Document:

Exhibit 10.2 to Select Comfort Corporation Form 10-Q for period ended July 1, 2006

Exhibit 10.2

 

PROFIT PARTICIPATION AGREEMENT

By and Between

OPUS NORTHWEST, L.L.C.,

a Delaware limited liability company

 

AND

SELECT COMFORT CORPORATION,

a Minnesota corporation

 

Date: July 26, 2006

 

PROFIT PARTICIPATION AGREEMENT

THIS PROFIT PARTICIPATION AGREEMENT (“Agreement”) is made as of July 26, 2006, by and between Opus Northwest, L.L.C., a Delaware limited liability company (“Opus”), and SELECT COMFORT CORPORATION, a Minnesota corporation (“Tenant”).

RECITALS:

A.    Unless otherwise defined in this Agreement, all capitalized words and terms used in this Agreement shall have the meanings ascribed to such words and terms in Exhibit B attached hereto and hereby made a part hereof.

B.    By that certain Net Lease Agreement (Build-to-Suit) dated on or about even date herewith by and between Opus, as landlord, and Tenant, as tenant (the “Lease”), Opus has agreed to lease to Tenant, and Tenant has agreed to lease from Opus certain real property legally described on Exhibit A (the “Property”) and the improvements constructed or to be constructed thereon. The Property and the improvements constructed or to be constructed thereon are collectively referred to herein as the “Project”.

C.    As a material inducement for Tenant to enter into the Lease, Opus has agreed to pay to Tenant a portion of the sale proceeds of the Project upon the Sale of the Project, upon and subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged (including, without limitation, execution by Tenant of the Lease), Opus and Tenant hereby agree as follows:

 

 

 

 

ARTICLE 1

 

PROFIT PARTICIPATION

1.1          Upon the Sale of the Project, Opus agrees to pay Tenant the Profit Participation Fee as determined hereunder; provided, however, that Opus shall not be required to pay Tenant any Profit Participation Fee if at the time such payment would otherwise be made, an Event of Default (as defined in the Lease) by Tenant  by Tenant has occurred and is continuing. In the event the Net Sale Proceeds is a negative number, Tenant shall not be required to pay any amount to Opus.

1.2          Notwithstanding the foregoing, Opus shall have no obligation to pay Tenant the Profit Participation Fee with respect to any Excluded Sale. Further, in the event there is an Excluded Sale related to a foreclosure or a transfer of a deed in lieu of foreclosure, then this Agreement shall automatically terminate and be of no further force and effect.          

1.3          At such time as Opus has paid to Tenant the Profit Participation Fee required hereunder, or this Agreement is otherwise terminated in accordance with its terms, then Tenant shall deliver to Opus such documents as Opus may reasonably request to evidence termination of this Agreement and Opus’ obligations to make any payment hereunder. Tenant shall have the right to audit the books and records of Opus for the sole purpose of verifying the accuracy of the Profit Participation Fee. Opus shall use an “open book” process (as provided in Section 2.8 of the Lease, and also including information on any additional costs, fees or other expenses not specifically referenced in the Lease but constituting an Actual Project Closing Cost or a Project Cost under the terms of this Agreement)
in allowing the Tenant to confirm the accuracy of the calculation of the Net Profit Participation Fee.

ARTICLE 2

 

MISCELLANEOUS

2.1          All notices and demands herein required shall be in writing and shall be sent by United States Certified Mail return receipt requested, personal delivery, overnight courier (guaranteeing next day delivery) or facsimile:

	
            To Tenant:

 

 

 

 

with a copy to:
 	
            Select Comfort Corporation

6105 Trenton Lane North

Minneapolis, Minnesota  55442

Attention:  Mark A. Kimball

 

Select Comfort Corporation

6105 Trenton Lane North

Minneapolis, Minnesota  55442

Attention:  Mitchell W. Johnson

 
 

 

 

 

	
             
 	
            2
 

 

 

	
            To Opus:
 	
            Opus Northwest, L.L.C.

10350 Bren Road West

Minnetonka, Minnesota 55343-9002

Attention:           Vice President

Facsimile Number:         612-656-4814

 
 
	
            with a copy to:
 	
            Opus, L.L.C.

10350 Bren Road West

Minnetonka, Minnesota 55343-9002

Attention:  Legal Department - Brad J. Osmundson

Facsimile Number:         612-656-4755

 
 
	
            and a copy to:
 	
            Briggs and Morgan, Professional Association

Attention:           Charles R. Haynor

2200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

Facsimile
Number:         612-977-8650

 
 

                              All notices shall be deemed given two (2) business days following deposit in the United States mail with respect to a certified or registered letter, one (1) business day following deposit if delivered to an overnight courier guaranteeing next day delivery or on the same day if sent by personal delivery or telecopy (with proof of transmission). Attorneys for each party shall be authorized to give notices for such party. Any party may change its address for the service of notice by giving written notice of such change to the other party, in the manner above specified.

2.2          Neither Opus nor Tenant shall assign any of their respective rights, obligations or duties under this Agreement; provided, however, that the parties may assign their respective rights, obligations and duties under this Agreement to wholly owned subsidiary entities, to entities acquiring all or substantially all the assets of such party, or in connection with any merger or consolidation involving substantially all of the assets of such party.   This Agreement shall be personal to Opus and Tenant and shall not be binding upon or inure to the benefit of any other party. This Agreement shall not run with the land, and shall not constitute a lien, claim or encumbrance of any kind or nature whatsoever with respect to the Project or Opus’ interest therein. Tenant hereby agrees that this
Agreement and the rights of Tenant hereunder (including, without limitation, the right to receive the Profit Participation Fee) are subordinate to any mortgage or other secured loan encumbering the Project, and in furtherance of such agreement, Tenant agrees that upon request from any Project lender, Tenant shall deliver to such lender and to Opus such documentation evidencing such subordination as such lender may reasonably require; provided, however, the foregoing shall not be construed to diminish or in any way release Opus from its obligations to pay any fee payable under this Agreement in accordance with the terms and conditions herein contained.

2.3          Except as set forth in Article I and Section 2.10 hereof, neither party shall be entitled to any fees or other compensation under this Agreement.

2.4          Time is of the essence of this Agreement. If the time for performance of any obligations hereunder falls on a Saturday, Sunday or a day which is a Minnesota state or federal holiday, the time for performance of such obligations shall be extended to the next day which is not a Saturday, Sunday or Minnesota state or federal holiday.

 

 

	
             
 	
            3
 

 

 

2.5          This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota.

2.6          The parties each agree to do, execute, acknowledge and deliver any and all other reasonable documents and instruments and to take all such further reasonable action as shall be necessary or required in order to fully carry out this Agreement and to fully consummate and effect the transaction contemplated hereby.

2.7          This Agreement, together with the exhibits hereto, constitutes the entire agreement of the parties with respect to the subject matter herein contained and supersedes any and all prior agreements, oral or written, with respect to the subject matter herein contained. There are no representations, warranties, covenants or other agreements between the parties in connection with the transaction contemplated by this Agreement other than those expressly set forth herein or expressly contemplated hereby to be executed and delivered by the parties in accordance with the terms hereof.

2.8          Nothing herein contained shall be construed as creating a joint venture, partnership, tenancy in common, or joint tenancy relationship between Opus and Tenant, or to create any other relationship between Tenant and Opus, express or implied, including for federal and state income tax purposes.

2.9          The following are made a part hereof, with the same force and effect as if specifically set forth herein:

	
             
 	
            A.
 	
            Legal Description - Exhibit A
 
	
             
 	
            B.
 	
            Definitions - Exhibit B
 	
             

2.10        If any party shall bring suit against the other to enforce the terms of this Agreement, then the losing party shall pay to the prevailing party the prevailing party’s costs and expenses (including, without limitation, reasonable attorneys’ fees and costs) incurred in enforcing this Agreement.

 

 

	
             
 	
            4
 

 

 

 

IN WITNESS WHEREOF, Opus and Tenant have executed this Agreement as of the day and year first above
written.

	OPUS:  		TENANT:  
	 
	OPUS NORTHWEST, L.L.C. 		SELECT COMFORT CORPORATION. 
	 
	By:    	/s/   Thomas G. Shaver 	 	By:    	/s/   Mark A. Kimball 
	Name:    	Thomas G. Shaver 	 	Name:    	Mark A. Kimball 
	Title:    	Vice President Real Estate Development	 	Title:    	Senior VP & General Counsel

EXHIBIT A

Legal Description

Lot 2, Block 1 in Bass Creek Business Park, 4th Addition, according to the recorded plat thereof, Hennepin County, Minnesota.

EXHIBIT B

Definitions

“Actual Project Closing
Costs” means, the actual, out-of-pocket costs and expenses of Opus associated with consummation of
the Sale including, without limitation, broker commissions, a 1.00% sales fee to Opus or any Affiliate of Opus (provided, however,
Actual Project Closing Costs shall not include a 1.00% sales fee to Opus or any Affiliate of Opus if (i) Tenant or an Affiliate of
Tenant or an Affiliate of Opus is the Purchaser or (ii) any broker commission is payable by Opus or any Affiliate of Opus to a
listing broker or a broker engaged by Opus in connection with the Sale transaction), recording fees, escrow fees, loan prepayment
penalties for mortgage or other indebtedness encumbering the Project, attorneys’ fees, survey expenses, title insurance
premiums and charges, real property transfer taxes, environmental assessments expenses and appraisal fees.

“Affiliate” of
any Person shall mean any Person directly or indirectly controlling, controlled by or under common control with, such Person. For
purposes of this definition, the term “control” (including the correlative meanings of the terms
“controlling”, “controlled by” and “under common control with”), as applied with respect to any
Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management
policies of such Person whether through the ownership of voting securities or by contract or otherwise, provided (but without
limiting the foregoing) that no pledge of voting securities of any Person without the current right to exercise voting rights with
respect thereto shall by itself be deemed to constitute control over such Person. Without limiting the generality of the
foregoing, the word “Affiliate” in connection with an Affiliate of Opus shall include Gerald Rauenhorst, a trust for the
benefit of Gerald Rauenhorst and/or members of his family or their issue, Opus, L.L.C., Opus Corporation, or the parent or
subsidiary of any of them, or a partnership, limited liability company, corporation or other entity comprised of all or some of
the above.

“Excluded Sale” means any sale (i) relating to or resulting from a foreclosure, or a deed in lieu of foreclosure; or (ii) a sale relating to a condemnation by a governmental authority.

“Net Sale Proceeds” means the amount, if any, by which the sum of all cash and any other property, consideration or proceeds payable in connection with the Sale exceeds the sum of (a) Actual 

 

	
             
 	
            5
 

 

 

Project Closing Costs, plus (b) Project Costs. If the Sale includes the sale of property in addition to the Project, Opus and Tenant shall agree upon a reasonable and equitable allocation of the portion of the total purchase price and closing costs for any sale transaction allocable to the Project, and the amounts so allocated shall be used to calculate Net Sale Proceeds and Actual Project Closing Costs for the Project. Any non-cash property, consideration or proceeds shall be valued for the foregoing purposes at the fair market value thereof as agreed by Opus and Tenant, and if Opus and Tenant fail to agree as to the fair market value thereof within ten (10) days of initial consideration of any such item, then the fair market value thereof shall be determined by binding arbitration, in accordance with the following provisions.

The party desiring such arbitration shall give written notice to that effect to the other party, specifying in such notice the name, address and professional qualifications of the person designated to act as arbitrator on its behalf. Within ten (10) days after service of such notice, the other party shall give written notice to the party desiring such arbitration, specifying the name, address and professional qualifications of the person designed to act as arbitrator on its behalf. The decision of the arbitrators so chosen shall be given within a period of thirty (30) days after the appointment of such second arbitrator. If the lesser of such appraised values when multiplied by 105% exceeds the higher of such appraised values, then the fair market value of the non-cash property, consideration or proceeds subject to arbitration shall be the average of the two appraised values. If the
lesser of such appraised values when multiplied by 105% does not exceed the higher of such appraised values, then the two (2) arbitrators shall, within ten (10) days after disclosure of the second appraised value, select a third arbitrator.

The decision of the third arbitrator shall be given within a period of twenty (20) days after the appointment of such third arbitrator. The fair market value of the non-cash property, consideration or proceeds subject to arbitration shall be the average of the three appraised values; provided, however, in the event the lowest or the highest of the three appraised values, or both, varies by more than ten percent (10%) from the median (i.e. middle) appraised value, the appraised value or values so varying shall be disregarded. 

All arbitrators appointed shall be members of the Appraisal Institute with not less then ten (10) years of experience in the appraisal of like-property, consideration or proceeds, and be devoting substantially all of their time to professional appraisal work at the time of appointment, and be in all respects impartial and disinterested. If the party receiving a request for arbitration fails to appoint its arbitrator within the time specified above, or if the two (2) arbitrators so selected cannot agree on the selection of the third arbitrator within the time above specified, then either party, on behalf of both parties, may request the appointment of such second or third arbitrator, as the case may be, by application to any Judge of the District Court of the County of Hennepin, State of Minnesota, upon ten (10) days’ prior written notice to the other party of such intent. Each party
shall pay the fees and expenses of the arbitrator appointed by or on behalf of such party and the fees and expenses of the third arbitrator shall be borne equally by the parties. Any fees and expenses paid by Opus for the fees and expenses of the arbitrator shall be considered Project Costs.

“Person” shall mean any individual, corporation, partnership, joint venture, association, limited liability company, joint stock company, trust, non-incorporated organization or government or any agency or political subdivision thereof or any other entity.

“Profit Participation Fee” an amount equal to fifty percent (50%) of the Net Sale Proceeds with respect to the Project. 

“Project Costs” shall mean as of the date of the Sale, all costs and expenses paid or incurred by Opus attributable to the Project and, with respect to real estate taxes and special assessments, any amounts 

 

	
             
 	
            B-2
 

 

 

which are payable or deferred, including, without duplication or limitation the following costs and expenses:

	
             
 	
            1.
 	
            all out-of-pocket costs and expenses paid or incurred by Opus associated with Opus’ acquisition of the Property including, without limitation, the value of the land in the amount of $4,171,320, title insurance premiums, real property transfer taxes, brokers commissions, closing and escrow costs and expenses, attorneys’ fees and expenses including fees and expenses incurred in drafting and negotiating construction contracts, development agreements, financing and loan documents, architectural contracts, purchase agreements, leases and this Agreement and any documents pertaining thereto;
 

	
             
 	
            2.
 	
            all out-of-pocket costs and expenses paid or incurred by Opus for site inspections, as-built plans and surveys, traffic studies, market analysis, site plans, soil testing, engineering or environmental assessments of the Project;
 

	
             
 	
            3.
 	
            all out-of-pocket costs and expenses paid or incurred (or in the case of the fees listed below, earned) by Opus in connection with the engineering, design, permitting and construction of Landlord’s Improvements (as defined in the Lease), Tenant Improvements (as defined in the Lease) or any other improvements on the Property including, without limitation, the development fees, design fees, contractor fees and subcontractor fees paid to Opus or its Affiliates at the rates specified in Section 2.7 and Exhibit E of the Lease;
 

	
             
 	
            4.
 	
            any and all hard and soft costs and expenses paid or incurred by Opus with respect to infrastructure improvements or off-site improvements or contributions to public improvements, facilities or operations located on or in any way connected with Opus’ development of the Project including any impact or like development fee, utility connection or use charge, park or dedication fee or other charge, including a development fee of three percent (3%) of the cost of such items paid to Opus or its Affiliates;
 

	
             
 	
            5.
 	
            all payments of interest on any loans obtained by Opus from a third party lender (other than any Affiliate of Opus) and procured in connection with the acquisition of the Property and the construction of improvements thereon, together with any points, loan fees and financing costs paid or incurred by Opus to the lender;
 

	
             
 	
            6.
 	
            the amount by which all expenses paid or incurred by Opus attributable to Opus’ ownership, operation, construction and management of the Project (including but not limited to real estate taxes and special assessments (whether levied, pending or deferred), insurance premiums, utility service, operating and maintenance costs, leasing commissions paid or payable in connection with the Project, rent abatement, moving expense or other concessions granted to any tenant at the Project, and construction of tenant improvements) exceeds the amounts reimbursed for such items by Tenant to Opus;
 

	
             
 	
            7.
 	
            Costs and expenses paid or incurred by Tenant for the Project, to the extent Opus reimburses Tenant therefor;
 

	
             
 	
            8.
 	
            the cost to complete any punchlist work; and
 

	
             
 	
            9.
 	
any other costs,
expenses or sums reasonably paid or incurred by Opus to any third party to the extent attributable to the Project or Opus’
development thereof (not including the Profit Participation Fee), including any attorneys’ fees and expenses in drafting and
negotiating any lease or other agreement pertaining to the Project.
 

 

	
             
 	
            B-3
 

 

 

All costs and expenses described herein, including but not limited to “out-of-pocket” costs and expenses, shall include amounts which are payable to an Affiliate of Opus to the extent such payments would not exceed those to a third party vendor at prevailing market rates, but costs and expenses, including but not limited to “out-of-pocket” costs and expenses, shall not include any amounts which are payable to an Affiliate of Opus to the extent such payments exceed prevailing market rates. If, as of the date of the Sale, there is any threatened or pending litigation relating to any one or more of the costs or expenses described above, then the Project Costs shall include a reasonable estimate of the additional cost or expense which will be incurred by Opus if such litigation is determined adversely to Opus, including attorneys’ fees, expenses and court costs,
whether at trial or on appeal. Upon determination of the actual costs and expenses incurred by Opus in any such litigation, an appropriate adjustment to Project Costs shall be made, and the appropriate party shall pay to the other any amount due and owing as a result thereof. Project Costs shall not include any non-cash expenses such as depreciation or amortization.

 “Purchaser” shall mean a bona fide third party purchaser of the Project (which may include an Affiliate of Opus).

 “Sale” means the sale of the Project by Opus to a Purchaser, specifically excluding any Excluded Sale.    

 

 

	
             
 	
            B-4Exhibit 4.1 to CyberOptics Corporation Form S-8

 

 

EXHIBIT 4.1

 

As Amended

Through May 16, 2006

 

CYBEROPTICS CORPORATION

1992 EMPLOYEE STOCK PURCHASE PLAN

 

ARTICLE I.  INTRODUCTION

 

Section 1.01  Purpose.  The purpose of the CYBEROPTICS CORPORATION 1992 EMPLOYEE STOCK PURCHASE PLAN (the "Plan") is to provide employees of CYBEROPTICS CORPORATION, a Minnesota corporation (the "Company"), and certain related corporations with an opportunity to share in the ownership of the Company by providing them with a convenient means for regular and systematic purchases of the Company's Common Shares, without par value, and, thus, to develop a stronger incentive to work for the continued success of the Company.

 

Section 1.02  Rules of Interpretation.  It is intended that the Plan be an "employee stock purchase plan" as defined in Section 423(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations promulgated thereunder.  Accordingly, the Plan shall be interpreted and administered in a manner consistent therewith if so approved.  All Participants in the Plan will have the same rights and privileges consistent with the provisions of the Plan.

 

Section 1.03  Definitions.  For purposes of the Plan, the following terms will have the meanings set forth below:

 

(a)         "Acceleration Date" means the earlier of the date of shareholder approval or approval by the Company's Board of Directors of (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which Company Common Shares would be converted into cash, securities or other property, other than a merger of the Company in which shareholders of the Company immediately prior to the merger have the same proportionate share ownership in the surviving corporation immediately after the merger; (ii) any sale, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or (iii) any plan of liquidation or dissolution of the Company.

 

(b)         "Affiliate" means any subsidiary corporation of the Company, as defined in Section 424(f) of the Code, whether now or hereafter acquired or established.

 

(c)         "Committee" means the committee described in Section 10.01.

 

(d)         "Company" means CyberOptics Corporation, a Minnesota corporation, any subsidiary of the Company and any successors to the Company by merger or consolidation as contemplated by Article XI herein.

 

 

(e)         "Current Compensation" means all regular wage, salary and commission payments paid by the Company to a Participant in accordance with the terms of his or her employment, including bonus payments and all other forms of special compensation.

 

(f)         "Fair Market Value" as of a given date means such value of the Common Shares as reasonably determined by the Committee in a manner consistent with Section 423 of the Code. 

 

(g)         "Participant" means a Full-Time Employee who is eligible to participate in the Plan under Section 2.01 and who has elected to participate in the Plan.

 

(h)         "Participating Affiliate" means an Affiliate which has been designated by the Committee in advance of the Purchase Period in question as a corporation whose eligible Full-Time Employees may participate in the Plan.

 

(i)          "Full-Time Employee" means an employee of the Company or a Participating Affiliate as of the first day of a Purchase Period, including an officer or director who is also an employee, but excluding employees (I) whose customary employment is less than 20 hours per week, (II) who have not yet completed six months of employment, or (III) whose customary employment is not more than 5 months in a calendar year.

 

(j)          "Plan" means the CyberOptics Corporation 1992 Employee Stock Purchase Plan, as amended, the provisions of which are set forth herein.

 

(k)         "Purchase Period" means each of the 12-month periods beginning on the first business day in August of each year and ending on the last business day in the following July, respectively.

 

(l)          "Common Shares" means the Company's Common Shares, without par value, as such Shares may be adjusted for changes in the Shares or the Company as contemplated by Article XI herein.

 

(m)       "Share Purchase Account" means the account maintained on the books and records of the Company recording the amount received from each Participant through payroll deductions made under the Plan and from the Company through matching contributions.

ARTICLE II.  ELIGIBILITY AND PARTICIPATION

 

Section 2.01  Eligible Employees.  All Full-Time Employees shall be eligible to participate in the Plan beginning on the first day of the first Purchase Period to commence after such person becomes a Full-Time Employee.  Subject to the provisions of Article VI, each such employee will continue to be eligible to participate in the Plan so long as he or she remains a Full-Time Employee.

 

Section 2.02  Election to Participate.  An eligible Full-Time Employee may elect to participate in the Plan for a given Purchase Period by filing with the Company, in advance of that Purchase Period and in accordance with such terms and conditions as the Committee in its sole discretion may impose, a form provided by the Company for such purpose (which authorizes regular payroll deductions from Current Compensation beginning with the first payday in that Purchase Period and continuing until the employee withdraws from the Plan or ceases to be eligible to participate in the Plan).

 

Section 2.03  Limits on Shares Purchased.  No employee shall be granted any right to purchase Common Shares hereunder if such employee, immediately after such a right to purchase is granted, would own, directly or indirectly, within the meaning of Section 423(b)(3) and Section 424(d) of the Code, Common Shares possessing 5% or more of the total combined voting power or value of all the classes of the capital shares of the Company or of all Affiliates.

 

Section 2.04  Voluntary Participation.  Participation in the Plan on the part of a Participant is voluntary and such participation is not a condition of employment nor does participation in the Plan entitle a Participant to be retained as an employee.

 

ARTICLE III.  PAYROLL DEDUCTIONS, COMPANY

CONTRIBUTIONS AND SHARE PURCHASE ACCOUNT

 

Section 3.01  Deduction from Pay.  The form described in Section 2.02 will permit a Participant to elect payroll deductions of not less than 1% and not more than 10% of such Participant's Current Compensation for each pay period, subject to such other limitations as the Committee in its sole discretion may impose.

 

Section 3.02  Interest and Company Contributions.  The Company may, in the sole discretion of and subject to such limitations as the Committee may impose, pay interest with respect to each Participant's Share Purchase Account.

 

Section 3.03  Credit to Account.  Payroll deductions will be credited to the Participant's Share Purchase Account on each payday.

 

Section 3.04  Nature of Account.  The Share Purchase Account is established solely for accounting purposes, and all amounts credited to the Share Purchase Account will remain part of the general assets of the Company or the Participating Affiliate (as the case may be).

Section 3.05  No Additional Contributions.  A Participant may not make any payment into the Share Purchase Account other than the payroll deductions made pursuant to the Plan.

 

ARTICLE IV.  RIGHT TO PURCHASE SHARES

 

Section 4.01  Number of Shares.  Each Participant will have the right to purchase on the last business day of the Purchase Period all, but not less than all, of the largest number of whole Common Shares that can be purchased at the price specified in Section 4.02 with the entire credit balance in the Participant's Share Purchase Account, subject to the limitations that (a) no more than 10,000 Common Shares may be purchased under the Plan by any one Participant for a given Purchase Period, (b) in accordance with Section 423(b)(8) of the Code, no more than $25,000 in Fair Market Value (determined at the beginning of each Purchase Period) of Common Shares and other shares may be purchased under the Plan and all other employee share purchase plans (if any) of the Company and the Affiliates by any one Participant for any calendar year and (c) if the
purchases for all Participants in any Purchase Period would result in the sale of more than 100,000 Common Shares in the aggregate under the Plan for such Purchase Period, each Participant shall be allocated a pro rata portion of the 100,000 Common Shares to be sold for that Purchase Period.  If the purchases for all Participants would otherwise cause the aggregate number of  Common Shares to be sold under the Plan to exceed the number specified in Section 10.03, each Participant shall be allocated a pro rata portion of the Common Shares to be sold.

 

Section 4.02  Purchase Price.  The purchase price for any Purchase Period shall be the lesser of (a) 85% of the Fair Market Value of the Common Shares on the first business day of that Purchase Period or (b) 85% of the Fair Market Value of the Common Shares on the last business day of that Purchase Period, in each case rounded up to the next higher full cent.

 

ARTICLE V.  EXERCISE OF RIGHT

 

Section 5.01  Purchase of Shares.  On the last business day of a Purchase Period, the entire credit balance in each Participant's Share Purchase Account will be used to purchase the largest number of whole Common Shares purchasable with such amount (subject to the limitations of Section 4.01), unless the Participant has filed with the Company, in advance of that date and subject to such terms and conditions as the Committee in its sole discretion may impose, a form provided by the Company which requests the distribution of the entire credit balance in cash.

 

Section 5.02  Cash Distributions.  Any amount remaining in a Participant's Share Purchase Account after the last business day of a Purchase Period will be paid to the Participant in cash in a timely fashion after the end of that Purchase Period.

 

Section 5.03  Notice of Acceleration Date.  The Company shall use its best efforts to notify each Participant in writing at least ten days prior to any Acceleration Date that the then current Purchase Period will end on such Acceleration Date.

ARTICLE VI.  WITHDRAWAL FROM PLAN; SALE OF SHARES

 

Section 6.01  Voluntary Withdrawal.  A Participant may, in accordance with such terms and conditions as the Committee in its sole discretion may impose, withdraw from the Plan and cease making payroll deductions by filing with the Company a form provided for this purpose.  In such event, the entire credit balance in the Participant's Share Purchase Account will be paid to the Participant in cash within 30 days.  A Participant who withdraws from the Plan will not be eligible to reenter the Plan until the beginning of the next Purchase Period following the date of such withdrawal.

 

Section 6.02  Death.  Subject to such terms and conditions as the Committee in its sole discretion may impose, upon the death of a Participant, no further amounts shall be credited to the Participant's Share Purchase Account.  Thereafter, on the last business day of the Purchase Period during which such Participant's death occurred and in accordance with Section 5.01, the entire credit balance in such Participant's Share Purchase Account will be used to purchase Common Shares, unless such Participant's estate has filed with the Company, in advance of that day and subject to such terms and conditions as the Committee in its sole discretion may impose, a form provided by the Company which elects to have the entire credit balance in such Participant's Shares Account distributed in cash within 30 days after the end of that Purchase Period or at
such earlier time as the Committee in its sole discretion may decide.  Each Participant, however, may designate one or more beneficiaries who, upon death, are to receive the Common Shares or the amount that otherwise would have been distributed or paid to the Participant's estate and may change or revoke any such designation from time to time.  No such designation, change or revocation will be effective unless made by the Participant in writing and filed with the Company during the Participant's lifetime.  Unless the Participant has otherwise specified the beneficiary designation, the beneficiary or beneficiaries so designated will become fixed as of the date of the death of the Participant so that, if a beneficiary survives the Participant but dies before the receipt of the payment due such beneficiary, the payment will be made to such beneficiary's estate.

 

Section 6.03  Termination of Employment.  Subject to such terms and conditions as the Committee in its sole discretion may impose, upon a Participant's normal or early retirement with the consent of the Company under any pension or retirement plan of the Company or Participating Affiliate, no further amounts shall be credited to the Participant's Share Purchase Account. Thereafter, on the last business day of the Purchase Period during which such Participant's approved retirement occurred and in accordance with Section 5.01, the entire credit balance in such Participant's Share Purchase Account will be used to purchase Common Shares, unless such Participant has filed with the Company, in advance of that day and subject to such terms and conditions as the Committee in its sole discretion may impose, a form provided by the Company which elects to
receive the entire credit balance in such Participant's Share Purchase Account in cash within 30 days after the end of that
Purchase Period, provided that such Participant shall have no right to purchase Common Shares in the event that the last day of
such a Purchase Period occurs more than three months following the termination of such Participant's employment with the Company
by reason of such an approved retirement. In the event of any other termination of employment (other than death) with the Company
or a Participating Affiliate, participation in the Plan will cease on the date the Participant ceases to be a Full-Time Employee for any reason. In such event, the entire credit balance
in such Participant's Share Purchase Account will be paid to the Participant in cash within 30 days. For purposes of this Section
6.03, a transfer of employment to any Affiliate, or a leave of absence which has been approved by the Committee, will not be
deemed a termination of employment as a Full-Time Employee.

ARTICLE VII.  NONTRANSFERABILITY

 

Section 7.01  Nontransferable Right to Purchase.  The right to purchase Common Shares hereunder may not be assigned, transferred, pledged or hypothecated (whether by operation of law or otherwise), except as provided in Section 6.02, and will not be subject to execution, attachment or similar process.  Any attempted assignment, transfer, pledge, hypothecation or other disposition or levy of attachment or similar process upon the right to purchase will be null and void and without effect.

 

Section 7.02  Nontransferable Account.  Except as provided in Section 6.02, the amounts credited to a Share Purchase Account may not be assigned, transferred, pledged or hypothecated in any way, and any attempted assignment, transfer, pledge, hypothecation or other disposition of such amounts will be null and void and without effect.

 

ARTICLE VIII.  SHARE CERTIFICATES

 

Section 8.01  Delivery.  Promptly after the last day of each Purchase Period and subject to such terms and conditions as the Committee in its sole discretion may impose, the Company will cause to be delivered to or for the benefit of the Participant a certificate representing the Common Shares purchased on the last business day of such Purchase Period.

 

Section 8.02  Securities Laws.  The Company shall not be required to issue or deliver any certificate representing Common Shares prior to registration under the Securities Act of 1933, as amended, or registration or qualification under any state law if such registration is required.  The Company shall use its best efforts to accomplish such registration (if and to the extent required) not later than a reasonable time following the Purchase Period, and delivery of certificates may be deferred until such registration is accomplished.

 

Section 8.03  Completion of Purchase.  A Participant shall have no interest in the Common Shares purchased until a certificate representing the same is issued to or for the benefit of the Participant.

 

Section 8.04  Form of Ownership.  The certificates representing Common Shares issued under the Plan will be registered in the name of the Participant.

 

ARTICLE IX.  EFFECTIVE DATE, AMENDMENT AND

   TERMINATION OF PLAN

 

 

 

Section 9.01  Effective Date.  The Plan as amended, was approved by the Board of Directors on March 24, 2003, and by the shareholders of the Company within twelve (12) months thereof.  In the event that the Plan is not so approved by the shareholders of the Company, for any reason, it shall then be of no force or effect whatsoever, and no Common Shares shall be purchased hereunder.  The Plan will terminate upon completion of the Purchase Period which ends on the first business day occurring on or after July 31, 2012.

 

Section 9.02  Plan Commencement.  The initial Purchase Period under the Plan will commence on August 3, 1992.  Thereafter, each succeeding Purchase Period will commence and terminate in accordance with Section 1.03(k).

 

Section 9.03 Powers of Board. The Board of Directors may amend or discontinue the Plan at any time. No amendment
or discontinuation of the Plan, however, shall without shareholder approval be made that: (i) absent such shareholder approval,
would cause Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Act") to become unavailable with respect to the Plan, (ii) requires
shareholder approval under any rules or regulations of the National Association of Securities Dealers, Inc. or any securities
exchange that are applicable to the Company, or (iii) permit the issuance of Common Shares before payment therefor in full.

 

Section 9.04  Automatic Termination.  The Plan shall automatically terminate when all of the Common Shares provided for in Section 10.03 have been sold.

 

ARTICLE X.  ADMINISTRATION

 

Section 10.01  The Committee.  The Plan shall be administered by a committee (the "Committee") of two or more directors of the Company, none of whom shall be officers or employees of the Company and all of whom shall be "disinterested persons" with respect to the Plan within the meaning of Rule 16b-3 under the Act.  The members of the Committee shall be appointed by and serve at the pleasure of the Board of Directors.

 

Section 10.02  Powers of Committee.  Subject to the provisions of the Plan, the Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan, to establish deadlines by which the various administrative forms must be received in order to be effective, and to adopt such other rules and regulations for administering the Plan as it may deem appropriate.  The Committee shall have full and complete authority to determine whether all or any part of the Common Shares acquired pursuant to the Plan shall be subject to restrictions on the transferability thereof or any other restrictions affecting in any manner a Participant's rights with respect thereto but any such restrictions shall be contained in the form by which a Participant elects to participate in the Plan pursuant to Section
2.02.  Decisions of the Committee will be final and binding on all parties who have an interest in the Plan.

Section 10.03 Shares to be Sold. The Common Shares to be issued and sold under the Plan may be treasury shares or
authorized but unissued shares, or the Company may purchase Common Shares in the market for sale under the Plan. Except as
provided in Section 11.01, the aggregate number of Common Shares to be
sold under the Plan will not exceed 800,000 shares.

 

Section 10.04 Notices.
Notices to the Committee should be addressed as follows:

 

Compensation Committee

CyberOptics Corporation

5900 Golden Hills Drive

Golden Valley, MN  55416

 

ARTICLE XI.  ADJUSTMENT FOR CHANGES

          IN SHARES OR COMPANY

 

Section 11.01  Share Dividend or Reclassification.  If the outstanding  Common Shares are increased, decreased, changed into or exchanged for a different number or kind of securities of the Company, or shares of a different par value or without par value, through reorganization, recapitalization, reclassification, share dividend, share split, amendment to the Company's Articles of Incorporation, reverse share split or otherwise, an appropriate adjustment shall be made in the maximum numbers and kind of securities to be purchased under the Plan with a corresponding adjustment in the purchase price to be paid therefor.

 

Section 11.02  Merger or Consolidation.  If the Company is merged into or consolidated with one or more corporations during the term of the Plan, appropriate adjustments will be made to give effect thereto on an equitable basis in terms of issuance of shares of the corporation surviving the merger or of the consolidated corporation, as the case may be.

 

ARTICLE XII.  APPLICABLE LAW

 

Rights to purchase Common Shares granted under the Plan shall be construed and shall take effect in accordance with the laws of the State of Minnesota.

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