Document:

ex10-25.htm

Exhibit 10.25

 

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

First Amendment to Collaboration and License Agreement by and between NovaBay Pharmaceuticals, Inc. and Alcon Research, Ltd.

 

Page 1 of 5

 

 

FIRST AMENDMENT TO COLLABORATION AND LICENSE AGREEMENT

 

This First Amendment to Collaboration and License Agreement (“First Amendment”) is entered into as of November 4, 2010 (the “First Amendment Effective Date”) by and between NovaBay Pharmaceuticals, Inc., a Delaware corporation having its principal place of business at 5980 Horton Street, Suite 550, Emeryville, CA 94608 (collectively, “NovaBay”) and Alcon Research, Ltd., a Delaware corporation, having its principal place of business at 620 I S. Freeway, Fort Worth, Texas 76134-2099 (“Alcon”). NovaBay and Alcon are each referred to herein by name, or individually as a “Party” or collectively as “Parties.”

 

BACKGROUND

 

A.  NovaCal Pharmaceuticals, Inc. (“NovaCal”) and Alcon Manufacturing, Ltd. Entered into a Collaboration and License Agreement (the “Agreement”) on August 29, 2006.

 

B.  On February 9, 2007, NovaCal merged into NovaBay Pharmaceuticals, Inc., California (“NovaBay California”) and assumed all of its obligations.

 

C.  On June 29, 2010, NovaBay California merged into and assigned all rights and responsibilities to NovaBay.

 

D.  On January 1, 2008, Alcon Manufacturing, Ltd. merged into and assigned all rights and responsibilities to Alcon Research, Ltd.

 

E.  In connection with NovaCal’s (and after the name change, NovaBay’s) performance of the Discovery Research Program under the Agreement, the Parties agree that the structures of certain chemical entities subject to the Agreement have exceeded the scope of “Aganocide Compounds” as originally defined therein and the Parties wish to expand the definition of such term to include such chemical entities, together with certain other provisions of this Agreement, as set forth in this First Amendment.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements provided herein below and other consideration to the receipt and sufficiency of which is hereby acknowledged, NovaBay and Alcon hereby agree to amend the Agreement as follows:

 

AMENDMENT

 

10.           The Parties acknowledge and agree that pursuant to the Certificate of Ownership executed on February 9, 2007, a copy of which is attached as Exhibit A, NovaBay California assumed, and hereby assumes, all rights and obligations of NovaCal

under the Agreement. Accordingly, the name “NovaCal” is hereby replaced by the name “NovaBay” in all places where “NovaCal” appears in the Agreement.

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

11.           The Parties acknowledge and agree that pursuant to the Certificate of Merger effective June 29, 2010, a copy is attached as Exhibit B, NovaBay assumed, and hereby assumes all rights and obligations of NovaBay California under the agreement.

 

12.            The Parties acknowledge and agree that pursuant to the Certificate of Merger effective January 1, 2008, a copy of which is attached as Exhibit C, Alcon Research, Ltd. assumed, and hereby assumes, all rights and obligations of Alcon Manufacturing, Ltd. under the Agreement. Accordingly, the name “Alcon Manufacturing, Ltd.” is hereby replaced by the name “Alcon Research, Ltd.” in all places where “Alcon Manufacturing, Ltd.” appears in the Agreement.

 

13.            Section 1.3 of the Agreement is hereby amended to read in its entirety as follows:

1.3          “Aganocide Compound” shall mean (A) any chemical entity (i) having bactericidal, antibacterial, anti-infective, antimicrobial, antifungal, anti-parasidic, sporicidal, antiviral, immunomodulatory or anti-inflammatory activity, and (ii) consisting of either hypochlorous acid or consisting of the following chemical formula: [***].  For clarity, Aganocide Compounds include the compounds listed in Exhibit 1.3B.

 

14.            Exhibit 1.3 is hereby amended in its entirety and replaced by Exhibit 1.3B, as attached to this First Amendment.

 

15.            Section 1.37 of the Agreement is hereby amended to read in its entirety as follows:

1.37 “Funding Term” shall mean, subject to (i) earlier termination by Alcon in accordance with Section 8.2.3 and (ii) extension by mutual written agreement of the Parties referencing this Section 1.37, the period commencing on the Effective Date and expiring upon the earlier of (a) December 31, 2015 and (b) termination of this Agreement in accordance with Article 12.

 

16.            Section 1.38 of the Agreement is hereby amended to read in its entirety as follows:

1.38 [Intentionally left blank].

 

17.            The first sentence of Section 3.4 is hereby amended to read in its entirety as follows:

3.4  Designation of Development Compounds.  From time to time during the Exclusivity Period, either Party may recommend to the Coordination Committee a particular Licensed Compound for consideration as a Development Compound for Development as a Licensed Product hereunder, based on the profile of such Licensed Compound.

 

18.            Section 7.1.2(b) of the Agreement is hereby amended to read in its entirety as follows:

 

 

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

  

(b)  Additionally, subject to the terms and conditions of this Agreement, Alcon hereby grants to NovaBay a non-exclusive, worldwide license to make, use, sell, offer for sale, import and otherwise exploit products incorporating Licensed Compounds for applications outside the Field (as may be modified as a result of Section 12.2) under Know-How and Patents Controlled by Alcon related to such Licensed Compounds (including formulations and methods of manufacture thereof) (such Patents, the “Alcon Patents”).  The license granted under this Section 7.1.2(b) shall include the right to sublicense. Prior to the exercise of such license (or grant of any sublicense) with respect to particular Know-How or Patents Controlled by Alcon, NovaBay shall provide written notice to Alcon. In the event NovaBay desires to exercise its right to sublicense, the Parties shall negotiate in good faith the consideration to be paid by NovaBay with respect to products covered by the Alcon Patents; provided that the consideration payable to Alcon for each such sublicense pursuant to this Section 7.1.2(b) shall not exceed [***] of net sales of products covered by the Alcon Patents outside the Field by such sublicensee or its Affiliates and shall not exceed [***] for all such sublicenses. Notwithstanding the foregoing, NovaBay shall not have the right to exercise the licenses or grant sublicenses pursuant to this Section 7.1.2(b) with respect to such Know-How or Patents in a manner that can reasonably be expected to (i) create a risk of substitutability of the type contemplated in Section 2.6.3 hereof, or (ii) otherwise compete with Alcon products in the ophthalmic, otic and nasal fields.

 

19.            The Parties agree that Section 7.4.1 of the Agreement shall not apply to any activities of Alcon or its Affiliates prior to the First Amendment Effective Date with respect to any compounds that (i) were independently discovered and synthesized by Alcon or obtained from a Third Party (i.e., without use of or reliance upon any NovaBay Know-How or other Confidential Information of NovaBay and outside of the Discovery Research Program) and (ii) are now encompassed by the expanded definition of Aganocide Compound established by this First Amendment but were not Aganocide Compounds as originally defined in the Agreement.  Such compounds shall not be considered Aganocide Compounds for purposes of Section 7.4.1 and shall not be considered Licensed Compounds for purposes of the Agreement.

 

20.            Section 8.2.3 of the Agreement is hereby amended to read in its entirety as follows:

8.2.3  Termination of the Funding Term.  Alcon may terminate the Funding Term on written notice to NovaBay referencing this Section 8.2.3 provided not less than six (6) months in advance of the next funding date (i.e., January 1 or July 1 of each year during the Funding Term).

 

21.             Section 8.3.1 (f) of the Agreement is hereby amended to read in its entirety as follows:

(f) If prior to the achievement of Milestone Event 1 with respect to a Sub-Field, Alcon (i) terminates this Agreement pursuant to Section 12.2.1 with respect to the Agreement in its entirety, (ii) terminates this Agreement pursuant to Section 12.2.2 with respect to a particular Sub-Field, or (iii) ceases active Development activities with respect to a Sub-Field, then Alcon shall pay to NovaBay upon such event an amount equal to [***] of the Milestone Payment for Milestone Event 1 for each Sub-Field for which Milestone Event 1 has not been achieved (i.e., in case (i) with respect to each Sub-Field for which Milestone Event 1 has not occurred at the time of termination, or in case (ii) or (iii) with respect to the Sub-Field(s) for which Milestone Event 1 has not occurred at the time of termination or cessation in relation to such Sub-Field(s)).

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

22.             Section 9.1.1 of the Agreement is hereby amended to read in its entirety as follows:

9.1.1 General. As between the Parties, title to all inventions and other intellectual property made (i) solely by Alcon personnel in connection with the Agreement shall be owned by Alcon, (ii) solely by NovaBay personnel in connection with this Agreement shall be owned by NovaBay and (iii) made jointly by personnel of Alcon and NovaBay (such joint inventorship to be determined based upon U.S. patent law) in connection with the Agreement shall be jointly owned by Alcon and NovaBay. Except as expressly provided in this Agreement, it is understood that neither Party shall have any obligation to account to the other for profits, or to obtain any approval of the other Party to license, assign, or otherwise exploit such jointly owned inventions or intellectual property, by reasons of joint ownership thereof, and each Party hereby waives any right it may have under the laws of any jurisdiction to require any such approval or accounting.  In the event that Alcon elects not to Prosecute or Maintain any Patent covering inventions made by Alcon in connection with this Agreement at any time during the Term, then it shall promptly notify NovaBay of such election (and in any event at least sixty (60) days prior to the date any action is required to maintain rights in such Patent).  In such event, NovaBay shall have the right, at its option, to control the Prosecution and Maintenance of such Patent at its own expense in NovaBay’s name whereupon Alcon shall, upon request by NovaBay, transfer ownership of such invention and such Patent to NovaBay, together with all related documents and filings thereto and take such actions as NovaBay reasonably requests to effectuate such ownership, at NovaBay’s expense.

 

23.             The following sentences shall be added to the end of Section 9.2.2:

Without limiting the foregoing, in the event that the Party responsible for the Prosecution and Maintenance of Patents claiming subject matter jointly owned by the Parties, as mutually agreed from time to time (the “Prosecuting Party”), determines (i) to abandon any claims within such jointly owned Patent, or (ii) not to pay its allocated share of costs attributable to the Prosecution and Maintenance of such jointly owned Patent, then the Prosecuting Party shall provide the other Party (the “Second Party”) written notice thereof (a) at least sixty (60) days prior to the date such abandonment would become effective or (b) reasonably in advance of any other necessary action required to maintain rights in such jointly own Patent, as applicable.  In such case, the Second Party shall have the right, at its option, to control the Prosecution and Maintenance of such claims at its own expense and its own name, whereupon the Prosecuting Party shall, upon request by the Second Party, assign such claims to the Second Party, together with documents and filings with respect thereto, and take such actions as the Second Party reasonably requests to effectuate such ownership, at the Second Party’s expense.  Similarly, in the event the Second Party determines not to pay its allocated share of costs attributable to the Prosecution and Maintenance of any jointly owned Patent (as may be mutually agreed by the Parties on a case by case basis), and the Prosecuting Party elects to pay one hundred percent of the costs associated with the Prosecution and Maintenance of such jointly owned Patent, the Second Party shall assign its joint interest in such jointly owned Patent to the Prosecuting Party and take such further actions as reasonably requested by the Prosecuting Party to effectuate such ownership, at the Prosecuting Party’s expense.

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

24.             Section 12.2.1 of the Agreement is hereby amended to read in its entirety as follows:

12.2.1 Alcon shall have the right to terminate this Agreement in its entirety upon six (6) months’ prior notice to NovaBay referencing this Section 12.2.1; provided that during the XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

 

Funding Term such notice is provided not less than six (6) months in advance of the next funding date (i.e., January 1 or July 1 of each year during the Funding Term).

 

 

EXCEPT AS MODIFIED BY THE TERMS OF THIS FIRST AMENDMENT, the provisions of the Agreement remain unchanged, in full force and effect, and binding upon the Parties hereto.

 

This Amendment may be executed in two counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Parties have executed this First Amendment in duplicate original by their duly authorized representative as of the Effective Date.

 

 

 

	NOVABAY PHARMACEUTICALS, INC.	 	ALCON RESEARCH, LTD.	 
	 	 	 	 
	By: /s/Ron Najafi                                          	 	By: /s/Sabri Markabi                               	 
	Name: Ron Najafi, Ph.D                                	 	Name: Sabri Markabi, M.D.                   	 
	Title: Chairman & Chief Executive Officer	 	
Title: Senior Vice President and Chief

          Medical Officer                             

	 
	 	 	 	 
	Date: 11/18/10	 	Date:                                                         	 

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

SM:MEF:ss

(2005-06471-004)

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

Exhibit 1.3B to the First Amendment to Collaboration and License Agreement by and between NovaBay Pharmaceuticals, Inc. and Alcoa Research, Ltd.

 

Page 1 of 2

 

 

EXHIBIT 1.3B

AGANOCIDE COMPOUNDS

 

For purposes of this Agreement and for purposes of providing specific examples but without limiting the definition in Section 1.3, Aganocide Compounds shall include compounds with the following chemical formula:

 

[***]

 

Examples of which include but are not limited to the following:

 

[***]

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

Exhibit 1.3B to the First Amendment to Collaboration and License Agreement by and between NovaBay Pharmaceuticals, Inc. and Alcon Research, Ltd.

 

Page 2 of 2

 

 

Additional exemplary Aganocide Compounds include the following:

 

[***]

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

Exhibit A to the First Amendment to Collaboration and License Agreement by and between NovaBay Pharmaceuticals, Inc. and Alcon Research, Ltd.

 

 

EXHIBIT A

NOVABAY CERTIFICATE OF OWNERSHIP

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

 

CERTIFICATE OF OWNERSHIP

Ramin Najafi and Robert R. Tufts hereby certify that:

 

1.                      They are the duly elected and acting President and Secretary, respectively, of NovaCal Pharmaceuticals, Inc., a California corporation.

 

2.                      This corporation owns all the outstanding shares of NovaBay Pharmaceuticals, Inc., a California corporation.

 

3.                      The board of directors of this corporation have duly adopted the following resolutions:

 

RESOLVED, that this corporation merge NovaBay Pharmaceuticals, Inc., its wholly-owned subsidiary corporation, into itself and assume all its obligations pursuant to Section 1110 of the California Corporations Code; and

 

RESOLVED FURTHER, that Article 1 of the Amended and Restated Articles of Incorporation of this corporation be amended and restated in its entirety to read as follows:

 

“ARTICLE 1.

 

The name of this corporation (“Corporation”) is NovaBay Pharmaceuticals, Inc.”

 

* * *

 

We further declare under penalty of perjury that we am the persons who executed the foregoing Certificate of Ownership and said instrument is our act and deed, and that the matters set forth in this Certificate of Ownership are true and correct of our own knowledge.  Executed in Emeryville, CA.

 

Executed this   9th   day of February, 2007.

 

	 	 
/s/Ramin Najafi                                                              

Ramin Najafi

President

 

/s/Robert R. Tufts                                                              

Robert R. Tufts

Secretary

 

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

Exhibit B to the First Amendment to Collaboration and License Agreement by and between NovaBay Pharmaceuticals, Inc. and Alcon Research, Ltd.

 

Page 1 of 4

 

 

EXHIBITB

CERTIFICATE OF MERGER

NovaBay Pharmaceuticals Inc., California/NovaBay Pharmaceuticals, Inc., Delaware

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

CERTIFICATE OF MERGER

OF

NOVABAY PHARMACEUTICALS, INC.,

a California corporation

INTO

NOVABAY PHARMACEUTICALS, INC.,

a Delaware corporation

 

The undersigned corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify that:

 

1.          The name and state of incorporation of each of the constituent corporations of the merger is as follows:

 

	

Name

	 	

State of Incorporation

	
NovaBay Pharmaceuticals, Inc.

	 	
California

	
NovaBay Pharmaceuticals, Inc.

	 	
Delaware

 

2.          An Agreement and Plan of Merger dated as of June 25, 2010 (the “Agreement and Plan of Merger”) between NovaBay Pharmaceuticals, Inc., a California corporation (“NovaBay California”) and NovaBay Pharmaceuticals, Inc., a Delaware corporation (“NovaBay Delaware”) has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with subsection (c) of Section 252 of the General Corporation Law of the State of Delaware.

 

3.          The surviving corporation in the merger is NovaBay Delaware.  Upon the effectiveness of the filing of this Certificate of Merger, the Certificate of Incorporation of NovaBay Delaware shall be its Certificate of Incorporation of the surviving corporation in the merger.

 

4.          The executed Agreement and Plan of Merger is on file at the principal place of business of the surviving corporation.  The address of the principal place of business of the surviving corporation is 5890 Horton Street, Suite 550, Emeryville, CA 94608.

 

6.          A copy of the Agreement and Plan of Merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation.

 

7.          The authorized capital stock of NovaBay Delaware consists of (a) 65,000,000 shares of Common Stock, $0.01 par value per share, and (b) 5,000,000 shares of Preferred Stock, $0.01 par value per share, all of which are undesignated as to series, rights, preferences, privileges or restrictions.

 

IN WITNESS WHEREOF, this Certificate of Merger is hereby executed on behalf of the surviving corporation, NovaBay Pharmaceuticals, Inc., a Delaware corporation, and attested to by its officers thereunto duly authorized.

 

Dated as of the 25th day of June, 2010.

 

NovaBay Pharmaceuticals, Inc.,

a Delaware corporation

 

By:    /s/Ramin “Ron” Najafi                                                                               

Ramin “Ron” Najafi

President and Chief Executive Officer

 

Attest:

 

By:    /s/Thomas J. Paulson                                                                               

Thomas J. Paulson

Chief Financial Officer and Secretary

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

Exhibit C to the First Amendment to Collaboration and License Agreement by and between NovaBay Pharmaceuticals, Inc. and Alcon Research, Ltd.

 

Page 1 of 4

 

EXHIBIT C

CERTIFICATE OF MERGER

ALCON MANUFACTURING, LTD. / ALCON RESEARCH, LTD.

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

 

 

STATE OF DELAWARE

CERTIFICATE OF MERGER OF

DOMESTIC CORPORATIONS

 

Pursuant to Title 8, Section 251(c) of the Delaware General Corporation Law, the undersigned corporation executed the following Certificate of Merger:

 

FIRST: The name of the surviving corporation is Alcon Research, Ltd., a Delaware corporation, and the name of the corporation being merged into this surviving corporation is Alcon Manufacturing, Ltd., a Delaware corporation.

 

SECOND: The Agreement of Merger has been approved, adopted, certified, executed, and acknowledged by each of the constituent corporations.

 

THIRD: The name of the surviving corporation is Alcon Research, Ltd., a Delaware corporation.

 

FOURTH: The Certificate of Incorporation of the surviving corporation shall be its Certificate of Incorporation.

 

FIFTH: The merger is to become effective at a later date, which is not more than 90 days from the date of signing. The delayed effective date is January 1, 2008, at 12:01 A.M. Eastern Standard Time.

 

SIXTH: The Agreement of Merger is on file at 6201 South Freeway, Fort Worth, Texas, 76134-2099, the place of business of the surviving corporation.

 

SEVENTH: A copy of the Agreement of Merger will be furnished by the surviving corporation on request, without cost, to any stockholder of the constituent corporations.

 

 

[Signature page follows.]

 

  

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.

 

IN WITNESS WHEREOF, said surviving corwation has caused this Certificate to be signed by an authorized officer, the 14th day of December, A.D., 2007.

 

 

	 	 
Alcon Research, Ltd.,

 

a Delaware corporation

 

By: /s/Elaine E. Whitbeck                             

Elaine E. Whitbeck, Senior VicePresident,

General Counsel, andCorporate Secretary

 

 

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.ex10-10.htm

EXHIBIT 10.10

EMPLOYEE

 

PHANTOM STOCK UNIT AGREEMENT

 

THIS PHANTOM STOCK UNIT AGREEMENT (the "Agreement"), dated as of the 10th day of August 2010, by and between Arden-Mayfair, Inc., a Delaware corporation (the "Company"), and Laura Neumann (the "Unit Holder"), is made with reference to the following facts:

 

A.           The Company is a wholly owned subsidiary of Arden Group, Inc., a Delaware corporation (“Arden Group”).

 

B.           The Company is desirous of providing additional incentives to the Unit Holder in rendering services as an employee of the Company and, in order to accomplish this result, has determined to grant the Unit Holder phantom stock units (based on the Class A Common Stock of Arden Group) representing the right to receive a cash payment on the terms and conditions set forth herein.

 

C.           The Unit Holder is desirous of accepting said right on the terms and conditions set forth herein.

 

NOW, THEREFORE, it is agreed as follows:

 

1.           Grant

 

(a)           Subject to the terms and conditions set forth herein, the Company hereby grants to the Unit Holder Three Thousand Five Hundred (3,500) Units exercisable from time to time in accordance with the provisions of this Agreement during a period commencing on the date hereof and expiring at the close of business on August 10, 2017 (the "Expiration Date"). Each Unit hereunder represents the right to receive an amount equal to the excess of (i) the fair market value (determined in accordance with Paragraph 1(b) below) of one share of the Class A Common Stock, $.25 par value per share, of Arden Group (the "Class A Common Stock") based on the date upon which the Unit Holder exercises such Unit (the “Exercise Date Price”) over (ii) $95.22 (the "Base Price"), representing the fair market value of one share of the Class A Common Stock on the effective date hereof determined on the basis of the closing sales price of the Class A Common Stock on the effective date hereof as reported by the NASDAQ Global Market.

 

(b)           The Exercise Date Price shall be determined as follows: (i) if the Class A Common Stock is then listed on a national securities exchange, the average of the closing sales prices of the Class A Common Stock for the twenty Trading Days (as defined below) preceding the date of exercise of such Units (the “Determination Date”) on the principal securities exchange on which such stock is then listed, and, if there is no reported sale on any Trading Day within such twenty day period, such Trading Day shall be counted for purposes of determining such twenty day period but shall be disregarded for purposes of determining such average, or (ii) if the Class A Common Stock is then publicly traded in the over-the-counter market, the average of the closing sales prices of the Class A Common Stock in the over-the-counter market for the twenty Trading Days preceding the Determination Date and, if there is no reported sales on any Trading Day within such twenty day period, such Trading Day shall be counted for purposes of determining such twenty day period but shall be disregarded for purposes of determining such average, or (iii) if the Class A Common Stock is not then separately quoted or publicly traded, the fair market value on the Determination Date, as determined by the Board of Directors of Arden Group (the "Board").  For purposes hereof, “Trading Day” shall mean any day upon which the principal national securities exchange or over-the-counter market upon which the Class A Common Stock is then traded is open for the trading of securities.

 

  

 

  

 

2.           Exercise of Units

 

(a)           The Unit Holder may elect to be paid for any then vested Units by timely delivering or mailing to the Company (in accordance with Paragraph 10 below), Attention: Chief Executive Officer and Secretary (or Assistant Secretary), a notice of exercise, in the form prescribed by the Company, stating therein that the Unit Holder has elected to exercise his or her vested Units and specifying therein the date of this Agreement and the number of vested Units for which he or she is electing to be paid.  The exercise of any Units shall not be deemed effective unless and until the Unit Holder has complied with all of the provisions of this Paragraph 2(a).  Upon an effective exercise of any one or more vested Units, the Company shall thereafter pay the Unit Holder in complete satisfaction of each vested Unit with respect to which such right and option has been exercised an amount equal to: (i) the Exercise Date Price minus (ii) the Base Price.  Such payment shall be made to the Unit Holder within thirty (30) days after the exercise of such right and option.

 

(b)           No Units shall vest or become exercisable during the first, second or third year from the date of grant hereof; thereafter Units shall vest and become exercisable in installments as to (i) twenty-five percent (25%) of the total number of Units subject to this Agreement on August 10, 2013, (ii) an additional twenty-five percent (25%) of the total number of Units subject to this Agreement on August 10, 2014, (iii) an additional twenty-five percent (25%) of the total number of Units subject to this Agreement on August 10, 2015, and (iv) the remaining twenty-five percent (25%) of the total number of Units subject to this Agreement on August 10, 2016.

 

(c)           In connection with the exercise of any one or more Units and as a condition to delivery of any payment to which the Unit Holder is entitled upon such exercise, the Company may withhold from such payment an amount sufficient to satisfy all current or estimated future federal, state and local withholding tax requirements and federal social security or other taxes or other tax requirements relating thereto.

 

3.           Termination.  All unexercised Units shall automatically and without notice terminate and become null and void at the time of the earliest to occur of the following:

 

(a)           the Expiration Date; or

 

(b)           The date of termination of the Unit Holder's employment with the Company and its parent and subsidiary corporations; or

 

(c)           Any of the events as described in Paragraph 7 below.

 

Nothing contained in this Agreement shall obligate the Company or any of its parent or subsidiary corporations to continue to employ or engage the services of the Unit Holder as an employee of the Company or in any other capacity with the Company or any of its parent or subsidiary corporations, nor confer upon the Unit Holder any right to continue in the employ or in any other capacity with the Company or any of its parent or subsidiary corporations, nor limit in any way the right of the Company or its parent or subsidiary corporations to amend, modify or terminate at any time the Unit Holder's compensation or employment agreement, if any, with the Company or any of its parent or subsidiary corporations.

 

  

-2-

  

 

4.           Payment Upon Death.  Upon the termination of the employment of the Unit Holder due to the death of the Unit Holder while employed by the Company (or its parent or subsidiary corporations), (a) the Company shall pay the legal representative of the estate of the deceased Unit Holder or the person or persons who acquire the right to receive payment for a Unit by bequest or inheritance or reason of the death of the Unit Holder (hereinafter, "Successor(s)"), in complete satisfaction of all fully vested and unexercised Units held by the Unit Holder on the date of such termination of his or her employment, an amount determined in the manner set forth in Paragraph 2 above as if the Unit Holder had exercised the right and option to be paid for all then fully vested and unexercised Units held by the Unit Holder on the date of such termination of his or her employment, and (b) all other Units held by the Unit Holder on the date of such termination of his or her employment shall terminate and shall become null and void.  Such payment shall be made by the Company to the Successor(s) within thirty (30) days after the date of such termination of employment.

 

5.           Non-Assignability.  The Unit Holder shall not transfer, assign, pledge or hypothecate in any manner this Agreement or any of the rights and privileges granted hereby other than by will or by the laws of descent and distribution.  Units are exercisable during the Unit Holder's lifetime only by the Unit Holder.  Upon any attempt by the Unit Holder to transfer this Agreement or any right or privilege granted hereby (including without limitation any Units) other than by will or by the laws of descent and distribution and contrary to the provisions hereof, this Agreement and said rights and privileges shall immediately become null and void.

 

6.           Anti-Dilution.  In the event that the shares of Class A Common Stock subject to this Agreement shall be changed into or exchanged for a different number or kind of shares of stock or other securities of Arden Group or of another corporation (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares, or otherwise) or if the number of such shares of Class A Common Stock shall be increased solely through the payment of a stock dividend, then there shall be made an appropriate adjustment (a) in the number of Units then covered hereby, (b) to the Base Price and/or (c) to the other terms as may be necessary to reflect the foregoing events.  There may also be made similar adjustments as described in (a)-(c) of the previous sentence in the event of any distribution of assets to stockholders of Arden Group other than a dividend payable in cash or property (other than stock).  Any determinations or interpretations under this Section shall be made by the Board, whose determination shall be final, binding and conclusive.  In the event there shall be any other change in the number or kind of the outstanding shares of stock of Arden Group subject to this Agreement, then if the Board, in its sole discretion, determines that such change equitably requires an adjustment in this Agreement, such adjustments shall be made in accordance with such determination, and the Board’s determination of the nature and amount of such adjustment, if any, shall be final, binding and conclusive.

 

7.           Termination upon Merger.  In the event that Arden Group merges with or into any other corporation, consolidates with any other corporation, or sells substantially all of its assets and business to another corporation and, in any such case, stockholders of Arden Group immediately prior to the consummation of the transaction own less than fifty percent (50%) of the outstanding voting securities of the surviving or acquiring corporation immediately after consummation of the transaction, then (a) the Unit Holder shall be paid the amount provided in Paragraph 2 above for all then fully vested and unexercised Units then held by him or her in the manner provided in said Paragraph 2 as if such Unit Holder had exercised his or her right and option to be paid for all of such then fully vested Units immediately prior to the effectiveness of such merger or consolidation, consummation of such sale or the occurrence of the Class A Common Stock no longer being listed on a national securities exchange or publicly traded in the over-the-counter market and (b) all of the Units shall automatically and without notice terminate and become null and void upon such effectiveness, consummation or occurrence.

 

  

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8.           Rights Unfunded.  The Unit Holder understands that the rights provided for hereunder are unfunded and the Company has not made, and has no obligation to make, any provision with respect to segregating assets of the Company for payment of any benefits hereunder.  The Unit Holder further understands that he or she has no interest in any particular asset of the Company by reason of this Agreement but only the rights of a general unsecured creditor with respect to his or her rights under this Agreement.

 

9.           No Rights as a Stockholder.  Neither the Unit Holder nor any other person legally entitled to exercise any Units hereunder shall have any voting or other rights of a stockholder by virtue of the grant, vesting or exercise of a Unit.

 

10.         Notices.  Whenever under this Agreement notice is required to be given in writing, it shall be deemed to have been duly given upon personal delivery or upon receipt by the Company by fax (telecopy), one business day following deposit with a nationally recognized air courier guaranteeing overnight delivery, or three business days after deposit in the United States mail if mailed by registered or certified mail, postage prepaid, to the Company at the address set forth below or to the Unit Holder at the address set forth on the last page hereof (or to such other address as either party shall have indicated to the other party by notice in accordance with this Paragraph):

 

	
  

	
Company:

	
Arden-Mayfair, Inc.

	
  

	
2020 South Central Avenue

	
  

	
Compton, California 90220

	
  

	
Attention: Chief Executive Officer and

	
  

	
Secretary or Assistant Secretary

 

For purposes hereof, a "business day" is any day other than a Saturday, Sunday or a holiday in the State of California.

 

11.           Benefit.  Except as otherwise specifically provided herein, this Agreement shall be binding upon and shall operate for the benefit of the Company and the Unit Holder and his or her successors.

 

12.           Governing Law.  This Agreement and any rights and obligations arising hereunder shall be governed and construed in accordance with the laws of the State of California.

 

13.           Entire Agreement.  This Agreement represents the entire agreement between the parties hereto regarding Units based on the Class A Common Stock and supersedes any and all prior or contemporaneous written or oral agreements or discussions between the parties and any other person or legal entity concerning the specific transactions contemplated herein.  Except as otherwise expressly provided herein, this Agreement cannot be amended or modified except by a written instrument executed by the parties hereto.

 

14.           Construction.  The headings of the Paragraphs are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  If any of the provisions of this Agreement shall be unlawful, void or for any reason unenforceable, they shall be deemed separable from, and shall in no way affect the validity or enforceability of, the remaining provisions of this Agreement.

 

15.           Further Acts.  The parties hereto agree to execute and deliver such further instruments as may be reasonably necessary to carry out the intent of this Agreement.

 

  

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

 

	ARDEN-MAYFAIR, INC.	 	UNIT HOLDER:
	 	 	 
	 	 	 
	By:	 	 	 
	 	 	
Laura Neumann

 

Address for Notice:

 

c/o Arden Group, Inc.

2020 S. Central Ave.

Compton, California 90220

 

 

The undersigned, the spouse of the Unit Holder, does hereby agree to be bound by the terms of the foregoing Phantom Stock Unit Agreement.

 

 

	Date:	_________________, ___	 	__________________

 

 

 

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