Document:

a50039752ex10_1.htm

 

Exhibit 10.1

 

 

 

 

 

OTTER TAIL CORPORATION

NONQUALIFIED RETIREMENT PLAN

2011 RESTATEMENT

 

 

 

 

 

 

 

 

 

	 	 	 	 	Prepared By:
	 	 	 	 	Leonard, Street and Deinard
	 	 	 	 	Professional Association/AMB
	 	 	 	 	150 S. Fifth Street #2300
	 	 	 	 	Minneapolis, MN 55402
	 	 	 	 	 (612) 335-1500

 

 

 

 

  

  

  

 

 

 

TABLE OF CONTENTS

 

 

	
ARTICLE 1.

	
DEFINITIONS, GENDER, AND NUMBER.

	 	 	1	 
	 	 	 	 	 	 
	
Section 1.1.

	
Definitions

	 	 	1	 
	 	 	 	 	 	 
	
Section 1.2.

	
Gender and Number

	 	 	14	 
	 	 	 	 	 	 
	
ARTICLE 2.

	
DEFERRED COMPENSATION ACCOUNTS

	 	 	14	 
	 	 	 	 	 	 
	
Section 2.1.

	
Establishment of Accounts

	 	 	14	 
	 	 	 	 	 	 
	
Section 2.2.

	
Property of Company

	 	 	14	 
	 	 	 	 	 	 
	
ARTICLE 3.

	
PARTICIPATION

	 	 	14	 
	 	 	 	 	 	 
	
Section 3.1.

	
Who May Participate

	 	 	14	 
	 	 	 	 	 	 
	
Section 3.2.

	
Time and Conditions of Participation

	 	 	14	 
	 	 	 	 	 	 
	
Section 3.3.

	
Termination of Participation

	 	 	15	 
	 	 	 	 	 	 
	
Section 3.4.

	
Missing Persons

	 	 	15	 
	 	 	 	 	 	 
	
Section 3.5.

	
Relationship to Other Plans

	 	 	16	 
	 	 	 	 	 	 
	
ARTICLE 4.

	
ENTRIES TO THE ACCOUNT

	 	 	16	 
	 	 	 	 	 	 
	
Section 4.1.

	
Deferrals

	 	 	16	 
	 	 	 	 	 	 
	
Section 4.2.

	
Company Contributions

	 	 	18	 
	 	 	 	 	 	 
	
Section 4.3.

	
Disability

	 	 	18	 
	 	 	 	 	 	 
	
Section 4.4.

	
Change in Eligibility Status

	 	 	19	 
	 	 	 	 	 	 
	
Section 4.5.

	
Allocation to Accounts

	 	 	19	 
	 	 	 	 	 	 
	
Section 4.6.

	
Earnings Crediting

	 	 	19	 
	 	 	 	 	 	 
	
ARTICLE 5.

	
DISTRIBUTION OF BENEFITS

	 	 	21	 
	 	 	 	 	 	 
	
Section 5.1.

	
Election of Benefit Commencement

	 	 	21	 
	 	 	 	 	 	 
	
Section 5.2.

	
Benefit Commencement

	 	 	22	 
	 	 	 	 	 	 
	
Section 5.3.

	
Form of Benefit Payment

	 	 	25	 
	 	 	 	 	 	 
	
Section 5.4.

	
Death Benefits

	 	 	26	 
	 	 	 	 	 	 
	
Section 5.5.

	
Change in Elections

	 	 	27	 
	 	 	 	 	 	 
	
Section 5.6.

	
Confidentiality

	 	 	28	 
	 	 	 	 	 	 
	
Section 5.7.

	
Competition

	 	 	29	 
	 	 	 	 	 	 
	
Section 5.8.

	
Forfeiture for Cause

	 	 	30	 
	 	 	 	 	 	 
	
Section 5.9.

	
Minimum Amount and Frequency of Payments

	 	 	30	 
	 	 	 	 	 	 
	
Section 5.10.

	
Section 162(m) of the Code

	 	 	30	 
	 	 	 	 	 	 
	
Section 5.11.

	
Acceleration of Distributions

	 	 	31	 
	 	 	 	 	 	 
	
Section 5.12.

	
Unforeseeable Emergencies

	 	 	31	 
	 	 	 	 	 	 
	
Section 5.13.

	
Deferred Election Termination

	 	 	32	 
	 	 	 	 	 	 
	
Section 5.14.

	
Limitation on Payment

	 	 	32	 

 

 

 

i

 

 

  

  

  

 

 

	 	 	 	 	 	 
	
Section 5.15.

	
Delay of Distribution

	 	 	32	 
	 	 	 	 	 	 
	
Section 5.16.

	
Distributions on Plan Termination

	 	 	33	 
	 	 	 	 	 	 
	
Section 5.17.

	
Claims Procedure

	 	 	33	 
	 	 	 	 	 	 
	
ARTICLE 6.

	
FUNDING

	 	 	38	 
	 	 	 	 	 	 
	
Section 6.1.

	
Source of Benefits.

	 	 	38	 
	 	 	 	 	 	 
	
Section 6.2.

	
No Claim on Specific Assets

	 	 	38	 
	 	 	 	 	 	 
	
ARTICLE 7.

	
ADMINISTRATION AND FINANCES

	 	 	38	 
	 	 	 	 	 	 
	
Section 7.1.

	
Administration

	 	 	38	 
	 	 	 	 	 	 
	
Section 7.2.

	
Powers of Committee

	 	 	38	 
	 	 	 	 	 	 
	
Section 7.3.

	
Actions of the Committee

	 	 	39	 
	 	 	 	 	 	 
	
Section 7.4.

	
Delegation

	 	 	39	 
	 	 	 	 	 	 
	
Section 7.5.

	
Reports and Records

	 	 	40	 
	 	 	 	 	 	 
	
ARTICLE 8.

	
AMENDMENTS AND TERMINATION.

	 	 	40	 
	 	 	 	 	 	 
	
Section 8.1.

	
Amendments

	 	 	40	 
	 	 	 	 	 	 
	
Section 8.2.

	
Termination

	 	 	40	 
	 	 	 	 	 	 
	
ARTICLE 9.

	
MISCELLANEOUS

	 	 	42	 
	 	 	 	 	 	 
	
Section 9.1.

	
No Guarantee of Employment

	 	 	42	 
	 	 	 	 	 	 
	
Section 9.2.

	
Release

	 	 	43	 
	 	 	 	 	 	 
	
Section 9.3.

	
Notices

	 	 	43	 
	 	 	 	 	 	 
	
Section 9.4.

	
Nonalienation

	 	 	43	 
	 	 	 	 	 	 
	
Section 9.5.

	
Tax Liability

	 	 	44	 
	 	 	 	 	 	 
	
Section 9.6.

	
Parachute and Other Payments

	 	 	44	 
	 	 	 	 	 	 
	
Section 9.7.

	
Indemnification

	 	 	44	 
	 	 	 	 	 	 
	
Section 9.8.

	
Captions

	 	 	44	 
	 	 	 	 	 	 
	
Section 9.9.

	
Applicable Law

	 	 	44	 
	 	 	 	 	 	 

 

ii

 

 

  

  

  

 

OTTER TAIL CORPORATION

NONQUALIFIED RETIREMENT PLAN

2011 RESTATEMENT

 

Effective January 1, 2005, the Otter Tail Corporation Revised Nonqualified Retirement Plan became effective. This document restates the Plan as the “Otter Tail Corporation Nonqualified Retirement Plan 2011 Restatement,” generally effective January 1, 2011, except as otherwise set forth herein. This restatement does not eliminate or reduce the account balance of any Participant or Beneficiary eligible for benefits as of the date of that this restatement is signed. The Plan continues to be a nonqualified deferred compensation plan for the benefit of certain executive employees of Otter Tail Corporation and its subsidiaries. The Plan is intended to comply with Section 409A of the Code. It continues to apply to amounts previously deferred under the Otter Tail Corporation Nonqualified Retirement Plan effective January 1, 2003, that were not earned and vested as of December 31, 2004, as well as to amounts deferred under the Otter Tail Revised Nonqualified Retirement Plan effective January 1, 2005. The Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, as described in Sections 201(2), 301(a)(3) and 401(a)(1) of Title I of ERISA.

 

ARTICLE 1.   DEFINITIONS, GENDER, AND NUMBER.

 

Section 1.1.       Definitions. Whenever used in the Plan, the following words and phrases shall have the meanings set forth below unless the context plainly requires a different meaning, and when a defined meaning is intended, the term is capitalized.

 

1.1.1.           “Account” means the bookkeeping account used to measure and determine the amount of deferred compensation to be paid to a Participant or Beneficiary under the Plan, consisting of one or more of the Company Account, the Retirement Account, or a 

 

 

  

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Scheduled Withdrawal Account. Accounts that had been opened under the Otter Tail Corporation Nonqualified Retirement Plan with respect to amounts not earned and vested as of December 31, 2004 became Accounts of the same kind (Company Account, Retirement Account or Scheduled Withdrawal Account) under this Plan and elections made with respect to such Accounts shall continue in effect as elections made under this Plan unless and until changed as permitted under this Plan.

 

1.1.2.           “Affiliates” means any entity that employs employees and in which the Company has a controlling interest.  In addition, “Affiliates” includes any entity affiliated with the Company that the Company determines is an Affiliate under this Plan for legitimate business reasons consistent with the provisions of Section 409A of the Code. With respect to the definition of “employer” under Section 409A of the Code, the language “at least 50%” shall be used each place where it appears in Section 1563(a)(1), (2), and (3) of the Code to determine a controlled group of corporations under Section 414(b) of the Code and in applying Regulation Section 1.414(c)-2 to determine whether trades or businesses are under common control. Affiliates as of the date that this restated Plan is adopted are listed on Appendix A to the Plan.

 

1.1.3.           “Base Salary” of a Participant for any Plan Year means the total annual salary and wages paid by the Company or an Affiliate to such individual for such Plan Year, including any amount which would be included in the definition of Base Salary but for the individual's election to defer some of the individual’s compensation pursuant to this Plan or any other deferred compensation plan established by the Company or an Affiliate; but excluding any other remuneration paid by the Company or an Affiliate, such as bonuses, commissions, overtime, Incentive Compensation, equity-based 

 

 

  

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compensation, including, but not limited to stock options, restricted stock or stock-based units, distributions of compensation previously deferred, allowances for expenses (including moving expenses, travel expenses, and automobile allowances), and fringe benefits, whether payable in cash or in a form other than cash. In the case of an individual who is a participant in a plan sponsored by the Company or an Affiliate which is described in Section 401(k), 125 or 132(f) of the Code, the term Base Salary shall include any amount which would be included in the definition of Base Salary but for the individual's election to reduce the individual’s compensation and have the amount of the reduction contributed to or used to purchase benefits under such plan.

 

1.1.4.           “Beneficiary” or “Beneficiaries” means the persons or trusts designated by a Participant in writing pursuant to Section 5.4.1 of the Plan as being entitled to receive any benefit payable under the Plan by reason of the death of a Participant, or, in the absence of such designation, the persons specified in Section 5.4.2 of the Plan.

 

1.1.5.           “Board” means the Board of Directors of the Company as constituted at the relevant time.

 

1.1.6.           “Cause” means the occurrence of one of the following: (a) a Participant’s violation in any material respect of any agreement or representation set forth in any employment or other agreement, if any, between the Company or an Affiliate and the Participant; (b) the occurrence of an event that would constitute “cause” (or any similar concept) under any employment or other agreement, plan, or program that governs the Participant or by which the Participant is bound; (c) a Participant’s willful violation of any material rule or policy of the Company or an Affiliate or any theft or defalcation of property committed against the Company or an Affiliate; (d) any continual willful or 

 

  

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material failure by a Participant to comply with a reasonable and lawful direction of the Board or any duly authorized committee of the Board or the chief executive officer of the Company or an Affiliate, or the willful misconduct by Participant in the responsibilities reasonably assigned to the Participant; (e) conviction of or plea of nolo contendere by a Participant to a felony or other actions or omissions that reflect moral turpitude or threaten to materially and adversely reflect on the Company or an Affiliate in the conduct of its business; or (f) violation of the confidentiality provisions of Section 5.6 or the noncompetition provisions of Section 5.7.

 

1.1.7.           “Change in Control” of the Company means:

 

(a)         Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes within a 12 month period ending on the date of the most recent acquisition the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities; or

 

(b)         Within a 12 month period the Continuing Directors cease to constitute a majority of the Company’s Board of Directors; provided that such change is the direct or indirect result of a proxy fight and contested election or elections for positions on the Board of Directors.

 

(c)         With respect to a Plan Participant, a Change in Control event must relate to: (i) the corporation for which the Participant is performing services at the time of the Change in Control event; (ii) the corporation that is liable for the payment of the deferred compensation (or all corporations liable for the payment 

 

 

  

4

  

 

 

if more than one corporation is liable); or (iii) a corporation that is a majority shareholder of a corporation identified in part (i) or part (ii) above, or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in part (i) or part (ii) above. For purposes of this provision, a majority shareholder is a shareholder owning more than 50% of the total fair market value and total voting power of such corporation. Also, for purposes of this provision, Section 318(a) of the Code applies to determine stock ownership.

 

(d)         The provisions of this Section 1.1.7 regarding the definition of the term “Change in Control,” shall be determined and administered in accordance with Section 409A of the Code so that no Change in Control shall be considered to have occurred unless and until it is also a change in control under Section 409A of the Code. Provided, however, that a Change in Control must relate to the Company and not to Affiliates, and a Sale is not a Change in Control of the Company under the Plan.

 

 

1.1.8.           “Code” means the Internal Revenue Code of 1986, as amended from time to time and any successor statute. References to a Code section shall be deemed to be to that section or to any successor to that section and to the guidance issued under that section.

 

1.1.9.           “Committee” means the Committee of one or more persons appointed by the Company's Board, or any person or entity designated by the Committee to administer the Plan pursuant to Section 7.4. In the absence of an appointed Committee, the Board shall serve as the Committee. Until changed by the Board the Committee shall consist of 

 

 

  

5

  

 

 

the Vice President and Chief Financial Officer; the Vice President of Human Resources and Strategy; and the Manager of Compensation and Benefits.

 

1.1.10.           “Company” means Otter Tail Corporation, a Minnesota corporation. Prior to July 1, 2009, “Company” meant Otter Tail Corporation, a Minnesota corporation doing business as Otter Tail Power Company. Effective July 1, 2009, that Otter Tail Corporation became a wholly owned subsidiary of a new holding company in a reverse triangular merger pursuant to which the new holding company took the name “Otter Tail Corporation,” which is now the “Company” under the Plan, and the subsidiary took the name “Otter Tail Power Company.”

 

1.1.11.           “Company Account” means a bookkeeping account established for a Participant for Company Contributions made to the Plan under Section 4.2.

 

1.1.12.           “Company Contribution” means the contribution of the Company to a Participant’s Company Account under Section 4.2.

 

1.1.13.           “Compensation” with respect to a Participant for any period means the sum of such Participant's Base Salary paid and Incentive Compensation accrued with respect to such period.

 

1.1.14.            “Confidential Information” means unique, confidential and proprietary systems, records, customer lists, product information and other information of the Participant’s Employer that derives value from not being generally known to the public and with respect to which the Employer takes reasonable steps to keep confidential.

 

1.1.15.           “Continuing Director” means any person who is a member of the Board of Directors of the Company, while such person is a member of the Board of Directors, and who (a) was a member of the Board of Directors on the Effective Date or (b) 

 

 

  

6

  

 

 

subsequently becomes a member of the Board of Directors, if such person’s nomination for election or initial election to the Board of Directors is recommended or approved by a majority of the Continuing Directors.

 

1.1.16.           “Crediting Rate” with respect to any Plan Year means the rate or rates established by the Company in its sole discretion to determine earnings and losses with respect to an Account. The Company may select any investment index (i.e., mutual funds, annuities, bank collective funds or an insurance company dividend rate) as a Crediting Rate to be applied to amounts credited to a Participant’s Accounts as set forth in Section 4.6. The Company may change such indices at any time or from time to time and can restrict or limit at any time and from time to time the Account(s) eligible for any Crediting Rate. The Company has the discretion to determine the exact manner in which any Crediting Rate shall be calculated and applied to an Account. The Company also has the discretion to determine the Crediting Rate to apply as a default Crediting Rate to any Account for which a Participant fails or refuses to select a Crediting Rate. The Company shall not be liable to any person or entity, including the Participant, for losses or reduced gains associated with or relating to the selection or application of a particular Crediting Rate, whether as a default rate or otherwise.

 

1.1.17.           “Deferral Account” means one or more of the Retirement Account or a Scheduled Withdrawal Account, according to the context.

 

1.1.18.           “Disabled” or “Disability” means, with respect to a Participant, that the Participant (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; (b) by

 

 

  

7

  

 

 

 reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company; or (c) has been determined to be totally disabled by the Social Security Administration. Disability under subsections (a) and (b) shall be determined by a physician selected by the Company. A Participant shall cooperate with the Company, including making the Participant reasonably available for examination by physicians at the Company’s request and at the Company’s expense to determine whether or not the Participant is Disabled.

 

1.1.19.           “Early Retirement” means a Participant’s termination of employment with the Company and Affiliates before the Participant’s Retirement and before there has occurred a Sale or Change in Control, but only if before the Participant’s termination of employment or within 30 days thereafter, the Committee determines in its sole discretion to consider the termination an Early Retirement. The sole effect of a determination that the termination is an Early Retirement is that the Participant shall become vested in the Company Account. Provided, however, that a Participant will not be considered to have attained “Early Retirement” if the Participant is or could have been terminated from employment for Cause. Provided further, that a Participant shall not be considered to have terminated employment with the Company and Affiliates unless and until the Participant terminates employment with the Company and Affiliates and with any entity that is the parent company of the Company or an entity that is affiliated with the Company or the Affiliates or the parent company of the Company, and a transfer of employment between or among such entities shall not be considered a termination of 

 

 

  

8

  

 

 

employment under this Plan. In determining whether an entity is affiliated with the Company, the Company shall include all members of a controlled group of corporations and all trades or businesses under common control. The language “at least eighty percent” used in applying the concepts of Section 1563 of the Internal Revenue Code and Section 414(b) and (c) of the Internal Revenue Code shall be replaced by “at least fifty percent.” Any termination of employment under this Plan must also constitute a separation from service under the provisions of Section 409A of the Code.

 

1.1.20.           “Effective Date” means January 1, 2005, the date on which this Plan becomes effective. The effective date of this restatement of the Plan is January 1, 2011.

 

1.1.21.           “Eligible Executive” means any employee of the Company or an Affiliate who is designated by the Committee, in its sole discretion, as an Eligible Executive. An employee shall cease to be an Eligible Executive if the Committee, in its sole discretion, determines not to designate the employee as an Eligible Executive for the year; or if the Committee, in its sole discretion, determines at any time that the employee should no longer participate in the Plan. The Committee shall notify any employee who has been an Eligible Executive and who is no longer an Eligible Executive.

 

1.1.22.           “Eligible Pay” with respect to a Participant for any Plan Year, means the taxable income reported on the Participant’s Form W-2 for the Plan Year, reduced by income attributable to taxable fringe benefits, including, but not limited to automobile allowances, excess life insurance coverage, moving expenses, travel expenses, amounts realized on the sale or disposition of qualified or nonqualified stock options or stock purchases, or amounts realized on the inclusion in income of property under Section 83 of the Code. Eligible Pay shall include any amount which would be included in the 

 

 

  

9

  

 

 

definition of Eligible Pay but for the individual's election to defer some of the individual’s compensation pursuant to this Plan or any other deferred compensation plan established by the Company or an Affiliate; and shall exclude distributions of compensation previously deferred. In the case of an individual who is a participant in a plan sponsored by the Company or an Affiliate which is described in Section 401(k), 125, 132(f) of the Code, the term Eligible Pay shall include any amount which would be included in the definition of Eligible Pay but for the individual's election to reduce the individual’s compensation and have the amount of the reduction contributed to or used to purchase benefits under such plan. Eligible Pay for any Participant for a Plan Year may be limited to such amount as the Committee shall determine.

 

1.1.23.           “Employer” means with respect to a Participant the Company or Affiliate that employs that Participant.

 

1.1.24.           “Enrollment Period” means the period during each Plan Year designated by the Committee during which new Accounts may be opened and deferral elections may be changed for Compensation payable with respect to the immediately succeeding Plan Year. The Enrollment Period for a Plan Year with respect to Base Salary and Incentive Compensation shall end no later than December 31 preceding the first day of the Plan Year for which the election is to be effective and any deferral election shall become irrevocable as of such December 31 (or such earlier date as established by the Committee). Provided, however, that for the initial year that an Employee is selected as an Eligible Executive, the Enrollment Period shall be such period of time following selection as the Committee shall determine consistent with the requirements of Section 409A of the Code and Section 4.1.

 

 

  

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1.1.25.           “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. References to an ERISA section shall be deemed to be to that section or to any successor to that section and to the guidance issued under that section.

 

1.1.26.           “Incentive Compensation” of a Participant for any Plan Year means the total remuneration paid to such Participant under the various incentive compensation programs maintained by the Company or an Affiliate with respect to that Plan Year, including any amount which would be included in the definition of Incentive Compensation but for the Participant's election to defer some or all of the Participant’s Incentive Compensation pursuant to this Plan or some other deferred compensation plan established by the Company or an Affiliate; but excluding any other remuneration paid by the Company or an Affiliate, such as Base Salary, overtime, net commissions, equity-based compensation including, but not limited to, stock options, restricted stock or stock-based units, distributions of compensation previously deferred, allowances for expenses (including moving expenses, travel expenses, and automobile allowances), and fringe benefits whether payable in cash or in a form other than cash. In the case of an individual who is a participant in a plan sponsored by the Company or an Affiliate which is described in Section 401(k), 125, or 132(f) of the Code, the term Incentive Compensation shall include any amount which would be included in the definition of Incentive Compensation but for the individual's election to reduce the individual’s compensation and have the amount of the reduction contributed to or used to purchase benefits under such plan.

 

 

  

11

  

 

 

1.1.27.           “Maximum Annual Deferral” with respect to a Participant for a Plan Year means the sum of (a) 50% of the Participant's Base Salary paid for such Plan Year; and (b) 100% of the Participant's Incentive Compensation accrued for such Plan Year.

 

1.1.28.           “Participant” means an Eligible Executive who has satisfied the requirements of Article 3.

 

1.1.29.           “Plan” means the “Otter Tail Corporation Nonqualified Retirement Plan 2011 Restatement” (formerly known as the Otter Tail Corporation Revised Nonqualified Retirement Plan effective January 1, 2005), as set forth herein and as amended or restated from time to time.

 

1.1.30.           “Plan Year” means January 1 through December 31.

 

1.1.31.           “Retirement” means a Participant’s termination of employment with the Company and Affiliates at any age as a result of death or Disability; or a Participant’s termination of employment with the Company and Affiliates on or after age 58. Provided, however, that a Participant will not be considered to have attained “Retirement” if the Participant is or could have been terminated from employment for Cause. Provided further, that a Participant shall not be considered to have terminated employment with the Company and Affiliates unless and until the Participant terminates employment with the Company and Affiliates and with any entity that is the parent company of the Company or an entity that is affiliated with the Company or the Affiliates or the parent company of the Company, and a transfer of employment between or among such entities shall not be considered a termination of employment under this Plan. In determining whether an entity is affiliated with the Company, the Company shall include all members of a controlled group of corporations and all trades or businesses under common control. The

 

 

  

12

  

 

 

 language “at least eighty percent” used in applying the concepts of Section 1563 of the Internal Revenue Code and Section 414(b) and (c) of the Internal Revenue Code shall be replaced by “at least fifty percent.” Any termination of employment under this Plan must also constitute a separation from service under the provisions of Section 409A of the Code.

 

1.1.32.           “Retirement Account” means a bookkeeping account that a Participant may have established for deferral of Compensation made to the Plan under Section 4.1.3.

 

1.1.33.           “Sale” means the occurrence of an event pursuant to which the Participant’s Employer is sold or transferred to an entity that is not the Company or an Affiliate; however, no Sale shall be considered to have occurred unless and until it is also a change in control under Section 409A of the Code.

 

1.1.34.           “Scheduled Withdrawal Account” means a bookkeeping account that a Participant may have established for deferral of Compensation made to the Plan under Section 4.1.3. When a Participant opens a Scheduled Withdrawal Account, the Participant shall establish the Specified Year in which benefits are to commence pursuant to Section 5.1.2. Effective with respect to deferrals of Compensation during the Plan Year beginning January 1, 2011, a Participant may have open no more than two Scheduled Withdrawal Accounts with positive balances at any time.

 

1.1.35.           “Specified Year” means the year in which the Participant wishes to receive distributions from a Scheduled Withdrawal Account, as specified at the time that the Participant opens the Account.

 

1.1.36.           “Trust” means the Trust under the Otter Tail Corporation Revised Nonqualified Retirement Plan (or the Otter Tail Corporation Nonqualified Retirement

 

 

  

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 Account 2011 Restatement, if the Trust name is so amended), as amended from time to time.

 

Section 1.2.     Gender and Number. Except as otherwise indicated by context, masculine terminology used herein also includes the feminine and neuter, and terms used in the singular may also include the plural.

 

ARTICLE 2.   DEFERRED COMPENSATION ACCOUNTS.

 

Section 2.1.   Establishment of Accounts. The Company shall establish one or more (but no more than four) Accounts for each Participant which shall be utilized solely as a device to measure and determine the amount of deferred compensation to be paid under the Plan to the Participant or the Participant’s Beneficiaries.

 

Section 2.2.   Property of Company. Any amounts so set aside for benefits payable under the Plan are the property of the Company, except, and to the extent, provided in the Trust.

 

ARTICLE 3.   PARTICIPATION.

 

Section 3.1.   Who May Participate. Participation in the Plan is limited to those Eligible Executives selected by the Committee for participation in the Plan. Unless specifically excluded by the Committee, Eligible Executives participating in the Otter Tail Corporation Nonqualified Retirement Plan as of December 31, 2004, shall participate in the Plan, and Eligible Executives participating in the Otter Tail Corporation Revised Nonqualified Retirement Plan effective January 1, 2005, shall continue to participate in the Plan.

 

Section 3.2.   Time and Conditions of Participation. An Eligible Executive shall become a Participant only upon the Eligible Executive’s compliance with such terms and conditions as the Committee may from time to time establish for the implementation of the Plan, including but not limited to, any condition the Committee may deem necessary or appropriate for the Company 

 

 

  

14

  

 

 

to meet its obligations under the Plan. The Company may, in its sole discretion, purchase insurance on the lives of each Participant. The Committee may, in its sole discretion, reject for participation in the Plan Eligible Executives who fail or refuse to cooperate with the Company in obtaining insurance on their lives.

 

Section 3.3.   Termination of Participation. Once an individual has become a Participant in the Plan, participation shall continue until the first to occur of (a) payment in full of all benefits to which the Participant or the Participant’s Beneficiary is entitled under the Plan, or (b) the occurrence of the event specified in Section 3.4 which results in loss of benefits. Except as otherwise specified in the Plan, the Company may not terminate an individual's participation in the Plan; provided, however, that if the Committee, in its discretion, determines that it is likely that a Participant would not be considered to be a member of a select group of management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(l) of ERISA, for any period, the Committee may require that no contributions be made to the Plan by or on behalf of such Participant during such period, at the time and to the extent consistent with Section 409A of the Code.

 

Section 3.4.   Missing Persons. If the Company is unable to locate the Participant or the Participant’s Beneficiary for purposes of making a distribution, the amount of a Participant's benefits under the Plan that would otherwise be considered as nonforfeitable shall be forfeited on the first to occur of the following dates: (a) effective one year after the Participant’s termination from employment; (b) effective on the date of termination of the Plan; or (c) effective at such time as is required under Section 409A of the Code. If a person is located after the date of such forfeiture, the benefits for such Participant or Beneficiary shall not be reinstated under the Plan.

 

 

  

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Section 3.5.   Relationship to Other Plans. Participation in the Plan shall not preclude participation of the Participant in any other fringe benefit program or plan sponsored by the Company for which such Participant would otherwise be eligible.

 

ARTICLE 4.   ENTRIES TO THE ACCOUNT.

 

Section 4.1.   Deferrals.

 

4.1.1.   Deferral Elections. Each Participant wishing to defer Compensation under the Plan shall enter into a deferral election, which shall specify the amount of Compensation the Participant wishes to have deducted from the Participant’s pay and contributed to the Plan. Deferral elections with respect to Base Salary must specify the percentage (stated as an integer) of the Compensation that the Participant wishes to have deducted from Base Salary. Deferral elections with respect to Incentive Compensation must specify either the percentage (stated as an integer) or the dollar amount, or a combination of percentage and dollar amount, as determined by the Committee in its discretion, of the Compensation that the Participant wishes to have deducted from Incentive Compensation.

 

4.1.2.   Timing of Elections. To the extent permissible under Section 409A of the Code, Eligible Executives who first become eligible to participate in the Plan may make a deferral election with respect to Base Salary and Incentive Compensation within 30 days after the date the Eligible Executive becomes eligible to participate in the Plan. Such election shall apply with respect to Base Salary to be paid after the date of the election. However, with respect to Incentive Compensation, the deferral election shall apply to the total amount of the Incentive Compensation accrued for the Plan Year in which the initial election is made multiplied by a fraction, the numerator of which is the number of days 

 

 

  

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remaining in the performance period after the election and the denominator of which is the total number of days in the performance period. The election shall become irrevocable as of the date that it is made. Eligible Executives after their first year of selection must make a deferral election with respect to Base Salary and Incentive Compensation during the Enrollment Period preceding the beginning of a Plan Year. The Participant’s deferral election shall remain in effect unless and until terminated or changed by the Participant in accordance with the terms of the Plan and consistent with Section 409A of the Code.

 

4.1.3.   Allocation Between Accounts. At the time a Participant makes the Participant’s initial deferral election, the Participant shall specify the Deferral Account(s) the Participant wishes to open in the Plan. A Participant with a deferral election shall always have at least one Deferral Account in the Plan and may, at the Participant’s election, have up to three Deferral Accounts, specifically, a Retirement Account and two Scheduled Withdrawal Accounts. A Participant may open a new Deferral Account (up to a total of three Deferral Accounts) during an Enrollment Period. A Participant shall specify in the Participant’s deferral election the proportions in which the Participant’s deferrals are to be allocated between the Participant’s Retirement Account and the Participant’s Scheduled Withdrawal Account(s). Provided, however, that no deferrals may be contributed to a Participant’s Scheduled Withdrawal Account in the calendar year in which a distribution is to be made from said Account.

 

4.1.4.   Limitation on Deferral Elections. A Participant may make a deferral election for any Plan Year provided that: (a) in no event may the amount deferred by a Participant for a Plan Year under the Participant’s Deferral Account(s) exceed the 

 

 

  

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Maximum Annual Deferral; and (b) the Participant's remaining Compensation, after all deferrals, is sufficient to enable the Employer to withhold from the Participant's Compensation (i) any amounts necessary to satisfy withholding requirements under applicable tax law; (ii) the amount of any contributions which the Participant may be required to make or may have elected to make under the various benefit plans of the Company or an Affiliate; and (iii) any other payroll deduction from Compensation required by law or authorized by the Participant.

 

Section 4.2.   Company Contributions. For each Plan Year that commences on or after the Effective Date, the Company and/or any Affiliate may, but is not required to credit a contribution to the Plan on behalf of any Participant who was an Eligible Employee during the Plan Year. The amount of the contribution credited shall be the amount determined by the Company or Affiliate in its sole discretion. Such amount is not required to be uniform among the Eligible Employees, and the Company or Affiliate is permitted to credit Company Contributions for some Eligible Employees and not for other Eligible Employees. Such Company Contributions can be expressed as a fixed dollar amount; a percentage of Compensation, Base Salary, Incentive Compensation or Eligible Pay; or as a matching contribution based on the Deferrals made by the Eligible Employee. A Company Contribution on behalf of a Participant pursuant to this Section 4.2 shall be allocated to the Company Account of the Participant on whose behalf the contribution is made. Provided, however, that at the discretion of the Committee exercised at the time the Contribution is credited, the contribution may be allocated to the Participant’s Retirement Account.

 

Section 4.3.   Disability. If a Participant becomes Disabled, deferrals and Company Contributions, if any, shall continue to be allocated as described in Sections 4.1 and 4.2 during 

 

 

  

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the period in which the Participant is entitled to receive Compensation or Eligible Pay from the Company or an Affiliate, other than compensation under a long term disability plan. If a Participant continues to be Disabled after such period, deferrals and other Plan contributions will cease.

 

Section 4.4.   Change in Eligibility Status. If a Participant in the Plan ceases to be an Eligible Executive for a Plan Year, the Participant’s deferrals to the Plan shall cease. No further Company Contributions under Section 4.2 shall be made to the Plan unless and until the employee again becomes an Eligible Executive. The Participant’s Account shall continue to be credited with earnings and losses under Section 4.6 and shall be paid in accordance with Article 5.

 

Section 4.5.   Allocation to Accounts. During each Plan Year, the Company shall post to the appropriate Deferral Account(s) of each Participant the amount of Base Salary and Incentive Compensation to be deferred under such Deferral Account(s) as designated by the Participant in the Participant’s deferral election in effect for that Plan Year. Such allocation shall occur as of the dates that the Base Salary and Incentive Compensation would have been paid to the Participant. The Company shall also post to the Company Account amounts to be allocated to the Participant pursuant to Sections 4.2 and 4.3.

 

Section 4.6.   Earnings Crediting.

 

4.6.1.   Earnings Credits for Company Account. During each Plan Year a Participant's Company Account will be credited with interest at the Crediting Rate in effect for the Company Account for the Plan Year.

 

4.6.2.   Earnings Credits for Deferral Accounts. Each Participant may request that a Scheduled Withdrawal Account or the Retirement Account be allocated to one or more 

 

 

  

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investment indices selected by the Committee and credited or debited, as the case may be, with such earnings or losses as the Account would have been credited or debited had it been actually invested in such investment indices. The initial allocation request may be made at the time of opening of an Account. Once made, an investment allocation request shall remain in effect for all subsequent contributions until changed by the Participant. The Participant may change the investment allocation election by submitting a written request to the Committee. Participants may change elections no more than once in any calendar quarter. Such changes shall become effective as of the first day of the next quarter that is administratively feasible after the Committee receives such written request. Provided, however, that during the Plan Year in which a final distribution of a Participant’s Deferral Account is expected to occur, the Committee may apply to that Deferral Account the Crediting Rate applicable to Company Accounts for that Plan Year. Allocation requests shall be subject to such other requirements as established by the Committee.

 

4.6.3.   Period of Crediting Rates. Crediting Rates shall continue to be credited or debited until the first to occur of (a) the Participant’s termination of employment that is not a Retirement under the Plan or (b) payment of all amounts owed to the Participant under all Account(s).

 

4.6.4.   No Guarantee of Account Value. The Participant agrees on behalf of the Participant and any Beneficiary to assume all risk in connection with any decrease in value of the Deferral Accounts resulting from the Participant’s request and selection of any particular investment index under the Plan or from the application of any default Crediting Rate in accordance with the terms of the Plan.

 

 

  

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4.6.5.   No Actual Investment. The Company is under no obligation to make investments or change investments in a manner consistent with the investment indices available under the Plan. The elections made by the Participant are for purposes of determining earnings and losses to be credited to the Accounts and not for the purpose of determining any actual investment of the assets of the Company or the Trust, if any.

 

4.6.6.   Participant Statements. At least annually, the Company shall provide each Participant with a statement of the Participant’s Account(s).

 

 

ARTICLE 5.   DISTRIBUTION OF BENEFITS.

 

Section 5.1.   Election of Benefit Commencement.

 

5.1.1.   Distribution on Change in Control. During a Participant’s first Enrollment Period under this Plan, the Participant may elect to commence distribution of all Accounts upon a Change in Control, if such a Change in Control should occur before the Account would otherwise be payable under this Plan. If such election is not made at such time, then no acceleration of any Account shall occur upon a Change in Control under the Plan. If such an election is made and if distribution of an Account has commenced in installments before a Change in Control, the balance of the Account shall be paid in a lump sum within 90 days of the date of the Change in Control. Provided, however, that except as otherwise provided in Section 5.5.2, a Participant who was first eligible under the Otter Tail Corporation Nonqualified Retirement Plan or the Varistar Corporation Incentive and Deferral Plan may not make an election under this Section 5.1.1, but the election made by such Participant under the Otter Tail Corporation Nonqualified Retirement Plan or the Varistar Corporation Incentive and Deferral Plan, as the case may 

 

 

  

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be, with respect to a distribution of all Accounts upon a Change in Control shall be considered an election under this Plan.

 

5.1.2.   Scheduled Withdrawal Account. At the time a Participant opens a Scheduled Withdrawal Account under the Plan, the Participant shall establish the Specified Year for that Account. The Specified Year must be a year that is at least two years following the beginning of the Plan Year in which deferrals to the Scheduled Withdrawal Account commence.

 

Section 5.2.   Benefit Commencement.

 

5.2.1.   Scheduled Withdrawal Account. Distribution of a Scheduled Withdrawal Account will be made in a lump sum during March of the Specified Year unless any of the following occurs before January 1 of the Specified Year: (a) the Participant terminates employment for reason other than Retirement, in which event distributions will be made in a lump sum within 90 days following the Participant’s termination of employment; (b) the Participant dies, in which event distributions will commence in the manner specified in Section 5.4.4; or (c) there occurs a Change in Control and the Participant requested distribution to commence upon the Change in Control (as described in Section 5.1.1), in which event distribution will be made in a lump sum within 90 days following the Change in Control; (d) the Participant’s Retirement occurs (other than by reason of death), in which event distribution will be made in a lump sum within 90 days following the date of Retirement; or (e) the Plan terminates, in which event distributions will be made in the manner specified in Section 8.2. Provided, however, that a Participant who transfers employment between or among the Company, an Affiliate, the parent company of the Company or an Affiliate, or any entity affiliated with any of the 

 

 

  

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foregoing as determined under Section 1.1.30 shall not be considered to have terminated employment for purposes of this Section.

 

5.2.2.   Retirement Account. Distribution of a Retirement Account will commence in January of the Plan Year following Retirement (other than by reason of death) unless any of the following occurs before the Participant’s Retirement (other than by reason of death): (a) the Participant terminates employment for reasons other than Retirement, in which event distribution will be made in a lump sum within 90 days following the Participant’s termination of employment (including Early Retirement); (b) the Participant dies, in which event distribution will commence in the manner specified in Section 5.4.4; or (c) there occurs a Change in Control and the Participant requested distribution to commence upon the Change in Control (as described in Section 5.1.1), in which event distribution will be made in a lump sum within 90 days following the Change in Control; or (d) the Plan terminates, in which event distributions will be made in the manner specified in Section 8.2. Provided, however, that a Participant who transfers employment between or among the Company, an Affiliate, the parent company of the Company or an Affiliate, or any entity affiliated with any of the foregoing as determined under Section 1.1.30 shall not be considered to have terminated employment for purposes of this Section.

 

5.2.3.   Company Account. Distribution of a Company Account will be made only if the Participant remains employed with the Company or an Affiliate until Early Retirement, Retirement, Sale, or a Change in Control. In such event, distribution will commence in accordance with the following: (a) if the Participant reaches Early Retirement or Retirement (other than by reason of Disability or death), the first month of 

 

 

  

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Plan Year following the later of the Participant’s 58th birthday or termination of employment; (b) in the event of Disability or Sale, within 90 days following the Disability or Sale, as the case may be; (c) if the Participant dies, in the manner specified in Section 5.4.4; or (d) if there occurs a Change in Control and the Participant requested to commence distribution upon the Change in Control (as described in Section 5.1.1), in a lump sum within 90 days following the Change in Control; or (e) the Plan terminates, in which event distributions will be made in the manner specified in Section 8.2. Provided, however, that a Participant who transfers employment between or among the Company, an Affiliate, the parent company of the Company or an Affiliate, or any entity affiliated with any of the foregoing as determined under Section 1.1.30 shall not be considered to have terminated employment for purposes of this Section. Any portion not payable as of the Participant’s termination of employment shall be forfeited.

 

5.2.4.   Special Rule in Event of Sale. If a Participant remains employed with the Company or an Affiliate until the Sale of the Participant’s Employer and if after the Sale, the Participant is no longer employed by the Company, an Affiliate, or the parent company of the Company or an Affiliate, or any entity affiliated with any of the foregoing as determined under Section 1.1.30, the Sale shall be a distribution event with respect to a Participant’s Scheduled Withdrawal Accounts and Retirement Account, including that portion of such Accounts with respect to which distribution has commenced in installments on or before the Sale, but only with respect to amounts deferred under the Plan on or after January 1, 2011. Such distribution shall be made in a lump sum within 90 days following the Sale. The Plan shall separately account for 

 

 

  

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amounts deferred on or before December 31, 2010 and on or after January 1, 2011, under a Participant’s Scheduled Withdrawal Accounts and Retirement Account.

 

Section 5.3.   Form of Benefit Payment. At the time that a Retirement Account or Company Account is first opened under the Plan for a Participant, the Participant shall select the period over which payments from both Accounts will be made, and an election made with respect to one Account shall apply with respect to the other Account even if the other Account has not yet been opened. Provided, however, that if the Company Account is the first Account of the two to be opened, an election with respect to that Company Account must be made either before the Company Account is opened or, if made after the Account has been opened, only if the Participant will not be vested in the Account for at least 12 months from the date of the election and only if the election is made within 30 days of the date that the Account is opened. If made after the Account is opened, the election made will not be effective until 12 months after the date of the election. The Participant may elect to receive payment in the form of a lump sum or in monthly installments over 10, 15 or 20 years, or in a combination of lump sum and installments except that a distribution upon a Change in Control or Sale or upon termination of employment (including Early Retirement, but not including Retirement) will be distributed in the form of a lump sum only. If no valid election is made, the Participant shall be deemed to have made an election to receive payments from the Retirement Account and Company Account in a lump sum. A Participant's Account will continue to be credited during the payment period with earnings and losses as set forth in Section 4.6, except that earnings and losses shall not be credited after termination of employment other than Early Retirement (with respect to the Company Account only), Retirement, Sale or Change in Control.

 

 

  

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Section 5.4.   Death Benefits.

 

5.4.1.   Beneficiary Designation. At the time a Participant begins participation in the Plan, the Participant may designate primary and contingent Beneficiaries for death benefits payable under the Plan. Such Beneficiaries may be individuals or trusts for the benefit of individuals. If the Participant is married at the time of the Participant’s death, the designation of a primary Beneficiary other than the Participant’s spouse as sole primary Beneficiary shall be valid only if the Participant’s spouse has consented in writing to the naming of such primary Beneficiary and only if the spouse’s consent has been notarized. A Beneficiary designation by a Participant shall be in writing on a form acceptable to the Committee and shall only be effective upon delivery to the Committee. A Beneficiary designation may be revoked by a Participant at any time by delivering to the Company a new Beneficiary designation form. The Beneficiary designation form last delivered to the Committee before the death of a Participant, if valid, shall control.

 

5.4.2.   Failure to Designate. If there is no valid Beneficiary designation on file with the Company, or if all Beneficiaries designated by a Participant have predeceased the Participant, the benefits payable under the Plan by reason of the death of the Participant shall be paid to the Participant's spouse, if living; if the Participant does not leave a surviving spouse, to the Participant's issue by right of representation; or, if there are no such issue then living, to the Participant's estate. If there are benefits remaining unpaid at the death of a sole Beneficiary (who died after the Participant) under the Plan and if no successor Beneficiary has been designated, the remaining balance of the benefits under the Plan shall be paid to the deceased Beneficiary's estate, unless the Beneficiary designation form provides to the contrary. If there are benefits remaining 

 

 

  

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unpaid at the death of a Beneficiary (who died after the Participant) who is one of multiple concurrent Beneficiaries, such remaining benefits shall be paid proportionally to the surviving Beneficiaries, unless the Beneficiary designation form provides to the contrary.

 

5.4.3.   Death After Benefit Commencement. If a Participant dies after benefits have commenced pursuant to Section 5.2, the Participant's Account balance(s), if any, shall be paid to the Participant's Beneficiary in the same manner that benefits would have been paid to the Participant had the Participant survived.

 

5.4.4.   Death Before Benefit Commencement. If the Participant dies before distribution has commenced to the Participant, distribution to the Beneficiary shall be in the form of a lump sum. Distribution shall be made as soon as administratively practicable following the Participant's death, but in no event later than 90 days following the date of death.

 

5.4.5.   Marital Deduction. If any benefits are payable under the Plan to the surviving spouse of a deceased Participant, the estate of the Participant's spouse shall be entitled to all remaining benefits, if any, at the spouse’s death, unless specifically directed to the contrary by an effective Beneficiary designation.

 

Section 5.5.   Change in Elections. A Participant may change a distribution election only in conformance with the provisions of Section 409A of the Code. Specifically, a change in distribution election must conform to the following: (a) The change cannot be effective for 12 months after the election is made, or such later date as the Participant specifies in the election; (b) The change in election must be made at least 12 months before the date that the distribution was otherwise to commence; and (c) The commencement date of the distribution must be 

 

 

  

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delayed for at least five years. For purposes of this provision, an installment payment shall be deemed to be a single payment so that a change in a payment election relating to installment payments shall apply to all installments. A change in election cannot be made after benefit payments have begun to the Participant or Beneficiary and cannot be made after the Participant or Beneficiary is in constructive receipt of the benefit payments to be changed.

 

Section 5.6.   Confidentiality. By accepting benefits under this Plan, a Participant recognizes that the Participant’s knowledge of the Employer’s Confidential Information is of great value to the Employer. Therefore, each Participant shall be bound by the following provisions:

 

Section 5.6.1.   Duty of Confidentiality. The Participant shall not, during the Participant’s employment, or at any time thereafter, use, divulge or disclose to any person, firm, corporation or other entity, any Confidential Information, except in the performance of the Participant’s duties for the Employer

 

Section 5.6.2.   Injunctive Relief. Recognizing that damages at law would be difficult to ascertain, a Participant consents to the granting of equitable relief by way of restraining order or injunction in any court of competent jurisdiction to prevent the breach or threatened breach of the covenants contained in this Section 5.6.

 

Section 5.6.3.   Forfeiture of Account for Breach of Confidentiality Covenant. In addition to injunctive relief, if the Participant breaches or threatens to breach the covenants contained in this Section 5.6, the Participant shall forfeit 100% of the Company Account under this Plan.

 

Section 5.6.4.   Costs of Suit. The Participant shall pay all costs of any suit brought to enforce the provisions of this Section 5.6, including, but not limited to, reasonable attorneys’ fees.

 

 

  

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Section 5.7.   Competition. By accepting benefits under this Plan, a Participant recognizes that the Participant’s knowledge of the business, customers, suppliers and employees of the Participant’s Employer is of great value to the Employer. The Participant understands that the Company and the Employer are willing to make the full benefit of the Plan available to a Participant only if the Participant does not reduce that value to the Company and the Employer through Competition as defined in Sections 5.7.1 and 5.7.2. The Company and the Participants understand that the provisions of this Section 5.7 do not prevent the Participant from taking any of the actions set forth below. The consequence of the Participant’s engaging in Competition as set forth below is the forfeiture of the Accounts as set forth in Section 5.7.3.

 

5.7.1.   Employment by Competition. A Participant shall be considered to be in Competition for purposes of this Plan if during the Participant’s employment or during any of the three year period beginning on the date that the Participant leaves the employ of the Employer, the Participant enters the employ or is engaged as an officer or director of any person, firm, corporation or other entity, or engages, directly or indirectly, as a proprietor, partner, shareholder, member, agent, officer, director, independent contractor, financier, or co-investor in a business competitive with that of the Employer, as such business is now or may hereafter be conducted in the United States, other than as the owner of less than 5% of the securities of a publicly-traded corporation.

 

5.7.2.   Solicitation of Customers, Suppliers or Employees. A Participant shall be considered to be in Competition for purposes of this Plan if during the Participant’s employment or during any of the three year period beginning on the date the Participant leaves the employ of the Employer, the Participant solicits for business, directly or indirectly, otherwise than on behalf of the Employer, any person, firm, corporation or other 

 

 

  

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entity which is or was a customer or supplier of the Employer at any time during the Participant’s employment or which the Employer is or was actively soliciting as a customer or supplier during said time, or if the Participant solicits for business or for employment, directly or indirectly, any person who is or was an employee of the Employer at the time or during the six month period preceding the date the Participant leaves the employ of the Employer.

 

Section 5.7.3.   Forfeiture of Account for Breach of Competition Covenants. The Company’s remedy for any Competition by the Participant under Section 5.7.1 or 5.7.2 is the forfeiture of 100% of the Company Account under this Plan. Neither the Company nor the Employer can obtain injunctive relief for Competition by the Participant under this Section 5.7.

 

Section 5.7.4.   Costs of Suit. The Participant shall pay all costs of any suit brought to enforce the provisions of this Section 5.7, including, but not limited to, reasonable attorneys’ fees.

 

Section 5.8.   Forfeiture for Cause. Anything in this Plan to the contrary notwithstanding, the Participant shall forfeit 100% of the unpaid portion of the Company Account if the Participant is or could have been terminated from employment for Cause.

 

Section 5.9.   Minimum Amount and Frequency of Payments. If the value of all Accounts at the date of initial distribution is less than $50,000, then, notwithstanding any other provision of the Plan to the contrary, the Committee shall pay the Accounts in a lump sum.

 

Section 5.10.   Section 162(m) of the Code. Notwithstanding anything to the contrary in this Plan, a Participant’s Employer may defer payment of any amounts otherwise required to be 

 

 

  

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paid under this Plan in order to preserve the deduction for such payment under Section 162(m) of the Code, but only to the extent permitted by and consistent with Section 409A of the Code.

 

Section 5.11.   Acceleration of Distributions. If the Internal Revenue Service determines that the Plan violates Section 409A of the Code and has made a final assessment of an income tax deficiency with respect to such determination or if a final judicial determination has been entered that the Plan violates Section 409A of the Code with respect to a Participant or Beneficiary, the Committee shall distribute to such Participant or Beneficiary an amount equal to the taxable income recognized.

 

Section 5.12.   Unforeseeable Emergencies. Upon the application of any Participant, the Committee may permit such Participant to withdraw some or all of the amount in one or more of the Participant’s Deferral Accounts. A Participant must provide the Committee with a written petition of the intent to withdraw from the Participant’s Deferral Accounts at least 60 days (or such shorter time as permitted by the Committee in its discretion) before the date of withdrawal. No withdrawal shall be made under the provisions of this Section except for the purpose of enabling a Participant to meet immediate needs created by a severe financial hardship to the Participant or resulting from an illness or accident of the Participant or of the spouse or dependent (as determined under Section 152 of the Code, without regard to Section 152(b)(1), (b)(2) and (d)(3)(B)) or Beneficiary of the Participant, loss of the property of the Participant due to casualty, the Disability of the Participant, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute a severe financial hardship will depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved: (a) through reimbursement or compensation through insurance or otherwise; (b) by 

 

 

  

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liquidation of the Participant’s assets, to the extent such liquidation would not itself cause a severe financial hardship; or (c) by termination of deferrals under the Plan, which termination shall be required. If a withdrawal is permitted, the amount of the withdrawal, which may include amounts reasonably anticipated as needed to pay applicable federal, state or local taxes and penalties, shall be distributed to the Participant in a lump sum as soon as is administratively practicable following the requested withdrawal date. If the deferral election of the Participant is terminated under this Section the Participant may not enter into a new deferral election until a Plan Year that begins at least 12 months following the date of the withdrawal and then only at a time consistent with Section 4.1. and Section 409A of the Code.

 

Section 5.13.   Deferral Election Termination. Notwithstanding any provision of this Plan to the contrary, a Participant’s deferral election shall be terminated if the Participant receives a hardship withdrawal distribution from a plan described in Section 401(k) of the Code in which the Participant participates, but only if the terms of such 401(k) plan require that the deferral election under this Plan be terminated. The Participant may not enter into a new deferral election until at least six months following the effective date of the termination of the deferral election and then only at a time consistent with Section 4.1 and Section 409A of the Code.

 

Section 5.14.   Limitation on Payment. Notwithstanding any provision in the Plan to the contrary, the payment of a benefit payable under the Plan to a Participant or Beneficiary may be deferred or limited in order to comply with applicable securities laws, tax laws, judicial determinations or orders, bank covenants, or any other applicable law as permitted under Section 409A of the Code.

 

Section 5.15.   Delay of Distribution. Notwithstanding any other provision of the Plan to the contrary, distribution on separation from service, as defined under Code Section 409A, shall 

 

 

  

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be delayed until the first day of the month following the six month anniversary of the Participant’s separation from service, or if earlier, the death of the Participant, but only with respect to a specified employee, as defined in Code Section 409A. If such distribution is delayed, then the first payment under the Plan shall include all amounts that were otherwise scheduled to be paid but for the required delay. Earnings shall be credited on such amounts as calculated under Section 4.6.

 

Section 5.16.   Distributions on Plan Termination. Notwithstanding anything in Article 5 to the contrary, if the Plan is terminated, distributions shall be made in accordance with Section 8.2.

 

Section 5.17.   Claims Procedure.

 

5.17.1. Initial Claim for Benefits. The following shall apply with respect to claims of Participants for benefits under the Plan, other than claims governed by Section 5.17.3 below. The Committee shall give notice to a Participant within 90 days of the Participant's written application for benefits of the Participant’s eligibility or noneligibility for benefits under the Plan. If the Committee determines that a Participant is not eligible for benefits or full benefits, the notice shall set forth (a) the specific reasons for such denial, (b) a specific reference to the provision of the Plan on which the denial is based, (c) a description of any additional information or material necessary for the claimant to perfect the claim, and a description of why it is needed, and (d) an explanation of the Plan's claims review procedure and other appropriate information as to the steps to be taken if the Participant wishes to have the claim reviewed. If the Committee determines that there are special circumstances requiring additional time to make a decision, the Committee shall give notice to the Participant of the special 

 

 

  

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circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90-day period.

 

5.17.2.Appeal of Claim Denial. If a Participant is determined by the Committee under Section 5.17.1 above to be not eligible for benefits, or if the Participant believes that the Participant is entitled to greater or different benefits, the Participant shall have the opportunity to have the claim reviewed by filing a petition for review within 60 days after the Participant has been given the notice issued by the Committee. If there is no Trust in place with respect to the Participant’s benefit, or if there is a Trust, but the Trustee has not agreed to determine appeals from denials of claims for benefits under the Plan, then the petition shall be filed with the Committee. If there is a Trust in place with respect to the Participant’s benefit and if the Trustee has agreed to determine appeals from denials of claims for benefits under the Plan, then the petition shall be filed with the Trustee of the Trust. A petition shall state the specific reasons the Participant believes that the Participant is entitled to benefits or greater or different benefits. Within 60 days after the petition has been filed, the Committee or the Trustee, as the case may be, shall afford the Participant an opportunity to present the Participant’s position to the Committee or the Trustee, as the case may be, in writing, and the Participant shall have the right to review pertinent documents. The Committee or the Trustee, as the case may be, shall give notice to the Participant of its decision in writing within said 60-day period, stating specifically the basis of the decision written in a manner calculated to be understood by the Participant and the specific provisions of the Plan on which the decision is based. If because of special circumstances, the 60-day period is not sufficient, the decision may be deferred for up to another 60-day period at the election of the 

 

 

  

34

  

 

 

Committee or the Trustee, as the case may be, but notice of this deferral shall be given to the Participant.

 

5.17.3.Disability Claim for Benefits. If a Participant makes a claim for benefits under the Plan that is contingent on the Committee determining that the Participant is Disabled, the Committee will give notice to the Participant within 45 days of the Participant's written application for benefits of the Participant’s eligibility or noneligibility for benefits under the Plan. If special circumstances require an extension, the Committee will notify the Participant within the 45-day processing period that additional time is needed. The notice will specify the circumstances requiring the extension and the date a decision can be expected. The extension notice will also: (a) explain the standards for approving a disability claim; (b) state the unresolved issue(s) that prevent the Committee from reaching a decision; and (c) describe any additional information needed to resolve the issue(s). If the Committee requests the Participant to provide additional information so it can process the claim, the Participant will be given at least 45 days in which to provide the information. Otherwise, the initial extension cannot exceed 30 days. If circumstances require further extension, the Committee will notify the Participant before the end of the initial 30-day extension. The notice will specify the circumstances requiring the further extension and the date a decision can be expected. In no event will a decision be postponed beyond an additional 30 days after the end of the first 30-day extension. If the disability claim is denied based on an internal rule, guideline, protocol, or other similar provision, in addition to the notice provisions described in this section, the Committee’s notice will provide that a copy of such rule, guideline, protocol or other similar provision is available upon request and free of charge. 

 

 

  

35

  

 

 

The notice will also identify any medical or vocational experts consulted on the claim. The Participant may obtain reasonable access to, and copies of, all documents, records, and other information relevant to the claim for benefits and may request, in writing, a list of medical or vocational experts consulted.

 

5.17.4. Review of a Denied Disability Claim. A Participant may request a review of the Committee’s decision regarding a disability claim within 180 days after receipt of the denial of the disability claim. This request must be in writing and addressed to the Plan Administrator. The Participant may, but is not required to, submit written comments, documents, records and other information relating to the claim for benefits. The review will take into account any such comments, documents, records and other information submitted by the Participant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The review will be conducted by a Plan fiduciary different from the fiduciary who originally denied the claim. This fiduciary cannot be a subordinate of the fiduciary who originally denied the claim. If the original denial of the claim was based on a medical judgment, the reviewing fiduciary will consult with an appropriate health care professional who was not consulted on the original claim and who is not subordinate to someone who was. The Participant will receive notice of the reviewing fiduciary's final decision regarding the disability claim within 45 days of the request for review.

 

5.17.5. Deadline to File Claim. To be considered timely under the Plan’s Claims Procedures, a claim must be filed under Section 5.17.1 or 5.17.3 within one year after the claimant knew or reasonably should have known of the principal facts upon which the 

 

 

  

36

  

 

 

claim is based. Knowledge of all facts that the Participant knew or reasonably should have known shall be imputed to the claimant for the purpose of applying this deadline.

 

5.17.6. Exhaustion of Administrative Remedies. The exhaustion of the Plan’s claims procedures is mandatory for resolving every claim and dispute arising under this Plan. As to such claims and disputes: (a) No claimant shall be permitted to commence any legal action to recover Plan benefits or to enforce or clarify rights under the Plan under Section 502 or Section 510 of ERISA or under any other provision of law, whether or not statutory, until the claims procedures have been exhausted in their entirety; and (b) In any such legal action all explicit and all implicit determinations by the Committee, Trustee or Plan Administrator, as the case may be, (including, but not limited to, determinations as to whether the claim, or a request for a review of a denied claim, was timely filed) shall be afforded the maximum deference permitted by law.

 

5.17.7. Deadline to File Legal Action. No legal action to recover Plan benefits or to enforce or clarify rights under the Plan under Section 502 or Section 510 of ERISA or under any other provision of law, whether or not statutory, may be brought by any claimant on any matter pertaining to this Plan unless the legal action is commenced in the proper forum before the earlier of: (a) 30 months after the claimant knew or reasonably should have known of the principal facts on which the claim is based, or (b) six months after the claimant has exhausted the claims procedure under this Plan. Knowledge of all facts that the Participant knew or reasonably should have known shall be imputed to every claimant who is or claims to be a beneficiary of the Participant or otherwise claims to derive an entitlement by reference to the Participant for the purpose of applying the previously specified periods.

 

 

  

37

  

 

 

5.17.8. Committee Discretion; Court Review. The Committee and all persons determining or reviewing claims have full discretion to determine benefit claims under the Plan. Any interpretation, determination or other action of such persons shall be subject to review only if it is arbitrary or capricious or otherwise an abuse of discretion. Any review of a final decision or action of the persons reviewing a claim shall be based only on such evidence presented to or considered by such persons at the time they made the decision that is the subject of review.

 

 

ARTICLE 6.   FUNDING.

 

Section 6.1.   Source of Benefits. All benefits under the Plan shall be paid when due by the Company out of its assets or from the Trust.

 

Section 6.2.   No Claim on Specific Assets. No Participant shall be deemed to have, by virtue of being a Participant in the Plan, any claim on any specific assets of the Company such that the Participant would be subject to income taxation on the Participant’s benefits under the Plan before distribution. The rights of Participants and Beneficiaries to benefits to which they are otherwise entitled under the Plan shall be those of an unsecured general creditor of the Company. 

 

ARTICLE 7.   ADMINISTRATION AND FINANCES.

 

Section 7.1.   Administration. The Plan shall be administered by the Committee. The Company shall bear all administrative costs of the Plan other than those specifically charged to a Participant or Beneficiary.

 

Section 7.2.   Powers of Committee. In addition to the other powers granted under the Plan, the Committee shall have all powers necessary to administer the Plan, including, without limitation, power exercisable in its sole discretion (a) to interpret the provisions of the Plan; (b) to determine the rights of employees, Participants and Beneficiaries to benefits under the Plan; 

 

 

  

38

  

 

 

(c) to establish and revise the method of accounting for the Plan; (d) to maintain the Accounts; (e) to determine Crediting Rates for the Accounts; (f) to establish rules for the administration of the Plan; and (g) to prescribe any forms required to administer the Plan.

 

Section 7.3.   Actions of the Committee. Except as modified by the Board, the Committee (including any person or entity to whom the Committee has delegated duties, responsibilities or authority, to the extent of such delegation) has total and complete discretionary authority to determine conclusively for all parties all questions arising in the administration of the Plan, to interpret and construe the terms of the Plan, and to determine all questions of eligibility and status of employees, Participants and Beneficiaries under the Plan and their respective interests. Subject to the claims procedures of Section 5.17, all determinations, interpretations, rules and decisions of the Committee (including those made or established by any person or entity to whom the Committee has delegated duties, responsibilities or authority, if made or established pursuant to such delegation) are conclusive and binding upon all persons having or claiming to have any interest or right under the Plan.

 

Section 7.4.   Delegation. The Committee, or any officer designated by the Committee, shall have the power to delegate specific duties and responsibilities to officers or other employees of the Company or other individuals or entities. Any delegation may be rescinded by the Committee at any time. Each person or entity to whom a duty or responsibility has been delegated shall be responsible for the exercise of such duty or responsibility and shall not be responsible for any act or failure to act of any other person or entity. All delegations made under the Otter Tail Corporation Nonqualified Retirement Plan effective January 1, 2003 shall also apply under this Plan.

 

 

  

39

  

 

 

Section 7.5.   Reports and Records. The Committee, and those to whom the Committee has delegated duties under the Plan, shall keep records of all their proceedings and actions and shall maintain books of account, records, and other data as shall be necessary for the proper administration of the Plan and for compliance with applicable law.

 

ARTICLE 8.   AMENDMENTS AND TERMINATION.

 

Section 8.1.   Amendments. The Company, by action of the Board, or the Committee to the extent authorized by the Board, may amend the Plan, in whole or in part, at any time and from time to time. Provided, however, that for a period of 24 months following a Change in Control, no amendment shall be effective without the approval of a majority of the Participants in the Plan (so long as there is more than one Participant). Any amendment shall be filed with the Plan documents. No amendment, however, may be effective to eliminate or reduce any Account balance, determined as of the date of such amendment, of any Participant or of any Beneficiary then eligible for benefits, without such Participant's or Beneficiary's consent.

 

Section 8.2.   Termination.

 

8.2.1.   Termination of Plan. The Company reserves the right to terminate the Plan at any time by action of the Board. Provided, however, that for a period of 24 months following a Change in Control, no termination shall be effective without the approval of a majority of the Participants in the Plan (so long as there is more than one Participant). Upon termination of the Plan, all deferrals and Company Contributions will cease and no future deferrals or Company Contributions will be made. Termination of the Plan shall not operate to eliminate or reduce any Account balance, determined as of the date of such termination, of any Participant or of any Beneficiary then eligible for benefits, without such Participant's or Beneficiary's consent. If the Company desires to distribute benefits 

 

 

  

40

  

 

 

on termination of the Plan, the Company must also meet the following requirements: (a) The distribution must not occur proximate to a downturn in the financial health of the Company; (b) The Company must terminate all arrangements of a type similar to the Plan; (c) No distributions may be made as a result of the termination within 12 months of the termination of all the arrangements; (d) All distributions must be made in a lump sum within 24 months of the termination of the Plan; and (e) The Company may not adopt a new arrangement of the same type covering any of the Participants at any time within three years following the date of termination of the Plan. Provided, however, that if the termination occurs within 12 months following a Change in Control, then in lieu of the requirements of the foregoing sentence, the Company must terminate the arrangement for all Participants affected by the Change in Control and distribution must be made in a lump sum as soon as administratively practicable (but in no event longer than 90 days) following the termination and in no event later than 12 months following the Change in Control. Accounts shall be credited with earnings during the payment period in accordance with Section 4.6 and 5.3. Each Participant who has not terminated employment shall become entitled to 100% of the amount in all the Participant’s Accounts on Plan termination. These termination provisions shall be interpreted in a manner consistent with Section 409A of the Code.

 

8.2.2.   Termination of Portion of Plan after a Sale. The Company reserves the right to terminate that portion of the Plan applicable to Participants employed by an Employer that is the subject of a Sale to an entity that is not the Company or an Affiliate so long as the Sale is considered a change in control under Section 409A of the Code with respect to the Participants whose Accounts shall be paid in connection with the 

 

 

  

41

  

 

 

termination. The Company may terminate and liquidate that portion of the Plan pursuant to irrevocable action taken within 30 days preceding or 12 months following the Sale. Provided, however, that all agreements, methods, programs and other arrangements sponsored by the Company and its Affiliates immediately after the Sale with respect to which deferrals of compensation are treated as having been deferred under a single plan under Section 409A of the Code are terminated and liquidated with respect to each Participant that experienced the Sale so that all such Participants receive all amounts of compensation under the Plan and all such agreements, methods, programs and other arrangements. Such payment shall be made within 12 months of the date the Company irrevocably takes all necessary action to terminate and liquidate such portion of the Plan and all other arrangements. The Company may take this action only if the Company remains primarily liable after the Sale for the payment of the deferred compensation under the Plan. Accounts under this Plan to be liquidated shall be credited with earnings during the period between the action taken to terminate the portion of the Plan and the distribution in accordance with Sections 4.6 and 5.3. This termination provision shall be interpreted in a manner consistent with Section 409A of the Code and shall be effective on the date the restated Plan is adopted by the Company.

 

ARTICLE 9.   MISCELLANEOUS.

 

Section 9.1.   No Guarantee of Employment. Neither the adoption and maintenance of the Plan nor the execution by the Company of a deferral or Account election with any Participant shall be deemed to be a contract of employment between the Company or any Affiliate and any Participant. Nothing contained herein shall give any Participant the right to be retained in the employ of the Company or any Affiliate or to interfere with the right of the Company or any 

 

 

  

42

  

 

 

Affiliate to discharge any Participant at any time, nor shall it give the Company or any Affiliate the right to require any Participant to remain in its employ or to interfere with the Participant's right to terminate the Participant’s employment at any time.

 

Section 9.2.   Release. Any payment of benefits to or for the benefit of a Participant or a Participant's Beneficiaries that is made in good faith by the Company in accordance with the Company's interpretation of its obligations hereunder shall be in full satisfaction of all claims against the Company or an Affiliate for benefits under this Plan to the extent of such payment.

 

Section 9.3.   Notices. Any notice or communication permitted or required under the Plan shall be in writing and shall be delivered personally, or sent by registered or certified mail, return receipt requested, postage prepaid, or sent by nationally recognized overnight carrier, postage prepaid, or sent by facsimile transmission to the principal office of the Company, if to the Company, or to the address last shown on the records of the Company or an Affiliate, if to a Participant or Beneficiary. Such notice or communication shall be deemed given (a) when delivered if personally delivered; (b) five mailing days after having been placed in the mail, if delivered by registered or certified mail; (c) the business day after having been placed with a nationally recognized overnight carrier, if delivered by nationally recognized overnight carrier, and (d) the business day after transmittal when transmitted with electronic confirmation of receipt, if transmitted by facsimile. Any party may change the address or facsimile number to which notices or communications are to be sent to it by giving notice of such change in the manner herein provided for giving notice.

 

Section 9.4.   Nonalienation. No benefit payable at any time under this Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge, levy, attachment, or encumbrance of any kind by any Participant or Beneficiary.

 

 

  

43

  

 

Section 9.5.   Tax Liability. The Company may withhold or direct the trustee of the Trust to withhold from any payment of benefits (or from any other amounts to be paid to the Participant or Beneficiaries) such amounts as the Company determines are reasonably necessary to pay any taxes (and interest thereon) required to be withheld or for which the trustee of the Trust may become liable under applicable law. The Company may also forward or direct the trustee of the Trust to forward to the appropriate taxing authority any amounts required to be paid by the Company or the Trust under the preceding sentence.

 

Section 9.6.   Parachute and Other Payments. No gross up or other recalculations of amounts owed under this Plan shall be made to avoid excess parachute payments under Section 280G of the Code or excise tax liability under Section 4999 of the Code or liability under Section 409A of the Code.

 

Section 9.7.   Indemnification. The Company shall indemnify and defend to the fullest extent permitted by law any employee or former employee serving or formerly serving as a member of the Committee against all liabilities, damages, costs and expenses (including attorneys' fees and amounts paid in settlement of any claims approved by the Company) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith.

 

Section 9.8.   Captions. Article and section headings and captions are provided for purposes of reference and convenience only and shall not be relied upon to construe, define, modify, limit, or extend the scope of any provision of the Plan.

 

Section 9.9.   Applicable Law. The Plan and all rights hereunder shall be governed by and construed according to the laws of the State of Minnesota, except to the extent such laws are preempted by the laws of the United States of America. The Plan shall be interpreted in a manner 

 

 

  

44

  

 

 

consistent with all applicable laws, including the Americans with Disabilities Act and Section 409A of the Code. The restatement of the Plan shall be interpreted in a manner that does not change the time or form of distribution of any deferrals made to the Plan before the effective date of the restatement.

 

IN WITNESS WHEREOF, Otter Tail Corporation has caused this Plan to be executed and has confirmed the joinder of the Affiliates listed on the attached Appendix A by its duly authorized officers this 28 day of October, 2010.

 

 

	 	OTTER TAIL CORPORATION	 
	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Michelle Kommer 	 
	 	 Its	    SVP  HR 	 
	 	 	 	 
	 	 	 	 

 

 

 

  

45

  

 

APPENDIX A

AFFILIATES

 

             The following entities are Affiliates under the Plan as of the date of adoption of the restated Plan:

             Aevenia, Inc.

 

             BTD Manufacturing, Inc.

 

             DMI Industries, Inc.

 

             DMS Health Technologies, Inc.

 

             E.W. Wylie Corporation

 

             Foley Company

 

             Idaho Pacific Holdings, Inc.

 

             Northern Pipe Products, Inc.

 

             Otter Tail Energy Services Company, Inc.

 

             Otter Tail Power Company

 

             ShoreMaster, Inc.

 

             T.O. Plastics, Inc.

 

             Vinyltech Corporation

 

 

 

46a50060960_ex10-2.htm

Exhibit 10.2

 

Execution Version

 

 

 

 

ACIEX THERAPEUTICS, INC.

 

 

SERIES A-2 PREFERRED STOCK PURCHASE AGREEMENT

 

 

 

 

August 1, 2011

 

  

  

  

 

TABLE OF CONTENTS

 

	 	 	Page
	 	 	 
	
1.

	
Purchase and Sale of Series A-2 Preferred Stock.

	
1

	  	
1.1

	
Sale and Issuance of Series A-2 Preferred Stock.

	
1

	  	
1.2

	
Closing; Delivery.

	
1

	  	
1.3

	
Defined Terms Used in this Agreement.

	
1

	  	  	  	  
	
2.

	
Representations and Warranties of the Company.

	
2

	  	
2.1

	
Organization, Good Standing and Qualification.

	
3

	  	
2.2

	
Capitalization.

	
3

	  	
2.3

	
Subsidiaries.

	
4

	  	
2.4

	
Authorization.

	
4

	  	
2.5

	
Valid Issuance of Securities.

	
4

	  	
2.6

	
Governmental Consents and Filings.

	
4

	  	
2.7

	
Litigation.

	
4

	  	
2.8

	
Intellectual Property.

	
5

	  	
2.9

	
Compliance with Other Instruments

	
7

	  	
2.10

	
Agreements; Actions.

	
7

	  	
2.11

	
Disclosure

	
8

	  	
2.12

	
Related-Party Transactions.

	
8

	  	
2.13

	
Rights of Registration and Voting Rights

	
8

	  	
2.14

	
Title to Property and Assets.

	
8

	  	
2.15

	
Financial Statements.

	
8

	  	
2.16

	
Changes.

	
9

	  	
2.17

	
Company Employee Plans

	
10

	  	
2.18

	
Tax Returns and Payments.

	
11

	  	
2.19

	
Insurance.

	
11

	  	
2.20

	
Labor Agreements and Actions.

	
11

	  	
2.21

	
Confidential Information and Invention Assignment Agreements.

	
11

	  	
2.22

	
Permits.

	
12

	  	
2.23

	
Corporate Documents.

	
12

	  	
2.24

	
83(b) Elections.

	
12

	  	
2.25

	
Real Property Holding Corporation.

	
12

	  	
2.26

	
Environmental and Safety Laws.

	
12

	  	  	  	  
	
3.

	
Representations and Warranties of the Purchaser

	
13

	  	
3.1

	
Authorization.

	
13

	  	
3.2

	
Purchase Entirely for Own Account

	
13

	  	
3.3

	
Disclosure of Information.

	
13

	  	
3.4

	
Restricted Securities.

	
13

	  	
3.5

	
No Public Market.

	
14

	  	
3.6

	
Legends.

	
14

	  	
3.7

	
Accredited Investor.

	
14

	  	
3.8

	
No Brokers; No General Solicitation

	
14

 

  

i

  

 

TABLE OF CONTENTS

(continued)

 

	 	 	 	Page
	  	  	  	  
	
4.

	
Conditions of the Purchaser’s Obligations at Closing

	
14

	  	
4.1

	
Representations and Warranties.

	
14

	  	
4.2

	
Performance.

	
15

	  	
4.3

	
Material Adverse Effect.

	
15

	  	
4.4

	
Compliance Certificate.

	
15

	  	
4.5

	
Qualifications.

	
15

	  	
4.6

	
Board of Directors.

	
15

	  	
4.7

	
Amended Investors’ Rights Agreement.

	
15

	  	
4.8

	
Amended Right of First Refusal and Co-Sale Agreement.

	
15

	  	
4.9

	
Amended Voting Agreement.

	
15

	  	
4.10

	
Secretary’s Certificate.

	
15

	  	
4.11

	
Reserved Employee Shares.

	
15

	  	
4.12

	
Proceedings and Documents.

	
16

	  	
4.13

	
License Agreement.

	
16

	  	
4.14

	
Manufacturing Agreement.

	
16

	  	  	  	  
	
5.

	
Conditions of the Company’s Obligations at Closing.

	
16

	  	
5.1

	
Representations and Warranties.

	
16

	  	
5.2

	
Performance.

	
16

	  	
5.3

	
Qualifications.

	
16

	  	
5.4

	
License Agreement.

	
16

	  	
5.5

	
Manufacturing Agreement.

	
16

	  	  	  	  
	
6.

	
Miscellaneous.

	
16

	  	
6.1

	
Use of Proceeds Covenant.

	
16

	  	
6.2

	
Survival of Warranties.

	
16

	  	
6.3

	
Transfer; Successors and Assigns.

	
17

	  	
6.4

	
Governing Law.

	
17

	  	
6.5

	
Counterparts.

	
17

	  	
6.6

	
Titles and Subtitles

	
17

	  	
6.7

	
Notices

	
17

	  	
6.8

	
Finder’s Fee.

	
17

	  	
6.9

	
Attorney’s Fees.

	
18

	  	
6.10

	
Amendments and Waivers.

	
18

	  	
6.11

	
Severability.

	
18

	  	
6.12

	
Delays or Omissions.

	
18

	  	
6.13

	
Entire Agreement.

	
18

	  	
6.14

	
Confidentiality.

	
18

	  	
6.15

	
Mediation; Dispute Resolution.

	
19

	  	
6.16

	
Waiver of Jury Trial

	
19

 

  

ii

  

 

ACIEX THERAPEUTICS, INC.

 

SERIES A-2 PREFERRED STOCK PURCHASE AGREEMENT

 

This Series A-2 Preferred Stock Purchase Agreement (this “Agreement”) is made as of the 1st day of August, 2011 by and between Aciex Therapeutics, Inc., a Delaware corporation (the “Company”), and Akorn, Inc., a Louisiana corporation (the “Purchaser”).

 

WHEREAS, the Company and the Purchaser agree that it is in their best interests that the Company sell, and the Purchaser purchase, shares of A-2 Stock (as defined below); and

 

WHEREAS, the proceeds from the sale of the shares of A-2 Stock are intended to be used by the Company to fund development of its product pipeline, including the Company's AC-170 program and up to two additional prescription clinical stage programs and related overhead, in each case as determined by the Company's Board of Directors.

 

NOW, THEREFORE, BE IT RESOLVED, that the parties hereby agree as follows:

 

1. Purchase and Sale of Series A-2 Preferred Stock.

 

1.1          Sale and Issuance of Series A-2 Preferred Stock.

 

Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase at the Closing (as defined below) and the Company agrees to sell and issue to the Purchaser at the Closing 2,962,963 shares of Series A-2 Preferred Stock (such shares of Series A-2 Preferred Stock to be issued and sold hereunder are referred to herein as the “A-2 Stock”), at a purchase price of $2.70 per share.

 

1.2          Closing; Delivery.

 

(a)           The purchase and sale of the A-2 Stock shall take place at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 850 Winter Street, Waltham, MA 02451, at 10:00 a.m. (Boston Time), on August 1, 2011, or at such other time and place as the Company and the Purchaser mutually agree upon, orally or in writing (which time and place are designated as the “Closing”).

 

(b)           At the Closing, the Company shall deliver to the Purchaser a certificate representing the A-2 Stock being purchased thereby against payment of the purchase price therefor by wire transfer to a bank account designated by the Company.

 

1.3          Defined Terms Used in this Agreement. In addition to the terms defined above, the following terms used in this Agreement shall be construed to have the meanings set forth or referenced below.

 

“Amended Investors’ Rights Agreement” means the Amended and Restated Investors’ Rights Agreement among the Company, the Purchaser and the other parties thereto, dated as of the date of the Closing, in the form of Exhibit C attached hereto.

  

  

  

 

"Amended Right of First Refusal and Co-Sale Agreement" means the Amended and Restated Right of First Refusal and Co-Sale Agreement among the Company, the Purchaser and the other parties thereto, dated as of the date of the Closing, in the form of Exhibit D attached hereto.

 

"Amended Voting Agreement" means the Amended and Restated Voting Agreement among the Company, the Purchaser and the other parties thereto, dated as of the date of the Closing, in the form of Exhibit E attached hereto.

 

"Code" means the Internal Revenue Code of 1986, as amended.

 

"License Agreement" means the AC-160 License Agreement between the Purchaser and the Company, dated as of the date of the Closing, in the form of Exhibit A-1 attached hereto.

 

"Manufacturing Agreement" means the Commercial Manufacturing Supply Agreement between the Purchaser and the Company, dated as of the date of the Closing, in the form of Exhibit A-2 attached hereto.

 

"Material Adverse Effect" means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property or results of operation of the Company, taken together as a whole.

 

"Securities Act" means the Securities Act of 1933, as amended.

 

"Transaction Agreements" means this Agreement, the Amended Investors' Rights Agreement, the Amended Right of First Refusal and Co-Sale Agreement and the Amended Voting Agreement.

 

2. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser that, except as set forth on the Disclosure Schedule delivered separately by the Company to the Purchaser, specifically identifying the relevant subsection hereof, which exceptions shall be deemed to be representations and warranties as if made hereunder, the following representations are true and complete as of the date of the Closing, except as otherwise indicated.

 

For purposes of these representations and warranties, the phrase "to the Company's knowledge" shall mean the actual knowledge of the following officer: Tom Cavanagh. In addition, for purposes of these representations and warranties, the term "the Company" shall include any subsidiaries of the Company, unless otherwise noted.

  

-2-

  

 

2.1          Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted and as currently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a Material Adverse Effect.

 

2.2          Capitalization. The authorized capital of the Company consists, or will consist, immediately prior to the Closing, of:

 

(a)            13,333,334 shares of Preferred Stock, of which 5,555,556 shares have been designated Series A-1 Preferred Stock, all of which are issued and outstanding immediately prior to the Closing, and of which 7,777,778 shares have been designated Series A-2 Preferred Stock, 4,814,815 of which are issued and outstanding immediately prior to the Closing. The rights, privileges and preferences of the Preferred Stock are as stated in the Amended and Restated Certificate of Incorporation of the Company, in the form attached hereto as Exhibit B (the "Amended Certificate of Incorporation").

 

(b)            20,000,000 shares of Common Stock, 4,696,557 shares of which are issued and outstanding immediately prior to the Closing. All of the outstanding shares of capital stock of the Company have been duly authorized, are fully paid and nonassessable and were issued in compliance with the Securities Act and all applicable state securities laws.

 

(c)            The Company has reserved 1,547,459 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to its 2007 Stock Plan, duly adopted by the Board of Directors of the Company (the "Board") and approved by the Company stockholders, as amended to date (the "Stock Plan"). Of such reserved shares of Common Stock, no shares have been issued pursuant to restricted stock purchase agreements, no shares have been issued upon exercise of options granted under the Stock Plan, 539,308 options to purchase shares have been granted and are currently outstanding, and 1,008,151 shares of Common Stock remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Plan.

 

(d)            Except for (i) the conversion privileges of the Preferred Stock; (ii) the rights provided in the Amended Investors Rights' Agreement; (iii) outstanding options issued pursuant to the Stock Plan; and (iv) this Agreement, or as set forth on Schedule 2.2, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of its capital stock. Except as set forth on Schedule 2.2, no stock plan, stock purchase, stock option or other agreement or understanding between the Company and any holder of equity securities or rights to purchase equity securities provides for acceleration or other changes in the vesting provisions of such agreements or understandings, or the lapse of a Company repurchase right, upon the occurrence of any event. Except as set forth on Schedule 2.2, the Company has never adjusted or amended the exercise price of any stock options previously awarded, whether through amendment, cancellation, replacement grant, repricing, or any other means.

  

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  2.3          Subsidiaries. Except as set forth on Schedule 2.3, the Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association or other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement.

 

2.4          Authorization. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the other Transaction Agreements, the performance of all obligations of the Company hereunder and thereunder and the authorization, issuance and delivery of the A-2 Stock and the Common Stock issuable upon conversion of the A-2 Stock (together, the "Securities") has been taken or will be taken prior to the Closing, and the Transaction Agreements, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies or (iii) to the extent the indemnification provisions contained in the Amended Investors' Rights Agreement may be limited by applicable federal or state securities laws.

 

2.5          Valid Issuance of Securities. The A-2 Stock, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, applicable state and federal securities laws and liens or encumbrances created by or imposed by the Purchaser. Based in part upon the representations of the Purchaser in Section 3 of this Agreement and subject to the provisions of Section 2.6 below, the A-2 Stock will be issued in compliance with the Securities Act and all applicable state securities laws. The Common Stock issuable upon conversion of the A-2 Stock has been duly and validly reserved for issuance, and upon issuance in accordance with the terms of the Amended Certificate of Incorporation, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, applicable federal and state securities laws and liens or encumbrances created by or imposed by the Purchaser. Based in part upon the representations of the Purchaser in Section 3 of this Agreement, and subject to Section 2.6 below, the Common Stock issuable upon conversion of the A-2 Stock will be issued in compliance with the Securities Act and all applicable federal and state securities laws.

 

2.6          Governmental Consents and Filings. Assuming the accuracy of the representations made by the Purchaser in Section 3 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement, except for filings pursuant to applicable state securities laws and Regulation D of the Securities Act.

 

  

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2.7          Litigation. There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or, to the Company's knowledge, currently threatened against the Company that questions the validity of the Transaction Agreements or the right of the Company to enter into them, or to consummate the transactions contemplated thereby, or that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, or any change in the current equity ownership of the Company. The Company is not a party or is not named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. To the Company's knowledge, none of its officers or directors are a party or are named as subject to the provisions of an order, writ, injunction, judgment or decree of any court or government agency or instrumentality that would affect their duties to the Company. There is no action, suit, proceeding or investigation by the Company pending or which the Company intends to initiate. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to the Company) involving the prior employment of any of the Company's employees, their use in connection with the Company's business, or any information or techniques allegedly proprietary to any of their fottner employers, or their obligations under any agreements with prior employers.

 

  2.8          Intellectual Property.

 

(a)            Schedule 2.8 of the Disclosure Schedule sets forth a complete and accurate list of (i) all registrations and applications for registration of Intellectual Property (as defined in Section 2.8(e)) owned by the Company (the "Company Registrations"), (ii) the product candidates that the Company currently manufactures, markets, sells or licenses and the services that the Company currently provides, and (iii) outstanding options, licenses, or similar agreements of any kind relating to the foregoing and any options, licenses or agreements of any kind with respect to the Intellectual Property of any other person or entity to which the Company is bound or a party to, except for standard end-user, off-the-shelf, object code, internal-use and similar software licenses and support/maintenance agreements. "Company-owned Intellectual Property" means all Intellectual Property owned by the Company, including the Company Registrations and all Intellectual Property contributed by Afferent Therapeutics, LLC pursuant to the Contribution Agreement dated on or about September 26, 2007, between Afferent Therapeutics, LLC and the Company, but does not include any third-party Intellectual Property licensed by the Company. All assignments of Company-owned Intellectual Property to the Company have been properly executed and, to the extent necessary to reflect or perfect ownership, recorded. The Company owns or possesses sufficient legal rights to all Intellectual Property necessary to the conduct of the Company's business as now conducted and as presently contemplated to be conducted, without any known conflict with, or infringement of, the rights of others. The Company is the sole and exclusive owner of all Company-owned Intellectual Property, free and clear of any encumbrance and all joint owners of the Company-owned Intellectual Property are listed in Schedule 2.8 of the Disclosure Schedule. The Company has not agreed to indemnify any person against any infringement, violation or misappropriation of any Intellectual Property rights with respect to any Company-owned Intellectual Property or any third party Intellectual Property licensed by the Company. The Company is not a member of or party to any patent pool, industry standards body, trade association or other organization pursuant to the rules of which it is obligated to license any existing or future Company-owned Intellectual Property to any person.

 

  

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(b)            All Company Registrations which are used in the business of the Company, are subsisting and have not expired or been cancelled or abandoned. To the knowledge of the Company, all Company Registrations are valid and enforceable and all issuance, renewal, maintenance and other payments that are or have become due with respect thereto have been timely paid by or on behalf of the Company. There are no inventorship challenges, opposition or nullity proceedings or interferences declared, commenced or provoked, or to the knowledge of the Company threatened, with respect to any patents included in the Company Registrations. The Company has complied with its duty of candor and disclosure to the United States Patent and Trademark Office and any relevant foreign patent office with respect to all patent and trademark applications filed by or on behalf of the Company and have made no material misrepresentation in such applications. The Company has no knowledge of any information that would preclude the Company from having clear title to the Company Registrations or affecting the patentability or enforceability of any Company Registrations.

 

(c)            The Company has not received any communications alleging that the Company has violated or, by conducting its business as proposed, would violate any of the Intellectual Property of any other person or entity. To the Company's knowledge, no third party is infringing, violating or misappropriating any of the Intellectual Property of the Company.

 

(d)            The Company has taken commercially reasonable steps to protect and preserve its rights in any proprietary Intellectual Property used in the business of the Company, and to maintain in confidence all trade secrets and confidential information comprising a part thereof (including executing confidentiality and intellectual property assignment agreements with current executive officers and current employees and contractors that have a material role in the development of the products of the Company and the Intellectual Property of the Company). The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee's best efforts to promote the interest of the Company or that would conflict with the Company's business. Neither the execution or delivery of the Transaction Agreements, nor the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as proposed, will, to the Company's knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated. The Company does not believe it is or will be necessary to use any inventions of any of its employees made prior to or outside the scope of their employment by the Company in conduct of the Company's business.

 

(e)            "Intellectual Property" means, all intellectual property, including without limitation, all (i) patents, inventions, trademarks, service marks, trade names, domain names, copyrights, designs and trade secrets, (ii) applications for and registrations of such patents, trademarks, service marks, trade names, domain names, copyrights and designs, (iii) lists (including customer lists), databases, processes, formulae, methods, schematics, technology, know-how, computer software programs and related documentation and (iv) other tangible or intangible proprietary or confidential information and materials (including, without limitation associated goodwill and remedies against infringements, misappropriations and violations thereof and rights of protection of an interest therein under the laws of all jurisdictions).

  

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2.9          Compliance with Other Instruments. The Company is not in violation or default of any provisions of its Amended Certificate of Incorporation or Bylaws, or of any instrument, judgment, order, governmental permit, writ, or decree, or under any note, indenture, mortgage, lease, agreement, contract or purchase order to which it is a party or by which it is bound or, of any provision of federal or state statute, rule or regulation applicable to the Company, the violation of which would have a Material Adverse Effect. The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any material peiinit, license, authorization or approval applicable to the Company, its prospects, business or operation, or any of its assets or properties.

 

  2.10       Agreements; Actions.

 

(a)            Other than (i) standard employee benefits generally made available to all employees, (ii) standard director and officer indemnification agreements approved by the Board, (iii) the purchase of shares of the Company's capital stock and the issuance of options to purchase shares of the Company's Common Stock, in each instance, approved by the Board and (iv) the transactions contemplated by the Transaction Agreements, there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, affiliates, or any affiliate thereof.

 

(b)            Except for the Transaction Agreements, there are no agreements, understandings, instruments, contracts or proposed transactions to which the Company is a party or by which it is bound that involve (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of, $100,000, (ii) the license of any patent, copyright, trade secret or other proprietary right to or from the Company other than (A) the license of the Company's software and products in the ordinary course of business or (B) the license to the Company of generally commercially available "off-the-shelf' third-party products, or (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other person or affect the Company's exclusive right to develop, manufacture, assemble, distribute, market or sell its products.

 

(c)            The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess of $100,000, (iii) made any loans or advances to any person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business.

 

(d)            For the purposes of subsections (b) and (c) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated with that person or entity) shall be aggregated for the purposes of meeting the individual minimum dollar amounts of each such subsection.

 

  

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  2.11        Disclosure. The Company has provided the Purchaser with all the information the Purchaser has requested in writing for deciding whether to purchase the A-2 Stock. To the Company's knowledge, no certificates made or delivered in connection with the Transaction Agreements contain any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading.

 

  2.12        Related-Party Transactions. No employee, officer or director of the Company or holder of more than 10% of the equity securities of the Company on a fully diluted and as-converted-to Common Stock basis (a "Related Party") or member of such Related Party's immediate family, or any corporation, partnership or other entity in which such Related Party is an officer, director or partner, or in which such Related Party has an ownership interest (excluding ownership interests of 2% or less in any public company) or otherwise controls, is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them. To the Company's knowledge, none of such persons have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company, except that Related Parties and members of their immediate families may own stock in (but not exceeding 2% of the outstanding capital stock of) publicly traded companies that may compete with the Company. To the Company's knowledge, no Related Party or member of their immediate families is directly or indirectly interested in any material contract with the Company. The Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.

 

  2.13        Rights of Registration and Voting Rights. Except as provided in the Amended Investors' Rights Agreement, the Company is not under any obligation to register under the Securities Act any of its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities. To the Company's knowledge, except as contemplated in the Amended Voting Agreement, no stockholder of the Company has entered into any agreements with respect to the voting of capital shares of the Company.

 

  2.14        Title to Property and Assets. Except as set forth on Schedule 2.14, the Company owns its property and assets free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company's ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than to the lessors of such property or assets.

 

  2.15        Financial Statements. The Company has made available to the Purchaser a complete and accurate copy of the unaudited balance sheet (the "Balance Sheet") of the Company at April 30, 2011 (the "Balance Sheet Date") and the related unaudited statements of operations and cash flows (collectively, the "Financial Statements"). The Company has no material liabilities, contingent or otherwise, other than (i) liabilities shown on the Balance Sheet, (ii) liabilities incurred after the Balance Sheet Date in the ordinary course of business that are not individually in excess of $100,000, and (iii) obligations under contracts and commitments incurred in the ordinary course of business which would not be required under generally accepted accounting principles to be reflected on the face of financial statements prepared in accordance with generally accepted accounting principles.

 

  

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  2.16        Changes. Since the Balance Sheet Date, there has not been:

 

(a)            any change in the assets, liabilities, financial condition or operating results of the Company, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse;

 

(b)            any damage, destruction or loss, whether or not covered by insurance, that constitutes a Material Adverse Effect;

 

(c)            any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

 

(d)            any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect;

 

(e)            any material change to a material contract or agreement by which the Company or any of its assets is bound or subject;

 

(f)            any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

 

(g)            any sale, assignment or transfer by the Company of any patents, trademarks, copyrights, trade secrets or other intangible assets by the Company;

 

(h)            any resignation or termination of employment of any officer or key employee of the Company;

 

(i)             any material change, except in the ordinary course of business, in a contingent obligation of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise;

 

(j)             any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair the Company's ownership or use of such property or assets;

 

(k)            any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

  

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(l)             any declaration, setting aside or payment or other distribution in respect to any of the Company's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company;

 

(m)           to the Company's knowledge, any other event or condition of any character, other than events affecting the economy or the Company's industry generally, that could reasonably be expected to result in a Material Adverse Effect; or

 

(n)            any arrangement or commitment by the Company to do any of the things described in this Section 2.16.

 

  2.17        Company Employee Plans. Except as set forth in Schedule 2.17:

 

(a)            Schedule 2.17 sets forth all Company Employee Plans (as defined below). The Company has made all required contributions and has complied in all material respects with all applicable laws for any such Company Employee Plan.

 

(b)            Neither the Company nor any ERISA Affiliate (as defined below) contributes to or has any contingent obligations to any Multiemployer Plan (as defined below). Neither the Company nor any ERISA Affiliate has incurred any liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA (as defined below) or as a result of a sale of assets described in Section 4204 of ERISA.

 

(c)            Neither the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in, or contributed to, any Pension Plan (as defined below) which is subject to Title IV of ERISA or Section 412 of the Code. Neither the Company nor any ERISA Affiliate has any liability with respect to any post-retirement benefit under any Company Employee Plan which is a welfare plan (as defined in section 3(1) of ERISA), other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA or similar state laws.

 

(d)            Each Company Employee Plan complies, in both form and operation, in all material respects, with its terms, ERISA and the Code, and no condition exists or event has occurred with respect to any such plan which would result in the incurrence by the Company or any ERISA Affiliate of any material liability, fine or penalty. To the knowledge of the Company, no Company Employee Plan is being audited or investigated by any government agency or is subject to any pending or threatened claim or suit. Neither the Company nor, to the knowledge of the Company, any ERISA Affiliate nor any fiduciary of any Company Employee Plan has engaged in a prohibited transaction under section 406 of ERISA or section 4975 of the Code.

 

(e)            The following definitions will apply to this Section 2.17:

 

i. "Company Employee Plan" shall mean any plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written or unwritten or otherwise, funded or unfunded, including without limitation, each "employee benefit plan," within the meaning of Section 3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate has or may have any liability or obligation;

 

  

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ii.       "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended;

 

iii.       "ERISA Affiliate" shall mean any other person or entity under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder;

 

iv.       "Multiemployer Plan" shall mean any "Pension Plan" (as defined below) which is a "multiemployer plan," as defined in Section 3(37) of ERISA; and

 

v.       "Pension Plan" shall mean each Company Employee Plan which is an "employee pension benefit plan," within the meaning of Section 3(2) of ERISA.

 

  2.18        Tax Returns and Payments. The Company has filed all tax returns and reports as required by law. These returns and reports are true and correct in all material respects. The Company has paid all taxes and other assessments due.

 

  2.19        Insurance. The Company has in full force and effect fire and casualty insurance policies, with extended coverage, sufficient in amount (subject to reasonable deductibles) to allow it to replace any of its properties that might be damaged or destroyed. Set forth in Schedule 2.19 is a list of all insurance policies maintained by the Company. All such policies are in full force and effect and no claim made pursuant to such policies has been disputed. There is no breach or default under any such policies.

 

  2.20        Labor Agreements and Actions. The Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the Company's knowledge, has sought to represent any of the employees, representatives or agents of the Company. There is no strike or other labor dispute involving the Company pending, or to the Company's knowledge threatened, which could have a Material Adverse Effect, nor is the Company aware of any labor organization activity involving its employees. The Company is not aware that any officer or key employee intends to terminate their employment with the Company, nor does the Company have any present intention to terminate the employment of any officer or key employee. Except as set forth in Schedule 2.20, the employment of each officer and employee of the Company is tetininable at the will of the Company. The Company has complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related to employment.

 

  2.21       Confidential Information and Invention Assignment Agreements. Each employee, consultant and officer of the Company has executed an agreement with the Company regarding confidentiality and proprietary information substantially in the form or forms made available to the Purchaser. The Company is not aware that any of its employees or consultants is in violation thereof.

 

  

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  2.22        Permits. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which would be reasonably expected to have a Material Adverse Effect. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.

 

  2.23        Corporate Documents. The Amended Certificate of Incorporation and Bylaws of the Company are in the folin made available to the Purchaser. The copy of the minute books of the Company made available to the Purchaser contains minutes of all meetings of directors and stockholders and all actions by written consent without a meeting by the directors and stockholders since the date of incorporation and reflects all actions by the directors (and any committee of directors) and stockholders with respect to all transactions referred to in such minutes accurately in all material respects.

 

  2.24        83(b) Elections. To the Company's knowledge, all elections and notices under Section 83(b) of the Code have been timely filed by all individuals who have purchased shares of the Company's Common Stock.

 

  2.25        Real Property Holding Corporation. The Company is not a "United States real property holding corporation" within the meaning of the Code and any applicable regulations promulgated thereunder, and has filed with the Internal Revenue Service all statements, if any, with its United States income tax returns, which are required under Treasury Regulation §1.897-2(h). The Company shall provide prompt notice to the Purchaser following any "determination date" (as defined in Treasury Regulation §1.897-2(c)(1) on which the Company becomes a United States real property holding corporation. In addition, upon a written request by the Purchaser, the Company shall provide the Purchaser, within ten days of such request, with a written statement informing whether such Purchaser's interest in the Company constitutes a United States real property interest. The Company's detelinination shall comply with the requirements of Treasury Regulation §1.897-2(h)(1) or any successor regulation, and the Company shall provide timely notice to the Internal Revenue Service, in accordance with and to the extent required by Treasury Regulation Section §1.897-2)(2) or any successor regulation, that such statement has been made. The Company's obligation to furnish such written statement shall continue notwithstanding the fact that a class of the Company's stock may be regularly traded on an established securities market or the fact that there is no preferred stock then outstanding.

 

  2.26        Environmental and Safety Laws. The Company is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to the Company's knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. No Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by the Company or, to the Company's knowledge after reasonable investigation, by any other person or entity on any property owned, leased or used by the Company. For the purposes of the preceding sentence, "Hazardous Materials" shall mean (a) materials which are listed or otherwise defined as "hazardous" or "toxic" under any applicable local, state, federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous substances, including building materials or (b) any petroleum products or nuclear materials.

 

  

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 3. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company that:

 

3.1           Authorization. The Purchaser has full power and authority to enter into the Transaction Agreements. The Transaction Agreements, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, (b) as limited by any other laws of general application affecting enforcement of creditors' rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies, or (c) to the extent the indemnification provisions contained in the Amended Investors' Rights Agreement may be limited by applicable federal or state securities laws.

 

3.2           Purchase Entirely for Own Account. This Agreement is made with the Purchaser in reliance upon the Purchaser's representation to the Company, which by the Purchaser's execution of this Agreement, the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. If the Purchaser is a corporation, partnership or other entity, such Purchaser has not been formed for the specific purpose of acquiring the A-2 Stock.

 

3.3           Disclosure of Information. The Purchaser believes it has received all information it considers necessary or appropriate for deciding whether to purchase the A-2 Stock. The Purchaser further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the A-2 Stock and the business, properties, prospects and financial condition of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchaser to rely on such representations and warranties.

 

3.4           Restricted Securities. The Purchaser understands that the Securities will be characterized as "restricted securities" under the federal securities laws, inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and that under such laws and applicable regulations such Securities may not be resold without registration under the Act, except in certain limited circumstances. In this connection, the Purchaser represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. The Purchaser acknowledges that the Company has no obligation to register or qualify the Securities for resale, except as set forth in the Amended Investors' Rights Agreement. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company that are outside the Purchaser's control, and which the Company is under no obligation and may not be able to satisfy.

 

  

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3.5           No Public Market. The Purchaser understands that no public market now exists for any of the securities issued by the Company, and that the Company has made no assurances that a public market will ever exist for the Securities.

 

3.6           Legends. The Purchaser understands that the Securities and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:

 

(a)            "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."

 

(b)            Any legend set forth in or required by any other section of this Agreement or any of the other Transaction Agreements.

 

(c)            Any legend required by the securities laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

3.7           Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

 

3.8           No Brokers; No General Solicitation. Neither the Purchaser, nor any of its officers, employees, agents, directors, stockholders or partners has engaged the services of a broker or investment banker in connection with the transactions contemplated hereby, nor has the Purchaser or any of the Purchaser's officers, employees, agents, directors, stockholders or partners, agreed to pay any commission, fee or other remuneration to any third party in connection with the transactions contemplated hereby. Purchaser acknowledges that the A-2 Stock was not offered to it by any form of general solicitation or advertising, as described in rule 502(c) of Regulation D under the Securities Act.

 

 4. Conditions of the Purchaser's Obligations at Closing The obligations of the Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

 

4.1           Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

 

  

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4.2          Performance. The Company shall have perfouned and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing.

 

4.3           Material Adverse Effect. There shall not have occurred any Material Adverse Effect between the date of this Agreement and the Closing.

 

 4.4           Compliance Certificate. The President of the Company shall deliver to the Purchaser at the Closing a certificate certifying that the conditions specified in Sections 4.1, 4.2 and 4.3 have been fulfilled.

 

4.5           Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the A-2 Stock pursuant to this Agreement shall be obtained and effective as of the Closing.

 

4.6           Board of Directors.As of immediately following the Closing, the Board shall be comprised of six (6) members, to be appointed as set forth in the Amended Voting Agreement.

 

4.7           Amended Investors' Rights Agreement. The Company, the Purchaser and the parties required to amend and restate the Investors' Rights Agreement dated as of September 26, 2007, as amended, among the Company and the other parties thereto shall have executed and delivered the Amended Investors' Rights Agreement.

 

4.8           Amended Right of First Refusal and Co-Sale Agreement. The Company, the Purchaser and the parties required to amend and restate the Right of First Refusal and Co-Sale Agreement dated as of September 26, 2007, as amended, among the Company and the other parties thereto shall have executed and delivered the Amended Right of First Refusal and Co-Sale Agreement.

 

4.9           Amended Voting Agreement. The Company, the Purchaser and the parties required to amend and restate the Voting Agreement dated as of September 26, 2007, as amended, among the Company and the other parties thereto shall have executed and delivered the Amended Voting Agreement.

 

4.10          Secretary's Certificate. The Secretary of the Company shall deliver to the Purchaser at the Closing a certificate certifying as to (i) the Amended Certificate of Incorporation, (ii) the Bylaws of the Company and (iii) resolutions of the Board approving this Agreement, the other Transaction Agreements and the transactions contemplated hereby and thereby.

 

4.11          Reserved Employee Shares. The Company shall have reserved 1,547,459 shares of Company Common Stock to be issued from time-to-time to employees and independent contractors of the Company pursuant to the Stock Plan.

  

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4.12          Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Purchaser, and the Purchaser (or its counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested. Such documents may include good standing certificates.

 

4.13          License Agreement. The Company shall have entered into the License Agreement with the Purchaser.

 

4.14          Manufacturing Agreement. The Company shall have entered into the Manufacturing Agreement with the Purchaser.

 

5. Conditions of the Company's Obligations at Closing. The obligations of the Company to the Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

 

5.1           Representations and Warranties. The representations and warranties of the Purchaser contained in Section 3 shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

 

5.2           Performance. All covenants, agreements and conditions contained in this Agreement to be performed by the Purchaser on or prior to the Closing shall have been performed or complied with in all material respects.

 

5.3           Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the A-2 Stock pursuant to this Agreement shall be obtained and effective as of the Closing.

 

5.4           License Agreement. The Purchaser shall have entered into the License Agreement with the Company.

 

5.5           Manufacturing Agreement. The Purchaser shall have entered into the Manufacturing Agreement with the Company.

 

6. Miscellaneous.

 

6.1          Use of Proceeds Covenant.

 

The Company shall use proceeds from the sale of the shares of A-2 Stock to fund development of its product pipeline, including the Company's AC-170 program and additional prescription programs and related overhead, related product development clinical stage programs, working capital and for general corporate purposes, in each case as determined by the Company's Board of Directors.

 

6.2           Survival of Warranties. Unless otherwise set forth in this Agreement, the warranties, representations and covenants of the Company and the Purchaser contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing.

 

  

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6.3           Transfer; Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Except as set forth below, no party to this Agreement may assign its rights or obligations hereunder, provided that nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. The Purchaser may assign its rights or obligations pursuant to this Agreement to a transferee as peiinitted pursuant to the Amended Right of First Refusal and Co-Sale Agreement. The Company may not assign its rights or obligations pursuant to this Agreement without the prior written consent of the Purchaser.

 

6.4           Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

 

6.5           Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

6.6           Titles and Subtitles The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

6.7           Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by fax (upon customary confirmation of receipt), or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party's address as set forth on the signature page, or as subsequently modified by written notice, and if to the Company, with a copy to WilmerHale, 850 Winter Street, Waltham, MA 02451, Attention: Steven D. Singer, Esq.

 

6.8           Finder's Fee. Except as set forth on the Disclosure Schedule with respect to the obligations of the Company, each party represents that it neither is nor will be obligated for any finder's fee or similar commission in connection with this transaction. The Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder's fee or similar commission arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Purchaser or any of its officers, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless the Purchaser from any liability for any commission or compensation in the nature of a finder's fee or similar commission arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

  

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6.9            Attorney's Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of the Transaction Agreements, the prevailing party shall be entitled to reimbursement of its reasonable attorney's fees, costs and necessary disbursements incurred in connection with such action in addition to any other relief to which such party may be entitled.

 

6.10          Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the Company and the Purchaser. Any amendment or waiver effected in accordance with this Section 6.10 shall be binding upon the Purchaser and each transferee of the A-2 Stock (or the Common Stock issuable upon conversion thereof), each future holder of all such securities, and the Company.

 

6.11          Severability,. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as though such provision were so excluded and shall be enforceable in accordance with its terms.

 

6.12          Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

6.13          Entire Agreement. This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements relating to the subject matter hereof existing between the parties hereto are expressly canceled, including, without limitation, that certain Nonbinding Memorandum of Understanding dated as of May 19, 2011, and the related Summary of Terms of Series A Preferred Stock.

 

6.14          Confidentiality. The Purchaser hereto agrees that, except with the prior written pelinission of the Company, it shall at all times hold in confidence and trust and not use or disclose any confidential information of the Company provided to or learned by the Purchaser in connection with the Purchaser's rights under the Transaction Agreements. Notwithstanding the foregoing, the Purchaser may disclose any confidential information of the Company provided to or learned by the Purchaser in connection with such rights to the minimum extent necessary (i) to evaluate or monitor the Purchaser's investment in the Company; (ii) as required by any court or other governmental body, provided that the Purchaser provides the Company with prompt notice of such court order or requirement to the Company to enable the Company to seek a protective order or otherwise to prevent or restrict such disclosure; (iii) to legal counsel of the Purchaser; (iv) in connection with the enforcement of this Agreement or rights under this Agreement; or (v) to comply with applicable law (including, without limitation, disclosure of information related to this Agreement to the extent the Purchaser is required to disclose to the U.S. Securities and Exchange Commission), provided that the Purchaser provides written notice of such required disclosure and takes reasonable and lawful actions to avoid and/or minimize the extent of such disclosure. The provisions of this Section 6.14 shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by the parties hereto with respect to the transactions contemplated hereby.

 

  

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6.15          Mediation; Dispute Resolution. The parties to this Agreement shall attempt in good faith to settle any dispute, controversy or claim arising out of or relating to this Agreement or the other Transaction Agreements, or any breach thereof, including any claim that this Agreement or the other Transaction Agreements, or any part hereof or thereof, is invalid, illegal or otherwise voidable or void ("Dispute"), before the commencement of arbitration proceedings, by mediation in Boston, Massachusetts, in accordance with the International Institute for Conflict Prevention & Resolution ("CPR Institute") Mediation Procedure then currently in effect. Unless the parties agree otherwise, the mediator will be selected from the CPR Panels of Distinguished Neutrals or the JAMS Panel of Mediators. If the Dispute is not resolved within sixty (60) days of the written request for mediation, there are no further obligations to mediate.

 

(b)            Any Dispute that remains unresolved sixty (60) days after a written request for mediation made by a party to this Agreement pursuant to the CPR Institute Mediation Procedure shall be submitted, at the request of any party, to binding arbitration in accordance with the rules of the American Arbitration Association ("AAA") then currently in effect by a sole arbitrator to be appointed jointly by the parties. In the event the parties to this Agreement cannot agree to a sole arbitrator within thirty (30) days after commencement of the arbitration, the arbitrator shall be selected by the A. The arbitrator must render his/her award by the application of the substantive laws of Delaware without giving effect to principles of conflicts of laws and is not free to act as amiable compsiteur or ex aequo et bono. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The place of arbitration shall be Boston, Massachusetts.

 

6.16          Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION RELATED TO THIS AGREEMENT.

 

[Signature Page Follows]

  

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The parties have executed this Series A-2 Preferred Stock Purchase Agreement as of the date first written above.

 

	  	  
	  	
COMPANY:

	  	  
	  	
ACIEX THERAPEUTICS, INC.

	  	  
	  	
By: /s/ Tom Cavanagh                                    

	  	
Name:  Tom Cavanagh

	  	
Title:    President

	  	  
	  	
Address: 82 Flanders Road, Suite 102,

	  	                 Westborough, MA 01581
	  	  
	  	
PURCHASER:

	  	  
	  	
AKORN, INC.

	  	   
	  	
By: /s/ Raj Rai                                                   

	  	
Name:  Raj Rai

	  	
Title:    CEO

	  	  
	  	
Address: 1925 West Field Court,

	  	
                  Lake Forest, IL 60045

 

 

S-1

 

Signature Page to Series A-2 Preferred Stock Purchase Agreement

  

  

  

 

EXHIBITS

 

 

	
Exhibit A-1 -

	
Form of License Agreement

	 	 
	
Exhibit A-2 -

	
Form of Manufacturing Agreement

	 	 
	
Exhibit B -

	
Form of Amended Certificate of Incorporation

	 	 
	
Exhibit C -

	
Form of Amended Investors’ Rights Agreement

	 	 
	
Exhibit D -

	
Form of Amended Right of First Refusal and Co-Sale Agreement

	 	 
	
Exhibit E -

	
Form of Amended Voting Agreement

 

  

  

  

 

EXHIBIT A-1

 

FORM OF

LICENSE AGREEMENT

 

 

 

  

  

  

 

EXHIBIT A-2

 

FORM OF

MANUFACTURING AGREEMENT

 

 

 

  

  

  

 

EXHIBIT B

 

FORM OF

AMENDED CERTIFICATE OF INCORPORATION

 

 

 

  

  

  

 

EXHIBIT C

 

FORM OF AMENDED INVESTORS’ RIGHTS AGREEMENT

 

 

 

  

  

  

 

EXHIBIT D

 

FORM OF AMENDED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT

 

 

 

  

  

  

 

EXHIBIT E

 

FORM OF AMENDED VOTING AGREEMENT

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