Exhibit 10.3 

  

 

EMPLOYEE MATTERS AGREEMENT

 

 

 

between

 

 

 

GREATBATCH, INC.

 

 

 

and

 

 

 

QIG GROUP, LLC

 

(to be converted into Nuvectra Corporation)

 

 

 

 

 

 

 

 

 

dated as of March 14, 2016

 

 
 

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Table of Contents

 

  PAGE    

Article I DEFINITIONS  

1

Section 1.1

Definitions

1

Section 1.2

Interpretation

4

     

Article II ASSIGNMENT OF EMPLOYEES  

6

Section 2.1

Active Employees

6

Section 2.2

Former Employees

7

Section 2.3

Employment Law Obligations

7

Section 2.4

Employee Records

8

     

Article III EQUITY AND INCENTIVE COMPENSATION PLANS  

10

Section 3.1

General Principles

10

Section 3.2

Equity Incentive Programs

11

Section 3.3

Section 16(b) of the Exchange Act; Code Sections 162(m) and 409A

14

Section 3.4

Cash Incentive Awards

14

     

Article IV GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES  

14

Section 4.1

General Principles

14

Section 4.2

Sponsorship and/or Establishment of Nuvectra Plans

16

Section 4.3

Service Credit

16

Section 4.4

Plan Administration

17

     

Article V 401(k) PLANS  

17

Section 5.1

General Principles

17

Section 5.2

Transfer of Accounts

17

Section 5.3

Employer Securities

18

Section 5.4

Third-Party Vendors

18

     

Article VI WELFARE PLANS  

18

Section 6.1

Establishment of Nuvectra Welfare Plans

18

Section 6.2

Transitional Matters Under Nuvectra Welfare Plans

19

Section 6.3

Credit for Deductibles Under Medical and Dental Plans

20

Section 6.4

Insurance Contracts

20

Section 6.5

Third-Party Vendors

20

     

Article VII WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION

  21    

Article VIII EMPLOYMENT AGREEMENTS, SEVERANCE AND OTHER MATTERS  

21

Section 8.1

Employment Agreements

21

Section 8.2

Severance

21

Section 8.3

Accrued Time Off

21

Section 8.4

Leaves of Absence

21

Section 8.5

Restrictive Covenants in Employment and Other Agreements

22

 

 
 

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Article IX miscellaneous  

23  

Section 9.1

Preservation of Rights to Amend

23

Section 9.2

Confidentiality

23

Section 9.3

Administrative Complaints/Litigation

23

Section 9.4

Reimbursement and Indemnification

23

Section 9.5

Costs of Compliance with Agreement

24

Section 9.6

Fiduciary Matters

24

Section 9.7

Form S-8

24

Section 9.8

Entire Agreement

24

Section 9.9

Binding Effect; No Third-Party Beneficiaries; Assignment

24

Section 9.10

Amendment; Waivers

25

Section 9.11

Remedies Cumulative

25

Section 9.12

Notices

25

Section 9.13

Counterparts; Facsimile Signatures

25

Section 9.14

Severability

25

Section 9.15

Governing Law

26

Section 9.16

Performance

26

Section 9.17

Construction

26

Section 9.18

Effect if Distribution Does Not Occur

26

 

 
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EMPLOYEE MATTERS AGREEMENT

 

This EMPLOYEE MATTERS AGREEMENT dated as of March 14, 2016 by and between
Greatbatch, Inc., a Delaware corporation (“Greatbatch”), and QiG Group, LLC, a
Delaware limited liability company (to be converted into Nuvectra Corporation, a
Delaware corporation) (“Nuvectra”). Greatbatch and Nuvectra are sometimes
referred to herein, individually, as a “Party,” and, collectively, as the
“Parties.”

 

RECITALS

 

WHEREAS, Nuvectra is an indirect subsidiary of Greatbatch; and

 

WHEREAS, the Board of Directors of Greatbatch has determined that it would be
appropriate and in the best interests of Greatbatch and its stockholders to
effectuate the Distribution as described in the Separation and Distribution
Agreement between Greatbatch and Nuvectra dated as of the date hereof (the
“Separation Agreement”); and

 

WHEREAS, the Separation Agreement provides, among other things, subject to the
terms and conditions thereof, for the Distribution and for the execution and
delivery of certain other agreements, including this Agreement, in order to
facilitate and provide for the separation of Nuvectra and its subsidiaries from
Greatbatch; and

 

WHEREAS, in order to ensure an orderly transition under the Separation
Agreement, it will be necessary for the Parties to allocate between them assets,
liabilities and responsibilities with respect to certain employee compensation,
benefit plans and programs, and certain employment matters.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, the Parties, intending to be legally bound, agree
as follows:

 

Article I

DEFINITIONS

 

Section 1.1     Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1.1:

 

“Adjusted Greatbatch Awards” means Adjusted Greatbatch Options, Adjusted
Greatbatch RSAs, and Adjusted Greatbatch RSUs.

 

“Adjusted Greatbatch Options” means Greatbatch Options adjusted as set forth in
Section 3.2(a)(i).

 

“Adjusted Greatbatch RSAs” means Greatbatch RSAs adjusted as set forth in
Section 3.2(a)(ii).

 

“Adjusted Greatbatch RSUs” means Greatbatch RSUs adjusted as set forth in
Section 3.2(a)(iii).

 

 
 

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“Adjusted Nuvectra Stock Value” means the product obtained by multiplying (i)
the Nuvectra Stock Value by (ii) the Distribution Ratio.

 

“Agreement” means this Employee Matters Agreement together with all Schedules
hereto and all amendments, modifications and changes hereto and thereto entered
into in accordance with Section 9.10.

 

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
codified at Part 6 of Subtitle B of Title I of ERISA and at Code Section 4980B.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Distribution Ratio” means the number of shares of Nuvectra Common Stock to be
distributed for each share of Greatbatch Common Stock.

 

“Employee” means any Greatbatch Employee, Former Greatbatch Employee, Nuvectra
Employee or Former Nuvectra Employee.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Former Greatbatch Employee” has the meaning set forth in Section 2.2(b).

 

“Former Nuvectra Employee” has the meaning set forth in Section 2.2(c).

 

“Greatbatch” has the meaning set forth in the preamble to this Agreement.

 

“Greatbatch 401(k) Plan” means the Greatbatch, Inc. 401(k) Retirement Plan.

 

“Greatbatch Employee” means any individual who is employed by a member of the
Greatbatch Group on the Distribution Date other than the Nuvectra Employees and,
only for purposes of Article III and any defined terms as used therein, as of
the day after the Distribution Date.

 

“Greatbatch FSA” has the meaning set forth in Section 6.3(b).

 

“Greatbatch Group” means Greatbatch and each Subsidiary of Greatbatch,
collectively, other than Nuvectra and each Nuvectra Subsidiary.

 

“Greatbatch Legacy Equity Plan” means any equity plan sponsored or maintained by
Greatbatch immediately prior to the Distribution Date.

 

“Greatbatch Option” means an option to purchase shares of Greatbatch Common
Stock granted and outstanding immediately prior to the Distribution Date
pursuant to any of the Greatbatch Legacy Equity Plans.

 

“Greatbatch Post-Distribution Stock Value” means the closing per-share price, as
reported on the NYSE, of a share of Greatbatch Common Stock on the Distribution
Date.

 

 
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“Greatbatch RSA” means a restricted stock award issued and outstanding
immediately prior to the Distribution Date under any of the Greatbatch Legacy
Equity Plans.

 

“Greatbatch RSU” means a restricted stock unit award issued and outstanding
immediately prior to the Distribution Date under any of the Greatbatch Legacy
Equity Plans.

 

“Greatbatch Welfare Plan” means the Greatbatch, Inc. Health and Welfare Benefit
Plan sponsored or maintained by any one or more members of the Greatbatch Group
on the Distribution Date.

 

“Nasdaq” means the NASDAQ Stock Market.

 

“Nuvectra” has the meaning set forth in the preamble to this Agreement.

 

“Nuvectra 401(k) Plan” has the meaning set forth in Section 5.1.

 

“Nuvectra 401(k) Plan Beneficiaries” has the meaning set forth in Section 5.1.

 

“Nuvectra Awards” means Nuvectra Options, Nuvectra RSAs, and Nuvectra RSUs.

 

“Nuvectra Employee” means any individual who is employed by a member of the
Nuvectra Group on the Distribution Date or will be transferred to a member of
the Nuvectra Group and is listed on Schedule II to the Separation Agreement;
provided, however, that for purposes of Article III and any defined terms as
used therein, “Nuvectra Employee” means any such individual who is employed by a
member of the Nuvectra Group on the date immediately following the Distribution
Date.

 

“Nuvectra Equity Plan” means the Nuvectra Corporation 2016 Equity Incentive Plan
adopted by the board of managers of Nuvectra and approved by Nuvectra’s sole
membership interest holder prior to the Distribution under which the Nuvectra
equity-based awards described in Article III shall be issued.

 

“Nuvectra FSA” has the meaning set forth in Section 6.3(b).

 

“Nuvectra Group” means, collectively, Nuvectra and each Nuvectra Subsidiary.

 

“Nuvectra Option” means an option to purchase shares of Nuvectra Common Stock
granted pursuant to the Nuvectra Equity Plan as described in Section 3.2(a)(i).

 

“Nuvectra RSA” means a restricted stock award for shares of Nuvectra Common
Stock issued under the Nuvectra Equity Plan as described in Section 3.2(a)(ii).

 

“Nuvectra RSU” means a restricted stock unit for shares of Nuvectra Common Stock
issued under the Nuvectra Equity Plan as described in Section 3.2(a)(iii).

 

“Nuvectra Stock Value” means the closing per-share price, as reported on Nasdaq,
of Nuvectra Common Stock on the Distribution Date (or, if the Distribution Date
is not a Nasdaq trading day, on the first trading day following the Distribution
Date).

 

 
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“Nuvectra Subsidiary” means any Subsidiary of Nuvectra on the Distribution Date.

 

“Nuvectra Welfare Plan” has the meaning set forth in Section 6.1.

 

“Nuvectra Welfare Plan Participants” has the meaning set forth in Section 6.1.

 

“NYSE” means the New York Stock Exchange.

 

“Participating Nuvectra Employers” has the meaning set forth in Section 6.1.

 

“Participation Period” has the meaning set forth in Section 6.3(b).

 

“Party” or “Parties” has the meaning set forth in the preamble to this
Agreement.

 

“Privacy Contract” means any contract entered into in connection with applicable
privacy protection laws or regulations.

 

“Separation Agreement” has the meaning set forth in the recitals to this
Agreement.

 

“WARN” means the Worker Adjustment and Retraining Notification Act, and any
applicable state or local law equivalent.

 

“Welfare Plan” means a “welfare plan” as defined in ERISA Section 3(1) and also
means a cafeteria plan under Code Section 125 and any benefits offered
thereunder, including pre-tax premium conversion benefits, a dependent care
assistance program, contribution funding toward a health savings account and
flex or cashable credits.

 

Capitalized terms used, but not otherwise defined in this Agreement, shall have
the respective meanings assigned to such terms in the Separation Agreement.

 

Section 1.2     Interpretation. In this Agreement, unless the context clearly
indicates otherwise:

 

(a)     words used in the singular include the plural and words used in the
plural include the singular;

 

(b)     if a word or phrase is defined in this Agreement, its other grammatical
forms, as used in this Agreement, shall have a corresponding meaning;

 

(c)     reference to any gender includes the other gender and the neuter;

 

(d)     the words “include,” “includes” and “including” shall be deemed to be
followed by the words “without limitation;”

 

(e)     the words “shall” and “will” are used interchangeably and have the same
meaning;

 

(f)     the word “or” shall have the inclusive meaning represented by the phrase
“and/or;”

 

 
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(g)     relative to the determination of any period of time, “from” means “from
and including,” “to” means “to but excluding” and “through” means “through and
including;”

 

(h)     all references to a specific time of day in this Agreement shall be
based upon Eastern Standard Time or Eastern Daylight Savings Time, as
applicable, on the date in question;

 

(i)     whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless otherwise specified;

 

(j)     accounting terms used herein shall have the meanings historically
ascribed to them by Greatbatch and its Subsidiaries, including Nuvectra and the
Nuvectra Subsidiaries for this purpose, in its and their internal accounting and
financial policies and procedures in effect immediately prior to the date of
this Agreement;

 

(k)     reference to any Article, Section or Schedule means such Article or
Section of, or such Schedule to, this Agreement, as the case may be, and
references in any Section or definition to any clause means such clause of such
Section or definition;

 

(l)     the words “this Agreement,” “herein,” “hereunder,” “hereof,” “hereto,”
and words of similar import shall be deemed references to this Agreement as a
whole and not to any particular Section or other provision of this Agreement;

 

(m)     reference to any agreement, instrument or other document means such
agreement, instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof and not
prohibited by this Agreement;

 

(n)     reference to any “law” (including statutes and ordinances) means such
Law (including any and all rules and regulations promulgated thereunder) as
amended, modified, codified or reenacted, in whole or in part, and in effect at
the time of determining compliance or applicability;

 

(o)     references to any Person include such Person’s successors and assigns
but, if applicable, only if such successors and assigns are permitted by this
Agreement, and any reference to a third party shall be deemed to mean a Person
who is not a Party or an Affiliate of a Party;

 

(p)     if there is any conflict between the provisions of the main body of this
Agreement and the Schedules hereto, the provisions of the main body of this
Agreement shall control unless explicitly stated otherwise in such Schedule;

 

(q)     unless otherwise specified in this Agreement, all references to dollar
amounts herein shall be in respect of lawful currency of the U.S.;

 

(r)     the titles to Articles and headings of Sections contained in this
Agreement, in any Schedule and in the table of contents to this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of or to affect the meaning or interpretation of this Agreement; and

 

(s)     any portion of this Agreement obligating a Party to take any action or
refrain from taking any action, as the case may be, shall mean that such Party
shall also be obligated to cause its relevant Subsidiaries to take such action
or refrain from taking such action, as the case may be.

 

 
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Article II

ASSIGNMENT OF EMPLOYEES

 

Section 2.1     Active Employees.

 

(a)     Nuvectra Employees. Except as otherwise set forth in this Agreement,
effective as of the Distribution Date, the employment of the Nuvectra Employees
shall be continued by a member of the Nuvectra Group.

 

(b)     Greatbatch Employees. Except as otherwise set forth in this Agreement,
effective as of the Distribution Date, the employment of the Greatbatch
Employees shall be continued by a member of the Greatbatch Group.

 

(c)     At Will Status. Nothing in this Agreement shall create any obligation on
the part of any member of the Greatbatch Group or any member of the Nuvectra
Group to continue the employment of any employee for any period following the
date of this Agreement or the Separation or the Distribution or to change the
employment status of any employee from “at will,” to the extent such employee is
an “at will” employee under applicable law.

 

(d)     Severance. The assignment, transfer or continuation of the employment of
employees as contemplated by this Agreement or otherwise effected in connection
with the Separation or the Distribution shall not be deemed a severance of
employment of any employee for any purpose, including for purposes of any plan,
policy, practice or arrangement of any member of the Greatbatch Group or any
member of the Nuvectra Group.

 

(e)     Change of Control/Change in Control. No provision in this Agreement or
the Separation Agreement nor any transaction undertaken by either Party in
connection with the Distribution shall be construed to create any right, or
accelerate entitlement, to any compensation or benefit whatsoever, or be deemed
a “change of control” or “change in control” for any purpose including for
purpose of any plan, policy, practice or arrangement relating to directors,
employees or consultants of any member of the Greatbatch Group or any member of
the Nuvectra Group.

 

 
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Section 2.2     Former Employees

 

(a)     General Principles. Except as otherwise provided in this Agreement, each
former employee of any member of the Greatbatch Group or any member of the
Nuvectra Group as of the Distribution Date will be considered a former employee
of the Greatbatch Group or the Nuvectra Group based on his or her employer as of
his or her last day of employment with any member of the Greatbatch Group or the
Nuvectra Group.

 

(b)     Former Greatbatch Employees. Former employees of the Greatbatch Group
shall be deemed to include all employees who, as of their last day of
employment, were employed by a member of the Greatbatch Group and will not be
either a Nuvectra Employee or a Greatbatch Employee for purposes of this
Agreement (collectively, the “Former Greatbatch Employees”).

 

(c)     Former Nuvectra Employees. Former employees of the Nuvectra Group shall
be deemed to include all employees who, as of their last day of employment, were
employed by a member of the Nuvectra Group and will not be either a Nuvectra
Employee or a Greatbatch Employee for purposes of this Agreement (collectively,
the “Former Nuvectra Employees”).

 

Section 2.3     Employment Law Obligations.

 

(a)     WARN Act. After the Distribution Date, (i) Greatbatch shall be
responsible for providing any necessary WARN notice (and meeting any similar
state law notice requirements) with respect to any termination of any Greatbatch
Employee and (ii) Nuvectra shall be responsible for providing any necessary WARN
notice (and meeting any similar state law notice requirements) with respect to
any termination of any Nuvectra Employee.

 

(b)     Compliance with Employment Laws. On and after the Distribution Date, (i)
each member of the Greatbatch Group shall be responsible for adopting and
maintaining any policies or practices, and for all other actions and inactions,
necessary to comply with employment-related laws and requirements relating to
the employment of the Greatbatch Employees and the treatment of any applicable
Former Greatbatch Employees in respect of their former employment, and (ii) each
member of the Nuvectra Group shall be responsible for adopting and maintaining
any policies or practices, and for all other actions and inactions, necessary to
comply with employment-related laws and requirements relating to the employment
of the Nuvectra Employees and the treatment of any applicable Former Nuvectra
Employees in respect of their former employment.

 

 
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Section 2.4     Employee Records.

 

(a)     Records Relating to Greatbatch Employees and Former Greatbatch
Employees. All records and data in any form relating to Greatbatch Employees and
Former Greatbatch Employees shall be the property of the Greatbatch Group;
provided, however, that records and data pertaining to such an Employee and
relating to any period that such an Employee was (i) employed by any member of
the Nuvectra Group or (ii) covered under any employee benefit plan sponsored by
any member of the Nuvectra Group (to the extent that such records or data relate
to such coverage) prior to the Distribution Date shall be shared with
appropriate members of the Nuvectra Group by the Greatbatch Group to the extent
such records are reasonably necessary for payroll or employee benefit plan
purposes.

 

(b)     Records Relating to Nuvectra Employees and Former Nuvectra Employees.
All records and data in any form relating to Nuvectra Employees and Former
Nuvectra Employees shall be the property of the Nuvectra Group; provided,
however that records and data pertaining to such an Employee and relating to any
period that such an Employee was (i) employed by any member of the Greatbatch
Group or (ii) covered under any employee benefit plan sponsored by any member of
the Greatbatch Group (to the extent that such records or data relate to such
coverage) prior to the Distribution Date shall be shared with appropriate
members of the Greatbatch Group by the Nuvectra Group to the extent such records
are reasonably necessary for payroll or employee benefit plan purposes.

 

(c)     Sharing of Records. Each Party shall use its respective commercially
reasonable efforts to provide the other Party, upon request, such
employee-related records and information as necessary or appropriate to carry
out their respective obligations under applicable law (including any relevant
privacy protection laws or regulations in any applicable jurisdictions or
Privacy Contract), this Agreement, any other Ancillary Agreement or the
Separation Agreement, and for the purposes of administering their respective
employee benefit plans and policies. All information and records regarding
employment, personnel and employee benefit matters provided to the other Party
shall be accessed, retained, held, used, copied and transmitted in accordance
with all applicable laws, policies and Privacy Contracts relating to the
collection, storage, retention, use, transmittal, disclosure and destruction of
such records by such receiving Party.

 

(d)     Access to Records. To the extent not inconsistent with this Agreement
and any applicable privacy protection laws or regulations or Privacy Contracts,
access to such records and information, as described in this Section 2.4, after
the Distribution Date, will be provided to members of the Greatbatch Group and
members of the Nuvectra Group in accordance with the Separation Agreement. In
addition, Greatbatch shall be provided reasonable access to those records
necessary for its administration of any benefit plans, policies, arrangements or
programs on behalf of Greatbatch Employees and Former Greatbatch Employees after
the Distribution Date, as permitted by any applicable privacy protection laws or
regulations or Privacy Contracts. Greatbatch shall also be permitted to retain
copies of all agreements with any Nuvectra Employee or Former Nuvectra Employee
in which any member of the Greatbatch Group has a valid business interest. In
addition, Nuvectra shall be provided reasonable access to those records
necessary for its administration of any benefit plans, policies, arrangements or
programs on behalf of Nuvectra Employees and Former Nuvectra Employees after the
Distribution Date, as permitted by any applicable privacy protection laws or
regulations or Privacy Contracts. Nuvectra shall also be permitted to retain
copies of all agreements with any Greatbatch Employee or Former Greatbatch
Employee in which any member of the Nuvectra Group has a valid business
interest.

 

 
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(e)     Maintenance of Records. With respect to retaining, destroying,
transferring, sharing, copying and permitting access to all such records and
information, Greatbatch and Nuvectra shall (and shall cause their respective
Subsidiaries to) comply with all applicable laws, regulations, Privacy Contracts
and internal policies, and shall indemnify and hold harmless each other from and
against any and all liability, claims, actions, and damages that arise from a
failure (by the indemnifying party or its Subsidiaries or their respective
agents) to so comply with all applicable laws, regulations, Privacy Contracts
and internal policies applicable to such records and information.

 

(f)     No Access to Computer Systems or Files. Except as set forth in the
Separation Agreement or any other Ancillary Agreement, no provision of this
Agreement shall give (i) any member of the Greatbatch Group direct access to the
computer systems or other files, records or databases of any member of the
Nuvectra Group or (ii) any member of the Nuvectra Group direct access to the
computer systems or other files, records or databases of any member of the
Greatbatch Group, unless specifically permitted by the owner of such systems,
files, records or databases.

 

(g)     Relation to Separation Agreement. The provisions of this Section 2.4
shall be in addition to, and not in derogation of, the provisions of the
Separation Agreement governing Confidential Information, including Section 6.8
of the Separation Agreement.

 

(h)     Confidentiality. Except as otherwise set forth in this Agreement, all
records and data relating to Employees shall, in each case, be subject to the
confidentiality provisions of the Separation Agreement and any other applicable
agreement and applicable law.

 

(i)     Cooperation. Each Party shall use commercially reasonable efforts to
cooperate with the other Party to share, retain and maintain data and records
that are necessary or appropriate to further the purposes of this Section 2.4
and for each Party to administer its respective benefit plans, policies,
arrangements or programs to the extent consistent with this Agreement and
applicable law, and each Party agrees to cooperate as long as is reasonably
necessary to further the purposes of this Section 2.4. Except as provided under
any other Ancillary Agreement, no Party shall charge another Party a fee for
such cooperation.

 

 
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Article III

EQUITY AND INCENTIVE COMPENSATION PLANS

 

Section 3.1     General Principles.

 

(a)     For the avoidance of doubt, the provisions of this Article III shall not
apply unless the Distribution and approval by the appropriate administrators of
the applicable plans takes place. Greatbatch and Nuvectra shall take any and all
reasonable action as shall be necessary and appropriate to give effect to the
provisions of this Article III.

 

(b)     Where an award granted under one of the Greatbatch Legacy Equity Plans
is supplemented by an award under the Nuvectra Equity Plan in accordance with
the provisions of this Article III, such award generally shall be on terms which
are in all material respects identical to the terms of the award which it
supplements (including any requirements of continued employment) but subject to
any necessary changes to take into account that (i) the award relates to
Nuvectra Common Stock, (ii) the Nuvectra Equity Plan is administered by
Nuvectra, (iii) if applicable, the grantee under the award is employed or
affiliated with a new employer or plan sponsor and (iv) the other specific
provisions described in this Article III.

 

(c)     Following the Distribution, a grantee who has outstanding awards that
are supplemented with awards under the Nuvectra Equity Plan (as described in
Section 3.1(b) above) shall be considered to have been employed by the
applicable plan sponsor before and after the Distribution for purposes of (i)
vesting and (ii) determining the date of termination of employment as it applies
to any such supplemental awards under the Nuvectra Equity Plan. Following the
Distribution, (i) service as an employee with Nuvectra will be deemed to be
services to Greatbatch with respect to Adjusted Greatbatch Options, Adjusted
Greatbatch RSAs, or Adjusted Greatbatch RSUs held by Nuvectra Employees
immediately after the Distribution Date and (ii) service as an employee with
Greatbatch will be deemed to be services to Nuvectra with respect to Nuvectra
Options, Nuvectra RSAs, or Nuvectra RSUs held by Greatbatch Employees
immediately after the Distribution Date.

 

(d)     No award described in this Article III, whether outstanding or to be
issued, adjusted, substituted or cancelled by reason of or in connection with
the Distribution, shall be adjusted, settled, cancelled, or exercisable, until
in the judgment of the administrator of the applicable plan or program such
action is consistent with all applicable law, including federal securities laws
and the adjustment, settlement, cancellation or exercisability is in a manner
consistent with Section 409A of the Code or other applicable law. Any period of
exercisability will not be extended on account of a period during which such an
award is not exercisable in accordance with the preceding sentence.

 

 
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Section 3.2     Equity Incentive Programs.

 

(a)     The Parties shall use commercially reasonable efforts to take all
actions necessary or appropriate so that each outstanding Greatbatch Option,
Greatbatch RSA or Greatbatch RSU award granted under a Greatbatch Legacy Equity
Plan shall be adjusted as set forth in this Section 3.2.

 

(i)     Greatbatch Options and Nuvectra Options. As determined by the Greatbatch
Compensation Committee pursuant to its authority under the applicable Greatbatch
Legacy Equity Plan, each Greatbatch Option, regardless of by whom held, whether
vested or unvested, shall be converted on the Distribution Date into both an
Adjusted Greatbatch Option and a Nuvectra Option, and both the Adjusted
Greatbatch Option and the Nuvectra Option shall, except as otherwise provided in
this Section 3.2(a)(i), be subject to the same terms and conditions (including
with respect to vesting) after the Distribution Date as applicable to such
Greatbatch Option immediately prior to the Distribution Date; provided, however,
that from and after the Distribution Date:

 

(A)     the number of shares of Greatbatch Common Stock subject to such Adjusted
Greatbatch Option, shall be equal to the number of shares of Greatbatch Common
Stock subject to such Greatbatch Option immediately prior to the Distribution
Date;

 

(B)     the number of shares of Nuvectra Common Stock subject to such Nuvectra
Option, rounded down to the nearest whole share, shall be equal to the product
obtained by multiplying (1) the number of shares of Greatbatch Common Stock
subject to the Greatbatch Option immediately prior to the Distribution Date by
(2) the Distribution Ratio;

 

(C)     the per share exercise price of such Adjusted Greatbatch Option, rounded
up to the nearest hundredth of a cent, shall be equal to the product obtained by
multiplying (1) the per share exercise price of such Greatbatch Option
immediately prior to the Distribution Date by (2) a fraction (I) the numerator
of which is the Greatbatch Post-Distribution Stock Value and (II) the
denominator of which is the sum of the Greatbatch Post-Distribution Stock Value
and the Adjusted Nuvectra Stock Value; and

 

(D)     the per share exercise price of such Nuvectra Option, rounded up to the
nearest hundredth of a cent, shall be equal to the product obtained by
multiplying (1) the per share exercise price of the Greatbatch Option
immediately prior to the Distribution Date by (2) a fraction (I) the numerator
of which is the Nuvectra Stock Value and (II) the denominator of which is the
sum of the Greatbatch Post-Distribution Stock Value and the Adjusted Nuvectra
Stock Value;

 

provided, however, that the exercise price, the number of shares of Greatbatch
Common Stock and shares of Nuvectra Common Stock subject to such options, and
the terms and conditions of exercise of such options shall be determined in a
manner consistent with the requirements of Code Section 409A; and provided,
further, that, in the case of any Greatbatch Option to which Code Section 421
applies by reason of its qualification under Code Section 422 as of immediately
prior to the Distribution Date, the exercise price, the number of shares of
Greatbatch Common Stock and shares of Nuvectra Common Stock subject to such
option, and the terms and conditions of exercise of such option shall be
determined in a manner consistent with the requirements of Code Section 424(a).

 

(ii)     Greatbatch RSAs and Nuvectra RSAs. Each holder of a Greatbatch RSA
award shall receive, as of the Distribution Date, a Nuvectra RSA for such number
of shares as determined by applying the Distribution Ratio, rounded down to the
nearest whole share, in the same way as if the outstanding Greatbatch RSAs were
comprised of fully vested shares of Greatbatch Common Stock as of the
Distribution Date. Except as set forth in this Section 3.2(a)(ii), the
Greatbatch RSA and the Nuvectra RSA both shall be subject to substantially the
same terms and conditions immediately following the Distribution Date as
applicable to the Greatbatch RSA immediately prior to the Distribution Date.

 

 
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(iii)     Greatbatch RSU Awards and Nuvectra RSU Awards. Each holder of an
outstanding Greatbatch RSU award shall receive, as of the Distribution Date, a
Nuvectra RSU award in such number of restricted stock units as determined by
applying the Distribution Ratio, rounded down to the nearest whole share, in the
same way as if the outstanding Greatbatch RSU award comprised fully vested
shares of Greatbatch Common Stock as of the Distribution Date. Except as set
forth in this Section 3.2(a)(iii), the Greatbatch RSU award and the Nuvectra RSU
award both shall be subject to substantially the same terms and conditions
immediately following the Distribution Date as applicable to the Greatbatch RSU
award immediately prior to the Distribution Date. With respect to any Greatbatch
RSU award that is subject to performance vesting requirements, which is held by
either a Greatbatch Employee or Former Greatbatch Employee, the performance
metric for both the Greatbatch RSU award and the corresponding Nuvectra RSU
award shall continue to be total shareholder return of Greatbatch’s common stock
versus Greatbatch’s peer group, but this performance metric shall be adjusted so
as to treat the Distribution as a dividend of an amount of cash that is equal to
the opening per-share price, as reported on Nasdaq, of a share of Nuvectra
common stock on the Distribution Date that is reinvested into shares of
Greatbatch Common Stock at the opening per-share price on the Distribution Date,
as reported on NYSE. With respect to any Greatbatch RSU award subject to
performance vesting requirements that is held by either a Nuvectra Employee or a
Former Nuvectra Employee, such Nuvectra Employee or Former Nuvectra Employee
shall receive, as of the Distribution Date, (A) a modified Greatbatch RSU award,
which shall not be subject to any performance vesting requirement, but shall be
subject to a time-based vesting requirement that would be satisfied at the end
of what was the applicable performance period, for a number of shares of
Greatbatch common stock based upon performance under the previously applicable
performance metric for such Greatbatch RSU award up to the Distribution Date and
(B) an Nuvectra RSU award, which shall not be subject to any performance vesting
requirement, but shall be subject to a time-based vesting requirement that would
be satisfied at the end of what was the applicable performance period of the
relevant Greatbatch RSU.

 

(b)     Miscellaneous Award Terms. After the Distribution Date, Adjusted
Greatbatch Awards, regardless of by whom held, shall be settled by Greatbatch,
and Nuvectra Awards, regardless of by whom held, shall be settled by Nuvectra;
provided, however, that Greatbatch shall be, if applicable, responsible for any
dividend equivalent payments with respect to Adjusted Greatbatch RSAs and
Adjusted Greatbatch RSUs and Nuvectra RSAs and Nuvectra RSUs held by Greatbatch
Employees or Former Greatbatch Employees, and Nuvectra shall be, if applicable,
responsible for any dividend equivalent payments with respect to Adjusted
Greatbatch RSAs and Adjusted Greatbatch RSUs and Nuvectra RSAs and Nuvectra RSUs
held by Nuvectra Employees or Former Nuvectra Employees. Except as otherwise
provided in this Agreement (such as in Section 3.2(d) or Section 4.3), with
respect to awards adjusted pursuant to this Section 3.2, (i) employment with the
Greatbatch Group shall be treated as employment with the Nuvectra Group with
respect to Nuvectra Awards held by Greatbatch Employees, and (ii) employment
with the Nuvectra Group shall be treated as employment with the Greatbatch Group
with respect to Adjusted Greatbatch Awards held by Nuvectra Employees. In
addition, none of the Separation, the Distribution, or any employment transfer
described in Section 2.1 shall constitute a termination of employment for any
Employee for purposes of any Greatbatch Award or any Adjusted Greatbatch Award.
Following the Distribution Date, any reference to a “change in control,” “change
of control” or similar definition in an award agreement, employment agreement or
Greatbatch Legacy Equity Plan (A) with respect to Adjusted Greatbatch Awards,
shall be deemed to refer to a “change in control,” “change of control” or
similar definition as set forth in the award agreement, employment agreement or
Greatbatch Legacy Equity Plan applicable to such award (a “Greatbatch Change of
Control”), and (B) with respect to Nuvectra Awards, shall be deemed to refer to
a “Change in Control” as defined in the Nuvectra Equity Plan (a “Nuvectra Change
of Control”). Without limiting the foregoing, with respect to provisions related
to vesting of awards, a Greatbatch Change of Control shall be treated as a
Nuvectra Change of Control for purposes of Nuvectra Awards held by Greatbatch
Employees, and a Nuvectra Change of Control shall be treated as an Greatbatch
Change of Control for purposes of Adjusted Greatbatch Awards held by Nuvectra
Employees.

 

 
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(c)     Tax Reporting and Withholding. Following the Distribution Date, and for
the duration of the applicable Transition Services Agreement provisions under
which Greatbatch provides payroll services for Nuvectra, it is expected that (i)
Greatbatch will be responsible for all income, payroll and other tax remittance
and reporting related to income of Greatbatch Employees, Former Greatbatch
Employees, including in respect of Adjusted Greatbatch Awards and Nuvectra
Awards, and individuals who are or were Greatbatch non-employee directors,
including in respect of Adjusted Greatbatch Awards and Nuvectra Awards, and (ii)
Nuvectra will be responsible for all income, payroll and other tax remittance
and reporting related to income of Nuvectra Employees and Former Nuvectra
Employees in respect of Adjusted Greatbatch Awards and Nuvectra Awards.
Greatbatch or Nuvectra, as applicable, shall facilitate performance by the other
Party of its obligations hereunder by promptly remitting amounts or shares
withheld in conjunction with a transfer of shares or cash, either (as mutually
agreed by the Parties) directly to the applicable taxing authority or to the
other Party for remittance to such taxing authority. The Parties will cooperate
and communicate with each other and with third-party providers to effectuate
withholding and remittance of taxes, as well as required tax reporting, in a
timely, efficient and appropriate manner.

 

(d)     Equity-Based Awards in Certain Non-U S. Jurisdictions. Notwithstanding
the foregoing provisions of this Section 3.2, the Parties may mutually agree, in
their sole discretion, not to adjust certain outstanding equity-based awards
under the Greatbatch Legacy Equity Plans pursuant to the foregoing provisions of
this Section 3.2, where those actions would create or trigger adverse legal,
accounting or tax consequences for Greatbatch, Nuvectra, or the affected
non-U.S. award holders. In such circumstances, Greatbatch or Nuvectra may take
any action necessary or advisable to prevent any such adverse legal, accounting
or tax consequences, including, but not limited to, agreeing that the
outstanding awards under the Greatbatch Legacy Equity Plan of the affected
non-U.S. award holders shall terminate in accordance with the terms of the
Greatbatch Legacy Equity Plan and the underlying award agreements, in which case
Nuvectra or Greatbatch, as applicable, shall equitably compensate the affected
non-U.S. award holders in an alternate manner determined by Nuvectra or
Greatbatch, as applicable, in its sole discretion, or apply an alternate
adjustment method. Where and to the extent required by applicable Law or tax
considerations outside the United States, the adjustments described in this
Section 3.2 shall be deemed to have been effectuated immediately prior to the
Distribution Date.

 

 
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Section 3.3     Section 16(b) of the Exchange Act; Code Sections 162(m) and
409A.

 

(a)     By approving the adoption of this Agreement, the respective boards of
directors of Greatbatch and Nuvectra intend to exempt from the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act, by reason of
the application of Rule 16b-3 thereunder, all acquisitions and dispositions of
equity incentive awards by directors and executive officers of each of
Greatbatch and Nuvectra, and the respective boards of directors of Greatbatch
and Nuvectra also intend to expressly approve, in respect of any equity-based
award, the use of any method for the payment of an exercise price and the
satisfaction of any applicable tax withholding (specifically including the
actual or constructive tendering of shares in payment of an exercise price and
the withholding of option shares from delivery in satisfaction of applicable tax
withholding requirements) to the extent such method is permitted under the
applicable equity incentive plan and award agreement.

 

(b)     Notwithstanding anything in this Agreement to the contrary, Greatbatch
and Nuvectra agree to negotiate in good faith regarding the need for any
treatment different from that otherwise provided herein to ensure that (i) a
federal income tax deduction for the payment of any annual incentive or
long-term incentive award, or other compensation is not limited by reason of
Code Section 162(m), and (ii) the treatment of such annual incentive or
long-term incentive award, or other compensation does not cause the imposition
of a tax under Code Section 409A.

 

Section 3.4     Cash Incentive Awards. Nuvectra shall assume and perform all
liabilities with respect to the participation of each Nuvectra Employee in any
cash-based annual bonus or other cash incentive compensation plan of Greatbatch
(including, for avoidance of doubt, any cash-based transition bonus agreement or
arrangement entered into in connection with the Distribution) with respect to
performance periods that are ongoing as of the Distribution Date. Greatbatch
shall, as it determines in its sole discretion, (i) pay each Nuvectra Employee
directly for any amount owed or (ii) reimburse Nuvectra in full after Nuvectra’s
payment in full of each amount owed to a Nuvectra Employee, in either case, that
was earned for fiscal year 2015 performance under Greatbatch’s cash incentive
compensation plan.

 

Article IV

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

 

Section 4.1     General Principles.

 

(a)     Except as otherwise provided in this Agreement, each member of the
Greatbatch Group and each member of the Nuvectra Group shall take any and all
reasonable action as shall be necessary or appropriate so that active
participation in the Greatbatch 401(k) Plan and Greatbatch Welfare Plans by all
Nuvectra Employees and Former Nuvectra Employees shall terminate in connection
with the Distribution effective as of 11:59 p.m. on the day immediately
preceding the Distribution Date, and each member of the Nuvectra Group shall
cease to be a participating employer under the terms of such Greatbatch 401(k)
Plan and Greatbatch Welfare Plans as of such time. Except as otherwise provided
in this Agreement, one or more members of the Nuvectra Group (as designated by
Nuvectra) shall assume, effective as of the Distribution Date, all employee
benefits liabilities for Nuvectra Employees and Former Nuvectra Employees, and
the assets relating to such employee benefits for Nuvectra Employees and Former
Nuvectra Employees, if any, shall be transferred to one or more members of the
Nuvectra Group (as designated by Nuvectra); and one or more members of the
Greatbatch Group (as designated by Greatbatch) shall continue to be responsible
for or assume all employee benefits liabilities for Greatbatch Employees and
Former Greatbatch Employees and the assets relating to such employee benefits
for Greatbatch Employees and Former Greatbatch Employees shall be transferred to
or continue to be held by one or more members of the Greatbatch Group (as
designated by Greatbatch).

 

 
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(b)     Except as otherwise provided in this Agreement, effective as of the day
after the Distribution Date, one or more members of the Nuvectra Group (as
determined by Nuvectra) shall assume or continue the sponsorship of, and no
member of the Greatbatch Group shall have any further liability for or under,
the following agreements, obligations and liabilities, and Nuvectra shall
indemnify each member of the Greatbatch Group, and the officers, directors, and
employees of each member of the Greatbatch Group, and hold them harmless with
respect to such agreements, obligations or liabilities:

 

(i)     any and all individual agreements entered into between any member of the
Greatbatch Group and any Nuvectra Employee or Former Nuvectra Employee;

 

(ii)     any and all agreements entered into between any member of the
Greatbatch Group and any individual who is an independent contractor providing
services primarily for the business activities of the Nuvectra Group;

 

(iii)     any and all wages, salaries, incentive compensation (as the same may
be modified by this Agreement), commissions and bonuses payable to any Nuvectra
Employees or Former Nuvectra Employees after the Distribution Date, without
regard to when such wages, salaries, incentive compensation, commissions and
bonuses are or may have been earned;

 

(iv)     any and all moving expenses and obligations related to relocation,
repatriation, transfers or similar items incurred by or owed to any Nuvectra
Employees or Former Nuvectra Employees, whether or not accrued as of the
Distribution Date (other than such expenses and obligations incurred by
Greatbatch on or prior to the Distribution Date as a result of which there is an
existing liability as of the Distribution Date);

 

(v)     any and all immigration-related, visa, work application or similar
rights, obligations and liabilities related to any Nuvectra Employees or Former
Nuvectra Employees; and

 

(vi)     any and all liabilities and obligations whatsoever with respect to
claims made by or with respect to any Nuvectra Employees or Former Nuvectra
Employees in connection with any employee benefit plan, program or policy not
otherwise retained or assumed by any member of the Greatbatch Group pursuant to
this Agreement, including such liabilities relating to actions or omissions of
or by any member of the Nuvectra Group or any officer, director, employee or
agent thereof on or prior to the Distribution Date.

 

 
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(c)     Except as otherwise provided in this Agreement, effective as of the day
after the Distribution Date, no member of the Nuvectra Group shall have any
further liability for, and Greatbatch shall indemnify each member of the
Nuvectra Group, and the officers, directors, and employees of each member of the
Nuvectra Group, and hold them harmless with respect to any and all liabilities
and obligations whatsoever with respect to, claims made by or with respect to
any Greatbatch Employees or Former Greatbatch Employees in connection with any
employee benefit plan, program or policy not otherwise retained or assumed by
any member of the Nuvectra Group pursuant to this Agreement, including such
liabilities relating to actions or omissions of or by any member of the
Greatbatch Group or any officer, director, employee or agent thereof on or prior
to the Distribution Date.

 

(d)     This Agreement is not intended and shall not create any third party
rights or provide any Nuvectra Employee, Former Nuvectra Employee, Greatbatch
Employee or Former Greatbatch Employee (or any beneficiary or dependent thereof)
with any rights to any specific benefits or, in the case of active employees,
continued employment.

 

Section 4.2     Sponsorship and/or Establishment of Nuvectra Plans. Except as
otherwise provided in this Agreement, sponsorship of benefit plans that cover
solely Nuvectra Employees, and to the extent applicable, Former Nuvectra
Employees, shall become effective on the Distribution Date by the member of the
Nuvectra Group as identified in this Agreement, and to the extent necessary to
achieve such sponsorship, each member of the Greatbatch Group and each member of
the Nuvectra Group shall take appropriate action, including transfer of
sponsorship of each such plan.

 

Section 4.3     Service Credit.

 

(a)     Service for Eligibility and Vesting Purposes. Except as otherwise
provided in any other provision of this Agreement, for purposes of eligibility
and vesting under the Nuvectra 401(k) Plan and Nuvectra Welfare Plans, Nuvectra
shall, and shall cause each member of the Nuvectra Group to, credit each
Nuvectra Employee and Former Nuvectra Employee with service for any period of
employment with any member of the Greatbatch Group on or prior to the
Distribution Date to the same extent that such service would be credited for the
same purpose if it had been performed for a member of the Nuvectra Group.

 

(b)     Service for Benefit Purposes. Except as otherwise provided in any other
provision of this Agreement, for purposes of benefit levels and accruals and
benefit commencement entitlements under the Nuvectra 401(k) Plan, Nuvectra
shall, and shall cause each member of the Nuvectra Group to, credit each
Nuvectra Employee and Former Nuvectra Employee with service for any period of
employment with any member of the Greatbatch Group on or prior to the
Distribution Date to the same extent that such service is taken into account for
the same purpose pursuant to the terms of the Greatbatch 401(k) Plan.

 

(c)     Evidence of Prior Service. Notwithstanding anything to the contrary, but
subject to applicable law, upon reasonable request by one Party to the other
Party, the first Party will provide to the other Party information relating to
and confirming service for purposes of seniority (or seniority date) and service
date for such Employees for purposes of determining benefit eligibility,
participation, vesting and calculation of benefits with respect to any Employee.

 

 
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Section 4.4     Plan Administration.

 

(a)     Transition Services. The Parties acknowledge that the Greatbatch Group
may provide administrative services for certain of the Nuvectra Group’s benefit
programs for a transitional period under the terms of the Transition Services
Agreement. The Parties agree to enter into a business associate agreement (if
required by applicable health information privacy laws) in connection with such
administrative services.

 

(b)     Administration. Nuvectra shall use commercially reasonable efforts to,
and shall cause each member of the Nuvectra Group to use commercially reasonable
efforts to, administer its benefit plans in a manner that does not jeopardize
the tax-favored status of the tax-favored benefit plans maintained by any member
of the Greatbatch Group. Greatbatch shall use commercially reasonable efforts
to, and shall cause each member of the Greatbatch Group to use commercially
reasonable efforts to, administer its benefit plans in a manner that does not
jeopardize the tax-favored status of the tax-favored benefit plans maintained by
any member of the Nuvectra Group.

 

Article V

401(k) PLANS

 

Section 5.1     General Principles. Effective on or before the Distribution Date
or as soon as administratively practicable after the Distribution Date, Nuvectra
(or another member of the Nuvectra Group) shall establish and adopt a qualified
employee cash or deferred arrangement under Code Section 401(k) (the “Nuvectra
401(k) Plan”) intended to be qualified under Code Section 401(a) for the benefit
of Nuvectra Employees and Former Nuvectra Employees who were participants (or
former participants with a remaining account balance) in the Greatbatch 401(k)
Plan as of the Distribution Date (and each beneficiary and alternate payee of
such person) (the “Nuvectra 401(k) Plan Beneficiaries”). Each Nuvectra Employee
who was an active participant in the Greatbatch 401(k) Plan on the Distribution
Date shall participate in the Nuvectra 401(k) Plan in accordance with the terms
of the Nuvectra 401(k) Plan. Nuvectra Employees and Former Nuvectra Employees
shall not make or receive additional contributions under the Greatbatch 401(k)
Plan for payroll periods commencing on or after the Distribution Date. A
Greatbatch Employee or Former Greatbatch Employee shall not participate in the
Nuvectra 401(k) Plan.

 

Section 5.2     Transfer of Accounts. On or as soon as practicable after the
Distribution Date (or such later time as mutually agreeable to Greatbatch and
Nuvectra), Greatbatch shall cause to be transferred from the trust under the
Greatbatch 401(k) Plan to the trust under the Nuvectra 401(k) Plan the aggregate
amount that was credited to the accounts of the Nuvectra 401(k) Plan
Beneficiaries as of such transfer date. The transfer may, to the extent
reasonably possible, be an in-kind transfer, subject to the reasonable consent
of the trustee of the Nuvectra 401(k) Plan trust and shall include the transfer
of the aggregate value of assets held in the accounts relating to each Nuvectra
401(k) Plan Beneficiary under the Greatbatch 401(k) Plan and any participant
loan notes held under such plans. The transfer of assets shall be conducted in
accordance with Code Section 414(l), Treasury Regulation Section 1.414(l)-1 and
ERISA Section 208. During the period after the Distribution Date and before such
transfer of assets, with respect to any Nuvectra Employee or Former Nuvectra
Employee who has an outstanding loan balance under the Greatbatch 401(k) Plan,
Greatbatch shall provide that any amount received as payment on any such loan,
in accordance with its terms, is timely remitted as directed by the
administrator of the Greatbatch 401(k) Plan for crediting under the Greatbatch
401(k) Plan in respect of such loan, and Greatbatch shall cause the
administrator of the Greatbatch 401(k) Plan to apply such amounts in
satisfaction of such loan.

 

 
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Section 5.3     Employer Securities. Greatbatch presently intends to preserve
the right, for a period of time, of Greatbatch Employees to receive
distributions in kind from the Greatbatch 401(k) Plan if, and to the extent,
investments under such plan is comprised of Greatbatch Common Stock or Nuvectra
Common Stock. Greatbatch shall determine the extent to which and when Nuvectra
Common Stock shall cease to be an investment alternative under the Greatbatch
401(k) Plan.

 

Section 5.4     Third-Party Vendors. Except as provided below, to the extent the
Greatbatch 401(k) Plan is administered by a third-party vendor, Greatbatch and
Nuvectra will cooperate and use their commercially reasonable efforts to
replicate any contract with such third-party vendor for Nuvectra and to maintain
any pricing discounts or other preferential terms for both Greatbatch and
Nuvectra for a reasonable term with respect to such vendor. Neither Party shall
be liable for failure to obtain such pricing discounts or other preferential
terms for the other Party with respect to any third-party vendors. Each Party
shall be responsible for any additional charges or administrative fees that such
Party may incur pursuant to this Section 5.4.

 

Article VI

WELFARE PLANS

 

Section 6.1     Establishment of Nuvectra Welfare Plans.

 

(a)     The members of the Nuvectra Group who are participating employers under
the Greatbatch Welfare Plan on the day immediately preceding the Distribution
Date (“Participating Nuvectra Employers”) shall, on or before 11:59 p.m. on that
date, withdraw from such participation. Nuvectra and/or the Participating
Nuvectra Employers (with Nuvectra included in the definition of Participating
Nuvectra Employers for purposes of this Article VI) shall establish a
comprehensive welfare benefit program (“Nuvectra Welfare Plan”) for the benefit
of Nuvectra Employees and Former Nuvectra Employees who were eligible for
coverage under the Greatbatch Welfare Plan as of the Distribution Date
(“Nuvectra Welfare Plan Participants”). The Nuvectra Welfare Plan shall be
effective as of the Distribution Date, except for the health and dependent care
flexible spending accounts, which shall be effective as soon as administratively
practicable following the Distribution Date. The Nuvectra Welfare Plan shall
include the following benefits:

 

(i)     A high deductible health plan within the meaning of Code § 223(c)(2)(A)
and related Internal Revenue Service guidance;

 

 
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(ii)     A cafeteria plan that meets the requirements of Code § 125 that
includes a premium conversion feature, general purpose and limited purpose
health flexible spending accounts, health savings account contributions, and a
dependent care flexible spending account;

 

(iii)     Dental benefits;

 

(iv)     Vision benefits;

 

(v)     Short term and long term disability benefits;

 

(vi)     Life and accidental death and dismemberment insurance, including basic
employer paid life and accidental death and dismemberment insurance,
supplemental employee life insurance, and optional dependent life insurance; and

 

(vii)     Employee assistance program benefits.

 

Any benefits in addition to those specified above shall be at the option of the
members of the Nuvectra Group.

 

The benefits that comprise the Nuvectra Welfare Plan (and the nonelective
employer contributions towards those benefits) need not be substantially similar
in all material respects to the similar benefits (and nonelective employer
contributions) provided under the Greatbatch Welfare Plan as of the Distribution
Date.

 

(b)     As a result of withdrawal from participation in the Greatbatch Welfare
Plans by the Participating Nuvectra Employers, the Nuvectra Welfare Plan
Participants will cease to be eligible for coverage as active Employees under
the Greatbatch Welfare Plans at 11:59 p.m. on the day immediately preceding the
Distribution Date, and Nuvectra Welfare Plan Participants shall not participate
in any Greatbatch Welfare Plans after 11:59 p.m. on that date.

 

Section 6.2     Transitional Matters Under Nuvectra Welfare Plans.

 

(a)     Treatment of Incurred Claims.

 

(i)     Insured Benefits. With respect to benefits that, prior to the
Distribution Date, were provided for under the Greatbatch Welfare Plans through
the purchase of insurance, Greatbatch shall cause the Greatbatch Welfare Plans
to fully perform, pay and discharge all claims of Nuvectra Welfare Plan
Participants that were incurred prior to the Distribution Date.

 

(ii)     Uninsured/Self-Insured Benefits. Except as otherwise specifically
provided in this Agreement, Greatbatch shall retain all Liabilities relating to
Incurred Claims under the Greatbatch Welfare Plans, and shall also retain Assets
(including, without limitation, Medicare reimbursements, pharmaceutical rebates,
and similar items) associated with such Incurred Claims. Nuvectra shall be
responsible for all Liabilities relating to Incurred Claims under any Nuvectra
Welfare Plan and shall also retain Assets (including, without limitation,
Medicare reimbursements, pharmaceutical rebates, and similar items) associated
with such Incurred Claims.

 

 
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(iii)     Incurred Claims. For purposes of this Section 6.2(a), an “Incurred
Claim” is deemed to be incurred (A) with respect to medical, dental, vision
and/or prescription drug benefits, upon the rendering of health services giving
rise to such claim or liability; (B) with respect to life insurance, accidental
death and dismemberment and business travel accident insurance, upon the
occurrence of the event giving rise to such claim or liability; and (C) with
respect to long-term disability benefits, upon the date of an individual’s
disability, as determined by the disability benefit insurance carrier, giving
rise to such claim or liability.

 

(b)     COBRA. Notwithstanding any other provision of this Agreement to the
contrary, for the avoidance of doubt, and other than for individuals (and their
qualified beneficiaries) identified on Schedule 6.2(b), the Nuvectra Group
(which, for this purpose, is the “Buying Group” as defined in Treas. Reg.
section 54.4980B-9) will be responsible for providing any required COBRA
notices, and for providing COBRA continuation coverage, to all individuals who
are “M&A qualified beneficiaries” (as defined in Treas. Reg. section 54.4980B-9)
with respect to the transactions contemplated by this Agreement and the group
health plans maintained by the Greatbatch Group (which, for this purpose is the
“Selling Group” as defined in Treas. Reg. section 54.4980B-9). If and to the
extent that the Buying Group fails to comply with its obligations under this
paragraph, each member of the Buying Group will be jointly and severally liable
to the Selling Group for all costs, expenses, and liabilities incurred by any
member of the Selling Group however characterized (including benefits paid to
M&A qualified beneficiaries which the Selling Group’s group health plans would
not otherwise have been required to pay).

 

Section 6.3     Credit for Deductibles Under Medical and Dental Plans.
Individuals enrolled in the Greatbatch medical and dental plans during the 2016
calendar year, will receive credit under the deductible provisions of the
Nuvectra medical and dental plan for out-of-pocket expenses incurred while
covered under the Greatbatch Welfare Plan provided the expenses would have been
paid by both the Greatbatch Welfare Plan and the Nuvectra Welfare Plan but for
the application of their deductible limits.

 

Section 6.4     Insurance Contracts. To the extent any Greatbatch Welfare Plan
is funded through the purchase of an insurance contract or is subject to any
stop loss contract, Greatbatch and Nuvectra will cooperate and use their
commercially reasonable efforts to replicate such insurance contracts for
Nuvectra (except to the extent changes are required under applicable state
insurance laws) and to maintain any pricing discounts or other preferential
terms for both Greatbatch and Nuvectra for a reasonable term under such
contracts. Neither Party shall be liable for failure to obtain such pricing
discounts or other preferential terms for the other Party under any insurance
contracts. Each Party shall be responsible for any additional premiums, charges
or administrative fees that such Party may incur pursuant to this Section 6.4.

 

Section 6.5     Third-Party Vendors. Except as provided below, to the extent any
Greatbatch Welfare Plan is administered by a third-party vendor, Greatbatch and
Nuvectra will cooperate and use their commercially reasonable efforts to
replicate any contract with such third-party vendor for Nuvectra and to maintain
any pricing discounts or other preferential terms for both Greatbatch and
Nuvectra for a reasonable term with respect to such vendor. Neither Party shall
be liable for failure to obtain such pricing discounts or other preferential
terms for the other Party with respect to any third-party vendors. Each Party
shall be responsible for any additional premiums, charges or administrative fees
that such Party may incur pursuant to this Section 6.5.

 

 
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Article VII

WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION

 

Effective as of the Distribution Date, Nuvectra shall have (and, to the extent
it has not previously had such obligations, assume) the obligations for all
claims and liabilities relating to workers’ compensation and unemployment
compensation benefits for all Nuvectra Employees and Former Nuvectra Employees.
Nuvectra shall use commercially reasonable efforts to provide that workers’
compensation and unemployment insurance costs are not adversely affected for
either Party by reason of the Distribution.

 

Article VIII

EMPLOYMENT AGREEMENTS, SEVERANCE AND OTHER MATTERS

 

Section 8.1     Employment Agreements. Effective as of the Distribution Date,
Nuvectra hereby assumes Greatbatch’s rights and obligations arising under the
employment agreements described in Schedule 8.l and agrees to honor the terms
and conditions of those agreements applicable to Nuvectra as a successor under
the terms of such agreements. The terms of the employment agreements shall in
all other respects be unaffected. The Parties agree that the Nuvectra Employees
who are covered by employment agreements described above are express third party
beneficiaries of this Section 8.1.

 

Section 8.2     Severance.

 

(a)     Except as otherwise provided in this Agreement, immediately following
the Distribution, Greatbatch shall have no liability or obligation under any
Greatbatch severance plan, program, or policy with respect to Nuvectra Employees
or Former Nuvectra Employees.

 

(b)     Except as otherwise provided in this Agreement, effective after the
Distribution Date, Nuvectra shall assume and shall be responsible for
administering all payments and benefits under the applicable Greatbatch
severance policies or any termination agreements with Former Nuvectra Employees
whose employment terminated prior to the Distribution Date for an eligible
reason under such policies or in accordance with such agreements.

 

Section 8.3     Accrued Time Off. Nuvectra shall recognize and assume all
liability for all vacation, holiday, sick leave, flex days, personal days and
paid-time off with respect to Nuvectra Employees, and Nuvectra shall credit each
Nuvectra Employee with such accrual.

 

Section 8.4     Leaves of Absence. Nuvectra will continue to apply leave of
absence policies applicable to inactive Nuvectra Employees who are on an
approved leave of absence as of the Distribution Date that are substantially
similar in all material respects to those that were applied by Greatbatch prior
to the Distribution Date. Leaves of absence taken by Nuvectra Employees prior to
the Distribution Date shall be deemed to have been taken as employees of a
member of the Nuvectra Group.

 

 
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Section 8.5     Restrictive Covenants in Employment and Other Agreements.

 

(a)     To the fullest extent permitted by the agreements described in this
Section 8.5(a) and applicable law, Greatbatch shall assign, or cause any member
of the Greatbatch Group to assign, to Nuvectra or a member of the Nuvectra
Group, as designated by Nuvectra, all agreements containing restrictive
covenants (including confidentiality and non-competition provisions) between a
member of the Greatbatch Group and a Nuvectra Employee or Former Nuvectra
Employee, with such assignment effective as of the Distribution Date. To the
extent that assignment of such agreements is not permitted, effective as of the
Distribution Date, each member of the Nuvectra Group shall be considered to be a
successor to each member of the Greatbatch Group for purposes of, and a
third-party beneficiary with respect to, all agreements containing restrictive
covenants (including confidentiality and non-competition provisions) between a
member of the Greatbatch Group and a Nuvectra Employee or Former Nuvectra
Employee whom Nuvectra reasonably determines have substantial knowledge of the
business activities of the Nuvectra Group, such that each member of the Nuvectra
Group shall enjoy all the rights and benefits under such agreements (including
rights and benefits as a third-party beneficiary), with respect to the business
operations of the Nuvectra Group; provided, however, that in no event shall
Greatbatch be permitted to enforce such restrictive covenant agreements against
Nuvectra Employees or Former Nuvectra Employees for action taken in their
capacity as employees of a member of the Nuvectra Group.

 

(b)     To the fullest extent permitted by the agreements described in this
Section 8.5(b) and applicable law, Nuvectra shall assign, or cause any member of
the Nuvectra Group to assign, to Greatbatch or a member of the Greatbatch Group,
as designated by Greatbatch, all agreements containing restrictive covenants
(including confidentiality and non-competition provisions) between a member of
the Nuvectra Group and a Greatbatch Employee or Former Greatbatch Employee, with
such assignment effective as of the Distribution Date. To the extent that
assignment of such agreements is not permitted, effective as of the Distribution
Date, each member of the Greatbatch Group shall be considered to be a successor
to each member of the Nuvectra Group for purposes of, and a third-party
beneficiary with respect to, all agreements containing restrictive covenants
(including confidentiality and non-competition provisions) between a member of
the Nuvectra Group and a Greatbatch Employee or Former Greatbatch Employee whom
Greatbatch reasonably determines have substantial knowledge of the business
activities of the Greatbatch Group, such that Greatbatch and each member of the
Greatbatch Group shall enjoy all the rights and benefits under such agreements
(including rights and benefits as a third-party beneficiary), with respect to
the business operations of the Greatbatch Group; provided, however, that in no
event shall Nuvectra be permitted to enforce such restrictive covenant
agreements against Greatbatch Employees or Former Greatbatch Employees for
action taken in their capacity as employees of a member of the Greatbatch Group.

 

 
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Article IX

miscellaneous

 

Section 9.1     Preservation of Rights to Amend. The rights of each member of
the Greatbatch Group and each member of the Nuvectra Group to amend, waive, or
terminate any plan, arrangement, agreement, program, or policy referred to
herein shall not be limited in any way by this Agreement.

 

Section 9.2     Confidentiality. Each Party agrees that any information conveyed
or otherwise received by or on behalf of a Party in conjunction herewith that is
not otherwise public through no fault of such Party is confidential and is
subject to the terms of the confidentiality provisions set forth in the
Separation Agreement.

 

Section 9.3     Administrative Complaints/Litigation. Except as otherwise
provided in this Agreement, on and after the Distribution Date, Nuvectra shall
assume, and be solely liable for, the handling, administration, investigation
and defense of actions, including ERISA, occupational safety and health,
employment standards, union grievances, wrongful dismissal, discrimination or
human rights and unemployment compensation claims asserted at any time against
Greatbatch or any member of the Greatbatch Group by any Nuvectra Employee or
Former Nuvectra Employee (including any dependent or beneficiary of any such
Employee) or any other person, to the extent such actions or claims arise out of
or relate to employment or the provision of services (whether as an employee,
contractor, consultant or otherwise) to or with respect to the business
activities of any member of the Nuvectra Group, whether or not such employment
or services were performed before or after the Distribution. To the extent that
any legal action relates to a putative or certified class of plaintiffs, which
includes both Greatbatch Employees (or Former Greatbatch Employees) and Nuvectra
Employees (or Former Nuvectra Employees) and such action involves employment or
benefit plan related claims, reasonable costs and expenses incurred by the
Parties in responding to such legal action shall be allocated among the Parties
equitably in proportion to a reasonable assessment of the relative proportion of
Employees included in or represented by the putative or certified plaintiff
class. The procedures contained in the indemnification and related litigation
cooperation provisions of the Separation Agreement shall apply with respect to
each Party’s indemnification obligations under this Section 9.3.

 

Section 9.4     Reimbursement and Indemnification. Greatbatch and Nuvectra each
agree to reimburse the other Party, within 30 days of receipt from the other
Party of reasonable verification, for all costs and expenses which the other
Party may incur on its behalf as a result of any of the respective Greatbatch
and Nuvectra Welfare Plans (including, but not limited to, Nuvectra’s
reimbursement of Greatbatch for all COBRA liabilities for Nuvectra Employees and
Former Nuvectra Employees), 401(k) Plan and, as contemplated by Section 8.2, any
termination or severance payments or benefits. All liabilities retained, assumed
or indemnified against by Nuvectra pursuant to this Agreement, and all
liabilities retained, assumed or indemnified against by Greatbatch pursuant to
this Agreement, shall in each case be subject to the indemnification provisions
of the Separation Agreement. Notwithstanding anything to the contrary, (i) no
provision of this Agreement shall require any member of the Nuvectra Group to
pay or reimburse to any member of the Greatbatch Group any benefit-related cost
item that a member of the Nuvectra Group has previously paid or reimbursed to
any member of the Greatbatch Group; and (ii) no provision of this Agreement
shall require any member of the Greatbatch Group to pay or reimburse to any
member of the Nuvectra Group any benefit-related cost item that a member of the
Greatbatch Group has previously paid or reimbursed to any member of the Nuvectra
Group.

 

 
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Section 9.5     Costs of Compliance with Agreement. Except as otherwise provided
in this Agreement or any other Ancillary Agreement, each Party shall pay its own
expenses in fulfilling its obligations under this Agreement.

 

Section 9.6     Fiduciary Matters. Greatbatch and Nuvectra each acknowledge that
actions required to be taken pursuant to this Agreement may be subject to
fiduciary duties or standards of conduct under ERISA or other applicable law,
and no Party shall be deemed to be in violation of this Agreement if it fails to
comply with any provisions hereof based upon its good faith determination (as
supported by advice from counsel experienced in such matters) that to do so
would violate such a fiduciary duty or standard. Each Party shall be responsible
for taking such actions as are deemed necessary and appropriate to comply with
its own fiduciary responsibilities and shall fully release and indemnify the
other Party for any liabilities caused by the failure to satisfy any such
responsibility.

 

Section 9.7     Form S-8. Before the Distribution or as soon as reasonably
practicable thereafter and subject to applicable law, Nuvectra shall prepare and
file with the SEC a registration statement on Form S-8 (or another appropriate
form) registering under the Securities Act of 1933, as amended, the offering of
a number of shares of Nuvectra Common Stock at a minimum equal to the number of
shares subject to the Nuvectra Options, the Nuvectra RSAs and the Nuvectra RSUs.
Nuvectra shall use commercially reasonable efforts to cause any such
registration statement to be kept effective (and the current status of the
prospectus or prospectuses required thereby shall be maintained) as long as any
Nuvectra Options, Nuvectra RSAs, or Nuvectra RSUs may remain outstanding.

 

Section 9.8     Entire Agreement. This Agreement, together with the documents
referenced herein (including the Separation Agreement, any other Ancillary
Agreements and the plans and agreements referenced herein), constitutes the
entire agreement and understanding among the Parties with respect to the subject
matter hereof and supersedes all prior written and oral and all contemporaneous
oral agreements and understandings with respect to the subject matter hereof. To
the extent any provision of this Agreement conflicts with the provisions of the
Separation Agreement, the provisions of this Agreement shall be deemed to
control with respect to the subject matter hereof.

 

Section 9.9     Binding Effect; No Third-Party Beneficiaries; Assignment. This
Agreement shall inure to the benefit of and be binding upon the Parties and
their respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, this Agreement is solely for the benefit of the
Parties and should not be deemed to confer upon any third parties any remedy,
claim, liability, reimbursement, cause of action or other right in excess of
those existing without reference to this Agreement. Nothing in this Agreement is
intended to amend any employee benefit plan or affect the applicable plan
sponsor’s right to amend or terminate any employee benefit plan pursuant to the
terms of such plan. Except as otherwise provided in Section 8.1, the provisions
of this Agreement are solely for the benefit of the Parties, and no current or
former Employee, officer, director or independent contractor or any other
individual associated therewith shall be regarded for any purpose as a
third-party beneficiary of this Agreement. This Agreement may not be assigned by
any Party, except with the prior written consent of the other Party.

 

 
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Section 9.10     Amendment; Waivers. No change or amendment may be made to this
Agreement except by an instrument in writing signed on behalf of each of the
Parties. Any Party may, at any time, (a) extend the time for the performance of
any of the obligations or other acts of another Party, (b) waive any
inaccuracies in the representations and warranties of another Party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance by
another Party with any of the agreements, covenants or conditions contained
herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the Party to be bound thereby. No failure or
delay on the part of any Party in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty, covenant or agreement contained herein,
nor shall any single or partial exercise of any such right preclude other or
further exercises thereof or of any other right.

 

Section 9.11     Remedies Cumulative. All rights and remedies existing under
this Agreement or the Schedules attached hereto are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

 

Section 9.12     Notices. Unless otherwise expressly provided herein, all
notices, claims, certificates, requests, demands and other communications
hereunder shall be in writing and shall be deemed to be duly given: (a) when
personally delivered, (b) if mailed by registered or certified mail, postage
prepaid, return receipt requested, on the date the return receipt is executed or
the letter is refused by the addressee or its agent, (c) if sent by overnight
courier which delivers only upon the executed receipt of the addressee, on the
date the receipt acknowledgment is executed or refused by the addressee or its
agent, or (d) if sent by facsimile or electronic mail, on the date confirmation
of transmission is received (provided that a copy of any notice delivered
pursuant to this clause (d) shall also be sent pursuant to clause (a), (b) or
(c)), addressed to the attention of the addressee’s General Counsel at the
address of its principal executive office or to such other address or facsimile
number for a Party as it shall have specified by like notice.

 

Section 9.13     Counterparts; Facsimile Signatures. This Agreement, including
the Schedules hereto and the other documents referred to herein, may be executed
in multiple counterparts, each of which when executed shall be deemed to be an
original but all of which together shall constitute one and the same agreement.
Delivery of an executed signature page to this Agreement, and any of the other
agreements, documents and instruments contemplated hereby, by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
hereof or thereof.

 

Section 9.14     Severability. If any term or other provision of this Agreement
or the Schedules attached hereto is determined by a non-appealable decision by a
court, administrative agency or arbitrator to be invalid, illegal or incapable
of being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any Party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the court, administrative agency or arbitrator shall
interpret this Agreement so as to effect the original intent of the Parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible. If any
sentence in this Agreement is so broad as to be unenforceable, the provision
shall be interpreted to be only as broad as is enforceable.

 

 
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Section 9.15     Governing Law. To the extent not preempted by applicable
federal law, this Agreement shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of Delaware without regard to
any conflicts of law provisions thereof that would result in the application of
the laws of any other jurisdiction.

 

Section 9.16     Performance. Each of Greatbatch and Nuvectra shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any member of the Greatbatch
Group and any member of the Nuvectra Group, respectively. The Parties each agree
to take such further actions and to execute, acknowledge and deliver, or to
cause to be executed, acknowledged and delivered, all such further documents as
are reasonably requested by the other for carrying out the purposes of this
Agreement or of any document delivered pursuant to this Agreement.

 

Section 9.17     Construction. This Agreement shall be construed as if jointly
drafted by the Parties and no rule of construction or strict interpretation
shall be applied against any Party.

 

Section 9.18     Effect if Distribution Does Not Occur. Notwithstanding anything
in this Agreement to the contrary, if the Separation Agreement is terminated
prior to the Distribution Date, this Agreement shall be of no further force and
effect.

 

 

 

[signature page follows]

 

 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in
their names by a duly authorized officer as of the date first written above.

 

 

 

 

GREATBATCH, INC.

          By: /s/ Thomas J. Hook     Name:  Thomas J. Hook     Title:  President
and Chief Executive Officer                

QIG GROUP, LLC

  (to be converted into Nuvectra Corporation)           By: /s/ Scott F. Drees  
  Name:  Scott F. Drees   Title:  Chief Executive Officer

 

 

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