Document:

ex10-1.htm

Exhibit 10.1

 

Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request.  Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH

RESTATED AND AMENDED LICENSE AGREEMENT

 

This license agreement (“Agreement”) is by and between Mayo Foundation for Medical Education and Research, a Minnesota charitable corporation, located at 200 First Street SW, Rochester, Minnesota 55905-0001 (“Mayo”), and OnPoint Medical Diagnostics, Inc., a for profit Minnesota corporation located at 221 First Avenue SW, Suite 300, Rochester, MN 55902 (“Company”).

 

WHEREAS, Mayo and Company entered into a License Agreement, effective August 1, 2009 as amended (“2009 License”); and

 

WHEREAS, Mayo and Company desire to supersede and replace in its entirety the 2009 License by this License Agreement; and

 

WHEREAS, Mayo desires to make its intellectual and tangible property rights available for the development and commercialization of products, methods and processes for public use and benefit; and

 

WHEREAS, Company represents itself as being knowledgeable in developing and commercializing web based software; and

 

WHEREAS, Mayo is willing to grant and Company is willing to accept a non-exclusive license under such rights for the purpose of developing imaging quality control software.

 

NOW THEREFORE, in consideration of the foregoing and the terms and conditions set forth below, the parties hereby agree as follows:

 

Article 1.00 – Definitions

 

For purposes of this Agreement, the terms defined in this Article will have the meaning specified and will be applicable both to the singular and plural forms:

 

1.01           For Mayo, “Affiliate”: any corporation or other entity within the same “controlled group of corporations” as Mayo or its parent Mayo Clinic. For purposes of this definition, the term “controlled group of corporations” will have the same definition as Section 1563 of the Internal Revenue Code as of November 10, 1998, but will include corporations or other entities which if not a stock corporation, more than 50% of the board of directors or other governing body of such corporation or other entity is controlled by a corporation within the controlled group of corporations of Mayo or Mayo Clinic. Mayo’s Affiliates include, but are not limited to: Mayo Clinic; Mayo Collaborative Services, Inc.; Rochester Methodist Hospital; Saint Marys Hospital;

 

  

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Mayo Clinic Rochester; Mayo Clinic Florida; Mayo Clinic Arizona; and its Mayo Health System entities.

 

For Company, “Affiliate”: any corporation or other entity that controls, is controlled by, or is under common control with, Company. For purposes of this definition, “control” means ownership of: (a) at least 50% or the maximum percentage, if less than 50%, as allowed by applicable law, of the outstanding voting securities of such entity; or (b) at least 50% of the decision-making authority of such entity.

 

1.02           “Company Improvements”: any new discovery or technology created by the Company using the Licensed Software, Licensed Device and/or Know-How.

 

1.03           “Confidential Information”: any information or material disclosed by one party, the disclosing party, to the other, the receiving party, identified in writing as confidential at the time of disclosure or, if first disclosed orally, identified as confidential and confirmed in writing within forty-five days. Confidential Information does not include any information or material that receiving party evidences is: (a) already known to the receiving party at the time of disclosure (other than from the disclosing party); (b) publicly known other than through acts or omissions of the receiving party; (c) disclosed to the receiving party by a third party who was not and is not under any obligation of confidentiality; or (d) independently developed by employees of the receiving party without knowledge of or access to the Confidential Information.

 

1.04           “Effective Date”: November 12, 2010.

 

1.05           “Field”: Healthcare.

 

1.06           “First Commercial Sale” means any transfer in an arms length transaction to an independent third party whereby such third party acquires the right to possession or use of a Licensed Product or Know-How.

 

1.07           “*** Sales”: means any *** received by, collected or owed Company relating to the Licensed Product or Know-How, including without limitation, *** by means of which a third party *** of a Licensed Product or Know-How will be considered ***. *** Sales on Licensed Products and Know-How transferred as part of a non-cash exchange shall be calculated at the *** or *** if there are no current invoices to ***. *** Sales accrue with the ***.

 

1.08           “Know-How”: research and development information, materials, technical data, unpatented inventions, trade secrets, know-how and supportive information owned and controlled by Mayo as of the Effective Date to the extent it is necessary for the development or manufacture of a Licensed Product.

 

1.09           “Licensed Copyrights” means the common law and/or federal copyrights owned by Mayo covering the Licensed Software as of the Effective Date or that arise during and in the course of work pursuant to Section 5.03.

 

1.10           “Licensed Device” means the ***, developed by Mayo to ***

 

  

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1.11           “Licensed Product”: any product, application or process the development, manufacture, use, sale, offer for sale or importation of which incorporates in whole or in part or uses, or is derived from, identified by or validated using the Licensed Software, Licensed Devices, Licensed Copyrights, Licensed Patents and/or Know-How excluding, however, for the avoidance of doubt, any product, application or process the development, manufacture, use, sale, offer for sale or importation of which does not incorporate in whole or in part or uses, or is not derived from, identified by or validated using the Licensed Software, Licensed Copyrights, Licensed Devices Licensed Patents or Know How.

 

1.12           “Licensed Quarter” begins on the Effective Date of this Agreement, and thereafter begins on the first day of each January, April, July and October during the term of this Agreement.

 

1.13           “Licensed Software”: means object and source code for the ***, which is software that *** and all documentation relating thereto that is provided by Mayo to Company as more particularly described in Exhibit A attached hereto.

 

1.14           “License Year” begins on the Effective Date of this Agreement, and thereafter begins on the first day each January during the term of this Agreement.

 

1.15           “Mayo Improvements”: Any new discovery or technology created during and in the course of work pursuant to Section 5.03.

 

1.16           “Patent Rights” means any U.S. patent application including provisionals, divisionals, continuations, and continuations-in-part (but only for subject matter supported pursuant to 35 U.S.C. §112 by the foregoing) therefrom, patents issuing thereon, re-examinations and re-issues thereof, as well as extensions and supplementary protection certificates and any foreign counterpart of any of the foregoing filed on a Mayo Improvement or Licensed Device.

 

1.17           “Term”: begins on the Effective Date and ends, subject to Article 10, unless the Licensed Software and Know-How are still in use, or were used such that Section 3.04 and Article 4 still apply, in which case upon the date of the satisfaction of these provisions.

 

Article 2.00 – Grant of Rights

 

2.01           GRANT.  Subject to the terms and conditions of this Agreement, Mayo grants to Company: (a) a non-exclusive, worldwide license under the Licensed Copyrights, without the right to sublicense, within the Field to make, have made, use, offer for sale, sell and import Licensed Products; and (b) a nonexclusive license without the right to sublicense within the Field to use the Know-How to develop, make, have made, use, offer for sale, sell and import Licensed Products. Excluding the nonexclusive license Mayo has in place on the Effective Date of this License Agreement for the Licensed Software and Mayo’s ability to non-exclusively license a Licensed Product in connection with a service Mayo and its Affiliates’ provide to third parties, Mayo agrees not to enter into any other nonexclusive or exclusive license agreements with a commercial third party for the Licensed Software, Licensed Copyrights or Licensed Device. For the avoidance of doubt, any improvement made by Mayo which does not constitute a Mayo Improvement, is specifically excluded from this Agreement. No rights are granted to Company under any Mayo owned/controlled patents aside from the Patent Rights.

 

  

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2.02           RESERVATION OF RIGHTS.  All rights herein are subject to: (a) the rights and obligations to and requirements of the U.S. government, if any have arisen or may arise, regarding the Patent Rights, including as set forth in 35 U.S.C. §§200 et al., 37 C.F.R. Part 401 et al. (“Bayh-Dole Act”); and (b) Mayo’s and its Affiliates’ reserved, irrevocable right to practice and have practiced the Licensed Products in connection with Mayo’s and its Affiliates’ educational, research and clinical programs. Company agrees to comply with the provisions of the Bayh-Dole Act, including promptly providing to Mayo with information requested to enable Mayo to meet its compliance requirements and substantially manufacturing Licensed Product in the U.S.

 

2.03           NO OTHER RIGHTS GRANTED.  This Agreement does not grant any right, title or interest in or to any tangible or intangible property right of Mayo or its Affiliates, including any improvements thereon, or to any Licensed Copyrights, Licensed Devices or Know-How outside the Field that is not expressly stated in Section 2.01. All such rights, titles and interests are expressly reserved by Mayo and Company agrees that in no event will this Agreement be construed as a sale, an assignment, or an implied license by Mayo or its Affiliates to Company of any such tangible or intangible property rights.

 

2.04           COMPANY GRANT.  Company grants to Mayo and its Affiliates, under all Company Improvements, a non-exclusive, perpetual, royalty free, fully paid up, worldwide license to make, have made, use, reproduce, adapt and modify the Company Improvement. Company shall provide Mayo with the source code, object code, device and/or documentation in a form such that Mayo may fully practice the license, provided that Mayo will not license the source code as provided to Mayo to any third party except as may be necessary for such third party to develop software for Mayo’s benefit. For the avoidance of doubt, any improvement made by Company which does not constitute a Company Improvement, is specifically excluded from this Agreement. No rights are granted to Mayo under any Company owned/controlled patents that do not constitute a Company Improvement.

 

2.05           MAYO GRANT.  Mayo grants to Company and its Affiliates, under all Mayo Improvements, an exclusive, perpetual, worldwide license under the same terms as granted to Company for their Licensed Products hereunder, to make, have made, use, reproduce, adapt and modify the Mayo Improvement. Mayo shall provide Company with the source code, object code, device prototypes and documentation in a form such that Company may fully practice the license. Each such Mayo Improvement developed shall be listed on Exhibit B and incorporated into this Agreement.

 

Article 3.00 – Royalties

 

3.01           UP-FRONT.  Within ten (10) days of the Effective Date of this Restated and Amended Agreement, Company will make a non-refundable payment to MAYO of FIFTY THOUSAND DOLLARS (US $50,000.00) . Should Company not make such payment in the ten day period, this Agreement will immediately terminate.

 

3.02           EARNED ROYALTIES.  Company will make nonrefundable earned royalty payments to Mayo of: ***of***Sales (“Earned Royalties”). The Earned Royalties are payable as described in Section 4.01. Licensed Product transferred to Mayo or its Affiliates are not considered

 

  

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transfers for purposes of determining *** Sales or for calculating Earned Royalties. No Earned Royalties are due Mayo on transfers to Mayo or Mayo Affiliates.

 

3.03           MINIMUM ROYALTIES.  If the Earned Royalties in any single License Year do not equal or exceed the minimum annual royalty for that License Year as indicated in this Section 3.03, then the Company shall pay Mayo the difference between the amount paid in royalties for that License Year and the minimum annual royalty for that License Year. It is a material breach of this Agreement if such payment is not received by Mayo on or before 1 February following the end of the License Year to which such payment applies.

 

License Year                                                      Minimum Annual Royalty

2011                                                                                 $50,000

2012 and every year thereafter                                    $100,000

 

3.04           TAXES.  Company is responsible for all taxes, duties, import deposits, assessments, and other governmental charges, however designated, which are now or hereafter imposed by any authority on Company: (a) by reason of the performance by Mayo of its obligations under this Agreement, or the payment of any amounts by Company to Mayo under this Agreement; (b) based on the Patent Rights; or (c) related to use, sale or import of the Licensed Product. Any withholding taxes which Company is required by law to withhold on remittance of the royalty payments shall be deducted from the royalty paid and Company shall promptly furnish Mayo with original copies of all official receipts for such taxes. Company will obtain, or assist Mayo in obtaining, any tax reduction (including avoidance of double taxation), tax refund or tax exemption available to Mayo by treaty or otherwise.

 

3.05           U.S. CURRENCY.  All payments to Mayo under this Agreement will be made by draft drawn on a U.S. bank, and payable in U.S. dollars. In the event that conversion from foreign currency is required in calculating a payment under this Agreement, the exchange rate used shall be the Interbank rate quoted by Citibank at the end of the last business day of the quarter in which the payment accrued.

 

3.06           OVERDUE PAYMENTS.  If overdue, the payments due under this Agreement shall bear interest until paid at a *** rate *** on the due date and Mayo shall be entitled to recover, in addition to all other remedies, reasonable attorneys’ fees and costs related to the administration or enforcement of this Agreement, including collection of payments, following such failure to pay. The acceptance of any payment, including of such interest shall not foreclose Mayo from exercising any other right or seeking any other remedy that it may have as a consequence of the failure of Company to make any payment when due.

 

3.07           EQUITY.  So long as Mayo is a holder of common shares in Company (which common shares were previously transferred to Mayo under the 2009 License and which transfer is hereby ratified and confirmed notwithstanding the supersession of the 2009 License through this Agreement), Mayo shall be entitled to ***. Company shall provide Mayo *** of *** and shall provide Mayo *** without limitation ***, provided to *** whether or not Mayo chooses to ***.

 

Article 4.00 – Accounting and Reports

 

  

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4.01           REPORTS AND PAYMENT.  Company will deliver to Mayo on or before the following dates: 1 February, 1 May, 1 August, and 1 November, a written report setting forth a full accounting showing how any amounts due to Mayo for the preceding calendar quarter have been calculated as provided in this Agreement, including an accounting of total *** Sales with a reporting of any applicable foreign exchange rates, deductions, allowances, and charges. If no Licensed Product transfers have occurred and no other amounts are due to Mayo, Company will submit a report so stating along with the status of development of Licensed Product and of preparations to market Licensed Product if marketing has not yet begun. Each such report will be accompanied by the payment of all amounts due for such calendar quarter.

 

4.02           ACCOUNTING.  Company will keep complete, continuous, true, and accurate books of accounts and records sufficient to support and verify the calculation of *** Sales, all royalties and any other amount believed due and payable to Mayo under this Agreement. Such books and records will be kept at Company’s principal place of business for at least three years after the end of the calendar year to which they pertain, and will be open at all reasonable times for inspection by a representative of Mayo for verification of royalty statements or compliance with other aspects of this Agreement. The Mayo representative will treat as confidential all relevant matters and will be a person or firm reasonably acceptable to Company. In the event such audit reveals an underpayment by Company, Company will within thirty days pay the royalty due in excess of the royalty actually paid. In the event the audit reveals an underpayment by Company of *** of the amount due, Company will pay interest *** at the *** rate ***. In either event, Company will *** in conducting the audit.

 

Article 5.00 – Diligence

 

5.01           DILIGENCE REPORTS.  Company will provide Mayo with annual reports within thirty days of each anniversary of the Effective Date describing in detail: (a) as of that reporting period, all development and marketing activities for each Licensed Product; and (b) an updated development plan for the next annual period. Mayo shall have the right to audit Company’s records relating to development of Licensed Products.

 

5.02           BEST EFFORTS.  Company will make its First Commercial sale within *** of the Effective Date. Company also represents and warrants that it will continue to use best efforts throughout the Term of this Agreement to develop, market and sell the Licensed Products.

 

5.03           KNOW-HOW SERVICES.  Subject to Mayo’s internal policies, procedures and approvals, Company can request the services of any of the inventors of the Licensed Software or Licensed Devices to help in development of future Licensed Products. Such services would be performed under a statement of work which would be approved and executed by both parties prior to work commencing and attached as an exhibit hereto. Terms related to payment of such services would be addressed in each statement of work. Mayo shall provide the Company Licensed Know-How as follows:

 

	
  

	
(a)

	
STATEMENT OF WORK.  Company may request the assistance of Mayo personnel for work on Company directed initiatives, with the project scope, specifications and compensation to be mutually determined. The Company will submit project requests

 

  

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to Mayo through their Office of Intellectual Property, by a Statement of Work to be mutually agreed upon.

 

	
  

	
(b)

	
STOCK OR OPTIONS.  By mutual agreement and subject to existing Mayo policy, Company and Mayo may choose to utilize stock, stock options and/or cash payments to compensate Mayo for future product development efforts on behalf of the Company by Mayo. Company agrees that stock options, if any, shall be provided at the rate equivalent to those that Company would provide Company personnel in a similar position.

 

	
  

	
(c)

	
CONSULTING/KNOW-HOW LICENSING.  To the extent permitted under Mayo policy, Company will be free to enter into separate consulting and/or know-how licensing agreements with Mayo personnel for providing software development or related support services to Company.

 

Article 6.00 – Intellectual Property Management

 

6.01           CONTROL.  Mayo will have the sole right to prepare, file, prosecute, maintain, abandon, enforce, defend or otherwise handle the Licensed Copyrights and Know-How in its sole discretion, at Company’s expense. Mayo will keep Company informed on these activities. Company shall *** for all documented costs and expenses associated with the Licensed Copyrights, whether arising before or during the Term, within *** of invoice. Mayo will have no liability to Company for any act or omission in the preparation, filing, prosecution, maintenance, abandonment, enforcement, defense or other handling of the Licensed Copyrights or Know-How.

 

6.02           COPYRIGHT REGISTRATION.  To the extent commercially feasible, Company will register all Licensed Products that are manufactured or sold under this Agreement. Any such registration will be in conformance with the copyright laws and other laws of the country of manufacture or sale.

 

6.03           ENFORCEMENT.  Company shall promptly inform Mayo in writing of any alleged or threatened infringement of any of the Licensed Copyrights and/or Know-How and provide Mayo with any available evidence of such infringement. Mayo will have the sole right, but not the obligation, to take any measures deemed appropriate by Mayo, including the bringing or defending of suits, to enforce the Licensed Copyrights and/or Know-How. Upon request, Company will cooperate with Mayo in such measures. Mayo shall be entitled to retain any related recovery and damages after reimbursement of Company’s reasonable and documented out-of-pocket expenses.

 

6.04           PATENT PROSECUTION AND ENFORCEMENT. Company will have the first right to prepare, file, prosecute and maintain Patent Rights, in Mayo’s name, with prior advice and comment from Mayo. In the event of a disagreement between Company and Mayo regarding the Patent Rights, Mayo shall make the decision. Regardless of who is controlling the actions, Company shall pay all costs and expenses associated with the filing, prosecution and maintenance of the Patent Rights within thirty days invoice. Mayo will have no liability to Company for any act or omission in the preparation, filing, prosecution, maintenance, abandonment, enforcement, defense or other handling of the Patent Rights or Know-How. The

 

  

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Company will promptly inform Mayo of any suspected infringement of any Patent Rights and Mayo and the Company will have the right to institute an action for infringement of the Licensed Patent consistent with the following:

 

	
  

	
(a)

	
If Mayo and the Company agree to institute suit jointly, then the suit will be brought in the names of both parties. The Company will exercise control over such action, provided, however, that Mayo may, if it so desires, be represented by counsel of its own selection, and at its own expense.

 

	
  

	
(b)

	
In the absence of an agreement to institute a suit jointly, Mayo may institute suit and, at its option, join the Company as a plaintiff. Mayo will bear the entire cost of such litigation, including attorneys’ fees. The Company will cooperate reasonably with Mayo, except financially, in such litigation.

 

	
  

	
(c)

	
In the absence of an agreement to institute a suit jointly, and if Mayo determines not to institute a suit, as provided herein, then the Company may institute suit and, at its option, join Mayo if Mayo is a necessary party to the litigation. The Company will bear the entire cost of such litigation, including attorneys’ fees. Mayo will cooperate reasonably with the Company, except financially, in such litigation and Company will indemnify Mayo and its Affiliates, including the trustees, officers, agents, and employees of the foregoing, in respect to any damages or other costs of any type arising out of or relating to such enforcement. Company will not settle or enter into a voluntary disposition of the action without Mayo ’s prior written consent.

 

	
  

	
(d)

	
Absent an agreement to the contrary, any costs under (a) above will be borne equally by the parties and any recoveries will be shared equally. Otherwise, each party will bear its own expenses and any recovery will be applied as follows:

 

	
  

	
i.

	
first, to reimburse the Party bringing the action;

	
  

	
ii.

	
second, to reimburse the expenses of the other party in connection with such action; and

	
  

	
iii.

	
third, any remainder to be split equally between Mayo and Company.

 

6.05           THIRD PARTY LITIGATION.  In the event a third party institutes a suit against Company for patent infringement involving a Licensed Product, Company will promptly inform Mayo and keep Mayo regularly informed of the proceedings.

 

Article 7.00 – Use of Name

 

7.01           USE OF NAME AND LOGO.  All uses of any logo, name, trade name, service mark or trademark of Mayo or its Affiliates, including, but not limited to, the terms “Mayo®,” “Mayo Clinic®,” and the triple shield Mayo logo, or any simulation, abbreviation, or adaptation of the same, or the name of any Mayo employee or agent must have prior written approval before any use by Company. All requests for approval pursuant to this Section must be submitted to the ***, at the following e-mail address: *** at least *** business days prior to the date on which a response is needed. The process for submitting requests is attached here as Exhibit C. Mayo approval of any request may include (i) a factual statement, agreed upon by Mayo and company, that reflects the relationship between Mayo and Company; and (ii) a conflict of interest

 

  

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statement, if deemed necessary and provided by Mayo’s Conflict of Interest Committee. Any violation of this Section 7.01 is a material breach of this Agreement. The terms of this Section 7.01 survive the termination, expiration, non-renewal, or rescission of this Agreement.

 

Article 8.00 – Confidentiality

 

8.01           TREATMENT OF CONFIDENTIAL INFORMATION.  Except as provided for in Section 8.02, neither party will disclose, use or otherwise make available the other’s Confidential Information during Term or for *** thereafter and will use the same degree of care it employs to protect its own confidential information.

 

8.02           RIGHT TO DISCLOSE.

 

(a)           To the extent it is reasonably necessary or appropriate to fulfill its obligations or exercise its rights under this Agreement, Company may disclose Confidential Information of Mayo to its consultants and outside contractors on the condition that each such entity agrees to obligations of confidentiality and non-use at least as stringent as those herein.

 

(b)           If a party is required by law, regulation or court order to disclose any of the Confidential Information, it will have the right to do so, provided it: (i) promptly notifies the disclosing party; and (ii) reasonably assists the disclosing party to obtain a protective order or other remedy of disclosing party’s election and at disclosing party’s expense.

 

8.03           CONFIDENTIALITY OF AGREEMENTS.  Except as otherwise required by law, the specific terms and conditions of this Agreement shall be Confidential Information but the existence of this Agreement will not be Confidential Information and the parties may state that Company is licensed under the Licensed Copyrights & Licensed Software.

 

Article 9.00 – Warranties, Representations, Disclaimers and Indemnification

 

9.01           REPRESENTATIONS AND WARRANTIES OF COMPANY. Company warrants and represents to Mayo that:

 

(a)           it is experienced in the development, production, quality control, service, manufacture, marketing, and sales of products similar to the subject matter of the Licensed Copyright and Licensed Software, and that it will commit itself to a thorough, vigorous, and diligent program of developing and marketing the Licensed Products;

 

(b)           it has independently evaluated the Licensed Copyright, Licensed Software, Know-How and Confidential Information, if any, their applicability or utility in Company’s activities, is entering into this Agreement on the basis of its own evaluation and not in reliance of any representation by Mayo, and assumes all risk and liability in connection with such determination;

 

(c)           the earlier of January 1, 2011 or the First Commercial Sale, Company will have in place and will thereafter continue to maintain throughout the Term and beyond insurance coverage as set forth in Section 9.03 and that such insurance coverage sufficiently covers the Mayo Indemnitees;

 

  

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(d)           the execution and delivery of this Agreement has been duly authorized and no further approval, corporate or otherwise, is required in order to execute this binding Agreement;

 

(e)           it shall comply with all applicable international, national, and state laws, ordinances and regulations in its performance under this Agreement;

 

(f)           its rights and obligations under this Agreement do not conflict with any contractual obligation or court or administrative order by which it is bound; and

 

(g)           all Company *** in the Company either through a *** that was ***, or to the extent *** were made by *** and *** was ***, such *** were provided all *** the Company *** and the *** was *** under the *** and ***; and

 

(h)           *** is *** involved ***

 

9.02           DISCLAIMERS.

 

(a)           MAYO HAS NOT MADE AND DOES NOT MAKE ANY PROMISES, COVENANTS, GUARANTEES, REPRESENTATIONS OR WARRANTIES OF ANY NATURE, DIRECTLY OR INDIRECTLY, EXPRESS, STATUTORY OR IMPLIED, INCLUDING WITHOUT LIMITATION MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

(b)           KNOW-HOW, CONFIDENTIAL INFORMATION, LICENSED COPYRIGHTS AND LICENSED SOFTWARE ARE PROVIDED “AS IS,” “WITH ALL FAULTS,” AND “WITH ALL DEFECTS,” AND COMPANY EXPRESSLY WAIVES ALL RIGHTS TO MAKE ANY CLAIM WHATSOEVER AGAINST MAYO FOR MISREPRESENTATION OR FOR BREACH OF PROMISE, GUARANTEE, REPRESENTATION OR WARRANTY OF ANY KIND RELATING TO THE LICENSED PRODUCTS, KNOW-HOW, CONFIDENTIAL INFORMATION, LICENSED SOFTWARE OR LICENSED COPYRIGHTS. MAYO EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES ARISING FROM ANY COURSE OF DEALING, USAGE, OR TRADE PRACTICE, WITH RESPECT TO: THE SCOPE, VALIDITY OR ENFORCEABILITY OF THE LICENSED COPYRIGHT OR KNOW-HOW; OR THAT THE MANUFACTURE, USE, SALE, OFFER FOR SALE OR IMPORTATION OF THE LICENSED PRODUCTS WILL NOT INFRINGE OTHER INTELLECTUAL PROPERTY RIGHTS. NOTHING IN THIS AGREEMENT WILL BE CONSTRUED AS AN OBLIGATION FOR MAYO TO BRING, PROSECUTE OR DEFEND ACTIONS REGARDING THE LICENSED SOFTWARE OR LICENSED COPYRIGHTS OR KNOW-HOW.

 

(c)           COMPANY AGREES THAT MAYO AND ITS AFFILIATES WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY OR ARISING OUT OF ANY RIGHTS GRANTED OR PERFORMANCE MADE UNDER THIS AGREEMENT, WHETHER TO OR BY COMPANY OR A THIRD PARTY. IN NO EVENT WILL MAYO’S LIABILITY OF ANY KIND INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE LOSSES OR DAMAGES, EVEN IF MAYO HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR EXCEED THE TOTAL AMOUNT OF ROYALTIES WHICH HAVE ACTUALLY BEEN PAID TO MAYO BY

 

  

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COMPANY AS OF THE DATE OF FILING AN ACTION AGAINST MAYO WHICH RESULTS IN THE SETTLEMENT OR AWARD OF DAMAGES TO COMPANY.

 

9.03           INDEMNIFICATION AND INSURANCE.

 

(a)           Company will defend, indemnify, and hold harmless Mayo, Mayo’s Affiliates and their respective trustees, officers, agents, independent contractors and employees (“Mayo Indemnitees”) from any and all claims, actions, demands, judgments, losses, costs, expenses, damages and liabilities (including attorneys’ fees, court costs and other expenses of litigation), regardless of the legal theory asserted, arising out of or connected with: (a) the practice or exercise of any rights granted hereunder by or on behalf of Company; (b) research, development, design, manufacture, distribution, use, sale, importation, exportation or other disposition of Licensed Products; (c) any act or omission of Company hereunder, including the negligence or willful misconduct thereof; and (d) any claims by *** relating to ***. Mayo and Mayo Affiliates shall have no obligation to indemnify Company hereunder.

 

(b)           The parties agree that this indemnity should be construed and applied in favor of maximum indemnification of Mayo Indemnitees.

 

(e)           Company will continuously carry *** insurance, including products liability and contractual liability, in an amount and for a time period sufficient to cover the liability assumed by Company hereunder during the Term and after, such amount being at least *** In addition, such policy will ***as ***

 

(d)           Company expressly waives any right of subrogation that it may have against Mayo Indemnitees resulting from any claim, demand, liability, judgment, settlement, costs, fees (including attorneys’ fees), and expenses for which Company is obligated to indemnify, defend and hold Mayo Indemnitees harmless for under this Agreement.

 

9.04           PROHIBITION AGAINST INCONSISTENT STATEMENTS.  Company shall not make any statements, representations or warranties, or accept any liabilities or responsibilities whatsoever which are inconsistent with any disclaimer or limitation included in this section or any other provision of this Agreement. Company shall not settle any matter that will incur liability for Mayo or require Mayo to make any admission of liability without Mayo’s prior written consent.

 

Article 10.00 – Term and Termination

 

10.01           TERM.  The Term of this contract is perpetual.

 

10.02           TERMINATION FOR BREACH.  If Company commits a material breach of this Agreement, Mayo will notify Company in writing of such breach and Company will have *** days after such notice to cure such breach to Mayo’s satisfaction, provided however that if such breach is the failure to make any required royalty or fee payments hereunder, Company will have *** days after such notice to cure such breach to Mayo’s satisfaction. If Company fails to cure such breach, Mayo may, at its sole option, terminate this Agreement in whole or in part by sending Company written notice of termination. Should Company breach any of the

 

  

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representation and warranties of the Company in Section 9.01 or commit a material breach of Section 7.01, Mayo may terminate this agreement immediately upon notice to Company.

 

10.03           TERMINATION FOR SUIT.  Mayo does not license entities that bring suit against Mayo or its Affiliates and as such, Mayo may immediately terminate this Agreement if Company directly or indirectly brings any action or proceeding against Mayo or its Affiliates, except for an uncured material breach of this Agreement by Mayo.

 

10.04           INSOLVENCY OF COMPANY.  This Agreement terminates immediately without an obligation of notice of termination to Company in the event Company ceases conducting business in the normal course, becomes insolvent or bankrupt, makes a general assignment for the benefit of creditors, admits in writing its inability to pay its debts as they are due, permits the appointment of a receiver for its business or assets, or avails itself of or becomes subject to any proceeding under any statute of any governing authority relating to insolvency or the protection of rights of creditors.

 

10.05           SURVIVAL.  The termination or expiration of this Agreement does not relieve either party of its rights and obligations that have previously accrued. After the Term, all rights granted immediately revert to Mayo. All Confidential Information of the other party shall be returned or destruction certified, at the disclosing party’s election. Rights and obligations that by their nature prescribe continuing rights and obligations shall survive the termination or expiration of this Agreement including Sections 4.02, 7.01, 9.03, 10.5 and Articles 8 and 11. Company shall provide an accounting for and pay, within thirty days of termination or expiration, of all amounts due hereunder.

 

Article 11.00 – General Provisions

 

11.01           ASSIGNMENT AND TRANSFER.  Company is strictly prohibited from assigning, delegating or otherwise transferring any of its obligations or rights under this Agreement without Mayo’s prior, express and written consent, which consent may be withheld in Mayo’s sole discretion. Any assignment, delegation or transfer in contravention hereof is null and void.

 

11.02           WAIVER.  No part of this Agreement may be waived except by the further written agreement of the party granting such waiver. Forbearance in any form from demanding the performance of a duty owed under this Agreement is not a waiver of that duty. Until complete performance of a duty owed under this Agreement is accomplished, the party to which that duty is owed may invoke any remedy under this Agreement or under law, despite its past forbearance in demanding performance of that duty.

 

11.03           GOVERNING LAW AND JURISDICTION.  This Agreement is made and performed in Minnesota. The terms and conditions of this Agreement, as well as all disputes arising under or relating to this Agreement, shall be governed by Minnesota law, specifically excluding its choice-of-law principles, except that the interpretation, validity and enforceability of the Patent Rights will be governed by the patent laws of the country in which the patent application is pending or issued. This is not an Agreement for the sale of goods and as such Article 2 of the Uniform Commercial Code as enacted in Minnesota does not apply. The exclusive forums for the foregoing are the State or District Court of Olmsted County, Minnesota, unless such action

 

  

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cannot by law be brought in such forum, in which case the venue required by law shall govern. Company agrees unconditionally that it is personally subject to the jurisdiction of such courts.

 

11.04           HEADINGS.  The headings of articles and sections used in this document are for convenience of reference only.

 

11.05           NOTICES.  Any notice required to be given under this Agreement is properly provided if in writing and sent to the party at its address or facsimile number below, or as otherwise designated by the party in accordance with this provision, and duly given or made: (a) on the date delivered in person; (b) on the date transmitted by facsimile, if confirmation is received; (c) three days after deposit in the mail if sent by certified U.S. mail postage prepaid, return receipt requested; and (d) one day after deposit with a nationally recognized overnight carrier service with charges prepaid.

 

***

With a copy to:

***

COMPANY: ***

With a copy to:

***

***

***

11.06           LIMITATION OF RIGHTS CREATED.  This Agreement is personal to the parties and shall be binding on and inure to the sole benefit of the parties and their permitted successors and assigns and shall not be construed as conferring any rights to any third party. Specifically, no interests are intended to be created for any customer, patient, research subjects, or other persons (or their relatives, heirs, dependents, or personal representatives) by or upon whom the Licensed Products may be used.

 

11.07           INDEPENDENT CONTRACTORS.  Company is an independent contractor not an agent, employee, partner, joint venturer or servant of Mayo and has no right to obligate or bind Mayo in any manner.

 

11.08           ENTIRE AGREEMENT.  This Agreement states the entire agreement and understanding between the parties about its subject matter. All past and contemporaneous discussions, writings, agreements, proposals, promises, covenants, warranties, representations, guarantees, correspondence, and understandings, whether oral or written, formal or informal, are entirely superseded by this Agreement.

 

11.09           SEVERABILITY.  If any terms or conditions of this Agreement are or become in conflict with the laws, regulations or court order of any jurisdiction or any governmental entity having jurisdiction over the parties or this Agreement, those terms and conditions shall be

 

  

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deemed automatically deleted in such jurisdiction(s) only, and the remaining terms and conditions of this Agreement shall remain in full force and effect. If such a deletion is not so allowed in a given jurisdiction or if such a deletion leaves terms and conditions thereby made clearly illogical or inappropriate in effect, the parties agree to substitute new terms and conditions as similar in effect to the present terms of this Agreement as may be allowed under the applicable laws, regulations or court order of such jurisdiction. The parties desire the terms and conditions herein to be valid and enforced to the maximum extent not prohibited by law, regulation or court order in a given jurisdiction.

 

11.10           CHANGES TO AGREEMENT. No terms or conditions of this Agreement may be changed except in writing, through another document signed by both parties, and expressly referencing this Agreement.

 

11.11           CONSTRUCTION.  Each party acknowledges that it was provided an opportunity to seek advice of counsel and as such this Agreement shall not be construed for or against either party.

 

11.12           REGISTRATION OF LICENSES.  Company will register and give required notice concerning this Agreement, at its expense, in each country in the Territory where an obligation under law exists to so register or give notice.

 

11.13           EXPORT CONTROL.  Mayo is subject to U.S. laws and regulations controlling the export of technical data, computer software, laboratory prototypes, and other commodities that may require a license from the applicable agency of the United States government and/or may require written assurances by Company that it will not export data or commodities to certain foreign countries without prior approval of such agency. Mayo neither represents that a license is required, nor that, if required, it will be issued.

 

The parties execute this Agreement in one or more counterparts, each of which shall be deemed an original but all of which taken together constitute one and the same instrument, as of the Effective Date.

 

	
MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH:

 

	
Signed:

	  /s/ Steven P. VanNurden
	  	  
	
Printed Name:

	  Steven P. VanNurden
	  	  
	
Title:

	  Assistant Treasurer
	  	  
	
Date:

	  November 12, 2010
	  	  

                                                                                            

  

Page 14 of 15

  

	  	  
	
COMPANY:

	  
	  	  
	
Signed:

	  /s/ William T. Cavanaugh
	 	 
	
Printed Name:

	  William T. Cavanaugh
	  	  
	
Title:

	  President and CEO
	  	  
	
Date:

	  November 12, 2010

 

 

 

 

Page 15 of 15ex10-2.htm

 

 

Exhibit 10.2

 

 

ONPOINT MEDICAL DIAGNOSTICS, INC.

 

2011 OMNIBUS INCENTIVE COMPENSATION PLAN

 

 

  

  

  

ONPOINT MEDICAL DIAGNOSTICS, INC.

 

2011 OMNIBUS INCENTIVE COMPENSATION PLAN

 

The purpose of the OnPoint Medical Diagnostics, Inc. 2011 Incentive Compensation Plan (the “Plan”) is (i) to provide employees of OnPoint Medical Diagnostics Inc. (the “Company”) and its subsidiaries, certain consultants and advisors who perform services for the Company or its subsidiaries and non-employee members of the Board of Directors of the Company with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units, performance units and other stock-based awards, and (ii) to provide selected executive employees with the opportunity to receive bonus awards that are considered “qualified performance-based compensation” under section 162(m) of the Code (as defined below).

 

The Company believes that the Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefitting the Company’s stockholders, and will align the economic interests of the participants with those of the stockholders.  The Plan shall be effective as of the Effective Date.

 

Section 1.               Definitions

 

The following terms shall have the meanings set forth below for purposes of the Plan:

 

(a)           “Board” shall mean the Board of Directors of the Company.

 

(b)           “Bonus Award” shall mean a bonus awarded under the Plan that is designated as “qualified performance-based compensation” under section 162(m) of the Code, as described in Section 15.

 

(c)           “Cause” shall mean, except to the extent specified otherwise by the Committee, a finding by the Committee that the Participant (i) has breached his or her employment or service contract with the Employer, (ii) has engaged in disloyalty to the Employer, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty, (iii) has disclosed trade secrets or confidential information of the Employer to persons not entitled to receive such information, (iv) has breached any written non-competition, non-solicitation, invention assignment or confidentiality agreement between the Participant and the Employer or (v) has engaged in such other behavior detrimental to the interests of the Employer as the Committee determines.

 

(d)           Unless otherwise set forth in a Grant Instrument, a “Change of Control” shall be deemed to have occurred if:

 

(i)           Any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the

 

  

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voting power of the then outstanding securities of the Company; provided that a Change of Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the parent corporation would be entitled in the election of directors.

 

(ii)           The consummation of (A) a merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficially own in substantially the same proportion as ownership immediately prior to the merger or consolidation, immediately after the merger or consolidation, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors, or where the members of the Board, immediately prior to the merger or consolidation, would not, immediately after the merger or consolidation, constitute a majority of the board of directors of the surviving corporation, (B) a sale or other disposition of all or substantially all of the assets of the Company, or (C) a liquidation or dissolution of the Company.

 

(iii)           A change in the composition of the Board over a period of twelve (12) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.

 

The Committee may modify the definition of Change of Control for a particular Grant as the Committee deems appropriate to comply with section 409A of the Code or otherwise.

 

(e)           “Code” shall mean the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder.

 

(f)           “Committee” shall mean the Compensation Committee of the Board or another committee appointed by the Board to administer the Plan.  With respect to Grants and Bonus Awards that are intended to be “qualified performance-based compensation” under section 162(m) of the Code, the Committee shall consist of two or more persons appointed by the Board, all of whom shall be “outside directors” as defined under section 162(m) of the Code.  The Committee shall also consist of directors who are “non-employee directors” as defined under Rule 16b-3 promulgated under the Exchange Act.

 

(g)           “Company” shall mean OnPoint Medical Diagnostics Inc. and shall include its successors.

 

(h)           “Company Stock” shall mean common stock of the Company.

 

  

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(i)           “Disability” or “Disabled” shall mean a Participant’s becoming disabled within the meaning of section 22(e)(3) of the Code, within the meaning of the Employer’s long-term disability plan applicable to the Participant or as otherwise determined by the Committee.

 

(j)           “Dividend Equivalent” shall mean an amount determined by multiplying the number of shares of Company Stock subject to a Grant by the per-share cash dividend paid by the Company on its outstanding Company Stock, or the per-share fair market value (as determined by the Committee) of any dividend paid on its outstanding Company Stock in consideration other than cash.

 

(k)           “Effective Date” shall mean April 4, 2011; provided, however, that stockholder approval of the Plan is required for certain Grants under the Plan.

 

(l)           “Employee” shall mean an employee of the Employer (including an officer or director who is also an employee), but excluding any person who is classified by the Employer as a “contractor” or “consultant,” no matter how characterized by the Internal Revenue Service, other governmental agency or a court.  Any change of characterization of an individual by the Internal Revenue Service or any court or government agency shall have no effect upon the classification of an individual as an Employee for purposes of this Plan, unless the Committee determines otherwise.

 

(m)           “Employed by, or providing service to, the Employer” shall mean employment or service as an Employee, Key Advisor or member of the Board (so that, for purposes of exercising Options and SARs and satisfying conditions with respect to Stock Awards, Stock Units, Performance Units and Other Stock-Based Awards, a Participant shall not be considered to have terminated employment or service until the Participant ceases to be both an Employee, Key Advisor and member of the Board).

 

(n)           “Employer” shall mean the Company and each of its subsidiaries.

 

(o)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(p)           “Exercise Price” shall mean the per share price at which shares of Company Stock may be purchased under an Option, as designated by the Committee.

 

(q)           “Fair Market Value” shall mean:

 

(i)           If the Company Stock is publicly traded, then the Fair Market Value per share shall be determined as follows: (A) if the principal trading market for the Company Stock is a national securities exchange, the closing price during regular trading hours on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, or (B) if the Company Stock is not principally traded on any such exchange, the last reported sale price of a share of Company Stock during regular trading hours on the

 

  

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relevant date, as reported by the OTC Bulletin Board or, if shares are not reported on the OTC Bulletin Board, as determined by the Committee through any reasonable valuation method authorized under the Code.

 

(ii)           If the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions as set forth above, the Fair Market Value per share shall be as determined by the Committee through any reasonable valuation method authorized under the Code.

 

(r)           “Grant” shall mean an Option, SAR, Stock Award, Stock Unit, Performance Unit, Other Stock-Based Award or Bonus Award granted under the Plan.

 

(s)           “Grant Instrument” shall mean the written agreement that sets forth the terms and conditions of a Grant, including all amendments thereto.

 

(t)           “Incentive Stock Option” shall mean an Option that is intended to meet the requirements of an incentive stock option under section 422 of the Code.

 

(u)           “Key Advisor” shall mean a consultant or advisor of the Employer.

 

(v)           “Non-Employee Director” shall mean a member of the Board who is not an Employee.

 

(w)           “Nonqualified Stock Option” shall mean an Option that is not intended to be taxed as an incentive stock option under section 422 of the Code.

 

(x)             “Option” shall mean an option to purchase shares of Company Stock, as described in Section 6.

 

(y)             “Other Stock-Based Award” shall mean any Grant based on, measured by or payable in Company Stock, as described in Section 11.

 

(z)             “Plan” shall mean this OnPoint Medical Diagnostics Inc. 2011 Omnibus Incentive Compensation Plan, as in effect from time to time.

 

(aa)           “Participant” shall mean an Employee, Key Advisor or Non-Employee Director designated by the Committee to participate in the Plan.

 

(bb)           “Performance Unit” shall mean a performance unit award, as described in Section 10.

 

(cc)           “SAR” shall mean a stock appreciation right, as described in Section 9.

 

(dd)           “Stock Award” shall mean an award of Company Stock, as described in Section 7.

 

  

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(ee)           “Stock Unit” shall mean an award of a phantom unit representing a share of Company Stock, as described in Section 8.

 

Section 2.             Administration

 

(a)           Committee.  The Plan shall be administered and interpreted by the Committee; provided, however, that any Grants to members of the Compensation Committee must be authorized by a disinterested majority of the Board.  The Committee may delegate authority to one or more subcommittees, as it deems appropriate.  To the extent that the Board or a subcommittee administers the Plan, references in the Plan to the “Committee” shall be deemed to refer to the Board or such subcommittee.  In the absence of a specific designation by the Board to the contrary, the Plan shall be administered by the Committee of the Board or any successor Board committee performing substantially the same functions.

 

(b)           Committee Authority.  The Committee shall have the sole authority to (i) determine the individuals to whom Grants or Bonus Awards shall be made under the Plan, (ii) determine the type, size and terms of the Grants or Bonus Awards to be made to each such individual, (iii) determine the time when the Grants or Bonus Awards will be made, (iv) determine the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (v) amend the terms of any previously issued Grant or Bonus Award, subject to the provisions of Section 20 below, and (vi) deal with any other matters arising under the Plan.

 

(c)           Committee Determinations.  The Committee shall have full power and express discretionary authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion.  The Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder.  All powers of the Committee shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals.

 

Section 3.              Grants

 

Grants under the Plan may consist of Options as described in Section 6, Stock Awards as described in Section 7, Stock Units as described in Section 8, SARs as described in Section 9, Performance Units as described in Section 10 and Other Stock-Based Awards as described in Section 11.  Bonus Awards may be granted as described in Section 15.  All Grants and Bonus Awards shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with this Plan as the Committee deems appropriate and as are specified in writing by the Committee to the individual in the Grant Instrument.  All Grants and Bonus Awards shall be made conditional upon the Participant’s acknowledgement, in writing or by acceptance of the Grant or Bonus Award, that all decisions and determinations of the Committee

 

  

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shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under such Grant or Bonus Award.  Grants and Bonus Awards under a particular Section of the Plan need not be uniform as among the Participants.

 

Section 4.              Shares Subject to the Plan

 

(a)           Shares Authorized.  Subject to adjustment as described below, the aggregate number of shares of Company Stock that may be issued or transferred under the Plan shall be 1,600,000 shares; provided, however, that the aggregate number of shares of Company Stock that may be issued or transferred under the Plan pursuant to Incentive Stock Options shall not exceed 1,000,000 shares of Company Stock.  In addition, as of the first trading day of January during the term of the Plan (excluding any extensions), beginning with calendar year 2011, an additional positive number of shares of Company Stock shall be added to the number of shares of Company Stock authorized to be issued or transferred under the Plan and the number of shares authorized to be issued or transferred pursuant to Incentive Stock Options, equal to twenty percent (20%) of the total number of shares of Company Stock outstanding on the last trading day in December of the immediately preceding calendar year, or 1,000,000 shares, whichever is less.

 

(b)           Source of Shares; Share Counting.  Shares issued or transferred under the Plan may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of the Plan.  If and to the extent Options or SARs granted under the Plan terminate, expire or are canceled, forfeited, exchanged or surrendered without having been exercised, or if any Stock Awards, Stock Units or Other Stock-Based Awards are forfeited, terminated or otherwise not paid in full, the shares subject to such Grants shall again be available for purposes of the Plan.  If shares of Company Stock otherwise issuable under the Plan are surrendered in payment of the Exercise Price of an Option, then the number of shares of Company Stock available for issuance under the Plan shall be reduced only by the net number of shares actually issued by the Company upon such exercise and not by the gross number of shares as to which such Option is exercised.  Upon the exercise of any SAR under the Plan, the number of shares of Company Stock available for issuance under the Plan shall be reduced by the gross number of shares as to which such right is exercised, and not by the net number of shares actually issued by the Company upon such exercise.  If shares of Company Stock otherwise issuable under the Plan are withheld by the Company in satisfaction of the withholding taxes incurred in connection with the issuance, vesting or exercise of any Grant or the issuance of Company Stock thereunder, then the number of shares of Company Stock available for issuance under the Plan shall be reduced by the net number of shares issued, vested or exercised under such Grant, calculated in each instance after payment of such share withholding.  To the extent any Grants are paid in cash, and not in shares of Company Stock, any shares previously subject to such Grants shall again be available for issuance or transfer under the Plan.

 

(c)           Individual Limits.  Each person participating in the Plan shall be subject the following limitations:

 

  

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(i)           for Grants measured in shares of Company Stock (whether payable in Company Stock, cash or a combination of both), the maximum number of shares of Company Stock for which such Grants may be made to such person in any calendar year shall not exceed 1,000,000 shares of Company Stock in the aggregate, and

 

(ii)           for Grants measured in cash dollars (whether payable in cash, Company Stock or a combination of both), the maximum dollar amount for which such Grants may be made to such person in any calendar year shall not exceed $1,000,000 in the aggregate, with such limitation to be measured at the time the Grant is made.

 

(d)           Adjustments.  If there is any change in the number or kind of shares of Company Stock outstanding by reason of (i) a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (ii) a merger, reorganization or consolidation, (iii) a reclassification or change in par value, or (iv) any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company’s receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced as a result of a spinoff or the Company’s payment of an extraordinary dividend or distribution, the maximum number of shares of Company Stock available for issuance under the Plan, the maximum number of shares of Company Stock for which any individual may receive Grants in any year, the kind and number of shares covered by outstanding Grants, the kind and number of shares issued and to be issued under the Plan, and the price per share or the applicable market value of such Grants shall be equitably adjusted by the Committee to reflect any increase or decrease in the number of, or change in the kind or value of, the issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under the Plan and such outstanding Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated.  In addition, in the event of a Change of Control, the provisions of Section 14 of the Plan shall apply.  Any adjustments to outstanding Grants shall be consistent with section 409A or 424 of the Code, to the extent applicable.  The Committee shall have the sole discretion and authority to determine what appropriate adjustments shall be made and any adjustments determined by the Committee shall be final, binding and conclusive.

 

Section 5.              Eligibility for Participation

 

(a)           Eligible Persons.  All Employees (including, for all purposes of the Plan, an Employee who is a member of the Board) and Non-Employee Directors shall be eligible to participate in the Plan.  Key Advisors shall be eligible to participate in the Plan if the Key Advisors render bona fide services to the Employer, the services are not in connection with the offer and sale of securities in a capital-raising transaction and the Key Advisors do not directly or indirectly promote or maintain a market for the Company’s securities.

 

(b)           Selection of Participants.  The Committee shall select the Employees, Non-Employee Directors and Key Advisors to receive Grants and shall determine the number of shares of Company Stock subject to a particular Grant in such manner as the Committee determines.

 

  

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Section 6.              Options

 

The Committee may grant Options to an Employee, Non-Employee Director or Key Advisor upon such terms as the Committee deems appropriate.  The following provisions are applicable to Options:

 

(a)           Number of Shares.  The Committee shall determine the number of shares of Company Stock that will be subject to each Grant of Options to Employees, Non-Employee Directors and Key Advisors.

 

(b)           Type of Option and Exercise Price.

 

(i)           The Committee may grant Incentive Stock Options or Nonqualified Stock Options or any combination of the two, all in accordance with the terms and conditions set forth herein.  Incentive Stock Options may be granted only to employees of the Company or its parent or subsidiary corporations, as defined in section 424 of the Code.  Nonqualified Stock Options may be granted to Employees, Non-Employee Directors and Key Advisors.

 

(ii)           The Exercise Price of Company Stock subject to an Option shall be determined by the Committee and shall be equal to or greater than the Fair Market Value of a share of Company Stock on the date the Option is granted.  However, an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary corporation of the Company, as defined in section 424 of the Code, unless the Exercise Price per share is not less than 110% of the Fair Market Value of a share of Company Stock on the date of grant.

 

(c)           Option Term.  The Committee shall determine the term of each Option.  The term of any Option shall not exceed ten years from the date of grant.  However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary corporation of the Company, as defined in section 424 of the Code, may not have a term that exceeds five years from the date of grant.

 

(d)           Exercisability of Options.  Options shall become exercisable in accordance with such terms and conditions, consistent with the Plan, as may be determined by the Committee and specified in the Grant Instrument.  The Committee may accelerate the exercisability of any or all outstanding Options at any time for any reason.

 

(e)           Grants to Non-Exempt Employees.  Notwithstanding the foregoing, Options granted to persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, may not be exercisable for at least six months after the date of grant (except that such Options may become exercisable, as determined by the Committee, upon the

 

  

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Participant’s death, Disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations).

 

(f)           Termination of Employment, Disability or Death.

 

(i)           Except as provided below, an Option may only be exercised while the Participant is employed by, or providing service to, the Employer as an Employee, member of the Board or Key Advisor.

 

(ii)           In the event that a Participant ceases to be employed by, or provide service to, the Employer for any reason other than Disability, death or termination for Cause, any Option which is otherwise exercisable by the Participant shall terminate unless exercised within 90 days after the date on which the Participant ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term.  Except as otherwise provided by the Committee, any of the Participant’s Options that are not otherwise exercisable as of the date on which the Participant ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

 

(iii)           In the event the Participant ceases to be employed by, or provide service to, the Company on account of a termination for Cause by the Employer, any Option held by the Participant shall terminate as of the date the Participant ceases to be employed by, or provide service to, the Employer.  In addition, notwithstanding any other provisions of this Section 6, if the Committee determines that the Participant has engaged in conduct that constitutes Cause at any time while the Participant is employed by, or providing service to, the Employer or after the Participant’s termination of employment or service, any Option held by the Participant shall immediately terminate and the Participant shall automatically forfeit all shares underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon refund by the Company of the Exercise Price paid by the Participant for such shares.  Upon any exercise of an Option, the Company may withhold delivery of share certificates pending resolution of an inquiry that could lead to a finding resulting in a forfeiture.

 

(iv)           In the event the Participant ceases to be employed by, or provide service to, the Employer because the Participant is Disabled, any Option which is otherwise exercisable by the Participant shall terminate unless exercised within one year after the date on which the Participant ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term.  Except as otherwise provided by the Committee, any of the Participant’s Options which are not otherwise exercisable as of the date on which the Participant ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

 

(v)           If the Participant dies while employed by, or providing service to, the Employer or within 90 days after the date on which the Participant ceases to be employed or provide service on account of a termination specified in Section 6(f)(ii) above (or within such

 

  

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other period of time as may be specified by the Committee), any Option that is otherwise exercisable by the Participant shall terminate unless exercised within one year after the date on which the Participant ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term.  Except as otherwise provided by the Committee, any of the Participant’s Options that are not otherwise exercisable as of the date on which the Participant ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

 

(g)           Exercise of Options.  A Participant may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to the Company.  The Participant shall pay the Exercise Price for an Option as specified by the Committee (i) in cash, (ii) unless the Committee determines otherwise, by delivering shares of Company Stock owned by the Participant and having a Fair Market Value on the date of exercise at least equal to the Exercise Price or by attestation (on a form prescribed by the Committee) to ownership of shares of Company Stock having a Fair Market Value on the date of exercise at least equal to the Exercise Price, (iii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (iv) by such other method as the Committee may approve.  In addition, to the extent an Option is at the time exercisable for vested shares of Company Stock, all or any part of that vested portion may be surrendered to the Company for an appreciation distribution payable in shares of Company Stock with a Fair Market Value at the time of the Option surrender equal to the dollar amount by which the then Fair Market Value of the shares of Company Stock subject to the surrendered portion exceeds the aggregate Exercise Price payable for those shares.  Shares of Company Stock used to exercise an Option shall have been held by the Participant for the requisite period of time necessary to avoid adverse accounting consequences to the Company with respect to the Option.  Payment for the shares to be issued or transferred pursuant to the Option, and any required withholding taxes, must be received by the Company by the time specified by the Committee depending on the type of payment being made, but in all cases prior to the issuance or transfer of such shares.

 

(h)           Limits on Incentive Stock Options.  Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the Company Stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock Option.

 

Section 7.              Stock Awards

 

The Committee may issue or transfer shares of Company Stock to an Employee, Non-Employee Director or Key Advisor under a Stock Award, upon such terms as the Committee deems appropriate.  The following provisions are applicable to Stock Awards:

 

(a)           General Requirements.  Shares of Company Stock issued or transferred pursuant to Stock Awards may be issued or transferred for consideration or for no consideration,

 

  

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and subject to restrictions or no restrictions, as determined by the Committee.  The Committee may, but shall not be required to, establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Committee deems appropriate, including, without limitation, restrictions based upon the achievement of specific performance goals.  The period of time during which the Stock Awards will remain subject to restrictions will be designated in the Grant Instrument as the “Restriction Period.”

 

(b)           Number of Shares.  The Committee shall determine the number of shares of Company Stock to be issued or transferred pursuant to a Stock Award and the restrictions applicable to such shares.

 

(c)           Requirement of Employment or Service.  If the Participant ceases to be employed by, or provide service to, the Employer during a period designated in the Grant Instrument as the Restriction Period, or if other specified conditions are not met, the Stock Award shall terminate as to all shares covered by the Grant as to which the restrictions have not lapsed, and those shares of Company Stock must be immediately returned to the Company.  The Committee may, however, provide for complete or partial exceptions to this requirement as it deems appropriate.

 

(d)           Restrictions on Transfer and Legend on Stock Certificate.  During the Restriction Period, a Participant may not sell, assign, transfer, pledge or otherwise dispose of the shares of a Stock Award except under Section 18(a) below.  Unless otherwise determined by the Committee, the Company will retain possession of certificates for shares of Stock Awards until all restrictions on such shares have lapsed.  Each certificate for a Stock Award, unless held by the Company, shall contain a legend giving appropriate notice of the restrictions in the Grant.  The Participant shall be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on such shares have lapsed.  The Committee may determine that the Company will not issue certificates for Stock Awards until all restrictions on such shares have lapsed.

 

(e)           Right to Vote and to Receive Dividends.  Unless the Committee determines otherwise, during the Restriction Period, the Participant shall have the right to vote shares of Stock Awards and to receive any dividends or other distributions paid on such shares, subject to any restrictions deemed appropriate by the Committee, including, without limitation, the achievement of specific performance goals.

 

(f)           Lapse of Restrictions.  All restrictions imposed on Stock Awards shall lapse upon the expiration of the applicable Restriction Period and the satisfaction of all conditions, if any, imposed by the Committee.  The Committee may determine, as to any or all Stock Awards, that the restrictions shall lapse without regard to any Restriction Period.

 

Section 8.            Stock Units

 

The Committee may grant Stock Units, each of which shall represent one hypothetical share of Company Stock, to an Employee, Non-Employee Director or Key Advisor upon such

 

  

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terms and conditions as the Committee deems appropriate.  The following provisions are applicable to Stock Units:

 

(a)           Crediting of Units.  Each Stock Unit shall represent the right of the Participant to receive a share of Company Stock or an amount of cash based on the value of a share of Company Stock, if and when specified conditions are met.  All Stock Units shall be credited to bookkeeping accounts established on the Company’s records for purposes of the Plan.

 

(b)           Terms of Stock Units.  The Committee may grant Stock Units that are payable if specified performance goals or other conditions are met, or under other circumstances.  Stock Units may be paid at the end of a specified performance period or other period, or payment may be deferred to a date authorized by the Committee.  The Committee shall determine the number of Stock Units to be granted and the requirements applicable to such Stock Units.

 

(c)           Requirement of Employment or Service.  If the Participant ceases to be employed by, or provide service to, the Employer prior to the vesting of Stock Units, or if other conditions established by the Committee are not met, the Participant’s Stock Units shall be forfeited.  The Committee may, however, provide for complete or partial exceptions to this requirement as it deems appropriate.

 

(d)           Payment With Respect to Stock Units.  Payments with respect to Stock Units shall be made in cash, Company Stock or any combination of the foregoing, as the Committee shall determine.

 

Section 9.              Stock Appreciation Rights

 

The Committee may grant SARs to an Employee, Non-Employee Director or Key Advisor separately or in tandem with any Option.  The following provisions are applicable to SARs:

 

(a)           General Requirements.  The Committee may grant SARs to an Employee or Non-Employee Director separately or in tandem with any Option (for all or a portion of the applicable Option).  Tandem SARs may be granted either at the time the Option is granted or at any time thereafter while the Option remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the time of the Grant of the Incentive Stock Option.  The Committee shall establish the base amount of the SAR at the time the SAR is granted.  The base amount of each SAR shall be equal to the per share Exercise Price of the related Option or, if there is no related Option, an amount equal to or greater than the Fair Market Value of a share of Company Stock as of the date of Grant of the SAR.

 

(b)           Tandem SARs.  In the case of tandem SARs, the number of SARs granted to a Participant that shall be exercisable during a specified period shall not exceed the number of shares of Company Stock that the Participant may purchase upon the exercise of the related Option during such period.  Upon the exercise of an Option, the SARs relating to the Company

 

  

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Stock covered by such Option shall terminate.  Upon the exercise of SARs, the related Option shall terminate to the extent of an equal number of shares of Company Stock.

 

(c)           Exercisability.  An SAR shall be exercisable during the period specified by the Committee in the Grant Instrument and shall be subject to such vesting and other restrictions as may be specified in the Grant Instrument.  The Committee may accelerate the exercisability of any or all outstanding SARs at any time for any reason.  SARs may only be exercised while the Participant is employed by, or providing service to, the Employer or during the applicable period after termination of employment or service as described in Section 6(f) above.  A tandem SAR shall be exercisable only during the period when the Option to which it is related is also exercisable.

 

(d)           Grants to Non-Exempt Employees.  Notwithstanding the foregoing, SARs granted to persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, may not be exercisable for at least six months after the date of grant (except that such SARs may become exercisable, as determined by the Committee, upon the Participant’s death, Disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations).

 

(e)           Value of SARs.  When a Participant exercises SARs, the Participant shall receive in settlement of such SARs an amount equal to the value of the stock appreciation for the number of SARs exercised.  The stock appreciation for an SAR is the amount by which the Fair Market Value of the underlying Company Stock on the date of exercise of the SAR exceeds the base amount of the SAR as described in subsection (a).

 

(f)           Form of Payment.  The appreciation in an SAR shall be paid in shares of Company Stock, cash or any combination of the foregoing, as the Committee shall determine.  For purposes of calculating the number of shares of Company Stock to be received, shares of Company Stock shall be valued at their Fair Market Value on the date of exercise of the SAR.

 

Section 10.           Performance Units

 

The Committee shall have the discretionary authority to make Performance Unit awards in accordance with the terms of this Section 10.  The following provisions are applicable to Performance Unit awards:

 

(a)           General Requirements.  A Performance Unit award shall represent a participating interest in a special bonus pool tied to the attainment of pre-established corporate performance objectives based on one or more performance goals or the right to receive a targeted dollar amount tied to the attainment of pre-established corporate performance objectives based on one or more performance goals.  The amount of the bonus pool may vary with the level at which the applicable performance objectives are attained, and the value of each Performance Unit which becomes due and payable upon the attained level of performance shall be determined by dividing the amount of the resulting bonus pool, if any, by the total number of Performance Units issued and outstanding at the completion of the applicable performance period.  Similarly,

 

  

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the targeted dollar amount may vary with the level at which the applicable performance objectives are attained and the value of the Performance Units which becomes due and payable upon the attained level of performance shall be determined based on the threshold, target and maximum amounts that may be paid if the performance goals are met.

 

(b)           Continued Employment or Service Requirement.  Performance Units may also be structured to include a requirement that the Participant continue to be employed by, or providing service to, the Employer following the completion of the performance period in order to vest in the Performance Units awarded with respect to that performance period.

 

(c)           Payment with Respect to Performance Units.  Payments with respect to Performance Units shall be made in cash, Company Stock or any combination of the foregoing, as the Committee shall determine.

 

(d)           Requirement of Employment or Service.  If a Participant ceases to be employed by, or providing service to the Company prior to the vesting of Performance Units, or if other conditions established by the Committee are not met, the Participant’s Performance Units shall be forfeited.  The Committee may provide for complete or partial exceptions to this requirement as it deems appropriate.

 

Section 11.            Other Stock-Based Awards

 

The Committee may grant Other Stock-Based Awards, which are awards (other than those described in Sections 6, 7, 8, 9 and 10 of the Plan) that are based on or measured by Company Stock, to any Employee, Non-Employee Director or Key Advisor, on such terms and conditions as the Committee shall determine.  Other Stock-Based Awards may be awarded subject to the achievement of performance goals or other conditions and may be payable in cash, Company Stock or any combination of the foregoing, as the Committee shall determine.

 

Section 12.            Dividend Equivalents

 

The Committee may grant Dividend Equivalents in connection Stock Units or Other Stock-Based Awards.  Dividend Equivalents may be paid currently or accrued as contingent cash obligations and may be payable in cash or shares of Company Stock, and upon such terms as the Committee may establish, including, without limitation, the achievement of specific performance goals.

 

Section 13.            Qualified Performance-Based Compensation

 

The Committee may determine that Stock Awards, Stock Units, Performance Units Other Stock-Based Awards and Dividend Equivalents granted to an Employee shall be considered “qualified performance-based compensation” under section 162(m) of the Code.  The following provisions shall apply to Grants of Stock Awards, Stock Units, Performance Units Other Stock-Based Awards and Dividend Equivalents that are to be considered “qualified performance-based compensation” under section 162(m) of the Code:

 

  

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(a)           Performance Goals.

 

(i)           When Stock Awards, Stock Units, Performance Units, Other Stock-Based Awards or Dividend Equivalents that are to be considered “qualified performance-based compensation” are granted, the Committee shall establish in writing (A) the objective performance goals that must be met, (B) the performance period during which the performance will be measured, (C) the threshold, target and maximum amounts that may be paid if the performance goals are met, and (D) any other conditions that the Committee deems appropriate and consistent with the Plan and section 162(m) of the Code.

 

(ii)           The performance goal criteria may relate to the Participant’s business unit or the performance of the Company and its parents and subsidiaries as a whole, or any combination of the foregoing. The Committee shall use objectively determinable performance goals based on one or more of the following criteria: cash flow; earnings (including gross margin, earnings before interest and taxes, earnings before taxes, earnings before interest, taxes, depreciation, amortization and charges for stock-based compensation, earnings before interest, taxes, depreciation and amortization, and net earnings); earnings per share; growth in earnings or earnings per share; stock price; return on equity or average stockholder equity; total stockholder return or growth in total stockholder return either directly or in relation to a comparative group; return on capital; return on assets or net assets; revenue, growth in revenue or return on sales; income or net income; operating income, net operating income or net operating income after tax; operating profit or net operating profit; operating margin; return on operating revenue or return on operating profit; regulatory filings; regulatory approvals, litigation and regulatory resolution goals; other operational, regulatory or departmental objectives; budget comparisons; growth in stockholder value relative to established indexes, or another peer group or peer group index; development and implementation of strategic plans and/or organizational restructuring goals; development and implementation of risk and crisis management programs; improvement in workforce diversity; compliance requirements and compliance relief; accreditation goals; safety goals; project goals; productivity goals; workforce management and succession planning goals; economic value added (including typical adjustments consistently applied from generally accepted accounting principles required to determine economic value added performance measures); growth and innovation of technologies or delivery methods; growth of customer or subscriber base; measures of customer satisfaction, employee satisfaction or staff development; development or marketing collaborations, formations of joint ventures or partnerships or the completion of other similar transactions intended to enhance the Corporation’s revenue or profitability or enhance its customer base; merger and acquisitions; and other similar criteria consistent with the foregoing.

 

(b)           Establishment of Goals.  The Committee shall establish the performance goals in writing either before the beginning of the performance period or during a period ending no later than the earlier of (i) 90 days after the beginning of the performance period or (ii) the date on which 25% of the performance period has been completed, or such other date as may be required or permitted under applicable regulations under section 162(m) of the Code.  The performance goals shall satisfy the requirements for “qualified performance-based

 

  

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compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met.  The Committee shall not have discretion to increase the amount of compensation that is payable upon achievement of the designated performance goals.

 

(c)           Certification of Results.  The Committee shall certify and announce the results for each performance period to all Participants after the announcement of the Company’s financial results for the performance period.  If and to the extent that the Committee does not certify that the performance goals have been met, the grants of Stock Awards, Stock Units, Performance Units, Other Stock-Based Awards and Dividend Equivalents for the performance period shall be forfeited or shall not be made, as applicable.  If Dividend Equivalents are granted as “qualified performance-based compensation” under section 162(m) of the Code, a Participant may not accrue more than $1,000,000 of such Dividend Equivalents during any calendar year.

 

(d)           Death, Disability or Other Circumstances.  The Committee may provide that Stock Awards, Stock Units, Performance Units, Other Stock-Based Awards and Dividend Equivalents shall be payable or restrictions on such Grants shall lapse, in whole or in part, in the event of the Participant’s death or Disability during the performance period, or under other circumstances consistent with the Treasury regulations and rulings under section 162(m) of the Code.

 

Section 14.           Consequences of a Change of Control

 

(a)           Notice and Acceleration.  Unless the Committee determines otherwise, effective upon the date of the Change of Control, (i) all outstanding Options and SARs shall automatically accelerate and become fully exercisable, (ii) the restrictions and conditions on all outstanding Stock Awards shall immediately lapse, and (iii) all Stock Units, Performance Units, Other Stock-Based Awards and Dividend Equivalents shall become fully vested and shall be paid at their target values, or in such greater amounts as the Committee may determine.

 

(b)           Other Alternatives.  Notwithstanding the foregoing, in the event of a Change of Control, the Committee may take one or more of the following actions with respect to any or all outstanding Grants: the Committee may (i) require that Participants surrender their outstanding Options and SARs in exchange for one or more payments by the Company, in cash or Company Stock as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value of the shares of Company Stock subject to the Participant’s unexercised Options and SARs exceeds the Exercise Price of the Options or the base amount of the SARs, as applicable, (ii) after giving Participants an opportunity to exercise their outstanding Options and SARs, terminate any or all unexercised Options and SARs at such time as the Committee deems appropriate, or (iii) determine that outstanding Options and SARs that are not exercised shall be assumed by, or replaced with comparable options or rights by, the surviving corporation, (or a parent or subsidiary of the surviving corporation), and other outstanding Grants that remain in effect after the Change of Control shall be converted to similar grants of the surviving corporation (or a parent or subsidiary of the surviving corporation).  Such surrender

 

  

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or termination shall take place as of the date of the Change of Control or such other date as the Committee may specify.

 

Section 15.           Bonus Awards

 

(a)           General Requirements.  The Committee may grant Bonus Awards that shall be considered “qualified performance-based compensation” under section 162(m) of the Code to Employees who are executive Employees, upon such terms and conditions as the Committee deems appropriate under this Section 15.

 

(b)           Target Bonus Awards and Performance Goals.  When the Committee decides to make Bonus Awards under this Section 15, the Committee shall select the executive Employees who will be eligible for Bonus Awards, specify the performance period and establish target Bonus Awards and performance goals for the performance period.  The performance period shall be the Company’s fiscal year or such other period (of not more than 12 months) as the Committee determines.  The Committee shall determine each Participant’s target Bonus Award based on the Participant’s responsibility level, position or such other criteria as the Committee shall determine.  A Participant’s target Bonus Award may provide for differing amounts to be paid based on differing thresholds of performance.  The Committee shall establish in writing (i) the objective performance goals that must be met in order for the Bonus Awards to be paid for the performance period, (ii) the maximum amounts that may be paid if the performance goals are met, (iii) any threshold levels of performance that must be met in order for Bonus Awards to be paid, and (iv) any other conditions that the Committee deems appropriate and consistent with the requirements of section 162(m) of the Code for “qualified performance-based compensation.”  The performance goals shall satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the performance goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met.  The Company shall notify each Participant of the Participant’s target Bonus Award and the applicable performance goals for the performance period.

 

(c)           Criteria Used for Objective Performance Goals.  The Committee shall use objectively determinable performance goals based on one or more of the criteria described in Section 13(a)(ii) above.  The performance goals may relate to one or more business units or the performance of the Company and its subsidiaries as a whole, or any combination of the foregoing.  Performance goals need not be uniform among Participants.

 

(d)           Timing of Establishment of Target Bonus Awards and Goals. The Committee shall establish each Participant’s target Bonus Award and performance goals in writing either before the beginning of the performance period or during a period ending no later than the earlier of (i) 90 days after the beginning of the performance period or (ii) the date on which 25% of the performance period has been completed, or such other date as may be required or permitted under applicable regulations under section 162(m) of the Code.

 

  

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(e)           Section 162(m) Requirements.  A target Bonus Award that is designated as “qualified performance-based compensation” under section 162(m) of the Code may not be awarded as an alternative to any other award that is not designated as “qualified performance-based compensation,” but instead must be separate and apart from all other awards made.  The Committee shall not have discretion to increase the amount of compensation that is payable based achievement of the performance goals, but the Committee may reduce the amount of compensation that is payable based upon the Committee’s assessment of personal performance or other factors.  Any reduction of a Participant’s Bonus Award shall not result in an increase in any other Participant’s Bonus Award.

 

(f)           Certification of Results.  The Committee shall certify the performance results for the performance period after the performance period ends.  The Committee shall determine the amount, if any, to be paid pursuant to each Bonus Award based on the achievement of the performance goals, the Committee’s exercise of its discretion to reduce Bonus Awards and the satisfaction of all other terms of the Bonus Awards.  Subject to the provisions of Sections 15(i) and Section 16, payment of the Bonus Awards certified by the Committee shall be made in a single lump sum cash payment on or after January 1, but not later than March 15 of the calendar year following the close of the performance period.

 

(g)           Limitations on Rights to Payment of Bonus Awards.  No Participant shall have any right to receive payment of a Bonus Award under the Plan for a performance period unless the Participant remains in the employ of the Employer through the last day of the performance period; provided, however, that the Committee may determine that if a Participant’s employment with the Company terminates prior to the end of the performance period, the Participant may be eligible to receive all or a prorated portion of any Bonus Award that would otherwise have been earned for the performance period, under such circumstances as the Committee deems appropriate.

 

(h)           Change of Control.  If a Change of Control occurs prior to the end of a performance period, the Committee may determine that each Participant who is then an Employee and was awarded a target Bonus Award for the performance period may receive a Bonus Award for the performance period, in such amount and at such time as the Committee determines.

 

(i)            Discretionary and Other Bonuses.  In addition to Bonus Awards that are designated “qualified performance-based compensation” under section 162(m) of the Code, as described above, the Committee may grant to executive Employees such other bonuses as the Committee deems appropriate, which may be based on individual performance, Company performance or such other criteria as the Committee determines.  Decisions with respect to such bonuses shall be made separate and apart from the Bonus Awards described in this Section 15.

 

Section 16.            Deferrals

 

The Committee may permit or require a Participant to defer receipt of the payment of cash or the delivery of shares that would otherwise be due to such Participant in connection with

 

  

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any Grant or Bonus Award.  If any such deferral election is permitted or required, the Committee shall establish rules and procedures for such deferrals and may provide for interest or other earnings to be paid on such deferrals.  The rules and procedures for any such deferrals shall be consistent with applicable requirements of section 409A of the Code.

 

Section 17.           Withholding of Taxes

 

(a)           Required Withholding.  All Grants and Bonus Awards under the Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements.  The Employer may require that the Participant or other person receiving Grants or Bonus Awards or exercising Grants pay to the Employer the amount of any federal, state or local taxes that the Employer is required to withhold with respect to such Grants or Bonus Awards, or the Employer may deduct from other wages and compensation paid by the Employer the amount of any withholding taxes due with respect to such Grants or Bonus Awards.

 

(b)           Election to Withhold Shares.  If the Committee so permits, a Participant may elect to satisfy the Employer’s tax withholding obligation with respect to Grants paid in Company Stock by having shares withheld up to an amount that does not exceed the Participant’s minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities.  The election must be in a form and manner prescribed by the Committee and may be subject to the prior approval of the Committee.

 

Section 18.           Transferability of Grants

 

(a)           Nontransferability of Grants.  Except as described in subsection (b) below, only the Participant may exercise rights under a Grant during the Participant’s lifetime.  A Participant may not transfer those rights except (i) by will or by the laws of descent and distribution or (ii) with respect to Grants other than Incentive Stock Options, pursuant to a domestic relations order.  When a Participant dies, the personal representative or other person entitled to succeed to the rights of the Participant may exercise such rights.  Any such successor must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Participant’s will or under the applicable laws of descent and distribution.  Bonus Awards are not transferable.  If a Participant dies, any amounts payable after the Participant’s death pursuant to a Bonus Award shall be paid to the personal representative or other person entitled to succeed to the rights of the Participant.

 

(b)           Transfer of Nonqualified Stock Options.  Notwithstanding the foregoing, the Committee may provide, in a Grant Instrument, that a Participant may transfer Nonqualified Stock Options to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with the applicable securities laws, according to such terms as the Committee may determine; provided that the Participant receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

 

  

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Section 19.            Requirements for Issuance or Transfer of Shares

 

No Company Stock shall be issued or transferred in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance or transfer of such Company Stock have been complied with to the satisfaction of the Committee.  The Committee shall have the right to condition any Grant on the Participant’s undertaking in writing to comply with such restrictions on his or her subsequent disposition of the shares of Company Stock as the Committee shall deem necessary or advisable, and certificates representing such shares may be legended to reflect any such restrictions.  Certificates representing shares of Company Stock issued or transferred under the Plan may be subject to such stop-transfer orders and other restrictions as the Committee deems appropriate to comply with applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon.

 

Section 20.            Amendment and Termination of the Plan

 

(a)           Amendment.  The Board may amend or terminate the Plan at any time; provided, however, that the Board shall not amend the Plan without stockholder approval if such approval is required in order to comply with the Code or other applicable law, or to comply with applicable stock exchange requirements.

 

(b)           Repricing of Options or SARs.

 

(i)           The Committee shall have the authority to effect, at any time and from time to time, with the consent of the affected holders, the cancellation of any or all outstanding Options or SAR and to grant in exchange one or more of the following: (A) new Options or SARs covering the same or a different number of shares of Company Stock but with an Exercise Price or base amount per share not less than the Fair Market Value per share of Company Stock on the new grant date or (B) cash or shares of Company Stock, whether vested or unvested, equal in value to the value of the cancelled Options or SARs.

 

(ii)           The Committee shall also have the authority, exercisable at any time and from time to time, with the consent of the affected holders, to reduce the Exercise Price or base amount of one or more outstanding Options or SARs to the then current Fair Market Value per share of Company Stock or issue new Options or SARs with a lower Exercise Price or base amount on immediate cancellation of outstanding Options or SARs with a higher Exercise Price or base amount.

 

(c)           Stockholder Approval for “Qualified Performance-Based Compensation.” If Grants are made as “qualified performance-based compensation” under Section 13 above or if Bonus Awards are made under Section 15 above, the Plan must be reapproved by the stockholders no later than the first stockholders meeting that occurs in the fifth year following the year in which the stockholders previously approved the provisions of Sections 13 and 15, if additional Grants are to be made under Section 13 or if additional Bonus Awards are made under Section 15 and if required by section 162(m) of the Code or the regulations thereunder.

 

  

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(d)           Termination of Plan.  The Plan shall terminate on the day immediately preceding the tenth anniversary of its Effective Date, unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the stockholders.

 

(e)           Termination and Amendment of Outstanding Grants.  A termination or amendment of the Plan that occurs after a Grant or Bonus Award is made shall not materially impair the rights of a Participant unless the Participant consents or unless the Committee acts under Section 21(f) below.  The termination of the Plan shall not impair the power and authority of the Committee with respect to an outstanding Grant or Bonus Award.  Whether or not the Plan has terminated, an outstanding Grant or Bonus Award may be terminated or amended under Section 21(f) below or may be amended by agreement of the Company and the Participant consistent with the Plan.

 

Section 21.            Miscellaneous

 

(a)           Grants in Connection with Corporate Transactions and Otherwise.  Nothing contained in the Plan shall be construed to (i) limit the right of the Committee to make Grants under the Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees, or (ii) limit the right of the Company to grant stock options or make other awards outside of the Plan.  The Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company, in substitution for a stock option or stock awards grant made by such corporation.  Notwithstanding anything in the Plan to the contrary, the Committee may establish such terms and conditions of the new Grants as it deems appropriate, including setting the Exercise Price of Options or the base price of SARs at a price necessary to retain for the Participant the same economic value as the prior options or rights.

 

(b)           Governing Document.  The Plan shall be the controlling document.  No other statements, representations, explanatory materials or examples, oral or written, may amend the Plan in any manner.  The Plan shall be binding upon and enforceable against the Company and its successors and assigns.

 

(c)           Funding of the Plan.  The Plan shall be unfunded.  The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants or Bonus Awards under the Plan.

 

(d)           Rights of Participants.  Nothing in the Plan shall entitle any Employee, Non-Employee Director, Key Advisor or other person to any claim or right to receive a Grant or Bonus Award under the Plan.  Neither the Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employ of the Employer or any other employment rights.

 

  

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(e)           No Fractional Shares.  No fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or any Grant.  Except as otherwise provided under the Plan, the Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

(f)           Compliance with Law.

 

(i)           The Plan, the exercise of Options and SARs and the obligations of the Company to issue or transfer shares of Company Stock under Grants shall be subject to all applicable laws and regulations, and to approvals by any governmental or regulatory agency as may be required.  With respect to persons subject to section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act.  In addition, it is the intent of the Company that Incentive Stock Options comply with the applicable provisions of section 422 of the Code, that Grants of “qualified performance-based compensation” and Bonus Awards comply with the applicable provisions of section 162(m) of the Code and that, to the extent applicable, Grants and Bonus Awards comply with the requirements of section 409A of the Code.  To the extent that any legal requirement of section 16 of the Exchange Act or section 422, 162(m) or 409A of the Code as set forth in the Plan ceases to be required under section 16 of the Exchange Act or section 422, 162(m) or 409A of the Code, that Plan provision shall cease to apply.  The Committee may revoke any Grant or Bonus Award if it is contrary to law or modify a Grant or Bonus Award to bring it into compliance with any valid and mandatory government regulation.  The Committee may also adopt rules regarding the withholding of taxes on payments to Participants.  The Committee may, in its sole discretion, agree to limit its authority under this Section.

 

(ii)           The Plan is intended to comply with the requirements of section 409A of the Code, to the extent applicable.  Each Grant shall be construed and administered such that the Grant either (A) qualifies for an exemption from the requirements of section 409A of the Code or (B) satisfies the requirements of section 409A of the Code.  If a Grant is subject to section 409A of the Code, (I) distributions shall only be made in a manner and upon an event permitted under section 409A of the Code, (II) payments to be made upon a termination of employment shall only be made upon a “separation from service” under section 409A of the Code, (III) unless the Grant specifies otherwise, each installment payment shall be treated as a separate payment for purposes of section 409A of the Code, and (IV) in no event shall a Grantee, directly or indirectly, designate the calendar year in which a distribution is made except in accordance with section 409A of the Code.

 

(iii)           Any Grant that is subject to section 409A of the Code and that is to be distributed to a Key Employee (as defined below) upon separation from service shall be administered so that any distribution with respect to such Award shall be postponed for six months following the date of the Participant’s separation from service, if required by section 409A of the Code.  If a distribution is delayed pursuant to section 409A of the Code, the distribution shall be paid within 15 days after the end of the six-month period.  If the Grantee

 

  

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dies during such six-month period, any postponed amounts shall be paid within 90 days of the Grantee’s death.  The determination of Key Employees, including the number and identity of persons considered Key Employees and the identification date, shall be made by the Committee or its delegate each year in accordance with section 416(i) of the Code and the “specified employee” requirements of section 409A of the Code.

 

(iv)           Notwithstanding anything in the Plan or any Grant agreement to the contrary, each Grantee shall be solely responsible for the tax consequences of Grants under the Plan, and in no event shall the Company have any responsibility or liability if a Grant does not meet any applicable requirements of section 409A of the Code.  Although the Company intends to administer the Plan to prevent taxation under section 409A of the Code, the Company does not represent or warrant that the Plan or any Grant complies with any provision of federal, state, local or other tax law.

 

(g)           Employees Subject to Taxation Outside the United States.  With respect to Participants who are believed by the Committee to be subject to taxation in countries other than the United States, the Committee may make Grants on such terms and conditions, consistent with the Plan, as the Committee deems appropriate to comply with the laws of the applicable countries, and the Committee may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws.

 

(h)           Clawback Rights.  Subject to the requirements of applicable law, the Committee may provide in any Grant Instrument that, if a Participant breaches any restrictive covenant agreement between the Participant and the Employer or otherwise engages in activities that constitute Cause either while employed by, or providing service to, the Employer or within a specified period of time thereafter, all Grants held by the Participant shall terminate, and the Company may rescind any exercise of an Option or SAR and the vesting of any other Grant and delivery of shares upon such exercise or vesting, as applicable on such terms as the Committee shall determine, including the right to require that in the event of any such rescission, (i) the Participant shall return to the Company the shares received upon the exercise of any Option or SAR and/or the vesting and payment of any other Grant or, (ii) if the Participant no longer owns the shares, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of any sale or other disposition of the shares  (or, in the event the Participant transfers the shares by gift or otherwise without consideration, the Fair Market Value of the shares on the date of the breach), net of the price originally paid by the Participant for the shares.  Payment by the Participant shall be made in such manner and on such terms and conditions as may be required by the Committee.  The Employer shall be entitled to set off against the amount of any such payment any amounts otherwise owed to the Participant by the Employer.

 

(i)           Governing Law.  The validity, construction, interpretation and effect of the Plan and Grant Instruments issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Minnesota, without giving effect to the conflict of laws provisions thereof.

 

 

 

 

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