Document:

DISTRIBUTION AGREEMENT

Exhibit 10.34

 

DEVELOPMENT AND LICENSE

AGREEMENT

 

THIS DEVELOPMENT

AGREEMENT (the “Agreement”) is made and entered into as of November 26th,

2001, (the “Effective Date”) between VITAL IMAGES, INC. (as defined below,

“VTAL”)

and SURGICAL NAVIGATION TECHNOLOGIES, INC. (as defined below, “SNT”).

WITNESSETH:

WHEREAS, VTAL has

expertise in the development, manufacture and distribution of volume rendering

and visualization software for radiology; and

WHEREAS, SNT has expertise in the development,

manufacture and distribution of visualization and surgical planning software;

and

 

WHEREAS, VTAL and SNT desire to enter into an

agreement to utilize each other’s expertise in the 2D and 3D visualization and

surgical planning marketplace; and

 

WHEREAS, it is the desire of the parties that SNT

shall market and sell products developed by VTAL into the image guided surgery

and surgical planning marketplaces and that VTAL market and sell products it

has developed into the radiology and surgical planning marketplaces; and

 

WHEREAS, the parties desire to work together to

produce certain “Products” (as defined below);

 

NOW THEREFORE, in

consideration of the representations, warranties, covenants and agreements

contained herein, and for other valuable consideration, the receipt and

adequacy of which is hereby acknowledged, the parties mutually agree as

follows:

ARTICLE 1

DEFINITIONS

1.1           Specific Definitions.  As used in this Agreement, the following

terms shall have the meanings set forth or as referenced below:

“Affiliate” of a specified person (natural or juridical) means a

person that directly, or indirectly through one or more intermediaries,

controls, or is controlled by, or is under common control with, the person

specified.  “Control” shall mean

ownership of more than 50% of the shares of stock entitled to vote for the

election of directors in the case of a corporation, and more than 50% of the

voting power in the case of a business entity other than a corporation.

“Agreement” means this Agreement and all Appendices and Product

Plans hereto.

“API” means an application programming interface.

 

 

“Confidential Information” means know-how, trade secrets, and unpublished

information disclosed (whether before or during the term of this Agreement) by

one of the parties (the “disclosing party”) to the other party (the “receiving

party”), and which is marked as proprietary or confidential as provided below,

excluding information that:

(a)           was already in the possession of

receiving party prior to its receipt from the disclosing party (provided that

the receiving party is able to provide the disclosing party with reasonable

documentary proof thereof);

(b)           is or becomes part of the public

domain by reason of acts not attributable to the receiving party;

(c)           is or becomes available to receiving

party from a source other than the disclosing party which source, to the

receiving party’s Knowledge, has rightfully obtained such information and has

no obligation of nondisclosure or confidentiality with respect thereto;

(d)           is made available by the disclosing

party to a third party unaffiliated with the disclosing party on an

unrestricted basis;

(e)           is independently developed by the

receiving party completely without reference to any Confidential Information of

the disclosing party, as evidenced by the receiving party’s written records; or

(f)            has been or must be publicly

disclosed by reason of legal, accounting or regulatory requirements beyond the

reasonable control, and despite the reasonable efforts, of the receiving party;

provided, with respect to this Paragraph (f), that the other party gives the

disclosing party reasonable notice in order to permit the disclosing party to

contest such requirement of disclosure.

All Confidential

Information disclosed by one party to the other under this Agreement shall be

in writing and bear a legend “Proprietary,” “Confidential” or words of similar

import or, if disclosed in any manner other than writing, shall be followed by

a written description of the Confidential Information and confirmation that

such information is confidential by the disclosing party within 30 days after

the non-written disclosure.

“Current SNT IGS Systems” means each of the following SNT IGS Systems:

StealthStation® system, TreonTM system, TreonTM ENT system and LandmarXTM system

and successors thereto, in each case to the extent running on the SGI 02

Platform, but not replacements thereof.

“FDA” means the United States Food and Drug Administration.

“Force Majeure” means any event or condition, not existing as of the

date of this Agreement, not reasonably foreseeable as of such date and not

reasonably within the control of the affected party, which prevents in whole or

in material part the performance by such party of its obligations hereunder,

such as an act of government, war or related actions, civil insurrection, riot,

sabotage, strike, epidemic, fire, flood, windstorm, and similar events.

 

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“GAAP” means United States generally accepted accounting principles

consistently applied.

“GMP” means Good Manufacturing Practices as defined in 21 CFR Parts 800

through 898 as applicable.

“IGS System” means any image guided surgery system or product.

“Intellectual Property”  means U.S. and

foreign patents and patent applications, trademarks, service marks and

registrations thereof and applications therefor, copyrights and copyright

registrations and applications, mask works and registrations thereof, know-how,

trade secrets, inventions, discoveries, ideas, technology, data, information,

processes, drawings, designs, licenses, computer programs and software, and

technical information including but not limited to information embodied in

material specifications, processing instructions, equipment specifications,

product specifications, confidential data, electronic files, research

notebooks, invention disclosures, research and development reports and the like

related thereto and all amendments, modifications, and improvements to any of

the foregoing.

“Invention” means any invention, discovery, know-how, trade

secret, data, information, technology, process or concept, whether or not

patented or patentable, and whether or not memorialized in writing.

“Knowledge” means actual knowledge of a fact or the knowledge

that such person could reasonably be expected to have based on reasonable

inquiry.  The “knowledge” of an entity

shall include the knowledge of such entity’s employees.

“Net Sales” of Products for purposes of this Agreement with

respect to a particular period means the difference between amounts recognized

as revenue on a consolidated basis in accordance with GAAP by SNT with respect

to the sale, licensing or other disposition of a designated Product minus any

deductions from such revenue by reason of rejections, credits or returns of

such Products the revenue from which was previously so recognized,  (and excluding to the extent included

therein revenue from licenses to use such Product in clinical trials or other

testing, sales, occupation or excise taxes, freight, duty or insurance,

discounts and allowances, all determined in accordance with GAAP); provided that if SNT recognizes income

with respect to a Product sold at a single price or rate as part of a

package/combination of products, not all of which if sold individually would be

Products, then “Net Sales” with respect to a sale of such package shall equal

the greater of (i) the average revenue per such Product recognized by SNT in

accordance with GAAP with respect to its sale, licensing or other disposition,

on a consolidated basis during such period or (ii) the average revenue per

such package/combination of products recognized in accordance with GAAP on a

consolidated basis during such period multiplied by a fraction, the numerator

of which is the average list price during such period of the Product included

in such package/combination of products and the denominator of which is the sum

of average list prices during such period of all products, including the

Product, included in such package/combination.

“Product” means any product developed pursuant to a Product

Plan under this Agreement.

 

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“Product Plan” means, with respect to each Product, the

mutually-agreed upon and signed written description of the development process

for such Product anticipated to be in the form of Appendix A hereto, as amended

from time to time by written agreement thereto.

“Proposed Product” means the following products, each of which are

expected to become a Product under a Product Plan: a) a product incorporating

the VRE into the Current SNT IGS Systems, b) a product incorporating the VRE on

to a computer platform other than IGS 02 Platform, c) a product to be known as

the Vitrea®

OR, expected to be a standard Vitrea®  2, version 2.0 product

adapted for use on the Current SNT IGS Systems; d) a product to be known as

various types of Vitrea® Therapy Application Modules, being

Application-specific planning modules (e.g., vascular, AAAs, basal ganglia,

calcium scoring, etc.) for use on the Current SNT IGS Systems; e) a product to be

known as the Vitrea® — SNT IGS Link, being a planning protocol to bridge

radiology and the operating room, by transfers of fiducial information gathered

by the Vitrea®

product to a Current SNT IGS Systems; f) a product to be known as Vitrea®  with SNT IGS Link, being a Vitrea® based

visualization and planning station for surgeons and g) a product under which

information gathered by the Vitrea2® can be transferred to the Current

SNT IGS Systems.

“IGS 02 Platform” means the IGS O2 platform with the IRIX

6.5 operating system.

“SNT” means SNT, Inc. and its Affiliates.

“Specifications” means the specifications for a Product as set forth

in the respective Product Plan as amended from time to time.

“VRE” means the Vitrea® volume rendering engine with

respect to a specified platform, e.g., IGS O2 or Windows® software platform, as

the same exists on the date hereof or as is otherwise agreed in the applicable

Product Plan.

“VTAL” means Vital Images, Inc. and its Affiliates.

1.2           Meaning of “Sale”.  In addition to the foregoing,  terms such as “sale” and “purchase” and

variants and synonyms thereof when used with reference to the supply of any

software product are used herein for convenience only and refer to transactions

involving the grant of a software license for product.

1.3           Other Terms.  Other terms may be defined elsewhere in the

text of this Agreement and shall have the meaning indicated throughout this

Agreement.

1.4           Definitional Provisions.  The term “person” includes any individual,

partnership, joint venture, corporation, trust, unincorporated organization or

government or any department or agency thereof.

 

ARTICLE

2

DEVELOPMENT OF PRODUCTS

2.1           Development Efforts.  VTAL and SNT will work together to develop

Products according to each Product Plan attached hereto or added from time to

time.

 

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2.2           Product Plans.  Product Plans Products may be executed from

time to time  by the parties as and when

they reach agreement thereon.  Each

Product Plan, when signed by both parties, shall be subject to the general

terms and provisions of this Agreement; provided that to the extent of any

conflict between the terms hereof and the terms of a Product Plan, the terms of

the Product Plan will control.  The

parties affirm their intention to enter into a Product Plan with respect to

each Proposed Product, but no Proposed Products shall be a Product unless and

until a Product Plan with respect thereto is executed by the parties.

2.3           Reports and Records.  Within fifteen (15) days after the end of

each month, VTAL shall provide to SNT a reasonably detailed report setting

forth a summary of the development activities of VTAL under each Product Plan

during such month and the status of development of each Product as of the end

of such month.

2.4           Regulatory.

(a)           VTAL shall, at its cost and expense,

use commercially reasonable efforts to ensure that each Product is produced and

packaged in accordance with all applicable regulations in the USA, Canada and

the countries of the European Union as constituted on the date hereof,

including without limitation the FDA and CE Mark per Medical Device Directive

(MDD 93/42/EEC), and shall bear all costs related to such compliance.  Responsibility for production compliance

with the regulations of any other governmental unit and paying the cost thereof

shall be agreed to and allocated as set forth in the applicable Product Plan.

(b)           SNT shall be responsible for

obtaining all other regulatory approvals for the commercial sale of Products,

including the preparation of the clinical study protocols, selection of

investigational sites, preparation of the investigator’s brochures, instruction

and training of clinical investigators, monitoring the performance of clinical

trials, data collection and analysis, reporting of adverse events, preparation

and prosecution of regulatory submissions, and post approval clinical

studies.  All regulatory approvals for

the Products will be in SNT’s name and owned by SNT.  In connection with the foregoing:

(c)           VTAL shall supply to SNT such

quantities of Products as is reasonably required by SNT to obtain necessary

regulatory approvals.  Unless otherwise

specified in the Product Plan, SNT shall pay VTAL an amount equal to VTAL’s

direct cost of materials and labor for such Products supplied to SNT for use in

obtaining necessary regulatory approvals.

(d)           VTAL will grant SNT the right of

reference to VTAL’s regulatory files with the FDA or other appropriate

government agencies as necessary or helpful for support of SNT’s regulatory submissions

with respect to Products and, upon SNT’s request participate in any discussions

with the FDA or clinical investigators with respect thereto  at SNT’s expense.

2.5           Termination of Product Plan.  SNT shall be entitled to terminate any

Product Plan for a Product if SNT, in its sole discretion, determines that such

Product will not be technically or commercially feasible or will have only

limited commercial value to SNT. 

Payment for any 

 

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work performed by VTAL in

connection with a terminated Product Plan will be as provided in the Product

Plan.  If the terminated Product Plan is

silent on the issue of payment, SNT shall pay VTAL the actual costs that it has

incurred in performance of its duties under the Product Plan.

 

ARTICLE 3

MARKETING OF PRODUCTS

3.1           VTAL Exclusivity. VTAL shall

not, nor shall it permit its Affiliates to, incorporate, or facilitate the

integration of its volume rendering engine into any IGS System sold or

otherwise made available by persons other than SNT.

3.2           SNT Exclusivity.   SNT shall not, nor shall it permit its

Affiliates to, incorporate, or facilitate the integration of, a volume

rendering engine of any person other than VTAL into any IGS System sold or

otherwise made available by SNT; provided that the foregoing shall not preclude

SNT from selling or otherwise making available an IGS System feature developed

by a non-Affiliated third party which includes a different volume rendering

engine.

3.3           Cooperation.  SNT and VTAL will cooperate on marketing and

sales of Products.  VTAL and SNT will

implement a lead-sharing program and cite each other in marketing literature

relating to Products.  All demonstration

software related to Products shall be provided to the other party free of

charge and demonstration hardware related to Products, if purchased from the

other party, shall be transferred to the other party at standard cost.  Within fifteen (15) days of the date hereof

(i) SNT shall provide to VTAL a then current list, including contact

information, with respect to licensees of 

any of the Current SNT IGS systems and (ii) VTAL shall provide to SNT a

then current list, including contact information, with respect to licensees of

its  Vitrea® 2 product.

 

3.4           Distribution

Territory.  The distribution

territory for all Products shall be the entire world.

 

ARTICLE

4

ROYALTIES AND OTHER

PAYMENTS

 

4.1           Reports and Payments.  Within sixty (60) days of the end of each

SNT fiscal quarter, SNT shall provide VTAL with a written report indicating the

Net Sales of Products by SNT, as well as other reasonably detailed information

supporting the amount of any non-Net Sales based payments due to VTAL by the

terms of any Product Plan, in relation to such quarter, and shall

simultaneously pay to VTAL all Net Sales based and non-Net Sales based amounts

due with respect to such fiscal quarter. 

Within sixty (60) days of the end of each VTAL fiscal quarter, VTAL

shall provide SNT with reasonably detailed information supporting the amount of

any payments due to SNT by the terms of any Product Plan in relation to such

quarter, and shall simultaneously pay to SNT such amounts.

4.2           Records.  Each party agrees to keep accurate written

records sufficient in detail and where applicable in accordance with GAAP, to

enable the verification and audit of any payments due the other under each

Product Plan.  Such records shall be

retained by each party for a period of not less than three (3) years after each

such quarter.

4.3           Audit of Records.  Upon reasonable notice and during regular

business hours, each party (the “Audited Party”) shall from time to time (but

no more frequently than once annually) make 

 

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available its records

referred to in Article 4.2 for audit by independent certified public accounting

representatives selected by such other party and reasonably acceptable to the

Audited Party, at such other’s expense, to verify the accuracy of the reports

provided by the audited Party hereunder. 

Such representatives shall execute a suitable confidentiality agreement

reasonably acceptable to the Audited Party prior to conducting such audit.  If under-payment or under–reporting

resulting in under–payment of royalties is verified during any audit in

an amount in excess of five percent (5%) of the total amount due, then the

Audited Party shall (i) reimburse the other party for the cost of such audit

and (ii) pay to the other party the amount found to be due by such independent

certified public accounting representatives together with interest from the

date due until the date of payment at a rate of one percent (1%) per month.

 

ARTICLE 5

REPRESENTATIONS,

WARRANTIES, DISCLAIMERS AND LIMITATIONS 

 

5.1           Representations of VTAL.  VTAL represents, warrants and covenants to

SNT that:

(a)           VTAL is a corporation duly organized,

validly existing, and in good standing under the laws of the State of Minnesota

and has full company power to conduct the business in which it is presently

engaged and to enter into and perform its obligations under this Agreement.

(b)           VTAL has taken all necessary company

action under the laws of the state of its organization and its articles of

organization and operating agreement to authorize the execution and

consummation of this agreement and, when executed and delivered by VTAL, this

agreement shall constitute the valid and legally binding agreement of VTAL

enforceable against VTAL in accordance with the terms hereof, subject to

bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and

similar laws of general applicability relating to or affecting creditors’

rights and to general equity principles.

(c)           Neither the execution and delivery of

this agreement nor the consummation of the transactions contemplated herein

will violate any provision of the articles of organization or operating

agreement of VTAL or any law, rule, regulation, writ, judgment, injunction,

decree, determination, award or other order of any court or governmental agency

or instrumentality, domestic or foreign, or conflict with or result in any

breach of any of the terms of or constitute a default under or result in

termination of or the creation or imposition of any mortgage, deed of trust,

pledge, lien, security interest or other charge or encumbrance of any nature

pursuant to the terms of any contract or agreement to which VTAL is a party or

by which VTAL or any of its assets is bound.

(d)           VTAL owns, or has valid and

subsisting right to grant each license set forth in Product Plan, subject to no

lien, charge or encumbrance whatsoever. 

To VTAL’s Knowledge, all pending patent applications with respect to

each product to which a license is granted to SNT in a Product Plan are valid

and the claims described therein patentable. 

To VTAL’s Knowledge, SNT’s exploitation of each license set forth in

Product Plan will not infringe, misappropriate, misuse or 

 

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conflict

with the rights of third parties.  To

VTAL’s Knowledge, no person or entity nor such person’s or entity’s business or

product has infringed, misused or misappropriated the technology which is the

subject of a license set forth in Product Plan.

(e)           To VTAL’s Knowledge, there are no

actions, suits, claims, disputes or proceedings or governmental investigations

pending or threatened against VTAL with respect to any license set forth in

Product Plan, either at law or in equity, before any court or administrative

agency or before any governmental department, commission, board, bureau, agency

or instrumentality, or before any arbitration board or panel whether located in

the United States or a foreign country, other than patent applications being

prosecuted before the applicable patent authority by VTAL or its

licensors.  To VTAL Knowledge, VTAL has

not failed to comply with any law, rule, regulation, writ, judgment,

injunction, decree, determination, award or other order of any court or other

governmental agency or instrumentality, domestic or foreign, which failure in

any case would in any material respect impair any rights of SNT under this

Agreement.

(f)            Each

Product to be licensed under this Agreement will have been produced and

packaged in accordance with all applicable laws and regulations, including (as

applicable) FDA and GMP requirements and European Medical Device Directive

requirements, as well as applicable ISO 9001 or successor certification

requirements, of the USA, Canada and the countries of the European Union as

constituted on the date hereof and any other countries required by the

applicable Product Plan, including without limitation the FDA and CE Mark per

Medical Device Directive (MDD 93/42/EEC), and shall bear all costs related to

such compliance.  Upon prior written

notice, VTAL shall allow SNT’s regulatory personnel to be provided with

reasonable access from time to time to the facilities and records of VTAL for

the purpose of confirming VTAL’s and the Product’s compliance with this

representation and warranty.  VTAL’s

entire liability, and SNT’s exclusive remedy, for any warranty claim made by

SNT under this Subarticle  5.1(f) shall

be for VTAL (i) use commercially reasonable efforts to bring itself and all

Products into conformity with this representation and warranty and (ii) to the

extent required by applicable law, at its option, to either (a) replace any defective

media which prevents the Product from satisfying the limited warranty described

in Article 5.1; (b) attempt to correct any material and reproducible errors

reported by SNT provided however if VTAL is unsuccessful in such attempts VTAL

agrees to take action under either (a) or (c) of this Clause (f); or (c)

terminate the relevant Product Plan and refund all fees paid under the

applicable Product Plan for the affected Product, less charges for the previous

usage of such Product based on a ten year amortization from the date of sale,

or in the case of fees based on the grant of a sublicense, from the date of

grant of the sublicense.  VTAL does not

warrant that the operation of any Product will be uninterrupted or error-free,

that all errors in a Product will be corrected, that any Product will satisfy

SNT’s requirements where they differ from the specification 

 

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defined in the respective Product Plan or that any Product will operate

in the combinations which SNT may select for use.

5.2           Representations of SNT.  SNT represents, warrants and covenants to

VTAL that:

(a)           Surgical Navigation Technologies,

Inc. is duly incorporated in Delaware and is a wholly owned subsidiary of

Medtronic, Inc., a corporation duly organized, validly existing and in good

standing under the laws of the State of Minnesota.

(b)           SNT has full corporate power to

conduct the business in which it is presently engaged and to enter into and

perform its obligations under this agreement.

(c)           SNT has taken all necessary company

action under the laws of the state of its organization and its articles of

organization and operating agreement to authorize the execution and

consummation of this agreement and, when executed and delivered by SNT, this

agreement shall constitute the valid and legally binding agreement of SNT

enforceable against SNT in accordance with the terms hereof, subject to

bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and

similar laws of general applicability relating to or affecting creditors’

rights and to general equity principles.

(d)           Neither the execution and delivery of

this agreement nor the consummation of the transactions contemplated herein

will violate any provision of the articles of organization or operating

agreement of SNT or any law, rule, regulation, writ, judgment, injunction,

decree, determination, award or other order of any court or governmental agency

or instrumentality, domestic or foreign, or conflict with or result in any

breach of any of the terms of or constitute a default under or result in

termination of or the creation or imposition of any mortgage, deed of trust,

pledge, lien, security interest or other charge or encumbrance of any nature

pursuant to the terms of any contract or agreement to which SNT is a party or

by which SNT or any of its assets is bound.

(e)           To SNT’s Knowledge, SNT has not

failed to comply with any law, rule, regulation, writ, judgment, injunction,

decree, determination, award or other order of any court or other governmental

agency or instrumentality, domestic or foreign, which failure in any case would

in any material respect impair any rights of VTAL under this Agreement.

5.3           Limited Warranty.  THE EXPRESS WARRANTIES SET FORTH IN THIS

AGREEMENT OR IN ANY PRODUCT PLAN ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS

OR IMPLIED, WHICH ARE HEREBY SPECIFICALLY DISCLAIMED, INCLUDING WITHOUT

LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A

PARTICULAR PURPOSE OR USE.

 

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5.4           No Consequential Damages.  IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR

CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES, EVEN THOUGH IT MAY HAVE

BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

ARTICLE 6

INDEMNIFICATION

 

6.1           VTAL’s Liability.  VTAL shall indemnify, defend and hold

harmless SNT and each of its officers, directors, employees, shareholders and

distributors from and against and in respect of any and all demands, claims,

actions or causes of action, assessments, losses, damages, liabilities,

interest and penalties, costs and expenses (including, without limitation,

reasonable legal fees and disbursements incurred in connection therewith and in

seeking indemnification therefor, and any amounts or expenses required to be

paid or incurred in connection with any action, suit, proceeding, claim,

appeal, demand, assessment or judgment) finally awarded (“Indemnifiable

Losses”), resulting from, arising out of, or imposed upon or incurred by any

person to be indemnified hereunder by reason of (i) its negligence or gross

misconduct, (ii) personal injury or product damage resulting from the failure

of a VTAL Product to meet its Specification or (iii) a VTAL Infringement (as

defined below).  VTAL shall maintain

product liability insurance or self-insurance in such amounts as ordinary good

business practice for its type of business would make advisable and shall

provide SNT with evidence of this coverage. 

For purposes of this Agreement, a “VTAL Infringement” means

(a) infringement by a Product of a third party’s patent, copyright or

trademark to the extent not arising out of the requirements specified by SNT

for such Product or the information or designs SNT provides to VTAL for

incorporation into such Product; or (b) provision by VTAL of a

misappropriated trade secret of a third party for incorporation into a Product.

6.2           SNT’s Liability.  SNT shall indemnify, defend and hold

harmless VTAL and each of its officers, directors, employees, shareholders from

and against and in respect of any and all Indemnifiable Losses resulting from,

arising out of, or imposed upon or incurred by any person to be indemnified

hereunder by reason of (i) its negligence or gross misconduct, (ii) personal

injury or product damage resulting from a Product except to the extent VTAL

must indemnify SNT with respect thereto under Article 6.1 or (iii) a SNT

Infringement (as defined below).  SNT

shall maintain product liability insurance or self-insurance in such amounts as

ordinary good business practice for its type of business would make advisable

and shall provide VTAL with evidence of this coverage.  For purposes of this Agreement, a “SNT

Infringement” means (a) infringement by a Product of a third party’s patent,

copyright or trademark except to VTAL must indemnify SNT with respect thereto

under Article 6.1 or (b) provision by SNT of a misappropriated trade

secret of a third party for incorporation into a Product.

6.3           Procedure.  If a claim by a third party is made and a

party (the “Indemnitee”) intends to claim indemnification under this Article 6,

the Indemnitee shall promptly notify the other party (the “Indemnitor”) in

writing of any claim in respect of which the Indemnitee or its Affiliates and

any of their respective directors, officers, employees, shareholders or

distributors intends to claim such indemnification.  If the Indemnitor accepts liability for indemnifying Indemnitee

hereunder, Indemnitor shall have sole control of the defense and/or settlement

thereof; provided that the Indemnitee may participate in any such proceeding

with counsel of its choice at its own expense. 

The indemnity agreement in this Article 6 shall not apply to amounts

paid in settlement 

 

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of any

Indemnifiable Losses if such settlement is effected without the consent of the

Indemnitor, which consent shall not be withheld unreasonably.  The failure to deliver written notice to the

Indemnitor within a reasonable time after the commencement of any such action,

if adversely prejudicial to its ability to defend such action, shall relieve

such Indemnitor of any liability to the Indemnitee under this Article 6 but the

omission to so deliver written notice to the Indemnitor shall not relieve the

Indemnitor of any liability that it may otherwise have to any Indemnitee other

than under this Article 6.  If the

Indemnitor fails to provide defense of the claim, and diligently defend or

settle the same after receipt of notice from Indemnitee of, and a reasonable

opportunity to cure, such failure, the Indemnitee may defend or settle the

claim without prejudice to its rights to indemnification hereunder, provided

that the Indemnitee does so diligently and in good faith and further does not

enter into any settlement or agree to any stipulation that would adversely

affect the rights of the Indemnitor or impose any additional obligation on the

Indemnitor without the Indemnitor’s prior written consent (which consent will

not be unreasonably withheld).  The Indemnitee

under this Article 6, its employees and agents, shall cooperate fully with the

Indemnitor and its legal representatives and provide full information in the

investigation of any Indemnifiable Losses covered by this indemnification.

6.4           If any Product should become the

subject of any claim, suit or proceeding for infringement of any third party

United States or Canadian patent or any copyright, trade secret or trademark,

or in the event of any adjudication that any Product infringes upon any third

party United States or Canadian patent, or any copyright, trade secret or

trademark, or VTAL reasonably believes that either such event is likely to

occur, VTAL shall consult with SNT and, at VTAL’s expense and at its option,

shall secure for SNT and its sublicensee’s the right to continue using such

Product; replace or modify the Product to make it noninfringing in a manner

reasonable acceptable to SNT; or, if commercially reasonable efforts to achieve

the foregoing are unsuccessful, VTAL shall have the right to terminate the

license for such Product and pay to SNT an amount equal to the fee paid for it

under the applicable Product Plan, less charges for the previous usage of the

Product based on a ten year amortization from the date such fee was paid.

 

ARTICLE 7

TERM AND TERMINATION

 

7.1           Term.  This Agreement shall take effect as of the

date hereof and shall continue in force until the fifth (5th)

anniversary of the date hereof.  Nothing

contained in this Agreement will be interpreted as requiring either party to

renew or extend this Agreement beyond the initial term hereof.

7.2           Termination.  Notwithstanding the provisions of Article

7.1 above, this Agreement may be terminated in accordance with the following

provisions:

(a)           A party may terminate this Agreement

by giving notice in writing to the other party if the other party is in breach

of any material representation, warranty or covenant of this Agreement and,

except as otherwise provided herein, shall have failed to cure such breach

within 90 days after receipt of written notice thereof from the first party;

(b)           Either party may terminate this

Agreement if all or substantially all of either party’s assets are acquired or

if all or substantially all of either party’s 

 

11

 

business

that relates to this Agreement are acquired, upon twelve (12) months prior

written notice to the other party, which notice must be given within 90 days

after it learns of such acquisition; and

(c)           A party may terminate this Agreement

at any time by giving notice in writing to the other party, which notice shall

be effective upon dispatch, should the other party become insolvent, make an

assignment for the benefit of creditors, go into liquidation or receivership or

otherwise lose legal control of its business.

7.3           Rights and Obligations on

Termination.  In the event of

termination of this Agreement for any reason, the parties shall have the

following rights and obligations:

(a)           Termination of this Agreement shall

not release either party from the obligation to make payment of all amounts

previously due and payable.

(b)           The terminating party shall have the

right, at its option, to cancel any or all purchase orders that provide for

delivery after the effective date of termination.

(c)           Upon termination of this Agreement

for any reason, nothing herein shall be construed to release either party from

any obligation that matured prior to the effective date of such termination.

(d)           Upon any termination of this

Agreement, the parties will return and deliver to the other party all of such

party’s materials and documents developed during the performance of this

Agreement provided that a party may retain one copy of such material and

documents in the possession of its law department or with its lawyers for the

sole and only purpose of determining the party’s obligation of confidentiality

hereunder.

(e)           Upon any termination of this

Agreement by SNT, SNT may nevertheless : a) continue making, using and

sublicensing Products for a period of eighteen (18) months following

termination provided SNT continues to pay VTAL the royalties or transfer cost

due under Article 4 and b) service and support customers that have licensed

Products during or prior to the eighteen (18) month period, including in the

case of the VRE through use of any API licensed under the applicable product

plan, provided that the foregoing shall not be deemed to obligate VTAL to

provide to SNT source code for any Product.

(f)            The parties’ obligations pursuant to

Article 4, Article 5, Article 6, Article 7.3, Article 8, Article 9 and Article

10 hereof and any and all other terms and provisions hereof intended to be

observed and performed by the parties after the termination hereof, shall

survive termination of this Agreement. 

All other provisions of this Agreement shall terminate upon termination

of this Agreement.

 

12

 

ARTICLE 8

INTELLECTUAL PROPERTY AND CONFIDENTIALITY

 

8.1           Ownership of Intellectual Property.  All Intellectual Property developed solely

by the employees or agents of one party, including but not limited to all

designs and specifications for Products and all manufacturing processes

specific to Products, shall be owned by the inventing party.  Each work of authorship created by employees

of, or consultants or agents working for each party in connection with such

party’s development of Products under this Agreement shall be considered a

“work for hire” and all copyrights thereto shall be owned by such party.  Each

Invention made jointly by VTAL and SNT employees shall be jointly owned by VTAL

and SNT.  VTAL or SNT may elect to file

a joint patent or other Intellectual Property application(s) thereon and shall

notify the other party promptly upon making this election.  The parties agree that each party’s

employees necessary to execute, file and prosecute such patent or other IP

applications will fully cooperate in the preparation, filing and prosecution of

such patent applications.  Both VTAL and

SNT agree to cooperate in the filing and prosecution of any and all patent

and/or other Intellectual Property applications jointly owned by VTAL and SNT.

8.2           Trademarks.  No licenses to trademarks or service marks

of a party are granted hereby.

8.3           Transfer of Know-How.  Except as expressly provided in this

Agreement, neither party shall be required to transfer confidential and

proprietary know-how owned by or licensed to such party to the other party.

8.4           VTAL Property.  All specifications, drawings, samples,

designs, software, firmware, programs, formulas, and other items and information,

including, without limitations improvements to the Product furnished by VTAL to

SNT in connection with this Agreement shall only be used in the performance of

work for VTAL and shall remain the property of VTAL; and together with all

copies thereof shall be disposed of or returned in good repair, normal wear and

tear excepted, by SNT to VTAL at VTAL’s direction and expense upon VTAL’s

request.  SNT assumes risk of loss and

damage to said items while in its possession or under its control.  SNT shall notify VTAL promptly whenever any

items of VTAL’s tangible property are in need of repair or replacement.  VTAL’s property shall be marked or otherwise

adequately identified by SNT as property of VTAL for use only under this

Agreement and shall be safely stored. 

SNT waives any right it may have in law or equity to withhold VTAL’s

property.

 

8.5           SNT Property.  All specifications, drawings, samples,

designs, software, firmware, programs, formulae, and other items and

information, including, without limitations improvements to the Product

furnished by SNT to VTAL in connection with this Agreement shall only be used

in the performance of work for SNT and shall remain the property of SNT; and

together with all copies thereof shall be disposed of or returned in good

repair, normal wear and tear excepted, by VTAL to SNT at SNT’s direction and

expense upon SNT’s request.  VTAL

assumes risk of loss and damage to said items while in its possession or under

its control.  VTAL shall notify SNT

promptly whenever any items of SNT’s tangible property are in need of repair or

replacement.  SNT’s property shall be

marked or otherwise adequately identified by VTAL as property of SNT for use

only under this Agreement and shall be safely stored.  VTAL waives any right it may have in law or equity to withhold

SNT’s property.

 

13

 

8.6           Confidentiality.  With respect to any Confidential Information

of a party to which the other party gains access in connection with this

Agreement, the following terms and conditions shall apply:

(a)           Each party shall maintain all

Confidential Information of the other in secrecy and confidence;

(b)           Each party expressly agrees that, in

each instance, without the other party’s prior written consent, it shall not

disclose or divulge any of the Confidential Information of the other party to

any third party or to that party’s employees unless they are bound to maintain

it in confidence and use it only in furtherance hereof;

(c)           Each party expressly agrees that, in

each instance, without the other party’s prior written consent, it shall not

use the Confidential Information of the other party for any purpose other than

in connection with the transactions contemplated hereby;

(d)           Each party expressly agrees that, in each

instance, without the other party’s prior written consent, it shall not make

any copies of, excerpts from or in any way reproduce any of the Confidential

Information of the other party, except as may be specifically required in

furtherance of the transactions contemplated hereby; Where reproductions are

permitted in accordance with this Agreement or such consent, each reproduction

shall be appropriately marked to show that it contains Confidential Information

of the other party and shall contain all applicable copyright notices and

proprietary legends, if any.

(e)           Each party retains all worldwide

rights, title and interest in and to its own Confidential Information subject

to any licenses granted in accordance herewith;

(f)            Each party shall return any and all

documents and other materials, regardless of media, evidencing or embodying the

Confidential Information of the other party upon the written request of such

other party, subject to any licenses hereunder provided that a party may retain

one copy of such material and documents in the possession of its law department

or with its lawyers for the sole and only purpose of determining the party’s

obligation with respect to the 

Confidential Information hereunder.

(g)           The foregoing obligations with

respect to a particular item of Confidential Information shall survive

termination of this Agreement for any reason and until five (5) years after the

date such item of Confidential Information was first received by the other

party; provided that this five (5) year limitation shall not apply to the

software, which shall remain Confidential Information so long as it falls

within the definition thereof.

 

14

 

ARTICLE 9

FORCE MAJEURE

 

9.1           Notice of Force Majeure.  Upon giving notice to the other party, a

party affected by an event of Force Majeure shall be released without any

liability on its part from the performance of its obligations under this

Agreement, except for the obligation to pay any amounts due and owing hereunder,

but only to the extent and only for the period that its performance of such

obligations is prevented by the event of Force Majeure.

9.2           Suspension of Performance.  During the period that the performance by

one of the parties of its obligations under this Agreement has been suspended

by reason of an event of Force Majeure, the other party may likewise suspend

the performance of all or part of its obligations hereunder (except for the

obligation to pay any amounts due and owing hereunder) to the extent that such

suspension is commercially reasonable.

ARTICLE 10

MISCELLANEOUS

10.1         Successors and Assigns.  This Agreement shall be binding upon and

inure to the benefit of the parties hereto and the successors or assigns of the

parties hereto; provided, that the rights and obligations of either party

herein may not be assigned except to any person who succeeds to substantially

all of the assets and business of that party to which this Agreement relates.

10.2         Complete Agreement.  This Agreement and the Schedules and

Exhibits hereto and thereto, constitute the entire agreement between the

parties hereto with respect to the subject matter hereof and supersede all

prior agreements whether written or oral relating hereto.

10.3         Governing Law.  This Agreement shall be governed by and

interpreted in accordance with the laws of the State of Minnesota, including

all matters of construction, validity, performance and enforcement, without

giving effect to principles of conflict of laws.

10.4         Waiver, Discharge, Amendment, Etc.  The failure of any party hereto to enforce

at any time any of the provisions of this Agreement shall not, absent an

express written waiver signed by the party making such waiver specifying the

provision being waived, be construed to be a waiver of any such provision, nor

in any way to affect the validity of this Agreement or any part thereof or the

right of the party thereafter to enforce each and every such provision.  No waiver of any breach of this Agreement shall

be held to be a waiver of any other or subsequent breach.  Any amendment to this Agreement shall be in

writing and signed by the parties hereto.

10.5         Notices.  All notices or other communications to a

party required or permitted hereunder shall be in writing and shall be

delivered personally or by facsimile (receipt confirmed electronically) to such

party (or, in the case of an entity, to an executive officer of such party) or

shall be sent by a reputable express delivery service or by certified mail,

postage prepaid with return receipt requested, addressed as follows:

 

15

 

1.             if

to SNT, to:

 

SNT, Inc.

Corporate Center

7000 Central

Avenue N.E.

Minneapolis,

MN  55432

Attention:  General Counsel

FAX (763) 505-2350

 

with a copy to:

 

SNT, Inc.

826 Coal Creek Circle

Louisville, CO 80027

Attention: 

Business Development Officer

FAX (720) 890-3500

 

2.             if to VTAL, to:

 

Vital Images, Inc.

330 Fernbrook Lane North, Suite 200

Plymouth, MN 

55447

Attention:  Jay

Miller

FAX (763) 852-4110

 

with a copy to:

 

Oppenheimer Wolff & Donnelly

Plaza VII, Suite 3300

45 South Seventh Street

Minneapolis, MN 55402 - 1609

Attention: 

Dennis P. Whelpley

FAX (612) 607-7797

 

10.6         Changes to Notice.  Any party may change the recipient and/or

mailing address of Article 10.6 by notice to all other parties given in the

manner herein prescribed.  All notices

shall be deemed given on the day when actually delivered as provided above (if

delivered personally or by facsimile) or on the day shown on the return receipt

(if delivered by mail or delivery service).

10.7         Expenses.  Except as expressly provided herein, VTAL

and SNT shall each pay their own expenses incident to this Agreement and the

preparation for, and consummation of, the transactions provided for herein.

10.8         Titles and Headings; Construction.  The titles and headings to the Articles and

Articles herein are inserted for the convenience of reference only and are not

intended to be a part of or to affect the meaning or interpretation of this

Agreement.  This Agreement shall be

construed

 

16

without regard to any

presumption or other rule requiring construction hereof against the party

causing this Agreement to be drafted.

 

10.9         Severability.  If any provision of this Agreement is held

invalid, illegal or unenforceable, such provision shall be enforced to the

maximum extent permissible and the remaining provisions shall nonetheless be

enforceable according to their terms.

10.10       Relationship.  This Agreement does not make either party

the employee, agent or legal representative of the other for any purpose

whatsoever.  Neither party is granted

any right or authority to assume or to create any obligation or responsibility,

express or implied, on behalf of or in the name of the other party.  In fulfilling its obligations pursuant to

this Agreement, each party shall be acting as an independent contractor.

10.11       Benefit.  Nothing in this Agreement, expressed or implied, is intended to

confer on any person other than the parties hereto or their respective

successors or assigns, any rights, remedies, obligations or liabilities under

or by reason of this Agreement.

10.12       Counterparts.  This Agreement may be executed in any number

of counterparts, each of which shall be deemed as original and all of which

together shall constitute one instrument.

10.13       Execution of Further Documents.  Each party agrees to execute and deliver

without further consideration any further applications, licenses, assignments

or other documents, and to perform such other lawful acts as the other party

may reasonably require to fully secure and/or evidence the rights or interests

herein.

10.14       Dispute Resolution.  Any dispute arising out of or relating to

this Agreement, including any alleged breach or fraud in the inducement hereof,

shall be resolved pursuant to binding arbitration under the commercial

arbitration rules of the American Arbitration Association in accordance with

Appendix B hereto.  The arbitration

shall take place in Minneapolis, Minnesota. 

The results of such arbitration proceedings shall be binding upon the

parties hereto, and judgment may entered upon the arbitration award in any

court having jurisdiction thereof. 

Notwithstanding the foregoing, either party may seek interim injunctive

relief from any court of competent jurisdiction.

10.15       Public Announcement.  In the event any party proposes to issue any

press release or public announcement concerning any provisions of this

Agreement or the transactions contemplated hereby, such party shall so advise

the other parties hereto, and the parties shall thereafter use their best

efforts to cause a mutually agreeable release or announcement to be

issued.  Neither party will publicly

disclose or divulge any provisions of this Agreement or the transactions contemplated

hereby without the other party’s written consent, except as may be required by

applicable law or stock exchange regulation, and except for communications to

such party’s employees or customers or investors or prospective investors

(subject to appropriate confidentiality obligations).

10.16       Compliance with Laws.  The parties, and any permitted sublicensees

of the parties, will comply with all applicable international, national, state,

regional and local laws and regulations, including all applicable import and

export control laws, in exercising their rights or performing their duties

under this Agreement.

 

17

 

IN WITNESS

WHEREOF, each of the parties has caused this Development and License Agreement

to be executed in the manner appropriate to each, as of the date first above

written.

 

	

  SURGICAL NAVIGATION TECHNOLOGIES, INC.

  	

   

  	

  VITAL IMAGES,

  INC.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  By: 

  	

   /s/Andrew M

  Weiss

  	

   

  	

  By:

  	

  /s/Albert Emola

  
	

  Its: 

  	

   Vice

  President & General Manager

  	

   

  	

  Its:

  	

  President & CEO

  
	

  Date: 

  	

   11/26/01

  	

   

  	

  Date:

  	

  11/21/01

  

 

Attachments:

Appendix A — Project Plan Template

Appendix B — Alternative Dispute Resolution Rules

 

18

 

APPENDIX A

 

PRODUCT PLAN UNDER

DEVELOPMENT AND LICENSE AGREEMENT BETWEEN SNT, INC. AND VITAL IMAGES, INC.

DATED NOVEMBER      , 2001

 

I.              DETAILED

DESCRIPTION OF PRODUCT

 

1.1           Product

Features/Specification.

 

1.2           Product Environment,

e.g., IGS O2, Windows® software platform or                    .

 

1.3           License Grant

 

II.            DEVELOPMENT PHASES

 

III.           MILESTONES AND

TARGET DATES

 

IV.           AMOUNTS TO BE PAID

 

4.1           Royalty

Payments.

 

4.2           Other

Payments and Expenses.

 

V.                                     REQUIRED TECHNICAL SUPPORT

 

VI.                                 REGULATORY REQUIREMENTS

 

VII.          MARKETING.

 

7.1           Trademarks

 

7.2           Exclusivity

 

VIII         TRAINING

 

IX            DOCUMENTATION.

 

X.            WARRANTY.

 

XI.           MAINTENANCE

 

XII.         MISCELLANEOUS

 

THE UNDERSIGNED

ACKNOWLEDGES THE FOREGOING PRODUCT PLAN.

 

	

  SURGICAL NAVIGATION TECHNOLOGIES, INC.

  	

   

  	

  VITAL IMAGES,

  INC.

  

 

A-1

 

APPENDIX

B

 

ALTERNATIVE

DISPUTE RESOLUTION

 

Negotiations.  If any dispute arises between VTAL and SNT

with respect to the Development and License Agreement (the “Agreement”),

including any alleged breach or fraud in the inducement thereof, either party

may, by written notice to the other party, have such dispute referred to their

respective employees designated below or their successors for attempted

resolution by good faith negotiations within forty-five (45) days after such

written notice is received.  Such designated

employees are as follows:

 

For

VTAL - the President of VTAL, or his or her designee; and

 

For

SNT — the President of SNT’s business unit to which this Agreement relates, or

his or her designee.

 

Any settlement

reached by the parties under this Article 1 shall not be binding until reduced

to writing and signed by the above-specified employees of SNT and VTAL.  When reduced to writing, such settlement

agreement shall supersede all other agreements, written or oral, to the extent

such agreements specifically pertain to the matters so settled.

 

If the

above-designated employees are unable to resolve such dispute within such

forty-five (45) day period, any party may invoke the provisions below.

 

Arbitration.  All claims, disputes, controversies, and other

matters in question arising out of or relating to the Agreements or to the

alleged breach thereof shall be settled by negotiation between the parties as

described above or, if such negotiation is unsuccessful, by binding arbitration

in accordance with procedures set forth below.

 

Notice.  Notice of demand for binding arbitration

shall be given in writing to the other party pursuant to the Agreements.  In no event may a notice of demand of any

kind be filed more than one (1) year after the date the claim, dispute,

controversy, or other matter in question was first asserted in writing to the

other party as set forth above, and if such demand is not timely filed, the

claim, dispute, controversy, or other matter in question referenced in the

notice of dispute given as set forth above shall be deemed released, waived,

barred, and unenforceable for all time, and barred as if by statute of

limitations.

 

Binding Arbitration.  Upon filing of a notice of demand for

binding arbitration by either party, arbitration shall be commenced and

conducted as follows:

 

Arbitrators.  All claims, disputes, controversies, and

other matters (collectively “matters”) in question shall be referred to and

decided and settled by a panel of three arbitrators, one selected by each of

the parties and the third by the two arbitrators so selected.  The third shall be a former judge of one of

the state or U.S. courts of general jurisdiction or Courts of Appeals, or such

other classes of persons as the parties may agree.  Selection of the arbitrators to be selected by the parties shall

be made within ten (10) business days after the date of filing of a demand for

arbitration, and the two 

 

Appendix

B-1

 

arbitrators

so appointed will appoint the third within ten (10) business days following

their appointment.

 

Cost

of Arbitration.  The cost of

arbitration proceedings, including without limitation the arbitrators’

compensation and expenses, hearing room charges, court reporter transcript

charges etc., shall be borne by the parties equally or otherwise as the

arbitrators may determine.  The

arbitrators may award the prevailing party its reasonable attorneys’ fees and

costs incurred in connection with the arbitration.  The arbitrators are specifically instructed to award attorneys’

fees for instances of abuse of the discovery process.

 

Location

of Proceedings.  The

arbitration proceedings shall be held at a location selected by the parties, or

selected by the arbitrators if the parties are unable to agree.

 

Pre-hearing

Discovery.  The parties

shall have the right to conduct and enforce pre-hearing discovery in accordance

with the then current United States Federal Rules of Civil Procedure, subject

to these limitations:

 

Each party may depose the other party’s expert

witnesses who will be called to testify at the hearing, plus two fact witnesses

without regard to whether they will be called to testify (each party will be

entitled to a total of not more than 24 hours of depositions of the other

party’s witnesses); and

 

Document discovery and other discovery shall be under

the control of and enforceable by the arbitrators.

 

Discovery disputes shall be decided by the

arbitrators.  The arbitrators are

empowered:

 

to

issue subpoenas to compel pre-hearing document or deposition discovery;

 

to

enforce the discovery rights and obligations of the parties; and

 

to otherwise to control the scheduling and conduct of

the proceedings.

 

Notwithstanding any contrary foregoing provisions, the

arbitrators shall have the power and authority to, and to the fullest extent

practicable shall, abbreviate arbitration discovery in a manner which is fair

to all parties in order to expedite the conclusion of each alternative dispute

resolution proceeding.

 

Pre-hearing

Conference.  Within fifteen

(15) days after selection of the third arbitrator or as soon thereafter as is

mutually convenient to the arbitrators, the arbitrators shall hold a

pre-hearing conference to establish schedules for completion of discovery, for

exchange of exhibit and witness lists, for arbitration briefs, for the hearing,

and to decide procedural matters and all other questions that may be presented.

 

Hearing

Procedures.  The hearing

shall be conducted to preserve its privacy and to allow reasonable procedural due

process.  Rules of evidence need not be

strictly followed, and the hearing shall be streamlined as follows:

 

Appendix B-2

 

 

Documents

shall be self-authenticating, subject to valid objection by the opposing party;

 

Expert reports, witness biographies, depositions, and

affidavits may be utilized, subject to the opponent’s right of a live

cross-examination of the witness in person;

 

Charts, graphs, and summaries shall be utilized to

present voluminous data, provided (i) that the underlying data was made

available to the opposing party thirty (30) days prior to the hearing, and (ii)

that the preparer of each chart, graph, or summary is available for explanation

and live cross-examination in person;

 

The hearing should be held on consecutive business

days without interruption to the maximum extent practicable; and

 

The arbitrators shall establish all other procedural

rules for the conduct of the arbitration in accordance with the rules of

arbitration of the Center for Public Resources.

 

Governing

Law.  This arbitration provision

shall be governed by, and all rights and obligations specifically enforceable

under and pursuant to, the Federal Arbitration Act (9 U.S.C. § 1, et  seq.).

 

Consolidation.  No arbitration shall include, by

consolidation, joinder, or in any other manner, any additional person not a

party to this Agreement (other than Affiliates of any such party, which

Affiliates may be included in the arbitration), except by written consent of

both parties containing a specific reference to this Agreement.

 

Award.  The arbitrators are empowered to render an

award of general compensatory damages and equitable relief (including, without

limitation, injunctive relief), but are not empowered to award exemplary, special

or punitive damages.  The award rendered

by the arbitrators (1) shall be final; (2) shall not constitute a basis for

collateral estoppel as to any issue; and (3) shall not be subject to vacation

or modification.

 

Confidentiality.  The parties hereto will maintain the

substance of any proceedings hereunder in confidence and the arbitrators, prior

to any proceedings hereunder, will sign an agreement whereby the arbitrators

agree to keep the substance of any proceedings hereunder in confidence.

 

Language.  All arbitration proceedings hereunder shall

be conducted in the English language and all documents submitted in connection

with the arbitration proceedings hereunder shall be in English.

 

Appendix

B-3EMPLOYMENT AND NONCOMPETITION AGREEMENT

 

 

 

 

EMPLOYMENT

AND NONCOMPETITION AGREEMENT

THIS EMPLOYMENT AND NONCOMPETITION AGREEMENT (the “Agreement”) is made

and entered into as of March 4, 2002, by and among Cybex Computer Products

Corporation (dba Avocent-Huntsville), an Alabama corporation (“Cybex” or

“Employer”), Avocent Corporation, a Delaware corporation, and John R. Cooper  (the

“Employee”).

RECITALS

WHEREAS, Avocent Corporation and its affiliates (collectively referred

to in this Agreement as “Avocent”) are engaged in the business of designing, manufacturing, and selling connectivity

solutions for enterprise data centers, service providers, and financial

institutions; and

WHEREAS, Avocent and Employer desire to employ

Employee as President and Chief Executive Officer and Employee is willing to

accept such employment on the terms and subject to the conditions set forth in

this Agreement.

AGREEMENT

THE PARTIES HERETO AGREE AS FOLLOWS:

1.             DUTIES.  During the term of this Agreement, the

Employee agrees to be employed by Employer and to serve Avocent as its

President and Chief Executive Officer. 

The Employee shall devote such of his business time, energy, and skill

to the affairs of Avocent and Employer as shall be necessary to perform the

duties of President and Chief Executive Officer.  The Employee shall report only to the Board of Directors of

Avocent Corporation and at all times during the term of this Agreement, the

Employee shall have powers and duties at least commensurate with his position

as President and Chief Executive Officer of Avocent Corporation.

2.             TERM OF EMPLOYMENT.

2.1           DEFINITIONS.  For purposes of this Agreement the following

terms shall have the following meanings:

(a)           “TERMINATION FOR CAUSE” shall mean

termination by the Employer of the Employee’s employment by the Employer by reason

of the Employee’s willful dishonesty towards, fraud upon, or deliberate injury

or attempted injury to, the Employer or Avocent or by reason of the Employee’s

willful material breach of this Agreement which has resulted in material injury

to the Employer or Avocent.

(b)           “TERMINATIONS OTHER THAN FOR CAUSE”

shall mean termination by the Employer or Avocent Corporation of the Employee’s

employment by the Employer (other than in a Termination for Cause) and shall

include any constructive termination

 

1

 of the

Employee’s employment by reason of material breach of this Agreement by the

Employer or Avocent, such constructive termination to be effective upon thirty

(30) days written notice from the Employee to the Employer of such constructive

termination.

(c)           “VOLUNTARY TERMINATION” shall mean

termination by the Employee of the Employee’s employment by the Employer other

than (i) constructive termination as described in subsection 2.1(b),

(ii) “Termination Upon a Change in Control” as described in Section 2.1(e), and

(iii) termination by reason of the Employee’s disability or death as

described in Sections 2.5 and 2.6.

(d)           “TERMINATION UPON A CHANGE IN

CONTROL” shall mean (i) a termination by the Employee of the Employee’s

employment with the Employer or services to Avocent within six (6) months

following any “Change in Control” or (ii) any termination by the Employer or

Avocent Corporation of the Employee’s employment by the Employer (other than a

Termination for Cause) within eighteen (18) months following any “Change in

Control.”

(e)           “CHANGE IN CONTROL” shall mean, after

the date of this Agreement, any one of the following events:

(i)    Any person (other than Avocent) acquires

beneficial ownership of Employer’s or Avocent Corporation’s securities and is

or thereby becomes a beneficial owner of securities entitling such person to

exercise twenty-five percent (25%) or more of the combined voting power of

Employer’s or Avocent Corporation’s then outstanding stock.  For purposes of this Agreement, “beneficial

ownership” shall be determined in accordance with Regulation 13D under the

Securities Exchange Act of 1934, or any similar successor regulation or rule;

and the term “person” shall include any natural person, corporation,

partnership, trust or association, or any group or combination thereof, whose

ownership of Employer’s or Avocent Corporation’s securities would be required

to be reported under such Regulation 13D, or any similar successor

regulation or rule.

(ii)   Within any twenty-four (24) month period, the

individuals who were Directors of Avocent Corporation at the beginning of any

such period, together with any other Directors first elected as directors of

Avocent Corporation pursuant to nominations approved or ratified by at least

two-thirds (2/3) of the Directors in office immediately prior to any such

election, cease to constitute a majority of the Board of Directors of Avocent

Corporation.

(iii)  Avocent Corporation’s stockholders approve:

(1)           any consolidation or merger of

Avocent Corporation in which Avocent Corporation is not the continuing or

surviving corporation or pursuant to which shares of Avocent Corporation common

stock would be converted into cash, securities or other property, other than a

merger or consolidation of Avocent Corporation in which the holders of Avocent

Corporation’s common stock immediately prior to the merger or consolidation

have substantially the same proportionate ownership and voting control of the

surviving corporation immediately after the merger or consolidation; or

 

2

(2)           any

sale, lease, exchange, liquidation or other transfer (in one transaction or a

series of transactions) of all or substantially all of the assets of Avocent

Corporation.

Notwithstanding subparagraphs (e)(iii)(1) and

(e)(iii)(2) above, the term “Change in Control” shall not include a

consolidation, merger, or other reorganization if upon consummation of such

transaction all of the outstanding voting stock of Avocent Corporation is

owned, directly or indirectly, by a holding company, and the holders of Avocent

Corporation’s common stock immediately prior to the transaction have

substantially the same proportionate ownership and voting control of such

holding company after such transaction.

2.2           BASIC TERM.  The term of employment of the Employee by the Employer shall be

for the period beginning on March 4, 2002, and ending on December 31, 2004,

unless terminated earlier pursuant to this Section 2.  At any time before December 31, 2004, the Employer and the

Employee may by mutual written agreement extend the Employee’s employment under

the terms of this Agreement for such additional periods as they may agree.

2.3           TERMINATION FOR CAUSE.  Termination For Cause may be effected by the

Employer at any time during the term of this Agreement and shall be effected by

thirty (30) days written notification to the Employee from the Board of

Directors of Avocent Corporation stating the reason for termination.  Upon Termination For Cause, the Employee

immediately shall be paid all accrued salary, bonus compensation to the extent

earned, vested deferred compensation, if any (other than pension plan or profit

sharing plan benefits which will be paid in accordance with the applicable

plan), any benefits under any plans of Employer or Avocent in which the

Employee is a participant to the full extent of the Employee’s rights under

such plans, accrued vacation pay and any appropriate business expenses incurred

by the Employee in connection with his duties hereunder, all to the date of

termination, but the Employee shall not be paid any other compensation or

reimbursement of any kind, including without limitation, severance

compensation.

2.4           TERMINATION OTHER THAN FOR

CAUSE.  Notwithstanding anything else in

this Agreement, the Employer may effect a Termination Other Than For Cause at

any time upon giving thirty (30) days written notice to the Employee of such

termination.  Upon any Termination Other

Than For Cause, the Employee shall immediately be paid all accrued salary,

bonus compensation to the extent earned, vested deferred compensation, if any

(other than pension plan or profit sharing plan benefits which will be paid in

accordance with the applicable plan), any benefits under any plans of Employer

or Avocent in which the Employee is a participant to the full extent of the

Employee’s rights under such plans, accrued vacation pay and any appropriate

business expenses incurred by the Employee in connection with his duties

hereunder, all to the date of termination, and all severance compensation

provided in Section 4.2, but no other compensation or reimbursement of any

kind.

2.5           TERMINATION BY REASON OF

DISABILITY.  If, during the term of this

Agreement, the Employee, in the reasonable judgment of the Board of Directors

of Avocent, has failed to perform his duties under this Agreement on account of

illness or physical or mental incapacity, and such illness or incapacity

continues for a period of more than six (6) consecutive months, the Employer

shall have the right to terminate the Employee’s employment hereunder by

 

3

delivery of written notice to the Employee at any time

after such six month period and payment to the Employee of all accrued salary,

bonus compensation to the extent earned, additional bonus compensation in an

amount equal to the average annual bonus earned by the Employee as an employee

of Avocent and its affiliates in the two (2) years immediately preceding the

date of termination, vested deferred compensation, if any (other than pension

plan or profit sharing plan benefits which will be paid in accordance with the

applicable plan), any benefits under any plans of Employer or Avocent in which

the Employee is a participant to the full extent of the Employee’s rights under

such plans (including having the vesting of any awards granted to the Employee

under any Cybex or Avocent stock option plans fully accelerated), accrued

vacation pay and any appropriate business expenses incurred by the Employee in

connection with his duties hereunder, all to the date of termination, with the

exception of medical and dental benefits which shall continue through the

expiration of this Agreement, but the Employee shall not be paid any other compensation

or reimbursement of any kind, including without limitation, severance

compensation.

2.6           TERMINATION BY REASON OF DEATH.  In the event of the Employee’s death during

the term of this Agreement, the Employee’s employment shall be deemed to have

terminated as of the last day of the month during which his death occurs and

the Employer shall pay to his estate or such beneficiaries as the Employee may

from time to time designate all accrued salary, bonus compensation to the

extent earned, vested deferred compensation, if any (other than pension plan or

profit sharing plan benefits which will be paid in accordance with the

applicable plan), any benefits under any plans of Employer or Avocent in which

the Employee is a participant to the full extent of the Employee’s rights under

such plans (including having the vesting of any awards granted to the Employee

under any Cybex or Avocent stock option plans fully accelerated), accrued

vacation pay and any appropriate business expenses incurred by the Employee in

connection with his duties hereunder, all to the date of termination, but the

Employee’s estate shall not be paid any other compensation or reimbursement of

any kind, including without limitation, severance compensation.

2.7           VOLUNTARY TERMINATION.  Notwithstanding anything else in this

Agreement, the Employee may effect a Voluntary Termination at any time upon

giving thirty (30) days written notice to the Employer of such

termination.  In the event of a

Voluntary Termination, the Employer shall immediately pay all accrued salary,

bonus compensation to the extent earned, vested deferred compensation, if any

(other than pension plan or profit sharing plan benefits which will be paid in

accordance with the applicable plan), any benefits under any plans of Employer

or Avocent in which the Employee is a participant to the full extent of the

Employee’s rights under such plans, accrued vacation pay and any appropriate

business expenses incurred by the Employee in connection with his duties

hereunder, all to the date of termination, but no other compensation or

reimbursement of any kind, including without limitation, severance

compensation.

2.8           TERMINATION UPON A CHANGE IN

CONTROL.  In the event of a Termination

Upon a Change in Control, the Employee shall immediately be paid all accrued

salary, bonus compensation to the extent earned, vested deferred compensation,

if any (other than pension plan or profit sharing plan benefits which will be

paid in accordance with the applicable plan), any benefits under any plans of Employer

or Avocent in which the Employee is a participant to the full extent of the

Employee’s rights under such plans (including having the 

 

4

vesting of any awards granted to the Employee under

any Cybex or Avocent stock option plans fully accelerated), accrued vacation

pay and any appropriate business expenses incurred by the Employee in

connection with his duties hereunder, all to the date of termination, and all

severance compensation provided in Section 4.1, but no other compensation

or reimbursement of any kind.

3.     SALARY, BENEFITS AND BONUS COMPENSATION.

3.1           BASE SALARY. 

Effective March 4, 2002, as payment for the services to be rendered by

the Employee as provided in Section 1 and subject to the terms and

conditions of Section 2, the Employer agrees to pay to the Employee a

“Base Salary” at the rate of $300,000 per annum, payable in equal bi–weekly

installments.  The Base Salary for each

calendar year (or proration thereof) beginning January 1, 2003  shall

be determined by the Board of Directors of Avocent Corporation upon a

recommendation of the Compensation

Committee of Avocent Corporation (the “Compensation Committee”), which

shall authorize an increase in the Employee’s Base Salary in an amount which,

at a minimum, shall be equal to the cumulative cost-of-living increment on the

Base Salary as reported in the “Consumer

Price Index, Huntsville, Alabama, All Items,” published by the U.S. Department

of Labor (using July 1, 2002, as the base date for computation prorated for any

partial year).  The Employee’s Base

Salary shall be reviewed annually by the Board of Directors and the

Compensation Committee of Avocent Corporation.

3.2           BONUSES.  The Employee shall be eligible to receive a bonus for each calendar

year (or portion thereof) during the term of this Agreement and any extensions

thereof, with the actual amount of any such bonus to be determined in the sole

discretion of the Board of Directors of Avocent Corporation based upon its

evaluation of the Employee’s performance during such year.  All such bonuses shall be payable during the

last month of the fiscal year or within forty-five (45) days after the end of

the fiscal year to which such bonus relates. 

All such bonuses shall be reviewed annually by the Compensation Committee of Avocent

Corporation.

3.3           ADDITIONAL BENEFITS.  During the term of this Agreement, the

Employee shall be entitled to the following fringe benefits:

(a)           THE EMPLOYEE BENEFITS.  The Employee shall be eligible to

participate in such of Avocent’s benefits and deferred compensation plans as

are now generally available or later made generally available to executive

officers of or Avocent, including, without limitation, stock option plans,

Section 401(k) plan, profit sharing plans, annual physical examinations, dental

and medical plans, personal catastrophe and disability insurance, retirement

plans and supplementary executive retirement plans, if any.  For purposes of establishing the length of service

under any benefit plans or programs of Cybex or Avocent, the Employee’s

employment with the Employer (or any successor) will be deemed to have

commenced on March 4, 2002.

(b)           VACATION.  The Employee shall be entitled to vacation in accordance with the

Avocent Corporation’s vacation policy but in no event less than four weeks

during each year of this Agreement.

(c)           LIFE INSURANCE.  For the term of this Agreement and any

extensions thereof, the Employer shall at its expense procure and keep in

effect term life insurance 

 

5

on the life of the Employee, payable to such

beneficiaries as the Employee may from time to time designate, in an aggregate

amount equal to the lesser of (i) three times the Employee’s Base Salary

or (ii) $500,000.  Such policy

shall be owned by the Employee or by any person or entity with an insurable

interest in the life of the Employee.

(d)        REIMBURSEMENT FOR EXPENSES. 

During the term of this Agreement, the Employer or Avocent Corporation

shall reimburse the Employee for reasonable and properly documented

out-of-pocket business and/or entertainment expenses incurred by the Employee

in connection with his duties under this Agreement in accordance with Avocent’s

standard reimbursement policies.

4.             SEVERANCE COMPENSATION.

4.1           SEVERANCE COMPENSATION IN THE EVENT

OF A TERMINATION UPON A CHANGE IN CONTROL. 

In the event of a Termination Upon a Change in Control, the Employee

shall be paid as severance compensation his Base Salary (at the rate payable at

the time of such termination) for a period of twelve (12) months from the date

of termination of this Agreement, on the dates specified in Section 3.1,

and an amount equal to the average annual bonus earned by the Employee as an

employee of Avocent Corporation and its affiliates in the two (2) years

immediately preceding the date of termination. 

Notwithstanding anything in this Section 4.1 to the contrary, the

Employee may in the Employee’s sole discretion, by delivery of a notice to the Employer

within thirty (30) days following a Termination Upon a Change in Control, elect

to receive from the Employer a lump sum severance payment by bank cashier’s

check equal to the present value of the flow of cash payments that would

otherwise be paid to the Employee pursuant to this Section 4.1.  Such present value shall be determined as of

the date of delivery of the notice of election by the Employee and shall be

based on a discount rate equal to the interest rate of 90–day U.S.

Treasury bills, as reported in The Wall Street Journal (or similar publication),

on the date of delivery of the election notice.  If the Employee elects to receive a lump sum severance payment,

Avocent Corporation shall cause the Employer to make such payment to the

Employee within ten (10) days following the date on which the Employee notifies

the Employer of the Employee’s election. 

The Employee shall also be entitled to have the vesting of any awards

granted to the Employee under any Cybex or Avocent stock option plans fully accelerated.  The Employee shall be provided with medical

plan benefits under any health plans of Avocent or Employer in which the

Employee is a participant to the full extent of the Employee’s rights under

such plans for a period of 12 months from the date of termination of this

Agreement.

4.2           SEVERANCE COMPENSATION IN THE EVENT

OF A TERMINATION OTHER THAN FOR CAUSE. 

In the event of a Termination Other Than for Cause, the Employee shall

be paid as severance compensation his Base Salary (at the rate payable at the

time of such termination) for a period of twelve (12) months from the date of

such termination, on the dates specified in Section 3.1, and an amount

equal to the average annual bonus earned by the Employee as an employee of

Avocent Corporation and its affiliates in the two (2) years immediately

preceding the date of termination. 

Notwithstanding anything in this Section 4.2 to the contrary, the

Employee may in the Employee’s sole discretion, by delivery of a notice to the

Employer within thirty (30) days following a Termination Other Than for Cause,

elect to receive from the Employer a lump sum severance payment by bank

cashier’s check equal 

 

6

to the present value of the flow of cash payments that

would otherwise be paid to the Employee pursuant to this Section 4.2.  Such present value shall be determined as of

the date of delivery of the notice of election by the Employee and shall be

based on a discount rate equal to the interest rate on 90–day U.S.

Treasury bills, as reported in The Wall Street Journal (or similar

publication), on the date of delivery of the election notice.  If the Employee elects to receive a lump sum

severance payment, Avocent Corporation shall cause the Employer to make such

payment to the Employee within ten (10) days following the date on which the

Employee notifies the Employer of the Employee’s election.  The Employee shall also be entitled to have

the vesting of any awards granted to the Employee under any Cybex or Avocent

stock option plans fully accelerated.

4.3           NO SEVERANCE COMPENSATION UNDER OTHER

TERMINATION.  In the event of a

Voluntary Termination, Termination For Cause, termination by reason of the

Employee’s disability pursuant to Section 2.5, or termination by reason of the

Employee’s death pursuant to Section 2.6, the Employee or his estate shall not

be paid any severance compensation.

5.             NON-COMPETITION

OBLIGATIONS.  Unless waived or reduced

by the Employer or Avocent, during the term of this Agreement and for a period

of thirty-six (36) months thereafter, the Employee will not, without the

Employer’s and Avocent Corporation’s prior written consent, directly or

indirectly, alone or as a partner, joint venturer, officer, director, employee,

consultant, agent, independent contractor or stockholder of any company or

business, engage in any business activity in the United States, Canada, or

Europe which is substantially similar to or in direct competition with any of

the business activities of or services provided by the Employer or Avocent at

such time.  Notwithstanding the

foregoing, the ownership by the Employee of not more than five percent (5%) of

the shares of stock of any corporation having a class of equity securities

actively traded on a national securities exchange or on The Nasdaq Stock Market

shall not be deemed, in and of itself, to violate the prohibitions of this

Section 5.

6.             MISCELLANEOUS.

6.1           PAYMENT OBLIGATIONS.  If the Employee is the prevailing party in

any litigation after a Change in Control brought to enforce or interpret any

provision contained herein, the Employer and Avocent Corporation, to the extent

permitted by applicable law and the Employer’s and Avocent Corporation’s

Articles of Incorporation and Bylaws, each hereby indemnifies the Employee for

the Employee’s reasonable attorneys’ fees and disbursements incurred in such

litigation.

6.2           GUARANTEE.  Avocent Corporation hereby unconditional and irrevocable

guarantees the payment obligations of the Employer under this Agreement,

including, without limitation, the Employer’s obligations under Section 5 or

Section 6.1 hereof.

6.3           WITHHOLDINGS.  All compensation and benefits to the

Employee hereunder shall be reduced by all federal, state, local, and other

withholdings and similar taxes and payments required by applicable law.

6.4           WAIVER.  The waiver of the breach of any provision of this Agreement shall

not operate or be construed as a waiver of any subsequent breach of the same or

other provision hereof.

 

7

            6.5           ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided herein, this

Agreement represents the entire understanding among the parties with respect to

the subject matter hereof, and this Agreement supersedes any and all prior

understandings, agreements, plans and negotiations, whether written or oral

with respect to the subject matter hereof,  and

any understandings, agreements or obligations respecting any past or future

compensation, bonuses, reimbursements or other payments to the Employee from

the Employer or Avocent Corporation.  All

modifications to the Agreement must be in writing and signed by the party

against whom enforcement of such modification is sought.

6.6           NOTICES.  All notices and other communications under this Agreement shall

be in writing and shall be given by hand delivery or first class mail,

certified or registered with return receipt requested, and shall be deemed to

have been duly given upon hand delivery to an officer of the Employer or the

Employee, as the case may be, or upon three (3) days after mailing to the

respective persons named below:

	

   

  	

  If to the Employer/Avocent:

  	

   

  	

  Avocent Corporation

  
	

   

  	

   

  	

   

  	

  4991 Corporate Drive

  
	

   

  	

   

  	

   

  	

  Huntsville, AL 35805

  
	

   

  	

   

  	

   

  	

  Attn:

  	

  Executive Vice

  President

  
	

   

  	

   

  	

   

  	

  Copy to:

  	

  General Counsel

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  If to the Employee:

  	

   

  	

  John R. Cooper

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
						

Any party may change such party’s address for notices

by notice duly given pursuant to this Section 6.6.

6.7           HEADINGS.  The Section headings herein are intended for reference and shall

not by themselves determine the construction or interpretation of this Agreement.

6.8           GOVERNING LAW; VENUE.  This Agreement shall be governed by and

construed in accordance with the laws of the State of Alabama.  The Employee, the Employer, and Avocent

Corporation each hereby expressly consents to the exclusive venue of the state

and federal courts located in Huntsville, Madison County, Alabama, for any

lawsuit arising from or relating to this Agreement.

6.9           ARBITRATION.  Any controversy or claim arising out of or

relating to this Agreement, or breach thereof, shall be settled by arbitration

in Huntsville, Alabama, in accordance with the Rules of the American

Arbitration Association, and judgment upon any proper award rendered by the

arbitrators may be entered in any court having jurisdiction thereof.  There shall be three (3) arbitrators, one

(1) to be chosen directly by each party at will, and the third arbitrator to be

selected by the two (2) arbitrators so chosen. 

To the extent permitted by the Rules of the American Arbitration Association,

the selected arbitrators may grant equitable relief.  Each party shall pay the fees of the arbitrator selected by him

and of his own attorneys, and the expenses of his witnesses and all other

expenses connected with the presentation of his case.  The cost of the 

 

8

arbitration including the cost of the record or

transcripts thereof, if any, administrative fees, and all other fees and costs

shall be borne equally by the parties.

6.10         SEVERABILITY.  If a court or other body of competent jurisdiction determines

that any provision of this Agreement is excessive in scope or otherwise invalid

or unenforceable, such provision shall be adjusted rather than voided, if

possible, and all other provisions of this Agreement shall be deemed valid and

enforceable to the extent possible.

6.11         SURVIVAL OF EMPLOYER’S

OBLIGATIONS.  The Employer’s and Avocent

Corporation’s obligations hereunder shall not be terminated by reason of any

liquidation, dissolution, bankruptcy, cessation of business, or similar event relating

to the Employer or Avocent Corporation. 

This Agreement shall not be terminated by any merger or consolidation or

other reorganization of the Employer or Avocent Corporation.  In the event any such merger, consolidation

or reorganization shall be accomplished by transfer of stock or by transfer of

assets or otherwise, the provisions of this Agreement shall be binding upon and

inure to the benefit of the surviving or resulting corporation or person.  This Agreement shall be binding upon and

inure to the benefit of the executors, administrators, heirs, successors and

assigns of the parties; provided, however, that except as herein expressly

provided, this Agreement shall not be assignable either by the Employer (except

to an affiliate of the Employer (including Avocent Corporation) in which event

the Employer shall remain liable if the affiliate fails to meet any obligations

to make payments or provide benefits or otherwise) or by the Employee.

6.12         COUNTERPARTS.  This Agreement may be executed in one or more counterparts, all

of which taken together shall constitute one and the same Agreement.

6.13         INDEMNIFICATION.  In addition to any rights to indemnification

to which the Employee is entitled to under the Employer’s Articles of

Incorporation and Bylaws, the Employer and Avocent Corporation shall indemnify

the Employee at all times during and after the term of this Agreement to the

maximum extent permitted under the corporation laws of the State of Delaware

and any other applicable state law, and shall pay the Employee’s expenses in

defending any civil or criminal action, suit, or proceeding in advance of the

final disposition of such action, suit, or proceeding, to the maximum extent

permitted under such applicable state laws.

6.14         INDEMNIFICATION FOR SECTION 4999 EXCISE

TAXES.  In the event that it shall be

determined that any payment or other benefit paid by the Employer or Avocent

Corporation to or for the benefit of the Employee under this Agreement or otherwise,

but determined without regard to any additional payments required under this

Amendment (the “Payments”) would be subject to the excise tax imposed by

Section 4999 of the Internal Revenue Code (the “Excise Tax”), then the Employer

and Avocent Corporation shall indemnify the Employee for such Excise Tax in

accordance with the following:

(a)   The Employee shall be entitled to receive an

additional payment from the Employer and/or Avocent Corporation equal to (i)

one hundred percent (100%) of any Excise Tax actually paid or finally or

payable by the Employee in connection with the Payments, plus (ii) an

additional payment in such amount that after all taxes, interest and 

 

9

penalties incurred in

connection with all payments under this Section 2(a), the Employee retains an

amount equal to one hundred percent (100%) of the Excise Tax.

(b)   All determinations required to be made under

this Section shall be made by the Avocent Corporation’s primary independent

public accounting firm, or any other nationally recognized accounting firm

reasonably acceptable to the Avocent Corporation and the Employee (the

“Accounting Firm”).  Avocent Corporation

shall cause the Accounting Firm to provide detailed supporting calculations of

its determinations to the Employer and the Employee.  All fees and expenses of the Accounting Firm shall be borne

solely by the Employer.  For purposes of

making the calculations required by this Section, the Accounting Firm may make

reasonable assumptions and approximations concerning applicable taxes and may

rely on reasonable, good faith interpretations concerning the application of

Sections 280G and 4999 of the Internal Revenue Code, provided the Accounting

Firm’s determinations must be made with substantial authority (within the meaning

of Section 6662 of the Internal Revenue Code). The payments to which the

Employee is entitled pursuant to this Section shall be paid by the Employer

and/or Avocent Corporation to the Employee in cash and in full not later than

thirty (30) calendar days following the date the Employee becomes subject to

the Excise Tax.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as

of the day and year first above written.

 

	

   

  	

  CYBEX COMPUTER PRODUCTS CORPORATION

  (dba AVOCENT-HUNTSVILLE)

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Stephen

  F. Thornton

  
	

   

  	

  Its:

  	

  President

  and Chief Executive Officer

  
	

   

  	

   

  
	

   

  	

  AVOCENT

  CORPORATION:

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/

  Stephen F. Thornton

  
	

   

  	

  Its:

  	

  President

  and Chief Executive Officer

  
	

   

  	

   

  
	

   

  	

  EMPLOYEE:

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  /s/

  John R. Cooper

  
	

   

  	

  John

  R. Cooper

  	

   

  
				

 

 

10

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