Document:

ex10-4.htm

EXHIBIT 10.4

 

MASTER MANUFACTURING AGREEMENT

 

BETWEEN :

 

Signature Industries Ltd (SIL), a company incorporated and registered in England and Wales (number 02800561) whose registered office is at Tom Cribb Road Thamesmead London SE28 0BH, represented by Mike Cook as Managing Director.

 

(« Customer »)

 

ON THE FIRST PART,

 

AND :

 

Custom Interconnect Ltd (CIL), a company registered in England whose registered office is at Charlton Road, Andover, Hants SP10 3JL, represented by John Boston as Managing Director.

 

(“Supplier”)

 

ON THE SECOND PART,

 

 

(Customer and the Supplier being hereafter referred to individually as a “Party” and collectively as the “Parties”)

 

WHEREAS:

 

	
  

	
A.

	
Customer is in the business of designing, manufacturing and selling electronic products for military market and providing related systems and services.

 

	
  

	
B.

	
Supplier is a company engaged in the manufacture of electronic devices and has a long-term experience and technical expertise in the manufacture of electronic cards and box-building.

 

	
  

	
C.

	
Customer desires to subcontract to Supplier the manufacture of certain electronic devices, as well as certain related services including sourcing, procurement, certain testing, maintenance and repair.

 

	
  

	
D.

	
The Parties therefore wish to establish the terms and conditions of a long-term manufacturing agreement and thereby agree, for each product listed under Appendix A as revised and updated from time to time (the “Products”), on the terms and conditions of (i) transfers by Customer to Supplier of certain technical data relating to the products (ii) the overall Product manufacturing applicable by Supplier and related supply process to Customer, and (iii) the services to be provided by supplier in relation to the Products, also listed under Appendix A (the “Services”).

 

  

  

  

 

IT IS THEREFORE AGREED AS FOLLOWS:

 

 

Article 1.           Purpose

 

	
  

	
1.1

	
The purpose of this agreement (the “Agreement”) is to set forth the terms and conditions for the manufacture and supply by Supplier to Customer of Products and Services listed in Appendix A against purchase orders which may be placed by the Customer, now and then. It is expressly agreed that time shall be of the essence, in accordance with the agreed lead-times.

 

	
  

	
1.2

	
The terms of this Agreement shall apply to all orders of Products and Services placed in accordance with the terms contained herein by the Customer and by any entity directly or indirectly controlling, controlled by, or under common control with the Customer (the “Affiliates”). Affiliates or the Customer are intended to qualify as direct and indirect beneficiaries of this Agreement as if signatories hereof. The term “the Customer” shall therefore include, for the purposes of this Agreement, The Customer and any and all Affiliate of the Customer placing an order for Products or Services with Supplier. As of today, Affiliates are: Orolia Sas, Kannad Sas and McMurdo Ltd.

 

	
  

	
1.3

	
All Products and Services supplied to Customer by Supplier shall conform to the technical specifications, manufacturing and supply rules and methods as described in the warranty Section 9 and more generally to all terms and conditions contained and referred to in this Agreement.

 

 

Article 2.           Technical Data Transfer Scheme

 

	
  

	
2.1

	
A list of all Manufacturing Files and Information already provided or made available to Supplier by Customer on or before the execution of this Agreement is set out under Appendix B. For the purpose of this Agreement the term “Manufacturing Files Information” shall mean all information and data provided by Customer with respect to the Product and Testing; it shall exclude Supplier’s manufacturing processes. Supplier acknowledges that all Manufacturing Files and Information supplied or made available to it under this Agreement are and shall at all times remain the exclusive property of, and fully owned by Customer and supplied and made available to Supplier exclusively for the purpose of this Agreement. Supplier further recognizes that it or any
third party shall not acquire any ownership or other right whatsoever on any of these manufacturing files and information, including through the passing of time, and that upon termination or expiration of this Agreement for any reason whatsoever, the same shall be returned to Customer in accordance with Article 14 below.

 

	
  

	
2.2

	
A list of all specialist tools already provided or made available to Supplier by Customer on or before execution of this Agreement is set out under Appendix B. Supplier acknowledges that all tools supplied or made available to it under this Agreement are and shall at all times remain the exclusive property of, and fully owned by Customer and are supplied and made available to Supplier exclusively for the purpose of this Agreement. Supplier further recognizes that it or any third party shall not acquire any ownership or other right whatsoever on any of these tools, including through the passing of time, and that upon termination or expiration of this Agreement for any reason whatsoever, the same shall be returned to Customer in accordance with Article 14 below. It
is the responsibility of Supplier to maintain and calibrate such tools at Supplier’s cost for a mutually agreed life. Such tools must be clearly marked with Customer’s name and asset number.

 

  

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2.3

	
Manufacturing of Products by Supplier under this Agreement shall be subject to the prior issuance by Customer, for each Product, of a product and process qualification. The products for which Supplier has already obtained such qualification on or before the execution of this Agreement are set out under Appendix A.

 

	
  

	
2.4

	
In the event that new products would be manufactured by Supplier in accordance with Article 10 below, Customer shall provide Supplier with the specifications and Manufacturing Files and Information of such new product and with the necessary specialist tools.

 

	
  

	
2.5

	
The use of specialist tools may comprise the use of test software as indicated in Appendix B. Nothing herein shall construe as granting to Supplier any right or such test software through the authorized of the tools under this Agreement. Such test software shall be treated as strictly confidential and Supplier shall be responsible for recording revision of all test software and regularly backing-up.

 

	
  

	
2.6

	
It may, from time to time, be mutually agreed in writing that Supplier shall develop and supply under its full responsibility some testing tools. In such case, Supplier shall transfer to Customer all the intellectual property rights pertaining to the tool, software, data or other related material upon conception as outlined in clause 10.3

 

 

Article 3.           Supply of components by third-party suppliers – Savings

 

	
  

	
3.1

	
For the purpose of manufacturing the Products hereunder, Supplier will source parts from approved vendors or manufacturers, as specified by Customer in the Bill of Materials or Approved Vendor List (“BOM or “AVL”) that Customer will supply as part of the Manufacturing File and Information. Certain BOM and list of approved vendors or manufacturers are already indentified under Appendix B.

 

	
  

	
3.2

	
Except as otherwise agreed in writing between the Parties, Supplier shall be responsible to any third party supplier for the acquisition and supply of any component and for the payment thereof. It is agreed that, while the Supplier will totally be responsible for Supplier Controlled Components, Supplier will only manage the relationship, the purchasing, procurement, incoming inspection for Customer Controlled Components as expressly identified as such in Appendix D.

 

  

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Article 4.           Purchase Orders – Forecasts – Lead Times – Stocks – Delivery Dates

 

	
  

	
4.1

	
Customer will issue purchase order for Products under this Agreement according to a frozen shipment schedule  described in Appendix C. Supplier will launch procurements according to this schedule and Lead Times and as per rules described in said Appendix C, as needed for the proper fulfillment of the purchase orders within the agreed Lead Times.

 

	
  

	
4.2

	
All purchases orders placed by Customer shall be made in writing, sent either by mail, by telecopy or by e-mail (confirmed by telecopy) to Supplier Planning Services and shall include for each Product or Products so ordered:

 

	
  

	
-

	
Customer purchase order reference,

 

	
  

	
-

	
The exact Product reference and identification,

 

	
  

	
-

	
The applicable technical revision level indicator,

 

	
  

	
-

	
The applicable purchase price, and,

 

	
  

	
-

	
The delivery terms and conditions including as to delivery date and place.

 

	
  

	
4.3

	
In order to constitute binding orders between the Parties, purchase orders shall be subject to confirmation by Supplier, within a number of days, depending on whether there was a forecast, as indicated in Appendix C, elapsing from receipt by Supplier of the relevant Customer purchase order. Supplier shall confirm orders in writing. A written acknowledgement of receipt (or also referred to as “purchase order confirmation”) shall be addressed to Customer Scheduling Department and shall confirm quantities, price, delivery date and place according incoterms for the Products ordered within 5 working days at the maximum for un-forecasted Purchase Orders. Unless a written purchase order confirmation is sent to Customer Scheduling department within said time
period, purchase orders shall be deemed accepted and confirmed by Supplier upon expiry of said confirmation period. Any modification to the terms and conditions shall only be accepted if confirmed in written form by both Parties. Supplier has the obligation to accept any purchase orders issued by Customer in accordance with this Agreement and covered by forecast.

 

	
  

	
4.4

	
Only purchase orders confirmed in accordance with Article 4.3 above will trigger the manufacturing process by Supplier for the relevant products. This Agreement shall in no manner constitute a general authorization, whether express or tacit, granted by Customer to Supplier, to manufacture Products, or parts thereof, in advance of actual purchase orders so confirmed. Customer shall in no manner have an obligation to purchase finished Products from Supplier other than under a purchase order accepted as set forth above.

 

	
  

	
4.5

	
During the regular Monitoring Committee meetings, once per month during the qualification process and then, once per quarter, Supplier shall advise Customer in writing and documented of any excess or obsolete Components in its inventory and their Delivered Cost (the “E&O List”). For the purpose of this Agreement, “Delivered Cost” shall mean Supplier’s standard cost of Components as stated on the bill of materials plus Supplier material overhead (MOH) costs. Within ten (10) business days of receiving Supplier’s E&O List, Customer shall advise Supplier of any Component on the E&O List that believes is not excess or obsolete. After Receiving Supplier’s E&O List, Customer shall issue to Supplier an Order for all
obsolete Components and pay in accordance with Article 8 of this Agreement. For the purpose of this Section, the phrased “obsolete Component” shall mean any component which is confirmed as being an obsolete Component by Customer (based on the Supplier’s MRP information) because it will not be used to manufacture Customer’s Product (whether as a result of an ECN or otherwise), and the term “excess Component” shall mean any Component which is not required to meet Customer’s 12 months Forecast to which such Component was initially ordered. Supplier shall report any non expected events: Concession, waiver, yields below standard, fails during FQC (Final Quality Control),...

 

  

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4.6

	
Supplier undertakes to maintain at all times during this Agreement and under its own responsibility a safety stock of Products and/or a minimum stock of components as indicated in Appendix C.

 

	
  

	
4.7

	
The stock of production components under Customer ownership shall be kept under the custody of the Supplier, at the Customer’s own cost and Supplier’s risk. Supplier will not source any such components from third-party suppliers until such inventory is fully consumed.

 

 

Article 5.           Delivery – Packaging & Shipping

 

	
  

	
5.1

	
Supplier shall deliver the Products DDP (INCOTERM 2010 of the ICC) a location in the UK (to be confirmed by MoD)

 

	
  

	
5.2

	
Supplier acknowledges that time of delivery is of essence and that forecasts provided to Supplier will be established on the basis of delivery programs and obligations in force between Customer and its own clients. Delivery in due time (as per Appendix C) by Supplier is therefore an essential obligation under this Agreement and Supplier acknowledges that Customer’s decision to contract with Supplier was based on the latter’s ability to supply the Products in accordance with Customer’s needs and constraints.

 

	
  

	
5.3

	
Supplier shall inform, by written notice (i.e. email, confirmed via fax), as soon as reasonably possible Customer of any late deliveries or risk thereof and provide Customer with an explanation of the reasons for such failure, the measures taken by Supplier to remedy such delay, as well as the next possible date of delivery. In case of failure to make a delivery on the contractually requested delivery date (as outlined in Appendix C), Supplier shall be liable for the late delivery penalties as outlined in Appendix C.

 

	
  

	
5.4

	
Delivery delays in delivery exceeding five (5) working days beyond the mutually agreed written contractual date of delivery shall render the Supplier be liable for liquidated damages. When no due date has been agreed, the delivery Lead-Times in Appendix C shall apply. The liquidated damages shall be calculated on the price of the delayed Products not delivered on the mutually agreed delivery date. The liquidated damages shall be one percent (1%) of the second calendar week and two percent (2%)  for the third and two (2%) for the fourth week of delay of the price of delayed Products not delivered on the mutually agreed delivery date up to a maximum of five (5) percent of the price of delayed Products not delivered on the mutually agreed date. In the event
that the Products are not delivered after week four (4), it has been agreed that the liquidated damages scheme would re-start based on the mutually agreed re-acknowledgment delivery date. Supplier shall be obliged to notify a re-acknowledgement date as soon as it become aware of a potential delay that would go beyond four (4) weeks delay. The possibility to make partial deliveries shall be mutually and agreed between the parties in advance.

 

  

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5.5

	
Packaging and shipping shall be made in accordance with the standards and specifications set out in Appendix E, and more generally so as to protect the Products from any defects that may result from the transport. Packing slips will be attached to any Product delivery and, where applicable, will include the serial number of the Product and any relevant identification element.

 

	
  

	
5.6

	
Transfer of ownership and risks of the Products shall pass to Customer on delivery in accordance with the agreed incoterms.

 

	
  

	
5.7

	
Supplier undertakes to comply with health, safety and environmental rules and regulations applicable to the manufacturing of the Products accordingly, inform Customer (For this article, Customer is Signature Industries Ltd) that contains a substance or a material, which could pollute the environment or may be dangerous or hazardous for human health or the security of persons, even if such risk may only arise after a wrongful use or manipulation of the Product.

 

	
  

	
5.8

	
The Products sold are verified by the Supplier in its factory as being compliant with the terms and conditions of this Agreement and with Customer specifications. Supplier shall send Customer a certificate of internal acceptance proving that all mutually agreed tests have been successfully passed.

 

 

Article 6.           Quality Standards – Business continuity – Audits

 

	
  

	
6.1

	
Technical specifications applicable to the Products are given by the technical revision level indicator provided in each purchase order. Technical modification requirements regarding the Products or its components shall be addressed by Customer to Supplier in accordance with article 11 below.

 

	
  

	
6.2

	
The Products shall be manufactured in accordance with (a) the applicable technical standards and the procedure described in the Manufacturing Files and Information provided to Supplier upon execution of this Agreement or subsequently thereafter, and more generally in accordance with (b) Customer BOM information as per Appendix B, (c) the certifications as provided in Appendix F, (d) applicable industry standards. In particular, Supplier shall proceed with all controls and tests described in such files.

 

	
  

	
6.3

	
Supplier is currently ISO 9001-2008 certified and shall during the term of this Agreement be and remain ISO certified and maintain management quality criteria described in the Quality Assurance Agreement attached hereto as Appendix F. Supplier further undertakes to maintain during the term of this Agreement the certificates listed in Appendix F. Supplier shall also maintain during the term of this agreement its business continuity plan as described in said Appendix F. Without prejudice to the provisions of Article 6.4, Supplier shall allow visits or operational related audits of its manufacturing and inventory site by either Customer or Customer’s clients, upon Customer’s prior notification, during normal business days and hours, at conditions that will
be mutually agreed beforehand.

 

  

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6.4

	
Upon advance reasonable prior written notice from Customer and subject to the execution of an appropriate nondisclosure agreement by external auditors, if any, to comply with Supplier’s confidentiality rules, Supplier shall provide such auditors, as Customer may from time to time designate in such notice, with reasonable access, during normal business days and hours, to the manufacturing and inventory sites of Supplier for the purpose of performing audits to verify the nature, quality and quantity of any and all components, elements or sub-assemblies used to manufacture the Products, to examine the manufacturing process, tests and controls performed by Supplier, the performance of the specialist tools used, and more generally, any element in relation with the
quality of the Products. Supplier shall provide to such auditors any reasonable additional assistance on site that they reasonably require, at no cost to Customer nor such auditors. Customer and its representatives acknowledge that their presence on Supplier’s property is at their sole risk. If the audit performed by Customer reveals any deficiencies, concerns and/or recommendations, both Parties shall, upon written request to that effect sent by Customer, review and carry out remedial action in accordance with the corrective action.

 

	
  

	
6.5

	
Customer shall have the right to reject any Product in accordance with Article 9 (“Warranty”) not compliant with the agreed requirements and specifications (such as without limitation, manufactured in violation of the applicable technical specifications set out in the manufacturing files or otherwise applicable).

 

	
  

	
6.6

	
Supplier shall keep all records and documentation necessary to bring evidence of activities and results obtained in relation to Products manufacturing. When appropriate, on specific Customer’s request, some documentation in relation with controls and tests carried out such as, management reviews, corrective and preventive actions reviews and plans, process qualifications, will be kept by Supplier for a period of time mutually agreed upon by the Parties and Supplier hereby authorizes Customer to obtain, upon first demand, copies of such documentation.

 

  

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Article 7.           Services

 

	
  

	
7.1

	
Supplier shall provide the Services described in Appendix A, in accordance with the service levels and specifications set out in Appendix H.

 

	
  

	
7.2

	
The Services shall be ordered through a purchase order or through a formalised authorisation form.

 

 

Article 8.           Prices and Payments

 

	
  

	
8.1

	
Supplier will supply the Products and Services to Customer in accordance with the prices set out in Appendix C.

 

	
  

	
8.2

	
Invoices shall be directly addressed by the Supplier, to the Accounting Department as indicated in the order. Each invoice shall be expressed in the currency stipulated in the order.

 

	
  

	
8.3

	
Payment shall be made following invoice and Thirty (30) days net of receipt of relevant undisputed invoice and delivery of compliant Products and Services.

 

 

Article 9.           Warranties

 

	
  

	
9.1

	
Supplier warrants that the Products shall, during the mutually agreed warranty period (hereinafter referred to as “the Warranty Period”), be a) free from defects in manufacturing process, workmanship and, in the event of a Supplier Controlled Material (subject to the provision hereinafter with regards to Customer Controlled Material), material and b) compliant with the Customer specifications and the requirements contained in or referred to in this Agreement. The Products shall be manufactured in conformity with such applicable specifications. With respect to Customer Controlled Material included in the Products, Supplier warrants that the incoming inspection has been performed by Supplier with all due care and skill and in accordance with industry
standards in order to ensure that the Customer Controlled Material comply with Customer specifications and the needs and requirements of this Agreement.

 

	
  

	
9.2

	
The Warranty Period applicable to the Products shall be thirty six (36) months commencing on the date of manufacture in accordance with the Product date code. Supplier shall, at its option and its expense, either repair or replace any defective Products during the Warranty Period, at no cost for Customer. Replacement shall be made within a commercially reasonable number of days of the date of return of the defective Product or within that number of days as agreed under relevant purchase order. Any repaired or replaced Product shall be warranted as set forth in this Article for a period equal to the greater of (i) the balance of the applicable warranty period relating to such Product or (ii) ninety (90) days after it is received by Customer. All returns shall state
the specific reason for such return.

 

	
  

	
9.3

	
Supplier shall pay all transportation costs (including freight costs and packaging fees) for returns of the Products to Supplier pursuant to this Article 9 and for the shipment of the repaired or replacement Products to Customer, and shall bear all risk of loss and damage to such Products while in transit.

 

  

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9.4

	
Exclusions from Warranty. The warranty will not cover defects or failures resulting from (a) Customer’s design of Products and (b) if and to the extent the defect is due to neglect, abuse, misuse, accident improper handling, testing, storage or installation including improper handling in accordance with static sensitive electronic device handling requirements of the concerned Product by Customer, its agents or its clients, (c) alterations, modifications or repairs by Customer or third parties, unless in agreement with Supplier or (d) defective Customer-provided test equipment or test software.

 

 

Article 10.           New Products

 

	
10.1 

	
In the event Customer desires to subcontract to Supplier the manufacture of new products, Customer shall provide Supplier with initial manufacturing data and with the necessary specialist tools enabling Supplier to evaluate the initial investment required to initiate such manufacturing.

 

	
10.2

	
Customer shall, after agreement by the Parties on the price per unit for the supply of any new product as well as the initial investment required to be paid by Customer, where applicable, provide Supplier with the complete specifications and information (industrial files) in connection with this new product.

 

	
10.3

	
The Parties acknowledge that all Intellectual Property Rights owned by the other party prior to the date of this Agreement shall remain the property of that party (Background intellectual Property Rights). No intellectual property rights shall be transferred under this Agreement except for the intellectual property rights in new products, manufacturing files, software (if applicable), specifications, documentation, tools and other material created or modified and, if so agreed between the Parties, paid for by Customer under this Agreement pursuant to Customer’s request and specifications (hereafter referred to as “Materials”), such Intellectual Property Right shall vest in Customer absolutely upon creation (or upon payment if such payment is
agreed between the Parties).

 

	
10.4

	
The Supplier undertakes not to retain copies of the Material following the expiry or termination of this Agreement without the prior written consent of Customer.

 

	
10.5

	
All intellectual property rights developed by Customer shall always remain vested in Customer.

 

	
10.6

	
Should the Supplier be the developer of such Material, then Supplier shall transfer to Customer all the intellectual property rights pertaining to the Material upon their conception. Such intellectual property rights shall be transferred to Customer for all countries and for the entire duration of the intellectual property rights. The intellectual property rights so transferred include, in particular, any modification, upgrades, enhancements or changes to the Material, which Customer may carry out, or have carried out by Supplier or a third party and the rights to reproduce, commercially use and distribute the Material.

 

  

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Article 11.           Modification of Products – ECO – EOL

 

	
11.1

	
Supplier shall inform Customer of any changes to the production process, the production location, the production line, the technology, sub-contractors or suppliers used. Upon notification, Customer shall have the right to proceed to any verification in this respect and obtain from Supplier initial samples. Any notified modification, shall in order to be carried out, be subject to the prior written approval of Customer.

 

	
11.2

	
Customer shall have the right to request from Supplier certain technical modification requirements regarding the Products. Within one week from Customer’s written request, Supplier shall provide Customer with an estimate of the time and cost to carry out such modifications, which shall, in any case, be subject to written authorization by Customer. Supplier will take all necessary actions to implement such modifications according to Customer’s requirements.

 

	
11.3

	
Supplier shall not modify the Products, its components or technical specifications or bring modifications to the manufacturing process without the written prior approval of Customer. Supplier shall be responsible for the implementation of such modifications, including the implications of these modifications on the related inventory. The parties shall mutually agree the date of implementation of approved modifications.

 

	
11.4

	
The procedure for the above possible changes (“engineering change notification” or “ECN”) is described in Appendix G.

 

	
11.5

	
Supplier shall provide end of life (“EOL”) services for a period identified in Appendix H and starting from last production run, including maintenance of equipment, know-how and required materials. Customer will advise of Product discontinuance with a minimum notice period identified in said Appendix H prior to the last production run, along with a firm forecast. Customer is responsible for minimizing inventory exposure and lifetime buys of parts during this period. No lifetime buys will be purchased without prior written consent from Customer, these parts will become Customer’s property upon receipt, and will be invoiced accordingly. Supplier will negotiate phased deliveries of lifetime buys as per the rules under Appendix H, proactively monitor
component life cycles and advise Customer accordingly. Any relevant EOL/PCN information that Supplier receives from parts vendors must be promptly relayed to Customer. Lifetime buys resulting from component EOL will be handled as for Product EOL described above.

 

  

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Article 12.           Term

 

	
12.1

	
This Agreement shall become effective as of the date of 11th of July 2011 (“Effective Date”) and by execution by both Parties and, unless earlier terminated as provided herein, shall continue in effect for a period of two (2) years. Upon expiry of the initial term, this Agreement shall continue from year to year until one Party terminates the Agreement in accordance with Article 13.

 

 

Article 13.           Termination

 

	
13.1

	
Customer may, in case of a breach of obligation relating to a specific order and in the event such breach has not been remedied within thirty (30) days following the written notice to do so, terminate the correspondent order only and decide, at its own discretion, to pursue the Agreement.

 

	
13.2

	
Either Party may terminate this Agreement immediately and automatically in writing, without any advance or prior notice, upon the occurrence of the following events: (i) to the extent permitted by law, in the event that the other undergoes a bankruptcy proceedings or otherwise becomes insolvent or is stuck by any other bankruptcy-related judicial procedure, or (ii) enter into or file a petition, arrangement or proceeding seeking an order for relief under the bankruptcy laws of its respective its respective jurisdiction; (iii) enter into a receivership of any of its assets or (iv) enter into a dissolution or liquidation of its assets or an assignment for the benefit of its creditors.

 

	
13.3

	
Either Party may terminate this Agreement for convenience, at any time by written notice given (i) to Supplier at least six months prior to the date on which such termination is to become effective in the which such termination is to become effective in the case Customer is the terminating Party and (ii) to Customer at least six months prior to the date on which such termination is to become effective in the case Supplier is the terminating Party, subject to the provision in Article 8.1

 

	
13.4

	
Upon expiration or termination of this Agreement for any reason, unless otherwise instructed by Customer, Supplier shall return to Customer all documents, specialist tools and material provided by Customer within thirty (30) days of expiration or termination on mutually agreed costs in accordance with the mutually agreed Incoterms 2010. Upon expiration or termination of this Agreement for any reason, unless otherwise instructed by Supplier, Customer shall return to Supplier all Supplier Confidential Information within thirty (30) days of expiration or termination on mutually agreed costs in accordance with the mutually agreed Incoterms 2010.

 

	
13.5

	
Except in the event of termination for breach of the Supplier either of the order or of the Agreement as outlined in 13.1, In the event of the termination of this agreement, Customer shall (subject to any other agreement of the Parties at the time) be required:

 

  

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a)

	
To purchase from Supplier the ordered and finished Products which at the date of termination have been manufactured by Supplier (and which have not already been paid for by Customer), and

 

	
  

	
b)

	
To pay Supplier for the components or other raw materials ordered by Supplier solely for the performance of its obligations hereunder including Work in Progress corresponding to a purchase order issued by Customer, up to level mutually agreed by the Parties during their last Monitoring Committee meeting for the purchase price including material overhead of such components or raw materials.

 

 

	
13.6

	
In case of termination, Supplier shall provide Customer with commercially reasonable support and assistance necessary for the transfer by Customer of the manufacturing of the concerned Products to another supplier. The costs for such support shall be mutually agreed between the parties.

 

	
13.7

	
In the event Customer terminates this Agreement or any Order hereunder as a result of a breach by Supplier, Customer shall purchase:

 

	
  

	
a)

	
The contract price for all finished Products existing at the time of termination;

 

	
  

	
b)

	
Components pursuant to Article 4.7 and

 

	
  

	
c)

	
Customer Controlled Components

 

	
13.8

	
The provisions of Articles 2, 8, 9, 13, 14, 15, 16, 19, 20 and 21 shall survive any termination or expiration of this Agreement.

 

 

Article 14.           Confidentiality

 

	
14.1

	
Specifications applicable to the Products, Services, designs, drawings, technical data, samples, financial data and any other information whatsoever, provided to the Supplier by Customer under this Agreement (“Confidential Information”) shall be considered as strictly confidential during the term of this Agreement and for a period of four (4) years thereafter.

 

	
14.2

	
Confidential Information may be subject to specific requirements from Customer, as will be then notified and discussed with Supplier.

 

	
14.3

	
Customer shall keep Supplier’s Confidential Information received under this Agreement strictly confidential during the term of this Agreement and for a period of four (4) years thereafter, provided such Confidential Information has been marked as confidential at the time of its disclosure or, if disclosed orally or visually, has been reduced in writing and marked as confidential within fifteen (15) days following the disclosure.

 

	
14.4

	
The Receiving Party shall not obligated to maintain in confidence: (i) Confidential Information which is, or subsequently may become, within the knowledge of the public generally or which is in the public domain, through no fault of the Receiving Party, (ii) Confidential Information which the Receiving Party can show was previously known to it as a matter of record at the time of receipt; (iii) Confidential Information which may be obtained lawfully from a third party who as obtained the Confidential Information through no fault of the Receiving Party, (iv) Information that was independently develop by either Party without recourse to the Confidential Information or (v) which is required to be disclosed pursuant to the requirement of a government or regulatory
agency or by operation of law.

 

  

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14.5

	
Supplier acknowledges that neither this Agreement not the purchase orders under this Agreement shall confer upon Supplier any license rights or intellectual property rights with regard to the Products or any Confidential Information. Unless otherwise stated in the termination provisions of this Agreement, Supplier shall not manufacture, assemble or repair any Product and supply any Services, after termination or expiration of this Agreement, without the prior written consent of Customer.

 

	
14.6

	
Customer acknowledges that, unless otherwise stated in this Agreement, neither this Agreement nor receipt of any Confidential Information from Supplier shall confer upon Customer any license rights or intellectual property rights with regard to Supplier’s Confidential Information.

 

 

Article 15.           Indemnification

 

	
15.1

	
Supplier shall defend, indemnify and hold Customer harmless from any and all third party demands, actions, causes of action, proceedings, suits, judicial, tax or similar official assessments, liabilities, claims, damages, settlements, judgments, interest, costs and expense, of every kind, arising out of based on any actual or alleged infringement, in relation to any Products, of any patents, copyrights, trade secrets, or other intellectual property rights, unless Supplier can evidence that the infringement claim results from the use by Supplier of Manufacturing File and Information provided by Customer under this Agreement, provided Customer gives Supplier notice of the claim as set forth below, allows Supplier sole control of the defence or settlement of the
claim, and reasonably cooperates with Supplier in such defence or settlement, at Supplier’s cost.

 

	
15.2

	
Customer shall defend, indemnify and hold Supplier harmless from any and all third party demands, actions, causes of action, proceedings, suits, judicial, tax or similar official assessments, liabilities, claims, damages, settlements, judgments, interest, costs and expense, of every kind, arising out of based on any actual or alleged infringement, in relation to the use of Manufacturing File and Information provided to Supplier hereunder, of any patents, copyrights, trade secrets, or other intellectual property rights, provided Supplier gives Customer notice of the claim as set forth below, allows Customer sole control of the defence or settlement of the claim, and reasonably cooperates with Customer in such defence or settlement, at Customer’s
cost.

 

	
15.3

	
Each Party shall immediately notify the other upon learning of any existing or potential infringement. In the case of any alleged infringement by Products or Services, Supplier undertakes, within a reasonable time period, not to exceed three months and at its own cost, to procure the right for Customer or its clients to continue using and selling Products or to modify, in accordance with article 11 above, the Products so as to be non-infringing and substantially equivalent in functionality. In the case of any alleged infringement by the Manufacturing File and Information provided to Supplier by Customer hereunder, Customer undertakes, within a reasonable time period, not to exceed three months and at its own cost, to procure the right for Supplier to continue using
them for the purpose of this Agreement or to modify them so that they become non-infringing.

 

  

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Article 16.           Liability and Limitation of Liability

 

	
16.1

	
In no event shall either party be liable for any indirect, consequential, incidental, punitive or special damages whatsoever resulting from loss of use, data or profits, even is such other party has been advised of the possibility of such damages. For the purpose of this section, both lost profit and damages resulting from value added to the Product by Customer after the delivery by Supplier shall be considered consequential damages.

 

	
16.2

	
In no event shall either party’s liability per year for all claims for direct damages arising out of or relating to this Agreement exceed £5,000,000.

 

	
16.3

	
The limitations set forth in this Article shall apply where the damages arise out of or relate to the Agreement.

 

	
16.4

	
Notwithstanding the foregoing, the exclusions and limitations set forth herein shall not apply to limit (i) Customer’s obligation to pay the agreed price in accordance with the terms and conditions set forth in this Agreement (including pursuant with Article 4.7); (ii) a Party’s obligation to indemnify the other Party against third party’s claim for personal injury or death; or (iii) actual damages required to be paid to any third party as a result a any third party right infringement claim (pursuant Article 15).

 

 

Article 17.           Assignment

 

	
17.1

	
This Agreement or any rights hereunder may not be assigned or otherwise transferred by any Party without the prior written consent of the other Party; provided, however, that either party may, upon prior notice to the other party, assign this Agreement in all or in part without such other party’s prior or subsequent consent, (i) to any Affiliate or the parent or its holding company of the assigning party and (ii) to the buyer of all or part of the assigning’s assets, Products or Product lines to which this Agreement applies.

 

	
17.2

	
For the purpose of this Agreement, the term “assign” shall include, without limitation, a sale, merger, spin off, contribution or any other method of disposal of assets or business, or any other transfer of control by operation of law or otherwise, whether total or partial.

 

	
17.3

	
Customer shall have a right, upon reasonable prior written notice, to access, during normal business days and hours, to the manufacturing sites of Supplier in which Products or Services for Customer are being performed, for the purpose of performing any reasonable audit in order to verify that Supplier has done all commercially reasonable efforts, within each site concerned, to isolate the manufacturing of the Products (including teams, processes, lines) from the manufacturing of the competitor’s products.

 

  

14

  

 

Article 18.           Key personnel – Monitoring Committee

 

	
18.1

	
Supplier shall appoint, within fifteen (15) days of the date of execution of this Agreement, the following key personnel for the purpose of ensuring the proper application of this Agreement:

 

	
  

	
i)

	
Customer account Manager

 

	
  

	
ii)

	
Quality Manager

 

	
  

	
iii)

	
Material & planning Responsible (for the Project)

 

	
  

	
iv)

	
Engineering Responsible (for the Project)

 

	
  

	
-

	
And shall provide Customer with all information to contact directly such person, and both Parties agree to pay attention to providing (including updates) and using such information in order to avoid inadvertent disclosure of any sensitive information.

 

	
  

	
-

	
Both parties agree to handle a Monitoring Committee at least once a quarter.

 

	
18.2

	
Each Party shall also appoint one representative responsible for the general administration of this Agreement and who shall act as the contact point under this Agreement for any matter relating thereto, including, without limitation, for settlement of disputes as per Article 19.2. Such representatives shall co chair the Monitoring Committee described below.

 

	
18.3

	
For the purpose of ensuring adequate monitoring of the manner in which the obligations set forth in this Agreement are discharged by the Parties, the Parties shall, within fifteen (15) days of the execution hereof, establish a contract monitoring committee (the “Monitoring Committee”). The Monitoring Committee shall be in charge of reviewing, assessing and addressing any operational or other issue identified in the course of implementing this Agreement, and make any appropriate written suggestion to the Parties in relation thereto. The Monitoring Committee shall have no decision-making authority of its own. Minutes of its meetings shall be kept and circulated by the hosting Party. The other Party may, where appropriate, comment on these minutes if it
considers that they do not accurately reflect positions expressed during any meeting.

 

 

Article 19.           Governing law – Settlement of disputes

 

	
19.1

	
This Agreement shall be exclusively construed and enforced in all respects in accordance with the laws of England, without regard to its conflicts of law provisions.

 

	
19.2

	
If a dispute arises in relation to any aspect of this Agreement, the representatives of Customer and Supplier responsible for administration of this Agreement shall first consult and discuss in good faith in an attempt to come to an agreement in relation to the disputed matter, within a reasonable period of time (having due regard for the nature of the dispute and the operational necessity for its resolution) but in no case exceeding thirty (30) days from the date that either Party informs the other in writing that such a dispute exists. If the Parties fail to resolve the dispute at that level within such resolution period, the dispute shall be escalated to the respective responsible company members of senior management within each Party for resolution, within
fifteen (15) days of the end of the first resolution period. If the dispute remains unresolved at the end of such second resolution period, then the dispute shall be finally submitted to the commercial courts of Zurich, Switzerland to which the Parties hereby attribute full and exclusive jurisdiction for the purpose hereof.

 

  

15

  

 

Article 20.           Force Majeure

 

	
20.1

	
In the event that an event of force majeure (an “Event of Force Majeure”) arises, the Agreement will be suspended for so long as its performance may be substantially hindered or prevented by said Event of Force Majeure. Event of Force Majeure means any event beyond the Party’s control being unforeseeable and occurring without such Party’s negligence or willful misconduct including, but not limited to, any act by any governmental authority, act of war or natural disaster, boycott, embargo, lockout, riots or civil commotion, terrorism, or the failure of the Vendor to timely deliver due to an Event of Force Majeure.

 

	
20.2

	
If one Party is unable to perform its duties and obligations under this Agreement as a direct result of the effect of an Event of Force Majeure, that Party shall give written notice to the other of the inability, setting out full details of the reasons therefore and the expected date at which such inability shall cease.

 

	
20.3

	
In case the agreement is suspended or substantially hindered or prevented for more than three (3) months as a result of such an Event of Force Majeure, the Parties hereby mutually agree that the party not experiencing the Event of Force Majeure shall have the right to terminate the Agreement, but such termination shall be subject to the requirements of Section 13.5 above.

 

 

Article 21.           Miscellaneous

 

	
21.1

	
No amendment or alteration of this Agreement shall be effective unless in writing and signed by the duly authorised representatives of each Party.

 

	
21.2

	
This Agreement and Appendices hereto constitute the entire agreement the Parties and supersede any prior oral or written agreement between the Parties with respect to the subject matter hereof.

 

	
21.3

	
Nothing herein contained shall be construed as constituting or be deemed to constitute a partnership or joint venture between the Parties hereto. All Supplier employees, agents and contractors are employees, agents and contractors of Supplier and shall in no event be deemed employees, agents or contractors of Customer. Supplier is responsible without limitation for their administrative and social management.

 

	
21.4

	
Any failure by one of the Parties to this Agreement to exercise any of its rights hereunder shall not be deemed a waiver of such rights. No extension of time for, or waiver of performance of, any obligation of any party hereto shall be effective unless it is made in writing signed by the Party granting such extension or waiver. Unless specifically stating otherwise, no waiver shall constitute or be construed as a waiver of any subsequent breach or non-performance.

 

	
21.5

	
In the event that any provision of this Agreement shall be held by a court or other authority of competent jurisdiction to be invalid or unenforceable, the remaining provisions of this Agreement shall remain in full force and effect and shall be construed so as to best carry out the intentions of the Parties upon the execution and delivery of this Agreement. The Parties shall then meet as soon as practicable with a view to establishing new terms valid and enforceable in accordance with applicable rules, so as to reflect as closely as possible the intention initially expressed by the Parties in respect of the provisions so held invalid or unenforceable.

 

  

16

  

 

	
21.6

	
Without prejudice to Article 18, any notices hereunder shall be made by certified mail return receipt requested, by e-mail or fax and confirmed by certified mail return receipt requested, by nationally recognized overnight courier service or by personal deliver, and will be deemed effective upon receipt, to:

 

	
  

	
-

	
If Customer, to:

 

	
 

	
. Mike Cook, Managing Director: mcook@signatureindustries.com

 

	
 

	
.

 

	
 

	
.

 

	
  

	
-

	
If to Supplier, to:

 

	
 

	
. John Boston, Managing Director: john.boston@cil-uk.co.uk

 

	
 

	
.

 

	
 

	
.

 

	
 

	
.

 

	
  

	
-

	
All such notices shall be effective upon receipt. Any Party hereto may, by notice in writing served as set forth above, designate a different address or a different or additional person to whom such notices or communication are hereafter to be sent.

 

	
21.7

	
Unless specifically stated otherwise in this Agreement, time periods provided herein in “days” shall be calculated as “working” days.

 

  

17

  

 

Executed in two (2) original copies.

 

	For Customer:	 	 	For Supplier:	 
	Date: 7 July 2011	 	 	Date: 11 July 2011	 
	 	 	 	 	 
	 	 	 	 	 
	Signed: / Mike Cook / 	 	 	Signed: / John Boston /	 
	 Name Mike Cook	 	 	 Name John Boston	 
	 Title Managing Director 	 	 	 Title Managing Director	 

  

18

  

 

List of Appendices

 

 

Appendix A: Products and Services

Appendix B: Manufacturing files (including BOM) and tools/test software

Appendix C: Price List (costed BOM and Lead Times) / Cost of Lead Times/ Forecasts & firm orders schemes/ Stocks/ Delivery dates

Appendix D: Customer Controlled Material

Appendix E: Packaging and shipping specifications

Appendix F: Quality: Objectives & Penalties

Appendix G: ECO Rules

Appendix H: EOL Rules

 

Each appendix can be updated separately and has to be signed by both parties before implementation.

 

 

19ex4-2.htm

Exhibit 4.2

MEMSIC, INC.

AMENDED AND RESTATED

2009 NONQUALIFIED INDUCEMENT STOCK PLAN

SECTION 1. PURPOSE

The purpose of this Amended and Restated 2009 Nonqualified Inducement Stock Plan (the “Plan”) is to promote the interests of MEMSIC, Inc. (the “Company”), by affording certain persons the opportunity to acquire a proprietary interest in the Company.  The Company intends that the Plan be reserved for persons to whom the Company may issue securities without stockholder approval as an inducement pursuant to Rule 5635(c)(4) of the Marketplace Rules of the Nasdaq Stock Market, Inc.  It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company and its shareholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.  The Company intends that this purpose will be effected by the granting of equity awards under the Plan (in each case, a “Plan Award”), including:

(a) non-statutory stock options (“Inducement Options”);

(b) awards entitling the recipient to acquire, for a purchase price determined by the Plan Administrator, shares of Common Stock subject to restrictions and conditions as the Plan Administrator may determine at the time of grant (“Restricted Stock Awards”); and

(c) contractual rights entitling the holder to receive upon vesting, shares of Common Stock of the Company (“Restricted Stock Units”).

In addition, this Plan provides the Plan Administrator the sole authority to establish the terms and conditions for the exercise or vesting of any Plan Awards, including, but not limited to, non-competition, non-solicitation and non-hire provisions, and restrictions based on continued employment and/or achievement of pre-established performance goals and objectives.  As used in the Plan, the terms “parent” and “subsidiary” shall have the respective meanings set forth in Section 424 of the Internal Revenue Code of 1986, as amended (the “Code”).

  

- 1

  

SECTION 2. ADMINISTRATION

2.1           The Plan Administrator.  The Plan shall be administered by the Plan Administrator (the “Plan Administrator”), which shall be the Compensation Committee of the Board of Directors of the Company (the “Board”) unless otherwise determined by the Board, in which case the Plan Administrator shall be the entire Board unless the Board shall appoint another committee to be the Plan Administrator.  It is the intention of the Company that the Plan, if not administered by the Board, shall be administered by a committee of the Board composed solely of two or more “Non-Employee Directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “1934 Act”), but the authority and validity of any act taken or not taken by the Plan Administrator shall not be affected if any person administering the Plan is not a Non-Employee Director.  Except as specifically reserved to the Board under the terms of the Plan, the Plan Administrator shall have full and final authority to operate, manage and administer the Plan on behalf of the Company.

2.2           Powers of the Plan Administrator. The Plan Administrator shall have the power and authority to grant and modify Plan Awards consistent with the terms of the Plan, including the power and authority:

(a)           To determine from time to time the persons eligible to receive Plan Awards, the type or combination of Plan Award or Plan Awards to be granted, the number of shares to be covered by any Plan Award and to prescribe and modify the terms, conditions, restrictions, if any, and provisions (which need not be identical) of each Plan Award granted under the Plan to such persons;

(b)            To construe and interpret the Plan and Plan Awards granted thereunder and to establish, amend, modify and revoke guidelines, rules and regulations for administration of the Plan.  In this connection, the Plan Administrator may correct any defect or supply any omission, or reconcile any inconsistency in the Plan, or in any agreement evidencing or relating to a Plan Award, in the manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.  All decisions and determinations by the Plan Administrator in the exercise of this power shall be final and binding upon the Company and award recipients;

(c)           To make, in its sole discretion, changes to any outstanding Plan Award granted under the Plan, including: (i) to reduce the exercise price, (ii) to accelerate the vesting schedule or (iii) to extend the expiration date; and

(d)           Generally, to exercise such powers and to perform such acts as are deemed necessary or expedient to promote the best interests of the Company with respect to the Plan.

All decisions and interpretations of the Plan Administrator shall be binding on all persons, including the Company and Plan participants.  No member or former member of the Plan Administrator or the Board of Directors shall be liable for any action or determination made in good faith with respect to this Plan.

  

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SECTION 3. STOCK

3.1           Stock to be Issued.  The stock subject to the Plan Awards shall be shares of the Company’s authorized but unissued common stock, $0.00001 par value per share (“Common Stock”), or shares of the Company’s Common Stock held in treasury.  The total number of shares that may be issued pursuant to Plan Awards shall not exceed an aggregate of 2,500,000 shares of Common Stock; provided, however, that the class and aggregate number of shares which may be subject to Plan Awards shall be subject to adjustment as provided in Section 8 hereof.

3.2           Expiration, Cancellation or Termination of Plan Awards.  For purposes of the limitation in Section 3.1, the shares of Common Stock underlying any Plan Awards which are forfeited, cancelled, reacquired by the Company or otherwise terminated (other than by exercise) shall be added back to the shares of Common Stock with respect to which Plan Awards may be granted under the Plan.

SECTION 4. ELIGIBILITY

Plan Awards may be granted only to persons to whom the Company may issue securities without stockholder approval in accordance with Rule 5635(c)(4) of the Marketplace Rules of the Nasdaq Stock Market, Inc.

SECTION 5. TERMINATION OF EMPLOYMENT OR DEATH OF A RECIPIENT OF AN INDUCEMENT OPTION

5.1           Termination of Employment.  Except as may be otherwise expressly provided herein, Inducement Options shall terminate on the earliest of:

(a)           the date of expiration thereof;

(b)           immediately upon the termination of the recipient’s employment with or performance of services for the Company (or any parent or subsidiary of the Company) by the Company (or any such parent or subsidiary) for cause (as defined below and as determined by the Plan Administrator in its sole discretion); or

(c)           in the case of termination of employment without cause or voluntary termination of employment by the recipient, thirty (30) days after the termination of the recipient’s employment with or performance of services for the Company (or any parent or subsidiary of the Company), as determined by the Plan Administrator in its sole discretion, for any reason other than death or retirement;

provided, however, that Plan Awards granted to persons who are not employees of the Company (or any parent or subsidiary of the Company) need not, unless the Plan Administrator determines otherwise, be subject to the provisions set forth in clauses (b) and/or (c).

  

- 3

  

An employment relationship between the Company (or any parent or subsidiary of the Company) and the recipient shall be deemed to exist during any period in which the recipient is employed by the Company (or any such parent or subsidiary).  Whether authorized leave of absence, or absence on military or government service, shall constitute termination of the employment relationship between the Company (or any parent or subsidiary of the Company) and the recipient shall be determined by the Plan Administrator at the time thereof.

As used herein, “cause” shall be determined by the Company in its sole discretion subject to applicable law.

5.2           Death or Retirement of the Recipient of an Inducement Option.  In the event of the death of the holder of an Inducement Option that is subject to clause (c) of Section 5.1 above prior to termination of the recipient’s employment with or performance of services for the Company (or any parent or subsidiary of the Company) and before the date of expiration of such Inducement Option, such Inducement Option shall terminate on the earlier of such date of expiration or one year following the date of such death.  After the death of the recipient, the recipient’s executors, administrators or any person or persons to whom his Inducement Option may be transferred by will or by the laws of descent and distribution shall have the right, at any time prior to such termination, to exercise the Inducement Option to the extent the recipient was entitled to exercise such Inducement Option at the time of his death.

If, before the date of the expiration of an Inducement Option that is subject to clause (c) of Section 5.1 above, the recipient shall be retired in good standing from the Company for reasons of age or disability under the then established rules of the Company, the Inducement Option shall terminate on the earlier of such date of expiration or ninety (90) days after the date of such retirement.  In the event of such retirement, the recipient shall have the right prior to the termination of such Inducement Option to exercise the Inducement Option to the extent to which he was entitled to exercise such Inducement Option immediately prior to such retirement.

SECTION 6. TERMS OF PLAN AWARD AGREEMENTS

6.1           Inducement Options.  Each agreement for an Inducement Option shall be in writing and shall contain such terms, conditions, restrictions, if any, and provisions as the Plan Administrator shall from time to time deem appropriate.  Such provisions or conditions may include, without limitation, restrictions on transfer, repurchase rights, or such other provisions as shall be determined by the Plan Administrator; provided, however, that such additional provisions shall not be inconsistent with any other terms or conditions of the Plan.

Inducement Option agreements need not be identical, but each such agreement by appropriate language shall include the substance of all of the following provisions:

  

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(a)           Expiration of Inducement Option.  Notwithstanding any other provision of the Plan or of any agreement, each Inducement Option shall expire on the date specified in the agreement, which date shall not be later than as specified in Section 5 of this Plan.

(b)           Exercise.  Each Inducement Option may be exercised, so long as it is valid and outstanding, from time to time in part or as a whole, subject to any limitations with respect to the number of shares for which the Inducement Option may be exercised at a particular time and to such other terms and conditions as the Plan Administrator in its sole discretion may specify upon granting the Plan Award, including non-competition, non-solicitation and non-hire provisions.

(c)           Purchase Price.  The purchase price per share under each Inducement Option shall be determined by the Plan Administrator at the time the Plan Award is granted, provided however that such purchase price shall not be less than fair market value as of the date of Inducement Option grant.  For the purpose of the Plan the “fair market value” of the Common Stock shall be the closing price per share on the last trading day before the date of grant, as reported by a nationally recognized stock exchange, or, if the Common Stock is not listed on such an exchange, the mean of the bid and asked prices per share on the applicable date or, if the Common Stock is not traded over-the-counter, the fair market value as determined by the Plan Administrator.

(d)           Transferability of Options.  Inducement Options shall not be transferable by the recipient otherwise than by will or under the laws of descent and distribution, and shall be exercisable, during his lifetime, only by the recipient.  Notwithstanding the foregoing, the Plan Administrator may, in its sole discretion, permit the transfer or assignment of an Inducement Option by the original recipient for no consideration to: (i) any member of the recipient’s Immediate Family; (ii) any trust solely for the benefit of members of the recipient’s Immediate Family; (iii) any partnership whose only partners are members of the recipient’s Immediate Family; or (iv) any limited liability company or corporate entity whose only members or other equity owners are members of the recipient’s Immediate Family.  For purposes of this Section 6.4, “Immediate Family” means a recipient’s parents, spouse, children and grandchildren.  Nothing contained in this Section 6.4 shall be construed to require the Plan Administrator to give its approval to any transfer or assignment of any Inducement Option or portion thereof, and approval to transfer or assign any Inducement Option or portion thereof does not mean that such approval will be given with respect to any other Inducement Option or portion thereof.  The transferee or assignee of any Inducement Option shall be subject to all of the terms and conditions applicable to such Inducement Option immediately prior to the transfer or assignment and shall be subject to any conditions prescribed by the Plan Administrator with respect to such Inducement Option.  In particular, and without limiting the generality of the foregoing, the termination of employment, retirement or death of the original recipient shall continue to determine the term and time for exercise of such Inducement Option for purposes of Sections 5.1 and 5.2 above.

  

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(e)           Rights of Recipients.  No recipient shall be deemed for any purpose to be the owner of any shares of Common Stock subject to any Inducement Option unless and until the option shall have been exercised pursuant to the terms thereof, and the Company shall have issued and delivered certificates representing such shares to the recipient.

(f)           Certain Rights of the Company.  The Plan Administrator may in its discretion provide upon the grant of any Inducement Option hereunder that the Company shall have an option to repurchase upon such terms and conditions as determined by the Plan Administrator all or any number of shares purchased upon exercise of such Inducement Option or a right of first refusal in connection with subsequent transfer of any or all of such shares.  The repurchase price per share payable by the Company shall be such amount or be determined by such formula as is fixed by the Plan Administrator at the time the Inducement Option for the shares subject to repurchase is granted.  In the event the Plan Administrator shall grant Inducement Options subject to the Company’s repurchase option or right of first refusal, the certificates representing the shares purchased pursuant to such option shall carry a legend satisfactory to counsel for the Company referring to the Company’s repurchase option or right of first refusal.

6.2           Restricted Stock.

(a)           Restricted Stock Agreement.  Each recipient of a grant of Restricted Stock shall execute an agreement (“Restricted Stock Agreement”) in such form not inconsistent with the Plan as may be approved by the Plan Administrator.  Such Restricted Stock Agreements may differ among recipients.  A participant who is granted a Restricted Stock Award shall have no rights with respect to such Plan Award unless the participant shall have accepted the Restricted Stock Agreement.

(b)           Purchase Price.  The purchase price per share of Restricted Stock shall be determined by the Plan Administrator.  Restricted Stock Agreements may provided for the payment of any purchase price in any manner approved by the Plan Administrator at the time of authorizing the issuance thereof.

6.3           Restricted Stock Units.

(a)           Nature of Restricted Stock Units.  A Restricted Stock Unit is a contractual right entitling the holder to receive upon the vesting thereof, one share of Common Stock for each Restricted Stock Unit awarded to a grantee.  Restricted Stock Units represent unfunded and unsecured obligations of the Company.  The Plan Administrator shall determine the restrictions and vesting conditions applicable to each Restricted Stock Unit at the time of grant.

 

(b)           Acceptance of Award.  A participant who is granted a Restricted Stock Unit shall have no rights with respect to such Plan Award unless the participant shall have accepted the Plan Award following the award date by executing and delivering to the Company a written instrument that sets forth the terms and conditions applicable to the Restricted Stock Unit in such form as the Plan Administrator shall determine.

  

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(c)           Rights as a Stockholder.  A grantee shall have the rights as a stockholder only as to shares of Common Stock acquired by the grantee upon settlement of Restricted Stock Units.

6.4           “Lockup” Agreement.  The Plan Administrator may in its discretion specify upon granting a Plan Award that upon request of the Company or the underwriters managing any underwritten offering of the Company’s securities, the recipient shall agree in writing that for a period of time (not to exceed 180 days, plus such additional number of days (not to exceed 35) as may be reasonably requested to enable the underwriter(s) of such offering to comply with Rule 2711(f) of the Financial Industry Regulatory Authority or any amendment or successor thereto) from the effective date of any registration of securities of the Company, the recipient will not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares of Common Stock of the Company owned or controlled by him or her, without the prior written consent of the Company or such underwriters, as the case may be.

SECTION 7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE

7.1           Method of Exercise of Inducement Options.  Subject to the Company’s then-applicable “quiet period policy” and any other policy the Company may have in effect from time to time regarding the exercise and/or sale of securities, any Inducement Option granted under the Plan may be exercised by the recipient by delivering to the Company on any business day a written notice specifying the number of shares of Common Stock the recipient then desires to purchase and specifying the address to which the certificates for such shares are to be mailed (the “Notice”), accompanied by payment for such shares.  Such exercise shall comply with all other terms and provisions of such Plan Award.

7.2           Payment of Purchase Price.  Payment for the shares of Common Stock purchased pursuant to the exercise of an Inducement Option shall be made either by cash or check equal to the option price for the number of shares specified in the Notice or, with the consent of the Plan Administrator, by one or more of the following methods: (i) by delivery to the Company of shares of Common Stock that are not then subject to restriction under any Company plan; such surrendered shares shall have a fair market value equal in amount to the exercise price of the Inducement Options being exercised; (ii) a personal recourse note issued by the recipient to the Company in a principal amount equal to such aggregate exercise price and with such other terms, including interest rate and maturity, as the Plan Administrator may determine in its discretion; provided, however, that the interest rate borne by such note shall not be less than the lowest applicable federal rate, as defined in Section 1274(d) of the Code; (iii) by delivery of such documentation as the Plan Administrator and the broker, if applicable, shall require to effect an exercise of the Inducement Option and delivery to the Company of the sale or loan proceeds required to pay the option price, (iv) by delivery of such other consideration which is acceptable to the Plan Administrator and which has a fair market value equal to the option price of such shares (as defined at Section 6.3 above), or (v) by any combination of such methods.  As promptly as practicable after receipt of the Notice and accompanying payment, the Company shall deliver to the recipient certificates for the number of shares with respect to which such Inducement Option has been so exercised, issued in the recipient’s name; provided, however, that such delivery shall be deemed effected for all purposes when the Company or a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the recipient, at the address specified in the Notice.

  

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SECTION 8. CHANGES IN COMPANY’S CAPITAL STRUCTURE

8.1           Rights of Company.  The existence of outstanding Plan Awards shall not affect in any way the right or power of the Company or its stockholders to make or authorize, without limitation, any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of Common Stock, or any issue of bonds, debentures, preferred or prior preference stock or other capital stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

8.2           Recapitalizations, Stock Splits and Dividends.  In the event that after the Effective Date, the Company effects a stock dividend, stock split or similar change in capitalization affecting the Common Stock, the Plan Administrator shall make appropriate adjustments in (i) the number and kind of shares of stock or securities with respect to which Plan Awards may thereafter be granted (including without limitation the limitations set forth in Section 3.1 above), (ii) the number and kind of shares remaining subject to outstanding Plan Awards, and (iii) the exercise or purchase price in respect of such shares.  In the event of any merger, consolidation, dissolution or liquidation of the Company, the Plan Administrator in its sole discretion may, as to any outstanding Plan Awards, make such substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan and in the number and purchase price (if any) of shares subject to such Plan Awards as it may determine and as may be permitted by the terms of such transaction, or accelerate, amend or terminate such Plan Awards upon such terms and conditions as it shall provide (which, in the case of the termination of the vested portion of any Plan Award, shall require payment or other consideration which the Plan Administrator deems equitable in the circumstances), subject, however, to the provisions of Section 8.3.

8.3           Change of Control.  If the Company is merged with or into or consolidated with another corporation or other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or if the Company is liquidated, or sells or otherwise disposes of substantially all of its assets to another entity while unexercised Inducement Options or unvested shares of Restricted Stock or Restricted Stock Units remain outstanding under the Plan (each a “Change in Control Transaction”), then in such event:

  

- 8

  

(a)           subject to the provisions of clause (e) below, after the effective date of such Change of Control, each holder of an outstanding Plan Award shall be entitled, upon exercise (in the case of any Inducement Option) or vesting of such Award, to receive, in lieu of shares of Common Stock (or consideration based upon the fair market value of Common Stock), shares of such stock or other securities, cash or property (or consideration based upon shares of such stock or other securities, cash or property) as the holders of shares of Common Stock received or have the right to receive in connection with the Change of Control;

(b)           the Plan Administrator may accelerate the time for exercise of some or all unexercised and unexpired Inducement Options or accelerate all or any unvested shares of Restricted Stock or Restricted Stock Units so that from and after a date prior to the effective date of such Change in Control, specified by the Plan Administrator such accelerated Inducement Options shall be exercisable in full and all or any outstanding Restricted Stock Awards or Restricted Stock Units shall be vested in part or in full;

(c)           upon written notice to the Plan Award recipients, provide that all unvested shares of Restricted Stock shall be repurchased at cost;

(d)           arrange for any corporation succeeding to the business and assets of the Company to issue to the Plan Award holders replacement awards on such corporation's stock which will to the extent possible preserve the value of the outstanding Plan Awards; and

(e)           provide that each outstanding Plan Award shall be cancelled as of the effective date of any such Change of Control provided that (x) prior written notice of such cancellation shall be given to each holder of such a Plan Award and (y) each holder of such a Plan Award shall have the right to exercise such Plan Award (if an Inducement Option) to the extent that the same is then exercisable, or if the Plan Administrator shall have accelerated the time for exercise of all such unexercised and unexpired Plan Awards, during the ten (10) day period preceding the effective date of such Change of Control.

8.4           Adjustments to Common Stock Subject to Options.  Except as hereinbefore expressly provided, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock then subject to outstanding Inducement Options.

  

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8.5           Restricted Stock.  In the event of a business combination or other transaction of the type detailed in Section 8.3, any securities, cash or other property received in exchange for shares of Restricted Stock shall continue to be governed by the provisions of any Restricted Stock Agreement pursuant to which they were issued, including any provision regarding vesting, and such securities, cash, or other property may be held in escrow on such terms as the Plan Administrator may direct, to insure compliance with the terms of any such Restricted Stock Agreement.

8.6           Miscellaneous.  Adjustments under this Section 8 shall be determined by the Plan Administrator, and such determinations shall be conclusive.  No fractional shares of Common Stock shall be issued under the Plan on account of any adjustment specified above.

SECTION 9. GENERAL RESTRICTIONS

9.1           Investment Representations.  The Company may require any person to whom a Plan Award is granted, as a condition of such grant or subsequent exercise, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the Plan Award for his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws.

9.2           Compliance with Securities Laws.  The Company shall not be required to sell or issue any shares under any Plan Award if the issuance of such shares shall constitute a violation by the award recipient or by the Company of any provision of any law or regulation of any governmental authority.  In addition, in connection with the Securities Act of 1933, as now in effect or hereafter amended (the “Act”), upon exercise of any option or vesting of any Restricted Stock Unit, the Company shall not be required to issue shares unless the Plan Administrator has received evidence satisfactory to it to the effect that the holder of such Plan Award will not transfer such shares except pursuant to a registration statement in effect under such Act or unless an opinion of counsel satisfactory to the Company has been received by the Company to the effect that such registration is not required.  Any determination in this connection by the Plan Administrator shall be final, binding and conclusive.  In the event the shares subject to a Plan Award are not registered under the Act, the Company may imprint upon any certificate representing shares so issued the following legend or any other legend which counsel for the Company considers necessary or advisable to comply with the Act and with applicable state securities laws:

The shares of stock represented by this certificate have not been registered under the Securities Act of 1933 or under the securities laws of any State and may not be pledged, hypothecated, sold or otherwise transferred except upon such registration or upon receipt by the Corporation of an opinion of counsel satisfactory to the Corporation, in form and substance satisfactory to the Corporation, that registration is not required for such sale or transfer.

  

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The Company may, but shall in no event be obligated to, register any securities covered by a Plan Award pursuant to the Act; and in the event any shares are so registered, the Company may remove any legend on certificates representing such shares.  The Company shall not be obligated to take any other affirmative action in order to cause the issuance of shares pursuant to a Plan Award to comply with any law or regulation of any governmental authority.

9.3           Employment Obligation.  The granting of any Plan Award shall not impose upon the Company (or any parent or subsidiary of the Company) any obligation to employ or continue to employ any Plan Award recipient; and the right of the Company (or any such parent or subsidiary) to terminate the employment of any officer or other employee shall not be diminished or affected by reason of the fact that a Plan Award has been granted to him or her.

9.4           Withholding Tax.  Whenever under the Plan securities or other property are to be delivered pursuant to the terms of this Plan, the Company shall be entitled to require as a condition of delivery that the recipient remit an amount sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto, or make arrangements satisfactory to the Plan Administrator regarding payment of such withholding taxes.  The Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the recipient of the Plan Award.  A recipient of a Plan Award may elect, with the consent of the Plan Administrator, to have such tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Common Stock to be issued a number of shares with an aggregate fair market value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due, or (ii) delivering to the Company a number of mature shares of Common Stock with an aggregate fair market value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due.

SECTION 10. AMENDMENT OR TERMINATION OF THE PLAN

The Board of Directors may modify, revise or terminate this Plan at any time and from time to time.

SECTION 11. NONEXCLUSIVITY OF THE PLAN

The adoption of the Plan by the Board of Directors shall not be construed as creating any limitations on the power of the Board of Directors to adopt such other inducement or other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options and equity awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

  

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SECTION 12. EFFECTIVE DATE AND DURATION OF PLAN

The Plan became effective upon the Company acquiring assets from Crossbow Technology, Inc. (the “Effective Date”).  The amendments reflected in this amendment and restatement of the Plan shall become effective upon adoption by the Board of Directors of the Company.  No Plan Award may be granted under the Plan after the tenth anniversary of the Effective Date.  The Plan shall terminate (i) when the total amount of Common Stock with respect to which Plan Awards may be granted shall have been issued pursuant to Plan Awards or (ii) by action of the Board of Directors pursuant to Section 10 hereof, whichever shall first occur.

SECTION 13. GOVERNING LAW

This Plan and each option or Restricted Stock Award shall be governed by the laws of the State of Delaware, without regard to its principles of conflicts of law.

 

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