Document:

a680939ex10-1.htm

Dyax Corp. has requested that the highlighted portions of this document be accorded confidential treatment pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.

Exhibit 10.1

CONFIDENTIAL DOCUMENT

EXECUTION COPY

 

SECOND AMENDMENT

TO

JOINT DEVELOPMENT AND LICENSE AGREEMENT

This SECOND AMENDMENT (the "Second Amendment"), dated as of May 27, 2011 (the "Second Amendment Date"), is entered into by and between Dyax Corp., with principal offices at 300 Technology Square, Cambridge, Massachusetts 02139, U.S.A. ("Dyax"), and Defiante Farmacêutica S.A., with registered offices at Rua da Alfândega, n. 78, 3° andar, 9000-059, Funchal, Madeira, Portugal ("Defiante").  This Second Amendment further amends that certain Joint Development and License Agreement (the "Original Agreement"), dated effective as of June 18, 2010 (the "Effective Date") as amended by the First Amendment to Joint Development and License Agreement (the "First Amendment”), dated December 21, 2011 (the "First Amendment Date").  The Original Agreement as amended by the First Amendment, is referred to herein as the "Amended Agreement."  All capitalized terms not otherwise defined in this Second Amendment shall be as defined in the Amended Agreement.

WHEREAS, under the terms of the Amended Agreement, Dyax has granted Defiante certain rights to Develop, Manufacture and Commercialize products incorporating DX-88 for the treatment of angioedemas and certain other indications;

WHEREAS, under the terms of the Original Agreement, Defiante's rights with respect to DX-88 were limited to a territory comprised of the countries listed in Exhibit A to the Original Agreement;

WHEREAS, under the terms of the First Amendment, Defiante's territory was expanded to include Australia and New Zealand;

WHEREAS, Defiante wishes to amend the terms of the Amended Agreement to further expand its territory to include all of the countries listed on Exhibit A attached hereto; and

WHEREAS, Dyax is willing to agree to such an amendment on the terms set forth herein.

NOW, THEREFORE, in consideration of the promises and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Dyax and Defiante hereby agree as follows:

	
1.

	
Section 1.32 of the Amended Agreement is hereby deleted in its entirety and replaced by the following, in lieu thereof:

1.32           "Defiante Territory".  Defiante Territory shall mean:

 

	
  

	
(a)

	
the countries listed under the heading "Original Defiante Territory" on Exhibit A, together with (i) any additional countries that join the EU after the Effective Date, and (ii) any new countries or territories created or arising after the Effective Date that reside within the geographical boundaries of such countries (the "Original Defiante Territory");

 

	
  

	
(b)

	
the countries listed under the heading "First Additional Defiante Territory" on Exhibit A, together with any new countries or territories created or arising after the Effective Date that reside within the geographical boundaries of such countries (the "First Additional  Defiante Territory"); and

 

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote such omission.

  

  

 

	
  

	
(c)

	
the countries listed under the heading "Second Additional Defiante Territory" on Exhibit A, together with any new countries or territories created or arising after the Effective Date that reside within the geographical boundaries of such countries (the "Second Additional Defiante Territory" and together with the First Additional Defiante Territory, the "Additional Defiante Territory").

 

	
2.

	
Exhibit A to the Amended Agreement is hereby deleted in its entirety and replaced by Exhibit A attached to this Second Amendment.

 

	
3.

	
Section 4.2(a) of the Amended Agreement is hereby deleted in its entirety and replaced by the following, in lieu thereof:

	
  

	
4.2

	
HAE Indication.

 

	
  

	
(a)

	
HAE Development Plan. Prior to the Second Amendment Date, Dyax and Defiante have met to review and discuss the activities that are necessary to obtain Regulatory Approval of the Product for the treatment of HAE in the Original Defiante Territory and the First Additional Defiante Territory. Furthermore, Defiante and Dyax shall jointly complete, and the JSC shall approve [*****], such term to be extended in case of unforeseen circumstances or all relevant HAE Development Data being not available, a formal plan to file for Regulatory Approval for Product for the HAE Indication in the EU and in the Additional Defiante Territory (the "HAE Development Plan"). For the sake of clarity, such HAE Development Plan shall provide for no activities for the Second Additional Defiante Territory to be conducted by Defiante before [*****]. The HAE Development Plan shall set forth all further activities that are necessary to obtain Regulatory Approval of the Product for the treatment of HAE in the Defiante Territory, strategies and timelines for completing such activities, together with the annual budget for expenses related thereto. The HAE Development Plan shall also allocate responsibility between the Parties for such activities, subject to Section 4.2(c), (d) and (e) below and each Party's financial obligations under Section 7.3.

 

The JSC shall review and monitor the activities conducted by the Parties under the HAE Development Plan, which shall be updated and modified from time to time to include any additional studies required by any Regulatory Authority in the Defiante Territory, up until filing of an application for Regulatory Approval with such Regulatory Authority, and any Post-Filing Activities required to obtain Regulatory Approval for the treatment of HAE in each country of the Defiante Territory, in accordance with the following process:

 

	
  

	
(i)

	
each Party shall review the HAE Development Plan not less frequently than quarterly and shall develop detailed and specific updates to the HAE Development Plan, until the completion of the activities covered thereunder;

 

	
  

	
(ii)

	
each Party shall submit all such updates to the JSC for review and approval at each meeting of the JSC; and

 

	
  

	
(iii)

	
the JSC shall review proposed updates to the HAE Development Plan at the next scheduled meeting of the JSC, or earlier if the JSC so agrees, and may approve such proposed updates in its discretion and, upon such approval by the JSC, the HAE Development Plan shall be amended accordingly.

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote such omission.

  

  

 

 

	
4.

	
Section 5.1 of the Amended Agreement is hereby deleted in its entirety and replaced by the following, in lieu thereof:

 

5.1           [*****] Efforts.

 

	
  

	
(a)

	
Defiante shall use [*****] Efforts to obtain Regulatory Approval and Commercialize Product in the Original Defiante Territory for the HAE Indication and any Additional Indications that are Jointly Developed by the Parties in the Field.  Notwithstanding the foregoing provisions of this Section 5.1(a), it is understood that the [*****] Efforts obligations set forth in this Section 5.1(a) do not require that Defiante obtain Regulatory Approval and Commercialize Product in all countries in the Original Defiante Territory, or in any particular country of the Original Defiante Territory if undertaking such efforts to obtain Regulatory Approval and Commercialize Product in such country would not be advisable in the exercise of reasonable business judgment; provided that such obligation to exercise [*****] Efforts shall nonetheless require that Defiante exercise such [*****] Efforts to obtain Regulatory Approval and Commercialize Product in all the Major EU Countries for the Product in HAE and all other Indications that are Jointly Developed by the Parties in the Field.

 

	
  

	
(b)

	
Defiante shall use [*****] Efforts to obtain Regulatory Approval and Commercialize Product in the Additional Defiante Territory for the HAE Indication and any Additional Indications that are Jointly Developed by the Parties in the Field.  The parties acknowledge and agree that, among other things, this Section 5.1(b) shall require that Defiante shall file for Regulatory Approval of the Product in the Additional Defiante Territory in accordance with the timelines set forth in the HAE Development Plan to be agreed upon by June 30, 2011 (as per section 4.2 above); provided that, with respect to Brazil, Argentina, Taiwan, South Korea and Singapore, the filing for Regulatory Approval will occur within eighteen (18) months of June 30, 2011. Notwithstanding the foregoing, if Defiante fails to complete any such activities in accordance with the applicable timeline set forth in the HAE Development Plan as a result of Dyax's failure or delay in meeting any obligation to Defiante under this Agreement, then the timeline shall be extended to reasonably adjust for such failure or delay.

 

	
  

	
(c)

	
In connection with its obligation to use [*****] Efforts to obtain Regulatory Approval and Commercialize Product in the Defiante Territory for the HAE Indication and any Additional Indications that are Jointly Developed by the Parties in the Field, Defiante acknowledges and agrees that it shall not directly or indirectly engage in the commercialization of a therapeutic or prophylactic product that competes with the Product in the Field in the Defiante Territory.

 

	
5.

	
Section 7.1 of the Amended Agreement is hereby deleted in its entirety and replaced by the following, in lieu thereof:

 

7.1           Upfront Consideration.

 

	
  

	
(a)

	
License Fees.

 

	
  

	
(i)

	
As partial consideration for the rights granted by Dyax to Defiante in the Original Defiante Territory, Defiante has already paid to Dyax an upfront license fee in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000).

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote such omission.

  

  

 

	
  

	
(ii)

	
As partial consideration for the rights granted by Dyax to Defiante in the First Additional Defiante Territory, Defiante has already paid to Dyax an upfront license fee in the amount of Five Hundred Thousand Dollars ($500,000).

 

	
  

	
(iii)

	
As partial consideration for the rights granted by Dyax to Defiante in the Second Additional Defiante Territory, the following license fees shall be paid by Defiante to Dyax:

	
  

	
(A)

	
Four Million Dollars ($4,000,000) shall be due as of the Second Amendment Date for the rights granted by Dyax to Defiante in Latin America, which amount shall be paid by Defiante within thirty (30) days after the Second Amendment Date upon receipt of the relevant invoice; and

	
  

	
(B)

	
Three Million Dollars ($3,000,000) shall be due as of the Second Amendment Date for the rights granted by Dyax to Defiante in South East Asia, which amount shall be paid by Defiante on or before December 31, 2011 upon receipt of the relevant invoice.

	
  

	
(b)

	
Equity Investments.

 

	
  

	
(i)

	
Simultaneous with the execution of the Original Agreement,, Defiante and Dyax entered into a Stock Purchase Agreement attached as Exhibit G to the Original Agreement (the "First Stock Purchase Agreement"), under which Defiante purchased, in a private transaction, shares of Dyax common stock for a total of Two Million Five Hundred Thousand Dollars ($2,500,000) at a price per share calculated by applying a 50% premium to the average closing price of the Dyax common shares for the twenty (20) Business Days preceding the Effective Date.  It is acknowledged that the premium paid by Defiante was paid as additional consideration for the rights granted by Dyax to Defiante under the Original Agreement.

 

	
  

	
(ii)

	
Simultaneous with the execution of the First Amendment, Defiante and Dyax entered into a Stock Purchase Agreement attached as Exhibit A to the First Amendment  (the "Second Stock Purchase Agreement"), under which Defiante purchased, in a private transaction, shares of Dyax common stock for a total of Five Hundred Thousand Dollars ($500,000) at a price per share to be calculated by applying a 50% premium to the average closing price of the Dyax common shares for the twenty (20) Business Days preceding the First Amendment Date.  It is acknowledged that the premium paid by Defiante shall be paid as additional consideration for the rights granted by Dyax to Defiante in the First Additional Defiante Territory.

 

	
6.

	
Section 7.2 of the Amended Agreement is hereby deleted in its entirety and replaced by the following, in lieu thereof:

7.2           Milestone Payments.

	
  

	
(a)

	
EMA Approval Milestone. Within [*****] following Regulatory Approval in Defiante’s name of the Product for the HAE Indication by the EMA and  upon receipt of the relevant invoice, Defiante shall pay to Dyax a one-time milestone payment in the amount of [*****].

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote such omission.

  

  

 

	
  

	
(b)

	
EU Commercialization Milestone. Within [*****] following the First Commercial Sale of the Product in the Major EU Countries and upon receipt of the relevant invoice, Defiante shall pay to Dyax a one-time milestone payment in the amount of [*****].

 

	
  

	
(c)

	
Milestones for the Additional Defiante Territory. Within [*****] following the occurrence of each of the following events by Defiante, its Affiliates or sublicensees with respect to a Product and upon receipt of the relevant invoice, Defiante shall make the following one-time milestone payments to Dyax:

 

	
Milestone Event

 

	 	
Payment

	
(1)

	Upon first filing for Regulatory Approval in Australia or New Zealand.	 	 	[*****]
	
(2)       

	Upon first Regulatory Approval in Australia or New Zealand	 	 	[*****]
	(3)       	Upon First Commercial Sale in Australia or New Zealand This  milestone shall only be due if Defiante is able to secure a price reimbursement approval for the Product in excess of [*****] per treatment in Australia or  New Zealand	 	 	[*****]
	
(4)       

	Upon filing for Regulatory Approval in Taiwan	 	 	[*****]
	
(5)       

	Upon Regulatory Approval in Taiwan	 	 	[*****]
	
(6)       

	Upon filing for Regulatory Approval in South Korea	 	 	[*****]
	
(7)     

	Upon Regulatory Approval in South Korea	 	 	[*****]
	
(8)       

	Upon filing for Regulatory Approval in Brazil	 	 	[*****]
	
(9)       

	Upon Regulatory Approval in Brazil	 	 	[*****]
	
(10)           

	Upon filing for Regulatory Approval in Argentina	 	 	[*****]
	
(11)           

	Upon Regulatory Approval in Argentina	 	 	[*****]
	
(12)

	Upon obtainment of pricing and/or reimbursement approvals for the Product in Brazil	 	 	[*****]

 

For the avoidance of doubt, each of the foregoing milestone payments is a separate payment and shall be paid only once by Defiante.  Consequently, the maximum amount that Defiante is obligated to pay to Dyax under this Section 7.2 (c) is [*****].

	
7.

	
Except as expressly provided otherwise in this Second Amendment, all provisions of the Amended Agreement remain in full force and effect without modification and all such terms are hereby ratified and confirmed.

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote such omission.

  

  

 

	
 8.

	
From and after the Second Amendment Date, the term "Agreement" as used in the Original Agreement shall mean the Original Agreement, as amended by the First Amendment and this Second Amendment.

	
9.

	
This Second Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.

 

 

[Remainder of page intentionally left blank]

 

 

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote such omission.

  

  

 

IN WITNESS WHEREOF, Dyax and Defiante have caused this Second Amendment to be duly executed by their authorized representatives under seal, effective as of the Second Amendment Date.

 

	  	DYAX CORP.	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 By: 	/s/ Ivana Magovcevic-Liebisch	 
	  	
     

 

	
Name:  Ivana Magovcevic-Liebisch

Title:    EVP Corporate Development and General Counsel

	 
	 	 	 	 
	 	 	 	 
	  	DEFIANTE FARMACÊUTICA S.A.,	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 By:  	 /s/Paulo Viegas	 
	  	
    

 

	
Name:  Paulo Viegas

Title:    CEO

	 

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote such omission.

  

  

 

EXHIBIT A

 

Defiante Territory

 

 

Original Defiante Territory:

 

Europe:

Albania, Austria, Belgium, Bosnia Herzegovina, Bulgaria, Cyprus, Croatia, Czech Republic, Denmark, Estonia, Finland, France (Principality of Monaco), Germany, Greece, Hungary, Iceland, Ireland, Italy (City of Vatican and Republic of San Marino), Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Macedonia, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Serbia, Slovakia, Slovenia, Spain (Andorra), Sweden, Switzerland, Turkey, United Kingdom

North Africa and Middle East:

Morocco, Algeria, Tunisia, Egypt, Libya, Eritrea, Mauritania, Somalia , Ethiopia, Jordan, Syria, Lebanon, Saudi Arabia, Oman, Bahrain, United Arab Emirates, Islamic Republic of Iran

Russia:

Russian Federation, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Republic of Moldova, Tajikistan, Turkmenistan, Ukraine, Uzbekistan

 

First Additional Defiante Territory:

 

Australia

New Zealand

Second Additional Defiante Territory:

 

Southeast Asia:

Taiwan, South Korea, Singapore.

Latin America:

The following countries of Latin America and the Caribbean: Anguilla, Antigua and Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia, Brazil, British Virgin Islands, Cayman Islands, Chile, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Turks and Caicos Islands, Uruguay, Venezuela.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.a6814785ex10_1.htm

Exhibit 10.1

 

 

 

 

 

AMENDED AND RESTATED

ATRION CORPORATION 2006 EQUITY INCENTIVE PLAN

(As last amended on May 26, 2011)

 

 

  

  

  

	Table of Contents	  
	 	  	  	  
	ARTICLE 1. DEFINITIONS	3
	 	  	  	  
	ARTICLE 2.  COMMON STOCK SUBJECT TO PLAN	5
	 	
2.1

	
Common Stock Subject to Plan

	
5

	 	
2.2

	
Add-back of Grants

	
5

	 	  	  	  
	ARTICLE 3.  ELIGIBILITY; GRANTS; AWARD AGREEMENTS	6
	 	
3.1

	
Eligibility

	
6

	 	
3.2

	
Awards

	
6

	 	
3.3

	
Provisions Applicable to Section 162(m)

	
6

	 	
3.4

	
Award Agreement

	
6

	 	  	  	  
	ARTICLE 4.  OPTIONS	7
	 	
4.1

	
Award Agreement for Option Grant

	
7

	 	
4.2

	
Option Price

	
7

	 	
4.3

	
Qualification for Incentive Stock Options

	
7

	 	
4.4

	
Change in Incentive Stock Option Grant

	
7

	 	
4.5

	
Option Term

	
7

	 	
4.6

	
Option Exercisability and Vesting

	
7

	 	  	  	  
	ARTICLE 5.  EXERCISE OF OPTIONS	8
	 	
5.1

	
Exercise

	
8

	 	
5.2

	
Manner of Exercise

	
8

	 	
5.3

	
Conditions to Issuance of Common Stock

	
9

	 	
5.4

	
Rights as Stockholders

	
9

	 	
5.5

	
Ownership and Transfer Restrictions

	
9

	 	
5.6

	
Limitations on Exercise of Options

	
9

	 	  	  	  
	 ARTICLE 6.  STOCK AWARDS	9
	 	
6.1

	
Award Agreement

	
9

	 	
6.2

	
Awards of Restricted Common Stock, Restricted Stock Units and Deferred Stock Units

	
9

	 	
6.3

	
Rights as Stockholders.

	
10

	 	
6.4

	
Restriction

	
10

	 	
6.5

	
Lapse of Restrictions

	
11

	 	
6.6

	
Repurchase of Restricted Common Stock

	
11

	 	
6.7

	
Escrow

	
11

	 	
6.8

	
Legend

	
11

	 	
6.9

	
Conversion

	
11

	 	  	  	  
	ARTICLE 7.  STOCK APPRECIATION RIGHTS	  11
	 	
7.1

	
Award Agreement for SARs

	
11

	 	
7.2

	
General Requirements

	
11

	 	
7.3

	
Base Amount

	
11

	 	
7.4

	
Tandem SARs

	
11

	 	
7.5

	
SAR Exercisability

	
12

	 	
7.6

	
Value of SARs

	
12

	 	
7.7

	
Form of Payment

	
12

	 	  	  	  
	ARTICLE 8.  PERFORMANCE UNITS	12
	 	
8.1

	
Award Agreement for Performance Units

	
12

	 	
8.2

	
General Requirements

	
12

	 	
8.3

	
Performance Period and Performance Goals

	
12

	 	
8.4

	
Payment With Respect to Performance Units

	
12

 

  

i

  

 

	Table of Contents	  
	(continued)
	 	  	  	  
	ARTICLE 9.  DIVIDEND EQUIVALENTS	13
	 	
9.1

	
Grant of Dividend Equivalents

	
13

	 	  	  	  
	ARTICLE 10.  OTHER STOCK-BASED AWARDS	13
	 	
10.1

	
Grant of Other Stock-Based Awards

	
13

	 	  	  	  
	ARTICLE 11.  ADMINISTRATION	13
	 	
11.1

	
Committee

	
13

	 	
11.2

	
Duties and Powers of Committee

	
13

	 	
11.3

	
Compensation; Professional Assistance; Good Faith Actions

	
13

	 	  	  	  
	ARTICLE 12.  MISCELLANEOUS PROVISIONS	14
	 	
12.1

	
Transferability

	
14

	 	
12.2

	
Amendment, Suspension or Termination of this Plan

	
14

	 	
12.3

	
Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and

	  
	 	  	
Other Corporate Events

	
15

	 	
12.4

	
Continued Employment

	
16

	 	
12.5

	
Tax Withholding

	
16

	 	
12.6

	
Forfeiture Provisions

	
16

	 	
12.7

	
Limitations Applicable to Section 16 Persons and Performance-Based Compensation

	
16

	 	
12.8

	
Effect of Plan Upon Option and Compensation Plans

	
16

	 	
12.9

	
Compliance with Laws

	
17

	 	
12.10

	
Titles

	
17

	 	
12.11

	
Governing Law

	
17

	 	
12.12

	
Effective Date

	
17

 

 

  

ii

  

 

AMENDED AND RESTATED

ATRION CORPORATION 2006 EQUITY INCENTIVE PLAN

Atrion Corporation, a Delaware corporation (the "Company"), has established the Amended and Restated Atrion Corporation 2006 Equity Incentive Plan (the "Plan") for the benefit of Employees, Non-Employee Directors and Consultants.

The purposes of this Plan are (a) to recognize and compensate selected Employees, Non-Employee Directors and Consultants who contribute to the success of the Company and its Subsidiaries, (b) to attract and retain Employees, Non-Employee Directors and Consultants, and (c) to provide incentive compensation to Employees, Non-Employee Directors and Consultants based upon the performance of the Company and its Subsidiaries.

DEFINITIONS

Whenever the following initially capitalized terms are used in the Plan, they shall have the meanings specified below, unless the context clearly indicates otherwise.

"Award" shall mean the grant or award of Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs, Dividend Equivalents, Performance Units or Other Stock-Based Awards under this Plan.

"Award Agreement" shall mean an agreement between the Company and a Participant setting forth the terms and conditions of an Award granted to a Participant.

"Board" shall mean the Board of Directors of the Company, as comprised from time to time.

"Change in Control" shall mean the occurrence of any of the following events: (a) any person, entity or affiliated group, excluding the Company or any employee benefit plan of the Company, acquiring more than twenty-five percent (25%) of the then outstanding shares of voting stock of the Company, (b) the consummation of any merger or consolidation of the Company into another company, such that the holders of the shares of the voting stock of the Company immediately before such merger or consolidation own less than fifty percent (50%) of the voting power of the securities of the surviving company or the parent of the surviving company, (c) the adoption of a plan for complete liquidation of the Company or the sale or disposition of all or substantially all of the Company's assets of the Company, such that after the transaction, the holders of the shares of the voting stock of the Company immediately prior to the transaction own less than fifty percent (50%) of the voting securities of the acquiror or the parent of the acquiror, or (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Committee" shall mean the Compensation Committee of the Board.

"Common Stock " shall mean the common stock, par value ten cents ($0.10) per share, of the Company.

"Company" shall mean Atrion Corporation, a Delaware corporation, or any business organization which succeeds to all or substantially all of its business, whether by virtue of a purchase, merger, consolidation, or otherwise. For purposes of this Plan, the term Company shall include, where applicable, a Subsidiary that employs an Employee or engages a Consultant.

"Consultant" shall mean a professional or technical expert, consultant, advisor or independent contractor who provides services to the Company or a Subsidiary, and who may be selected to participate in the Plan.

"Deferred Stock Unit" shall mean a right to receive Common Stock awarded under Article 6 of this Plan.

"Director" shall mean a member of the Board.

  

3

  

 

"Dividend Equivalent" shall mean a right granted to a Participant under Article 9 of this Plan.

"Employee" shall mean any employee (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code) of the Company or a Subsidiary of the Company, whether such employee was so employed at the time this Plan was initially adopted or becomes so employed subsequent to the adoption of this Plan, who may be selected to participate in the Plan.

"Employment Agreement" shall mean the employment, consulting or similar contractual agreement entered into by an Employee or a Consultant, as the case may be, and the Company governing the terms of the Employee's or Consultant's employment or engagement with the Company, if any.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

"Fair Market Value" of a share of Common Stock, as of a given date, means (i) with respect to an Award of an Incentive Stock Option and an Award which is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code, the average of the high and low sales price of shares of Common Stock on such date as reported by any national securities exchange on which the shares of Common Stock are traded or, if no shares of Common Stock are traded on any such exchange on such date, then on the next preceding date on which any shares of Common Stock were traded on such exchange; and (ii) with respect to all other Awards, the closing sales price of a share of Common Stock on such date as reported by any national securities exchange on which the shares of Common Stock are traded or, if no shares of Common Stock are traded on any such exchange on such date, then on the next preceding date on which any shares of Common Stock were traded on such exchange; or (iii) if shares of Common Stock are not publicly traded on any exchange, the fair market value of a share of Common Stock as determined by the Committee acting in good faith and after consultation with independent advisors.

"Incentive Stock Option" shall mean an option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee.

"Non-Employee Director" shall mean a Director who is not an Employee.

"Non-Qualified Stock Option" shall mean an Option which the Committee does not designate as an Incentive Stock Option.

"Option" shall mean an option to purchase shares of Common Stock that is granted under Article 4 of this Plan. An option granted under this Plan shall, as determined by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to consultants shall be Non-Qualified Stock Options.

"Other Stock-Based Awards" shall mean a right granted to a Participant under Article 10 of this Plan.

"Participant" shall mean an Employee, Non-Employee Director or Consultant who has been granted an Award.

"Performance Units" shall mean performance units granted under Article 8 of this Plan.

"Permanent Disability" or "Permanently Disabled" shall mean the inability of a Participant, due to a physical or mental impairment, to perform the material services of the Participant's position with the Company for a period of six (6) months, whether or not consecutive, during any 365-day period.  A determination of Permanent Disability shall be made by a physician satisfactory to both the Participant and the Committee, provided that if the Participant and the Committee do not agree on a physician, each of them shall select a physician and those two physicians together shall select a third physician, whose determination as to Permanent Disability shall be binding on all parties.

"Plan" shall mean the Amended and Restated Atrion Corporation 2006 Equity Incentive Plan, as embodied herein and as amended from time to time.

  

4

  

 

"Plan Year" shall mean the fiscal year of the Company.

"Restricted Common Stock" shall mean Common Stock awarded under Article 6 of this Plan.

"Restricted Stock Unit" shall mean a right to receive Common Stock awarded under Article 6 of this Plan.

"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such rule may be amended from time to time.

"SAR" shall mean stock appreciation rights awarded under Article 7 of this Plan.

"Stock Award" shall mean an Award of Restricted Common Stock, Restricted Stock Units or Deferred Stock Units under Article 6 of this Plan.

"Stock Award Account" shall mean the bookkeeping account reflecting Awards of Restricted Stock Units and Deferred Stock Units under Article 6 of this Plan.

"Subsidiary" shall mean an entity in an unbroken chain beginning with the Company if each of the entities other than the last entity in the unbroken chain owns fifty percent (50%) or more of the total combined voting power of all classes of equity in one of the other entities in such chain.

"Termination of Employment" shall mean the date on which the employee-employer, consulting, contractual, service or similar relationship between a Participant and the Company is terminated for any reason, with or without cause, including, but not by way of limitation, a termination of employment by resignation, discharge, death, Permanent Disability or Retirement, but excluding (i) termination of employment where there is a simultaneous reemployment or continuing employment of a Participant by the Company, and (ii) at the discretion of the Committee, termination of employment which results in a temporary severance of the employee-employer relationship. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to a Termination of Employment (subject to the provisions of any Employment Agreement between a Participant and the Company), including, but not limited to all questions of whether particular leaves of absence constitute a Termination of Employment; provided, however, that, unless otherwise determined by the Committee in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change the employee-employer, consulting, contractual, service or similar 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.

ARTICLE 2. COMMON STOCK SUBJECT TO PLAN

2.1              Common Stock Subject to Plan.

2.1.1           The Common Stock subject to an Award shall be shares of the Company's authorized but unissued, reacquired, or treasury Common Stock. Subject to adjustment as described in Section 12.3, the aggregate number of shares of Common Stock that may be issued under the Plan is two hundred thousand (200,000) shares.  The Company, during the term of the Plan, will at all times reserve and keep available such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan.

2.1.2           The maximum number of shares of Common Stock which may be awarded to any individual in any calendar year shall not exceed thirty-five thousand (35,000) shares.

 

2.2             Add-back of Grants. If any Option or SAR expires or is canceled without having been fully exercised, is exercised in whole or in part for cash as permitted by this Plan, or is exercised prior to becoming vested as permitted under Section 4.6.3 and is forfeited prior to becoming vested, the number of shares of Common Stock subject to such Option or SAR but as to which such Option, SAR or other right was not exercised or vested prior to its expiration, cancellation or exercise may again be optioned, granted or awarded hereunder.  Shares of Common Stock which are delivered by the Participant or withheld by the Company upon the exercise of any Option or other Award under this Plan, in payment of the exercise price thereof, may again be optioned, granted or awarded hereunder.  If any shares of Common Stock awarded as Restricted Common Stock, Restricted Stock Units, Dividend Equivalents, Other Stock-Based Awards or other Award hereunder or as payment for Performance Units are forfeited by the Participant, such shares may again be optioned, granted or awarded hereunder.  Notwithstanding the provisions of this Section 2.2, no shares of Common Stock may again be optioned, granted or awarded pursuant to an Incentive Stock Option if such action would cause such Option to fail to qualify as an Incentive Stock Option under Section 422 of the Code.

  

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ARTICLE 3. ELIGIBILITY; GRANTS; AWARD AGREEMENTS

3.1           Eligibility. Any Employee, Non-Employee Director or Consultant selected to participate pursuant to Section 3.2 shall be eligible to participate in the Plan.

3.2           Awards. The Committee shall determine which Employees, Non-Employee Directors and Consultants shall receive Awards, whether the Employee, Non-Employee Director or Consultant will receive Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, Dividend Equivalents, SARs, Performance Units or Other Stock-Based Awards, whether an Option grant shall be of Incentive Stock Options or Non-Qualified Stock Options, and the number of shares of Common Stock subject to such Award.  Notwithstanding the foregoing, the terms and conditions of an Award intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

3.3           Provisions Applicable to Section 162(m).

3.3.1           Notwithstanding anything in the Plan to the contrary, the Committee may grant Options, Restricted Common Stock, Restricted Stock Units, SARs, Dividend Equivalents, Performance Units or Other Stock Based Awards to an Employee that vest upon the attainment of performance targets for the Company which are related to one or more of the following performance goals:  (i) pre-tax income, (ii) operating income, (iii) cash flow,  (iv) earnings per share, (v) return on equity, (vi) return on invested capital or assets, (vii) cost reductions or savings, (viii) earnings from continuing operations, (ix) total stockholder return, or (x) such other identifiable and measurable performance objectives, as determined by the Committee.

3.3.2           To the extent necessary to comply with the performance-based compensation  requirements of Section 162(m)(4)(C) of the Code, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (i) select the performance goal or goals applicable to the fiscal year or other designated fiscal period, (ii) establish the various targets and bonus amounts which may be earned for such fiscal year or other designated fiscal period, (iii) specify the relationship between performance goals and targets and the amounts to be earned by each Employee for such fiscal year or other designated fiscal period and (iv) take such other action as the Committee may deem appropriate to comply with the performance-based compensation requirements of Section 162(m)(4)(C) of the Code. Following the completion of each fiscal year or other designated fiscal period, the Committee shall certify in writing whether the applicable performance targets have been achieved for such fiscal year or other designated fiscal period. In determining the amount earned by such Employee, the Committee shall have the right to reduce (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the fiscal year or other designated fiscal period.

 

3.4           Award Agreement.  Upon the selection of an Employee, Non-Employee Director or Consultant to receive an Award, the Committee shall cause a written Award Agreement to be issued to such individual encompassing the terms and conditions of such Award, as determined by the Committee in its sole discretion; provided, however, that, if applicable, the terms of such Award Agreement shall comply with the terms of such Employee’s or Consultant’s Employment Agreement, if any. Such Award Agreement shall provide for the exercise price for Options and SARs; the purchase price, if any, for Restricted Common Stock, Restricted Stock Units, Deferred Stock Units and Other Stock-Based Awards; the performance criteria for Performance Units; and the exercisability and vesting schedule, payment terms and such other terms and conditions of such Award that are consistent with the Plan, as determined by the Committee in its sole discretion.  Each Award Agreement shall be executed by the Participant and an officer of the Company authorized to sign such Award Agreement. All Awards shall be made conditional upon the Participant's acknowledgment, in writing in the Award Agreement or otherwise by acceptance of the Award, that all decisions and determinations of the Committee shall be final and binding on the Participant, his beneficiaries and any other person having or claiming an interest under such Award.

  

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ARTICLE 4. OPTIONS

 

4.1           Award Agreement for Option Grant. Option grants shall be evidenced by an Award Agreement, pursuant to Section 3.4.  All Award Agreements evidencing Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. All Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.

 

4.2           Option Price.  The price per share of the Common Stock subject to each Option shall be set by the Committee; provided, however, that (i) such price shall not be less than the par value of a share of Common Stock and shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the date the Option is granted, (ii) in the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code), such price shall not be less than one hundred and ten percent (110%) of the Fair Market Value of a share of Common Stock on the date the Option is granted.

 

4.3           Qualification for Incentive Stock Options.  The Committee may grant an Incentive Stock Option to an individual only if such person is an employee of the Company or is an employee of a Subsidiary as permitted under Section 422(a)(2) of the Code.

 

4.4           Change in Incentive Stock Option Grant.  Any Incentive Stock Option granted under this Plan may be modified by the Committee to disqualify such Option from treatment as an Incentive Stock Option under Section 422 of the Code. To the extent that the aggregate Fair Market Value of shares of Common Stock with respect to which Incentive Stock Options (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Participant during any calendar year (under the Plan and all other Incentive Stock Option plans of the Company) exceeds one hundred thousand dollars ($100,000), such Options shall be treated as Non-Qualified Stock Options to the extent required or permitted by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 4.4, the Fair Market Value of shares of Common Stock shall be determined as of the time the Option with respect to such shares of Common Stock is granted.

 

4.5           Option Term.  The term of an Option shall be set by the Committee in its discretion; provided, however, in the case of Incentive Stock Options, the term shall not be more than ten (10) years from the date the Incentive Stock Option is granted, or five (5) years from such date if the Incentive Stock Option is granted to an Employee then owning (within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Such Incentive Stock Options shall be subject to Section 5.6, except as limited by the requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options.

4.6           Option Exercisability and Vesting.

4.6.1           The period during which Options in whole or in part become exercisable and vest in the Participant shall be set by the Committee and shall be as provided for in the Award Agreement. At any time after the grant of an Option, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option becomes exercisable and vests.

4.6.2           Each Award Agreement shall set forth the extent to which, if any, the Participant shall have the right to exercise the Options after the Participant's Termination of Employment.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among the Options granted and may differentiate between the reasons for the Participants’ Termination of Employment.

4.6.3           At any time on or after the grant of an Option, the Committee may provide in an Award Agreement that the Participant may elect to exercise part or all of an Option before it otherwise has become exercisable. Any shares of Common Stock so purchased shall be restricted Common Stock and shall be subject to a repurchase right in favor of the Company during a specified restriction period, with the repurchase price equal to the lesser of (i) the price per share paid by the Participant for the Common Stock, or (ii) the Fair Market Value of such Common Stock at the time of repurchase, or such other restrictions as the Committee deems appropriate. The Participant shall have, unless otherwise provided by the Committee in the Award Agreement, all the rights of an owner of Common Stock, subject to the restrictions and provisions of his Award Agreement, including the right to vote such Common Stock and to receive all dividends and other distributions paid or made with respect to Common Stock.

4.6.4           Any Options which are not exercisable and vested immediately prior to a Change in Control, including shares of restricted Common Stock received upon the exercise of an Option as described in Section 4.6.3 above, shall, upon a Change in Control, become one hundred percent (100%) exercisable, if not previously exercised, and one hundred percent (100%) vested, unless the Award Agreement or the Participant's Employment Agreement provides otherwise.

  

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ARTICLE 5. EXERCISE OF OPTIONS

5.1           Exercise.  At any time and from time to time prior to the time when any exercisable Option or portion thereof becomes unexercisable under the Plan or the Award Agreement, such Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares of Common Stock and the Committee may, by the terms of the Option, require any partial exercise to be with respect to a minimum number of shares of Common Stock.

5.2           Manner of Exercise.  An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Company of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the Award Agreement:

5.2.1           A written notice signed by the Participant or other person then entitled to exercise such Option or portion thereof, stating that such Option or portion is being exercised, provided such notice complies with all applicable rules established by the Committee from time to time.

5.2.2           Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, causing legends to be placed on certificates for shares of Common Stock and issuing stop-transfer notices to agents and registrars.

5.2.3           In the event that the Option shall be exercised pursuant to Section 12.1 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option or portion thereof.

5.2.4           Unless otherwise determined by the Committee, the exercise price of an Option or portion thereof, including the amount of any withholding tax due, may be paid as follows:

5.2.4.1                      In cash or by check;

5.2.4.2                      Through the delivery of shares of Common Stock owned by the Participant, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, provided, that shares of Common Stock used to exercise the Option have been held by the Participant for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option;

5.2.4.3                      Through the surrender of shares of Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof;

5.2.4.4                      Through an exercise complying with Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System; or

5.2.4.5                      Through any combination of the consideration provided for in this Section 5.2.4 or such other method approved by the Committee consistent with applicable law.

 

  

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5.3           Conditions to Issuance of Common Stock.  The Company shall not be required to issue or deliver any certificate or other indicia evidencing ownership of shares of Common Stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions:

5.3.1           The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its sole discretion, determine to be necessary or advisable.

5.3.2           The lapse of such reasonable period of time following the exercise of the Option as the Committee may establish from time to time for reasons of administrative convenience.

5.3.3           The receipt by the Company of full payment for such Common Stock, including payment of any applicable withholding tax.

5.3.4           The Participant agreeing to the terms and conditions of the Plan and the Award Agreement.

5.4           Rights as Stockholders.  The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares of Common Stock purchasable upon the exercise of any part of an Option unless and until certificates or other indicia representing such shares of Common Stock have been issued by the Company to such holders.

5.5           Ownership and Transfer Restrictions.  The Committee, in its absolute discretion, may impose at the time of grant such restrictions on the ownership and transferability of the shares of  Common Stock purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the Award Agreement and may be referred to on the certificates or other indicia evidencing such shares of Common Stock.

5.6           Limitations on Exercise of Options.

5.6.1           Vested Incentive Stock Options may not be exercised after the earliest of (i) their  expiration date, (ii) twelve (12) months from the date of the Participant's Termination of Employment by reason of his death, (iii) twelve (12) months from the date of the Participant's Termination of Employment by reason of his Permanent Disability, or (iv) the expiration of three (3) months from the date of the Participant's Termination of Employment for any reason other than such Participant's death or Permanent Disability, unless the Participant dies within said three (3) month period and the Award Agreement or the Committee permits later exercise.  Leaves of absence for less than ninety (90) days shall not cause a Termination of Employment for purposes of Incentive Stock Options.

5.6.2           Non-Qualified Stock Options may be exercised up until their expiration date, unless the Committee provides otherwise in the Award Agreement.

ARTICLE 6. STOCK AWARDS

 

6.1           Award Agreement.  Awards of Restricted Common Stock, Restricted Stock Units and Deferred Stock Units shall be evidenced by an Award Agreement, pursuant to Section 3.4.  All Award Agreements evidencing Restricted Common Stock, Restricted Stock Units and Deferred Stock Units intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

6.2           Awards of Restricted Common Stock, Restricted Stock Units and Deferred Stock Units.

 

 

  

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6.2.1           The Committee may from time to time, in its absolute discretion, consistent with this Plan:

6.2.1.1                      determine which Employees, Non-Employee Directors and Consultants shall receive Stock Awards;

6.2.1.2                      determine the aggregate number of shares of Common Stock to be awarded as Stock Awards to Employees, Non-Employee Directors and Consultants;

6.2.1.3                      determine the terms and conditions applicable to such Stock Awards; and

6.2.1.4                      determine when the restrictions, if any, lapse.

6.2.2           The Committee may establish the purchase price, if any, and form of payment for a Stock Award.  If the Committee establishes a purchase price, the purchase price shall be no less than the par value of the Common Stock to be purchased, unless otherwise permitted by applicable state law.

6.2.3           Upon the selection of an Employee, Non-Employee Director or Consultant to be awarded Restricted Common Stock, the Committee shall instruct the Secretary of the Company to issue such Restricted Common Stock and may impose such conditions on the issuance of such Restricted Common Stock as it deems appropriate, subject to the provisions of Article 11.

6.2.4           Upon the selection of an Employee, Non-Employee Director or Consultant to be awarded Restricted Stock Units or Deferred Stock Units, the Committee shall instruct the Secretary of the Company to establish a Stock Award Account on behalf of each such Participant.  The Committee may impose such conditions on the issuance of such Restricted Stock Units or Deferred Stock Units as it deems appropriate.

6.2.5           Awards of Restricted Common Stock and Restricted Stock Units shall vest pursuant to the Award Agreement.

6.2.6           Upon the occurrence of a Change in Control, all Restricted Common Stock and Restricted Stock Units shall become one hundred percent (100%) vested, unless the Participant’s Award Agreement or the Participant’s Employment Agreement provides otherwise.

6.2.7           A Participant shall be one hundred percent (100%) vested in the number of Deferred Stock Units held in his or her Stock Award Account at all times.  The term for which the Deferred Stock Units shall be deferred shall be provided for in the Award Agreement.

 

6.3           Rights as Stockholders.

 

6.3.1           Upon delivery of the shares of Restricted Common Stock to the Participant or the escrow holder pursuant to Section 6.7, the Participant shall have, unless otherwise provided by the Committee in the Award Agreement, all the rights of an owner of Common Stock, subject to the restrictions and provisions of his Award Agreement; provided, however, that in the discretion of the Committee, any extraordinary distributions with respect to the Common Stock shall be subject to the restrictions set forth in Section 6.4.

6.3.2           Nothing in this Plan shall be construed as giving a Participant who receives an Award of Restricted Stock Units or Deferred Stock Units any of the rights of an owner of Common Stock unless and until shares of Common Stock are issued and transferred to the Participant in accordance with the terms of the Plan and the Award Agreement.  Notwithstanding the foregoing, in the event that any dividend is paid by the Company with respect to the Common Stock (whether in the form of cash, Common Stock or other property), then the Committee shall, in the manner it deems equitable or appropriate, adjust the number of Restricted Stock Units or Deferred Stock Units allocated to each Participant's Stock Award Account to reflect such dividend.

 

6.4           Restriction.  All shares of Restricted Common Stock issued under this Plan (including any Common Stock received as a result of stock dividends, stock splits or any other form of recapitalization, if any) shall at the time of the Award, in the terms of each individual Award Agreement, be subject to such restrictions as the Committee shall, in its sole discretion, determine, which restrictions may include, without limitation, restrictions concerning voting rights, transferability, vesting, Company performance and individual performance; provided, however, that by action taken subsequent to the time shares of Restricted Common Stock are issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Award Agreement. Restricted Common Stock may not be sold or encumbered until all restrictions are terminated or expire.

 

  

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6.5           Lapse of Restrictions.  The restrictions on Awards of Restricted Common Stock and Restricted Stock Units shall lapse in accordance with the terms of the Award Agreement. Each Award Agreement shall set forth whether shares of Restricted Common Stock or Restricted Stock Units then subject to restrictions are forfeited or if the restrictions shall lapse upon the Participant's Termination of Employment. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among the Awards of Restricted Common Stock or Restricted Stock Units and may differentiate between the reasons for the Participant's Termination of Employment.

 

6.6           Repurchase of Restricted Common Stock.  The Committee may provide in the terms of the Award Agreement awarding Restricted Common Stock that the Company shall have call rights, a right of first offer or a right of refusal regarding shares of Restricted Common Stock then subject to restrictions.

 

6.7           Escrow.  The Company may appoint an escrow holder to retain physical custody of each certificate or control of each other indicia representing shares of Restricted Common Stock until all of the restrictions imposed under the Award Agreement with respect to the shares of Common Stock evidenced by such certificate expire or shall have been removed.

 

6.8           Legend.  In order to enforce the restrictions imposed upon shares of Restricted Common Stock hereunder, the Committee shall cause a legend or restrictions to be placed on certificates of Restricted Common Stock that are still subject to restrictions under Award Agreements, which legend or restrictions shall make appropriate reference to the conditions imposed thereby.

 

6.9           Conversion.  Upon vesting in the case of Restricted Stock Units, and upon the lapse of the deferral period in the case of Deferred Stock Units, such Restricted Stock Units or Deferred Stock Units shall be converted into an equivalent number of shares of Common Stock that will be distributed to the Participant, or in the case of the Participant's death, to the Participant's legal representative.  Such distribution shall be evidenced by a stock certificate, appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company, or other appropriate means as determined by the Company.  All distributions shall be made no later than March 15th of the calendar year following the year, with respect to the Restricted Stock Units, in which such Restricted Stock Units vest or, with respect to Deferred Stock Units, in which the deferral period lapses.  In the event ownership or issuance of the Common Stock is not feasible due to applicable exchange controls, securities regulations, tax laws or other provisions of applicable law, as determined by the Company in its sole discretion, the Participant, or, in the case of the Participant's death, the Participant's legal representative, shall receive cash proceeds in an amount equal to the value of the shares of Common Stock otherwise distributable to the Participant, net of tax withholding as provided in Section 12.5.

ARTICLE 7. STOCK APPRECIATION RIGHTS

7.1           Award Agreement for SARs.  Awards of SARs shall be evidenced by an Award Agreement, pursuant to Section 3.4.  All Award Agreements evidencing SARs intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

7.2           General Requirements.  The Committee may grant SARs separately or in tandem with any Option (for all or a portion of the applicable Option). The Committee shall determine which Employees, Non-Employee Directors and Consultants shall receive Awards of SARs and the amount of such Awards.

7.3           Base Amount.  The Committee shall establish the base amount of the SAR at the time the SAR is granted.  The base amount of each SAR shall be equal to the price per share of the related Option or, if there is no related Option, the Fair Market Value of a share of Common Stock as of the date of grant of the SAR, unless the Committee determines a higher base amount.

7.4           Tandem SARs.  Tandem SARs may be granted either at the time the Option is granted or at any time thereafter while the Option remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the time of grant of the Incentive Stock Option. In the case of tandem SARs, the number of SARs granted to an Employee or Consultant that shall be exercisable during a specified period shall not exceed the number of shares of Common Stock that the Employee, Non-Employee Director or Consultant may purchase upon the exercise of the related Option during such period. Upon the exercise of an Option, the SARs relating to the Common Stock covered by such Option shall terminate. Upon the exercise of the SARs, the related Option shall terminate to the extent of an equal number of shares of Common Stock.

  

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7.5           SAR Exercisability.

 

7.5.1           The period during which SARs in whole or in part become exercisable shall be set by the Committee and shall be as provided for in the Award Agreement. At any time after the grant of an SAR, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions its selects, accelerate the period during which the SAR becomes exercisable.

7.5.2           In each Award Agreement, the Committee shall indicate whether the portion of the SAR, if any, that remains non-exercisable upon the Participant’s Termination of Employment with the Company is forfeited. In so specifying, the Committee may differentiate between the reason for the Participant’s Termination of Employment.

7.6           Value of SARs.  When a Participant exercises an SAR, the Participant shall receive in settlement of such SAR an amount equal to the value of the stock appreciation for the number of SARs exercised payable in cash, Common Stock or a combination thereof. The stock appreciation for an SAR is the amount by which the Fair Market Value of the underlying Common Stock on the date of exercise of the SAR exceeds the base amount of the SAR.

 

7.7           Form of Payment.  The Committee shall determine whether the appreciation in an SAR shall be paid in the form of cash, Common Stock or a combination of the two, in such proportion as the Committee deems appropriate. For purposes of calculating the number of shares of Common Stock to be received, shares of Common Stock shall be valued at their Fair Market Value on the date of exercise of the SAR. If shares of Common Stock are received upon exercise of a SAR, cash shall be delivered in lieu of any fractional shares of Common Stock.

 

ARTICLE 8. PERFORMANCE UNITS

8.1           Award Agreement for Performance Units.  Awards of Performance Units shall be evidenced by an Award Agreement, pursuant to Section 3.4.  All Award Agreements evidencing Performance Units intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

8.2           General Requirements.  Each Performance Unit shall represent the right of the Participant to receive an amount based on the value of the Performance Unit, if performance goals established by the Committee are met. A Performance Unit shall be based on the Fair Market Value of a share of Common Stock or such other measurement base as the Committee deems appropriate. The Committee shall determine and set forth in the Award Agreement the number of Performance Units to be granted and the requirements applicable to such Performance Units. The Committee shall determine which Employees and Consultants shall receive Awards of a Performance Unit and the amount of such Awards.

8.3           Performance Period and Performance Goals.  When Performance Units are granted, the Committee shall establish the performance period during which performance shall be measured (the "Performance Period"), performance goals applicable to the Performance Units ("Performance Goals") and such other conditions of the Award as the Committee deems appropriate. Performance Goals may relate to the financial performance of the Company or its Subsidiaries, the performance of Common Stock, individual performance or such other criteria as the Committee deems appropriate.

8.4           Payment With Respect to Performance Units.  At the end of each Performance Period, the Committee shall determine to what extent the Performance Goals and other conditions of the Performance Units are met, the value of the Performance Units (if applicable), and the amount, if any, to be paid with respect to the Performance Units. Payments with respect to Performance Units shall be made in cash, in Common Stock or in a combination of the two, as determined by the Committee.  All payments shall be made no later than March 15 of the calendar year following the year in which the Performance Period ends.

  

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ARTICLE 9.  DIVIDEND EQUIVALENTS

9.1           Grant of Dividend Equivalents.  The Committee is hereby authorized, in its sole discretion, to grant Dividend Equivalents to Employees, Non-Employee Directors and Consultants subject to such terms and conditions as may be selected by the Committee.  Dividend Equivalents shall entitle the Participant to receive payments (in cash, Common Stock, other Awards or other property as determined in the discretion of the Committee) equivalent to the amount of cash dividends paid by the Company to holders of Common Stock.  Dividend Equivalents may be granted on a free-standing basis or in connection with another Award.  Dividend Equivalents granted in connection with another Award may be granted with respect to all or a portion of the number of shares of Common Stock subject to such Award.  The Committee may provide that the Dividend Equivalents be paid or distributed when accrued or be deemed to have been reinvested in additional shares of Common Stock or otherwise reinvested; provided, however, that the terms of any reinvestment of Dividend Equivalents must comply with all applicable laws, rules and regulations, including, without limitation, Section 409A of the Code, and Dividend Equivalents (other than free-standing Dividend Equivalents) shall be subject to all conditions and restrictions of the underlying Awards to which they relate, unless otherwise provided by the Committee.  Notwithstanding the foregoing, the Committee may not grant Dividend Equivalents to Participants in connection with grants of Options or SARs to such Participants.

ARTICLE 10. OTHER STOCK-BASED AWARDS

10.1           Grant of Other Stock-Based Awards.  The Committee is authorized, subject to limitations under applicable law, to grant to Employees, Non-Employee Directors and Consultants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, shares of Common Stock awarded purely as a "bonus" and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of Common Stock and other Awards valued by reference to book value of shares of Common Stock or the value of securities of or the performance of specified Subsidiaries.  The Committee shall determine the terms and conditions of such Awards, which shall be evidenced an Award Agreement, pursuant to Section 3.4.

ARTICLE 11. ADMINISTRATION

 

11.1           Committee.  The Plan shall be administered by the Compensation Committee of the Board. The Board may remove members, add members, and fill vacancies on the Committee from time to time, all in accordance with the Company's Certificate of Incorporation, Bylaws, and with applicable law. The majority vote of the Committee, or for acts taken in writing without a meeting by the unanimous written consent of the members of the Committee, shall be valid acts of the Committee.  Committee members may resign at any time by delivering written notice to the Board.

11.2           Duties and Powers of Committee.  It shall be the duty of the Committee to conduct the general administration of this Plan in accordance with its provisions.  The Committee shall have the power to designate the Employees, Non-Employee Directors and Consultants who shall participate in the Plan and to construe and interpret this Plan and the agreements pursuant to which Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs, Dividend Equivalents, Performance Units or Other Stock-Based Awards are granted or awarded, and to adopt such rules for the administration, interpretation, and application of this Plan as are consistent therewith and to interpret, amend or revoke any such rules.  Any such Award under this Plan need not be the same with respect to each Participant. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code.  All determinations and decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding.

11.3           Compensation; Professional Assistance; Good Faith Actions.  Unless otherwise determined by the Board, members of the Committee shall receive no compensation for their services pursuant to this Plan. All expenses and liabilities which members of the Committee incur in connection with the administration of this Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company's officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Participants, the Company and all other interested persons.  No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan or any Awards made hereunder, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such action, determination or interpretation.

  

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ARTICLE 12. MISCELLANEOUS PROVISIONS

12.1           Transferability.

12.1.1           No Award or any right therein or part thereof, shall be liable for the debts, contracts or engagements of the Participant or his 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; provided, however, that nothing in this Section 12.1.1 shall prevent transfers by will or by the applicable laws of descent and distribution or as permitted in Section 12.1.2 below. The Committee shall not be required to accelerate the exercisabilty of an Award or otherwise take any action pursuant to a divorce or similar proceeding in the event Participant's spouse is determined to have acquired a community property interest in all or any portion of an Award. Except as provided below, during the lifetime of the Participant, only he may exercise an Award (or any portion thereof) granted to him under the Plan. After the death of the Participant, any exercisable portion of an Award, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement or other agreement, may be exercised by his 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.

12.1.2           Notwithstanding the foregoing, the Committee may provide in an Award Agreement, or amend an otherwise outstanding Award Agreement to provide, that a Participant may transfer an Award that is not an Incentive Stock Option or an SAR that is granted in relation to an Incentive Stock Option to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws, according to such terms as the Committee may determine; provided that the Participant receives no consideration for the transfer of such an Award and the transferred Award shall continue to be subject to the same terms and conditions as were applicable to the Award immediately before the transfer and shall be exercisable by the transferee according to the same terms as applied to the Participant.

12.2           Amendment, Suspension or Termination of this Plan.

12.2.1           Except as otherwise provided in this Section 12.2, this Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board; provided, however, no action of the Board may be taken that would otherwise require stockholder approval as a matter of applicable law, regulation or rule, without the consent of the stockholders.  In no event may any Option or SAR be amended, other than pursuant to Section 12.3, to decrease the exercise or grant price thereof, be cancelled in conjunction with the grant of any new Option or SAR with a lower exercise or grant price, or otherwise be subject to any action that would be treated, under generally accepted accounting principles, as a "repricing" of such Option or SAR, unless the stockholders of the Company provide prior approval.  No amendment, suspension or termination of this Plan shall impair any rights or obligations under any Award theretofore made to a Participant, unless such right has been reserved in the Plan or the Award Agreement, without the consent of the Participant holding such Award. No Award may be made during any period of suspension or after termination of this Plan. In no event may any Award be made under this Plan after December 31, 2019.

12.2.2           Notwithstanding the foregoing, the Board or the Committee may take any action necessary to comply with a change in applicable law, irrespective of the status of any Award as vested or unvested, exercisable or unexercisable, at the time of such change in applicable law.

  

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12.3           Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events.

12.3.1           In the event that any dividend (other than an ordinary cash dividend) or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split up, spin-off, combination, repurchase or other similar transaction or event affects the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of the following:

12.3.1.1                 the maximum number of shares of Common Stock available for Awards;

12.3.1.2                 the maximum number of shares of Common Stock subject to the Plan;

12.3.1.3                 the number and kind of Company stock with respect to which an Award may be made under the Plan;

12.3.1.4                 the number and kind of Company stock subject to an outstanding Award; and

12.3.1.5                 the exercise price or purchase price with respect to any Award.

12.3.2           In addition, in the event of any merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company or any unusual or nonrecurring transactions or events affecting the Company or the financial statements of the Company, or of changes in applicable laws, regulations, or accounting principles, the Committee in its discretion is hereby authorized to take any one or more of the following actions whenever the Committee determines, in its sole discretion, that such action is 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 any Award or right under this Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

12.3.2.1                 the Committee may provide, by the terms of the Award Agreement or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant's request, for (i) the purchase of any such Award for the payment of an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Participant's rights had such Award been currently exercisable, payable, fully vested or the restrictions lapsed, or (ii) the replacement of such Award with other rights or property selected by the Committee;

12.3.2.2                 the Committee may provide, by the terms of such Award Agreement or by action taken prior to the occurrence of such transaction or event, that the Award cannot be exercised after such event;

12.3.2.3                 the Committee may provide, by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that for a specified period of time prior to such  transaction or event such Award shall be exercisable, notwithstanding anything to the contrary in Section 4.6 or the provisions of such Award;

12.3.2.4                 the Committee may provide, by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that upon such event, such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar Awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;

12.3.2.5                 the Committee may make adjustments in the number, type and kind of shares of Common Stock subject to outstanding Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs and Performance Units and in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards, and rights and awards which may be granted in the future; and

12.3.2.6                 the Committee may provide, by the terms of an Award of Restricted Common Stock or Restricted Stock Units or by action taken prior to the occurrence of such event, that for a specified period of time prior to such event, the restrictions imposed under an Award Agreement upon some or all shares of the Restricted Common Stock or the Restricted Stock Units may be terminated, and some or all shares of such Restricted Common Stock or some or all of such Restricted Stock Units may cease to be subject to forfeiture under Section 6.5 or repurchase under Section 6.6 after such event.

12.3.3           Subject to Section 12.7, the Committee may, in its sole discretion, at the time of grant, include such further provisions and limitations in any Award Agreement or certificate, as it may deem appropriate and in the best interests of the Company; provided, however, that no such provisions or limitations shall be contrary to the terms of the Participant's Employment Agreement or the terms of this Plan.

12.3.4           Notwithstanding the foregoing, no action pursuant to this Section 12.3 shall be taken that is specifically prohibited under applicable law, the rules and regulations of any governing governmental agency or national securities exchange, or the terms of the Participant's Employment Agreement, and no adjustment to an Option or SAR shall be made to the extent the same constitutes a "modification" within the meaning of Section 424(h)(3) of the Code, Regulation §1.424-1(a) thereunder or Section 409(A) of the Code or the regulations thereunder.

  

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12.4           Continued Employment.  Nothing in this Plan or in any Award Agreement hereunder shall confer upon any Participant any right to continue his employment, consulting or similar relationship with the Company, whether as an employee or consultant or otherwise, or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to discharge or terminate the relationship with any Participant at any time for any reason whatsoever, subject to the terms of any Employment Agreement entered into by the Participant and the Company.

12.5           Tax Withholding.  The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Participant of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting, exercise or lapse of any restriction of any Option, Restricted Common Stock, Restricted Stock Unit, Deferred Stock Unit, SAR or Performance Unit.  The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes (i) by delivery of, or transfer of, shares of Common Stock to the Company or (ii) by directing the Company to retain shares of Common Stock otherwise deliverable under an Award; provided, however, that the total tax withholding where shares of Common Stock are being used to satisfy such obligation shall not exceed the minimum amount required to be withheld.  Shares of Common Stock withheld or delivered in accordance with this Section 12.5 shall be valued at Fair Market Value as of such date as may be specified in procedures established by the Committee.

 

12.6           Forfeiture Provisions.  Pursuant to its general authority to determine the terms and conditions applicable to Awards, the Committee shall have the right to provide, in the terms of such Award, or to require the Participant to agree by separate written instrument, that the Award shall terminate and any unexercised portion of such Award (whether or not vested) shall be forfeited if (i) a Termination of Employment occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, (ii) the Participant at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Committee or as specified in the Participant's Employment Agreement, or (iii) the Company terminates the Participant with or without cause.

 

12.7           Limitations Applicable to Section 16 Persons and Performance-Based Compensation.  Notwithstanding any other provision of this Plan, any Option, Restricted Common Stock, Restricted Stock Unit, Deferred Stock Unit, SARs, Divident Equivalents, Performance Units or Other Stock-Based Awards granted or awarded to any individual who is then subject to Section 16 of the Exchange Act 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 under the Exchange Act). To the extent permitted by applicable law, Options granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. Furthermore, notwithstanding any other provision of this Plan to the contrary, any Award that is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent necessary to conform to such requirements.

 

12.8           Effect of Plan Upon Option and Compensation Plans.  The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company. Nothing in this Plan shall be construed to limit the right of the Company (i) to establish any other forms of incentives or compensation for Employees, Non-Employee Directors and Consultants, or (ii) to grant or assume options or other rights otherwise than under this Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.

  

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12.9           Compliance with Laws.  This Plan, the granting and vesting of Awards under this Plan and the issuance and delivery of shares of Common Stock and the payment of money under this Plan or under Awards awarded hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.  No Award under this Plan (or modification thereof) shall provide for the deferral of compensation that violates Section 409A of the Code.  If any provision of the Plan or an Award Agreement contravenes any regulations or Treasury guidance promulgated under Section 409A of the Code or could cause an Award to be subject to the interest and penalties under Section 409A of the Code, such provision of the Plan or any Award Agreement shall be modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A of the Code. Moreover, any discretionary authority that the Board or the Committee may have pursuant to the Plan shall not be applicable to an Award that is subject to Section 409A of the Code to the extent such discretionary authority will contravene Section 409A of the Code.

12.10           Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan.

12.11           Governing Law.  This Plan and any agreements hereunder shall be administered, interpreted and enforced under the laws of the State of Texas, without regard to that state’s conflicts of laws rules.

12.12           Effective Date.  The Atrion Corporation 2006 Equity Incentive Plan first became effective on May 22, 2006.  This Amended and Restated Atrion Corporation 2006 Equity Incentive Plan shall be effective on the date it is approved by the stockholders of the Company.

 

 

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