Document:

Exhibit 10.3

 

NORTHSTAR HEALTHCARE INCOME, INC.

 

AMENDED AND RESTATED

INDEPENDENT DIRECTORS COMPENSATION PLAN

 

ARTICLE 1

PURPOSE

 

1.1.  PURPOSE.  The purpose of the Plan is to attract, retain and compensate highly-qualified individuals who are not employees of NorthStar Healthcare Income, Inc. or any of its subsidiaries or affiliates for service as members of the Board by providing them with competitive compensation and an ownership interest in the Stock of the Company.  The Company intends that the Plan will benefit the Company and its stockholders by allowing Independent Directors to have a personal financial stake in the Company through an ownership interest in the Stock and will closely associate the interests of Independent Directors with that of the Company’s stockholders.

 

1.2.  ELIGIBILITY.  Independent Directors of the Company who are Eligible Participants, as defined below, shall automatically be participants in the Plan.

 

ARTICLE 2

DEFINITIONS

 

2.1.  DEFINITIONS.  Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Incentive Plan.  Unless the context clearly indicates otherwise, the following terms shall have the following meanings:

 

“Base Annual Retainer” means the annual retainer payable by the Company to an Independent Director pursuant to Section 5.1 hereof for service as a director of the Company (i.e., excluding any Supplemental Annual Retainer), as such amount may be changed from time to time.

 

“Eligible Participant” means any person who is an Independent Director on the Plan Effective Date or becomes an Independent Director while this Plan is in effect; except that during any period a director is prohibited from participating in the Plan by his or her employer or otherwise waives participation in the Plan, such director shall not be an Eligible Participant.

 

“Incentive Plan” means the NorthStar Healthcare Income, Inc.  Amended and Restated Long Term Incentive Plan, or any subsequent equity compensation plan approved by the Board and designated as the Incentive Plan for purposes of this Plan.

 

“Plan” means this NorthStar Healthcare Income, Inc.  Amended and Restated Independent Directors Compensation Plan, as amended from time to time.

 

“Plan Effective Date” of the Plan has the meaning set forth in Section 9.4 of the Plan.

 

“Plan Year(s)” means the approximate twelve-month period beginning with the annual stockholders meeting and ending at the next annual stockholders meeting; provided that the first Plan Year shall begin on the Plan Effective Date and extend until the first annual stockholders meeting.

 

“Supplemental Annual Retainer” means the annual retainer payable by the Company to an Independent Director pursuant to Section 5.2 hereof for service as the chair of the Audit Committee of the Board, as such amount may be changed from time to time.

 

 

ARTICLE 3

ADMINISTRATION

 

3.1.  ADMINISTRATION.  The Plan shall be administered by the Board.  Subject to the provisions of the Plan, the Board shall be authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for the administration of the Plan.  The Board’s interpretation of the Plan, and all actions taken and determinations made by the Board pursuant to the powers vested in it hereunder, shall be conclusive and binding upon all parties concerned, including the Company, its stockholders and persons granted awards under the Plan.  The Board may appoint a plan administrator to carry out the ministerial functions of the Plan, but the administrator shall have no other authority or powers of the Board.

 

3.2.  RELIANCE.  In administering the Plan, the Board may rely upon any information furnished by the Company, its public accountants and other experts.  No individual will have personal liability by reason of anything done or omitted to be done by the Company or the Board in connection with the Plan.  This limitation of liability shall not be exclusive of any other limitation of liability to which any such person may be entitled under the Company’s certificate of incorporation or otherwise.

 

ARTICLE 4

SHARES

 

4.1.  SOURCE OF SHARES FOR THE PLAN.  The shares of Stock that may be issued pursuant to the Plan shall be issued under the Incentive Plan, subject to all of the terms and conditions of the Incentive Plan.  The terms contained in the Incentive Plan are incorporated into and made a part of this Plan with respect to shares of Stock, Restricted Stock and any other equity granted pursuant hereto and any such grant shall be governed by and construed in accordance with the Incentive Plan.  In the event of any actual or alleged conflict between the provisions of the Incentive Plan and the provisions of this Plan, the provisions of the Incentive Plan shall be controlling and determinative.  This Plan does not constitute a separate source of shares for the grant of Restricted Stock or shares of Stock described herein.

 

ARTICLE 5

RETAINERS AND EXPENSES

 

5.1.  BASE ANNUAL RETAINER.  Each Eligible Participant shall be paid a Base Annual Retainer for service as a director during each Plan Year, payable in such form as shall be elected by the Eligible Participant in accordance with Section 6.1.  The amount of the Base Annual Retainer shall be established from time to time by the Board.  Until changed by the Board, the Base Annual Retainer for a full Plan Year shall be $65,000.  The Base Annual Retainer shall be payable in approximately equal quarterly installments in advance, beginning on the date of the annual stockholders meeting; provided, however, that for the first Plan Year, the first installment shall begin on the Plan Effective Date and be prorated based on the number of full months in such quarter after the Plan Effective Date and, provided, further, that for purposes of this Article 5, the month in which the Plan Effective Date occurs shall be considered a “full month.”  Each person who first becomes an Eligible Participant on a date other than the Plan Effective Date or an annual meeting date shall be paid a retainer equal to the quarterly installment of the Base Annual Retainer for the first quarter of eligibility, based on the number of full months he or she serves as an Independent Director during such quarter.  Payment of such prorated Base Annual Retainer shall begin on the date that the person first becomes an Eligible Participant, and shall resume on a quarterly basis thereafter.  In no event shall any installment of the Base Annual Retainer be paid later than March 15 of the year following the year to which such installment relates.

 

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5.2.  AUDIT COMMITTEE CHAIRPERSON SUPPLEMENTAL ANNUAL RETAINER.  The chairperson of the Audit Committee of the Board shall be paid a Supplemental Annual Retainer for his or her service as such chairperson during a Plan Year, payable at the same times as installments of the Base Annual Retainer are paid and in such form as shall be elected by such chairperson in accordance with Section 6.1.  The amount of the Supplemental Annual Retainer for the chairperson of the Audit Committee shall be established from time to time by the Board.  Until changed by the Board, the Supplemental Annual Retainer for a full Plan Year for the chairperson of the Audit Committee shall be $10,000.  A pro rata Supplemental Annual Retainer will be paid to any Eligible Participant who becomes the chairperson of the Audit Committee of the Board on a date other than the beginning of a Plan Year, based on the number of full months he or she serves as a chairperson of the Audit Committee of the Board during the Plan Year.  Payment of such prorated Supplemental Annual Retainer shall begin on the date that the person first becomes chairperson of the Audit Committee, and shall resume on a quarterly basis thereafter.  In no event shall any installment of the Supplemental Annual Retainer be paid later than March 15 following the year to which such installment relates.

 

5.3.  TRAVEL EXPENSE REIMBURSEMENT.  All Eligible Participants shall be reimbursed for reasonable travel expenses in connection with attendance at meetings of the Board and its committees, or other Company functions at which the Chief Executive Officer or Chair of the Board requests the Independent Director to participate.  Notwithstanding the foregoing, the Company’s reimbursement obligations pursuant to this Section 5.3 shall be limited to expenses incurred during such director’s service as an Independent Director.  Such payments will be made within 30 days after delivery of the Independent Director’s written requests for payment, accompanied by such evidence of expenses incurred as the Company may reasonably require, but in no event later than the last day of the Independent Director’s tax year following the tax year in which the expense was incurred.  The amount reimbursable in any one tax year shall not affect the amount reimbursable in any other tax year.  Independent Directors’ right to reimbursement pursuant to this Section 5.3 shall not be subject to liquidation or exchange for another benefit.

 

ARTICLE 6

ALTERNATIVE FORM OF PAYMENT FOR BASE ANNUAL RETAINER AND 
 SUPPLEMENTAL ANNUAL RETAINER

 

6.1.  PAYMENT OF BASE ANNUAL RETAINER AND SUPPLEMENTAL ANNUAL RETAINER.  At the election of each Eligible Participant, in accordance with Section 6.2, the Base Annual Retainer or the Supplemental Annual Retainer for a given Plan Year shall be either: (i) payable in cash in approximately equal quarterly installments in arrears, beginning on the date of the annual stockholders meeting; or (ii) subject to share availability under the Incentive Plan, payable by a grant on the day an installment of the Base Annual Retainer or Supplemental Annual Retainer is normally paid (the “Stock Grant Date”) of that number of shares of Stock (rounded up to the nearest whole share) determined by dividing the Base Annual Retainer or Supplemental Annual Retainer installment otherwise payable by: (a) if the Stock Grant Date occurs during any “best efforts” public offering of the Company’s Stock prior to the date to the Stock is listed on a national securities exchange, the offering price of the Stock, net of dealer manager fees and selling commissions; or (b) if the Stock Grant Date occurs after the termination of any public offering of the Company’s Stock, the per share estimated value of the Stock disclosed in the Company’s most recent annual report distributed to investors pursuant to Section 13(a) of the 1934 Act, or (c) in any case, the Fair Market Value as otherwise determined by the Committee.  Any shares of Stock granted under the Plan as the Base Annual Retainer or Supplemental Annual Retainer under clause (ii) above will be 100% vested and nonforfeitable as of the Stock Grant Date, and the Eligible Participant receiving such shares of Stock (or his or her custodian, if any) will have immediate rights of ownership in the shares of Stock, including the right to vote the shares of Stock and the right to receive dividends or other distributions thereon.

 

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6.2.  TIMING AND MANNER OF PAYMENT ELECTION.  Eligible Participants may make an election pursuant to this Section 6.2 for the first full Plan Year following the date that the Company’s initial public offering of its common stock is declared effective by the Securities and Exchange Commission (the “IPO Effective Date”).  Each Eligible Participant shall elect the form of payment desired for his or her Base Annual Retainer and Supplemental Annual Retainer (if applicable) for a Plan Year by delivering a valid election form in such form as the Board or the plan administrator shall prescribe (the “Election Form”) to the Board or the plan administrator prior to the beginning of such Plan Year, which will be effective as of the first day of the Plan Year beginning after the Board or the plan administrator receives the Eligible Participant’s Election Form.  The Election Form signed by the Eligible Participant prior to the Plan Year will be irrevocable for the coming Plan Year.  However, prior to the commencement of the following Plan Year, an Eligible Participant may change his or her election for future Plan Years by executing and delivering a new Election Form indicating different choices.  If an Eligible Participant fails to deliver a new Election Form prior to the commencement of the new Plan Year, his or her Election Form in effect during the previous Plan Year shall continue in effect during the new Plan Year.  If no Election Form is filed or effective, or if there are insufficient shares of Stock in the Incentive Plan, the Base Annual Retainer and Supplemental Annual Retainer (if applicable) will be paid in cash.

 

ARTICLE 7

EQUITY COMPENSATION

 

7.1.  INITIAL RESTRICTED STOCK GRANT.  Provided that the Company has raised at least $2,000,000 in gross offering proceeds, on the first date that an Independent Director is initially elected or appointed to the Board, he or she shall receive an award of 5,000 shares of Restricted Stock, subject to share availability under the Incentive Plan and the terms of this Section 7.1.  Notwithstanding the foregoing, each Independent Director elected or appointed to the Board prior to the date that the Company has raised $2,000,000 in gross offering proceeds (the “Minimum Offering Date”), and who remains an Independent Director as of the Minimum Offering Date, shall receive such initial Restricted Stock grant on the Minimum Offering Date. Such shares of Restricted Stock shall be subject to the terms and restrictions described below in Section 7.3 and shall be in addition to any otherwise applicable annual grant of Restricted Stock granted to such Independent Director under Section 7.2.

 

7.2.  SUBSEQUENT RESTRICTED STOCK GRANT.  Subject to share availability under the Incentive Plan and the additional restrictions provided in this Section 7.2, on the date following an Independent Director’s subsequent re-election to the Board, such director shall receive 2,500 shares of Restricted Stock.  Such shares of Restricted Stock shall be subject to the terms and restrictions described below in Section 7.3.  Notwithstanding anything herein to the contrary, no Restricted Stock shall be granted pursuant to this Section 7.2 on a given date if, as a result of such grant, the total number of Shares subject to outstanding Awards (as defined in the Incentive Plan) granted under the Incentive Plan as of such date would exceed five percent (5%) of the number of Shares outstanding as of such date.  In such event, the grant of such Restricted Stock shall be delayed until such time as the grant would not violate the provisions of this Section 7.2 (the “Delayed Grant Date”). The grant of the delayed Restricted Stock shall be subject to the approval of the Board and shall be limited to Independent Directors who (a) otherwise would have received a grant on the original date under this Section 7.2, and (b) remain Independent Directors as of the Delayed Grant Date.  For all purposes, the grant date of the delayed Restricted Stock shall be the Delayed Grant Date and not the original date provided in this Section 7.2.

 

7.3.  TERMS AND CONDITIONS OF RESTRICTED STOCK.  Shares of Restricted Stock shall be evidenced by a written Award Certificate, and shall be subject to such restrictions and risk of forfeiture as determined by the Board, and shall be granted under and pursuant to the terms of the Incentive Plan.  

 

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Unless and until provided otherwise by the Board, the Restricted Stock granted pursuant to Section 7.1 and Section 7.2 herein shall vest and become non-forfeitable over four (4) years in equal quarterly installments beginning on the first day of the first quarter following the Restricted Stock grant date.  Notwithstanding the foregoing vesting schedule, the shares of Restricted Stock shall become fully vested on the earlier occurrence of: (i) the termination of the Independent Director’s service as a director of the Company due to his or her death or Disability; or (ii) a Change in Control of the Company.  If the Independent Director’s service as a director of the Company terminates other than as described in clause (i) of the foregoing sentence, then the Independent Director shall forfeit all of his or her right, title and interest in and to any unvested shares of Restricted Stock as of the date of such termination from the Board and such Restricted Stock shall be reconveyed to the Company without further consideration or any act or action by the Independent Director.

 

ARTICLE 8

AMENDMENT, MODIFICATION AND TERMINATION

 

8.1.  AMENDMENT, MODIFICATION AND TERMINATION.  The Board may, at any time and from time to time, amend, modify or terminate the Plan without stockholder approval; provided, however, that if an amendment to the Plan would, in the reasonable opinion of the Board, require stockholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of a securities exchange on which the Stock is listed or traded, then such amendment shall be subject to stockholder approval; and provided, further, that the Board may condition any other amendment or modification on the approval of stockholders of the Company for any reason.

 

ARTICLE 9

GENERAL PROVISIONS

 

9.1.  ADJUSTMENTS.  The adjustment provisions of the Incentive Plan shall apply with respect to Restricted Stock or other equity awards outstanding or to be granted pursuant to this Plan.

 

9.2.  DURATION OF THE PLAN.  The Plan shall remain in effect until terminated by the Board.

 

9.3.  EXPENSES OF THE PLAN.  The expenses of administering the Plan shall be borne by the Company.

 

9.4.  PLAN EFFECTIVE DATE.  The Plan originally became effective on June 22, 2011 (the “Plan Effective Date”).  The Plan was amended and restated by the Board on February 4, 2013.

 

*****

 

The foregoing is hereby acknowledged as being the NorthStar Healthcare Income, Inc. Independent Directors Compensation Plan as adopted by the Board.

 

	
 
    	
NORTHSTAR   HEALTHCARE INCOME, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ronald J. Lieberman
    
	
 
    	
 
    	
Name:
    	
Ronald   J. Lieberman
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President, General Counsel and Secretary
    

 

5Exhibit 10.1

 

January 29, 2013

 

Mr. Michael McMahon

411 University Ridge, Suite D

Greenville, SC 29601

 

Dear Michael:

 

We are delighted to make this offer of employment with Scio Diamond Technology Corporation, Inc. (“SCIO” or the “Company”) as the Chief Executive Officer.  The terms of the offer are as follows:

 

Compensation: Your base salary shall be fixed at $20,833.25 per month, less applicable withholdings, payable in periodic installments in accordance with the Company’s payroll policies as established from time to time. You will receive a review by the Compensation Committee at least annually (typically, within ninety days following the end of the Company’s fiscal year), and the Compensation Committee, or in the absence of such a committee, the Company’s Board of Directors (the “Board”), may, in its sole and unilateral discretion, increase (but without your consent may not decrease) your base salary at any time it shall determine to do so.  At the discretion and direction of the Company’s Chairman of the Board, you will report directly to the Company’s Chairman of the Board.

 

Performance Bonus:  You will be eligible for a 2013 fiscal year performance bonus of up to $100,000 for achieving performance targets, as determined in the sole and unilateral discretion of the Board, for the Company’s 2013 fiscal year plan.  For performance in excess of the plan you may be eligible in the sole and unilateral discretion of the Board for up to an additional $50,000 performance bonus.  The performance targets, to which award of these bonuses will be subject, must be agreed to by both you and the Company following acceptance of the Company’s 2013 operating plan by the Board.  Any such performance bonuses will be paid within 45 days of the close of the fiscal year to which the bonuses relate, provided that you have not voluntarily terminated employment or been terminated for Cause (as defined below) prior to that date, in which event no bonus amount shall be due or payable.

 

Severance:  Upon termination during the effectiveness of this letter for all reasons other than for Cause or your voluntary resignation, the Company agrees that in exchange for a general release by you to the Company and its officers, employees, shareholders, and agents from liability to be reasonably agreed upon by you and the Company and one-year non-solicitation and non-competition restrictions from you, you will be entitled to receive for a period of twelve months from your date of termination, (i) your base salary plus  (ii) $2,000, which $2,000 per month payments are intended to offset your potential medical, dental and life insurance expenses and any premiums required under COBRA or comparable state law, each paid in accordance with the Company’s payroll and benefit policies.  If the termination of your employment is for Cause or due to your voluntary resignation, you will not be entitled to any severance or benefit payment.

 

Fringe Benefits.  You will be entitled to participate in all employee benefit plans and programs available to similarly situated employees of the Company, which the Company shall have in force from time to time. You will be entitled to 20 days of paid vacation each calendar year.

 

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Equity:  You are offered herein an incentive stock option grant to purchase 1,500,000 common shares, of Scio Diamond Technology Corporation, Inc. Common Stock, $0.001 par value, at an exercise price equal to the closing price on the date of this agreement.  These stock options shall vest according to the following schedule: options to purchase 271,250 shares immediately upon your start date, options to purchase 234,375 shares upon the six-month anniversary of your start date, options to purchase 468,750 shares when SCIO achieves cumulative revenue of $5 million (U.S.) (cumulative from January 1, 2013 forward), options to purchase 234,375 shares when SCIO achieves cumulative EBITDA of $1 million (U.S.) (cumulative from January 1, 2013 forward), and options to purchase 291,250 shares when SCIO achieves cumulative EBITDA of $2.5 million (U.S.) (cumulative from January 1, 2013 forward). In the event of termination for all reasons other than for Cause or your voluntary resignation, the Company agrees that, in exchange for a general release by you to the Company and its officers, directors, employees, shareholders, and agents from liability to be reasonably agreed upon by you and the Company, the Company will:  1) extend the period during which you may exercise your option with respect to any portion or all of your vested options to purchase shares to within twelve months following your date of separation; and 2) agree not to exercise any right of repurchase.  All granted options will automatically vest in the event of a “change in control” (as defined below) of the Company.  The options may be exercised for five years from the vesting date, subject to approval of the Board (and in no event, and despite anything contained herein to the contrary, may any option be exercised after ten years from the grant date).  Notwithstanding anything contained herein to the contrary, the grant of incentive stock options and the terms therein are at all times subject to approval of the Board and subject to compliance with the Company’s Share Incentive Plan, the relevant qualified stock option grant agreement and applicable law.

 

Change in Control: In the event of termination, for any reason other than for Cause or your voluntary resignation, during the four-month period before or the twelve-month period after a “change in control” that implies a Company value of  $50,000,000 or more, you will be entitled to (i) a lump-sum cash payment equal to the sum of (a) 2.0 times your annual base salary on the day before the change in control or the day before your termination, whichever is higher, plus (b) any base salary or bonus earned or accrued through the date of termination and not previously paid, and (ii) payment of $2,000 per month for 24 months, which payments are intended to offset your potential medical, dental and life insurance expenses.  In such event, you will remain subject to the terms of the Company’s Proprietary Information and Inventions Agreement.  For purposes of this letter, a “change in control” shall be deemed to occur on the date of closing of any of the following: (x) a merger in which SCIO is not the surviving entity; (y) a sale of all of the outstanding shares of SCIO’s stock; or (z) a sale by SCIO of substantially all of its assets.

 

Definition of “Cause”:  As applied to the terms of this letter, the term “Cause” means:  (i) conviction of, or plea of guilty or no contest by you of a felony or crime of dishonesty or moral turpitude; (ii) your commission, as determined by the Board, of an intentional act, or an act of fraud, dishonesty, or theft affecting the property, reputation, or business of the Company; (iii) your willful and persistent neglect of the duties and responsibilities of your position; (iv) failure or refusal to carry out the lawful directives of the Board; (v) diverting any business opportunity of the Company or its affiliates for your own personal gain; (vi) misrepresentation of a significant fact on your employment application and/or resume; (vii) misuse of alcohol or drugs affecting work performance, or (viii) death or disability that prevents you from performing the essential functions of your position with or without reasonable accommodation.

 

Employee at Will:  Your employment relationship will be as an employee at will, which means that either you or the Company may terminate your employment at any time and for any reason or for no reason.

 

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No Obstacle to Acceptance:  You represent and warrant that you are not subject to any non-compete, non-disclosure, or similar agreement or restrictive covenant that would prevent you from accepting this position or that would materially impair your ability to perform the duties of this position.

 

Confidentiality, Etc. Agreement:  You agree that you will be subject to, and shall execute, the Company’s Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A and incorporated herein by reference.

 

Amendments:  The terms of your employment may in the future be amended, but only by a writing which is signed by both you and, on behalf of the Company, a duly authorized officer.

 

Entire Agreement:  This letter agreement constitutes the entire agreement between the parties, and supersedes all prior agreements and understandings, relating to the subject matter of this letter agreement.

 

Additional Terms:  This letter agreement shall be governed by and construed in accordance with the substantive law of the State of South Carolina, without regard to choice of law principles.  The parties agree that the exclusive jurisdiction and venue for resolution of any disputes arising out of this letter agreement or your employment with the Company shall be solely in the federal or state courts located in South Carolina, and the parties do hereby waive the right to proceed in any other forum.  If any portion or provision of this letter agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this letter agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this letter agreement shall be valid and enforceable to the fullest extent permitted by law.  This letter agreement may be executed in one or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together, when delivered, will constitute one and the same instrument.

 

All of us at SCIO are genuinely enthusiastic about the prospect of your joining the Company and helping to move us forward over what promises to be a very exciting and challenging future.  I look forward to your joining us at SCIO.

 

*****

 

Regards,

 

	
/s/ Edward S. Adams
    	
 
    
	
Edward S. Adams
    	
 
    

Chairman, Board of Directors, SCIO DIAMOND TECHNOLOGY CORPORATION

 

By signature attached below, I accept this offer of employment and the terms herein.

 

My employment as CEO will commence on February 1, 2013.

 

 

	
/s/ Michael McMahon
    	
 
    	
January 31, 2013
    
	
Michael McMahon
    	
Date of Acceptance
    

 

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EXHIBIT A

 

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

 

This Proprietary Information and Inventions Agreement (this “Agreement”) is made between me, the undersigned employee (sometimes referred to as “Executive”), and Scio Diamond Technology Corporation (the “Company”), and is a material part of the consideration for my employment by the Company, the premises, mutual covenants and representations contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties:

 

1.             No Conflict.   I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement or my employment with the Company. I will not violate any agreement with or rights of any third party or, except as expressly authorized by the Company in writing hereafter, use or disclose my own or any third party’s confidential information or intellectual property when acting within the scope of my employment or otherwise on behalf of the Company. Further, I have not retained anything containing any confidential information of a prior employer or other third party, whether or not created by me.

 

2.             Intellectual Property Assignment.   The Company shall own all right, title and interest (including, but not limited to, patent rights, copyrights, trade secret rights, mask work rights, sui generis database rights and all other intellectual and industrial property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designs, know-how, research, development, trade secrets, techniques, processes, procedures, plans, policies, discoveries, hardware, software, screens, specifications, designs, drawings, ideas and information made or conceived or reduced to practice, in whole or in part, by me or any other employee, independent contractor or agent of the Company during the term of my employment with Company (collectively, “Inventions”), and I will promptly disclose all Inventions to the Company. “Inventions” is to be broadly defined. By way of example only and without limitation, Inventions include all items mentioned in the first sentence of this paragraph and any and all information concerning teaching techniques, processes, formulas, innovations, discoveries, improvements, research or development and test results, data, formats, marketing plans, business plans, strategies, forecasts, unpublished financial information, budgets, projections, and customer and supplier identities, characteristics and agreements.

 

I hereby make all assignments necessary to accomplish the foregoing. I shall further assist the Company, at the Company’s expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint the Company and its agents as attorneys-in-fact to act for and in my behalf to execute and file any document and to do all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me. If I wish to clarify that something created by me prior to my employment that relates to the Company’s actual or proposed business is not within the scope of this Agreement, I have listed it on Appendix A. If I use or (except pursuant to this paragraph 2) disclose my own or any third party’s confidential information or intellectual property when acting within the scope of my employment or otherwise on behalf of the Company, the Company will have and I hereby grant the Company a perpetual, irrevocable, worldwide, royalty-free, non-exclusive, sublicensable right and license to exploit and exercise all such confidential information and intellectual property rights.

 

3.             Reserved.

 

4.             Moral Rights.   To the extent allowed by law, paragraph 2 includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral

 

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rights,” “artist’s rights,” “droit moral,” or the like (collectively “Moral Rights”). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by the Company and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratifications, consents and agreements from time to time as requested by the Company.

 

5.             Confidential Information.   I agree that all Inventions and all other business, technical and financial information (including, without limitation, the identity of and information relating to customers, potential customers, suppliers, strategic partners, service providers, employees, agents or shareholders of the Company) I develop, learn or obtain during the term of my employment that relate to the Company or the business or demonstrably anticipated business of the Company or that are received by or for the Company in confidence, constitute “Proprietary Information.” Proprietary Information includes not only information disclosed by the Company or its clients to me in the course of my employment, but also information developed or learned by me during the course of my employment with the Company, such as Inventions (as defined above). Proprietary Information is to be broadly defined. Proprietary Information includes, but is not limited to, all information that has or could have commercial value or other utility in the business in which the Company or clients are engaged or contemplate engaging, which also includes, but is not limited to, all information of which the unauthorized disclosure could be detrimental to the interests of the Company or clients, whether or not such information is identified as Proprietary Information by the Company or clients, which does not rise to the level of a Trade Secret. By way of example only and without limitation, Proprietary Information includes any and all information concerning teaching techniques, processes, innovations, inventions, discoveries, improvements, research or development and test results, specifications, data, know-how, formats, marketing plans, business plans, strategies, forecasts, unpublished financial information, budgets, projections, and customer and supplier identities, characteristics, and agreements which does not rise to the level of a Trade Secret.  The term Trade Secret(s), as such term is used herein, means information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.  During the term of my employment and until the fifth anniversary of the conclusion of my employment with the Company, I will hold in confidence and not divulge, disclose or otherwise use any Proprietary Information except within the scope of my employment by the Company. I further covenant and agree that during the term of my employment and at all times thereafter, I will hold in confidence and not divulge, disclose or otherwise use any Trade Secrets of the Company except within the scope of my employment by the Company.  However, I shall not be obligated under this paragraph with respect to information I can document is or becomes readily publicly available without restriction through no fault of mine. I acknowledge that all Proprietary Information, in any form or medium, including copies thereof is the sole and exclusive property of the Company. Upon termination of my employment, I will promptly return to the Company any and all items containing or embodying Proprietary Information in any form or medium (including all copies), except that I may keep a single personal copy of (i) my compensation records, (ii) materials distributed to shareholders generally and (iii) this Agreement. I also recognize and agree that I have no expectation of privacy with respect to the Company’s telecommunications, networking or information processing systems (including, without limitation, stored computer files, email messages and voice messages) and that my activity and any files or messages on or using any of those systems may be monitored or retrieved at any time without notice.

 

6.             Non-Solicitation.   I agree that during the term of my employment and until the second anniversary of the conclusion of my employment with the Company, I will not encourage or solicit any

 

5

 

employee or consultant of the Company to leave the Company for any reason (except for the bona fide firing of Company personnel within the scope of my employment). I also agree that during the term of my employment (whether or not during business hours) and until the second anniversary of the conclusion of my employment with the Company, I will not solicit business from, divert business from, or attempt to convert to other methods of using or offering the same or similar products or services as provided by the Company or its affiliates to any person or entity that is or was a client or prospective client of the Company or its affiliates at any time during the 24 months prior to the date of termination of my employment.

 

7.             Non-Compete.   During Executive’s employment with the Company and for a period of 12 months thereafter, Executive shall not (without the prior written consent of the Company) compete with the Company or any of its Affiliates by, directly or indirectly, forming, serving as an organizer, director or officer of, or consultant to, or acquiring or maintaining more than a 5% investment in, a Competing Business located in the Territory.  “Affiliate” shall mean any business entity controlled by, controlling or under common control with the Company. “Business” shall mean the production of cultured diamonds, and any other related business engaged in by the Company or any of its Affiliates as of the date of termination.  “Competing Business” shall mean any business that, in whole or in part, is the same or substantially the same as the Business.  “Territory” shall mean any state in the continental United States of America and the States of Alaska and Hawaii into which the Company has sold products during the 60 day period ending of the date of the Executive’s termination.

 

8.             Survival.   I agree that my obligations under paragraphs 2, 3, 4, 5, 6 and 7 of this Agreement shall continue in effect after termination of my employment, regardless of the reason or reasons for termination, and whether such termination is voluntary or involuntary on my part, and that the Company is entitled to communicate my obligations under this Agreement to any future employer or potential employer of mine. My obligations under paragraphs 2, 4 and 5 also shall be binding upon my heirs, executors, assigns, and administrators and shall inure to the benefit of the Company, its subsidiaries, successors and assigns.

 

9.             Governing Law; Choice of Forum.   Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of South Carolina without regard to the conflict of laws provisions thereof. I further agree that if one or more provisions of this Agreement are held to be illegal or unenforceable under applicable South Carolina law, such illegal or unenforceable portion(s) shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable in accordance with its terms. I also agree that if any restriction in this Agreement shall be determined to be invalid and unenforceable, it shall automatically be modified, or may be modified by a court of competent jurisdiction, to the extent necessary to make it valid and enforceable. I also understand that any breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, the Company will be entitled to injunctive relief with respect thereto in addition to any other remedies. I hereby waive any requirement that the Company post a bond or similar security or instrument in connection with any action the Company may commence in an effort to enforce this Agreement.

 

10.          Miscellaneous.   Except for my employment agreement with the Company, this Agreement supersedes all prior agreements and understandings between the parties—whether communicated in writing, orally or otherwise—and the representations, covenants and agreements herein shall be binding and in full force against the parties effective from the commencement of my employment with the Company. I may not assign this Agreement or any rights or obligations hereunder. This Agreement shall bind and inure to the benefit of each party and its respective successors, heirs and assigns. Any references to the “Company” in this Agreement shall include any subsidiary, affiliate, strategic partner, assign and/or successor of the Company or any similarly situated party.

 

6

 

I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS WHICH IT IMPOSES UPON ME WITHOUT RESERVATION. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE UNDERSTANDING THAT ONE COUNTERPART WILL BE RETAINED BY COMPANY AND THE OTHER COUNTERPART WILL BE RETAINED BY ME.

 

	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
/s/   Michael McMahon
    
	
 
    	
Michael   McMahon
    
	
 
    	
 
    
	
 
    	
February   1, 2013
    
	
 
    	
Date   of Commencement of Employment
    
	
 
    	
 
    
	
 
    	
February   1, 2013
    
	
 
    	
Date   Signed
    

 

 

Accepted and Agreed to:

Scio Diamond Technology Corporation

 

 

	
/s/   Edward S. Adams
    	
 
    
	
Edward   S. Adams
    	
 
    
	
Chairman   of the Board of Directors
    	
 
    

 

7

 

APPENDIX A

PRIOR MATTER

 

None

 

8

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