Document:

10.50 Hartung Employment Agreement 012014

EMPLOYMENT AGREEMENT
THIS AGREEMENT (the “Agreement”) is made and entered into effective the 1st day of January, 2014 (the “Effective Date”), by and between NORTHRIM BANCORP, INC. and its wholly owned subsidiary, NORTHRIM BANK, a state‐chartered commercial bank, with its principal office in Anchorage, Alaska (collectively, the “Employer”), and Steven L. Hartung (the “Executive”).
In consideration of the mutual promises made in this Agreement, the parties agree as follows:
1.    Employment.
Employer employs Executive and Executive accepts employment with Employer as its Executive Vice President, Chief Credit Officer.
2.    Term.
The term of this Agreement (the “Term”) shall commence on the Effective Date and, unless terminated earlier pursuant to Section 5, shall continue through December 31, 2014; provided, however, that on January 1, 2015 and each succeeding January 1, the Term shall automatically be extended for one additional year unless, not later than ninety (90) days prior to any such January 1, either party shall have given written notice to the other that it does not wish to extend the Term.  In the event the Term is not extended, Executive shall have no rights to any of the severance payments or benefits continuation described in Section 5 except as specifically provided for in Section 5.a.  
3.    Duties.
The Executive will serve as Executive Vice President, Chief Credit Officer of the Employer.  Executive shall render such executive, management and administrative services and perform such tasks in connection with the affairs and overall operation of the Employer as is customary for his position, subject to the direction of Employer’s President and Board of Directors.  Executive shall devote necessary time, attention and effort to Employer’s business in order to properly discharge his responsibilities under this Agreement.
4.    Compensation, Benefits, Reimbursement and Profit Sharing.
a.    Base Salary.  In consideration for all services rendered by Executive during the term of this Agreement, Employer shall pay Executive an annual base salary (before all customary and proper payroll deductions) of $238,198 as adjusted from time to time (“Base Salary”).  The Board of Directors of the Employer shall review Executive’s salary each year, in a manner consistent with that used for all management employees of the Employer, and in its sole discretion may adjust such salary commensurate with the Executive’s performance under this Agreement.

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b.    Profit Sharing Plan.  Under the Northrim BanCorp, Inc. Profit Sharing Plan, Executive shall be eligible to receive an annual profit share based on performance as defined by the Board of Directors.  Executive will be classified in the Executive tier under the Plan’s Responsibility Factors. If Employer is required to prepare an accounting restatement due to “material noncompliance of the Employer”, the Employer will recover from the Executive any incentive compensation during the three (3) years prior to the date of the restatement, in excess of what would have been paid under the restatement.  Executive’s signature on this Agreement authorizes Employer to offset or deduct from any compensation Employer may owe Executive, any excess payments (in whole or in part) that Executive may owe Employer due to such restatement(s).  
c.    Stock Incentive Plan.  Executive shall be eligible for awards under the Employer’s Stock Incentive Plan.  The type, timing and size of awards will be at the discretion of the Board of Directors.
d.    Supplemental Executive Retirement Plan (“SERP”), Supplemental Executive Retirement Deferred Compensation Plan and Deferred Compensation Plan.  Executive shall also be entitled to receive an annual contribution equal to twenty five percent (25%) of annual Base Salary in accordance with the Employer’s Supplemental Executive Retirement Plan, as may be adjusted at the discretion of the Board of Directors from time to time.  Annually, Employer will also make payment to Executive’s account as outlined in the Employer’s Supplemental Executive Retirement Deferred Compensation Plan.  The Executive may also participate in the Employer’s Deferred Compensation Plan.
e.    Other Benefits.  Throughout the term of this Agreement, Employer shall provide Executive with reasonable health insurance, disability and other employee benefits.  Executive shall participate in all employee benefit plans and programs of Employer on a basis at least as favorable as that accorded to any other officer of Employer.
f.    Expenses.  Employer shall reimburse Executive for his reasonable expenses (including, without limitation, travel, entertainment, and similar expenses) incurred in performing and promoting the business of Employer.  Executive shall present from time to time itemized accounts and receipts of any such expenses as required by Employer, subject to any limits of company policy and the rules and regulations of the Internal Revenue Service, including the Internal Revenue Code, (referred to throughout this Agreement as “IRC” or the “Code”).
g.    Automobile Allowance.  Executive shall receive a SEVEN HUNDRED DOLLAR ($700.00) monthly automobile allowance for his automobile, fuel and maintenance expenses for Bank business.  No other expense reimbursement will be provided for use of his vehicle.
5.    Termination of Agreement.
a.    Termination Due to a Change of Control.  If (A) Employer (either Northrim BanCorp, Inc. or Northrim Bank) is subjected to a Change of Control (as defined in Section 5.f.(i)), and (B) either Employer or its assigns terminates Executive’s employment without Cause (either during the annual term of this Agreement or by refusing to extend this 

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Agreement when the annual termination occurs every December 31) or Executive terminates his employment for Good Reason within 730 days of such Change of Control, then Employer shall pay Executive  (i) all Base Salary earned and all reimbursable expenses incurred under this Agreement through such termination date; (ii) an amount equal to one (1) times Executive’s highest Base Salary over the prior three (3) years; and (iii) benefits described in Sections 5.b.(I) and (II) below.   The amounts described in Section 5.a.(i) and (ii) herein shall be paid no later than forty-five (45) days after the day on which employment is terminated.    No payment will be made pursuant to Section 5.a.(ii) unless the Executive has signed an agreement, in a form acceptable to Employer, that releases and holds Employer harmless from all known and unknown claims and liabilities arising out of Executive’s employment with Employer or the performance of this Agreement (“Release Agreement”) and the Release Agreement has become irrevocable prior to the payment date.
b.    Termination by Employer Without Cause or by Executive for Good Reason.  If Employer terminates Executive’s employment without Cause, or if Executive terminates his employment for Good Reason, Employer shall pay Executive in a lump sum:  (i) all Base Salary earned and all reimbursable expenses incurred under this Agreement through such termination date; and (ii) an amount equal to one (1) times Executive’s highest Base Salary over the prior three (3) years.  The amount described in 5.b.(i) herein shall be paid no later than forty-five (45) days after the day on which employment is terminated.  The amount described in 5.b.(ii) herein shall be paid on the first day of the month following a period of six (6) months after the termination of employment, provided that the payment may be made sooner if  either (i) the amount does not exceed the IRC Safe Harbor or (ii) at the Executive’s election, the amount described in Section 5.a.(ii) is reduced to fit within the IRC Safe Harbor.  No payment will be made pursuant to Section 5.a.(ii) unless the Executive has signed a Release Agreement which has become irrevocable prior to the payment date.  
(I)    Benefits Continuation.  In addition, Executive shall be entitled to health and dental insurance benefits for a period of eighteen (18) months following the termination of this Agreement.  These benefits will be provided at Employer’s expense, but such period shall count towards the Employer’s continuation of coverage obligation under Section 4980B of the Internal Revenue Code (commonly referred to as “COBRA”).
(II)    Age and Service Credit.  Executive shall also be entitled to receive age credit and credit for period of service towards all SERP plans for the remaining period of time covered by this Agreement.  If Executive is hired by Employer, its assigns, any company in control of Employer, or any company controlled by Employer during the period covered by this Agreement, then Executive will be entitled to be treated for all purposes relating to future compensation, and benefits, as if this Agreement had never been terminated and as if Executive had performed his responsibilities as an Executive throughout the period originally covered by this Agreement.
c.    Termination by Employer for Cause or by Executive Without Good Reason.  If Employer terminates Executive’s employment for Cause or if Executive terminates his employment without Good Reason, Employer shall pay Executive upon the effective date of such termination only such Base Salary earned and expenses reimbursable under this Agreement incurred through such termination date.  In such case, Executive shall 

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have no right to receive compensation or other benefits for any period after termination under this Agreement.  
d.    Termination Due to Disability.  If Employer terminates Executive’s employment on account of any mental or physical Disability that prevents Executive from performing his essential job functions, even with reasonable accommodation, Executive shall be entitled to:  (i) all Base Salary earned and reimbursement for expenses incurred under this Agreement through the termination date, (ii) full Base Salary for the year following the termination date (less the amount of any payments received by Executive during such one (1) year period under any Employer‐sponsored disability plan), and (iii) health and dental insurance benefits for a period of one (1) year following the termination date, which benefits will be provided at Employer’s expense, but such period shall count towards the Employer’s continuation of coverage obligation under Section 4980B of Code (commonly referred to as “COBRA”).   All such compensation shall be paid Executive in one (1) lump sum the first day of the month following a period of six (6) months after Executive’s employment was terminated, provided that Executive has signed a Release Agreement which has become irrevocable prior to the payment date.
If any disputed termination under Section 5.c. is subsequently determined to have been without Cause, Executive's recovery shall be limited to those payments and benefits set out under Section 5.b. 
e.    Termination Upon Death of Executive.  Executive’s employment under this Agreement shall be terminated upon the death of Executive.  In such case, the Employer shall be obligated to pay to the surviving spouse of Executive, or if there is none, to the Executive’s estate: (i) that portion of Executive’s Base Salary that would otherwise have been paid to him for the month in which his death occurred, and (ii) any amounts due him pursuant to the Northrim Bank Savings Incentive Plan (401-K) and the Northrim BanCorp, Inc. Profit Sharing Plan, any supplemental deferred compensation plan, and any other death, insurance, employee benefit plan or stock benefit plan provided to Executive by the Employer, according to the terms of the respective plans.
f.    Termination Definitions.
(i)    “Change of Control.”  For purposes of this Agreement, the term “Change of Control” shall mean the occurrence of one or more of the following events:  (A) One (1) person or entity acquiring or otherwise becoming the owner of twenty-five percent (25%) or more of Employer’s outstanding common stock; (B) Replacement of a majority of the incumbent directors of Northrim BanCorp, Inc. or Northrim Bank by directors whose elections have not been supported by a majority of the Board of either company, as appropriate; (C) Dissolution or sale of fifty percent (50%) or more in value of the assets, of either Northrim BanCorp, Inc. or Northrim Bank; or (D) A change “in the ownership or effective control” or “in the ownership of a substantial portion of the assets” of Employer, within the meaning of Section 280G of the Internal Revenue Code.
(ii)    “Cause.”  For purposes of this Agreement, termination for “Cause” shall include termination because Executive (A) continually fails to substantially perform his duties with the Employer, (B) is adjudged guilty of a felony, any crime involving 

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dishonesty or breach of trust or any crime involving a breach of his fiduciary duties to the Employer, (C) is willfully and continually failing to comply with any law, rule, or regulation (other than traffic violations or similar offenses) or final cease and desist order of a regulatory agency having jurisdiction over Employer, (D)  commits a material act of dishonesty or disloyalty related to the business of the Employer, or (E) is unable to substantially perform his duties with the Employer due to drug addiction or chronic alcoholism.  Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three‐quarters (3/4) of the entire membership of the Employer’s Board of Directors at a meeting of the Board called for such purpose (after reasonable notice to Executive and an opportunity for him, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, he was guilty of conduct that constitutes Cause (as defined above) and specifying the conduct in detail.
(iii)    “Disability.”  For purposes of this Agreement, “Disability” shall mean a medically diagnosed physical or mental impairment that may be expected to result in death, or to be of long, continued duration, and that renders Executive incapable of performing his essential job functions under this Agreement, even after he has been accorded reasonable accommodation.  Employer’s Board of Directors, acting in good faith, in accordance with applicable law, shall make the final determination of whether Executive is suffering under any Disability (as herein defined) and, for purposes of making such determination, may require Executive to submit himself to a physical examination by a physician mutually agreed upon by the Executive and Employer’s Board of Directors at Employer’s expense.
(iv)    “Good Reason.”  For purposes of this Agreement, termination for “Good Reason” shall mean termination by Executive as a result of any material breach of this Agreement by Employer.  Good Reason shall include, but not be limited to:  (A) a material reduction in Executive’s compensation defined as a reduction equal to or greater than five percent (5%) of Executive’s then annual base salary, (B) a material reduction in Executive’s duties and responsibilities, but not merely a change in title, or (C) relocation of Executive’s primary workplace by more than fifty (50) miles.  “Good Reason” will only be deemed to occur if, within ninety (90) days after a material reduction or change described above first occurs, the Executive provides notice to the Employer of the existence of Good Reason and of the Executive’s intended termination of employment due to Good Reason, and the Employer does not remove the Good Reason condition within ninety (90) days after receiving such notice from the Executive. The Executive’s written notice must explain the basis on which the Executive believes Good Reason exists, the cure period, and the date on which the Executive intends to terminate employment, which must be no later than six (6) months after the existence of the Good Reason.  The provisions of Section 5.f.(iv) are intended to comply with the Good Reason safe harbor provisions of Code Section 409A and applicable regulations.
(v)    Termination from Employment.  A termination from employment under this Agreement shall mean a “Separation from Service” as interpreted in accordance with Code Section 409A and generally meaning the date on which the Executive is no longer performing services for the Employer.  The Executive shall not have 

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a Separation from Service while on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months, or if longer, so long as the Executive retains a right to reemployment under an applicable statute or contract.  A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Executive will return to perform services. 
6.    Limit on Severance Payment for Change of Control.
Notwithstanding anything above in Section 5.a., if the severance payment provided for in that Section, together with any other payments which the Executive has the right to receive from the Employer, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), the severance payment shall be reduced.  The reduction shall be in an amount so that the present value of the total amount received by the Executive from the Employer or its affiliates and subsidiaries will be 2.99 times the Executive’s base amount (as defined in Section 280G of the Code) and so that no portion of the amounts received by the Executive shall be subject to the excise tax imposed by Section 4999 of the Code (excise tax).  Insofar as permitted by the Code, Employer shall reduce those elements of the severance pay package specified by the Executive, provided, however, that Employer will not reduce the SERP credits provided for in Section 5.b.(II).   The determination as to whether any reduction in the severance payment is necessary shall be made by the Employer in good faith, and the determination shall be conclusive and binding on Executive.  If through error or otherwise Executive should receive payments under this Plan, together with other payments the Executive has the right to receive from the Employer, in excess of 2.99 times his base amount, Executive shall immediately repay the excess to Employer upon notification that an overpayment has been made.
7.    Covenant Not To Compete.
a.    Executive agrees that for the term of this Agreement and for a period of one (1) year after this Agreement is terminated pursuant to Section 5.a. or 5.b., Executive will not directly or indirectly be employed by, own, manage, operate, support, join, or benefit in any way from any business activity within the states where Employer operates that is competitive with Employer’s business or reasonably anticipated business of which Executive has knowledge.  For purposes of the foregoing, Executive will be deemed to be connected with such business if the business is carried on by:  (i) a partnership in which Executive is a general or limited partner; or (ii) a corporation of which Executive is a shareholder (other than a shareholder owning less than five percent (5%) of the total outstanding shares of the corporation), officer, director, employee or consultant, whether paid or unpaid.  In the event of an alleged breach by Executive of this Section 7, the one-year noncompete period shall be extended until such breach or violation has been duly cured, and shall restart so that Employer has received the intended benefit of one uninterrupted year of noncompetition by Executive.
b.    The parties agree that if a trial judge with jurisdiction over a dispute related to this Agreement should determine that the restrictive covenant set forth above is unreasonably broad, the parties authorize such trial judge to narrow the covenant so as to make it reasonable, given all relevant circumstances, and to enforce such covenant.  The provisions of this Section 7 shall survive termination of this Agreement.

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8.    Nondisclosure of Confidential Information.
a.    During the term of Executive’s employment and thereafter, Executive agrees to hold Employer’s Confidential Information in strict confidence, and not disclose or use it at any time except as authorized by Employer and for Employer’s benefit.  If anyone tries to compel Executive to disclose any Confidential Information, by subpoena or otherwise, Executive agrees immediately to notify Employer so that Employer may take any actions it deems necessary to protect its interests.  Executive’s agreement to protect Employer’s Confidential Information applies both during the term of this Agreement and after employment ends, regardless of the reason it ends.
b.    “Confidential Information” includes, without limitation, any information in whatever form that Employer considers to be confidential, proprietary, information and that is not publicly or generally available relating to Employer’s:  trade secrets (as defined by the Uniform Trade Secrets Act); know-how; concepts; methods; research and development; product, content and technology development plans; marketing plans; databases; inventions; research data and mechanisms; software (including functional specifications, source code and object code); procedures; engineering; purchasing; accounting; marketing; sales; customers; advertisers; joint venture partners; suppliers; financial status; contracts or employees.  Confidential Information includes information developed by Executive, alone or with others, or entrusted to Employer by its customers or others.
9.    Nonsolicitation.
During the course of Executive’s employment and for a period of one (1) year from the date of termination of employment for any reason, Executive shall not directly or indirectly solicit or entice any of the following to cease, terminate or reduce any relationship with Employer or to divert any business from Employer:  (a) any person who was an employee of Employer during the one (1) year period immediately preceding the termination of Executive’s employment; (b) any customer or client of Employer; or (c) any prospective customer or client of Employer from whom Executive actively solicited business within the last one (1) year of Executive’s employment.  In the event of an alleged breach by Executive of this Section 9, the one-year nonsolicitation period shall be extended until such breach or violation has been duly cured, and shall restart so that Employer has received the intended benefit of one uninterrupted year of nonsolicitation by Executive.
10.    Non-Disparagement.  
Executive will not, during the Term or after the termination or expiration of this Agreement or Executive’s employment, make disparaging statements, in any form, about Employer’s officers, directors, agents, employees, products or services which Executive knows, or has reason to believe, are false or misleading.
11.    Mutual Agreement to Arbitrate.
a.    Except as provided in Section 11.b., in the event of a dispute or claim between Executive and Employer related to Employee’s employment or termination of 

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employment, all such disputes or claims will be resolved exclusively by confidential arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“AAA”).  This means that the parties agree to waive their rights to have such disputes or claims decided in court by a jury.  Instead, such disputes or claims will be resolved by an impartial AAA arbitrator whose decision will be final.  
b.    The only disputes or claims that are not subject to arbitration are any claims by Executive for workers’ compensation or unemployment benefits, and any claim by Executive for benefits under an employee benefit plan that provides its own arbitration procedure.  Also, Executive and Employer may seek equitable relief (such as an injunction or declaratory relief) in court in appropriate circumstances. Specifically, Executive recognizes that Employer does not have an adequate remedy at law to protect its business from Executive’s breach of Sections 7, 8, or 9 of this Agreement, and therefore Employer shall be entitled to bring an action for a temporary restraining order and preliminary injunctive relief pre-arbitration, in the event of any actual or threatened breach by Executive of Sections 7, 8, or 9.  In such court proceeding, Employer shall not be required to post a bond or other security, and Employer may also be awarded actual damages caused by Executive’s breach of Sections 7, 8, or 9 of this Agreement as well as repayment of all or a portion of any severance that Employer previously paid to Executive.   
c.    Except as provided by section 11.b., the arbitration procedure will afford Executive and Employer the full range of legal, equitable, and/or statutory remedies.  Employer will pay all costs that are unique to arbitration, except that the party who initiates arbitration will pay the filing fee charged by AAA.  Executive and Employer shall be entitled to discovery sufficient to adequately arbitrate their claims, including access to essential documents and witnesses, as determined by the arbitrator and subject to limited judicial review.  In order for any judicial review of the arbitrator’s decision to be successfully accomplished, the arbitrator will issue a written decision that will decide all issues submitted and will reveal the essential findings and conclusions on which the award is based.  
12.    Miscellaneous.
a.    This Agreement contains the entire agreement between the parties with respect to Executive’s employment with Employer, and is subject to modification or amendment only upon agreement in writing signed by both parties.
b.    This Agreement shall bind and inure to the benefit of the heirs, legal representatives, successors and assigns of the parties, except that Employer’s rights and obligations may not be assigned.
c.    If any provision of this Agreement is invalid or otherwise unenforceable, in whole or in part, then such provision shall be modified so as to be enforceable to the maximum extent permitted by law.  If such provision cannot be modified to be enforceable, the provision shall be severed from the Agreement to the extent it is unenforceable.  All other provisions and any partially enforceable provisions shall remain unaffected and shall remain in full force and effect.

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d.    In the event of any claim or dispute arising out of this Agreement, the party that substantially prevails shall be entitled to reimbursement of all expenses incurred in connection with such claim or dispute, including, without limitation, attorneys’ fees and other professional fees.  This paragraph shall apply to expenses incurred with or without suit, and in any judicial, arbitration or administrative proceedings, including all appeals therefrom.
e.      Any notice required to be given under this Agreement to either party shall be given by personal service (i.e., via hand delivery) or by depositing a copy of such notice in the United States registered or certified mail, postage prepaid, addressed to the following address, or such other address as addressee shall designate in writing:
Employer:      

3111 “C” Street
Anchorage, AK  99503
Executive:    

4127 Raspberry Road
Anchorage, AK 99502

f.    This Agreement shall in all respects, including all matters of construction, validity and performance, be governed by and construed and enforced according to the laws of the State of Alaska.
g.    This Agreement is intended to comply and shall be interpreted and construed in a manner consistent with the provisions of Internal Revenue Code Section 409A, including any rule or regulation promulgated thereunder.  In the event that any provision of the Agreement would cause a benefit or amount provided hereunder to be subject to tax under the Internal Revenue Code prior to the time such amount is paid, such provision shall, without the necessity of further action by the signatories to this Agreement, be null and void as of the Effective Date.
h.    Notwithstanding any provision to the contrary in this Agreement, no payment of any type or amount of compensation or benefits shall be made or owed by Employer to Executive pursuant to this Agreement or otherwise to the extent that payment of such type or amount is restricted or prohibited by, is not permitted under, or has not received any required approval under, any applicable federal or state statute, regulation, rule, policy, order, opinion, interpretation or similar issuance, whether now in existence or hereafter adopted or imposed, including without limitation any provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or regulations promulgated thereunder, 12 USC 1828(k) or 12 CFR Part 359.  In the event that any payment made to Executive hereunder, under any prior employment agreement or arrangement or otherwise is required under any applicable federal or state statute, regulation, rule, policy, order, opinion, interpretation or similar issuance or under any agreement with or policy or plan of Employer to be paid back to Employer, Executive shall upon written demand from Employer promptly pay such amount back to Employer.

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EMPLOYER:    
NORTHRIM BANCORP, INC.

    
By:   /s/Ronald A. Davis    
Ronald A. Davis
Its: Chairman of the Compensation Committee of The Board of Directors

NORTHRIM BANK

By:   /s/Ronald A. Davis    
Ronald A. Davis
Its: Chairman of the Compensation Committee of The Board of Directors

EXECUTIVE:

  /s/Steven L. Hartung    
Steven L. Hartung

10 of 10Exhibit 10.1 H. Doran employment agreement

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of January 17, 2014, (the “Effective Date”), by and between HOWARD B. DORAN, JR. (“Executive”) and LIPOSCIENCE, INC. (the “Company”). This Agreement supersedes and replaces in its entirety all prior offer letters, employment agreements and severance benefits rights agreements between the Company and Executive, if any.  Contemporaneously with this Agreement, Executive has entered into a Confidentiality, Inventions and Non-Competition Agreement, attached hereto as Attachment 1 (the “Proprietary Agreement”).  Together, this Agreement and the Proprietary Agreement constitute Executive’s initial employment agreements with Company.
1.EMPLOYMENT BY THE COMPANY.
(a)    At-Will Employment. Executive shall be employed by the Company on an “at will” basis, meaning either the Company or Executive may terminate Executive’s employment at any time, with or without cause or advanced notice. Any contrary representations that may have been made to Executive are superseded by this Agreement. This Agreement constitutes the full and complete agreement between Executive and the Company on the “at will” nature of Executive’s employment with the Company, which may be changed only in an express written agreement signed by Executive and a non-employee member of the Company’s Board of Directors (the “Board”).  
(b)    Position & Duties. Executive shall serve as the President and Chief Executive Officer of the Company. In this position, Executive shall report to the Company’s Board of Directors and shall perform duties consistent with his position, as assigned by the Company and as adjusted from time to time. The Company expects Executive to perform his duties principally out of the Company’s corporate headquarters, currently in Raleigh, North Carolina, with travel as reasonably necessary to perform his duties. During his employment with the Company, Executive will devote his best efforts and substantially all of his business time and attention to the business of the Company.  Executive’s employment with the Company shall commence on February 3, 2014 (the “Employment Date”), and shall continue until terminated.
(c)    Company Policies. Executive shall be subject to the Company’s corporate, personnel and compliance policies and procedures, including but not limited to expense reimbursement policies, as such policies and procedures may be interpreted, adopted, revised, or terminated from time to time in the Company’s sole discretion. Executive agrees to abide by all applicable policies of the Company, as in effect from time to time. 

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(d)    No Conflicts. Executive represents that Executive’s performance of all the terms of this Agreement and his service as an employee of the Company do not and will not breach any agreement or obligation of any kind, including agreements or obligations Executive may have with prior employers or entities for which Executive has provided services. Executive has not entered into, and Executive agrees that Executive will not enter into, any agreement or obligation, either written or oral, in conflict with this Agreement.
2.    COMPENSATION.
(a)    Salary. Executive’s initial annual base salary shall be $440,000.00 (as adjusted from time to time, “Base Salary”). The Base Salary is subject to applicable withholdings and deductions, and is payable on the Company’s standard payroll cycle. The Base Salary is subject to review and adjustment from time to time, as determined by the Board or a duly authorized committee of the Board. 
(b)     Bonus. Executive will be eligible to earn an annual cash bonus under the Company’s annual Performance Bonus Plan for Strategic Leadership Team members, or such other plan which the Board defines as applicable to the Company’s Chief Executive Officer (the “Bonus Plan”), with the target amount of such bonus equal to 60% of Executive’s  Base Salary. The Board or the Compensation Committee of the Board (the “Committee”) may amend the Bonus Plan from time to time. To be eligible to earn any bonus under the Bonus Plan, Executive must remain an employee in good standing through the end of the applicable performance period. Whether or not Executive earns any bonus and the amount of any earned bonus will be determined by the Board or the Committee, in its sole discretion. Any earned bonus is subject to applicable withholdings and deductions, and is payable no later than March 15th of the year following the year for which it is no longer subject to a substantial risk of forfeiture. 
(c)    Executive Benefits. Executive will be eligible to participate on the same basis as similarly situated employees in the Company’s employee benefit plans in effect from time to time during Executive’s  employment. All matters of eligibility for coverage or benefits under any benefit plan will be determined in accordance with the provisions of those plans. The Company reserves the right to change, alter, or terminate any benefit plan in its sole discretion. 

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(d)    Relocation to Raleigh, NC; Relocation/Temporary Housing Expense Reimbursement.  Executive agrees to make Raleigh, NC his place of primary residence, with a target date of on or before September 15, 2014, and in any event no later than December 31, 2014.   Company will provide Executive with reimbursement for expenses directly related to Executive’s relocation costs (including but not limited to temporary housing, closing costs and moving expenses, all subject to Executive’s provision of actual receipts, the terms and conditions of the Company’s Travel and Expense Policy, and approval of the Company’s SVP of Human Resources), in an amount not to exceed $175,000.00, net of applicable taxes.    In order to qualify for relocation expense reimbursement under this paragraph and with the exception of costs associated with the sale of his home, Executive must meet the requirements hereof and otherwise incur qualifying expenses on or before March 31, 2015.  
(e)    Equity Grants.  Subject to the approval of the Committee and/or the Board, and to the terms of separate award agreements awarding stock options and restricted stock units (collectively, the “Award Agreements”) to which Executive must agree in writing, and the Company’s 2012 Equity Incentive Plan, as it may be amended by the Board and/or the Committee (the “Plan”), Executive shall receive two equity grants at a combined value of $880,000.00, such grants to be effective as of the date Executive begins his employment with the Company (the “Initial Equity Grants”).  The Initial Equity Grants shall be comprised as follows:  75% incentive stock options/25% restricted stock units.  Beginning in 2015, Executive shall be eligible to receive annual equity grants (subject to the terms and conditions of the Award Agreements and the Plan), at a target value of 100% of Executive’s Base Salary, to be comprised of 75% incentive stock options/25% restricted stock units.
3.    TERMINATION OF EMPLOYMENT.
(a)    Accrued Wages. On any termination of Executive’s employment, the Company will pay to Executive (or Executive’s legal representatives) any accrued but unpaid wages due to Executive. 
(b)    Coordination Following Termination. In connection with the termination of Executive’s employment for any reason, Executive will fully cooperate with the Company’s reasonable requests relating to the winding up of Executive’s work including, without limitation, any litigation in which the Company is involved, the signing of routine documents, and the issuance of any announcements concerning the termination. In the event Executive is a Director on Company’s Board of Directors, Executive agrees to resign from the Board upon any termination of his employment with Company.

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(c)    Executive Severance Benefit Plan. Executive is eligible to participate in the LipoScience, Inc. Executive Severance Benefit Plan (the “Severance Plan”), subject to the terms and conditions of such plan.   
4.    GENERAL PROVISIONS.
(a)    Recovery.  Any amounts paid to Executive by the Company, whether or not under this Agreement or the SLT Plan, will be subject to recoupment in accordance with The Sarbanes-Oxley Act of 2002, the Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations under these acts, any clawback policy adopted by the Company, or as otherwise required by applicable law. In addition, in consideration of Executive’s continued employment with the Company and in recognition of Executive’s position of trust and authority with the Company, Executive agrees to promptly consent to any clawback policy adopted by the Company. 
(b)    Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction. Rather, this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained in this Agreement.
(c)    Waiver. If either party should waive any breach of any provisions of this Agreement, Executive or the Company will not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
(d)    Complete Agreement. This Agreement, together with the Proprietary Agreement, which is incorporated by reference into this Agreement, constitutes the entire agreement between Executive and the Company with regard to the subject matter of this Agreement. This Agreement is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter and supersedes any prior oral discussions or written communications and agreements. This Agreement is entered into without reliance on any promise or representation other than those expressly contained in this Agreement, and it cannot be modified or amended except in writing signed by Executive and an authorized officer of the Board. The Proprietary Agreement governs other aspects of the relationship between the parties, and has or may have provisions that survive termination of Executive’s  employment under this Agreement, may be amended or superseded by the parties without regard to this Agreement and is enforceable according to its terms without regard to the enforcement provision of this Agreement.

4

(e)    Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.
(f)    Headings. The headings of the sections hereof are inserted for convenience only and will not be deemed to constitute a part hereof nor to affect the meaning thereof.
(g)    Successors and Assigns. The Company will assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any company or other entity with or into which the Company may hereafter merge or consolidate or to which the Company may transfer all or substantially all of its assets, if in any such case said company or other entity will by operation of law or expressly in writing assume all obligations of the Company hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder. Executive may not assign or transfer this Agreement or any rights or obligations hereunder, other than to Executive’s  estate upon Executive’s  death. 
(h)    Choice of Law. This Agreement is to be governed by and construed in accordance with the laws of the North Carolina applicable to contracts made and to be performed wholly within such jurisdiction, and without regard to the conflicts of laws principles thereof. Any suit brought hereon will be brought in the state courts sitting in Wake County, North Carolina and the federal court sitting in Raleigh, North Carolina, and the parties hereby waiving any claim or defense that such forum is not convenient or proper. Each party agrees that any such court will have in personam jurisdiction over it and consents to service of process in any manner authorized by North Carolina law. 
IN WITNESS WHEREOF, the parties have executed this Employment Agreement effective as of the day and year first written above.
	
	
	EXECUTIVE:

	/S/    HOWARD B. DORAN

	(Signature)

	
		
	 
	LIPOSCIENCE, INC:

	 
	/S/    KATHRYN F. TWIDDY

	 
	(Signature)

	By:
	Kathryn F. Twiddy

	Title:
	Vice President, General Counsel and Corporate Secretary

	 
	 

5

Attachment A

CONFIDENTIALITY, INVENTIONS AND NON-COMPETITION AGREEMENT

THIS CONFIDENTIALITY, INVENTIONS AND NON-COMPETITION AGREEMENT (this “Agreement”) is effective as of January 17, 2014 by and between LipoScience, Inc., a Delaware corporation, and its affiliates, subsidiaries, successors and assigns (collectively the “Company”), and the undersigned, an individual serving as:

	
						
	 
	 
	 
	 
	Initials
	 

	 
	x
	an employee of Company; or
	 
	HBD Jr.
	 

	 
	 
	 
	 
	 
	 

	 
	 
	an independent contractor engaged by Company
	 
	 
	 

STATEMENT OF PURPOSE

Company’s business includes the use and development of certain Proprietary Information (as defined below).  Company’s business success and competitive position in the industry are dependent on keeping Proprietary Information confidential.  The undersigned is being engaged by Company and may use Proprietary Information in the performance of the undersigned’s duties.  As a condition to Company’s engagement of the undersigned and making Proprietary Information available to the undersigned, the undersigned has agreed to execute this Agreement and to keep all such Proprietary Information confidential.

IN CONSIDERATION of the disclosure by Company to the undersigned of any Proprietary Information, and for other good and valuable consideration, including without limitation the engagement of the undersigned by the Company, the undersigned agrees to the following:

1.    “Proprietary Information” Defined.  For purposes of this Agreement, “Proprietary Information” is information (whether in written or other form or whether or not patentable or protectable by copyright) that has been created, discovered, developed or has otherwise become known to Company, and that has a commercial value in the business of Company.  Proprietary Information includes, but is not limited to, all inventions, processes, ideas, data, computer programs, developments, designs, marketing plans, customer lists, budgets, projections, cost analyses, acquisition candidates and other information owned by Company that is not public information.

2.    Nondisclosure of Proprietary Information.

2.1    The undersigned recognizes that Proprietary Information is the sole property of Company.  During and after the undersigned’s engagement by Company, the undersigned shall keep in the strictest of confidence and trust all Proprietary Information and shall not disclose or use any Proprietary Information except as required by law or permitted in writing by Company.

2.2    The undersigned shall not use or disclose to Company, or assist in the disclosure to Company of, confidential information belonging to any third parties, including any prior employer(s).

3.    Return of Documents.  Upon the termination of the undersigned’s engagement by Company for any reason, the termination of the undersigned’s access to Proprietary Information or upon the earlier request of Company, the undersigned shall return to Company all materials belonging to Company, whether kept at the undersigned’s business office, personal residence or otherwise, including all materials containing or relating to any Proprietary Information in any written or tangible form that the undersigned may have in his or her possession or control.  After returning the materials described in the preceding sentence to Company, the undersigned shall not retain any copies of any such materials.

4.    Ownership of Work Product.

4.1    All inventions, discoveries, computer programs, developments, designs, improvements, formulae, processes, techniques, programs, know-how, data or other information of possible technical or commercial importance relating to Company’s business or Company’s anticipated business or based on, derived from or relating to any Proprietary Information (collectively, “Work Product”) shall be the sole property of Company.  All Work Product made or conceived by the undersigned, solely or jointly, during the undersigned’s engagement by Company, including any previous Work Product made or conceived by the undersigned since the commencement of the undersigned’s employment by the Company, shall be deemed “works made for hire,” as that term is defined in Section 101 of the U.S. Copyright Act of 1976, as amended. 

4.2    If, for any reason, any Work Product does not qualify as work made for hire, the undersigned shall assign and does hereby assign to Company all such Work Product.  The undersigned shall assist Company, at Company’s expense, in every necessary way to obtain or enforce any patents, copyrights or other proprietary rights relating to the Work Product and to execute all documents necessary to give to Company full legal ownership to such Work Product, and the undersigned shall continue such assistance after the termination of his or her engagement by Company.

4.3    During the undersigned’s engagement by Company, the undersigned shall report promptly to Company all Work Product made or conceived by the undersigned, solely or jointly.

4.4    The undersigned hereby designates and appoints Company and its duly authorized officers and agents as its agents and attorneys-in-fact to execute and file any certificates, applications or documents and to do all of their lawful acts necessary to protect Company’s rights in the Work Product.  The undersigned expressly acknowledges that the foregoing power of attorney is coupled with an interest and is therefore irrevocable and shall survive his or her death or incompetency and the termination of his or her engagement by Company.

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4.5    The undersigned hereby represents and warrants that the undersigned has fully disclosed to Company on Schedule A attached hereto any idea, invention, discovery or process relating to the Company’s business which, prior to his or her engagement with Company, the undersigned conceived of or developed wholly or in part, and is to be excluded from the scope of this Agreement.

4.6    Notwithstanding anything in this Agreement to the contrary, the obligation of the undersigned to assign or offer to assign his or her rights in an invention to Company shall not extend or apply to an invention that the undersigned developed entirely on his or her own time without using Company equipment, supplies, facility or trade secret information unless such invention (a) relates to Company’s business or actual or demonstrably anticipated research or development, or (b) results from any work performed by the undersigned for Company.  The undersigned shall bear the burden of proof in establishing that his or her invention qualifies for exclusion under this Section 4.6. 

5.    Covenant Not To Compete.

5.1    It is recognized and understood by the parties hereto that the undersigned, through his or her association with Company, has and shall acquire a considerable amount of knowledge and goodwill with respect to the business of Company, which knowledge and goodwill are extremely valuable to Company and which would be extremely detrimental to Company if used by the undersigned to compete with Company.  It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of Company, it is necessary to afford fair protection to Company from such unfair competition by the undersigned.  

5.2    Consequently, as material inducement to engage the undersigned, the undersigned covenants and agrees that at any time while engaged by Company and for a period of one (1) year following his or her termination, he or she will not, directly or indirectly, with or through any family member or former director, officer or employee of Company, or acting alone or as a director, employee, agent, consultant, member of a partnership, firm, corporation or other entity or as a holder of or investor in as much as 5% of any security of any class of any corporation or other business entity:

(a) engage anywhere in the Noncompetition Area (as defined below) in any business related to the business then being actively pursued or reasonably anticipated to be pursued by Company at the time of such termination, including, without limitation, the following businesses:  Atherotech, Inc; Berkeley HeartLab, Inc.; Bio-Reference Laboratories, Inc.; Blue Wave Healthcare Consultants, Inc.; Carilion-Spectrum; Health Diagnostic Laboratory, Inc.; Laboratory Corporation of America Holdings; Boston Heart Diagnostics, or Quest Diagnostics Incorporated; provided, however, that the foregoing shall not be deemed to prevent the undersigned from working for a company or other entity (the “Competitive Entity”) whose business includes the sale, licensing or performance of testing or analysis services or products competitive or similar to those products or services then provided by Company (“Competitive 

8

Tests”) provided that such Competitive Tests constitute less than 5% of such Competitive Entity’s business and the undersigned is not involved in nor does work for any division or department responsible for developing, designing, marketing or selling such Competitive Tests; or

(b) interfere with, or seek to interfere with, the relationship between Company and any affiliate of Company with the following: (a) any of the employees of such entities; (b) any of the customers of such entities then existing or existing at any time within two (2) years prior to termination of the undersigned’s engagement by Company; or (c) any of the suppliers of such entities then existing or existing at any time within two (2) years prior to termination of the undersigned’s engagement by Company; or

(c) solicit to hire or hire any person who was an employee of Company or an affiliate of Company within the prior six (6) months.

5.3    For the purpose of this Agreement, the “Noncompetition Area” shall be (i) the entire world; (ii) the United States of America; (iii) each state in which Company does business or did business at any time within two (2) years prior to the termination of the undersigned’s engagement by Company; (iv) the States of Maryland, Virginia, North Carolina, South Carolina and Georgia; and (v) the State of North Carolina.  If a court of competent jurisdiction determines that the Noncompetition Area described above in subparagraph (i) is too restrictive, then the parties agree that the Noncompetition Area shall be the area specified in subparagraph (ii).  If a court of competent jurisdiction determines that the Noncompetition Area as set forth in subparagraphs (i) and (ii) above are too restrictive, then the parties agree the Noncompetition Area shall be reduced to the area specified in each of the following subsections and in the following order until the court determines an acceptable geographic area: subparagraphs (iii), (iv), or (v).  If the court determines that all of the areas mentioned above are too restrictive, then the parties agree that the court may reduce or limit the area to enable the intent of this Section to be enforced in the largest acceptable area. 

5.4    The parties hereto agree that in the event that the length of time set forth in Section 5.2 is deemed too restrictive in any court proceeding, that the court may reduce such restrictions to those which it deems reasonable under the circumstances.  

5.5    The undersigned agrees and acknowledges that Company does not have an adequate remedy at law for the breach or threatened breach by him or her of this Section 5 and agrees that Company may, in addition to the other remedies which may be available to it under this Agreement, file suit in equity to enjoin the undersigned from such breach or threatened breach.

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6.    Independent Contractor Status.

6.1    If the undersigned has so indicated by initialing “independent contractor” above, the undersigned acknowledges and agrees that the undersigned shall be treated as an independent contractor of Company, and not as an employee, agent or authorized representative of Company.  Although the undersigned will receive generalized instruction from Company as to the performance of services, Company shall not control or supervise the specific methods to be used or the sequence of tasks to be performed in connection with the undersigned’s duties.  The acts of the undersigned shall not constitute the acts of Company, and the undersigned shall not represent to any third party that the undersigned has any express or implied authority to bind Company to any contract, agreement or obligation.

6.2    If the undersigned has so indicated by initialing “independent contractor” above, the undersigned further acknowledges that the undersigned will be treated by Company as an independent contractor for federal and state income tax, social security tax and state unemployment tax purposes.  Accordingly, Company shall not withhold from any consideration paid to the undersigned any amounts for federal or state income taxes or social security (FICA) for the undersigned.  The undersigned shall indemnify and hold harmless Company from and against any damage, claim, assessment, interest, charge, cost or expense (including attorneys’ fees) or penalty incurred by or charged to Company as a result of any claim, cause of action or assessment by any federal or state government or agency for any nonpayment or underpayment by the undersigned of any tax.

7.    Miscellaneous.

7.1    The parties acknowledge that this Agreement does not constitute and shall not be deemed an agreement of employment for any specific duration, even if the undersigned individual is an employee of Company.

7.2    Failure to insist upon strict compliance with any provision of this Agreement shall not be deemed a waiver of such provision or of any other provision in the Agreement.

7.3    This Agreement shall be subject to and governed by the laws of the Sate of North Carolina, without regard to the conflicts-of-law rules of such State.

7.4    This Agreement contains the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior or contemporary agreements or understandings, whether written or oral, with respect thereto.  This Agreement may not be modified or amended except by an agreement in writing signed by both parties.

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7.5    Nothing in this Agreement or the obligations or relationship contemplated hereby shall be deemed to create a relationship of partners, joint ventures, associates or principal-and-agent between Company and the undersigned.
7.6    Arbitration and Equitable Relief.

a.    Arbitration.  Except as provided in Section 7.6(b) below, the undersigned agrees that any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance or breach of this Agreement, shall be settled by arbitration to be held in accordance with (a) the Employment Dispute Resolution Rules then in effect (if the undersigned is an employee of Company) or (b) the Commercial Rules then in effect (if the undersigned is an independent contractor) of the American Arbitration Association.  The arbitrator may grant injunctions or other relief in such dispute or controversy.  The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.  Company and the undersigned shall each pay their own respective attorneys’ fees and one-half of the costs and expenses of such arbitration (provided, however, that if the arbitrator finds that the arbitration action was brought or defended other than in good faith and with a reasonable basis in fact, the non-prevailing party shall pay all such costs and expenses of arbitration and the other party’s attorneys’ fees and expenses).

This arbitration clause constitutes a waiver of the undersigned’s right to a jury trial and relates to the resolution of all disputes relating to all aspects of the employer/employee or independent contractor relationship (except as provided in Section 7.6(b) below), including, but not limited to, the following claims.

(i)    Any and all claims for wrongful discharge of employment; breach of contract, both express and implied; breach of the covenant of good faith and fair dealing, both express and implied; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; and defamation;

(ii)    Any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, and Labor Code Section 201, et seq.;

(iii)    Any and all claims arising out of any other laws and regulations relating to employment or employment discrimination.

b.    Equitable Remedies. The undersigned agrees that it would be impossible or inadequate to measure and calculate Company’s damages from any breach of the Agreement.  Accordingly, the undersigned agrees that if the undersigned breaches any of such sections, Company will have available, in addition to any other right or remedy available, the right to obtain an injunction from a court of competent jurisdiction restraining such breach or threatened breach and to obtain 

11

specific performance of any such provision of this Agreement. The undersigned further agrees that no bond or other security shall be required in obtaining such equitable relief and the undersigned hereby consents to the issuance of such injunction and to the ordering of specific performance.

c.    Consideration. The undersigned understands that each party’s promise to resolve claims by arbitration in accordance with the provisions of this Agreement, rather than through the courts, is consideration for the other party’s like promise. The undersigned further understands that the undersigned is offered employment/engagement in consideration of the undersigned’s promise to arbitrate claims.

12

IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date set forth above.

	
					
	COMPANY:
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	By:
	/S/    KATHRYN F. TWIDDY
	 
	 
	/S/    HOWARD B. DORAN

	 
	 
	 
	 
	Signature of Employee or Independent Contractor

	Name:
	Kathryn F. Twiddy
	 
	 
	 

	Title:
	Vice President, General Counsel and Corporate Secretary
	 
	 
	HOWARD B. DORAN, JR.

	 
	 
	 
	 
	 

	Date:
	January 17, 2014
	 
	Date:
	January 17, 2014

13

SCHEDULE A TO CONFIDENTILAITY, INVENTIONS AND
NON-COMPETITION AGREEMENT

The following items are inventions, ideas, computer software programs or other equipment or technology not covered by Section 4 of this Agreement, which the undersigned conceived of or developed, wholly or in part, prior to his or her engagement with Company and shall be excluded from the scope of this Agreement.

If the undersigned has no such items to disclose, write “NONE” on this line:  	
	
	NONE.

Description of Items:  (if applicable)

	
			
	

Title on Document
	

Date on Document
	Name of Witness
on Document

	 
	 
	 

	

_____________________
	

______________________
	

_______________________

	

_____________________
	

______________________
	

 _______________________

	

_____________________
	

______________________
	

 _______________________

	

_____________________
	

______________________
	

 _______________________

	

_____________________
	

______________________
	

 _______________________

	 
	 
	 

        
	
						
	COMPANY:
	 
	 
	 

	 
	 
	 
	 
	 
	 

	By:
	/S/    KATHRYN F. TWIDDY
	(SEAL)
	 
	/S/    HOWARD B. DORAN
	(SEAL)

	 
	 
	 
	 
	HOWARD B. DORAN, JR.
	 

	Its:
	Vice President, General Counsel and Corporate Secretary
	 
	 
	 
	 

	 
	 
	 
	 
	January 17, 2014
	 

	 
	 
	 
	 
	Date
	 

    
                        

14

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