average Share Value is $12.44.
(c)The term “Accumulated Shares” means, for a given trading day, the sum of (i) one share and (ii) a cumulative number of shares of the company’s common stock purchased with dividends declared on a company’s common stock, assuming same day reinvestment of the dividends in the common stock of a company at the closing price on the ex-dividend date.  The calculations under this Schedule A shall include ex-dividend dates between April 14, 2016 and the trading day.   
2.Relative TSR Vesting Percentage.  
(a)Subject to Sections 3 and 5, the number of Restricted Stock Units that will vest for the TSR Performance Period shall be determined by multiplying the TSR Target Award by the Relative TSR Vesting Percentage, as determined under this Section 2.
(b)The Relative TSR Vesting Percentage will be determined based on the Company’s TSR as compared to the median TSR of the companies in the TSR Peer Group for the TSR Performance Period (the “Median Peer Group TSR”) as follows: 
	
		
	Performance
(increments of +/- point differential)
	Relative TSR Vesting Percentage

	Maximum at 50% above Median
	200%

	+1% Company Absolute TSR above Median
	102%

	Median Peer Group TSR
	100%

	-1% Company Absolute TSR below Median
	97%

	Threshold at -34% below Median
	0%

(i)If the Company’s TSR exceeds the Median Peer Group TSR, the Relative TSR Vesting Percentage will increase by 2% above 100% (but not in excess of 200%) for every 1% by which the Company’s TSR exceeds the Median Peer Group TSR.  
(ii)If the Company’s TSR is less than the Median Peer Group TSR, the Relative TSR Vesting Percentage will be below 100%, in an amount such that there is a 3% reduction for every 1% by which the Company’s TSR is less than the Median Peer Group TSR.  There is no vesting if the Company’s TSR is less than 34% of the Median Peer Group TSR.  
(iii)If the Company’s TSR rank falls between the measuring points, the Company’s TSR rank will be rounded to the nearest whole percentage point.

(c)The companies in the TSR Peer Group will be determined on the first day of the TSR Performance Period for purposes of the TSR calculation and will be changed only in accordance with Section 2(d) below.  No company shall be added to the TSR Peer Group during the TSR Performance Period for purposes of the TSR calculation. 
(d)The term “TSR Peer Group ” means the companies listed on Exhibit A and will be subject to change as follows:  
(i)In the event of a merger, acquisition or business combination transaction of a company in the TSR Peer Group in which the company in the TSR Peer Group is the surviving entity and remains publicly traded, the surviving entity shall remain a company in the TSR Peer Group.  Any entity involved in the transaction that is not the surviving company shall no longer be a company in the TSR Peer Group.
(ii)In the event of a merger, acquisition or business combination transaction of a company in the TSR Peer Group, a “going private” transaction or other event involving a company in the TSR Peer Group or the liquidation of a company in the TSR Peer Group, in each case where the company in the TSR Peer Group is not the surviving entity or is no longer publicly traded, the company shall no longer be a company in the TSR Peer Group.
(iii)Notwithstanding the foregoing, in the event of a bankruptcy of a company in the TSR Peer Group where the company in the TSR Peer Group is not publicly traded at the end of the TSR Performance Period, such company shall remain a company in the TSR Peer Group but shall be deemed to have a TSR of negative 100% (-100%).
3.Vesting Cap Based on Company Absolute TSR.  After the Relative TSR Vesting Percentage is determined, as described in Section 2 above, the Company Absolute TSR for the TSR Performance Period will be evaluated to determine the actual number of Restricted Stock Units that vest (the “Final Payout Percentage”).  If the Company Absolute TSR is negative, the Final Payout Percentage will not exceed 75% of the TSR Target Award, even if the Relative TSR Vesting Percentage determined under Section 2 is greater than 75%.  If the Company Absolute TSR is zero or positive, the Final Payout Percentage will be the Relative TSR Vesting Percentage determined under Section 2 above.  
4.General Vesting Terms.  Any fractional Restricted Stock Unit resulting from the vesting of the Restricted Stock Units in accordance with these Terms and Conditions shall be rounded down to the nearest whole number.  Any portion of the Restricted Stock Units with respect to the TSR Component that does not vest as of the end of the TSR Performance Period shall be forfeited as of the end of the TSR Performance Period.
5.Maximum Vesting and Payment.  In no event shall the maximum number of Restricted Stock Units that may be payable pursuant to these Terms and Conditions with respect to the TSR Component exceed 200% of the TSR Target Award.  In addition, notwithstanding anything in this Schedule A to the contrary, in no event shall the fair market value of the vested Restricted Stock Units to be distributed on the applicable Valuation Date exceed $72.96 ($12.16 multiplied by 600%) multiplied by the TSR Target Award, as described in Section 4(d) of the Terms and Conditions.

Exhibit A
TSR Peer Group
CoreLogic, Inc. (CLGX)
Essent Group Ltd. (ESNT)
EverBank Financial Corp. (EVER)
Fidelity National Financial, Inc. (FNF)
First American Corporation (FAF)
Genworth Financial, Inc. (GNW)
MGIC Investment Corp. (MTG)
Nationstar Mortgage Holdings, Inc. (NSM)
NMI Holdings Inc. (NMIH)
Ocwen Financial Corp. (OCN)
Old Republic International Corp. (ORI)
PHH Corp. (PHH)
Stewart Information Services Corp. (STC)
Walter Investment Management Corp. (WAC)

Schedule B
BV Performance Goals
1.    Calculation of Book Value per Share.  Vesting of the Restricted Stock Units with respect to the BV Component will be based on the Company’s growth in LTI Book Value per Share (as defined below) over the BV Performance Period beginning on March 31, 2016 and ending on March 31, 2019 as compared to the following reference points:
	
			
	 
	 
	 

	LTI Book Value per Share Growth (1)
	  
	 Payout Percentage(1)
(Percentage of BV Target Award)

	≥45%
	  
	200%

	35%
	  
	150%

	25%
	  
	100%

	15%
	  
	50%

	<5%(2)
	  
	0%

 
(1) If the Company’s growth in LTI Book Value per Share falls between two referenced percentages, the payout percentage will be interpolated.

(2) The LTI Book Value on the first day of the BV Performance Period (March 31, 2016) was $10.97.  If the Company’s growth in LTI Book Value per Share is less than 5%, the payout percentage will be zero.

The Company’s “LTI Book Value per Share” is defined as: (i) Tangible Book Value (Total Stockholders’ Equity less Goodwill and Other Intangible Assets, net) adjusted to exclude Accumulated Other Comprehensive Income and the impacts, if any, during the BV Performance Period from repurchases or retirements of convertible bonds, merger and acquisition-related expenses, changes in goodwill and other intangible assets related to acquisitions or dispositions, repurchases of common shares and declared dividends on common shares, divided by (ii) basic shares of Common Stock of the Company outstanding as of the applicable measurement date, as adjusted to exclude the share impact, if any, related to any of the items identified in (i) above, each applied on a consistent basis.  The LTI Book Value per Share shall be derived from the Company’s financial statements, prepared in accordance with GAAP, and the adjustments described above.

2.    General Vesting Terms.  Any fractional Restricted Stock Unit resulting from the vesting of the Restricted Stock Units in accordance with these Terms and Conditions shall be rounded down to the nearest whole number.  Any portion of the Restricted Stock Units with respect to BV Component that does not vest as of the end of the BV Performance Period shall be forfeited as of the end of the BV Performance Period.

3.    Maximum Vesting and Payment.  In no event shall the maximum number of Restricted Stock Units that may be payable pursuant to these Terms and Conditions with respect to the BV Component exceed 200% of the BV Target Award.

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