Document:

ex10-6.htm

Exhibit 10.6

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

AMENDMENT TO LICENSE AGREEMENT AND POTENTIAL Development Agreement

 

This AMENDMENT TO LICENSE AGREEMENT AND POTENTIAL Development Agreement (the “Development Agreement”) is made and entered into as of December 30, 2015 (the “Effective Date”) by and between Cardica, Inc., a Delaware corporation having its principal place of business at 900 Saginaw Drive, Redwood City, CA 94063 (“Cardica”), and Intuitive Surgical Operations, Inc., a Delaware corporation having its principal place of business at 1266 Kifer Road, Sunnyvale, California 94086 (“IS Ops”) and Intuitive Surgical International, Ltd., a Cayman Islands company and an indirect and wholly-owned subsidiary of the Intuitive (“ISI”), collectively as “Intuitive”). Cardica and Intuitive are individually referred to as a “Party” or collectively as the “Parties”. 

 

Whereas, Cardica is engaged in the design and manufacturing of proprietary stapling devices for surgical procedures;

 

Whereas, Intuitive designs, manufactures, and sells systems, instruments and accessories for robotic-assisted minimally invasive surgery; 

 

Whereas, Cardica and Intuitive are parties to that certain License Agreement, dated August 16, 2010 (the “License Agreement”), under which Cardica granted to Intuitive an exclusive license in the Field of Use to intellectual property rights of Cardica; 

 

Whereas, the License Agreement contemplates, inter alia, that the Parties will enter into a development agreement, pursuant to which Cardica and Intuitive will co-develop cutting and stapling devices and clip applier devices;

 

Whereas, the Parties now wish to enter into this Development Agreement to set forth the terms and conditions to evaluate the feasibility of such development work, to potentially engage in such development work, to amend certain terms and conditions of the License Agreement, and to provide a mutual release of past obligations under the License Agreement. 

 

Now therefore, in consideration of the mutual promises and agreement set forth herein, and for other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

	
1.
	
Definitions. Capitalized terms used but not defined herein shall have the meanings set forth in the License Agreement.

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  

 

 

 

	
2.
	
Extension of Improvement Period under the License Agreement, Feasibility Evaluation and Mutual Release. 

 

2.1     Extension of Improvement Period. The Parties agree to extend the “Improvement Period” in the License Agreement through August 16, 2018 and hereby amend the License Agreement accordingly as set forth in Section 8.1 below. As amended, the Improvement Period includes the entire time period between August 16, 2010 and August 16, 2018.

 

2.2     Feasibility Evaluation. Promptly after the Effective Date, the Parties shall initiate and collaborate on certain testing activities of Cardica’s MicroCutter XCHANGE®, in order for Intuitive to evaluate the feasibility of Cardica’s MicroCutter XCHANGE and decide whether to initiate a Joint Development Program (“Joint Development Program”) with Cardica to develop a new Reload and Stapler for use with Intuitive’s Surgical System, as further set forth in Section 3 (such testing and evaluation, the “Evaluation”). Such Evaluation shall be completed within the first six (6) months after the Effective Date unless the Parties otherwise agree in writing (the “Evaluation Period”). During the Evaluation Period, Cardica shall perform such testing as Intuitive shall reasonably request that is within the scope of the Evaluation and designed to evaluate whether Cardica’s MicroCutter XCHANGE will meet Intuitive’s specifications as specifically set forth in Exhibit A (the “Continuation Criteria”) and Cardica shall provide Intuitive with all data Intuitive shall reasonably request. Based on the result of such Evaluation, Intuitive shall decide whether it wishes to initiate the Joint Development Program by written notice to Cardica within sixty (60) days after the expiration of the Evaluation Period. If Intuitive notifies Cardica of its desire to initiate such Joint Development Program within sixty (60) days after the expiration of the Evaluation Period, then the Joint Development Program as set forth in Section 3 shall continue. If Intuitive notifies Cardica of its desire not to continue with such Joint Development Program, or if Intuitive does not provide Cardica with any notification of its intent within sixty (60) days after the expiration of the Evaluation Period, then the Joint Development Program as set forth in Section 3 herein shall not proceed. In the event that the Joint Development Program does not proceed because the Continuation Criteria have not been met by the end of the sixty (60) day period after the Evaluation Period, then the License Agreement shall continue as modified herein (e.g., Extension of the Improvement Period, the Mutual Release, etc.), but Section 7.3 shall not apply. In the event that testing during the Evaluation Period satisfies Intuitive that the MicroCutter XCHANGE is feasible, but Intuitive nevertheless elects not to proceed with the Joint Development Program, then the License Agreement shall continue as modified herein (e.g., Extension of the Improvement Period, the Mutual Release, etc.), and Section 7.3 shall apply. 

 

2.3     Payment. In consideration of the extension of the Improvement Period and the feasibility Evaluation, Intuitive shall pay to Cardica a one-time, non-refundable and non-creditable payment in the amount of two million dollars (US$2,000,000) within ten (10) business days after the Effective Date. 

 

2.4     Mutual Release In full consideration of and in exchange for the promises and consideration provided under this Article 2, each of Cardica and Intuitive hereby fully and unconditionally releases and forever discharges each other from any and all claims, causes of action, charges, complaints, demands, actions, and liabilities of any nature whatsoever, known or unknown, suspected or unsuspected, legal or equitable, that such Party may have against the other Party prior to and as of the Effective Date. It is further understood and agreed by the Parties that as a condition of this Development Agreement, Cardica and Intuitive hereby expressly waive and relinquish any and all claims, rights or benefits that they may have under California Civil Code Section 1542, which provides as follows:

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

In connection with such waiver and relinquishment, the Parties hereby acknowledge that they or their attorneys may hereafter discover claims or facts in addition to, or different from, those which they now know or believe to exist, but that they expressly agree to fully, finally and forever settle and release any and all claims, known or unknown, suspected or unsuspected, which exist or may exist on their behalf against Releasees at the time of execution of this Development Agreement. The Parties further acknowledge, understand and agree that this representation and commitment is essential to each Party and that this Development Agreement would not have been entered into were it not for this representation and commitment. For clarity, the License Agreement (as amended by this Development Agreement) remains in full force and effect, and nothing contained herein shall be construed to release, waive or discharge any Party from any of its future obligations under the License Agreement. 

 

	
3.
	
Potential Joint Development Program.

 

3.1     Overview. Subject to the terms and conditions of this Development Agreement, and only upon election by Intuitive as described in Section 2.2, above, the Parties will conduct a Joint Development Program with the goal of developing and obtaining regulatory approval for an 8mm Reload using Cardica’s proprietary technology and the corresponding Stapler (such Reload, the “8mm Reload”, such Stapler, the “8mm Stapler” and collectively, the “8mm Products”) for use in the Field of Use with Intuitive’s da Vinci Xi robotic surgical system or any other of Intuitive’s robotic surgical systems (the “Intuitive Surgical System”). As between the Parties, Cardica shall be responsible for the design and development of the 8mm Reload according to the specifications provided by Intuitive (the “Specifications”), and Intuitive shall be responsible for: (a) developing the 8mm Stapler that deploys the 8mm Reload in the Intuitive Surgical System; and (b) obtaining regulatory approval of the 8mm Products for use with the Intuitive Surgical System, all as set forth in the Development Plan. Each Party shall conduct the activities assigned to it under the Development Plan in a professional manner and in compliance with all applicable laws and regulations.

 

3.2     Development Plan. Within ninety (90) days after Intuitive notifies Cardica of its desire to initiate the Joint Development Program under Article 2, the Parties will agree on a development plan (the “Development Plan”) that sets forth the timeline and details of all development work to be conducted by the Parties in order to obtain regulatory approval for the 8mm Products for use with the Intuitive Surgical System. Intuitive shall be responsible for development work on the 8mm Stapler, and Cardica shall be primarily responsible for development work on the staple cartridges. The Development Plan shall also include a budget for the development work on the staple cartridges to be conducted (the “Development Budget”). From time to time, the Parties may amend or update the Development Plan by mutual agreement. 

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

3.3     Joint Development Team. In the event Intuitive elects to move forward under a Development Plan, the Parties shall establish a joint development team (the “Joint Development Team” or “JDT”) to oversee the Parties’ development work under this Development Agreement. The JDT shall consist of two (2) representatives from each Party, and each representative shall have knowledge and expertise in the development of similar products. The JDT shall coordinate the Parties’ development activities under the Development Plan, oversee the implementation of the Development Plan, and provide a forum for and facilitate communications between the Parties with respect to the development of the 8mm Products. The JDT shall not have any decision making authority and all decisions regarding the development of the 8mm Products shall be made by mutual agreement of the Parties. The JDT shall hold meetings at such times as it elects to do so, but in no event shall such meetings be held less frequently than once every quarter. The JDT meetings may be held in person or by audio or video teleconference. Each Party shall be responsible for all of its own expenses of participating in the JDT meetings. 

 

3.4     Development Costs

 

a)     Intuitive shall be solely responsible for all costs and expenses incurred in conducting the development work related to the 8mm Stapler (including for any such work performed by Cardica, at Intuitive’s request). 

 

b)     With regard to costs and expenses incurred in conducting the development work related to the 8mm Reload (“Reload Development Costs”), Intuitive shall contribute [*] of the Reload Development Costs during the first two and one half years after the Effective Date (the “Joint Development Period”), up to a maximum amount not to exceed [*] per year and [*] in total (collectively, the “Cap”). Within thirty (30) days after the end of each quarter in the Joint Development Period, each party shall provide the other with documentation setting forth Reload Development Costs incurred by them during the preceding quarter. Intuitive will then calculate each Party’s respective share of the Reload Development Costs and, in the event Cardica incurred more costs than its [*] share, Intuitive shall pay to Cardica the balance due, subject to the Cap, for that quarter within thirty (30) days after the receipt of documentation from Cardica setting forth its Reload Development Costs. In the event that Intuitive incurred more Reload Development Costs than its [*] share in a given quarter, then any amount incurred by Intuitive over and above its share shall be applied as credit to subsequent quarters. For avoidance of doubt, Intuitive shall not be credited for any Reload Development Costs for Reload Development Work that Cardica has not authorized. In the event of a dispute between the parties with regard to Development Costs incurred by either party, the parties shall proceed as set forth above with respect to the undisputed amount, and any disputed amounts shall be resolved pursuant to the Article 10 of the License Agreement (Dispute Resolution).

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

c)     Development Costs shall include parties’ internal (calculated at the FTE rate set forth below) and out of pocket costs and expenses incurred to conduct the development work under the Development Plan. For the purpose of this Development Agreement, (i) “FTE Rate” means the cost of an FTE performing development work under the Development Plan, which rate shall be calculated as (a) for an employee, [*] of that employee’s annual salary, up to a maximum of [*] per FTE per year, or (b) for a contractor, that contractor’s hourly rate of pay, up to a maximum of [*] per hour; and (ii) “FTE” means the equivalent of a full-time individual’s work, at [*] hours per year, for a twelve (12)-month period, performing development work under the Development Plan. For clarity, the Parties intend the FTE to be a unit of measurement used to calculate the amount of time dedicated to the performance of this Development Agreement. One FTE may constitute work performed by an individual whose time is dedicated solely to this Development Agreement or may be comprised of the efforts of several individuals, each of whom dedicates only part of his or her time to work under this Development Agreement.

 

3.5     Diligence. Each Party shall use Commercially Reasonable Efforts to conduct the development work assigned to such Party under the Development Plan. In particular, Intuitive shall use Commercially Reasonable Efforts to incorporate the 8mm Products into the Intuitive Surgical System and to obtain regulatory approval of the 8mm Products for use with the Intuitive Surgical System. Without limiting the foregoing, Intuitive shall maintain an active and ongoing development program for the 8mm Products, and for clarity, Intuitive shall not be deemed to be maintaining an active and ongoing development program for the 8 mm Product if Intuitive discontinues the development and/or commercialization activities with respect to the 8mm Product for an aggregate six (6) month period within any consecutive twelve (12) month period. 

 

3.6     Records. Each Party shall keep complete and accurate records of the activities conducted by it under the Development Plan. The Parties shall share the progress of the development program regularly through the JPT meetings, and each Party shall, at the other Party’s reasonable request, provide the other Party access to such records in furtherance of the development program and/or to verify such Party’s compliance with this Agreement.

 

	
4.
	
Commercialization; Royalty.

 

4.1     Diligence. Intuitive shall use Commercially Reasonable Efforts to launch and commercialize the 8mm Products after regulatory approval has been obtained.

 

4.2     Royalty. Intuitive shall pay royalties to Cardica on the sale of the 8mm Products under the License Agreement, provided however that Section 4.2 of the License Agreement shall be amended as provided in Section 8.3 below. 

 

	
5.
	
Special Tooling. 

 

5.1     Tooling Costs. The Parties acknowledge that the development and manufacture of the 8mm Reloads require certain special tooling (“Tooling”) and Intuitive shall pay for the cost of such Tooling for three (3) sizes of 8mm Reload (white, blue and green) up to a total of [*]. Cardica shall provide a request for the planned purchase of such Tooling to Intuitive and Intuitive shall purchase such Tooling as soon as practicable but in no event later than thirty (30) days after receiving such request from Cardica. Intuitive shall retain title to the Tooling, which will be located in Cardica’s third party vendor, as agreed by Intuitive, until such time as [*], or as otherwise agreed to by the Parties, at which time Intuitive shall take possession of the Tooling. 

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

5.2     Use; Maintenance. Cardica shall use the Tooling for the development and manufacture of the 8mm Reloads under this Development Agreement and for no other purpose absent the prior written consent of Intuitive. Intuitive shall be responsible for the maintenance and repair cost for the Tooling. 

 

	
6.
	
Manufacture and Supply. 

 

6.1     Initial Supply; Purchase Order. Cardica will manufacture and supply up to [*] 8mm Reloads to Intuitive for commercial use. Intuitive shall submit purchase order(s) for the 8mm Reloads to Cardica, specifying the quantity ordered and requested delivery date (no earlier than thirty (30) days after the date of the purchase order). All purchase orders are subject to reasonable acceptance by Cardica. The term and conditions of this Development Agreement shall be controlling over any conflicting terms and conditions stated in any purchase order or any other document submitted by a Party to the other Party with respect thereto (unless the Parties shall have mutually agreed to the contrary in writing with respect to a particular instance). 

 

6.2     Delivery; Inspection. If Cardica accepts a purchase order, then Cardica shall manufacture and supply the 8mm Reloads in accordance with the purchase order. The delivery of the 8mm Reloads shall take place EXW at Cardica’s (or its third party manufacturer’s) facility (Incoterm 2010) and Intuitive shall contract and arrange for shipping and insurance from such facility. Intuitive shall promptly inspect the 8mm Reloads upon receipt and shall notify Cardica if any 8mm Reload does not conform to the applicable 8mm Reload specifications within thirty (30) days after receipt. If Cardica agrees that the 8mm Reload supplied is non-conforming product, then Cardica shall promptly replace such non-conforming product with conforming product at no additional cost to Intuitive. 

 

6.3     Transfer Price; Payment. Intuitive shall pay for the 8mm Reloads supplied by Cardica at a transfer price of [*] per Reload. Cardica shall invoice Intuitive for the transfer price upon delivery and Intuitive shall pay the invoiced transfer price within thirty (30) days after the receipt of the invoice. 

 

6.4     Manufacture by Intuitive; Technology Transfer. After Intuitive has purchased up to [*] 8mm Reloads from Cardica, Intuitive will manufacture and supply the 8mm Reloads itself (or through its own contract manufacturer). Upon Intuitive’s reasonable request, Cardica shall provide Intuitive (or its third party contract manufacturer) reasonable technical assistance to transfer the manufacturing process for the 8mm Reloads. Such technology transfer shall include reasonable access to Cardica’s technical personnel familiar with the manufacturing process. Intuitive shall be responsible for and shall reimburse Cardica for the cost and expenses incurred by Cardica for providing such technical assistance, including both internal personal cost (at the FTE Rate) and out-of-pocket costs, except that the first [*] hours of FTE time shall be provided at no cost to Intuitive. 

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

	
7.
	
Term Termination.

 

7.1     Term. This Development Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to Section 7.2, shall remain in effect until the expiration of Intuitive’s royalty payment obligations under Section 4.2. 

 

7.2     Termination. The Agreement may be terminated: (a) in the event testing during the Evaluation Period does not establish that Cardica’s MicroCutter XCHANGE will meet Intuitive’s specifications, (b) in the event testing during the Evaluation Period establishes that Cardica’s MicroCutter XCHANGE meets the Continuation Criteria, but Intuitive decides not to initiate the Joint Development Program or does not provide notification thereof to Cardica within sixty (60) days after the Evaluation Period; (c) upon written notification by either Party to the other Party for such other Party’s material breach of its obligations, representations and/or warranties in this Agreement, unless such other Party cures such breach within such thirty (30) day period; and/or (d) upon the termination of the License Agreement. 

 

7.3     Effect of Early Termination. Upon any earlier termination (but not expiration) of this Development Agreement under Section 7.2(b) or a material breach by Intuitive under Section 7.2(c) (but not upon termination for a material breach by Cardica under Section 7.2(c), upon termination under Section 7.2(a) or upon termination under Section 7.2(d)):

 

a)     The licenses granted by Cardica to Intuitive under the License Agreement shall become non-exclusive, and the License Agreement shall be amended as set forth in Section 8.4. 

 

b)     Cardica shall have the right to grant additional licenses under the Licensed IP. If Cardica grants any additional license to a third party for such third party to develop and commercialize any staple product covered by Licensed IP in the Field of Use and receives any Licensing Revenue, then [*] to the extent [*]. As used herein, “[*]” means [*]. 

 

7.4     Survival. Expiration or termination of this Development Agreement shall not affect any rights or obligations of either Party under this Development Agreement that have accrued before the date of expiration or termination. Except as expressly set forth herein, expiration or termination of this Development Agreement shall not affect the License Agreement, which shall continue in full force and effect (as amended by this Development Agreement). Without limiting the foregoing, the following provisions shall survive any expiration or termination of this Development Agreement: Sections 2.1, 2.4, 5, 7.4, 8.1, 8.2, 8.3, 8.4, and 9. In addition, the following provisions shall survive the earlier termination (but not the expiration) of this Development Agreement: Sections, 7.3 and 8.4. 

 

	
8.
	
Amendment to Licensed Agreement. 

 

8.1     Improvement Period. Section 1(j) of the License Agreement is hereby deleted and replaced in its entirety with the following:

 

“(j)     “Improvement Period” shall mean the period of time beginning on the Agreement Date and expiring on August 16, 2018.”

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

8.2     Improvement Period Patent Rights. Section 1(k) of the License Agreement is hereby deleted and replaced in its entirety with the following:

 

“(k)     “Improvement Period Patent Rights” shall mean: (a) any Patent Rights conceived or applied for by Cardica between August 16, 2010 and August 16, 2013; and (b) any Patent Rights conceived or applied for by Cardica in the Licensed Field between August 17, 2013 and August 16, 2018.”

 

8.3     Royalty. Section 4.2 of the License Agreement is hereby deleted and replaced in its entirety with the following: 

 

“4.2.     8mm Products. Upon first commercial sale by Intuitive or an Affiliate or Sublicensee of an 8mm Reload, and for a period not to exceed [*] years from such first commercial sale, Intuitive or an Affiliate shall pay Cardica a royalty of [*] per 8mm Reload; provided however that, Intuitive shall have the right to deduct [*] of such royalty (i.e., [*] per 8mm Reload) until: the total development cost reimbursement paid by Intuitive to Cardica under Section 3.4 of that certain Development Agreement between the Parties dated December [__], 2015, minus the total deductions made by Intuitive under this Section 4.2 equals [*] of the total Cardica Development Costs incurred throughout the term of such Development Agreement. However, Intuitive is only obligated to pay Cardica any such royalty in a jurisdiction in which at least one valid granted patent owned or Controlled by Cardica has one or more claims that (i) include one or more novel features associated with such 8mm Reload and/or corresponding anvil, and (ii) would be infringed absent a license from Cardica by the use, sale, importation, or manufacture of any such 8mm Reload.” 

 

8.4     Amendment upon Termination. In addition, upon earlier termination (but not expiration) of this Development Agreement under Section 7.2(b) or a material breach by Intuitive under Section 7.2(c) (but not upon termination for a material breach by Cardica under Section 7.2(c), upon termination under Section 7.2(a) or upon termination under Section 7.2(d)): 

 

a)     The first sentence in Section 2.1(a) of the License Agreement shall be deleted and replaced with the following: 

 

“Cardica hereby grants to Intuitive a worldwide, perpetual, irrevocable, non-exclusive, non-sublicenseable (except for any sublicense(s) granted by Intuitive prior to the effective date of such termination and to Intuitive Affiliates) license under the Licensed IP to practice such Licensed IP in the Field of Use, such non-exclusive license including but not limited to the right to make, have made, use, offer for sale, sell, market, import, export, distribute, and Commercialize, in any manner whatsoever, the Licensed IP in the Field of Use.”

 

b)     Sections 2.1(c), 2.1(d), 2.1(g), 2.2(b) and Section 2.3 are hereby deleted in their entirety. 

 

c)     Section 5 of the License Agreement shall be deleted and replaced in its entirety with the following:

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

“5.     Enforcement and Defense of Licensed IP. 

 

5.1.     Rights to Enforce. Cardica shall have the sole right but not the obligation to prosecute or seek to end at its own expense any Infringement of the Licensed IP.

 

5.2.     Defense of Licensed IP. If Intuitive receives notice by counterclaim, declaratory judgment action or otherwise, alleging the invalidity, unenforceability, non-infringement, misuse, or misappropriation with respect to any Licensed IP, it shall bring such fact to the attention of Cardica. Cardica shall have the sole right but not the obligation to defend such action at its own cost and expense, and Intuitive agrees to cooperate with Cardica in such defense.” 

 

5.3.     Amount Recovered. Cardica shall retain any and all amounts recovered for the enforcement or defense of the Licensed IP. 

 

d)     Section 6 of the License Agreement shall be deleted and replaced in its entirety with the following:

 

“6.     Prosecution of Patent Rights. 

 

6.1     Prosecution and Maintenance of Patent Rights. As between the Parties, Cardica shall have the sole right, but not the obligation to prepare, file, prosecute and maintain any Licensed Patent Rights, at its own cost and expense.” 

 

e)     Sections 9.1, 9.2 and 9.3 are hereby deleted in their entirety. 

 

f)     The last sentence in Section 9.4 shall be deleted and replaced with the following: 

 

“This paragraph shall not apply to any violation or infringement by a Party or its Affiliates of the Intellectual Property of the other Party or its Affiliates, or to any breach of Section 7.” 

 

	
9.
	
Miscellaneous. 

 

9.1     Confidentiality. All information disclosed by a Party to the other Party under this Development Agreement shall be deemed disclosed under the License Agreement and subject to the confidentiality obligations set forth therein. 

 

9.2     Dispute Resolution. Any dispute or disagreement between the Parties under this Development Agreement shall be resolved in accordance with the dispute resolution mechanism set forth in the License Agreement. 

 

9.3     Entire Agreement; Amendment. This Development Agreement, together with the License Agreement (as amended), constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof, and supersede all prior agreements and understandings, whether written or oral, between the Parties, or any of the Parties, in connection with such subject matter. This Development Agreement may be amended, modified, or supplemented only by a written instrument executed by both Parties. 

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

9.4     No Waiver. No waiver of any provision of this Development Agreement, or consent to any departure from the terms of this Development Agreement, shall be effective unless the same shall be in writing and signed by the Party waiving or consenting thereto. No failure on the part of any Party to exercise, and no delay in exercising, any right or remedy under this Development Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right or remedy. The waiver by any Party to this Development Agreement of a breach of any provision of this Development Agreement shall not operate as a waiver of any subsequent breach. All rights and remedies under this Development Agreement are cumulative and are in addition to, and not exclusive of, any other rights and remedies provided by law. 

 

9.5     Severability. If any provision of this Development Agreement is found invalid or unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be enforced to the maximum extent permissible by law and the other provisions of this Development Agreement shall remain in full force and effect. 

 

9.6     Relationship of the Parties. This Development Agreement shall not constitute either Party the agent or legal representative of the other Party for any purpose whatsoever, and neither Party shall hold itself out as an agent of the other Party. This Development Agreement creates no relationship of joint venturers, partners, associates, employment, or principal and agent between the Parties, and both Parties are acting as independent contractors. Neither Cardica nor Intuitive is granted in this Development Agreement any right or authority to, and shall not attempt to, assume or create any obligation or responsibility for or on behalf of the other. Neither Cardica nor Intuitive shall have any authority to bind the other to any contract, whether of employment or otherwise, and Cardica and Intuitive shall bear all of their respective expenses for their operations, including the compensation of their employees and the maintenance of their offices and service facilities. Cardica and Intuitive shall each be solely responsible for their own employees and salespeople and for their acts and the things done by them.

 

9.7     No Election of Remedies. Except as otherwise specifically provided in this Development Agreement, the rights and remedies accorded in this Development Agreement to Cardica and Intuitive are cumulative and in addition to those provided by law, and may be exercised separately, concurrently, or successively.

 

9.8     Costs and Expenses. Except as expressly stated otherwise in this Development Agreement, each Party shall bear its own costs and expenses of performance of this Development Agreement.

 

9.9     Force Majeure. No Party shall be liable for failure to perform any of its obligations under this Development Agreement when such failure is due to fire, flood, strikes, labor troubles or other industrial disturbances, legal restriction, riot, insurrection, or any other cause beyond the reasonable ability of the Party affected thereby to control, and without such Party’s fault or negligence (“Force Majeure”), provided that any Party claiming the existence of Force Majeure shall give notice to the other Party not more than seven (7) days after the commencement of the event of Force Majeure, and shall use prompt and diligent efforts to mitigate the effects of Force Majeure. 

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

9.10     Notice. All notices, requests, demands, claims, and other communications under this Development Agreement shall be delivered in accordance with the requirements set forth in the License Agreement. 

 

9.11     Benefits and Burdens; Assignments. This Development Agreement shall be binding upon and shall inure to the benefit of each of the Parties as well as their respective legal representatives, successors, and permitted assigns. This Development Agreement shall not be assignable or transferable, by operation of law or otherwise, by either Party without the other Party’s written consent, which consent shall not be unreasonably withheld, conditioned, or delayed, and with the exceptions that either Party or its permitted assignee(s) may assign this Development Agreement together with any permitted assignment of the License Agreement (i) in whole or in part to an Affiliate of the assigning Party so long as the assigning Party agrees in writing to remain liable for the Affiliate’s performance of its obligations under this Agreement; or (ii) in whole to a party who acquires all or substantially all of the assets of the assigning Party or of the assets of the business of the assigning Party to which this Agreement relates; or (iii) in whole to any successor to the assigning Party by merger or consolidations; provided in each case the assignee agrees in writing to assume the assigning Party’s obligations under this Agreement. Any attempt to assign or transfer this Development Agreement or any portion thereof in violation of this Section shall be void.

 

9.12     Interpretation. When a reference is made in this Development Agreement to Sections or Exhibits, such reference shall be to a Section of or Exhibit to this Development Agreement unless otherwise indicated. References to Sections include subsections, which are part of the related Section (e.g., a section numbered “Section 5.1(a)” would be part of “Section 5.1”, and references to “Section 5.1” would also refer to material contained in the subsection described as “Section 5.1(a)”). The recitals to this Development Agreement constitute an integral part of this Development Agreement. Headings contained in this Development Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Development Agreement. The language used in this Development Agreement shall be deemed to be the language chosen by the Parties to this Development Agreement to express their mutual intent, and no rule of strict construction shall be applied against any Party (e.g., ambiguities, if any, in this Development Agreement shall not be construed by default against either Party simply because one or the other Party is deemed to have drafted the provision at issue). Whenever the context may require, any pronouns used in this Development Agreement shall include the corresponding masculine, feminine, or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Whenever the words “include,” “includes” or “including” are used in this Development Agreement, they shall be deemed to be followed by the words “but not limited to”. No summary of this Development Agreement prepared by any Party shall affect the meaning or interpretation of this Development Agreement. All references to dollars in this Development Agreement shall be to United States Dollars.

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

9.13     Public Announcement. Neither Party or any of its Affiliates or Representatives shall issue any press release or make any public announcement or disclosure with respect to this Development Agreement or the transactions contemplated hereby, including the mutual release under the License Agreement, without the prior written consent of the other Party, which will not be unreasonably withheld or delayed, provided that in the event that a Party shall have previously approved the form of a press release or other public disclosure, the other Party shall be free to continue to disclose substantially the same information in additional public disclosures without having to obtain such Party’s consent thereto. Additionally, Intuitive acknowledges that as a public company, Cardica is required by law to file or disclose certain information with certain agencies or authorities. In connection herewith, Intuitive acknowledges that Cardica will be required to file this Development Agreement with the U.S. Securities and Exchange Commission (“SEC”) as a “material agreement” of Cardica, but Cardica shall do so with respect to this Development Agreement under a request for confidential treatment which shall be submitted to Intuitive for its approval (not to be unreasonably withheld or delayed) prior to submission. Once information is so disclosed or filed and is thereby made publicly available, Cardica shall be free to disclose substantially the same information in subsequent public filings or in public disclosures without having to first obtain Intuitive’s prior written approval. 

 

9.14     Governing Law and Jurisdiction. This Development Agreement and any dispute arising from the performance or breach hereof shall be governed by, construed, and enforced in accordance with the laws of the State of California without regard to conflict of laws provisions. 

 

9.15     Counterparts and Facsimile Signatures. This Development Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each Party and delivered to the other Party, it being understood that all Parties need not sign the same counterpart. Facsimile execution and delivery of this Development Agreement by any of the Parties shall be legal, valid, and binding execution and delivery of such document for all purposes.

 

[signature page follows]

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

 

In Witness Whereof, the Parties have executed this Development Agreement in duplicate originals by their proper officers as of the Effective Date.

 

 

	CARDICA, INC.	 	 	INTUITIVE SURGICAL OPERATIONS, INC.	 
	
 
	
 
	
 
	
 
	
 

	By: /s/ Julian Nikolchev	
 
	
  
	
By: /s/ Bob DeSantis
	
 

	 	 	 	 	 
	
Name: Julian Nikolchev 
	
 
	
  
	
Name: Bob DeSantis
	
 

	 	 	 	 	 
	
Title: President and CEO
	
 
	
  
	
Title: Sr. VP Instrument Engineering 
	
 

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.   

 

 

    

EXHIBIT A

CONTINUATION CRITERIA

  

[*]

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Exhibit

EXHIBIT 10.8

 FORM OF OPTION AGREEMENT (2016) 
STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT 
TransDigm Group Incorporated, a Delaware corporation (the “Company”), pursuant to its [2006 Stock Incentive Plan OR 2014 Stock Option Plan] (the “Plan”), hereby grants to the holder listed below (“Participant”), an option to purchase the number of shares of the Company’s common stock, par value $0.01 (“Stock”), set forth below (the “Option”). This Option is subject to all of the terms and conditions set forth herein and in the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”) and the Plan, which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option Agreement. 
	
			
	Participant:
	 
	___________________________________________________________________________

	 
	 

	Grant Date:
	 
	___________________________________________________________________________

	 
	 

	Exercise Price per Share:
	 
	$__________________________________________________________________________

	 
	 

	Total Number of Shares Subject to the Option:
	 
	______________________________________________________________________Shares

	 
	 

	Expiration Date:
	 
	___________________________________________________________________________

	
			
	Type of Option:
	 
	 ̈ Incentive Stock Option x Non-Qualified Stock Option

	 
	 

	Vesting Schedule:
	 
	Subject to the terms of the Stock Option Agreement (including without limitation all exhibits thereto), the Option shall be eligible to become exercisable upon the achievement of performance objectives over the period set forth in Exhibit B hereto (provided that the Participant is an Eligible Person (as defined in the Plan) at all times during the period beginning on the Grant Date and ending on the applicable vesting date):

By his or her signature, the Participant agrees to be bound by the terms and conditions of the Plan, the Stock Option Agreement and this Grant Notice. The Participant has reviewed the Stock Option Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Stock Option Agreement and the Plan. The Participant agrees that as a condition to receiving the Option, the Participant shall comply with the Stock Retention Guidelines set forth on Exhibit C. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or relating to the Option.
	
									
	

	 
	 
	 
	 
	 
	 
	 
	 

	TRANSDIGM GROUP INCORPORATED
	 
	 
	 
	PARTICIPANT

	 
	 
	 
	 
	 

	By:
	 
	 
	 
	 
	 
	By:
	 
	 

	Print Name:
	 
	 
	 
	 
	 
	Print Name:
	 
	 

	Title:
	 
	 
	 
	 
	 
	 
	 
	 

	Address:
	 
	 
	 
	 
	 
	Address:
	 
	 

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EXHIBIT A 
TO STOCK OPTION GRANT NOTICE 
STOCK OPTION AGREEMENT 
Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, TransDigm Group Incorporated, a Delaware corporation (the “Company”), has granted to the Participant an option (the “Option”)1 under the Company’s [2006 Stock Incentive Plan OR 2014 Stock Option Plan] (the “Plan”) to purchase the number of shares of Stock indicated in the Grant Notice. 
ARTICLE I. 
GENERAL 
1.1 Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice. 
(a) “Administrator” shall mean the Board or the Compensation Committee or other committee of the Board responsible for conducting the general administration of the Plan in accordance with Section 3 of the Plan; provided that if the Participant is an Independent Director, “Administrator” shall mean the Board. 
(b) “Consultant” shall mean an individual who renders services to the Company as a consultant and has been so designated by the Committee. 
(c) “Credit Agreement” shall mean that certain credit agreement dated as of June 23, 2006 among TransDigm, Inc., TransDigm Group Incorporated and the lenders party thereto, as in effect as of the Grant Date and without reference to any amendment to the Credit Agreement made following the Grant Date. 
(d) “Diluted Shares” as of a given date shall mean the total diluted weighted-average of common shares of the Company outstanding as of such date. 
(e) “EBITDA” for a given fiscal year of the Company shall mean Consolidated EBITDA (as defined in the Credit Agreement) of the Company for such fiscal year on a pro forma basis adjusted for acquisitions or divestitures. 
(f) “Independent Director” shall mean a non-employee director of the Company. 
(g) “Net Debt” shall mean, as of the last day of a given fiscal year of the Company, the excess of (a) Consolidated Total Indebtedness (as defined in the Credit Agreement) of the Company over (b) the amount of cash and cash equivalents set forth on the Company’s balance sheet. 
(h) “Termination of Consultancy” shall mean the time when the engagement of the Participant as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding: (i) terminations where there is a simultaneous employment or continuing employment of the Participant by the Company or any Subsidiary, and (ii) terminations where there is a simultaneous re-establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant’s service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.
	
			
	1
	

	For the avoidance of doubt, the term “Option” as used herein only describes options granted pursuant to the Stock Option Grant Notice to which this Agreement is an Exhibit.

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(i) “Termination of Directorship” shall mean the time when the Participant, if he or she is or becomes an Independent Director, ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors. 
(j) “Termination of Employment” shall mean the time when the employee-employer relationship between the Participant and the Company or any Subsidiary is terminated for any reason, with or without Cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding: (i) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any Subsidiary, and (ii) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, if this Option is an Incentive Stock Option, unless otherwise determined by the Administrator in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. 
(k) “Termination of Services” shall mean the time when (i) every relationship between the Participant and the Company has been terminated by a Termination of Consultancy, Termination of Directorship and/or Termination of Employment, as applicable, and (ii) the Participant is no longer an Eligible Person under the Plan. 
1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. 
ARTICLE II. 
GRANT OF OPTION 
2.1 Grant of Option. In consideration of the Participant’s past and/or continued employment with or service to the Company or a Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to the Participant the Option to purchase any part or all of an aggregate of the number of shares of Stock set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement. Unless designated as a Non-Qualified Stock Option in the Grant Notice, the Option shall be an Incentive Stock Option to the maximum extent permitted by law. 
2.2 Exercise Price. The exercise price of the shares of Stock subject to the Option shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that the price per share of the shares of Stock subject to the Option shall not be less than 100% of the Fair Market Value of a share of Stock on the Grant Date. Notwithstanding the foregoing, if this Option is designated as an Incentive Stock Option and the Participant owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the price per share of the shares of Stock subject to the Option shall not be less than 110% of the Fair Market Value of a share of Stock on the Grant Date. 
2.3 Consideration to the Company. In consideration of the grant of the Option by the Company, the Participant agrees to render faithful and efficient services to the Company or any Subsidiary. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and the Participant. 

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ARTICLE III. 
PERIOD OF EXERCISABILITY 
3.1 Commencement of Exercisability. 
(a) Subject to Sections 3.1(b), 3.1(c) and 3.3, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice. 
(b) No portion of the Option which has not become vested and exercisable at the date of the Participant’s Termination of Services shall thereafter become vested and exercisable, except as may be otherwise provided by the Administrator or as set forth in a written agreement between the Company and the Participant. [ALTERNATE PROVISION FOR EXECUTIVE OFFICERS: No portion of the Option which has not become vested and exercisable at the date of the Participant’s Termination of Services shall thereafter become vested and exercisable, except as follows or as may be otherwise provided by the Administrator or as set forth in a written agreement between the Company and the Participant:
If the Participant incurs a termination of employment under any of the circumstances described in Section 5(a)(i) (death) of that certain Employment Agreement between the Participant and the Company effective _______________ (the "Employment Agreement"), Section 5(a)(ii) (Disability) of the Employment Agreement, Section 5(a)(iv) (Resignation for Good Reason of the Employment Agreement or Section 5(a)(v) (Termination without Cause) of the Employment Agreement or if the Participant retires from employment after at least 15 years of service after age 60 or after at least ten years of service after age 65, in each such case vesting will continue after termination of employment as provided below:
	
		
	Termination Date
	Percent of Remaining Options That May Continue to Vest

	Prior to October 1, 2016
	0%

	On or after October 1, 2016 but prior to October 1, 2017
	20%

	On or after October 1, 2017 but prior to October 1, 2018
	40%

	On or after October 1, 2018 but prior to October 1, 2019
	60%

	On or after October 1, 2019 but prior to October 1, 2020
	80%

	On or after October 1, 2020
	100%

The percentage of remaining Options permitted to vest will be spread ratably over the vesting schedule.
(c) Notwithstanding Section 3.1(a) of this Agreement and Section 8 of the Plan (but subject to Section 3.1(b) of this Agreement), in the event of a Change in Control Options shall become fully vested and exercisable. Notwithstanding the foregoing, the Administrator may, in good faith and in such manner as it may deem equitable, in its sole discretion, adjust the foregoing Fair Market Value requirements in the event of a dividend or other distribution (whether in the form of cash, Stock, other securities or property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, or any unusual or nonrecurring transactions or events affecting the Company or the financial statements of the Company if the adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option. For purposes 

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of this Section 3.1, shall take into account the consideration received by the stockholders in connection with a Change in Control or in connection with any other sale of common stock or other equity interests in the Company or any Subsidiary, after taking into account all post-closing adjustments relating to a Change in Control, and assuming the exercise of all vested options and warrants outstanding as of the effective date of such Change in Control (after giving effect to any dilution of securities or instruments arising in connection with such Change in Control); provided however, that if the stockholders retain any portion of the common stock following such Change in Control or other sale, the Fair Market Value of such portion of the retained common stock immediately following such Change in Control or other sale shall be deemed “consideration received” for purposes of calculating the proceeds and provided further that the Fair Market Value of any non-cash consideration (including stock) received in connection with a Change in Control shall be determined as of the date of such Change in Control. 
Notwithstanding Section 3.1(a) of this Agreement and Section 8 of the Plan (but subject to Section 3.1(b) of this Agreement) and notwithstanding Exhibit B to this Agreement, with respect to any portion of the Options that have not otherwise vested prior to the applicable date set forth below: (a) in the event that prior to September 30, 2019, the closing price of the Company's common stock on the New York Stock Exchange exceeded two times the Exercise Price of the Options less the amount of any dividends per share paid after the date hereof on any 60 trading days during any consecutive 12-month period commencing October 1, 2017, then all of the unvested Options will vest 50% on September 30, 2019 and 50% on September 30, 2020, and (b) in the event that the condition in clause (a) is not met but, prior to September 30, 2020, the closing price of the Company's common stock on the New York Stock Exchange exceeds two times the Exercise Price of the Options less the amount of dividends per share paid after the date hereof on any 60 trading days during any consecutive 12-month period commencing October 1, 2018, the remaining portion of the unvested Options will vest on September 30, 2020. 
3.2 Duration of Exercisability. The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes unexercisable under Section 3.3. 
3.3 Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events: 
(a) The expiration of ten years from the Grant Date; or
(b) If this Option is designated as an Incentive Stock Option and the Participant owned (within the meaning of Section 424(d) of the Code), at the time the Option was granted, more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the expiration of five years from the Grant Date; or
(c) The opening of business on the day of the Participant’s Termination of Employment by reason of a termination by the Company for Cause; [ALTERNATIVE PROVISION FOR EXECUTIVE OFFICERS: The opening of business on the day of the Participant's Termination of Services by reason of the Participant's Termination of Employment by reason of a termination by the Company for Cause (as defined in the Participant's employment agreement, if applicable), unless the Committee, in its discretion, determines that a longer period is appropriate;] or
(d) The expiration of six months from the date of the Participant’s Termination of Services, unless such termination occurs by reason of the Participant’s death, Disability or retirement (pursuant to Section 3.3(e)) or is a termination by the Company for Cause (as defined in Participant’s employment agreement), provided, however, that any portion of this Option that is an Incentive Stock Option shall cease to be an Incentive Stock Option on the expiration of three months from the Participant’s Termination of Services (and shall thereafter be a Non-Qualified Stock Option), provided, further, that to the extent that the Participant is prohibited from selling shares of Stock pursuant to the Company’s insider trading policy at all times during such six-month period, with the exception of an open trading window of less than seven days, the Option shall expire on the later of (i) the seventh day following the opening of the first open trading window thereafter or (ii) the first anniversary of the Participant’s Termination of Services; [ALTERNATIVE PROVISION FOR 

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EXECUTIVE OFFICERS:  The expiration of six months from the date of the Participant's Termination of Services, unless such termination occurs by reason of (i) the Participant's death, (ii) the Participant's Disability, (iii) the Participant's retirement (pursuant to Section 3.3(e)), (iv) the Participant's termination for Cause (as defined in the Participant's employment, agreement, if applicable) or(v) if the Participant has an employment agreement that defines a termination for "cause" and/or "good Reason," a termination by the Company without Cause (as defined in the Participant's employment agreement) or a termination by the Participant for Good Reason (as defined in the  Participant's employment agreement), provided, however, that any portion of this Option that is an Incentive Stock Option shall cease to be an Incentive Stock Option on the expiration of three months from the Participant's Termination of Services (and shall thereafter be a Non-Qualified Stock Option), provided, further, that to the extent that the Participant is prohibited from selling shares of Stock pursuant to the Company's insider trading policy at all times during such six-month period, with the exception of an open trading window of less than seven days, the Option shall expire on the seventh day following the opening of the first open trading window thereafter;] or 
(e) The expiration of one year from the date of the Participant’s Termination of Services by reason of (i) the Participant’s death or Disability; or (ii) the retirement, after a minimum of ten years of service, of a Participant who is at least 55 years old, provided, however, that to the extent that the Participant is prohibited from selling shares of Stock pursuant to the Company’s insider trading policy at all times during such one-year period, with the exception of an open trading window of less than seven days, the Option shall expire on the seventh day following the opening of the first open trading window thereafter. [ALTERNATIVE PROVISION FOR EXECUTIVE OFFICERS: The expiration of one year from the date of the Participant’s Termination of Services by reason of the retirement, after a minimum of ten years of service, of a Participant who is at least 55 years old, provided, however, that to the extent that the Participant is prohibited from selling shares of Stock pursuant to the Company’s insider trading policy at all times during such one-year period, with the exception of an open trading window of less than seven days, the Option shall expire on the seventh day following the opening of the first open trading window thereafter; or]
[ADDITIONAL PROVISION FOR EXECUTIVE OFFICERS: (f) The expiration date set forth in clause (a), (i) if the Participant has an employment agreement that defines a termination for "Cause" and/or "Good Reason," and upon a Participant's Termination of Services by the Company without Cause (as defined in Participant's employment agreement or a Termination of Services by the Participant for Good Reason (as defined in Participant's employment agreement) or (ii) upon the Participant's death or Disability or (iii) upon the Participant's retirement from employment after at least 15 years of service after age 60 or after at least ten years of service after age 65.
Notwithstanding the foregoing, if any Option vests after the Participant's Termination of Services for reasons set forth herein pursuant to Section 3.1 and the Participant has a limit of six months or one year following such Termination of Services to exercise the Option pursuant to paragraph (d) or (3), the Participant shall have six months after the Option vests to exercise such Option.]
3.4 Special Tax Consequences. The Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options, including the Option, are exercisable for the first time by the Participant in any calendar year exceeds $100,000, the Option and such other options shall be Non-Qualified Stock Options to the extent necessary to comply with the limitations imposed by Section 422(d) of the Code. The Participant further acknowledges that the rule set forth in the preceding sentence shall be applied by taking the Option and other “incentive stock options” into account in the order in which they were granted, as determined under Section 422(d) of the Code and the Treasury Regulations thereunder. The Participant acknowledges that an Incentive Stock Option exercised more than three months after the Participant’s Termination of Employment, other than by reason of death or Disability, will be taxed as a Non-Qualified Stock Option. 
ARTICLE IV. 
EXERCISE OF OPTION 
4.1 Person Eligible to Exercise. Except as provided in Sections 5.2(b), during the lifetime of the Participant, only the Participant may exercise the Option or any portion thereof. After the death of the Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, 

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be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution. 
4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3. 
4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (or any third party administrator or other person or entity designated by the Company) of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3: 
(a) An Exercise Notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator; 
(b) The receipt by the Company of full payment for the shares of Stock with respect to which the Option or portion thereof is exercised, including payment of any applicable withholding tax, which may be in one or more of the forms of consideration permitted under Section 4.4; 
(c) Any other written representations as may be required in the Administrator’s reasonable discretion to evidence compliance with the Securities Act or any other applicable law, rule, or regulation; and 
(d) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option. 
Notwithstanding any of the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time. 
4.4 Method of Payment. Payment of the exercise price, and any applicable withholding tax, shall be by any of the following, or a combination thereof, at the election of the Participant: 
(a) Cash; 
(b) Check; 
(c) Broker-Assisted Cash-less Exercise. With the consent of the Administrator, delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate exercise price; provided, that payment of such proceeds is then made to the Company upon settlement of such sale; 
(d) Share Surrender. With the consent of the Administrator, surrender of other shares of Stock which (i) in the case of shares of Stock acquired from the Company, have been owned by the Participant for more than six (6) months on the date of surrender (or such other minimum length of time as the Administrator determines from time to time to be necessary to avoid adverse accounting consequences or violation of any applicable law, rule or regulation), and (ii) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the shares of Stock with respect to which the Option or portion thereof is being exercised; or 
(e) Net Exercise. With the consent of the Administrator, surrendered shares of Stock issuable upon the exercise of the Option having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the shares of Stock with respect to which the Option or portion thereof is being exercised. 
4.5 Conditions to Issuance of Stock Certificates. The shares of Stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares of Stock or issued shares of Stock which have then been reacquired by the Company. Such shares of Stock shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions: 
(a) The admission of such shares of Stock to listing on all stock exchanges on which such Stock is then listed; 

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(b) The completion of any registration or other qualification of such shares of Stock under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable; 
(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; 
(d) The receipt by the Company of full payment for such shares of Stock, including payment of any applicable withholding tax, which may be in one or more of the forms of consideration permitted under Section 4.4; and 
(e) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative convenience. 
4.6 Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares of Stock purchasable upon the exercise of any part of the Option unless and until such shares of Stock shall have been issued by the Company to such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the shares of Stock are issued, except as provided in Section 8 of the Plan. 
ARTICLE V. 
OTHER PROVISIONS 
5.1 Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option. 
5.2 Option Transferability. 
(a) Except as otherwise set forth in Section 5.2(b), (i) the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the shares of Stock underlying the Option have been issued, and all restrictions applicable to such shares of Stock have lapsed. Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence; and (ii) during the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution. 
(b) Notwithstanding the foregoing, with respect to Participants who are corporate officers or operating presidents, the Administrator may permit any portion of the Option that is not an Incentive Stock Option to be transferred to, exercised by and paid to certain persons or entities related to such Participant, including but not limited to members of such Participant’s family, charitable institutions or trusts or other entities whose beneficiaries or beneficial owners are members of such Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Administrator, pursuant to such conditions and procedures as the Administrator may establish. Any permitted transfer shall be subject to the condition that the Administrator receive evidence satisfactory to it that the transfer is being made for estate and/or tax 

8

planning purposes (or to a “blind trust” in connection with such Participant’s termination of employment or service with the Company or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities. 
5.3   Adjustments. The Participant acknowledges that the Option is subject to modification and termination in certain events as provided in this Agreement and Section 8 of the Plan.
5.4 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the address given beneath the signature of the Company’s authorized officer on the Grant Notice, and any notice to be given to Participant shall be addressed to Participant at the address given beneath Participant’s signature on the Grant Notice. By a notice given pursuant to this Section 5.4, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise his or her Option pursuant to Section 4.1 by written notice under this Section 5.4. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. 
5.5 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. 
5.6 Governing Law; Severability. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. 
5.7 Conformity to Securities Laws. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. 
5.8 Amendments, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Option in any material way without the prior written consent of the Participant. 
5.9 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 5.2, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. 
5.10 Notification of Disposition. If this Option is designated as an Incentive Stock Option, Participant shall give prompt notice to the Company of any disposition or other transfer of any shares of Stock acquired under this Agreement if such disposition or transfer is made (a) within two years from the Grant Date with respect to such shares of Stock or (b) within one year after the transfer of such shares of Stock to him. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer. 
5.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 

9

5.12 Not a Contract of Employment. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee or other service provider of the Company or any of its Subsidiaries. 
5.13 Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. 
5.14 Section 409A. Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the U.S. Internal Revenue Code of 1986, as amended (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). The Committee reserves the right (without the obligation to do so or to indemnify the Participant for the failure to do so) to adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate to exempt the Option from Section 409A or to comply with the requirements of Section 409A and thereby avoid the penalty taxes under Section 409A. 

10

EXHIBIT B 
FOR USE WITH FIVE YEAR AWARDS
VESTING 
Annual Operational Performance per Diluted Share1 
	
																	
	 
	 
	Minimum Vesting (10% Growth)
	 
	 
	Maximum Vesting (17.5% Growth)
	 

	Fiscal Year (A)
	 
	% of Shares 
Vesting 
(B)
	 
	 
	YE Operating 
Performance 
(per Diluted Share) 
(C)
	 
	 
	% of Shares 
Vesting 
(D)
	 
	 
	YE Operating 
Performance 
(per Diluted Share) 
(E)
	 

	2016
	 
	 
	5
	%
	 
	$
	118.56
	 
	 
	 
	20
	%
	 
	$
	126.65
	 

	2017
	 
	 
	5
	%
	 
	$
	130.42
	 
	 
	 
	20
	%
	 
	$
	148.81
	 

	2018
	 
	 
	5
	%
	 
	$
	143.46
	 
	 
	 
	20
	%
	 
	$
	174.85
	 

	2019
	 
	 
	5
	%
	 
	$
	157.81
	 
	 
	 
	20
	%
	 
	$
	205.45
	 

	2020
	 
	 
	5
	%
	 
	$
	173.59
	 
	 
	 
	20
	%
	 
	$
	241.40
	 

1. Annual Operational Performance Vesting. Effective as of the last day of each of the Company’s fiscal years 2016-2020 there shall become vested the percentage of shares covered by the Option which is equal to the Annual Amount (as described below). The Options shall become vested and exercisable as of the date that the Administrator verifies the AOP (as defined below); provided, however, the vesting hereunder will be effective as to Participant as of the end of the fiscal year to which such Annual Amount relates (notwithstanding any termination of Participant’s employment during the period between the end of such fiscal year and the verification of the AOP and, in such case, notwithstanding the provisions of Section 3.1(b)). For each such fiscal year, the Administrator shall verify the AOP, and shall notify the Company’s Chief Executive Officer of its determination with respect thereto, within ten business days after the Administrator receives the Company’s audited financial statements for that fiscal year. 
X. For each year (the “performance year”), the Annual Amount is zero if the Annual Operational Performance per Diluted Share (“AOP”) with respect to such year is less than the amount indicated for such year in column (C) and otherwise shall be equal to the amount indicated for such year in column (B) plus the product of (a) the excess of (1) the amount indicated for such year in column (D) over (2) the amount indicated for such year in column (B) and (b) the ratio of (1) the excess of (x) the AOP with respect to the year (but not more than the amount indicated in Column (E) for such year) over (y) the amount indicated for such year in column (C) to (2) the excess of (x) the amount indicated for such year in column (E) over (y) the amount indicated for such year in column (C). 
Y. In calculating the AOP in Section X. above for any performance year there shall also be taken into account any AOP in any of the two prior performance years (starting in fiscal year 2016) which was in excess of the amount indicated in Column (E) for such prior year and has not previously been taken into account hereunder but only if doing so would increase the Annual Amount in such performance year. If the Participant is subsequently awarded options vesting in 2021 and 2022, any AOP during 2019 and 2020 in excess of the amount indicated in Column (E) (and not previously taken into account hereunder) may be used in one or more of the next two following years by treating such excess as AOP in the performance year under the option agreement granting said options.  
Z. If the Annual Amount in any performance year is less than the amount indicated in column (D) for such year then an amount equal to the excess of (1) the amount indicated in column (D) for such year over (2) the actual Annual Amount for such year may vest in one or more of the next two following years by treating as AOP in the performance year under Section X. above any excess of AOP in one of such following years over the amount  
1 As of a given date, the Company’s “Annual Operational Performance per Diluted Share” shall mean the ratio of (1) the excess of (a) the product of (i) EBITDA and (ii) the Fixed Market Multiple (as defined below) over (b) Net Debt to (2) the Company’s number of Diluted Shares as of such date, where “EBITDA,” “Net Debt” and “Diluted Shares” have the meanings set forth in the Stock Option Agreement set forth on Exhibit A. For purposes of this Exhibit B, the Fixed Market Multiple shall mean 10.353, as adjusted for the weighted EBITDA multiple of future acquisitions as determined by the Committee.

11

indicated in column (E) for the applicable following year. The portion of any excess AOP amount which is so used may not be used more than once. 

2. Adjustments of Operational Performance Objectives. The Operational Performance targets specified in this Exhibit B are based upon certain revenue and expense assumptions about the future business of the Company as of the date the Option is granted. Accordingly, in the event that, after such date, the Administrator determines, in its sole discretion, that any acquisition or disposition of any business by the Company or any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, any unusual or nonrecurring transactions or events affecting the Company, or the financial statements of the Company, or change in applicable laws, regulations, or accounting principles occurs such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option, then the Administrator may, in good faith and in such manner as it may deem equitable, adjust the amounts set forth on this Exhibit B (and/or adjust the definitions of EBITDA and Net Debt) to reflect the projected effect of such transaction(s) or event(s) on Operational Performance.   Further, in the event that the Company pays a special dividend, the AOP targets shall be adjusted as determined by the Administrator in accordance with past practice.

12

EXHIBIT B 

FOR USE WITH TWO YEAR EXTENSION GRANTS
VESTING 
Annual Operational Performance per Diluted Share1 
	
																
	 
	 
	Minimum Vesting (10% Growth)
	 
	 
	Maximum Vesting (17.5% Growth)

	Fiscal Year (A)
	 
	% of Shares 
Vesting 
(B)
	 
	 
	YE Operating 
Performance 
(per Diluted Share) 
(C)
	 
	 
	% of Shares 
Vesting 
(D)
	 
	 
	YE Operating 
Performance 
(per Diluted Share) 
(E)

	2019
	 
	 
	12.5
	%
	 
	$
	157.81
	 
	 
	 
	50
	%
	 
	$
	205.45

	2020
	 
	 
	12.5
	%
	 
	$
	173.59
	 
	 
	 
	50
	%
	 
	$
	241.40

1. Annual Operational Performance Vesting. Effective as of the last day of each of the Company’s fiscal years 2019-2020 there shall become vested the percentage of shares covered by the Option which is equal to the Annual Amount (as described below). The Options shall become vested and exercisable as of the date that the Administrator verifies the AOP (as defined below); provided, however, the vesting hereunder will be effective as to Participant as of the end of the fiscal year to which such Annual Amount relates (notwithstanding any termination of Participant’s employment during the period between the end of such fiscal year and the verification of the AOP and, in such case, notwithstanding the provisions of Section 3.1(b)). For each such fiscal year, the Administrator shall verify the AOP, and shall notify the Company’s Chief Executive Officer of its determination with respect thereto, within ten business days after the Administrator receives the Company’s audited financial statements for that fiscal year. 
X. For each year (the “performance year”), the Annual Amount is zero if the Annual Operational Performance per Diluted Share (“AOP”) with respect to such year is less than the amount indicated for such year in column (C) and otherwise shall be equal to the amount indicated for such year in column (B) plus the product of (a) the excess of (1) the amount indicated for such year in column (D) over (2) the amount indicated for such year in column (B) and (b) the ratio of (1) the excess of (x) the AOP with respect to the year (but not more than the amount indicated in Column (E) for such year) over (y) the amount indicated for such year in column (C) to (2) the excess of (x) the amount indicated for such year in column (E) over (y) the amount indicated for such year in column (C). 
Y. In calculating the AOP in Section X. above for any performance year there shall also be taken into account any AOP in any of the two prior performance years (starting in fiscal year 2017) which was in excess of the amount indicated in Column (E) for such prior year and has not previously been taken into account hereunder but only if doing so would increase the Annual Amount in such performance year.   For purposes of determining whether AOP has been exceeded and the amount of any excess, the YE Operating Performance per Diluted Share applicable to 2017 shall be $148.81 and to 2018 shall be $174.85.  If the Participant is subsequently awarded options vesting in 2021 and 2022, any AOP during 2019 and 2020 in excess of the amount indicated in Column (E) (and not previously taken into account hereunder) may be used in one or more of the next two following years by treating such excess as AOP in the performance year under the option agreement granting said options.
Z. If the Annual Amount in 2019 is less than the amount indicated in column (D) for 2019 then an amount equal to the excess of (1) the amount indicated in column (D) for 2019 over (2) the actual Annual Amount for 2019 may vest
2 As of a given date, the Company’s “Annual Operational Performance per Diluted Share” shall mean the ratio of (1) the excess of (a) the product of (i) EBITDA and (ii) the Fixed Market Multiple (as defined below) over (b) Net Debt to (2) the Company’s number of Diluted Shares as of such date, where “EBITDA,” “Net Debt” and “Diluted Shares” have the meanings set forth in the Stock Option Agreement set forth on Exhibit A. For purposes of this Exhibit C, the Fixed Market Multiple shall mean 10.353, as adjusted for the weighted EBITDA multiple of future acquisitions as determined by the Committee.

13

in 2020 by treating as AOP in 2019 above any excess of AOP in 2020 over the amount indicated in column (E) for 2020. The portion of any excess AOP amount which is so used may not be used more than once. 

2. Adjustments of Operational Performance Objectives. The Operational Performance targets specified in this Exhibit B are based upon certain revenue and expense assumptions about the future business of the Company as of the date the Option is granted. Accordingly, in the event that, after such date, the Administrator determines, in its sole discretion, that any acquisition or disposition of any business by the Company or any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, any unusual or nonrecurring transactions or events affecting the Company, or the financial statements of the Company, or change in applicable laws, regulations, or accounting principles occurs such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option, then the Administrator may, in good faith and in such manner as it may deem equitable, adjust the amounts set forth on this Exhibit B (and/or adjust the definitions of EBITDA and Net Debt) to reflect the projected effect of such transaction(s) or event(s) on Operational Performance.   Further, in the event that the Company pays a special dividend, the AOP targets shall be adjusted as determined by the Administrator in accordance with past practice. 

14

EXHIBIT C 
STOCK RETENTION GUIDELINES 
As a condition to receiving the Option grant, Participant acknowledges and agrees to hold a number of shares and/or options with such value and for such period of time as set forth below: 
(a) At all times during Participant’s continued employment by the Company, Participant shall hold an aggregate amount of Company equity with a value equal to or greater than $_____ (the “Retention Limit”)[FOR EXECUTIVE OFFICERS ADD:, one-half of which must be held in stock]. This Retention Limit will supersede any Retention Limit in any prior dated option agreement between the Company and Participant pursuant to the Plan. 
For purposes of this Exhibit C, Company equity shall be equal to (i) the Fair Market Value of any Common Stock held by the Participant plus (ii) the value of vested options then held by Participant, whether granted pursuant to the Plan, [IF GRANT IS UNDER THE 2014 STOCK OPTION PLAN, ADD: the Company’s 2006 Stock Incentive Plan], the Company’s 2003 Stock Option Plan or otherwise, which will be equal to the Fair Market Value of the Common Stock underlying the options over the exercise price. 
(b) If at any time after the date hereof the aggregate amount of Company equity held by Participant falls below the Retention Limit because of a decline in the Fair Market Value of the Common Stock, Participant will have three years to reach the Retention Limit before the Administrator may exercise any remedies under paragraph (d). 
(c)  Participant shall not be obligated to comply with the Retention Limit until five years from the date of grant; provided, however, that notwithstanding the foregoing, Participant may not make any sales of vested Options until the Retention Limit is reached, and thereafter, only to the extent that Participant would, at the time of the sale, be in compliance with the Retention Limit, except that Participants may make sales under 10b5-1 plans in existence on the date hereof so long as such sales would be in compliance with any preexisting Retention Limit. 
(d) Participant’s failure to hold that number of shares and/or vested options set forth in this Exhibit C shall result in Participant’s forfeiture of all unvested Options unless otherwise determined by the Administrator, in its sole discretion. 

15

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