Document:

Prepared by MerrillDirect

Exhibit 10.2

LUMERA CORPORATION

INVESTORS’ RIGHTS AGREEMENT

MARCH 14, 2001

TABLE OF CONTENTS

1.          Registration Rights

1.1        Definitions

1.2        Request for Registration

1.3        Company Registration

1.4        Form S-3 Registration

1.5        Obligations of the Company

1.6        Furnish Information

1.7        Expenses of Registration.

1.8        Underwriting Requirements

1.9        Delay of Registration

1.10      Indemnification

1.11      Reports
Under Securities Exchange Act of 1934

1.12      Assignment of
Registration Rights

1.13      Limitations
on Subsequent Registration Rights

1.14      “Market Stand-Off” Agreement

1.15      Termination of Registration
Rights

2.          Covenants of the Company

2.1        Delivery of Financial
Statements

2.2        Inspection

2.3        Right of Participation

2.4        Stock Vesting

2.5        Employee
Non-Disclosure and Assignment of Inventions Agreement

2.6        IRS Ruling

2.7        Termination of Covenants

3.          Miscellaneous

3.1        Successors and Assigns

3.2        Amendments and Waivers

3.3        Notices

3.4        Severability

3.5        Governing Law

3.6        Counterparts

3.7        Titles and Subtitles

3.8        Aggregation of Stock

3.9        Specific Enforcement

LUMERA CORPORATION

INVESTORS’ RIGHTS AGREEMENT

             This
Investors’ Rights Agreement (the “Agreement”) is made as of the 14 day
of March, 2001, by and among Lumera Corporation, a Washington corporation (the
“Company”) and the investors listed on Exhibit A hereto, each of
which is herein referred to as an “Investor.”

RECITALS

             WHEREAS, the Company and certain Investors have entered into
a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”)
of even date herewith pursuant to which the Company desires to sell to such
Investors and such Investors desire to purchase from the Company shares of the
Company’s Series A Preferred Stock;

             WHEREAS, a condition to the Investors’ obligations under the
Purchase Agreement is that the Company and the Investors enter into this
Agreement in order to provide the Investors with (i) certain rights to register
shares of the Company’s Class A Common Stock issuable upon conversion of the
Series A Preferred Stock held by the Investors, (ii) certain rights to receive
or inspect information pertaining to the Company, and (iii) a right of
participation with respect to certain issuances by the Company of its
securities; and

             WHEREAS, the Company desires to induce certain of the
Investors to purchase shares of Series A Preferred Stock pursuant to the
Purchase Agreement by agreeing to the terms and conditions set forth herein.

             NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties hereto agree as follows:

1.          Registration Rights.  The Company and the
Investors covenant and agree as follows:

             1.1        Definitions
.  For purposes of this
Section 1:

                           (a)         
The
terms “register,” “registered,” and “registration” refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
“Securities Act”), and the declaration or ordering of effectiveness of
such registration statement or document;

                           (b)        The
term “Registrable Securities” means (i) the shares of Class A
Common Stock issuable or issued upon conversion of the Series A Preferred Stock
purchased pursuant to the Purchase Agreement and (ii) any other shares of
Class A Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares listed in (i); provided, however, that
the foregoing definition shall exclude in all cases any Registrable Securities
sold by a person in a transaction in which his or her rights under this
Agreement are not assigned. 
Notwithstanding the foregoing, Class A Common Stock or other
securities shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in
a public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements
of the Securities Act under Section 4(l) thereof or Rule 144
thereunder so that all transfer restrictions, and restrictive legends with
respect thereto, if any, are removed upon the consummation of such sale;

 

                           (c)         
The
number of shares of “Registrable Securities then outstanding” shall be
determined by the number of shares of Class A Common Stock outstanding
which are, and the number of shares of Class A Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;

                           (d)        The
term “Holder” means any person owning or having the right to acquire
Registrable Securities or any assignee thereof in accordance with
Section 1.12 of this Agreement;

                           (e)         
The
term “Form S-3” means such form under the Securities Act as in effect on
the date hereof or any successor form under the Securities Act;

                           (f)         
The
term “SEC” means the Securities and Exchange Commission; and

                           (g)        The
term “Qualified IPO” means a firm commitment underwritten public
offering by the Company of shares of its Common Stock pursuant to a
registration statement under the Securities Act, with a public offering price
per share of not less than $10 and which results in aggregate cash proceeds to
the Company of an amount equal to or greater than $20,000,000 (net of
underwriting discounts and commissions).

             1.2        Request for
Registration

                           (a)         
If
the Company shall receive at any time after the earlier of (i) March __,
2004 or (ii) six (6) months after the effective date of the first registration
statement for a public offering of securities of the Company (other than a
registration statement relating either to the sale of securities to employees
of the Company pursuant to a stock option, stock purchase or similar plan
approved by the Board of Directors of the Company or an SEC Rule 145
transaction approved by the Board of Directors of the Company), a written
request from the Holders of at least 30% of the Registrable Securities then
outstanding that the Company file a registration statement under the Securities
Act covering the registration of not less than 30% of the Registrable
Securities then outstanding with an anticipated aggregate gross offering price
of at least $10,000,000, then the Company shall, within ten (10) days of the
receipt thereof, give written notice of such request to all Holders and shall,
subject to the limitations of subsection 1.2(b), use reasonable efforts to
effect as soon as practicable, and in any event within 90 days of the receipt
of such request, the registration under the Securities Act of all Registrable
Securities which the Holders request to be registered within fifteen (15) days
of the mailing of such notice by the Company in accordance with
Section 3.3.  Subject to the
limitations of this Section 1.2, the Company may also include shares of
its capital stock in such registration.

 

                           (b)        If
the Holders initiating the registration request hereunder (“Initiating
Holders”) intend to distribute the Registrable Securities covered by their
request by means of an underwriting, they shall so advise the Company as a part
of their request made pursuant to this Section 1.2 and the Company shall
include such information in the written notice referred to in
subsection 1.2(a). The underwriter will be selected by a majority in
interest of the Initiating Holders and shall be reasonably acceptable to the
Company.  In such event, the right of
any Holder to include his Registrable Securities in such registration shall be
conditioned upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in subsection 1.5(e)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting.  Notwithstanding any
other provision of this Section 1.2, if the underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the Initiating Holders shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be allocated among
all Holders thereof, including the Initiating Holders, in proportion (as nearly
as practicable) to the amount of Registrable Securities of the Company owned by
each Holder; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other securities are first entirely excluded from the underwriting; provided,
further, that notwithstanding the foregoing, if the University of
Washington (the “University”) requests pursuant to the Restricted Stock
Purchase Agreement dated October 20, 2000 between the University and the
Company to include in a registration pursuant to this Section 1.2 shares
of the Company’s Class A Common Stock held by the University (the “UW
Shares”), the number of securities to be registered in such registration shall
be allocated to each Holder and the University in proportion (as nearly as
practicable) to the amount of the Company’s securities held by each Holder
exercising its rights hereunder and the University (so long as, in a
registration subsequent to the Company’s initial public offering, the number of
UW Shares is not reduced below twenty percent (20%) of the number of securities
to be registered in such registration.

                           (c)         
Notwithstanding
the foregoing, if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 1.2, a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, the filing would interfere with a material
financing, corporate reorganization, acquisition, merger, consolidation or
other material fact or event, the Company shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve-month period.

                           (d)        In
addition, the Company shall not be obligated to effect, or to take any action
to effect, any registration pursuant to this Section 1.2:

                                     
   (i)          After
the Company has effected two (2) registrations pursuant to this
Section 1.2 and such registrations have been declared or ordered
effective;

 

                                     
   (ii)         During
the period starting with the date sixty (60) days prior to the Company’s good
faith estimate of the date of filing of, and ending on a date one hundred
eighty (180) days after the effective date of, a registration subject to
Section 1.3 hereof; provided that the Company is in good faith using
reasonable efforts to cause such registration statement to become effective; or

                                     
   (iii)        If
the Initiating Holders propose to dispose of shares of Registrable Securities
that may be immediately registered on Form S-3 pursuant to a request made
pursuant to Section 1.4 below.

             1.3        Company Registration
.  After the Company’s
initial public offering, if (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders other than the Holders) any of its stock under the
Securities Act in connection with the public offering of such securities solely
for cash (other than a registration relating solely to the sale of securities
to participants in a Company stock plan approved by the Board of Directors of
the Company or a transaction covered by Rule 145 under the Securities Act
approved by the Board of Directors of the Company, a registration in which the
only stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered, or any registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 3.3, the Company shall, subject to the provisions
of Section 1.8, cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.  If a Holder decides not to include any or
all of its Registrable Securities in any registration statement filed by the
Company, such holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.

             1.4        Form S-3 Registration
.  In case the Company
shall receive from any Holder or Holders a written request or requests that the
Company effect a registration on Form S-3, with an anticipated aggregate gross
offering price of not less than $2,000,000, and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:

                           (a)         
promptly
give written notice of the proposed registration, and any, related
qualification or compliance, to all other Holders; and

 

                           (b)        as
soon as practicable, effect such registration, up to one (1) per year, and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder’s
or Holders’ Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within twenty (20) days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.4:
(i) if Form S-3 is not available for such offering by the Holders; (ii) if the
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate gross price to
the public of less than $2,000,000; (iii) if the Company shall furnish to the
Holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors of the Company, the filing
would interfere with a material financing, corporate reorganization,
acquisition, merger, consolidation or other material fact or event, in which
event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 1.4; provided,
however, that the Company shall not utilize this right more than once in
any twelve month period; (iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected one registration on
Form S-3 for the Holders pursuant to this Section 1.4; (v) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting
such registration, qualification or compliance, and in which the Company is not
already qualified to do business or subject to service of process; or (vi)
during the period ending one hundred eighty (180) days after the effective date
of (x) a registration statement filed pursuant to Section 1.2 or a
registration statement subject to Section 1.3 or (y) the registration
statement for the Company’s initial public offering.

                           (c)         
Subject
to the foregoing, the Company shall file a registration statement covering the
Registrable Securities and other securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Holders.
Registrations effected pursuant to this Section 1.4 shall not be counted
as demands for registration or registrations effected pursuant to Sections 1.2
or 1.3, respectively.

             1.5        Obligations of
the Company.  Whenever required
under this Section 1 to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:

                           (a)         
Prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use reasonable efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to ninety (90) days. 
The Company shall not be required to file, cause to become effective or
maintain the effectiveness of any registration statement that contemplates a
distribution of securities on a delayed or continuous basis pursuant to Rule
415 under the Securities Act, except for registrations pursuant to
Section 1.4; provided, however, that the Company will only
be required to keep such registration statement effective for up to ninety (90)
days.

                          (b)        Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement for up to ninety (90) days.

 

                           (c)         
Furnish
to the Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.

                           (d)        Use
reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, and in which the
Company is not already qualified to do business or subject to service of
process.

                           (e)         
In
the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.

                           (f)         
Notify
each Holder of Registrable Securities covered by such registration statement at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, such obligation to
continue for ninety (90) days.

                           (g)        Cause

all such Registrable Securities registered pursuant hereunder to be listed on
each securities exchange or over-the-counter market on which similar securities
issued by the Company are then listed.

                           (h)        
Provide
a transfer agent and registrar for all Registrable Securities registered
pursuant hereunder and a CUSIP number for all such Registrable Securities, in
each case not later than the effective date of such registration.

                           (i)          
Use
reasonable efforts to furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the
date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, being
sold through underwriters, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters and to the Holders requesting registration of Registrable
Securities.

 

             1.6        Furnish Information
.  It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Section 1 with respect to the Registrable Securities of
any selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to
effect the registration of such Holder’s Registrable Securities. The Company
shall have no obligation with respect to any registration requested pursuant to
Section 1.2 or Section 1.4 of this Agreement if, as a result of the
application of the preceding sentence, the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company’s
obligation to initiate such registration as specified in subsection 1.2(a)
or section 1.4, whichever is applicable.

             1.7        Expenses of
Registration.

                           (a)         Demand
Registration.
All expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to
Section 1.2, including (without limitation) all registration, filing and
qualification fees, printers’ and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable and documented fees and
disbursements of one counsel for the selling Holders selected by them not to
exceed $15,000 shall be borne by the Company; provided, however,
that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 1.2 if the registration
request is subsequently withdrawn at the request of the Holders of a majority
of the Registrable Securities to be registered and the Company is in compliance
with this Agreement (in which case all participating Holders shall bear all
such reasonable expenses in proportion to the number of shares for which
registration was requested), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 1.2; provided further, however, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the
condition, results, business, or prospects of the Company that would adversely
affect the offering and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain
their rights pursuant to Section 1.2.

                           (b)        Company
Registration.  All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications of Registrable Securities pursuant to Section 1.3 for each
Holder, including (without limitation) all registration, filing, and
qualification fees, printers’ and accounting fees, fees and disbursements of
counsel for the Company and the reasonable and documented fees and
disbursements of one counsel for the selling Holder or Holders selected by them
not to exceed $15,000 shall be borne by the Company.

 

                           (c)         Registration
on Form S-3.  All expenses incurred in connection with
registrations requested pursuant to Section 1.4, including (without
limitation) all registration, filing, qualification, printers’ and accounting
fees and the reasonable and documented fees and disbursements of one counsel
for the selling Holder or Holders selected by them not to exceed $15,000 and
counsel for the Company, and any underwriters’ discounts or commissions
associated with Registrable Securities, shall be borne by the Company.

             1.8        Underwriting
Requirements.  In connection with
any offering involving an underwriting of shares of the Company’s capital
stock, the Company shall not be required under Section 1.3 to include any
of the Holders’ securities in such underwriting unless they accept the usual
and customary terms of the underwriting as agreed upon between the Company and
the underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by shareholders to be included in such offering exceeds the amount of
securities to be sold, other than by the Company, that the underwriters
determine in their sole discretion is compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not jeopardize the success
of the offering (the securities so included to be apportioned pro rata among
the selling shareholders according to the total amount of securities entitled
to be included therein owned by each selling shareholder or in such other
proportions as shall mutually be agreed to by such selling shareholders) but in
no event shall (i) any shares being sold by a shareholder exercising a demand
registration right similar to that granted in Section 1.2 be excluded from
such offering; (ii) or any securities held by an officer or director of the
Company (or an affiliate thereof, other than Microvision, Inc. or the
University of Washington) be included if any securities held by any selling
Holder are excluded; provided, however, that in a registration subsequent to
the Company’s initial public offering the number of UW Shares is not reduced
below twenty percent (20%) of the number of securities to be registered in such
registration. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single “selling shareholder,” and
any pro-rata reduction with respect to such “selling shareholder” shall be
based upon the aggregate amount of shares carrying registration rights owned by
all entities and individuals included in such “selling shareholder,” as defined
in this sentence.

             1.9        Delay of Registration
.  No Holder shall have
any right to obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Section 1.

 

             1.10      Indemnification
.  In the event any Registrable Securities are included in a
registration statement under this Section 1:

                           (a)         
To
the extent permitted by law, the Company will indemnify and hold harmless each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations (each, a “Violation”):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable to
any Holder, underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.

                           (b)        To
the extent permitted by law, each selling Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred
by any person indemnified pursuant to this subsection 1.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that in no event shall any
indemnity under this subsection 1.10(b) exceed the net proceeds from the
offering received by such Holder, except in the case of fraud by such Holder.

                           (c)         
Promptly
after receipt by an indemnified party under this Section 1.10 of notice of
the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.10, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party (together
with all other indemnified parties which may be represented without conflict by
one counsel) shall have the right to retain one separate counsel, with the
reasonable and documented fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.

 

                           (d)        If
the indemnification provided for in this Section 1.10 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such proportion
as is appropriate to reflect the relative fault of the indemnifying party on
the one hand and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations; provided,
that in no event shall any contribution by a Holder under this
subsection 1.10(d) exceed the net proceeds from the offering received by
such Holder, except in the case of fraud by such Holder. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.

                           (e)         
Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control.

                           (f)         
The
obligations of the Company and Holders under this Section 1.10 shall
survive the completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement.

             1.11      Reports Under
Securities Exchange Act of 1934.  With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:

                           (a)         
make
and keep public information available, as those terms are understood and
defined in SEC Rule 144, at all times after ninety (90) days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public so long as the Company remains
subject to the periodic reporting requirements under Sections 13 or 15(d) of
the Exchange Act;

 

                           (b)        take

such action, including the voluntary registration of its Common Stock under
Section 12 of the Exchange Act, as is necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities, such action to
be taken as soon as practicable after the end of the fiscal year in which the
first registration statement filed by the Company for the offering of its
securities to the general public is declared effective;

                           (c)         
file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and

                           (d)        
furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) a written statement by the Company that it has complied with
the reporting requirements of SEC Rule 144 (at any time after ninety (90) days
after the effective date of the first registration statement filed by the
Company), the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.

             1.12      Assignment of
Registration Rights.  The rights to cause
the Company to register Registrable Securities pursuant to this Section 1
may be assigned (but only with all related obligations) by a Holder (i) to
parent corporation of or a subsidiary of such Holder or (ii) any trust for
the benefit of the Holder or a spouse or family member or (iii) to a transferee
or assignee of at least 500,000 shares of such securities, provided the Company
is, within a reasonable time after such transfer, furnished with written notice
of the name and address of such affiliate, transferee or assignee and the
securities with respect to which such registration rights are being assigned,
provided such transferee shall agree to be subject to all restrictions set
forth in this Agreement; and provided, further, that such assignment shall be
effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act. For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by
gift, will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under Section 1.

 

             1.13      Limitations
on Subsequent Registration Rights.  Except for
registration rights to be granted to Microvision, Inc. covering Class A
Common Stock issuable upon conversion of shares of Series A Preferred
Stock issuable upon exercise of warrants to be issued under the terms of the
Company’s Convertible Promissory Note dated February 28, 2001 payable to
Microvision, Inc. (the “Convertible Note”), from and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the outstanding Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 1.2 hereof, unless
under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included, (b) to make a demand registration
which could result in such registration statement being declared effective
prior to the earlier of either of the dates set forth in subsection 1.2(a)
or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.

             1.14      “Market Stand-Off”
Agreement.  Each Holder hereby
agrees that, during the period of duration (up to, but not exceeding, one
hundred eighty (180) days) specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Securities Act, it
shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any securities of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that:

                           (a)         
such
agreement shall be applicable only to the first such registration statement of
the Company which covers Common Stock (or other securities) to be sold on its
behalf to the public in an underwritten offering; and

                           (b)        all
officers and directors of the Company and all one-percent (1%) securityholders,
and all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements, except that the University of
Washington shall only be required to do so to the extent required under the
terms of the Restricted Stock Purchase Agreement between the Company and the
University of Washington dated October 20, 2000.

             In
order to enforce the foregoing covenant, the Company may impose stop transfer
instructions with respect to the Registrable Securities of each Holder (and the
shares or securities of every other person subject to the foregoing
restriction) until the end of such period, and each Holder agrees that, if so
requested, such Holder will execute an agreement in the form provided by the
underwriter containing terms which are essentially consistent with the
provisions of this Section 1.14.

             Notwithstanding
the foregoing, the obligations described in this Section 1.14 shall not
apply to a registration relating solely to employee benefit plans on Form S-8
or similar forms which may be promulgated in the future, or a registration
relating solely to an SEC Rule 145 transaction on Form S-4 or similar forms
which may be promulgated in the future.

 

             1.15      Termination of
Registration Rights.  No Holder shall be
entitled to exercise any right provided for in this Section 1 after the
earlier of (i) three (3) years following the consummation of a Qualified IPO,
(ii) March __, 2008, or (ii) such time as Rule 144 or another similar
exemption under the Securities Act is available for the sale of all of such
Holder’s shares during a ninety (90) day period without registration.

2.          Covenants of the Company

             2.1        Delivery
of Financial Statements.  The Company shall
deliver to each Holder of at least 500,000 shares of Registrable Securities:

                           (a)         
as
soon as practicable, but in any event within ninety (90) days after the end of
each fiscal year of the Company ending after the date hereof, an income
statement for such fiscal year, a balance sheet of the Company and statement of
shareholder’s equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles (“GAAP”),
and audited and certified by an independent public accounting firm of
nationally recognized standing selected by the Company;

                           (b)        as
soon as practicable, but in any event within forty-five (45) days after the end
of each of the first three (3) quarters of each fiscal year of the Company, an
unaudited profit or loss statement, a statement of cash flows for such fiscal
quarter, a summary of bookings and backlog and an unaudited balance sheet as of
the end of such fiscal quarter;

                           (c)         
within
thirty (30) days of the beginning of each fiscal year, monthly financial
projections for such fiscal year, operating budgets for such fiscal year and a
fiscal business plan in reasonable detail; and

                           (d)        with

respect to the financial statements called for in subsections (b) of this
Section 2.1, an instrument executed by the Chief Financial Officer or
President of the Company and certifying that such financials were prepared in
accordance with GAAP consistently applied with prior practice for earlier
periods (with the exception of footnotes that may be required by GAAP) and
fairly present the financial condition of the Company and its results of
operation for the period specified, subject to normal and recurring year-end
audit adjustment, provided that the foregoing shall not restrict the right of
the Company to change its accounting principles consistent with GAAP.

             2.2        Inspection
.  The Company shall
permit each Holder of at least 500,000 shares of Series A Preferred Stock, at
such Holder’s expense and at reasonable times and with advance notice, to visit
and inspect the Company’s properties, to examine its books of account and
records and to discuss the Company’s affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by the Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 2.2 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.

             2.3        Right of 
Participation.  Subject to the terms and conditions
specified in this paragraph 2.3, the Company hereby grants to each Holder who
holds at least 250,000 shares of Series A Preferred Stock (a “Major
Investor”) a right of participation with respect to future sales by the Company
of its shares of, or securities convertible into or exercisable for any shares
of, any class of its capital stock (“Shares”).

 

             Each
time the Company proposes to issue and sell any Shares, the Company shall first
make an offering of such Shares to each Major Investor in accordance with the
following provisions:

                           (a)         
The
Company shall deliver a notice by certified mail (“Notice”) to the Major
Investors stating (i) its bona fide intention to offer such Shares, (ii) the
number of such Shares to be offered, and (iii) the price and terms, if any,
upon which it proposes to offer such Shares.

                           (b)        Withi
n
fifteen (15) calendar days after receiving the Notice, the Major Investor may
elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares that equals the proportion that the
number of shares of common stock issued and held, or issuable upon conversion
of the Series A Preferred Stock then held, by such Major Investor bears to the
total number of shares of common stock issued and held, or issuable upon
conversion of all convertible or exercisable securities then held, by all the
Major Investors.

                           (c)         
If
not all Shares that Investors are entitled to obtain pursuant to this Section
2.3 (b) are elected to be obtained as provided in Section 2.3(b), the Company
may, during the one hundred twenty (120) day period following the expiration of
the period provided in Section 2.3(b) hereof, offer the remaining unsubscribed portion
of such Shares to any person or persons at a price not less than, and upon
terms no more favorable to the offeree than, those specified in the
Notice.  If the Company does not sell
such Shares or enter into an agreement for the sale of the Shares within such
period, or if such agreement is not consummated within sixty (60) days of the
execution thereof, the right provided hereunder shall be deemed to be revived
and such Shares shall not be offered unless first reoffered to the Major
Investors in accordance herewith.

                           (d)        The
right of participation set forth in this Section 2.3 shall not apply to Shares
issued or issuable: (i) upon conversion of shares of Series A Preferred
Stock; (ii) upon conversion of Class B Common Stock into Class A
Common Stock; (iii) to officers, directors or employees of, or consultants
to, the Company pursuant to stock option or stock purchase plans or agreements
on terms approved by the Board of Directors; (iv) in connection with
equipment financings or similar transactions, or in connection with strategic
investments or corporate partnering transactions, the terms of which are
approved by the Board of Directors of the Corporation; (v) as a dividend
or distribution on Series A Preferred Stock; (vi) under the terms of
the Convertible Note; (vii) for which adjustment of the Conversion Price
(as defined in the Company’s Statement of Rights and Preferences for the
Series A Preferred Stock (the “Statement of Rights and Preferences”)) is
made pursuant to the Statement of Rights and Preferences; (viii) in
connection with a Qualified IPO; (ix) pursuant to the acquisition of
another business entity or business segment of any such entity by the Company
by merger, purchase of substantially all the assets or other reorganization whereby
the Company will own more than fifty percent (50%) of the voting power of such
business entity or business segment of any such entity; (x) upon the
exercise, conversion or exchange of any security outstanding as of the date
hereof or securities issued or issuable pursuant to subsections (i)
through (ix) above; or (xi) any right, option or warrant to acquire any
security convertible into the securities issued or issuable pursuant to
subsections (i) through (x) above.

 

             The
right of first offer set forth in this Section 2.3 may not be assigned or
transferred, except that (a) such right is assignable by each Holder to any
wholly owned subsidiary or parent of, or to any corporation or entity that is,
within the meaning of the Act, controlling, controlled by or under common
control with, any such Holder, and (b) such right is assignable between and
among any of the Holders.

             2.4        Stock
Vesting.  All stock options
and other stock equivalents issued after the date of this Agreement to
employees, directors, consultants and other service providers shall be subject
to vesting as determined by the Board of Directors or a committee thereof
composed of non-employee directors.

             2.5        
Employee Non-Disclosure and Assignment of Inventions
Agreement.  Except as provided
in the Purchase Agreement, the Company and each of its employees shall have
entered into the Company’s standard form Employee Agreement, in substantially
the form provided to special counsel to the Investors.

             2.6        IRS
Ruling.  Before distributing any stock of the Company to
the shareholders of Microvision, Inc. (“Parent”), Parent will use its
reasonable best efforts to obtain a favorable ruling from the Internal Revenue
Service that the distribution qualifies for tax-free treatment under Section
355 of the Internal Revenue Code.

             2.7        Termination of
Covenants

                           (a)         
The
covenant set forth in Section 2.1, Section 2.2, Section 2.3 and
Section 2.5 shall terminate as to each Holder and be of no further force
or effect (i) immediately prior to the consummation of a Qualified IPO, or (ii)
when the Company shall sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any other transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Company is disposed of,
provided that this subsection (ii) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company and which
does not affect the percentage equity interests of securityholders of the
Company in and to the Company.

                           (b)        The
covenants set forth in Sections 2.1 and 2.2 shall terminate as to each Holder
and be of no further force or effect when the Company first becomes subject to
the periodic reporting requirements of Sections 13 or 15(d) of the Exchange
Act, if this occurs earlier than the events described in Section 2.7(a)
above.

3.          Miscellaneous.

             3.1        Successors and Assign
s.  Except as otherwise
provided in this Agreement, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted successors
and assigns of the parties (including transferees of any of the Series A Preferred
Stock or any Class A Common Stock issued upon conversion thereof).  Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

             3.2        Amendments and Waivers
.  Any term of this
Agreement may be amended or waived only with the written consent of the Company
and the holders of a majority of the Registrable Securities then outstanding.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder or Holder of any Registrable Securities then
outstanding, each future holder or Holder of all such Registrable Securities,
and the Company.

             3.3        Notices.  Unless otherwise
provided, any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient upon delivery, when delivered personally
or by overnight courier or sent by telegram or fax, or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail, with
postage prepaid, and addressed to the party to be notified at such party’s
address or fax number as set forth below or on Exhibit A hereto or as
subsequently modified by written notice.

             3.4        Severability
.  If one or more
provisions of this Agreement are held to be unenforceable under applicable law,
the parties agree to renegotiate such provision in good faith. In the event
that the parties cannot reach a mutually agreeable and enforceable replacement
for such provision, then (a) such provision shall be excluded from this
Agreement, (b) the balance of the Agreement shall be interpreted as if such
provision were so excluded and (c) the balance of the Agreement shall be
enforceable in accordance with its terms.

             3.5        Governing
Law.  This Agreement and all acts and transactions
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of Washington, without giving effect to principles of
conflicts of laws.

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

             3.7        Titles and Subtitles
.  The titles and
subtitles used in this Agreement are used for convenience only and are not to
be considered in construing or interpreting this Agreement.

             3.8        Aggregation of Stock
.  All shares of the
Preferred Stock held or acquired by (i) affiliated entities or persons or (ii)
persons or entities under common investment management, shall be aggregated
together for the purpose of determining the availability of any rights as a
Holder under this Agreement.

             3.9        Specific Enforcement
.  It is agreed and
understood that monetary damages would not adequately compensate an injured
party for the breach of this Agreement by any party, that this Agreement shall
be specifically enforceable, and that any breach or threatened breach of this
Agreement shall be the proper subject of a temporary or permanent injunction or
restraining order.  Further, each party
hereto waives any claim or defense that there is an adequate remedy at law for
such breach or threatened breach.

 

             The
parties have executed this Investors’ Rights Agreement as of the date first
above written.

	COMPANY:	 	INVESTORS:
	 	 	 
	LUMERA
  CORPORATION	 	 
	 	 	 
	By:

	 	By:

	 	 	Name:

	 	 	(print)
	 	 	Title:

EXHIBIT A

INVESTORS

 

             Name/Address/Fax
No.Prepared by MerrillDirect

EXHIBIT
10.1

AMENDED
AND RESTATED

SEVERANCE
AGREEMENT

             THIS
AMENDED AND RESTATED SEVERANCE AGREEMENT (this "Agreement") is made
as of the _____ day of _____________ 2001, between Imation Corp., a Delaware
corporation, with its principal offices at One Imation Place, Oakdale,
Minnesota 55125 (the "Company") and __________________________
residing at ____________________________.

             WHEREAS,
this Agreement is intended to specify the financial arrangements that the
Company will provide to you upon your separation from employment with the
Company under any of the circumstances described herein; and

             WHEREAS,
this Agreement is entered into by the Company in the belief that it is in the
best 'interests of the Company and its shareholders to help assure that the
Company will have your continued dedication during your employment with the
Company, by providing for certain severance benefits under certain
circumstances in connection with your employment with the Company, thereby
enhancing the Company's ability to attract and retain highly qualified people;
and

             WHEREAS,
this Agreement hereby amends and restates in its entirety any previous
Severance Agreement between the Company and you.

             NOW
THEREFORE, to assure the Company that it will have your continued dedication,
and to induce you to remain in the employ of the Company, and for other good
and valuable consideration, the Company and you agree as follows:

             1.           Term of Agreement.  The term of this Agreement shall commence on
the date of this Agreement (the "Effective Date") and shall continue
in effect until the first anniversary of the Effective Date, and shall
thereafter be automatically renewed for successive one-year terms provided that
you are employed by the Company on each anniversary of the Effective Date (the
"Covered Period"), unless the Company, upon authorization by its
Board of Directors gives notice to you that the Company does not wish to extend
this Agreement, and provided further, that, notwithstanding any such
notice by the Company not to extend, the Covered Period and this Agreement
shall continue in effect for a period of 12 months from the date of the notice.

	 	2.	Definitions.  When the following terms are used in this
  Agreement with initial capital letters, they shall have the following
  meanings.
	 	 	 
	 	 	(i)	"Cause"
  shall mean termination by the Company of your employment based upon:
	 	 	 	 	 
	 	 	 	(a)	the
  willful and continued failure by you to substantially perform your duties and
  obligations (other than any such failure resulting from incapacity due to physical
  or mental illness or any such actual or anticipated failure resulting from
  your termination for Good Reason);
	 	 	 	 	 
	 	 	 	(b)	the
  willful engaging by you in misconduct which is materially injurious to the
  Company, monetarily or otherwise; or
	 	 	 	 	 
	 	 	 	(c)	your
  conviction of, or entering a plea of nolo contendere to, a crime that
  constitutes a felony.

 

             For
purposes of this Section 2(i), no action or failure to act on your part shall
be considered "willful" unless done, or omitted to be done, by you in
bad faith and without reasonable belief that your action or omission was in the
best interests of the Company.

	 	 	(ii)	"Good
  Reason" shall mean the occurrence of any of the following events, except
  for occurrence of such an event in connection with the termination of your
  employment or reassignment by the Company for Cause, for disability or for
  death:
	 	 	 	 	 
	 	 	 	(a)	the
  assignment to you, either prior to or following a Change of Control, of
  employment duties, functions or responsibilities that are significantly
  different from, and result in a substantial diminution of, your duties,
  functions or responsibilities as of the date of this Agreement; or
	 	 	 	 	 
	 	 	 	(b)	(1)  a significant reduction by the Company in
  your base salary, annual bonus opportunity (specifically excluding any
  long-term incentive compensation for which you are eligible), or benefits as
  in effect as of the date of this Agreement (excluding any reduction caused by
  a restructuring by management of benefits for the employees of the company as
  a whole that affects you in a manner comparable to other senior executives of
  the Company), or (2) following a Change of Control, a reduction in your total
  cash compensation opportunity (i.e., base salary plus annual bonus
  opportunity specifically excluding any long-term incentive compensation) at
  target compensation, a reduction in base salary that results in your base
  salary constituting less than 50% of your total cash compensation opportunity
  at your target compensation level), or a reduction in the aggregate value of
  your benefits, in each case compared to your base salary, bonus opportunity
  and aggregate benefits as in effect on the date of this Agreement; or
	 	 	 	 	 
	 	 	 	(c)	a
  relocation following a Change of Control of your place of business by more
  than 50 miles from Oakdale, Minnesota, unless such relocation does not
  increase  the actual distance required
  for you to commute from your home to the new place of business by more than
  10 miles.
	 	 	 	 	 
	 	 	(iii)	 	"Change
  of Control" shall mean one of the following events:

 

                           (a)         the
consummation of a transaction in which a person, entity or group (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) acquires
beneficial ownership of 35% or more of the Company's common stock unless the transaction
resulting in such ownership has been approved in advance by the Incumbent Board
(as defined below) (other than in connection with a Business Combination in
which clauses (1), (2) and (3) of paragraph (c) apply); or

                           (b)        individuals
who, as of the date hereof, constitute the Board of Directors of the Company
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors of the Company; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board; or

                           (c)         the
consummation of a reorganization, merger, statutory share exchange,
consolidation or similar transaction involving the Company,  a sale or other disposition of all or
substantially all of the Company's assets 
or the issuance by the Company of its stock in connection with the
acquisition of assets or stock of another entity (each, a "Business
Combination") in each case unless, following such Business Combination,
(1) all or substantially all of the individuals and entities that were the
beneficial owners of the Company's common stock immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of
the then outstanding shares of common stock of the corporation resulting from
such Business Combination (including a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one of more subsidiaries) in substantially
the same proportions as their ownership of the Company's common stock
immediately prior to such Business Combination, (2) no person, entity or group
beneficially owns, directly or indirectly, 35% or more of the common stock of
the corporation resulting from such Business Combination and (3) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement or of the action of the Board of
Directors of the Company providing for such Business Combination.

             (iv)       "Date
of Termination" shall mean the date specified in the Notice of Termination
(except in the case of your death, in which case Date of Termination shall be
the date of death); provided, that in the case of a termination by you for Good
Reason following a Change of Control as defined in subsection (a) of "Good
Reason," the Date of Termination may not be before the 120th day following
the Change of Control.

             (v)        "Notice
of Termination" shall mean a written notice which sets forth the Date of
Termination and, in reasonable detail, the facts and circumstances claimed to
provide a basis, if any, for termination of your employment.

             3.          Termination Procedures.  Any purported termination of your employment
by the Company or you (other than by reason of your death) during the Covered
Period shall be communicated by a Notice of Termination in accordance with
Section 8 hereof.  No purported
termination by the Company of your employment in the Covered Period shall be
effective if it is not pursuant to a Notice of Termination.  Failure by you to provide Notice of
Termination shall not limit any of your rights under this Agreement except (a)
that the Company shall be permitted to cure any purported event if specified in
Section 2 (ii) and (b) to the extent the Company can demonstrate that it
suffered actual damages by reason of such failure.

             4.          Qualification for Severance
Benefits.  You shall be eligible for
severance benefits pursuant to the terms of this Agreement if your employment
is terminated and the Date of Termination occurs during the Covered Period in
either of the following circumstances:

             (i)          termination
of employment by the Company for any reason other than Cause; 

or

             (ii)         termination
of employment by you for Good Reason;

provided, however, that
you shall not begin receiving any payments or benefits under this Agreement
unless and until you execute a general release of all claims against the
Company and its affiliates, including non-competition and non-solicitation
covenants, in the form attached hereto as Exhibit A and you have not rescinded
such release within the permitted time period for rescission under Section 3.J
therein; and provided  further,
that in such case, failure to execute such release within 21 days of your Date
of Termination shall result in the loss of any rights to receive payments or
benefits under this Agreement. No severance benefits become payable pursuant to
this Agreement in the event of termination of employment upon your death or
disability.

             5.          Compensation Upon Termination.

             (i)          Amounts.  Upon qualification for severance benefits
pursuant to this Agreement, you shall be entitled to the benefits, to be funded
from the general assets of the Company, provided below:

                           (a)         The
Company shall pay to you (1) the full base salary earned by you and unpaid
through the Date of Termination, at the rate in effect on the date of the
Notice of Termination, (2) any amount earned by you as a bonus with respect to
the fiscal year of the Company immediately preceding the Date of Termination if
such bonus has not theretofore been paid to you, and (3) an amount representing
credit for any vacation earned or accrued by you but not taken during the
current "vacation year";

 

                           (b)        In
lieu of any further base salary payments to you for periods subsequent to the
Date of Termination, the Company shall pay to you:

                                       
(I)         If the Date of Termination for a termination by the Company
other than for Cause, or the event giving rise to your termination of your employment
for Good Reason, occurs prior to a Change of Control (other than as described
in the proviso in clause (II) below) (a "Non-Change-of-Control
Termination"), the sum of an amount equal to the target bonus under the
applicable annual bonus plan for the fiscal year in which the Date of
Termination occurs (specifically excluding any long-term incentive compensation
for which you are eligible) plus an amount equal to your annual base salary for
the fiscal year in which the Date of Termination occurs (but disregarding any
decrease thereof that constituted "Good Reason"); or

                                       
(II)        If the Date of Termination for a termination by the Company
other than for Cause, or the event giving rise to your termination of your
employment for Good Reason, occurs after a Change of Control (a
"Change-of-Control Termination"), the sum of an amount equal to two
(2) times the average of the sum of the actual annual bonuses paid to
you for the two years prior to the fiscal year in which the Date of Termination
occurs (specifically excluding any long-term incentive compensation for which
you are eligible) plus an amount equal to two (2) times your annual base salary
for the fiscal year in which the Date of Termination occurs (but disregarding
any decrease thereof that constituted "Good Reason").

                           (c)         The
Company shall provide the Company's standard employee medical and dental
insurance coverages, as elected by you and in effect immediately prior to the
Date of Termination, (1) for twelve (12) months following the Date of Termination
in the case of a Non-Change-of-Control Termination, or (2) for twenty-four (24)
months following the Date of Termination in the case of a Change-of-Control
Termination.

                           (d)        Notwithstanding
any other agreement in existence between the Company and you, if you are
eligible for severance benefits under this Agreement, at the Date of
Termination all shares of restricted stock owned or held by you or promised to
you by the Company shall be immediately vested in you without further
restriction and you shall be treated at that time as the unrestricted owner of
such Company stock, subject to applicable constraints under federal and state
securities laws.

             (ii)         No
Disability Benefits.  The Company
shall not be required to continue to provide disability benefits (group or
individual) following your Date of Termination other than with respect to
benefits to which you became entitled prior to the Date of Termination and
which are required to be paid following such Date of Termination in accordance
with the terms of applicable disability plans or policies in effect prior to
such Date of Termination.

             (iii)        Time and Form of Cash Payments.

                           (a)         In
the case of a Non-Change-of-Control Termination, the cash payments provided for
in Sections 5(i)(a) and 5(i)(b) above shall be paid at regular payroll
intervals beginning forty-five (45) days after your Date of Termination
(subject to the provisions of Section 4 of this Agreement relating to execution
of a release in the form of Exhibit A) or, at the election of the Company, in a
single lump sum payment thirty (30) days after the Date of Termination. If
severance is paid at regular payroll periods, you shall receive the same amount
of base salary each pay-day that you were receiving before termination (plus an
amount equal to the pro rata portion of your target bonus, if not otherwise
included in such pre- termination amount) until the total amount of
severance pay that is due under this agreement has been paid. All severance
payments are subject to any required withholding.

                           (b)        In
the case of a Change-of-Control Termination, the cash payments provided for in
Sections 5(i)(a) and 5(i)(b) above shall be paid by the Company in a single
lump sum payment as promptly as practicable after the Date of Termination
(subject to the provisions of Section 4 of this Agreement relating to execution
of a release in the Form of Exhibit A provided you have not rescinded such
release within the permitted time period for rescission under Section 3.J
thereof).  All severance payments are
subject to any required withholding.

             (iv)       Effect
of Reemployment.  If you are
re-employed by the Company after severance payments have been scheduled to be
made but before the final severance payment is made, all remaining severance
payments shall be suspended and shall automatically terminate as of the date of
re-employment. If you have received severance payments in a single lump sum and
are re-employed before the date the final severance payment would have been
made if payments had been made at regular payroll intervals, you will be
required to refund to the Company: (a) that portion of the lump sum payment
representing severance payments you would have received after the date of
re-employment minus (b) an amount equal to any taxes paid or payable on such portion
of the lump sum payment.

             (v)        No
Mitigation.  You shall not be
required to mitigate the amount of any payment provided for in this Section 5
by seeking other employment or otherwise, nor shall the amount of any payment
provided for in this Section 5 be reduced by any compensation earned by you as
the result of employment by another employer after the Date of Termination, or
otherwise, except as set forth in Section 5(iv) hereof.

6.          280G Provision.

             (i)          In the event that any payment or
benefit received or to be received by you (whether payable pursuant to the
terms of this Agreement or otherwise (collectively, the "Total
Payments")) would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") or any
interest, penalties or additions to tax with respect to such excise tax (such
excise tax, together with any such interest, penalties or additions to tax, are
collectively referred to as the "Excise Tax"), then you shall be
entitled to receive from the Company an additional cash payment (a
"Gross-Up Payment") within thirty business days of such determination
in an amount such that after payment by you of all taxes (including such
interest, penalties or additions to tax imposed with respect to such taxes),
including any Excise Tax, imposed upon, the Gross-Up Payment, you retain an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total
Payments.  Notwithstanding the foregoing
provisions of this Section 6(a)(i), if it shall be determined that you are
entitled to the Gross-Up Payment, but that the Parachute Value of all Payments
do not exceed 110 % of the Safe Harbor Amount, then no Gross-Up Payment shall
be made to you and the amounts payable under this Agreement shall be reduced so
that the Parachute Value of all Payments, in the aggregate, equals the Safe
Harbor Amount. The reduction of the amounts payable hereunder, if applicable,
shall be made by first reducing the payments under Section 5(i)(b), unless you
elect an alternative method of reduction, and in any event shall be made in
such a manner as to maximize the Value of all Payments actually made to you.
For purposes of reducing the Payments to the Safe Harbor Amount, only amounts
payable under this Agreement (and no other Payments) shall be reduced. If the
reduction of the amount payable under this Agreement would not result in a
reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no
amounts payable under the Agreement shall be reduced pursuant to this Section
6(a). All determinations required to be made under this Section 6, including
whether a Gross-Up Payment is required and the amount of such Gross-Up Payment,
shall be made by an independent accounting firm retained by the Company (the
"Accounting Firm" ), which shall provide detailed supporting
calculations both to the Company and you within a reasonable period of time as
requested by the Company.  If the
Accounting Firm determines that no Excise Tax is payable by you, it shall
furnish you with an opinion that you have substantial authority not to report
any Excise Tax on your federal income tax return. For purposes of this
Agreement, the following terms have the meanings set forth below:

"Parachute
Value" of a Payment shall mean the present value as of the date of the
change of control for purposes of Section 280G of the Code of the portion of
such Payment that constitutes a "parachute payment" under Section
280G(b)(2), as determined by the Accounting Firm for purposes of determining
whether and to what extent the Excise Tax will apply to such Payment.

"Payment"
shall mean any payment or distribution in the nature of compensation (within
the meaning of Section 280G(b)(2) of the Code) to or for your benefit, whether
paid or payable pursuant to this Agreement or otherwise.

"Safe Harbor
Amount" means 2.99 times your "base amount," within the meaning
of Section 280G(b)(3) of the Code.

"Value" of a
Payment shall mean the economic present value of a Payment as of the date of
the change of control for purposes of Section 280G of the Code, as determined
by the Accounting, Firm using the discount rate required by Section 280G(d)(4)
of the Code.

             (ii)         Any
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder shall be resolved in
favor of you. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that at a later time there will be a determination
that the Gross-Up Payments made by the Company were less than the Gross-Up
Payments that should have been made by the Company ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that you are required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment, if any, that has occurred and
any such Underpayment shall be promptly paid by the Company to you or for your
benefit.  If, after you receive any Gross-Up
Payment, you become entitled to receive any refund with respect to such claim,
you shall promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto).

             (iii)        Any
determination by the Accounting Firm as to the amount of any Gross-Up Payment,
including the amount of any Underpayment, shall be binding upon the Company and
you.

             (iv)       Notwithstanding
any other provision of this Section 6, the Company may, in its sole discretion,
withhold and pay over to the Internal Revenue Service or any other applicable
taxing authority, for your benefit, all or any portion of any Gross-Up Payment,
and you hereby consent to such withholding.

             7.          Successors.

             (i)          This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns.

             (ii)         This
Agreement shall inure to the benefit of and be enforceable by your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement, to your devisee, legatee or other designee or, if
there is no such designee, to your estate or, if no estate, in accordance with
applicable law.

             (iii)        The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company), by agreement in form and substance satisfactory
to you, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle you to compensation from the Company in the
same amount and on the same terms as you would be entitled hereunder if you
terminated your employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company and any successor to its business
and/or assets which executes and delivers the agreement provided for in this
Section 7 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.

             8.          Notice.  All notices, requests, demands and all other
communications required or permitted by either party to the other party by this
Agreement (including, without limitation, any Notice of Termination) shall be
in writing and shall be deemed to have been duly given when delivered
personally or received by certified or registered mail, return receipt
requested, postage prepaid, at the address of the other party as follows:

	If
  to the Company:	Imation
  Corp.
	 	Attention:
	 	One
  Imation Place
	 	Oakdale,
  Minnesota 55128
	 	 
	 	 
	If
  to you:	 

	 	 

 

 

Either party to this Agreement may change its
address for purposes of this Section 8 by giving fifteen (15) days' prior
written notice to the other party hereto.

             9.          Miscellaneous.  No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and the Company. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Minnesota without regard to its conflicts
of law principles.

             10.        Effect of Agreement; Entire Agreement.  This agreement supersedes any and all other
oral or written agreements or policies made relating to the subject matter
hereof and constitutes the entire agreement of the parties relating to the
subject matter hereof.

             11.        Validity.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

             12.        Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

             13.        Employment.  This Agreement does not constitute a
contract of employment or impose on the Company any obligation to retain you as
an employee, to continue your current employment status or to change any
employment policies of the Company, including but not limited to the Company's
Employee Agreement.

If this letter sets forth our agreement on the
subject matter hereof, please sign and return to the Company the enclosed copy
of this letter which will then constitute our agreement on this subject.

	IMATION
  CORP.:
	By:

	 	William
  T. Monahan
	 	Its:
  Chairman, President and
	 	      Chief Executive Officer
	 
	EXECUTIVE:
	 	 
	 	 

	 	(executive
  name)

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