Document:

Exhibit 10.3

 

ARALEZ PHARMACEUTICALS INC.

2016 LONG-TERM INCENTIVE PLAN

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
1.
    	
History; Effective Date
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Purposes of the Plan
    	
1
    
	
 
    	
 
    	
 
    
	
3.
    	
Terminology
    	
1
    
	
 
    	
 
    	
 
    
	
4.
    	
Administration
    	
1
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Administration of the   Plan
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Powers of the   Administrator
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Delegation of   Administrative Authority
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Non-Uniform   Determinations
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Limited Liability;   Advisors
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(f)
    	
Indemnification
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(g)
    	
Effect of   Administrator’s Decision
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Shares Issuable   Pursuant to Awards
    	
3
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Initial Share Pool
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Adjustments to Share   Pool
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Code   Section 162(m) Individual Limits
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
ISO Limit
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Source of Shares
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Participation
    	
5
    
	
 
    	
 
    	
 
    
	
7.
    	
Awards
    	
5
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Awards, In General
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Minimum Restriction   Period for Full Value Awards
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Stock Options
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Limitation on Reload   Options
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Stock Appreciation   Rights
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(f)
    	
Repricing
    	
8
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(g)
    	
Stock Awards
    	
8
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(h)
    	
Stock Units
    	
9
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(i)
    	
Performance Shares and   Performance Units
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(j)
    	
Other Stock-Based   Awards
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(k)
    	
Qualified   Performance-Based Awards
    	
11
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(l)
    	
Awards to Participants   Outside the United States
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(m)
    	
Limitation on Dividend   Reinvestment and Dividend Equivalents
    	
12
    

 

i

 

	
 
    	
 
    	
Page
    
	
8.
    	
Withholding of Taxes
    	
13
    
	
 
    	
 
    	
 
    
	
9.
    	
Transferability of   Awards
    	
13
    
	
 
    	
 
    	
 
    
	
10.
    	
Adjustments for   Corporate Transactions and Other Events
    	
14
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Mandatory Adjustments
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Discretionary   Adjustments
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Adjustments to   Performance Goals
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Statutory Requirements Affecting   Adjustments
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Dissolution or   Liquidation
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
Change in Control   Provisions
    	
15
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Termination of Awards
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Continuation,   Assumption or Substitution of Awards
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Other Permitted Actions
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Section 409A   Savings Clause
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
Substitution of Awards   in Mergers and Acquisitions
    	
16
    
	
 
    	
 
    	
 
    
	
13.
    	
Compliance with   Securities Laws; Listing and Registration
    	
17
    
	
 
    	
 
    	
 
    
	
14.
    	
Section 409A   Compliance
    	
17
    
	
 
    	
 
    	
 
    
	
15.
    	
Plan Duration;   Amendment and Discontinuance
    	
18
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Plan Duration
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Amendment and   Discontinuance of the Plan
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Amendment of Awards
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
General Provisions
    	
19
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Non-Guarantee of   Employment or Service
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
No Trust or Fund   Created
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Status of Awards
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Subsidiary Employees
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Governing Law and   Interpretation
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(f)
    	
Use of English Language
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(g)
    	
Recovery of Amounts   Paid
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
17.
    	
Glossary
    	
20
    

 

ii

 

1.                                       History; Effective Date.

 

ARALEZ PHARMACEUTICALS INC., a company formed under the laws of the Province of British Columbia, Canada (“Aralez”), has established the ARALEZ PHARMACEUTICALS 2016 LONG-TERM INCENTIVE PLAN, as set forth herein, and as the same may be amended from time to time (the “Plan”). The Plan was adopted by the Board of Directors of Aralez (the “Board”) on December 11, 2015. The Plan shall become and is effective as of the consummation of the transactions contemplated by the Merger Agreement (the “Effective Date”).

 

2.                                       Purposes of the Plan.

 

The Plan is designed to:

 

(a)                                 promote the long-term financial interests and growth of Aralez and its Subsidiaries (together, the “Company”) by attracting and retaining management and other personnel and key service providers with the training, experience and ability to enable them to make a substantial contribution to the success of the Company’s business;

 

(b)                                 motivate management personnel by means of growth-related incentives to achieve long-range goals; and

 

(c)                                  further the alignment of interests of Participants with those of the shareholders of Aralez through opportunities for increased stock or stock-based ownership in Aralez.

 

Toward these objectives, the Administrator may grant stock options, stock appreciation rights, stock awards, stock units, performance shares, performance units, and other stock-based awards to eligible individuals on the terms and subject to the conditions set forth in the Plan.

 

3.                                       Terminology.

 

Except as otherwise specifically provided in an Award Agreement, capitalized words and phrases used in the Plan or an Award Agreement shall have the meaning set forth in the glossary at Section 17 of the Plan or as defined the first place such word or phrase appears in the Plan.

 

4.                                       Administration.

 

(a)                                 Administration of the Plan.  The Plan shall be administered by the Administrator.

 

(b)                                 Powers of the Administrator.  The Administrator shall, except as otherwise provided under the Plan, have plenary authority, in its sole and absolute discretion, to grant Awards pursuant to the terms of the Plan to Eligible Individuals and to take all other actions necessary or desirable to carry out the purpose and intent of the Plan. Among other things, the Administrator shall have the authority, in its sole and absolute discretion, subject to the terms and conditions of the Plan to:

 

(i)                                     determine the Eligible Individuals to whom, and the time or times at which, Awards shall be granted;

 

(ii)                                 determine the types of Awards to be granted any Eligible Individual;

 

(iii)                             determine the number of Common Shares to be covered by or used for reference purposes for each Award or the value to be transferred pursuant to any Award;

 

(iv)                              determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (A) the purchase price of any Common Shares, (B) the method of payment for shares purchased pursuant to any Award, (C) the method for satisfying any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of Common Shares, (D) subject to 

 

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Section 5(f) and 7(b), the timing, terms and conditions of the exercisability, vesting or payout of any Award or any shares acquired pursuant thereto, (E) the Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (F) the time of the expiration of any Award, (G) the effect of the Participant’s Termination of Service on any of the foregoing, and (H) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto as the Administrator shall consider to be appropriate and not inconsistent with the terms of the Plan;

 

(v)                                 subject to Sections 7(f), 7(k), 10(c) and 15, modify, amend or adjust the terms and conditions of any Award;

 

(vi)                              subject to Section 7(b), accelerate or otherwise change the time at or during which an Award may be exercised or becomes payable and waive or accelerate the lapse, in whole or in part, of any restriction, condition or risk of forfeiture with respect to such Award; provided, however, that, except in connection with death, disability or a Change in Control, no such change, waiver or acceleration shall be made with respect to a Qualified Performance-Based Award if the effect of such action would cause the Award to fail to qualify for the Section 162(m) Exemption or shall be made to any Award that is considered “deferred compensation” within the meaning of Section 409A of the Code if the effect of such action is inconsistent with Section 409A of the Code;

 

(vii)                           determine whether an Award will be paid or settled in cash, Common Shares, or in any combination thereof and whether, to what extent and under what circumstances cash or Common Shares payable with respect to an Award shall be deferred either automatically or at the election of the Participant;

 

(viii)                       for any purpose, including but not limited to, qualifying for preferred or beneficial tax treatment, accommodating the customs or administrative challenges or otherwise complying with the tax, accounting or regulatory requirements of one or more jurisdictions, adopt, amend, modify, administer or terminate sub-plans, appendices, special provisions or supplements applicable to Awards regulated by the laws of a particular jurisdiction, which sub-plans, appendices, supplements and special provisions may take precedence over other provisions of the Plan, and prescribe, amend and rescind rules and regulations relating to such sub-plans, supplements and special provisions;

 

(ix)                              establish any “blackout” period, during which transactions affecting Awards may not be effectuated, that the Administrator in its sole discretion deems necessary or advisable;

 

(x)                                 determine the Fair Market Value of Common Shares or other property for any purpose under the Plan or any Award;

 

(xi)                              administer, construe and interpret the Plan, Award Agreements and all other documents relevant to the Plan and Awards issued thereunder, and decide all other matters to be determined in connection with an Award;

 

(xii)                           establish, amend, rescind and interpret such administrative rules, regulations, agreements, guidelines, instruments and practices for the administration of the Plan and for the conduct of its business as the Administrator deems necessary or advisable;

 

(xiii)                       correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent the Administrator shall consider it desirable to carry it into effect; and

 

(xiv)                       specify that vesting conditions in respect of Awards shall not extend beyond applicable limitations such that the Award complies at all times with the exception in paragraph (k) of the 

 

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definition of “salary deferral arrangement” in subsection 248(1) of the Income Tax Act (Canada) or comparable legislation of any jurisdiction; and

 

(xv)                          otherwise administer the Plan and all Awards granted under the Plan.

 

(c)                                  Delegation of Administrative Authority.  The Administrator may designate officers or employees of the Company to assist the Administrator in the administration of the Plan and, to the extent permitted by applicable law and stock exchange rules, the Administrator may delegate to officers or other employees of the Company the Administrator’s duties and powers under the Plan, subject to such conditions and limitations as the Administrator shall prescribe, including without limitation the authority to execute agreements or other documents on behalf of the Administrator; provided, however, that such delegation of authority shall not extend to the granting of, or exercise of discretion with respect to, Awards to Eligible Individuals who are “covered employees” within the meaning of Section 162(m) of the Code or officers under Section 16 of the Exchange Act.

 

(d)                                 Non-Uniform Determinations.  The Administrator’s determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the Award Agreements evidencing such Awards, and the ramifications of a Change in Control upon outstanding Awards) need not be uniform and may be made by the Administrator selectively among Awards or persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.

 

(e)                                  Limited Liability; Advisors.  To the maximum extent permitted by law, no member of the Administrator shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder. The Administrator may employ counsel, consultants, accountants, appraisers, brokers or other persons. The Administrator, Aralez, and the officers and directors of Aralez shall be entitled to rely upon the advice, opinions or valuations of any such persons.

 

(f)                                   Indemnification.  To the maximum extent permitted by law, by Aralez’s Memorandum and Articles of Association, and by any directors’ and officers’ liability insurance coverage which may be in effect from time to time, the members of the Administrator and any agent or delegate of the Administrator who is a director, officer or employee of Aralez or an Affiliate shall be indemnified by Aralez against any and all liabilities and expenses to which they may be subjected by reason of any act or failure to act with respect to their duties on behalf of the Plan.

 

(g)                                  Effect of Administrator’s Decision.  All actions taken and determinations made by the Administrator on all matters relating to the Plan or any Award pursuant to the powers vested in it hereunder shall be in the Administrator’s sole and absolute discretion, unless in contravention of any express term of the Plan, including, without limitation, any determination involving the appropriateness or equitableness of any action. All determinations made by the Administrator shall be conclusive, final and binding on all parties concerned, including Aralez, its shareholders, any Participants and any other employee, consultant, or director of Aralez and its Affiliates, and their respective successors in interest. No member of the Administrator, nor any director, officer, employee or representative of Aralez shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards.

 

5.                                       Shares Issuable Pursuant to Awards.

 

(a)                                 Initial Share Pool.  As of the Effective Date, the number of Common Shares issuable pursuant to Awards that may be granted under the Plan (the “Share Pool”) shall be equal to the sum of (i) 2,300,000 Common Shares plus (ii) the number of unallocated Common Shares available for issuance as of the Effective Date under the POZEN, Inc. 2010 Omnibus Equity Compensation Plan that are not then subject to outstanding Awards, and (iii) the number of unallocated Common Shares available for issuance as of the Effective Date under the Amended and Restated Option Plan of 

 

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Tribute Pharmaceuticals Canada Inc. (“Tribute”) that are not then subject to outstanding Awards and (iv) the number of Common Shares required to cover each stock option granted in substitution of stock options held by employees of Tribute in connection with the pending business combination between Tribute and Aralez.

 

(b)                                 Adjustments to Share Pool.  On and after the Effective Date, the Share Pool shall be adjusted, in addition to any adjustments to be made pursuant to Section 10 of the Plan, as follows:

 

(i)                                     The Share Pool shall be reduced, on the date of grant, by one share for each stock option or stock appreciation right granted under the Plan and by 1.59 shares for each stock award, stock unit, Performance Share and/or Other Stock-Based Award granted under the Plan; provided that Awards that are valued by reference to Common Shares but are required to be paid in cash pursuant to their terms shall not reduce the Share Pool;

 

(ii)                                 If and to the extent options or stock appreciation rights originating from the Share Pool terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised, or if any stock awards, stock units, Performance Shares and/or Other Stock-Based Awards are forfeited, the Common Shares subject to such Awards shall again be available for Awards under the Share Pool, and shall increase the Share Pool by one share for each stock option or stock appreciation right and 1.59 shares for each stock award, stock unit, Performance Share and/or Other Stock-Based Award issued in connection with such Award or by which the Award is valued by reference;

 

(iii)                             Notwithstanding the foregoing, the following Common Shares shall not become available for issuance under the Plan: (A) shares tendered by Participants, or withheld by the Company, as full or partial payment to the Company upon the exercise of stock options granted under the Plan; (B) shares reserved for issuance upon the grant of stock appreciation rights, to the extent the number of reserved shares exceeds the number of shares actually issued upon the exercise of the stock appreciation rights; and (C) shares withheld by, or otherwise remitted to, the Company to satisfy a Participant’s tax withholding obligations upon the lapse of restrictions on stock awards or the exercise of stock options or stock appreciation rights granted under the Plan.

 

(c)                                  Code Section 162(m) and Other Individual Limits.  Subject to adjustment as provided in Section 10 of the Plan:

 

(i)                                     the maximum number of Common Shares that may be made subject to Awards granted under the Plan during a calendar year to any one person in the form of stock options or stock appreciation rights is, in the aggregate, 1,000,000 shares;

 

(ii)                                 the maximum number of Common Shares that may be made subject to Awards granted under the Plan during a calendar year to any one person in the form of Performance Awards is, in the aggregate, 1,000,000 shares, and

 

(iii)                             in connection with Awards granted under the Plan during a calendar year to any one person in the form of Performance Shares, the maximum cash amount payable thereunder is the amount equal to the number of shares made subject to the Award, as limited by Section 5(c)(ii), multiplied by the Fair Market Value as determined as of the payment date; and

 

(iv)                              in connection with Awards granted under the Plan during a calendar year to any one person in the form of Performance Units, the maximum cash amount payable under such Performance Units is $5,000,000;

 

provided, however, that each of the limitations set forth above in clauses (i), (ii) and (iii) of this Section 5(c) shall be multiplied by two when applied to Awards granted to any individual during the calendar year in which such individual first commences service with Aralez or a Subsidiary; and provided, further, that the limitations set forth above in clauses (ii) and (iii) of this Section 5(c) shall be 

 

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multiplied by the number of calendar years over which the applicable Performance Period spans (in whole or in part), if the Performance Period is longer than 12 months’ duration, when applied to Performance Awards. If an Award is terminated, surrendered or canceled in the same year in which it was granted, such Award nevertheless will continue to be counted against the limitations set forth above in this Section 5(c) for the calendar year in which it was granted.

 

(d)                                 ISO Limit.  Subject to adjustment pursuant to Section 10 of the Plan, the maximum number of Common Shares that may be issued pursuant to stock options granted under the Plan that are intended to qualify as Incentive Stock Options within the meaning of Section 422 of the Code shall be equal to the number of shares in the Share Pool as of the Effective Date of the Plan.

 

(e)                                  Source of Shares.  The Common Shares with respect to which Awards may be made under the Plan shall be shares authorized for issuance under Aralez’s memorandum and articles of association but unissued, or issued and reacquired, including without limitation shares purchased in the open market or in private transactions.

 

(f)                                   Stock Exchange Limits.

 

(i)                                     The number of Common Shares subject to Awards granted to any one Participant shall be determined by the Board, but no one Participant shall be granted Awards which exceed, in aggregate, the maximum number permitted by the Toronto Stock Exchange, or such other stock exchange on which Aralez’s securities are listed for trade from time to time (the “Exchange”).

 

(ii)                                 Subject to the aggregate limit and adjustment provisions in Section 5 of this Plan, the aggregate number of Common Shares that may be issued pursuant to the exercise of Awards under the Plan and all other security based compensation arrangements (as such term is defined in section 613 of the TSX Company Manual) of the Company are subject to the following additional limitations:

 

(A)                               in the aggregate, no more than 10% of the issued and outstanding Common Shares (on a non-diluted basis) may be reserved at any time for insiders (as defined in the Securities Act (Ontario) and includes an associate and Affiliate, as defined in the Securities Act (Ontario) (“Insider(s)”) under the Plan, together with all other security based compensation arrangements of the Company; and

 

(B)                               the number of securities of the Company issued to Insiders, within any one year period, under all security based compensation arrangements, cannot exceed 10% of the issued and outstanding Common Shares.

 

6.                                       Participation.

 

Participation in the Plan shall be open to all Eligible Individuals, as may be selected by the Administrator from time to time. The Administrator may also grant Awards to Eligible Individuals in connection with hiring, recruiting or otherwise, prior to the date the individual first performs services for Aralez or a Subsidiary; provided, however, that such Awards shall not become vested or exercisable, and no shares shall be issued to such individual, prior to the date the individual first commences performance of such services.

 

7.                                       Awards.

 

(a)                                 Awards, In General.  The Administrator, in its sole discretion, shall establish the terms of all Awards granted under the Plan consistent with the terms of the Plan. Awards may be granted individually or in tandem with other types of Awards, concurrently with or with respect to outstanding Awards. All Awards are subject to the terms and conditions of the Plan and as provided in the Award Agreement, which shall be delivered to the Participant receiving such Award upon, or as promptly as is 

 

5

 

reasonably practicable following, the grant of such Award. Unless otherwise specified by the Administrator, in its sole discretion, or otherwise provided in the Award Agreement, an Award shall not be effective unless the Award Agreement is signed or otherwise accepted by Aralez and the Participant receiving the Award (including by electronic delivery and/or electronic signature). Unless the Administrator determines otherwise, any failure by the Participant to sign and return the Award Agreement within such period of time following the granting of the Award as the Administrator shall prescribe shall cause such Award to the Participant to be null and void. The Administrator may direct that any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan.

 

(b)                                 Minimum Restriction Period for Full Value Awards.  Except as provided below and notwithstanding any provision of the Plan to the contrary, each Full Value Award granted under the Plan shall be subject to a minimum Restriction Period of 12 months from the date of grant if vesting of or lapse of restrictions on such Award is based on the satisfaction of Performance Goals and a minimum Restriction Period of 36 months from the date of grant, applied in either pro rata installments or a single installment, if vesting of or lapse of restrictions on such Award is based solely on the Participant’s satisfaction of specified service requirements with the Company. If the grant of a Performance Award is conditioned on satisfaction of Performance Goals, the Performance Period shall not be less than 12 months’ duration, but no additional minimum Restriction Period need apply to such Award. Except as provided below and notwithstanding any provision of the Plan to the contrary, the Administrator shall not have discretionary authority to waive the minimum Restriction Period applicable to a Full Value Award, except in the case of death, disability, retirement, or a Change in Control. The provisions of this Section 7(b) shall not apply and/or may be waived, in the Administrator’s discretion, with respect to up to the number of Full Value Awards that is equal to 10% of the aggregate Share Pool as of the Effective Date.

 

(c)                                  Stock Options.

 

(i)  Grants.  A stock option means a right to purchase a specified number of Common Shares from Aralez at a specified price during a specified period of time. The Administrator may from time to time grant to Eligible Individuals Awards of Incentive Stock Options or Nonqualified Options; provided, however, that Awards of Incentive Stock Options shall be limited to employees of Aralez or of any current or hereafter existing “parent corporation” or “subsidiary corporation,” as defined in Sections 424(e) and 424(f) of the Code, respectively, of Aralez, and any other Eligible Individuals who are eligible to receive Incentive Stock Options under the provisions of Section 422 of the Code. No stock option shall be an Incentive Stock Option unless so designated by the Administrator at the time of grant or in the applicable Award Agreement.

 

(ii)  Exercise.  Stock options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator; provided, however, that Awards of stock options may not have a term in excess of ten years’ duration unless required otherwise by applicable law. The exercise price per share subject to a stock option granted under the Plan shall not be less than the Fair Market Value of one Common Share on the date of grant of the stock option, except as provided under applicable law or with respect to stock options that are granted in substitution of similar types of awards of a company acquired by Aralez or a Subsidiary or with which Aralez or a Subsidiary combines (whether in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock, or otherwise) to preserve the intrinsic value of such awards. Should the expiry date of a stock option fall within a period during which the relevant Participant is prohibited from exercising a Nonqualified Option due to trading restrictions imposed by the Company pursuant to any policy of the Company respecting restrictions on trading that is in effect at that time (a “blackout period”) or within nine Business Days following the expiration of a blackout period, such expiry date of the Nonqualified Option shall be automatically extended without any further act or formality to that date which is 

 

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the tenth Business Day after the end of the blackout period, such tenth Business Day to be considered the expiry date for such Nonqualified Option for all purposes under the Plan. The ten Business Day period referred to in this paragraph may not be extended by the Board.

 

(iii)  Termination of Service.  Except as provided in the applicable Award Agreement or otherwise determined by the Administrator, to the extent stock options are not vested and exercisable, a Participant’s stock options shall be forfeited upon his or her Termination of Service.

 

(iv)  Additional Terms and Conditions.  The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock options, provided they are not inconsistent with the Plan.

 

(d)                                 Limitation on Reload Options.  The Administrator shall not grant stock options under this Plan that contain a reload or replenishment feature pursuant to which a new stock option would be granted automatically upon receipt of delivery of Common Shares to Aralez in payment of the exercise price or any tax withholding obligation under any other stock option.

 

(e)                                  Stock Appreciation Rights.

 

(i)  Grants.  The Administrator may from time to time grant to Eligible Individuals Awards of stock appreciation rights. A stock appreciation right entitles the Participant to receive, subject to the provisions of the Plan and the Award Agreement, a payment having an aggregate value equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one Common Share over (B) the base price per share specified in the Award Agreement, times (ii) the number of shares specified by the stock appreciation right, or portion thereof, which is exercised. The base price per share specified in the Award Agreement shall not be less than the lower of the Fair Market Value on the date of grant or the exercise price of any tandem stock option to which the stock appreciation right is related, or with respect to stock appreciation rights that are granted in substitution of similar types of awards of a company acquired by Aralez or a Subsidiary or with which Aralez or a Subsidiary combines (whether in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock, or otherwise) such base price as is necessary to preserve the intrinsic value of such awards.

 

(ii)  Exercise.  Stock appreciation rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator; provided, however, that stock appreciation rights granted under the Plan may not have a term in excess of ten years’ duration unless required otherwise by applicable law. The applicable Award Agreement shall specify whether payment by Aralez of the amount receivable upon any exercise of a stock appreciation right is to be made in cash or Common Shares or a combination of both, or shall reserve to the Administrator or the Participant the right to make that determination prior to or upon the exercise of the stock appreciation right. If upon the exercise of a stock appreciation right a Participant is to receive a portion of such payment in Common Shares, the number of shares shall be determined by dividing such portion by the Fair Market Value of a Common Share on the exercise date. No fractional shares shall be used for such payment and the Administrator shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional shares shall be eliminated.

 

(iii)  Termination of Service.  Except as provided in the applicable Award Agreement or otherwise determined by the Administrator, to the extent stock appreciation rights are not vested and exercisable, a Participant’s stock appreciation rights shall be forfeited upon his or her Termination of Service.

 

(iv)  Additional Terms and Conditions.  The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock appreciation rights, provided they are not inconsistent with the Plan.

 

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(f)                                   Repricing.  Notwithstanding anything herein to the contrary, except in connection with a corporate transaction involving Aralez (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of options and stock appreciation rights granted under the Plan may not be amended, after the date of grant, to reduce the exercise price of such options or stock appreciation rights, nor may outstanding options or stock appreciation rights be canceled in exchange for (i) cash, (ii) options or stock appreciation rights with an exercise price or base price that is less than the exercise price or base price of the original outstanding options or stock appreciation rights, or (iii) other Awards, unless such action is approved by Aralez’s shareholders.

 

(g)                                  Stock Awards.

 

(i)  Grants.  The Administrator may from time to time grant to Eligible Individuals Awards of unrestricted Common Shares or Restricted Stock (collectively, “Stock Awards”) on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Administrator shall determine, subject to the limitations set forth in Section 7(b). Stock Awards shall be evidenced in such manner as the Administrator may deem appropriate, including via book-entry registration.

 

(ii)  Vesting.  Restricted Stock shall be subject to such vesting, restrictions on transferability and other restrictions, if any, and/or risk of forfeiture as the Administrator may impose at the date of grant or thereafter. The Restriction Period to which such vesting, restrictions and/or risk of forfeiture apply may lapse under such circumstances, including without limitation upon the attainment of Performance Goals, in such installments, or otherwise, as the Administrator may determine. In the event that the Administrator conditions the grant or vesting of a Stock Award upon the attainment of Performance Goals, or the attainment of Performance Goals together with the continued service of the Participant, the Administrator may, prior to or at the time of grant, designate the Stock Award as a Qualified Performance-Based Award. Subject to the provisions of the Plan and the applicable Award Agreement, during the Restriction Period, the Participant shall not be permitted to vote, sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock.

 

(iii)  Rights of a Shareholder; Dividends.  Except to the extent restricted under the Award Agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a shareholder of Common Shares including, without limitation, the right to vote Restricted Stock upon the expiry of the Restriction Period. Subject to shareholder approval, cash dividends declared payable on Common Shares shall be paid, with respect to outstanding Restricted Stock, either as soon as practicable following the dividend payment date or deferred for payment to such later date as determined by the Administrator, and shall be paid in cash or as unrestricted Common Shares having a Fair Market Value equal to the amount of such dividends or may be reinvested in additional shares of Restricted Stock as determined by the Administrator; provided, however, that dividends declared payable on Restricted Stock that is granted as a Performance Award shall be held by Aralez and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such shares of Restricted Stock. Stock distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Common Shares or other property has been distributed. As soon as is practicable following the date on which restrictions on any shares of Restricted Stock lapse, Aralez shall deliver to the Participant the certificates for such shares or shall cause the shares to be registered in the Participant’s name in book-entry form, in either case with the restrictions removed, provided that the Participant shall have complied with all conditions for delivery of such shares contained in the Award Agreement or otherwise reasonably required by Aralez.

 

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(iv)  Termination of Service.  Except as provided in the applicable Award Agreement, upon Termination of Service during the applicable Restriction Period, Restricted Stock and any accrued but unpaid dividends that are at that time subject to restrictions shall be forfeited; provided that, subject to the limitations set forth in Section 7(b), the Administrator may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of Restricted Stock.

 

(v)  Additional Terms and Conditions.  The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of Restricted Stock, provided they are not inconsistent with the Plan.

 

(h)                                 Stock Units.

 

(i)  Grants.  The Administrator may from time to time grant to Eligible Individuals Awards of unrestricted stock Units or Restricted Stock Units on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Administrator shall determine, subject to the limitations set forth in Section 7(b). Restricted Stock Units represent a contractual obligation by Aralez to deliver a number of Common Shares, an amount in cash equal to the Fair Market Value of the specified number of shares subject to the Award, or a combination of Common Shares and cash, in accordance with the terms and conditions set forth in the Plan and any applicable Award Agreement.

 

(ii)  Vesting and Payment.  Restricted Stock Units shall be subject to such vesting, risk of forfeiture and/or payment provisions as the Administrator may impose at the date of grant. The Restriction Period to which such vesting and/or risk of forfeiture apply may lapse under such circumstances, including without limitation upon the attainment of Performance Goals, in such installments, or otherwise, as the Administrator may determine. In the event that the Administrator conditions the vesting and/or lapse of risk of forfeiture of Restricted Stock Units upon the attainment of Performance Goals, or the attainment of Performance Goals together with the continued service of the Participant, the Administrator may, prior to or at the time of grant, designate the Award of Restricted Stock Units as a Qualified Performance-Based Award. Common Shares, cash or a combination of Common Shares and cash, as applicable, payable in settlement of Restricted Stock Units shall be delivered to the Participant as soon as administratively practicable, but no later than 30 days, after the date on which payment is due under the terms of the Award Agreement provided that the Participant shall have complied with all conditions for delivery of such shares or payment contained in the Award Agreement or otherwise reasonably required by Aralez, or in accordance with an election of the Participant, if the Administrator so permits, that meets the requirements of Section 409A of the Code.

 

(iii)  No Rights of a Shareholder; Dividend Equivalents.  Until Common Shares are issued to the Participant in settlement of stock Units, the Participant shall not have any rights of a shareholder of Aralez with respect to the stock Units or the shares issuable thereunder. The Administrator may grant to the Participant the right to receive Dividend Equivalents on stock Units, on a current, reinvested and/or restricted basis, subject to such terms as the Administrator may determine provided, however, that Dividend Equivalents payable on stock Units that are granted as a Performance Award shall, rather than be paid on a current basis, be accrued and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such stock Units.

 

(iv)  Termination of Service.  Upon Termination of Service during the applicable deferral period or portion thereof to which forfeiture conditions apply, or upon failure to satisfy any other conditions precedent to the delivery of Common Shares or cash to which such Restricted Stock 

 

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Units relate, all Restricted Stock Units and any accrued but unpaid Dividend Equivalents with respect to such Restricted Stock Units that are then subject to deferral or restriction shall be forfeited; provided that, subject to the limitations set forth in Section 7(b), the Administrator may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock Units will be waived in whole or in part in the event of termination resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of Restricted Stock Units.

 

(v)  Additional Terms and Conditions.  The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock Units, provided they are not inconsistent with the Plan.

 

(i)                                     Performance Shares and Performance Units.

 

(i)  Grants.  The Administrator may from time to time grant to Eligible Individuals Awards in the form of Performance Shares and Performance Units. Performance Shares, as that term is used in this Plan, shall refer to Common Shares or Units that are expressed in terms of Common Shares, the issuance, vesting, lapse of restrictions on or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period. Performance Units, as that term is used in this Plan, shall refer to dollar-denominated Units valued by reference to designated criteria established by the Administrator, other than Common Shares, the issuance, vesting, lapse of restrictions on or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period. The applicable Award Agreement shall specify whether Performance Shares and Performance Units will be settled or paid in cash or Common Shares or a combination of both, or shall reserve to the Administrator or the Participant the right to make that determination prior to or at the payment or settlement date.

 

(ii)  Performance Criteria.  The Administrator shall, prior to or at the time of grant, condition the grant, vesting or payment of, or lapse of restrictions on, an Award of Performance Shares or Performance Units upon (A) the attainment of Performance Goals during a Performance Period or (B) the attainment of Performance Goals and the continued service of the Participant. The Administrator may, prior to or at the time of grant, designate an Award of Performance Shares or Performance Units as a Qualified Performance-Based Award. The length of the Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Administrator in the exercise of its absolute discretion. Performance Goals may include minimum, maximum and target levels of performance, with the size of the Award or payout of Performance Shares or Performance Units or the vesting or lapse of restrictions with respect thereto based on the level attained. An Award of Performance Shares or Performance Units shall be settled as and when the Award vests or at a later time specified in the Award Agreement or in accordance with an election of the Participant, if the Administrator so permits, that meets the requirements of Section 409A of the Code.

 

(iii)  Additional Terms and Conditions.  The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of Performance Shares or Performance Units, provided they are not inconsistent with the Plan.

 

(j)                                    Other Stock-Based Awards.  The Administrator may from time to time grant to Eligible Individuals Awards in the form of Other Stock-Based Awards. Other Stock-Based Awards in the form of Dividend Equivalents may be (A) awarded on a free-standing basis or in connection with another Award other than a stock option or stock appreciation right, (B) paid currently or credited to an account for the Participant, including the reinvestment of such credited amounts in Common Shares 

 

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equivalents, to be paid on a deferred basis, and (C) settled in cash or Common Shares as determined by the Administrator; provided, however, that Dividend Equivalents payable on Other Stock-Based Awards that are granted as a Performance Award shall, rather than be paid on a current basis, be accrued and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such Other Stock-Based Awards. Any such settlements, and any such crediting of Dividend Equivalents, may be subject to such conditions, restrictions and contingencies as the Administrator shall establish.

 

(k)                                 Qualified Performance-Based Awards.

 

(i)  Stock Options and Stock Appreciation Rights.  The provisions of the Plan are intended to ensure that all stock options and stock appreciation rights granted hereunder to any Participant who is or may be a “covered employee” (within the meaning of Section 162(m)(3) of the Code) in the tax year in which such stock option or stock appreciation right is expected to be deductible to Aralez or a Subsidiary qualify for the Section 162(m) Exemption, and all such Awards shall therefore be considered Qualified Performance-Based Awards, and the Plan shall be interpreted and operated consistent with that intention.

 

(ii)  Grant Process for Performance Awards.  When granting any Award other than a stock option or stock appreciation right, the Administrator may designate such Award as a Qualified Performance-Based Award, based upon a determination that (A) the recipient is or may be a “covered employee” (within the meaning of Section 162(m)(3) of the Code) with respect to such Award and (B) the Administrator wishes such Award to qualify for the Section 162(m) Exemption. For any Award so designated as a Qualified Performance-Based Award, the Administrator shall take steps to ensure that the terms of any such Award (and of the grant thereof) shall be consistent with such designation (including, without limitation, that all such Awards be granted by a committee composed solely of “outside directors” (within the meaning of Section 162(m) of the Code) and that the Performance Goals be established, in writing, by the Administrator within the time period prescribed by Section 162(m) of the Code). The Performance Goals established by the Administrator for each Qualified Performance-Based Award shall be objective such that a third party having knowledge of the relevant facts could determine whether or not any Performance Goal has been achieved, or the extent of such achievement, and the amount, if any, which has been earned by the Participant based on such performance. The Administrator may retain in an Award Agreement the discretion to reduce (but not to increase) the amount or number of Qualified Performance-Based Awards which will be earned based on the achievement of Performance Goals. When the Performance Goals are established, the Administrator shall also specify the manner in which the level of achievement of such Performance Goals shall be calculated and the weighting assigned to such Performance Goals.

 

(iii)  Certification and Payment.  Following completion of the applicable Performance Period, and prior to any, as applicable, grant, vesting, lapse of restrictions on or payment of a Qualified Performance-Based Award, the Administrator shall determine in accordance with the terms of the Award and shall certify in writing whether the applicable Performance Goal(s) were achieved, or the level of such achievement, and the amount, if any, earned by the Participant based upon such performance. For this purpose, approved minutes of the meeting of the Administrator at which certification is made shall be sufficient to satisfy the requirement of a written certification. No Qualified Performance-Based Awards will be granted, become vested, have restrictions lapse or be paid, as applicable, for a Performance Period until such certification is made by the Administrator. The amount of a Qualified Performance-Based Award actually granted, vested, or paid to a Participant, or on which restrictions shall lapse, may be less than the amount determined by the applicable Performance Goal formula, at the discretion of the Administrator to take into account additional factors that the Administrator may deem relevant to the assessment of individual or 

 

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corporate performance for the Performance Period or otherwise, subject to the terms and conditions of the applicable Award Agreement.

 

(iv)  Performance Goals.  Performance Goals may be applied on a per share or absolute basis and relative to one or more Performance Metrics, or any combination thereof, and may be measured pursuant to U.S. generally accepted accounting principles (“GAAP”), non-GAAP or other objective standards in a manner consistent with Aralez’s or its Subsidiary’s established accounting policies, all as the Administrator shall determine at the time the Performance Goals for a Performance Period are established. The Administrator may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to the manner in which one or more of the Performance Goals is to be calculated or measured to take into account, or ignore, one or more of the following: (1) items related to a change in accounting principle; (2) items relating to financing activities; (3) expenses for restructuring or productivity initiatives; (4) other non-operating items; (5) items related to acquisitions; (6) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (7) items related to the sale or disposition of a business or segment of a business; (8) items related to discontinued operations that do not qualify as a segment of a business under U.S. generally accepted accounting principles; (9) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (10) any other items of significant income or expense which are determined to be appropriate adjustments; (11) items relating to unusual or extraordinary corporate transactions, events or developments, (12) items related to amortization of acquired intangible assets; (13) items that are outside the scope of the Company’s core, on-going business activities; (14) changes in foreign currency exchange rates; (15) items relating to changes in tax laws; (16) certain identified expenses (including, but not limited to, cash bonus expenses, incentive expenses and acquisition-related transaction and integration expenses); (17) items relating to asset impairment charges; or (18) items relating to gains or unusual or nonrecurring events or changes in applicable law, accounting principles or business conditions. For all Awards intended to qualify as Qualified Performance-Based Awards, such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.

 

(v)  Non-delegation.  No delegate of the Administrator is permitted to exercise authority granted to the Administrator under Section 4 to the extent that the exercise of such authority by the delegate would cause an Award designated as a Qualified Performance-Based Award not to qualify for, or to cease to qualify for, the Section 162(m) Exemption.

 

(l)                                     Awards to Participants Outside the United States.  The Administrator may grant Awards to Eligible Individuals who are foreign nationals, who are located outside the United States or who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause Aralez or a Subsidiary to be subject to) tax, legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable in order that any such Award shall conform to laws, regulations, and customs of the country or jurisdiction in which the Participant is then resident or primarily employed or to foster and promote achievement of the purposes of the Plan.

 

(m)                             Limitation on Dividend Reinvestment and Dividend Equivalents.  Reinvestment of dividends in additional Restricted Stock at the time of any dividend payment, and the payment of Common Shares with respect to dividends to Participants holding Awards of stock Units, shall only be permissible if sufficient shares are available under the Share Pool for such reinvestment or payment (taking into account then outstanding Awards). In the event that sufficient shares are not available under the Share Pool for such reinvestment or payment, such reinvestment or payment shall be made in the form of a grant of stock Units equal in number to the Common Shares that would have been obtained by such 

 

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payment or reinvestment, the terms of which stock Units shall provide for settlement in cash and for Dividend Equivalent reinvestment in further stock Units on the terms contemplated by this Section 7(m).

 

8.                                      Withholding of Taxes.

 

Participants and holders of Awards shall pay to Aralez or its Affiliate, or make arrangements satisfactory to the Administrator for payment of, any Tax Withholding Obligation in respect of Awards granted under the Plan no later than the date of the event creating the tax or social insurance contribution liability. The obligations of Aralez under the Plan shall be conditional on such payment or arrangements. Unless otherwise determined by the Administrator, and subject always to applicable law, Tax Withholding Obligations may be settled in whole or in part with Common Shares, including unrestricted outstanding shares surrendered to Aralez and unrestricted shares that are part of the Award that gives rise to the Tax Withholding Obligation, having a Fair Market Value on the date of surrender or withholding equal to the statutory minimum amount (and not any greater amount) required to be withheld for tax or social insurance contribution purposes, all in accordance with such procedures as the Administrator establishes. Aralez or its Affiliate may deduct, to the extent permitted by law, any such Tax Withholding Obligations from any payment of any kind otherwise due to the Participant or holder of an Award.

 

9.                                      Transferability of Awards.

 

(a)                                 General Nontransferability Absent Administrator Permission.  Except as otherwise determined by the Administrator, and in any event in the case of an Incentive Stock Option or a tandem stock appreciation right granted with respect to an Incentive Stock Option, no Award granted under the Plan shall be transferable by a Participant otherwise than by will or the laws of descent and distribution. The Administrator shall not permit any transfer of an Award for value. An Award may be exercised during the lifetime of the Participant, only by the Participant or, during the period the Participant is under a legal disability, by the Participant’s guardian or legal representative, unless otherwise determined by the Administrator. Awards granted under the Plan shall not be subject in any manner to alienation, anticipation, sale, transfer, assignment, pledge, or encumbrance, except as otherwise determined by the Administrator; provided, however, that the restrictions in this sentence shall not apply to the Common Shares received in connection with an Award after the date that the restrictions on transferability of such shares set forth in the applicable Award Agreement have lapsed. Nothing in this paragraph shall be interpreted or construed as overriding the terms of any Aralez stock ownership or retention policy, now or hereafter existing, that may apply to the Participant or Common Shares received under an Award.

 

(b)                                 Administrator Discretion to Permit Transfers Other Than For Value.  Except as otherwise restricted by applicable law, the Administrator may, but need not, permit an Award, other than an Incentive Stock Option or a tandem stock appreciation right granted with respect to an Incentive Stock Option, to be transferred to a Participant’s Family Member (as defined below) as a gift or pursuant to a domestic relations order in settlement of marital property rights. The Administrator shall not permit any transfer of an Award for value. For purposes of this Section 9, “Family Member” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty percent (50%) of the voting interests. The following transactions are not prohibited transfers for value: (i) a transfer under a domestic relations order in settlement of marital property rights; and (ii) a transfer to an entity in 

 

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which more than fifty percent of the voting interests are owned by Family Members (or the Participant) in exchange for an interest in that entity.

 

10.                               Adjustments for Corporate Transactions and Other Events.

 

(a)                                 Mandatory Adjustments.  In the event of a merger, consolidation, stock rights offering, statutory share exchange or similar event affecting Aralez (each, a “Corporate Event”) or a stock dividend, stock split, reverse stock split, separation, spinoff, reorganization, extraordinary dividend of cash or other property, share combination or subdivision, or recapitalization or similar event affecting the capital structure of Aralez (each, a “Share Change”) that occurs at any time after adoption of this Plan by the Board (including any such Corporate Event or Share Change that occurs after such adoption and coincident with or prior to the Effective Date), the Administrator shall, with the approval of the Exchange (if required), make equitable and appropriate substitutions or proportionate adjustments to (i) the aggregate number and kind of Common Shares or other securities on which Awards under the Plan may be granted to Eligible Individuals, (ii) the maximum number of Common Shares or other securities with respect to which Awards may be granted during any one calendar year to any individual, (iii) the maximum number of Common Shares or other securities that may be issued with respect to Incentive Stock Options granted under the Plan, (iv) the number of Common Shares or other securities covered by each outstanding Award and the exercise price, base price or other price per share, if any, and other relevant terms of each outstanding Award, and (v) all other numerical limitations relating to Awards, whether contained in this Plan or in Award Agreements; provided, however, that any fractional shares resulting from any such adjustment shall be eliminated; and, provided further, that in no event shall the exercise price per Common Share of a stock option or stock appreciation right, or subscription price per Common Share or any other Award, be reduced to an amount that is lower than the par value of a Common Share.

 

(b)                                 Discretionary Adjustments.  In the case of Corporate Events, the Administrator may, with the approval of the Exchange (if required), make such other adjustments to outstanding Awards as it determines to be appropriate and desirable, which adjustments may include, without limitation, (i) the cancellation of outstanding Awards in exchange for payments of cash, securities or other property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Administrator in its sole discretion (it being understood that in the case of a Corporate Event with respect to which shareholders of Aralez receive consideration other than publicly traded equity securities of the ultimate surviving entity, any such determination by the Administrator that the value of a stock option or stock appreciation right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each Common Share pursuant to such Corporate Event over the exercise price or base price of such stock option or stock appreciation right shall conclusively be deemed valid and that any stock option or stock appreciation right may be cancelled for no consideration upon a Corporate Event if its exercise price or base price equals or exceeds the value of the consideration being paid for each Common Share pursuant to such Corporate Event), (ii) the substitution of securities or other property (including, without limitation, cash or other securities of Aralez and securities of entities other than Aralez) for the Common Shares subject to outstanding Awards, and (iii) the substitution of equivalent awards, as determined in the sole discretion of the Administrator, of the surviving or successor entity or a parent thereof (“Substitute Awards”).

 

(c)                                  Adjustments to Performance Goals.  The Administrator may, in its discretion, adjust the Performance Goals applicable to any Awards to reflect any unusual or non-recurring events and other extraordinary items, impact of charges for restructurings, discontinued operations and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identified in Aralez’s consolidated financial statements, notes to the consolidated financial statements, management’s discussion and analysis or other Aralez filings with the Securities and Exchange Commission; provided, however, that, except in connection with death, disability or a Change in Control, 

 

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no such adjustment shall be made if the effect would be to cause an Award that is intended to be a Qualified Performance-Based Award to no longer constitute a Qualified Performance-Based Award. If the Administrator determines that a change in the business, operations, corporate structure or capital structure of Aralez or the applicable subsidiary, business segment or other operational unit of Aralez or any such entity or segment, or the manner in which any of the foregoing conducts its business, or other events or circumstances, render the Performance Goals to be unsuitable, the Administrator may modify such Performance Goals or the related minimum acceptable level of achievement, in whole or in part, as the Administrator deems appropriate and equitable; provided, however, that, except in connection with death, disability or a Change in Control, no such modification shall be made if the effect would be to cause an Award that is intended to be a Qualified Performance-Based Award to no longer constitute a Qualified Performance-Based Award.

 

(d)           Statutory Requirements Affecting Adjustments.  Notwithstanding the foregoing: (A) any adjustments made pursuant to Section 10 to Awards that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code; (B) any adjustments made pursuant to Section 10 to Awards that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment, the Awards either (1) continue not to be subject to Section 409A of the Code or (2) comply with the requirements of Section 409A of the Code; (C) in any event, the Administrator shall not have the authority to make any adjustments pursuant to Section 10 to the extent the existence of such authority would cause an Award that is not intended to be subject to Section 409A of the Code at the date of grant to be subject thereto; and (D) any adjustments made pursuant to Section 10 to Awards that are Incentive Stock Options shall be made in compliance with the requirements of Section 424(a) of the Code.

 

(e)                                  Dissolution or Liquidation.  Unless the Administrator determines otherwise, all Awards outstanding under the Plan shall terminate upon the dissolution or liquidation of Aralez.

 

11.                               Change in Control Provisions.

 

(a)                                 Termination of Awards.  Notwithstanding the provisions of Section 11(b), in the event that any transaction resulting in a Change in Control occurs, outstanding Awards will terminate upon the effective time of such Change in Control unless provision is made in connection with the transaction for the continuation or assumption of such Awards by, or for the issuance therefor of Substitute Awards of, the surviving or successor entity or a parent thereof. Solely with respect to Awards that will terminate as a result of the immediately preceding sentence and except as otherwise provided in the applicable Award Agreement:

 

(i)                                     the outstanding Awards of stock options and stock appreciation rights that will terminate upon the effective time of the Change in Control shall, immediately before the effective time of the Change in Control, become fully exercisable and the holders of such Awards will be permitted, immediately before the Change in Control, to exercise the Awards;

 

(ii)                                  the outstanding shares of Restricted Stock the vesting or restrictions on which are then solely time-based and not subject to achievement of Performance Goals shall, immediately before the effective time of the Change in Control, become fully vested, free of all transfer and lapse restrictions and free of all risks of forfeiture;

 

(iii)                               the outstanding shares of Restricted Stock the vesting or restrictions on which are then subject to and pending achievement of Performance Goals shall, immediately before the effective time of the Change in Control and unless the Award Agreement provides for vesting or lapsing of restrictions in a greater amount upon the occurrence of a Change in Control, become vested, free of transfer and lapse restrictions and risks of forfeiture in such amounts as if the applicable 

 

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Performance Goals for the unexpired Performance Period had been achieved at the target level set forth in the applicable Award Agreement;

 

(iv)                              the outstanding Restricted Stock Units, Performance Shares and Performance Units the vesting, earning or settlement of which is then solely time-based and not subject to or pending achievement of Performance Goals shall, immediately before the effective time of the Change in Control, become fully earned and vested and shall be settled in cash or Common Shares (consistent with the terms of the Award Agreement after taking into account the effect of the Change in Control transaction on the shares) as promptly as is practicable, subject to any applicable limitations imposed thereon by Section 409A of the Code; and

 

(v)                                 the outstanding Restricted Stock Units, Performance Shares and Performance Units the vesting, earning or settlement of which is then subject to and pending achievement of Performance Goals shall, immediately before the effective time of the Change in Control and unless the Award Agreement provides for vesting, earning or settlement in a greater amount upon the occurrence of a Change in Control, become vested and earned in such amounts as if the applicable Performance Goals for the unexpired Performance Period had been achieved at the target level set forth in the applicable Award Agreement and shall be settled in cash or Common Shares (consistent with the terms of the Award Agreement after taking into account the effect of the Change in Control transaction on the shares) as promptly as is practicable, subject to any applicable limitations imposed thereon by Section 409A of the Code.

 

Implementation of the provisions of this Section 11(a) shall be conditioned upon consummation of the Change in Control.

 

(b)                                 Continuation, Assumption or Substitution of Awards.  The administrator may specify, on or after the date of grant, in an award agreement or amendment thereto, the consequences of a Participant’s Termination of Service that occurs coincident with or following the occurrence of a Change in Control, if a Change in Control occurs under which provision is made in connection with the transaction for the continuation or assumption of outstanding Awards by, or for the issuance therefor of Substitute Awards of, the surviving or successor entity or a parent thereof.

 

(c)                                  Other Permitted Actions.  In the event that any transaction resulting in a Change in Control occurs, the Administrator may take any of the actions set forth in Section 10 with respect to any or all Awards granted under the Plan.

 

(d)                                 Section 409A Savings Clause.  Notwithstanding the foregoing, if any Award is considered to be a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code, this Section 11 shall apply to such Award only to the extent that its application would not result in the imposition of any tax or interest or the inclusion of any amount in income under Section 409A of the Code.

 

12.                               Substitution of Awards in Mergers and Acquisitions.

 

Awards may be granted under the Plan from time to time in substitution for assumed awards held by employees, officers, consultants or directors of entities who become employees, officers, consultants or directors of Aralez or a Subsidiary as the result of a merger or consolidation of the entity for which they perform services with Aralez or a Subsidiary, or the acquisition by Aralez of the assets or stock of the such entity. The terms and conditions of any Awards so granted may vary from the terms and conditions set forth herein to the extent that the Administrator deems appropriate at the time of grant to conform the Awards to the provisions of the assumed awards for which they are substituted and to preserve their intrinsic value as of the date of the merger, consolidation or acquisition transaction. To the extent permitted by applicable law and marketplace or listing rules of the primary securities market or exchange on which the Common Shares are listed or admitted for trading, any available shares 

 

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under a shareholder-approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for Awards granted pursuant to this Section 12 and, upon such grant, shall not reduce the Share Pool.

 

13.                               Compliance with Securities Laws; Listing and Registration.

 

(a)                                 The obligation of Aralez to sell or deliver Common Shares with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal, state or foreign (non-United States) securities laws, or foreign (non-United States) securities laws and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Administrator. If at any time the Administrator determines that the delivery of Common Shares under the Plan is or may be unlawful under the laws of any applicable jurisdiction, or federal, state or foreign (non-United States) securities laws, the right to exercise an Award or receive Common Shares pursuant to an Award shall be suspended until the Administrator determines that such delivery is lawful. If at any time the Administrator determines that the delivery of Common Shares under the Plan would or may violate the rules of any exchange on which Aralez’s securities are then listed for trading, the right to exercise an Award or receive Common Shares pursuant to an Award shall be suspended until the Administrator determines that such delivery would not violate such rules. If the Administrator determines that the exercise or nonforfeitability of, or delivery of benefits pursuant to, any Award would violate any applicable provision of securities laws or the listing requirements of any stock exchange upon which any of Aralez’s equity securities are listed, then the Administrator may postpone any such exercise, nonforfeitability or delivery, as applicable, but Aralez shall use all reasonable efforts to cause such exercise, nonforfeitability or delivery to comply with all such provisions at the earliest practicable date.

 

(b)                                 Each Award is subject to the requirement that, if at any time the Administrator determines, in its absolute discretion, that the listing, registration or qualification of Common Shares issuable pursuant to the Plan is required by any securities exchange or under any state, federal or foreign (non-United States) law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Common Shares, no such Award shall be granted or payment made or Common Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Administrator.

 

(c)                                  In the event that the disposition of Common Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the “Securities Act”), and is not otherwise exempt from such registration, such Common Shares shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Administrator may require a person receiving Common Shares pursuant to the Plan, as a condition precedent to receipt of such Common Shares, to represent to Aralez in writing that the Common Shares acquired by such person is acquired for investment only and not with a view to distribution and that such person will not dispose of the Common Shares so acquired in violation of federal, state or foreign securities laws and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company to issue the Common Shares in compliance with applicable federal, state or foreign securities laws. If applicable, all certificates representing such Common Shares shall bear applicable legends as required by federal, state or foreign securities laws or stock exchange regulation.

 

14.                               Section 409A Compliance.

 

It is the intention of Aralez that any Award that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code shall comply in all respects with the requirements of Section 409A of the Code to avoid the imposition of any tax or interest or the

 

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inclusion of any amount in income pursuant to Section 409A of the Code, and the terms of each such Award shall be construed, administered and deemed amended, if applicable, in a manner consistent with this intention. Notwithstanding the foregoing, neither Aralez nor any of its Affiliates nor any of its or their directors, officers, employees, agents or other service providers will be liable for any taxes, penalties or interest imposed on any Participant or other person with respect to any amounts paid or payable (whether in cash, Common Shares or other property) under any Award, including any taxes, penalties or interest imposed under or as a result of Section 409A of the Code. Any payments described in an Award that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. For purposes of any Award, each amount to be paid or benefit to be provided to a Participant that constitutes deferred compensation subject to Section 409A of the Code shall be construed as a separate identified payment for purposes of Section 409A of the Code. For purposes of Section 409A of the Code, the payment of Dividend Equivalents under any Award shall be construed as earnings and the time and form of payment of such Dividend Equivalents shall be treated separately from the time and form of payment of the underlying Award. Notwithstanding any other provision of the Plan to the contrary, with respect to any Award that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code, any payments (whether in cash, Common Shares or other property) to be made with respect to the Award that become payable on account of the Participant’s separation from service, within the meaning of Section 409A of the Code, while the Participant is a “specified employee” (as determined in accordance with the uniform policy adopted by the Administrator with respect to all of the arrangements subject to Section 409A of the Code maintained by Aralez and its Affiliates) and which would otherwise be paid within six months after the Participant’s separation from service shall be accumulated (without interest) and paid on the first day of the seventh month following the Participant’s separation from service or, if earlier, within 15 days after the appointment of the personal representative or executor of the Participant’s estate following the Participant’s death. Notwithstanding anything in the Plan or an Award Agreement to the contrary, in no event shall the Administrator exercise its discretion to accelerate the payment or settlement of an Award where such payment or settlement constitutes deferred compensation within the meaning of Code section 409A unless, and solely to the extent that, such accelerated payment or settlement is permissible under Treasury Regulation section 1.409A-3(j)(4).

 

15.                               Plan Duration; Amendment and Discontinuance.

 

(a)                                 Plan Duration.  The Plan shall remain in effect, subject to the right of the Board or the Compensation Committee to amend or terminate the Plan at any time, until the earlier of (a) the earliest date as of which all Awards granted under the Plan have been satisfied in full or terminated and no Common Shares approved for issuance under the Plan remain available to be granted under new Awards or (b) the tenth anniversary of the transactions contemplated by the Merger Agreement. No Awards shall be granted under the Plan after such termination date. Subject to other applicable provisions of the Plan, all Awards made under the Plan on or before the tenth anniversary of the transactions contemplated in the Merger Agreement, or such earlier termination of the Plan, shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards. Notwithstanding the continuation of the Plan, no Award (other than a stock option or stock appreciation right) that is intended to be a Qualified Performance-Based Award shall be granted on or after the fifth anniversary of the Effective Date unless the material terms of the applicable performance goals, within the meaning of Treasury Regulation Section 1.162-27(e)(4)(i), are approved by the shareholders of Aralez no later than the first shareholder meeting that occurs in the fifth year following the Effective Date.

 

(b)                                 Amendment and Discontinuance of the Plan.  The Board or the Compensation Committee may, without shareholder approval, amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would materially impair the rights of a Participant with respect 

 

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to a previously granted Award without such Participant’s consent, except such an amendment made to comply with applicable law or rule of any securities exchange or market on which the Common Shares are listed or admitted for trading or to prevent adverse tax or accounting consequences to Aralez or the Participant. Notwithstanding the foregoing, no such amendment shall be made without the approval of Aralez’s shareholders to the extent such amendment would (A) materially increase the benefits accruing to Participants under the Plan, (B) materially increase the number of Common Shares which may be issued under the Plan or to a Participant, (C) materially expand the eligibility for participation in the Plan, (D) eliminate or modify the prohibition set forth in Section 7(f) on repricing of stock options and stock appreciation rights, (E) lengthen the maximum term or lower the minimum exercise price or base price permitted for stock options and stock appreciation rights, or (F) modify the prohibition on the issuance of reload or replenishment options. Except as otherwise determined by the Board or Compensation Committee, termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

 

(c)                                  Amendment of Awards.  Subject to Section 7(f), the Administrator may unilaterally amend the terms of any Award theretofore granted, but no such amendment shall materially impair the rights of any Participant with respect to an Award without the Participant’s consent, except such an amendment made to cause the Plan or Award to comply with applicable law, applicable rule of any securities exchange on which the Common Shares are listed or admitted for trading, or to prevent adverse tax or accounting consequences for the Participant or the Company or any of its Affiliates. For purposes of the foregoing sentence, an amendment to an Award that results in a change in the tax consequences of the Award to the Participant shall not be considered to be a material impairment of the rights of the Participant and shall not require the Participant’s consent.

 

16.                               General Provisions.

 

(a)                                 Non-Guarantee of Employment or Service.  Nothing in the Plan or in any Award Agreement thereunder shall confer any right on an individual to continue in the service of Aralez or any Affiliate or shall interfere in any way with any right of Aralez or any Affiliate may have to terminate such service at any time with or without cause or notice and whether or not such termination results in (i) the failure of any Award to vest or become payable; (ii) the forfeiture of any unvested or vested portion of any Award; and/or (iii) any other adverse effect on the individual’s interests under any Award or the Plan. No person, even though deemed an Eligible Individual, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. To the extent that an Eligible Individual who is an employee of a Subsidiary receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that Aralez is the Participant’s employer or that the Participant has an employment relationship with Aralez.

 

(b)                                 No Trust or Fund Created.  Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between Aralez and a Participant or any other person. To the extent that any Participant or other person acquires a right to receive payments from Aralez pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of Aralez.

 

(c)                                  Status of Awards.  Awards shall be special incentive payments to the Participant and shall not be taken into account in computing the amount of salary or compensation of the Participant for purposes of determining any pension, retirement, death, severance or other benefit under (a) any pension, retirement, profit-sharing, bonus, insurance, severance or other employee benefit plan of Aralez or any Affiliate now or hereafter in effect under which the availability or amount of benefits is related to the level of compensation or (b) any agreement between (i) Aralez or any Affiliate and (ii) the Participant, except as such plan or agreement shall otherwise expressly provide.

 

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(d)                                 Subsidiary Employees.  In the case of a grant of an Award to an Eligible Individual who provides services to any Subsidiary, Aralez may, if the Administrator so directs, issue or transfer the Common Shares, if any, covered by the Award to the Subsidiary, for such lawful consideration as the Administrator may specify, upon the condition or understanding that the Subsidiary will transfer the Common Shares to the Eligible Individual in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. All Common Shares underlying Awards that are forfeited or canceled after such issue or transfer of shares to the Subsidiary shall revert to Aralez.

 

(e)                                  Governing Law and Interpretation.  The validity, construction and effect of the Plan, of Award Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Administrator relating to the Plan or such Award Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable United States federal laws and the laws of the state of North Carolina without regard to its conflict of laws principles. The captions of the Plan are not part of the provisions hereof and shall have no force or effect. Except where the context otherwise requires: (i) the singular includes the plural and vice versa; (ii) a reference to one gender includes other genders; (iii) a reference to a person includes a natural person, partnership, corporation, association, governmental or local authority or agency or other entity; and (iv) a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them.

 

(f)                                   Use of English Language.  The Plan, each Award Agreement, and all other documents, notices and legal proceedings entered into, given or instituted pursuant to an Award shall be written in English, unless otherwise determined by the Administrator. If a Participant receives an Award Agreement, a copy of the Plan or any other documents related to an Award translated into a language other than English, and if the meaning of the translated version is different from the English version, the English version shall control.

 

(g)                                  Recovery of Amounts Paid.  Except as otherwise provided by the Administrator, Awards granted under the Plan shall be subject to any and all policies, guidelines, codes of conduct, or other agreement or arrangement adopted by the Board or Compensation Committee with respect to the recoupment, recovery or clawback of compensation (collectively, the “Recoupment Policy”) and/or to any provisions set forth in the applicable Award Agreement under which Aralez may recover from current and former Participants any amounts paid or Common Shares issued under an Award and any proceeds therefrom under such circumstances as the Administrator determines appropriate. The Administrator may apply the Recoupment Policy to Awards granted before the policy is adopted to the extent required by applicable law or rule of any securities exchange or market on which Common Shares are listed or admitted for trading, as determined by the Administrator in its sole discretion.

 

17.                               Glossary.

 

Under this Plan, except where the context otherwise indicates, the following definitions apply:

 

“Administrator” means the Compensation Committee, or such other committee(s) or officer(s) duly appointed by the Board or the Compensation Committee to administer the Plan or delegated limited authority to perform administrative actions under the Plan, and having such powers as shall be specified by the Board or the Compensation Committee; provided, however, that at any time the Board may serve as the Administrator in lieu of or in addition to the Compensation Committee or such other committee(s) or officer(s) to whom administrative authority has been delegated. With respect to any Award to which Section 16 of the Exchange Act applies, the Administrator shall consist of either the Board or a committee of the Board, which committee shall consist of two or more directors, each of whom is intended to be, to the extent required by Rule 16b-3 of the Exchange Act, a “non-employee director” as defined in Rule 16b-3 of the Exchange Act and an “independent director” to the extent 

 

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required by the rules of the national securities exchange that is the principal trading market for the Common Shares, and with respect to any Award that is intended to be a Qualified Performance-Based Award, the Administrator shall consist of two or more directors, each of whom is intended to be, to the extent required by Section 162(m) of the Code, an “outside director” as defined under Section 162(m) of the Code; provided, that with respect to Awards made to a member of the Board who is not an employee of the Company, “Administrator” means the Board. Any member of the Administrator who does not meet the foregoing requirements shall abstain from any decision regarding an Award and shall not be considered a member of the Administrator to the extent required to comply with Rule 16b-3 of the Exchange Act or Section 162(m) of the Code.

 

“Affiliate” means any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with, Aralez or any successor to Aralez. For this purpose, “control” (including the correlative meanings of the terms “controlled by” and “under common control with”) shall mean ownership, directly or indirectly, of 50% or more of the total combined voting power of all classes of voting securities issued by such entity, or the possession, directly or indirectly, of the power to direct the management and policies of such entity, by contract or otherwise.

 

“Aralez” means Aralez Pharmaceuticals Inc., a company organized under the laws of the province of British Colombia, Canada.

 

“Award” means any stock option, stock appreciation right, stock award, stock unit, Performance Share, Performance Unit, and/or Other Stock-Based Award, whether granted under this Plan.

 

“Award Agreement” means the written document(s), including an electronic writing acceptable to the Administrator, and any notice, addendum or supplement thereto, memorializing the terms and conditions of an Award granted pursuant to the Plan and which shall incorporate the terms of the Plan.

 

“Board” means the Board of Directors of Aralez.

 

“Business Day” means a day, other than a Saturday, Sunday or statutory holiday, when banks are generally open in the City of Toronto, or the City of New York for the transaction of banking business.

 

“Change in Control” means the first of the following to occur: (i) a Change in Ownership of Aralez, (ii) a Change in Effective Control of Aralez, or (iii) a Change in the Ownership of Assets of Aralez, as described herein and construed in accordance with Code section 409A.

 

(i)                                     A “Change in Ownership of Aralez” shall occur on the date that any one Person acquires, or Persons Acting as a Group acquire, ownership of the capital stock of Aralez that, together with the stock held by such Person or Group, constitutes more than 50% of the total fair market value or total voting power of the capital stock of Aralez. However, if any one Person is, or Persons Acting as a Group are, considered to own more than 50%, on a fully diluted basis, of the total fair market value or total voting power of the capital stock of Aralez, the acquisition of additional stock by the same Person or Persons Acting as a Group is not considered to cause a Change in Ownership of Aralez or to cause a Change in Effective Control of Aralez (as described below). An increase in the percentage of capital stock owned by any one Person, or Persons Acting as a Group, as a result of a transaction in which Aralez acquires its stock in exchange for property will be treated as an acquisition of stock.

 

(ii)                                  A “Change in Effective Control of Aralez” shall occur on the date either (A) a majority of members of Aralez’s Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of Aralez’s Board before the date of the appointment or election, or (B) any one Person, or Persons Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of Aralez possessing 50% or more of the total voting power of the stock of Aralez.

 

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(iii)                               A “Change in the Ownership of Assets of Aralez” shall occur on the date that any one Person acquires, or Persons Acting as a Group acquire (or has or have acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons), assets from Aralez that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of Aralez immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of Aralez, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

The following rules of construction apply in interpreting the definition of Change in Control:

 

(A)                               A “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, other than employee benefit plans sponsored or maintained by Aralez and by entities controlled by Aralez or an underwriter, initial purchaser or placement agent temporarily holding the capital stock of Aralez pursuant to a registered public offering.

 

(B)                               Persons will be considered to be Persons Acting as a Group (or Group) if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the corporation. If a Person owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a Group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. Persons will not be considered to be acting as a Group solely because they purchase assets of the same corporation at the same time or purchase or own stock of the same corporation at the same time, or as a result of the same public offering.

 

(C)                               A Change in Control shall not include a transfer to a related person as described in Code section 409A or a public offering of capital stock of Aralez.

 

(D)                               For purposes of the definition of Change in Control, Section 318(a) of the Code applies to determine stock ownership. Stock underlying a vested option is considered owned by the individual who holds the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option). For purposes of the preceding sentence, however, if a vested option is exercisable for stock that is not substantially vested (as defined by Treasury Regulation §1.83-3(b) and (j)), the stock underlying the option is not treated as owned by the individual who holds the option.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto, the Treasury Regulations thereunder and other relevant interpretive guidance issued by the Internal Revenue Service or the Treasury Department. Reference to any specific section of the Code shall be deemed to include such regulations and guidance, as well as any successor section, regulations and guidance.

 

“Common Shares” means common shares in the capital of Aralez, without par value, and any capital securities into which they are converted.

 

“Company” means Aralez and its Subsidiaries, except where the context otherwise requires. For purposes of determining whether a Change in Control has occurred, Company shall mean only Aralez.

 

“Compensation Committee” means the Compensation Committee of the Board.

 

“Dividend Equivalent” means a right, granted to a Participant, to receive cash, Common Shares, stock Units or other property equal in value to dividends paid with respect to a specified number of Common Shares.

 

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“Effective Date” means the date of consummation of the transactions contemplated by the Merger Agreement.

 

“Eligible Individuals” means (i) officers and employees of, and other individuals, including non-employee directors, who are natural persons providing bona fide services to or for, Aralez or any of its Subsidiaries, provided that such services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for Aralez’s securities, (ii) prospective officers, employees and service providers who have accepted offers of employment or other service relationship from Aralez or a Subsidiary; and (iii) consultants who are natural persons providing bona fide services to or for, Aralez or any of its Subsidiaries, provided that such services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for Aralez’s securities.

 

“Exchange” means collectively, the Toronto Stock Exchange and the NASDAQ or any such exchange in Canada or the United States on which Common Shares are listed and posted for trading.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. Reference to any specific section of the Exchange Act shall be deemed to include such regulations and guidance issued thereunder, as well as any successor section, regulations and guidance.

 

“Fair Market Value” means, on a per share basis as of any date, unless otherwise determined by the Administrator:

 

(i)                                     if the principal market for the Common Shares (as determined by the Administrator if the Common Shares are listed or admitted to trading on more than one exchange or market) is a national securities exchange or an established securities market, the official closing price per Common Share for the regular market session on that date on the principal exchange or market on which the Common Shares are then listed or admitted to trading or, if no sale is reported for that date, on the last preceding day on which a sale was reported, all as reported by such source as the Administrator may select;

 

(ii)                                  if the principal market for the Common Shares is not a national securities exchange or an established securities market, but the Common Shares are quoted by a national quotation system, the average of the highest bid and lowest asked prices for the Common Shares on that date as reported on a national quotation system or, if no prices are reported for that date, on the last preceding day on which prices were reported, all as reported by such source as the Administrator may select; or

 

(iii)                               if the Common Shares are neither listed or admitted to trading on a national securities exchange or an established securities market, nor quoted by a national quotation system, the value determined by the Administrator in good faith by the reasonable application of a reasonable valuation method, which method may, but need not, include taking into account an appraisal of the fair market value of the Common Shares conducted by a nationally recognized appraisal firm selected by the Administrator.

 

Notwithstanding the preceding, for foreign, federal, state and local income tax reporting purposes and for such other purposes as the Administrator deems appropriate, the Fair Market Value shall be determined by the Administrator in accordance with uniform and nondiscriminatory standards adopted by it from time to time.

 

“Full Value Award” means an Award that results in Aralez transferring the full value of a Common Share under the Award, whether or not an actual share of stock is issued. Full Value Awards shall include, but are not limited to, stock awards, stock units, Performance Shares, Performance Units that 

 

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are payable in Common Shares, and Other Stock-Based Awards for which Aralez transfers the full value of a Common Share under the Award, but shall not include Dividend Equivalents.

 

“Incentive Stock Option” means any stock option that is designated, in the applicable Award Agreement or the resolutions of the Administrator under which the stock option is granted, as an “incentive stock option” within the meaning of Section 422 of the Code and otherwise meets the requirements to be an “incentive stock option” set forth in Section 422 of the Code.

 

“Merger Agreement” means the Agreement and Plan of Merger and Arrangement, dated as of June 8, 2015, among Tribute Pharmaceuticals Canada Inc., POZEN Inc., the Company and certain other entities, as amended.

 

“Nonqualified Option” means any stock option that is not an Incentive Stock Option.

 

“Other Stock-Based Award” means an Award of Common Shares or any other Award that is valued in whole or in part by reference to, or is otherwise based upon, Common Shares, including without limitation Dividend Equivalents.

 

“Participant” means an Eligible Individual to whom one or more Awards are or have been granted pursuant to the Plan and have not been fully settled or cancelled and, following the death of any such person, his successors, heirs, executors and administrators, as the case may be.

 

“Performance Award” means a Full Value Award, the grant, vesting, lapse of restrictions or settlement of which is conditioned upon the achievement of performance objectives over a specified Performance Period and includes, without limitation, Performance Shares and Performance Units.

 

“Performance Goals” means the performance goals established by the Administrator in connection with the grant of Awards based on Performance Metrics or other performance criteria selected by the Administrator; provided, however, that in the case of Qualified Performance-Based Awards, such performance goals shall be based on the attainment of specified levels of one or more Performance Metrics.

 

“Performance Period” means that period established by the Administrator during which any Performance Goals specified by the Administrator with respect to such Award are to be measured.

 

“Performance Metrics” means criteria established by the Administrator relating to any of the following, as it may apply to an individual, one or more business units, divisions, or Affiliates, or on a company-wide basis, and in absolute terms, relative to a base period, or relative to the performance of one or more comparable companies, peer groups, or an index covering multiple companies:

 

(i)  Earnings or Profitability Metrics:  any derivative of revenue; earnings/loss (gross, operating, net, or adjusted); earnings/loss before interest and taxes (“EBIT”); earnings/loss before interest, taxes, depreciation and amortization (“EBITDA”); profit margins; operating margins; expense levels or ratios; provided that any of the foregoing metrics may be adjusted to eliminate the effect of any one or more of the following: interest expense, asset impairments or investment losses, early extinguishment of debt or stock-based compensation expense;

 

(ii)  Return Metrics:  any derivative of return on investment, assets, equity or capital (total or invested);

 

(iii)  Investment Metrics:  relative risk-adjusted investment performance; investment performance of assets under management;

 

(iv)  Cash Flow Metrics:  any derivative of operating cash flow; cash flow sufficient to achieve financial ratios or a specified cash balance; free cash flow; cash flow return on capital; net cash provided by operating activities; cash flow per share; working capital;

 

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(v)  Liquidity Metrics:  any derivative of debt leverage (including debt to capital, net debt-to-capital, debt-to-EBITDA or other liquidity ratios);

 

(vi)  Stock Price and Equity Metrics:  any derivative of return on shareholders’ equity; total shareholder return; stock price; stock price appreciation; market capitalization; earnings/loss per share (basic or diluted) (before or after taxes); and/or

 

(vii)  Strategic Metrics:  product research and development; completion of an identified special project; clinical trials; regulatory filings or approvals; patent application or issuance; manufacturing or process development; sales or net sales; market share; market penetration; economic value added; customer service; customer satisfaction; inventory control; balance of cash, cash equivalents and marketable securities; growth in assets; key hires; employee satisfaction; employee retention; business expansion; acquisitions, divestitures, joint ventures or financing; legal compliance or safety and risk reduction.

 

“Performance Shares” means a grant of stock or stock Units the issuance, vesting or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period.

 

“Performance Units” means a grant of dollar-denominated Units the value, vesting or payment of which is contingent on performance against predetermined objectives over a specified Performance Period.

 

“Plan” means this Aralez Pharmaceuticals Inc. 2016 Long-Term Incentive Plan, as set forth herein and as it may be amended from time to time.

 

“Qualified Performance-Based Award” means an Award intended to qualify for the Section 162(m) Exemption, as provided in Section 7(k).

 

“Restricted Stock” means an Award of Common Shares to a Participant that may be subject to certain transferability and other restrictions and to a risk of forfeiture (including by reason of not satisfying certain Performance Goals).

 

“Restricted Stock Unit” means a right granted to a Participant to receive Common Shares or cash at the end of a specified deferral period, which right may be conditioned on the satisfaction of certain requirements (including the satisfaction of certain Performance Goals).

 

“Restriction Period” means, with respect to Full Value Awards, the period commencing on the date of grant of such Award to which vesting or transferability and other restrictions and a risk of forfeiture apply and ending upon the expiration of the applicable vesting conditions, transferability and other restrictions and lapse of risk of forfeiture and/or the achievement of the applicable Performance Goals (it being understood that the Administrator may provide that vesting shall occur and/or restrictions shall lapse with respect to portions of the applicable Award during the Restriction Period in accordance with Section 7(b)).

 

“Section 162(m) Exemption” means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code.

 

“Subsidiary” means any corporation or other entity in an unbroken chain of corporations or other entities beginning with Aralez if each of the corporations or other entities, or group of commonly controlled corporations or other entities, other than the last corporation or other entity in the unbroken chain then owns stock or other equity interests possessing 50% or more of the total combined voting power of all classes of stock or other equity interests in one of the other corporations or other entities in such chain or otherwise has the power to direct the management and policies of the entity by contract or by means of appointing a majority of the members of the board or other body that controls the affairs of the entity; provided, however, that solely for purposes of determining whether a 

 

25

 

Participant has a Termination of Service that is a “separation from service” within the meaning of Section 409A of the Code or whether an Eligible Individual is eligible to be granted an Award that in the hands of such Eligible Individual would constitute a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code , a “Subsidiary” of a corporation or other entity means all other entities with which such corporation or other entity would be considered a single employer under Sections 414(b) or 414(c) of the Code.

 

“Tax Withholding Obligation” means any federal, state, local or foreign (non-United States) income, employment or other tax or social insurance contribution required by applicable law to be withheld in respect of Awards.

 

“Termination of Service” means the termination of the Participant’s employment or consultancy with, or performance of services for, Aralez and its Subsidiaries. Temporary absences from employment because of illness, vacation or leave of absence and transfers among Aralez and its Subsidiaries shall not be considered Terminations of Service. With respect to any Award that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code, “Termination of Service” shall mean a “separation from service” as defined under Section 409A of the Code to the extent required by Section 409A of the Code to avoid the imposition of any tax or interest or the inclusion of any amount in income pursuant to Section 409A of the Code. A Participant has a separation from service within the meaning of Section 409A of the Code if the Participant terminates employment with Aralez and all Subsidiaries for any reason. A Participant will generally be treated as having terminated employment with Aralez and all Subsidiaries as of a certain date if the Participant and the entity that employs the Participant reasonably anticipate that the Participant will perform no further services for Aralez or any Subsidiary after such date or that the level of bona fide services that the Participant will perform after such date (whether as an employee or an independent contractor) will permanently decrease to no more than 20 percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services if the Participant has been providing services for fewer than 36 months); provided, however, that the employment relationship is treated as continuing while the Participant is on military leave, sick leave or other bona fide leave of absence if the period of leave does not exceed six months or, if longer, so long as the Participant retains the right to reemployment with Aralez or any Subsidiary.

 

“Total and Permanent Disability” means, with respect to a Participant, except as otherwise provided in the relevant Award Agreement, that a Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to last until the Participant’s death or result in death, or (ii) determined to be totally disabled by the Social Security Administration or other governmental or quasi-governmental body that administers a comparable social insurance program outside of the United States in which the Participant participates and which conditions the right to receive benefits under such program on the Participant being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to last until the Participant’s death or result in death. The Administrator shall have sole authority to determine whether a Participant has suffered a Total and Permanent Disability and may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant’s condition.

 

“Unit” means a bookkeeping entry used by Aralez to record and account for the grant of the following types of Awards until such time as the Award is paid, cancelled, forfeited or terminated, as the case may be: stock units, Restricted Stock Units, Performance Units, and Performance Shares that are expressed in terms of units of Common Shares.

 

{end of document}

 

26Exhibit

SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT, dated as of December 4, 2015 (the “Agreement”), by and between SPX FLOW, Inc., a Delaware corporation (the “Company”), and J. Michael Whitted (the “Executive”).  The Company and the Executive are referred to as the “Parties”.
WHEREAS, the Executive and SPX Corporation (“SPX”) entered into a certain Employment Agreement, dated as of April 22, 2009, as may be amended, including by the letter agreement dated December 2, 2013 (the “Employment Agreement”);
WHEREAS, in connection with the separation of SPX into two separate, publicly traded companies, SPX and the Company, the Company, SPX and the Executive entered into an Assignment and Assumption of and Amendment to Employment Agreement, dated as of September 26, 2015, whereby the Company assumed all of the obligations of SPX under the Employment Agreement; and  
WHEREAS, except as otherwise provided herein, the Parties intend that this Agreement shall set forth the terms of the Executive’s separation from service with the Company and that this Agreement shall supersede all prior agreements between the Parties regarding the subject matter contained herein, including the Employment Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth in this Agreement, the Parties agree as follows:
1.Termination of Employment; Termination of Employment Agreement.  
(a)    The Executive’s employment with the Company and its subsidiaries and affiliates (the “Company Group”) shall terminate in all capacities effective as of December 4, 2015 (the “Separation Date”).  The Executive agrees to resign from any appointments, positions, offices and directorships with the Company Group effective as of the Separation Date.  The Executive agrees that he shall execute all documents required by the Company to effect such termination and resignations.  The Parties agree that the Executive’s termination of employment will be treated as a termination by the Company without Cause (as defined in the Employment Agreement) for purposes of Section 5(d) of the Employment Agreement.  
(b)    The Employment Agreement shall terminate effective as of the Separation Date.
2.    Accrued Obligations.  The Executive is entitled to receive the following accrued obligations, which shall be paid no later than the next regularly scheduled payroll date after the Separation Date:  (i) base salary earned or accrued but not yet paid through the Separation Date; (ii) unreimbursed business expenses incurred prior to the Separation Date, subject to the terms of the Company’s expense reimbursement policy; (iii) earned and accrued, but unused vacation days; and (iv) amounts payable under the Company’s benefit plans in 

1

accordance with the terms of such plans, except as may be required under Section 401(a)(13) of the Internal Revenue Code of 1986, as amended (the “Code”).
3.    Severance Payments and Benefits.  Subject to Section 10(b) below, in consideration of the covenants set forth herein and the delivery of the waiver and release of claims set forth in Section 9 below, and provided that the Executive does not revoke this Agreement during the Revocation Period (as defined in Section 10(l) below), the Company shall provide the Executive with the following severance payments and benefits:
(a)    Severance Payment.  The Company shall pay the Executive a severance payment in the amount of $1,342,097, minus all tax withholdings required by applicable law and other authorized payroll deductions.  This amount shall be payable in a single sum payment within thirty (30) days following the Effective Date (as defined in Section 11 below).  In addition, the Executive will be eligible to receive an additional severance payment equal to the portion of the annual bonus that would have been payable to the Executive for the 2015 bonus plan year, based on the performance level actually attained, that exceeds the higher of (A) $816,107 or (B) the average annual bonus paid to the Executive for the 2012, 2013 and 2014 bonus plan years.  This amount (if any) will be payable in a single sum payment no later than March 15, 2016.  Finally, the Company shall pay the Executive an additional severance payment in the amount of $200,000, minus all tax withholdings required by applicable law and other authorized payroll deductions.  This amount too shall be payable in a single sum payment within thirty (30) days following the Effective Date.
(b)    Treatment of Equity-Based Compensation.  
(i)    Stock Options.  Stock options to purchase shares of Company common stock granted to the Executive, as set forth on Schedule A attached hereto (the “Options”), shall (A) become fully vested on the Effective Date to the extent that the Options would have been vested on or before the first anniversary of the Separation Date and (B) continue to be exercisable until the earlier of:  (1) the second anniversary of the Separation Date or (2) the expiration of the term of the respective Options in accordance with the Company Stock Compensation Plan and applicable award documents.  Any other stock options held by the Executive on the Separation Date shall be cancelled without payment.
(ii)    Restricted Stock.  The shares of Company restricted common stock granted to the Executive, as set forth on Schedule A attached hereto (“RSA”), shall become fully vested only to the extent that the RSA would have been vested on or before the first anniversary of the Separation Date based on the attainment and certification of the relevant performance goals applicable to such RSAs.  Such RSAs (if any) will be provided to the Executive at the time of the original scheduled vesting date of the awards and only upon the attainment and certification of the specified performance goals.  Any other restricted common stock awards held by the Executive on the Separation Date shall be cancelled without payment.

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(iii)    Performance Shares.  The shares of Company performance shares granted to the Executive, as set forth on Schedule A attached hereto (“Performance Shares”), shall become fully vested only to the extent that the Performance Shares would have been vested on or before the first anniversary of the Separation Date based on the attainment and certification of the relevant performance goals applicable to such Performance Shares.  Such Performance Shares (if any) will be provided to the Executive at the time of the original scheduled vesting date of the awards and only upon the attainment and certification of the specified performance goals.  Any other performance shares held by the Executive on the Separation Date shall be cancelled without payment.
(c)    Continuation of Health Insurance.  The Company shall continue to provide the Executive with medical, dental and vision insurance through the one year anniversary of the Separation Date in accordance with Section 4980B(f) of the Code (relating to “COBRA” coverage).  The Executive shall continue to be obligated to pay his portion of the premiums (at the applicable current, active employee rate), and deductibles, coinsurance and co-payments pursuant to the applicable plan documents.  Following the one year anniversary of the Separation Date, the Executive’s participation in COBRA (if any) shall be at his own expense.  In order to receive the benefits described in this Section 3(c), the Executive must take the steps described in the attached Exhibit A.   
(d)    Key Manager Life Insurance.  The Company shall continue the Executive’s key manager life insurance coverage under the terms of the Company Life Insurance Plan for Key Managers (with coverage in an amount equal to $1,051,800) through the one year anniversary of the Separation Date.  The Executive shall be obligated to pay his applicable share of the premiums.
(e)    Supplemental Retirement Plan.  The Company shall credit the Executive with one additional year of credited service and one additional year of age for purposes of the Company’s Supplemental Retirement Plan for Top Management (the “SERP”).  Payment of the Executive’s SERP benefit shall be subject to applicable law and the terms and conditions of the SERP.  
(f)    Outplacement.  The Company shall reimburse the Executive for outplacement services incurred by the Executive (with a service provider of the Executive’s choice) in an amount up to $35,000, subject to the terms of the Company’s expense reimbursement policy.  Such outplacement services must be incurred by the Executive no later than December 31, 2017.
(g)    Financial Planning.  The Company shall reimburse the Executive for expenses related to annual income tax return preparation and financial planning services incurred on or before December 31, 2016, subject to a maximum amount of $20,000 per calendar year, provided that such reimbursement will be made in accordance with the terms of the Company’s expense reimbursement policy.
(h)    Annual Medical Exam.  The Company shall reimburse the Executive for the actual cost of an annual physical exam incurred on or before December 31, 2016, to the 

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extent not reimbursed by the health insurance plan covering the Executive.  The reimbursement (if any) will be made in accordance with the terms of the Company’s expense reimbursement policy.
(i)    Retiree Medical.  The Executive has not satisfied the eligibility requirements under Section 4(g) of the Employment Agreement regarding annual reimbursements of post-retirement medical coverage and is not eligible to receive any such reimbursements in the future.
(j)    No Other Compensation or Benefits.  Except as otherwise specifically provided herein or as required pursuant to applicable law or under an applicable Company benefit plan with respect to the Executive’s vested benefits, the Executive shall not be entitled to any compensation or benefits or to participate in any past, present or future employee benefit programs or arrangements of any member of the Company Group (including, without limitation, any compensation or benefits under any severance plan, program or arrangement) on or after the Separation Date.

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4.    Return of Company Property.  On or prior to the Separation Date, the Executive shall surrender to the Company all hard copy and electronic documents (and all copies thereof) and other property belonging to the Company Group in the Executive’s possession and all property made available to the Executive in connection with his employment by the Company, including, without limitation, any and all files, notes, notebooks, correspondence, memoranda, agreements, drawings, records, business plans, forecasts, financial information, specifications, computer-recorded information, tangible property (including, but not limited to, computers, PDAs, pagers, telephones, credit cards, entry cards, keys, identification badges and keys), and any materials of any kind that contain or embody any proprietary or confidential information of the Company Group.  If the Executive discovers after the Separation Date that he has retained any proprietary or confidential information (including, but not limited to, proprietary or confidential information contained in any electronic documents or e-mail systems in the Executive’s possession or control), the Executive agrees immediately upon discovery to surrender such information to the Company.
5.    Cooperation.  From and after the Separation Date, the Executive shall cooperate in all reasonable respects with the Company Group and their respective directors, officers, attorneys and experts in connection with the conduct of any past, current or future, actual or threatened, action, proceeding, investigation, hearings or litigation involving the Company Group, including any such action, proceeding, investigation, hearing or litigation in which the Executive is called to testify.  The Executive agrees to provide, on a timely basis, advice and consultation upon the reasonable request of the Company Group’s senior management team with respect to business, operational, financial, personnel and other matters relating to the period of the Executive’s employment with the Company Group.  The Executive shall be reimbursed by the Company for reasonable travel and lodging expenses incurred in connection with such cooperation except to the extent that such reimbursement may be prohibited, or may jeopardize the Company Group’s legal interests, as determined by the Company.
6.    Unfavorable Comments.  Except as otherwise provided in this Agreement, the Executive agrees to refrain from making, directly or indirectly, now or at any time in the future, whether in writing, orally or electronically:  (i) any derogatory comment concerning the Company Group or any of their current or former directors, officers, employees or shareholders, or (ii) any other comment that could reasonably be expected to be detrimental to the business or financial prospects or reputation of the Company Group.
7.    SPX FLOW, Inc. Confidentiality and Noncompetition.  In further consideration of this Agreement, the Executive acknowledges and hereby re-affirms, his obligations set forth in the post-employment restrictive covenants contained in the SPX FLOW Confidentiality and Non-Competition Agreement between the Company and the Executive dated as of September 17, 2015 (the “Restrictive Covenant Agreement”), previously executed by the Executive, a copy of which is attached hereto as Exhibit B and hereby incorporated into this Agreement.  Both the Company and the Executive agree that nothing in the Restrictive Covenant Agreement shall be construed to prevent executive from performing any services, currently or in the future, for SPX Corporation.  To the extent that there is a conflict between the Restrictive 

5

Covenant Agreement and this Agreement, this Agreement shall control but all other terms and provisions of the Restrictive Covenant Agreement shall remain in full force and effect.  Nothing in this Agreement or in Exhibit B shall be construed to limit any disclosure to any governmental officials.
8.    Certain Remedies.  
(a)    Remedies.  Without intending to limit the remedies available to the Company Group, including, but not limited to, those set forth in Section 8(b) hereof, the Executive agrees that a breach of this Agreement may result in material and irreparable injury to the Company Group for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, any member of the Company Group shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining the Executive from engaging in activities prohibited by the covenants contained in this Agreement or such other relief as may be required specifically to enforce any of the covenants contained in this Agreement.  Such injunctive relief in any court shall be available to the Company Group in lieu of, or prior to or pending determination in, any arbitration proceeding.
(b)    Cessation of Payments.  In addition to the remedies set forth in this Agreement or available to the Company under applicable law, the Company may terminate any payments or benefits due hereunder and require the Executive to immediately repay the severance payments and benefits provided to the Executive pursuant to Section 3 of this Agreement if the Executive (i) files any charge, claim, demand, action or arbitration with regard to the Executive’s employment, compensation or termination of employment under any federal, state or local law, or an arbitration under any industry regulatory entity, except in either case for a claim for breach of this Agreement or failure to honor the obligations set forth herein, or (ii) breaches any of the covenants contained in this Agreement or in the Restrictive Covenant Agreement.    
9.    Release.
(a)    General Release.  In consideration of the payments and benefits provided to the Executive under this Agreement and after consultation with counsel, the Executive, and each of the Executive’s respective heirs, executors, administrators, representatives, agents, successors and assigns (collectively, the “Releasors”) hereby irrevocably and unconditionally release and forever discharge the Company Group and each of their respective current and former parent companies, officers, employees, directors, shareholders and agents (the “Releasees”) from any and all claims, actions, causes of action, rights, judgments, obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “Claims”), including, without limitation, any Claims under any federal, state, local or foreign law, whenever they arose, that the Releasors have ever had or now may have as of the date the Executive signs this Agreement, arising out of (i) the Executive’s employment relationship with and service as an employee, officer or director of the Company Group, and the termination of such relationship or service or any other interactions the Executive may have had with the 

6

Company Group, (ii) the Employment Agreement, or (iii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date the Executive signs this Agreement; provided, however, that the release set forth in this Section 9(a) shall not apply to (x) the obligations of the Company under this Agreement and (y) any indemnification rights the Executive may have in accordance with the Company’s governance instruments or under any director and officer liability insurance maintained by the Company with respect to liabilities arising as a result of the Executive’s service as an officer, employee or director of the Company Group.  The Releasors further agree that the payments and benefits described in this Agreement shall be in full satisfaction of any and all Claims for payments or benefits, whether express or implied, that the Releasors may have against the Releasees arising out of the Executive’s employment relationship or the Executive’s service as an employee, officer or director of the Company Group and the termination thereof.  The Executive understands, acknowledges, and voluntarily agrees that this Agreement is a total and complete release by the Executive of any and all claims which he has against the Releasees as of the date he signs this Agreement, both known or unknown, even though there may be facts or consequences of facts which are unknown to the Executive.
The Executive further acknowledges that the Executive has received from the Company Group all wages and compensation which the Executive is owed by the Company Group or to which the Executive is entitled by law as of all dates preceding execution of this Agreement.  The Executive does not claim that he performed any work for the Company Group for which he was not compensated.  The Executive acknowledges, agrees, and affirmatively represents that, other than the severance payments and benefits described in Sections 3 of this Agreement, he is entitled to no other severance payment, benefit or other compensation under any other agreement, plan, or practice.  The Executive further agrees that there is no dispute between the parties that no other form of compensation whatsoever, other than the severance payments and benefits described in Section 3 of this Agreement, is due to the Executive.  The Executive further acknowledges that he has reported any and all work-related injuries or illnesses that the Executive has incurred or suffered prior to the execution of this Agreement.

(b)    Specific Release of ADEA Claims.  In further consideration of the payments and benefits provided to the Executive under this Agreement, the Releasors hereby unconditionally release and forever discharge the Releasees, from any and all Claims that the Releasors may have as of the date the Executive signs this Agreement arising under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”).  By signing this Agreement, the Executive hereby acknowledges and confirms the following:  (i) the Executive was advised and encouraged by the Company in connection with his termination to consult with an attorney of his choice prior to signing this Agreement and to have such attorney explain to the Executive the terms of this Agreement, including, without limitation, the terms relating to the Executive’s release of claims arising under ADEA and, the Executive has in fact consulted with an attorney; (ii) the Executive was given a period of not fewer than 21 days to consider the terms of this Agreement and to consult with an attorney of his choosing with respect thereto; (iii) the Executive is providing the release and discharge set forth in this Section 9(b) only in exchange for consideration in addition to anything of value to which the Executive is already entitled; (iv) that 

7

the Executive knowingly and voluntarily accepts the terms of this Agreement; and (v) the Executive has carefully read this Agreement and personally understands all of the terms, including that the Executive is releasing claims under ADEA.
(c)    Medicare.  The Executive affirms, covenants, and warrants that he is not a Medicare beneficiary and is not currently receiving, has not received in the past, will not have received at the time of any payment pursuant to this Agreement, is not entitled to, is not eligible for, and has not applied for or sought Social Security or Medicare benefits.  In the event any statement in the preceding sentence is incorrect (for example, but not limited to, if the Executive is a Medicare beneficiary, etc.), the remaining sentences of this paragraph apply.  The Executive affirms, covenants, and warrants he has made no claim against, nor is he aware of any facts supporting any claim against, the Company Group, under which the Company Group could be liable for medical expenses incurred by the Executive before or after the execution of this Agreement.  Furthermore, the Executive is aware of no medical expenses which Medicare has paid and for which the Company Group is or could be liable.  The Executive agrees and affirms that, to the best of his knowledge, no liens of any governmental entities, including those for Medicare conditional payments, exist.  The Executive will indemnify, defend, and hold the Company Group harmless from Medicare claims, liens, damages, conditional payments, and rights to payment, if any, including attorneys’ fees, and the Executive further agrees to waive any and all future private causes of action for damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) et seq.
(d)    No Assignment.  The Executive represents and warrants that he has not assigned any of the Claims being released under this Section 9.
(e)    Claims.  The Executive represents that he has not filed and will not file any charges, claims, complaints or other accusatory pleadings against the Releasees based upon or arising out of any aspect of the Executive’s employment relationship with the Company Group, or the separation of that employment, which may exist or may have accrued as of the date the Executive signs this Agreement.  Nothing in this Agreement, however, will prevent the Executive from filing and pursuing proceedings before the U.S. Equal Employment Opportunity Commission or other appropriate state or local comparable administrative agency.  The Executive nevertheless agrees that he waives the right to recover any monetary award, should the Executive, any government agency or other entity file a suit, charge, claim or action against the Releasees with respect to the employment with the Company Group or the separation of that employment.   
Further, nothing in this Agreement will prevent the Executive from initiating communications directly with, or responding to any inquiry from, or providing testimony before, any self-regulatory organization or state or federal regulatory authority, regarding his employment or separation therefrom or this Agreement or its underlying facts or circumstances.  Further, nothing in this Agreement prohibits the Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower 

8

provisions of federal law or regulation.  The Executive is not required to contact the Company regarding the subject matter of any such communications before engaging in such communications nor does the Executive need prior authorization to make any such reports or disclosures.
(f)    No Reemployment.  The Executive agrees not to seek reinstatement, reemployment, or future employment as a new employee with the Company Group, and the Company Group has no obligation, contractual or otherwise, to employ or reemploy, hire or rehire, or recall or reinstate the Executive in the future.
10.    Miscellaneous.
(a)    Entire Agreement.  This Agreement sets forth the entire agreement and understanding of the Parties with respect to the matters covered hereby and supersedes and replaces any express or implied, written or oral, prior agreement, plan or arrangement with respect to the terms of the Executive’s employment and the termination thereof which the Executive may have had with the Company Group (including, without limitation, the Employment Agreement and the Change of Control Agreement between the Executive and the Company, dated as of December 2, 2013, as may be amended), but excluding the Restrictive Covenant Agreement.  Except as set forth in Section 10(b), this Agreement may be amended only by a written document signed by the Parties.
(b)    Tax Compliance.  It is intended that all of the benefits and payments under this Agreement comply with, or be exempt from, the requirements of Section 409A of the Code.  To the extent that any payments or benefits under this Agreement are subject to Section 409A of the Code, to the maximum extent applicable, this Agreement will be construed to comply, and administered in compliance, with Section 409A of the Code.  
(i)    Notwithstanding anything in this Agreement to the contrary, if as of the Separation Date the Executive is a “specified employee” as defined in Section 409A of the Code and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then:
(1)    the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Executive) until the first business day of the seventh month following Separation Date (or the earliest date as is permitted under Section 409A of the Code), and
(2)    if any other payments or other benefits due to the Executive hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred to the extent that such deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits 

9

shall be restructured, to the extent possible, in a manner, determined by the Company, that does not cause such an accelerated or additional tax.
(ii)    For purposes of Section 409A of the Code, (x) references herein to the Executive’s Separation Date, “termination of employment” or like reference shall refer to the Executive’s separation from service with the Company within the meaning of Section 409A of the Code and (y) the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.  
(iii)    Notwithstanding anything to the contrary herein, except to the extent any expense, reimbursement or in-kind benefit provided pursuant to this Agreement does not constitute a “deferral of compensation” within the meaning of Section 409A of the Code: (x) the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive in any other calendar year, (y) the Employer shall reimburse the Executive for expenses for which he is entitled to be reimbursed on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred, and (z) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.
(iv)    Notwithstanding anything in this Agreement to the contrary, neither the Company nor any of its affiliates, employees or representatives shall have any liability to the Executive with respect to any tax liabilities imposed on the Executive under Section 409A of the Code.  In the event that any changes are made to Section 409A of the Code, this Section shall be deemed amended to the extent necessary to cause this Agreement to comply with such changes to such law.
(v)    If any payment or benefits subject to Section 409A of the Code is contingent on the delivery of a waiver and release of claims by the Executive, and could occur in either of two calendar years, payment will occur in the later calendar year.  
(c)    Withholdings.  Any payments made or benefits provided to the Executive under this Agreement shall be reduced by any applicable withholding taxes or payroll deductions.
(d)    Governing Law.  This Agreement shall be subject to, and construed in accordance with, the laws of the State of Delaware.
(e)    Waiver.  The failure of any party to this Agreement to enforce any of its terms, provisions or covenants shall not be construed as a waiver of the same or of the right of such party to enforce the same.  Waiver by any party hereto of any breach or default by another party of any term or provision of this Agreement shall not operate as a waiver of any other breach or default.
(f)    Severability.  In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and 

10

enforceability of the remainder of the Agreement shall not in any way be affected or impaired thereby.  Moreover, if any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the maximum extent allowed by applicable law.
(g)    Notices.  Any notices required or made pursuant to this Agreement shall be in writing and shall be deemed to have been given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, as follows:
if to the Executive:
The address on file with the Company.

if to the Company:
SPX FLOW, Inc.
13320 Ballantyne Corporation Place, Charlotte, NC 28277
Attention: General Counsel
or to such other address as either party may furnish to the other in writing in accordance with this Section 10(g).  Notices of change of address shall be effective only upon receipt.
(h)    Descriptive Headings.  The paragraph headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
(i)    Counterparts.  This Agreement may be executed in one or more counterparts, which, together, shall constitute one and the same agreement.
(j)    Successors and Assigns.  Except as otherwise provided herein, this Agreement shall inure to the benefit of and be enforceable by the Executive and the Company and their respective successors and assigns.
(k)    Dispute Resolution.  In the event of any dispute or claim relating to or arising out of this Agreement, the Executive and the Company agree that all such claims or disputes shall be fully and finally resolved by binding arbitration conducted by the American Arbitration Association (“AAA”) in Charlotte, North Carolina in accordance with the AAA’s National Rules for the Resolution of Employment Disputes, provided, however, that this arbitration provision shall not apply to, and the Company shall be free to seek, injunctive or other equitable relief with respect to any actual or threatened breach or violation by the Executive of any applicable non-compete, non-solicitation, confidentiality or similar restrictive covenants with respect to the Executive, in any court having appropriate jurisdiction.  The Executive acknowledges that by accepting this arbitration provision he is waiving any right to a jury trial in the event of a covered dispute.  The arbitrator may, but is not required to, order that the prevailing party shall be entitled to recover from the losing party its attorneys’ fees and costs incurred in any arbitration arising 

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out of this Agreement.  The Executive agrees to pay the Releasees for any and all costs and attorneys’ fees incurred in defending any action against them based upon any released claims in this Agreement, in prosecuting any action to enforce the terms of this Agreement or for breach of this Agreement by the Releasors, or asserting the defense of this Agreement in any action.  The Executive agrees to pay the attorneys’ fees as they are incurred, payable monthly during any period where the Executive is entitled to pay attorneys’ fees as described in this Paragraph.  Alternatively, if any provision of this Paragraph is determined to be unenforceable by a court of law or in arbitration, the Executive agrees that if he attempts to avoid or set aside the terms of this Agreement, and this Agreement is successfully asserted by the Releasees as a defense or bar to any claim asserted by the Executive, and a court of competent jurisdiction or an arbitrator has determined that such claims are barred, the Executive shall be liable for the costs and attorneys’ fees of the Releasees in defending such claims or asserting such defense based on this Agreement.  The arbitrator will have the right only to interpret and apply the provisions of this Agreement and may not change any of its provisions.  The arbitrator will permit reasonable pre-hearing discovery of facts, to the extent necessary to establish a claim or a defense to a claim, subject to supervision by the arbitrator.  The determination of the arbitrator will be conclusive and binding upon the parties and judgment upon the same may be entered in any court having jurisdiction thereof.  The arbitrator will give written notice to the parties stating the arbitrator’s determination, and will furnish to each party a signed copy of such determination.  Any arbitration or action pursuant to this Section will be subject to, and construed in accordance with, the substantive laws of the State of Delaware and, where applicable, federal law, without giving effect to the principles of conflict of laws of Delaware.  The Company will not be required to seek or participate in arbitration regarding any actual or threatened breach of any applicable non-compete, non-solicitation, confidentiality or similar restrictive covenants with respect to the Executive, but may pursue its remedies, including injunctive relief, for such breach in a court of competent jurisdiction in Charlotte, North Carolina, or in the sole discretion of the Company, in a court of competent jurisdiction where the Executive has committed or is threatening to commit a breach of the Executive’s covenants, and no arbitrator may make any ruling inconsistent with the findings or rulings of such court.
(l)    Revocation.  This Agreement may be revoked by the Executive within the seven (7)-day period commencing on the date the Executive signs this Agreement (the “Revocation Period”).  In the event of any such revocation by the Executive, all obligations of the Parties shall terminate and be of no further force and effect as of the date of such revocation.  No such revocation by the Executive shall be effective unless it is in writing and signed by the Executive and received by the Company prior to the expiration of the Revocation Period.  
11.    Effective Date of Agreement.  This Agreement shall not become effective until the day following the last day of the Revocation Period (the “Effective Date”). 

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the date(s) set forth below (or, if the Executive does not include a date under the Executive’s signature line, the date set forth shall be the date this Agreement, signed by the Executive, is received by the Company).

	
				
	 
	 
	 
	SPX FLOW, INC.

	 
	 
	 
	 

	 
	 
	By:
	 /s/ Stephen A. Tsoris    

	 
	 
	 
	Stephen A. Tsoris

	 
	 
	 
	Vice President, Secretary, and General Counsel

	 
	 
	 
	12/26/2015

THE EXECUTIVE HEREBY ACKNOWLEDGES THAT THE EXECUTIVE HAS READ THIS AGREEMENT, HAS HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL, THAT THE EXECUTIVE FULLY KNOWS, UNDERSTANDS AND APPRECIATES ITS CONTENTS, AND THAT THE EXECUTIVE HEREBY ENTERS INTO THIS AGREEMENT VOLUNTARILY AND OF HIS OWN FREE WILL.
	
		
	ACCEPTED AND AGREED
	 

	 
	 

	/s/ J. Michael Whitted
	 

	J. Michael Whitted
	 

	Date:  12/20/2015
	 

	 
	 

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Schedule A

Stock Options

	
			
	Grant Date
	Vesting Date
	Quantity Vesting

	01/02/2015
	Effective Date
	12,535

Restricted Share Award

	
			
	Grant Date
	Vesting Date
	Quantity Eligible to Vest

	01/02/2013
	February 2016
	2,736

	01/02/2014
	February 2016
	2,444

	01/02/2015
	January 2016
	4,009

	 
	 
	Total:  9,189

Performance Share Award

	
			
	Grant Date
	Vesting Date
	Quantity Eligible to Vest

	01/02/2013
	January 2016
	20,276

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