Document:

Exhibit 10.2

 

AGA MEDICAL
HOLDINGS, INC.

2006 EQUITY INCENTIVE PLAN

 

1.                                      DEFINED
TERMS

 

Exhibit A, which is
incorporated by reference, defines the terms used in the Plan and sets forth
certain operational rules related to those terms. Exhibit B, which is
also incorporated by reference, contains at Section B.5 thereof the
definitions for certain additional terms used in Exhibit B.

 

2.                                      PURPOSE

 

The Plan has been established
to advance the interests of the Company by providing for the grant to
Participants of Stock-based Awards.

 

3.                                      ADMINISTRATION

 

The Administrator has
discretionary authority, subject only to the express provisions of the Plan, to
interpret the Plan; determine eligibility for and grant Awards; determine,
modify or waive the terms and conditions of any Award; prescribe forms, rules and
procedures; and otherwise do all things necessary to carry out the purposes of
the Plan. Determinations of the Administrator made under the Plan will be
conclusive and will bind all parties.

 

4.                                      LIMITS ON
AWARDS UNDER THE PLAN

 

(a)           Number of Shares.  A
maximum of twenty million (20,000,000) shares of Stock may be delivered in
satisfaction of Awards under the Plan. Up to the maximum number of shares
specified in the immediately preceding sentence may be delivered upon the
exercise of ISOs. The number of shares of Stock delivered in satisfaction of
Awards shall, for purposes of the first two sentences of this Section 4(a)(1),
be determined net of shares of Stock (a) withheld by the Company in
payment of the exercise price of the Award or in satisfaction of tax
withholding requirements with respect to the Award, or (b) awarded under
the Plan as Restricted Stock but thereafter forfeited, or (c) made subject
to an Award that is exercised or satisfied, or that terminates or expires,
without the delivery of such shares. To the extent consistent with the
requirements of Section 422, Stock issued under awards of an acquired
company that are converted, replaced or adjusted in connection with the
acquisition shall not reduce the number of shares available for Awards under
the Plan.

 

(b)           Type of
Shares. Stock
delivered by the Company under the Plan may be authorized but unissued Stock or
previously issued Stock acquired by the Company. No fractional shares of Stock
will be delivered under the Plan.

 

5.                                      ELIGIBILITY
AND PARTICIPATION

 

The Administrator will select
Participants from among those key Employees and directors of, and consultants
and advisors to, the Company or its Affiliates who, in the opinion of the 

 

 

Administrator,
are in a position to make a significant contribution to the success of the
Company and its Affiliates. Eligibility for ISOs is limited to employees of the
Company or of a “parent corporation” or “subsidiary corporation” of the Company
as those terms are defined in Section 424 of the Code.

 

6.                                      RULES
APPLICABLE TO AWARDS

 

(a)                                  All Awards

 

(1)           Award
Provisions.  The
Administrator will determine the terms of all Awards, subject to the
limitations provided herein. By accepting any Award granted hereunder, the Participant
agrees to the terms of the Award and the Plan. Notwithstanding any provision of
this Plan to the contrary, awards of an acquired company that are converted,
replaced or adjusted in connection with the acquisition may contain terms and
conditions that are inconsistent with the terms and conditions specified
herein, as determined by the Administrator; provided,
that each such assumed, converted, replaced or adjusted award shall contain
provisions substantially equivalent to the provisions of Section 6(a)(9) and
Exhibit B hereof unless WCAS shall have expressly consented to the
omission of those provisions or the substitution of other provisions.

 

(2)           Term
of Plan.  No Awards may be
made after April 26, 2016, but previously granted Awards may continue beyond
that date in accordance with their terms.

 

(3)           Transferability.  Neither ISOs nor, except as the Administrator
otherwise expressly provides, other Awards may be transferred other than by
will or by the laws of descent and distribution, and during a Participant’s
lifetime ISOs (and, except as the Administrator otherwise expressly provides,
other non-transferable Stock Options) may be exercised only by the Participant.
Awards permitted by the Administrator to be transferred may be transferred only
to a Permitted Transferee.

 

(4)           Vesting,
Etc. 
The Administrator may determine the time or times at which an Award will
vest or (in the case of a Stock Option or SAR) become exercisable and the terms
on which a Stock Option or SAR will remain exercisable. Without limiting the
foregoing, the Administrator may at any time accelerate the vesting or
exercisability of an Award, regardless of any adverse or potentially adverse
tax consequences resulting from such acceleration. Unless the Administrator
expressly provides otherwise, however, the following rules will apply:
immediately upon the cessation of the Participant’s Employment, each Stock
Option or SAR that is then held by the Participant or by the Participant’s
Permitted Transferees, if any, will cease to be exercisable and will terminate,
and all other Awards that are then held by the Participant or by the
Participant’s Permitted Transferees, if any, to the extent not already vested
will be forfeited, except that:

 

(A)          subject
to (B) and (C) below, all Stock Options and SARs held by the
Participant or the Participant’s Permitted Transferees, if any, immediately
prior to the cessation of the Participant’s Employment, to the extent then
exercisable, will remain exercisable for the lesser of (i) a period of
three months or (ii) the period ending on the latest date on which such
Stock Option or SAR, as the case may be, could have been exercised without
regard to this Section 6(a)(4), and will thereupon terminate;

 

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(B)           all
Stock Options and SARs held by a Participant or the Participant’s Permitted
Transferees, if any, immediately prior to the Participant’s death, to the
extent then exercisable, will remain exercisable for the lesser of (i) the
one year period ending with the first anniversary of the Participant’s death or
(ii) the period ending on the latest date on which such Stock Option or
SAR, as the case may be, could have been exercised without regard to this Section 6(a)(4),
and will thereupon terminate; and

 

(C)           all
Stock Options and SARs held by a Participant or the Participant’s Permitted
Transferees, if any, immediately prior to the cessation of the Participant’s
Employment will immediately terminate upon such cessation if the Administrator
in its sole discretion determines that such cessation of Employment has
resulted for reasons which cast such discredit on the Participant as to justify
immediate termination of the Award.

 

(5)           Taxes.  The Administrator will make such provision
for the withholding of taxes as it deems necessary and may require that the
exercise or vesting of an Award, or the delivery of Stock, cash or other
property under an Award, be conditioned on the payment by the Participant or
another person of all required withholding taxes. The Administrator may, but
need not, hold back shares of Stock from an Award or permit a Participant to
tender previously owned shares of Stock in satisfaction of tax withholding
requirements (but not in excess of the minimum withholding required by law).

 

(6)           Dividend
Equivalents, Etc. 
The Administrator may provide for the payment of amounts in lieu of cash
dividends or other cash distributions with respect to Stock subject to an
Award.

 

(7)           Rights
Limited. 
Nothing in the Plan will be construed as giving any person the right to
continued employment or service with the Company or its Affiliates, or any
rights as a stockholder except as to shares of Stock actually issued under the
Plan. The loss of existing or potential profit in Awards will not constitute an
element of damages in the event of termination of Employment for any reason,
even if the termination is in violation of an obligation of the Company or
Affiliate to the Participant.

 

(8)           Section 409A. Awards
under the Plan are intended either to qualify for an exemption from Section 409A
or to comply with the requirements thereof, and shall be construed accordingly.

 

(9)           Certain
Additional Restrictions. 
In the case of any Award that is made prior to a Qualified Public
Offering (as that term is defined in Section B.5 of Exhibit B hereof)
and that does not involve the immediate delivery of Stock as to which the
Participant is then or contemporaneously therewith becomes a party to the
Stockholders Agreement (as that term is defined in Section B.5 of Exhibit B
hereof), the provisions of Exhibit B shall apply notwithstanding any other
provision of the Plan or the Award to the contrary unless the Administrator,
with the express written consent of WCAS, determines otherwise. No action by
the Administrator in administering or construing the Plan or any Award shall
adversely affect the rights of WCAS under Exhibit B or this Section 6(a)(9) without
the express written consent of WCAS.

 

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(b)                                Stock
Options and SARs

 

(1)           Time
And Manner Of Exercise. 
Unless the Administrator expressly provides otherwise, a Stock Option or
SAR will not be deemed to have been exercised until the Administrator receives
a notice of exercise (in form acceptable to the Administrator) signed by the
appropriate person and accompanied by any payment required under the Award. If
the Award is exercised by any person other than the Participant, the
Administrator may require satisfactory evidence that the person exercising the
Award has the right to do so.

 

(2)           Exercise
Price. 
The exercise price of each Stock Option and the share value above which
appreciation is to be measured in the case of an SAR shall be 100% of the fair
market value of the Stock subject to the Stock Option or SAR, determined as of
the date of grant, or such higher amount as the Administrator may determine in
connection with the grant.

 

(3)           Payment
Of Exercise Price. 
The Administrator may determine the required or permitted forms of
payment under a Stock Option, subject to the following: all payments will be by
cash or check acceptable to the Administrator, or, if so permitted by the
Administrator and if legally permissible, (i) through the delivery of
shares of Stock that have been outstanding for at least six months (unless the
Administrator approves a shorter period) and that have a fair market value
equal to the exercise price, (ii) by delivery to the Company of a
promissory note of the person exercising the Award, payable on such terms as
are specified by the Administrator, (iii) at such time, if any, as the
Stock is publicly traded, through a broker-assisted exercise program acceptable
to the Administrator, (iv) by other means acceptable to the Administrator,
or (v) by any combination of the foregoing permissible forms of payment.
The delivery of shares in payment of the exercise price under clause (i) above
may be accomplished either by actual delivery or by constructive delivery
through attestation of ownership, subject to such rules as the
Administrator may prescribe.

 

(c)          Awards Other
Than Stock Options and SARs

 

Restricted Stock and
Unrestricted Stock, whether delivered outright or under Awards of Stock Units
or other Awards, may be made in exchange for such lawful consideration,
including services, as the Administrator determines.

 

7.                                      EFFECT OF
CERTAIN TRANSACTIONS

 

(a)                                Mergers, etc.  Except as otherwise provided in an Award, the following provisions shall
apply in the event of a Covered Transaction:

 

(1)           Assumption
or Substitution. 
If the Covered Transaction is one in which there is an acquiring or
surviving entity, the Administrator may provide for the assumption of some or
all outstanding Awards or for the grant of new awards in substitution therefor
by the acquiror or survivor or an affiliate of the acquiror or survivor.

 

(2)           Cash-Out
of Awards. 
If the Covered Transaction is one in which holders of Stock will receive
upon consummation a payment (whether cash, non-cash or a combination of the
foregoing), the Administrator may provide for payment (a “cash-out”), with
respect to some or all Awards or portions thereof, equal in the case of each
affected Award or portion thereof to the 

 

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excess,
if any, of (A) the fair market value of one share of Stock (as determined
by the Administrator in its reasonable discretion) times the number of shares
of Stock subject to the Award or such portion, over (B) the aggregate
exercise price (or, in the case of an SAR, the aggregate base price above which
appreciation is measured), if any, under the Award or such portion, in each
case on such payment terms (which need not be the same as the terms of payment
to holders of Stock) and other terms, and subject to such conditions, as the
Administrator determines.

 

(3)           Acceleration
of Certain Awards. 
If the Covered Transaction (whether or not there is an acquiring or
surviving entity) is one in which there is no assumption, substitution or
cash-out, each Stock Option and SAR will become fully exercisable, and the
delivery of shares of Stock deliverable under each outstanding Award of Stock
Units (including Restricted Stock Units and Performance Awards to the extent
consisting of Stock Units) will be accelerated and such shares will be
delivered, prior to the Covered Transaction, in each case on a basis that gives
the holder of the Award a reasonable opportunity, as determined by the
Administrator, following exercise of the Award or the delivery of the shares,
as the case may be, to participate as a stockholder in the Covered Transaction.

 

(4)           Termination
of Awards Upon Consummation of Covered Transaction.  Each Award (unless assumed pursuant to Section 7(a)(1) above),
other than outstanding shares of Restricted Stock (which shall be treated in
the same manner as other shares of Stock, subject to Section 7(a)(5) below),
will terminate upon consummation of the Covered Transaction.

 

(5)           Additional
Limitations. 
Any share of Stock delivered pursuant to Section 7(a)(2) or Section 7(a)(3) above
with respect to an Award may, in the discretion of the Administrator, contain
such restrictions, if any, as the Administrator deems appropriate to reflect
any performance or other vesting conditions to which the Award was subject. In
the case of Restricted Stock, the Administrator may require that any amounts
delivered, exchanged or otherwise paid in respect of such Stock in connection
with the Covered Transaction be placed in escrow or otherwise made subject to
such restrictions as the Administrator deems appropriate to carry out the
intent of the Plan.

 

(b)                                Changes in
and Distributions With Respect to Stock

 

(1)           Basic
Adjustment Provisions. 
In the event of a stock dividend, stock split or combination of shares
(including a reverse stock split), recapitalization or other change in the
Company’s capital structure, the Administrator will make appropriate
adjustments to the maximum number of shares specified in Section 4(a) that
may be delivered under the Plan and will also make appropriate adjustments to
the number and kind of shares of stock or securities subject to Awards then outstanding
or subsequently granted, any exercise prices relating to Awards and any other
provision of Awards affected by such change.

 

(2)           Certain
Other Adjustments. 
The Administrator may also make adjustments of the type described in Section 7(b)(1) above
to take into account distributions to stockholders other than those provided
for in Section 7(a) and 7(b)(1), or any other event, if the
Administrator determines that adjustments are appropriate to avoid distortion
in the operation of 

 

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the
Plan and to preserve the value of Awards made hereunder, having due regard for
the qualification of ISOs under Section 422 and the requirements of Section 409A,
where applicable.

 

(3)           Continuing
Application of Plan Terms.  References in the Plan to shares of Stock
will be construed to include any stock or securities resulting from an
adjustment pursuant to this Section 7.

 

8.                                      LEGAL
CONDITIONS ON DELIVERY OF STOCK

 

The Company will not be
obligated to deliver any shares of Stock pursuant to the Plan or to remove any
restriction from shares of Stock previously delivered under the Plan until: (i) the
Company is satisfied that all legal matters in connection with the issuance and
delivery of such shares have been addressed and resolved; (ii) if the
outstanding Stock is at the time of delivery listed on any stock exchange or
national market system, the shares to be delivered have been listed or
authorized to be listed on such exchange or system upon official notice of
issuance; and (iii) all conditions of the Award have been satisfied or
waived. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Award, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act. The Company may require
that certificates evidencing Stock issued under the Plan bear an appropriate
legend reflecting any restriction on transfer applicable to such Stock, and the
Company may hold the certificates pending lapse of the applicable restrictions.

 

9.                                      AMENDMENT
AND TERMINATION

 

The Administrator may at any
time or times amend the Plan or any outstanding Award for any purpose which may
at the time be permitted by law, and may at any time terminate the Plan as to
any future grants of Awards; provided,
that except as otherwise expressly provided in the Plan the Administrator may
not, without the Participant’s consent, alter the terms of an Award so as to
affect adversely the Participant’s rights under the Award, unless the
Administrator expressly reserved the right to do so at the time of the Award; and  further
provided, that the Administrator may not, by amendment or otherwise,
adversely affect the rights of WCAS under Section 6(a)(9) or Exhibit B
hereof without the express written consent of WCAS. Any amendments to the Plan
shall be conditioned upon stockholder approval only to the extent, if any, such
approval is required by law (including the Code), as determined by the
Administrator.

 

10.                               OTHER
COMPENSATION ARRANGEMENTS

 

The existence of the Plan or
the grant of any Award will not in any way affect the Company’s right to award
a person bonuses or other compensation in addition to Awards under the Plan.

 

11.                               MISCELLANEOUS

 

(a)           Waiver of Jury Trial.  By
accepting an Award under the Plan, each Participant waives any right to a trial
by jury in any action, proceeding or counterclaim concerning any rights under
the Plan and any Award, or under any amendment, waiver, consent, instrument,
document or other agreement delivered or which in the future may be delivered
in connection therewith, and 

 

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agrees that
any such action, proceedings or counterclaim shall be tried before a court and
not before a jury. By accepting an Award under the Plan, each Participant
certifies that no officer, representative, or attorney of the Company has
represented, expressly or otherwise, that the Company would not, in the event
of any action, proceeding or counterclaim, seek to enforce the foregoing
waivers.

 

(b)           Limitation of Liability. 
Notwithstanding anything to the contrary in the Plan, neither the
Company nor the Administrator, nor any person acting on behalf of the Company
or the Administrator, shall be liable to any Participant or to the estate or
beneficiary of any Participant by reason of any acceleration of income, or any
additional tax, asserted by reason of the failure of an Award to satisfy the
requirements of Section 422 or Section 409A or by reason of Section 4999
of the Code; provided, that
nothing in this Section 11(b) shall limit the ability of the
Administrator or the Company to provide by express agreement with a Participant
for a gross-up payment or other payment in connection with any such tax or
additional tax.

 

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EXHIBIT A

 

Definition of Terms

 

The following terms, when used
in the Plan, will have the meanings and be subject to the provisions set forth
below in this Exhibit A. Certain terms used in Exhibit B are
separately defined in Exhibit B.

 

“Administrator”:  The Board, except that the Board may delegate
its authority under the Plan to a committee of the Board, in which case
references herein to the Board shall refer to such committee. The Board may
delegate (i) to one or more of its members such of its duties, powers and
responsibilities as it may determine; (ii) to one or more officers of the
Company the power to grant rights or options to the extent permitted by Section 157(c) of
the Delaware General Corporation Law; (iii) to one or more officers of the
Company the authority to allocate other Awards among such persons (other than
officers of the Company) eligible to receive Awards under the Plan as such
delegated officer or officers determine consistent with such delegation; provided, that with respect to any
delegation described in this clause (iii) the Board (or a properly
delegated member or members of the Board) shall have authorized the issuance of
a specified number of shares of Stock under such Awards and shall have
specified the consideration, if any, to be paid therefor; and (iv) to such
Employees or other persons as it determines such ministerial tasks as it deems
appropriate. In the event of any delegation described in the preceding
sentence, the term “Administrator” shall include the person or persons so
delegated to the extent of such delegation.

 

“Affiliate”:  Any corporation or other entity that stands
in a relationship to the Company that would result in the Company and such
corporation or other entity being treated as part of a single employer under Section 414(b) or
Section 414(c) of the Code, except that in determining eligibility
for the grant of a Stock Option or SAR by reason of service for an Affiliate,
Sections 414(b) and 414(c) of the Code shall be applied by
substituting “at least 50%” for “at least 80%” under Section 1563(a)(1), (2) and
(3) of the Code and Treas. Regs. § 1.414(c)-2; provided, that to the extent permitted under Section 409A,
“at least 20%” shall be used in lieu of “at least 50%”; and further provided, that the lower
ownership threshold described in this definition (50% or 20% as the case may
be) shall apply only if the same definition of affiliation is used consistently
with respect to all compensatory stock options or stock awards (whether under
the Plan or another plan). The Company may at any time by amendment provide
that different ownership thresholds (consistent with Section 409A) apply.

 

“Assumption
Agreement”:  An
agreement in form reasonably satisfactory to the Administrator and to WCAS
whereby a transferee of an Award or shares acquired under an Award agrees to be
bound with respect to such Award or shares by the provisions of Section 6(a)(9) and
Exhibit B of the Plan to the same extent as the Participant to whom such
Award was granted. An Assumption Agreement shall not be effective unless and
until the Administrator has either (i) been furnished with an opinion in
form and substance reasonably satisfactory to the Administrator of counsel
reasonably satisfactory to the Administrator that the transfer is exempt from
or not subject to the provisions of Section 5 of the Securities Act and
complies with or is exempt from all other applicable securities laws, or (ii) with
WCAS’s consent, expressly waived its rights under clause (i).

 

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“Award”:  Any or a combination of the following:

 

(i)                                     SARs.

 

(ii)                                  Stock
Options.

 

(iii)                               Restricted
Stock.

 

(iv)                              Unrestricted
Stock.

 

(v)                                 Stock
Units, including Restricted Stock Units.

 

(vi)                              Performance
Awards.

 

(vii)                           Awards
(other than Awards described in (i) through (vi) above) that are
convertible into or otherwise based on Stock.

 

“Board”:  The Board of Directors of the Company.

 

“Code”:  The U.S. Internal Revenue Code of 1986 as from
time to time amended and in effect, or any successor statute as from time to
time in effect. Any reference to a provision of the Code shall be deemed to
include a reference to any applicable guidance (as determined by the
Administrator) with respect to such provision.

 

“Company”:  AGA Medical Holdings, Inc.

 

“Covered
Transaction”: Any of (i) a consolidation, merger,
or similar transaction or series of related transactions, including a sale or
other disposition of stock, in which the Company is not the surviving
corporation or which results in the acquisition of all or substantially all of
the Company’s then outstanding common stock by a single person or entity or by
a group of persons and/or entities acting in concert, (ii) a sale or
transfer of all or substantially all the Company’s assets, or (iii) a
dissolution or liquidation of the Company. Where a Covered Transaction involves
a tender offer that is reasonably expected to be followed by a merger described
in clause (i) (as determined by the Administrator), the Covered
Transaction shall be deemed to have occurred upon consummation of the tender
offer.

 

“Employee”:  Any person who is employed by the Company or
an Affiliate.

 

“Employment”:  A Participant’s employment or other service
relationship with the Company and its Affiliates. Employment will be deemed to
continue, unless the Administrator expressly provides otherwise, so long as the
Participant is employed by, or otherwise is providing services in a capacity
described in Section 5 to the Company or its Affiliates. If a Participant’s
employment or other service relationship is with an Affiliate and that entity
ceases to be an Affiliate, the Participant’s Employment will be deemed to have
terminated when the entity ceases to be an Affiliate unless the Participant
transfers Employment to the Company or its remaining Affiliates.

 

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“ISO”:  A Stock Option intended to be an “incentive
stock option” within the meaning of Section 422. Each option granted
pursuant to the Plan will be treated as providing by its terms that it is to be
a non-incentive stock option unless, as of the date of grant, it is expressly
designated as an ISO.

 

“Participant”:  A person who is granted an Award under the
Plan.

 

“Performance
Award”: An Award subject to specified criteria, other
than the mere continuation of Employment or the mere passage of time, the satisfaction
of which is a condition for the grant, exercisability, vesting or full
enjoyment of the Award.

 

“Permitted
Transferee”:  In
the case of any Participant, the Participant’s spouse and lineal descendants or
trusts for the benefit of, or corporations, limited liability companies or
partnerships, the stockholders, members or general and/or limited partners of
which include, only such Participant and/or Participant’s parents, spouse or
lineal descendants. A transferee shall not be treated as a Permitted Transferee
unless and until the transferee is or becomes party to an effective Assumption
Agreement.

 

“Plan”:  The AGA Medical Holdings, Inc. 2006
Equity Incentive Plan as from time to time amended and in effect.

 

“Restricted
Stock”:  Stock
subject to forfeiture restrictions requiring that it be redelivered or offered
for sale to the Company if specified conditions are not satisfied.

 

“Restricted
Stock Unit”:  A
Stock Unit that is, or as to which the delivery of Stock or cash in lieu of
Stock is, subject to the satisfaction of specified performance or other vesting
conditions.

 

“SAR”:  A right entitling the holder upon exercise to
receive an amount (payable in cash or shares of Stock of equivalent value, as
specified in the Award except as otherwise determined by the Administrator)
equal to the excess of the fair market value of the shares of Stock subject to
the right over an amount that is not less than the fair market value of such
shares at the date of grant.

 

“Section 409A”:
Section 409A of the Code.

 

“Section 422”: Section 422
of the Code.

 

“Stock”:
Common Stock of the Company, par value $      
per share.

 

“Stock
Option”: An option entitling the holder to acquire
shares of Stock upon payment of the exercise price.

 

“Stock
Unit”: An unfunded and unsecured promise, denominated
in shares of Stock, to deliver Stock or cash measured by the value of Stock in
the future.

 

“Unrestricted
Stock”: Stock not subject to any restrictions under
the terms of the Award.

 

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“WCAS”:  Welsh, Carson, Anderson & Stowe IX,
L.P., a Delaware limited partnership.

 

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EXHIBIT B

 

Certain Restrictions

 

The provisions of this Exhibit B
shall apply to any Holder who is not a party to the Stockholders Agreement
dated as of July 28, 2005 by and among the Company, WCAS, and each of the
other individuals and entities from time to time named on Schedule I to said
Stockholders Agreement. The operative provisions of this Exhibit B are set
forth in Sections B.1 through B.4 below. Defined terms specific to this Exhibit B
are defined at Section B.5 below. Except as provided at Section B.1(c) below,
the provisions of this Exhibit B shall cease to have effect from and after
the consummation of a Qualified Public Offering.

 

B.1.  Restrictions on Transfer of Plan Shares.

 

(a)           Subject to any additional limitations on transfer that may
apply under an Award, a Holder of Plan Shares may at any time Transfer any or
all of the Plan Shares held by such Holder to any one or more Permitted
Transferees (but may not Transfer any Plan Shares, other than with the express
prior written consent of the Administrator and WCAS, other than to a Permitted
Transferee). No Transfer under this Section B.1 shall be permitted if it
would require the Company to register a class of equity securities under Section 12
of the Exchange Act under circumstances where the Company does not then have
securities of any class registered under Section 12 of the Exchange Act.
Each Holder agrees not to effect or attempt to effect any Transfer of Plan
Shares unless the Transfer is made pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and, in either case, in compliance with all applicable state securities laws.

 

(b)           The Company will not cause or permit the Transfer of any
Plan Shares to be made on its books (or on any register of securities
maintained on its behalf) unless the Transfer is permitted by and has been made
in accordance with the terms of this Exhibit B and all applicable federal
and state securities laws. Any attempted Transfer in violation of the terms
hereof shall be null and void ab  initio
and of no effect. Until one hundred eighty (180) days have elapsed following a
Qualified Public Offering or such earlier time as the Administrator may, with
the consent of WCAS, determine, all certificates representing Plan Shares that
are held by any Holder shall bear a legend (in addition to any other legends
required by the Administrator) which shall state the following:

 

“THE SECURITIES EVIDENCED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND NO INTEREST HEREIN MAY BE SOLD, OFFERED, ASSIGNED,
DISTRIBUTED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING ANY SUCH TRANSACTION
OR (B) THE COMPANY RECEIVES AN OPINION IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
STATING THAT SUCH TRANSACTION IS EXEMPT FROM SUCH REGISTRATION AND IN
COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS OR (C) THE COMPANY
AND ITS COUNSEL ARE OTHERWISE SATISFIED THAT SUCH 

 

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TRANSACTION IS EXEMPT FROM SUCH
REGISTRATION AND IN COMPLIANCE WITH ALL STATE SECURITIES LAWS.”

 

(c)           The provisions of this Section B.1 shall terminate
and be of no further force or effect from and after the 180th day
following the consummation of a Qualified Public Offering.

 

B.2.         Voting Rights. 
At each annual or special stockholders meeting called for the election
of directors, and whenever the stockholders of the Company act by written
consent with respect to the election of directors, each Holder of Plan Shares
shall be deemed to have given such Holder’s vote and consent in respect of such
shares and shall take any and all such additional steps as the Administrator
may require to cause such shares to be voted in a manner consistent with the
requirements of Section 4.01 of the Stockholders Agreement. For purposes
of the immediately preceding sentence, each Holder shall be bound by and may
rely conclusively on the instructions of the Administrator (which shall be
consistent with the Stockholders Agreement) and shall not, by reason of being a
Holder or by reason of this Exhibit B, have any right to review the
Stockholders Agreement.

 

B.3.         Participation in Certain Sales. In any case in which
WCAS initiates a “Third Party Sale” pursuant to Section 6.02 of the
Stockholders Agreement, each Holder shall participate in such sale if so
required by WCAS to the extent and in the manner specified by WCAS and in
connection therewith shall, on the same basis as other stockholders
participating in such transaction, (i) agree to covenants, join in
indemnification undertakings, and make representations and warranties; be (ii) fund
such Holder’s proportionate share of any adjustment in purchase price or escrow
arrangements and its proportionate share of any withdrawals from any such
escrow, including any such withdrawals that are made with respect to claims
arising out of agreements, covenants, representations, warranties or other
provisions relating to the transaction; (iii) be responsible for its
proportionate share of the fees and expenses of the transaction to the extent
not paid or reimbursed by the Company or another Person; and (iv) at the
closing of the transaction, deliver certificates evidencing the Plan Shares
then held by such Holder to be sold or cancelled in connection with such
transaction, duly endorsed for transfer or accompanied by stock powers executed
in blank, against payment of the purchase price therefor by wire transfer to
the account or accounts specified by such Holder. For purposes of this Section B.3,
each Holder shall be bound by and may rely conclusively on the instructions of
the WCAS (which shall be consistent with the Stockholders Agreement) and shall
not, by reason of being a Holder or by reason of this Exhibit B, have any
right to review the Stockholders Agreement.

 

B.4.         WCAS Consent to Certain Amendments; WCAS As Third Party
Beneficiary. Notwithstanding anything else to the contrary contained in
this Plan, none of the provisions of Section 6(a)(9), Section 9 or
this Exhibit B shall be amended, modified, terminated or supplemented
without the prior written approval of WCAS, which is intended to be a
beneficiary of such provisions entitled to enforce such provisions.

 

B.5.         Certain Defined Terms. When used in this Exhibit B,
the following terms not otherwise defined in Exhibit A shall have the
following meanings:

 

“Exchange
Act”: The Securities Exchange Act of 1934, as amended.

 

13

 

“Holder”:
A holder of Plan Shares.

 

“Plan
Share”: Any share of Stock acquired under an Award,
whether held by the Participant or his or her beneficiary or by a transferee.

 

“Qualified
Public Offering”: As defined in the Amended and
Restated Certificate of Incorporation of the Company, as amended from time to
time.

 

“Securities
Act”: The Securities Act of 1933, as amended.

 

“Stockholders
Agreement”: The stockholders agreement referenced in
the first paragraph of this Exhibit B, as the same is from time to time
amended and in effect.

 

“Transfer”:
A transfer, sale, assignment, pledge, hypothecation or other disposition
(including by operation of law), whether directly or indirectly pursuant to the
creation of a derivative security, the grant of an option or other right or the
imposition of a restriction on disposition or voting.

 

14Exhibit 10.4

 

UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MINNESOTA

 

	
  UNITED STATES OF AMERICA,

  	
  :

  	
   

  
	
   

  	
  :

  	
   

  
	
  Plaintiff,

  	
  :

  	
   

  
	
   

  	
  :

  	
   

  
	
  v.

  	
  :

  	
  NO.
                                        

  
	
   

  	
  :

  	
   

  
	
  AGA MEDICAL CORPORATION,

  	
  :

  	
  DEFERRED
  PROSECUTION 

  
	
   

  	
  :

  	
  AGREEMENT

  
	
   

  	
  :

  	
   

  
	
  Defendant.

  	
  :

  	
   

  
	
   

  	
  :

  	
   

  

 

Defendant AGA Medical Corporation (“AGA”), a Minnesota corporation, by
its undersigned attorneys, pursuant to authority granted by AGA’s Board of
Directors, and the United States Department of Justice, Criminal Division,
Fraud Section (the “Department of Justice” or “the Department”) enter into
this Deferred Prosecution Agreement (“the Agreement”). The terms and conditions
of this Agreement are as follows:

 

Criminal Information and Acceptance
of Responsibility

 

1. AGA accepts and acknowledges that the United States will file a
two-count criminal Information in the United States District Court for the
District of Minnesota charging AGA with conspiracy to commit an offense against
the United States, in violation of 18 U.S.C. § 371, that is, to violate the
Foreign Corrupt Practices Act of 1977 (“FCPA”), as amended, 15 U.S.C. §
78dd-2(a)(l) (Count One); and violating the FCPA, 15 U.S.C. § 78dd-2(a)(l) and
18 U.S.C. § 2 (Count Two). In so doing, AGA knowingly waives its right to
indictment on these charges, as well as all rights to a speedy trial pursuant
to the Sixth Amendment to the United

 

 

States
Constitution, Title 18, United States Code Section 3161, and Federal Rule of
Criminal Procedure 48(b). In addition, AGA consents to the filing of the
Information and the Agreement in the United States District Court for the
District of Minnesota.

 

2. AGA admits, accepts and acknowledges that it is responsible for the
acts of its officers, employees and agents, as set forth in the Statement of
Facts attached hereto as “Attachment A,” and incorporated by reference into
this Agreement, and that the facts described in Attachment A are true and
accurate. Should the Department initiate the prosecution that is deferred by
this Agreement, AGA agrees that it will neither contest the admissibility of,
nor contradict, in any such proceeding, the Statement of Facts.

 

Term of the Agreement

 

3. This Agreement is effective for a period beginning on the latest
date on which any party signs it and ending three (3) years and seven (7) calendar
days from that date (the “Term”), However, AGA agrees that, in the event that
the Department determines, in its sole discretion, that AGA has knowingly
violated any provision of this Agreement, an extension or extensions of the term
of the Agreement may be imposed by Department, in its sole discretion, for up
to a total additional time period of one-year. Any extension of the Agreement
extends all terms of this Agreement for an equivalent period. Conversely, in
the event the Department finds, in its sole discretion, that there exists a
change in circumstances sufficient to eliminate the need for the Monitor, and
the other provisions of this Agreement have been satisfied, the Term of the
Agreement may be terminated early.

 

2

 

Voluntary Cooperation

 

4. The Department enters into this Agreement based on the individual
facts and circumstances presented by this case and AGA. Among the facts
considered were: (a) AGA voluntarily and timely disclosed the misconduct
described in the Information and Statement of Facts; (b) AGA conducted a
thorough internal investigation of that misconduct; (c) AGA reported all
of its findings to the Department; (d) AGA cooperated in the Department’s
investigation of this matter; (e) AGA has undertaken remedial measures as
contemplated by this Agreement; and (f) AGA has agreed to continue to
cooperate with the Department in any investigation of the conduct of AGA and
its directors, officers, employees, agents, consultants, contractors and
subcontractors relating to violations of the FCPA.

 

5. During the Term of this Agreement, AGA agrees to cooperate fully
with the Department, and any other authority or agency, domestic or foreign,
designated by the Department investigating AGA, or any of its present and
former directors, officers, employees, agents, consultants, contractors and
subcontractors, or any other party, in any and all matters relating to corrupt
payments. AGA agrees that its cooperation shall include, but is not limited to,
the following:

 

a. AGA shall truthfully disclose all information with respect to its
activities and those of its present and former directors, officers, employees,
agents, consultants, contractors and subcontractors, concerning all matters
relating to corrupt payments, related false books and records, and inadequate
internal controls about which AGA has any knowledge or

 

3

 

about which the
Department may inquire. This obligation of truthful disclosure includes the
obligation of AGA to provide to the Department, upon request, any document,
record or other tangible evidence relating to such corrupt payments, books and
records, and internal controls about which the Department may inquire of AGA.

 

i. The Department specifically reserves the right to request that AGA
provide the Department with access to information, documents, records,
facilities and/or employees that may be subject to a claim of attorney-client
privilege and/or the attorney work-product doctrine.

 

ii. Upon written notice to the Department, AGA specifically reserves
the right to withhold access to information, documents, records, facilities
and/or employees based upon an assertion of a valid claim of attorney-client
privilege or application of the attorney work-product doctrine. Such notice
shall include a general description of the nature of the information,
documents, records, facilities and/or employees that are being withheld, as
well as the basis for the claim.

 

iii. In the event that AGA withholds access to the information,
documents, records, facilities and/or employees of AGA, the Department may
consider this fact in determining whether AGA has fully cooperated with the
Department.

 

iv. Except as provided in this paragraph, AGA shall not withhold from
the Department any information, documents, records, facilities and/or employees
on the basis of an attorney-client privilege or work product claim.

 

4

 

b. Upon request of the Department, with respect to any issue relevant
to its investigation of corrupt payments in connection with the operations of
AGA, related books and records and inadequate internal controls, AGA shall
designate knowledgeable employees, agents or attorneys to provide to the
Department the information and materials described in Paragraph 5(a) above,
on behalf of AGA. It is further understood that AGA must at all times provide
complete, truthful and accurate information.

 

c. With respect to any issue relevant to the Department’s investigation
of corrupt payments in connection with the operations of AGA, or any of its
present or former subsidiaries or affiliates, AGA shall use its best efforts to
make available for interviews or testimony, as requested by the Department,
present or former directors, officers, employees, agents and consultants of AGA
as well as the directors, officers, employees, agents and consultants of
contractors and subcontractors. This obligation includes, but is not limited
to, sworn testimony before a federal grand jury or in federal trials, as well
as interviews with federal law enforcement authorities. Cooperation under this
paragraph will include identification of witnesses who, to the knowledge of
AGA, may have material information regarding the matters under investigation.

 

d. With respect to any information, testimony, documents, records or
other tangible evidence provided to the Department pursuant to this Agreement,
AGA consents to any and all disclosures to other governmental authorities,
whether United States authorities or those of a foreign government, of such
materials as the Department, in its sole discretion, shall deem appropriate.

 

5

 

Payment of Monetary Penalty

 

6. AGA agrees to pay a monetary penalty in the amount of $2,000,000 to
the United States Treasury within ten days of the execution of this Agreement.
The $2,000,000 penalty is final and shall not be refunded: (a) if the
Department moves to dismiss the Information pursuant to this Agreement; or (b) should
the Department later determine that AGA has breached this Agreement and bring a
prosecution against AGA. Furthermore, nothing in this Agreement shall be deemed
an agreement by the Department that the $2,000,000 amount is the maximum
penalty that may be imposed in any such prosecution, and the Department is not
precluded from arguing that the Court should impose a higher fine, although the
Department agrees that under those circumstances, it will recommend to the
Court that the amount paid under this Agreement should be offset against any
fine the Court imposes as part of a judgment.

 

Conditional Release from Criminal
Liability

 

7. In return for the full and truthful cooperation of AGA, and
compliance with the terms and conditions of this Agreement, the Department
agrees not to use any information related to the conduct described in the
attached Statement of Facts against AGA in any criminal or civil case, except: (a) in
a prosecution for perjury or obstruction of justice; (b) in a prosecution
for making a false statement; (c) in a prosecution or other proceeding
relating to any crime of violence; or (d) in a prosecution or other
proceeding relating to a violation of any provision of Title 26 of the United
States Code. In addition, the Department agrees, except as provided herein,
that it will not bring any criminal or civil case against AGA related to the
conduct of present and former directors, officers, employees, agents,
consultants, contractors and

 

6

 

subcontractors, as
described in the attached Statement of Facts, or relating to information AGA
disclosed to the Department prior to the date on which this Agreement was
signed.

 

a. This paragraph does not provide any protection against prosecution
for any corrupt payments or false accounting, if any, made in the future by
AGA, or any of its directors, officers, employees, agents, consultants,
contractors and subcontractors irrespective of whether disclosed by AGA,
pursuant to the terms of this Agreement.

 

b. This paragraph also does not provide any protection against
prosecution for any corrupt payments made in the past which are not described
in the attached Statement of Facts or were not disclosed to the Department
prior to the date on which this Agreement was signed. In addition, this
paragraph does not provide any protection against criminal prosecution of any
present or former director, officer, employee, shareholder, agent or consultant
of AGA for any violations committed by them.

 

Corporate Compliance Program

 

8. AGA represents that it has implemented and will continue to
implement a compliance and ethics program designed to detect and prevent
violations of the FCPA and other applicable anti-corruption laws throughout its
operations, including those of its affiliates, joint ventures, and those of its
contractors and subcontractors, with responsibilities that include interactions
with foreign officials. Implementation of these policies and procedures shall
not be construed in any future enforcement proceeding as providing immunity or
amnesty for any crimes not disclosed to the Department as of the date of
signing of this Agreement for which AGA would otherwise be responsible.

 

7

 

9. In order to address deficiencies in its internal controls, policies
and procedures regarding compliance with the FCPA and other applicable
anti-corruption laws, AGA represents that it has undertaken, or will undertake
in the near-future, in a manner consistent with all of its obligations under
this Agreement, a review of the existing internal controls, policies and
procedures within AGA. Where necessary and appropriate, AGA will adopt new or
modify existing internal controls, policies and procedures in order to ensure
that AGA maintains: (a) a system of internal accounting controls designed
to ensure the making and keeping of fair and accurate books, records and
accounts; and (b) a rigorous anti-corruption compliance code designed to
detect and deter violations of the FCPA and other applicable anti-corruption
laws. The internal controls system and compliance code will include, but not be
limited to, the minimum elements set forth in Attachment C, which is
incorporated by reference into this Agreement.

 

Independent Corporate Monitor

 

10. AGA agrees to engage an independent corporate monitor (“the Monitor”)
within sixty (60) calendar days of signing this Agreement. Within thirty (30)
calendar days after the signing of this Agreement, and after consultation with
the Department, AGA will propose to the Department a candidate to serve as the
Monitor. The Monitor shall have, at a minimum, the following qualifications:

 

a. demonstrated expertise with respect to the FCPA, including
experience counseling on FCPA issues;

 

8

 

b. experience designing and/or reviewing corporate compliance policies,
procedures and internal controls, including FCPA-specific policies, procedures
and internal controls;

 

c. the ability to access and deploy resources as necessary to discharge
the Monitor’s duties as described in the Agreement; and

 

d. sufficient independence from AGA to ensure effective and impartial
performance of the Monitor’s duties as described in the Agreement.

 

11. The Department retains the right, in its sole discretion, to accept
or reject any Monitor proposed by AGA pursuant to the Agreement. In the event
the Department rejects a proposed monitor, AGA shall propose another candidate
within ten (10) calendar days after receiving notice of the rejection.
This process shall continue until a Monitor acceptable to all parties is
chosen. The Monitor’s term shall be three (3) years from the date on which
this Agreement was signed, subject to extension or early termination as
described in paragraph 3. The Monitor’s duties and authority, and the
obligations of AGA with respect to the Monitor and the Department, are set
forth in Attachment D, which is incorporated by reference into this Agreement.

 

Deferred Prosecution

 

12. In consideration of: (a) the past and future cooperation of
AGA described in Paragraphs 4 and 5 above; (b) AGA’s payment of a monetary
penalty of $2,000,000; and (c) AGA’s adoption and maintenance of remedial
measures, and independent review and audit of

 

9

 

such measures,
including the compliance code and review by the Monitor described in Paragraphs
8 through 11 above, the Department agrees that any prosecution of AGA for the
conduct set forth in the attached Statement of Facts, and for the conduct
relating to information that AGA disclosed to the Department, prior to the
signing of this Agreement, be and hereby is deferred for the Term of this
Agreement.

 

13. The Department further agrees that if AGA fully complies with all of
its obligations under this Agreement, the Department will not continue the
criminal prosecution against AGA described in Paragraph 1 and, after the Term,
this Agreement shall expire and the Department will move to dismiss the
criminal Information pending against AGA.

 

Breach of the Agreement

 

14. If, during the Term of this Agreement, the Department determines,
in its sole discretion, that AGA has committed any felony under federal law
subsequent to the signing of this Agreement, has, at any time, provided
deliberately false, incomplete or misleading information, or has otherwise
breached the Agreement, AGA shall thereafter be subject to prosecution for any
federal criminal violation of which the Department has knowledge. Any such
prosecutions may be premised on information provided by AGA. Any such
prosecution that is not time-barred by the applicable statute of limitations on
the date of the signing of this Agreement may be commenced against AGA
notwithstanding the expiration of the statute of limitations between the
signing of this Agreement and the expiration of the Term plus one year. Thus,
by signing this Agreement, AGA agrees that the statute of limitations with
respect to any prosecution that is not time-barred on the date of this
Agreement shall be tolled for the Term plus one year.

 

10

 

15. In the event that the Department determines that AGA has breached
this Agreement: (a) all statements made by or on behalf of AGA to the
Department or to the Court, including the attached Statement of Facts, and any
testimony given by AGA before a grand jury or any tribunal, at any legislative
hearings whether prior or subsequent to this Agreement, or any leads derived
from such statements or testimony, shall be admissible in evidence in any and
all criminal proceedings brought by the Department against AGA; and (b) AGA
shall not assert any claim under the United States Constitution, Rule 1l(f) of
the Federal Rules of Criminal Procedure, Rule 410 of the Federal Rules of
Evidence or any other federal rule, that statements made by or on behalf of AGA
prior or subsequent to this Agreement, and any leads derived therefrom, should
be suppressed. The decision whether conduct or statements of any individual
will be imputed to AGA for the purpose of determining whether AGA has violated
any provision of this Agreement shall be in the sole discretion of the
Department.

 

16. AGA acknowledges that the Department has made no representations,
assurances or promises concerning what sentence may be imposed by the Court if
AGA breaches this Agreement and this matter proceeds to judgment. AGA further
acknowledges that any such sentence is solely within the discretion of the
Court and that nothing in this Agreement binds or restricts the Court in the
exercise of such discretion.

 

Sale or Merger of AGA

 

17. AGA agrees that in the event it sells, merges, or transfers all or
substantially all of its business operations as they exist as of the date of
this Agreement, whether such sale is

 

11

 

structured as a
stock or asset sale, merger or transfer, it shall include in any contract for
sale, merger or transfer a provision binding the purchaser, or any successor in
interest thereto, to the obligations described in this Agreement.

 

Public Statements by AGA

 

18. AGA expressly agrees that it shall not, through present or future
attorneys, directors, officers, employees, agents or any other person
authorized to speak for AGA make any public statement, in litigation or
otherwise, contradicting the acceptance of responsibility by AGA set forth
above or the facts described in the attached Statement of Facts. Any such
contradictory statement shall, subject to cure rights of AGA described below,
constitute a breach of this Agreement and AGA thereafter shall be subject to
prosecution as set forth in Paragraphs 13 and 14 of this Agreement. The
decision whether any public statement by any such person contradicting a fact
contained in the Statement of Facts will be imputed to AGA for the purpose of
determining whether they have breached this Agreement shall be at the sole
discretion of the Department. If the Department determines that a public
statement by any such person contradicts in whole or in part a statement
contained in the Statement of Facts, the Department shall so notify AGA, and
AGA may avoid a breach of this Agreement by publicly repudiating such statement(s) within
five (5) business days after notification. Consistent with the obligations
of AGA as set forth above, AGA shall be permitted to raise defenses and to
assert affirmative claims in civil and regulatory proceedings relating to the
matters set forth in the Statement of Facts. This paragraph does not apply to
any statement made by any present or former employee of AGA in the course of
any criminal, regulatory or civil case initiated against such individual,
unless such individual is speaking on behalf of AGA.

 

12

 

19. In connection with this Agreement, AGA shall not issue a press
release unless it first determines that the text of the release is acceptable
to the Department.

 

Limitations on Binding Effect of
Agreement

 

20. This Agreement is binding on AGA and the Department but
specifically does not bind any other federal agencies, or any state, local or
foreign law enforcement or regulatory agencies, although the Department will
bring the cooperation of AGA and its compliance with its other obligations
under this Agreement, to the attention of such agencies and authorities if
requested to do so by AGA.

 

Complete Agreement

 

21. This Agreement sets forth all the terms of the Deferred Prosecution
Agreement between AGA and the Department. No amendments, modifications or
additions to this Agreement shall be valid unless they are in writing and
signed by the Department, the attorneys for AGA and a duly authorized
representative of AGA.

 

Notice

 

22. Any notice to the Department under this Agreement shall be given by
personal delivery, overnight delivery by a recognized delivery service or
registered or certified mail, in each case, for the Department, addressed to
Mark F. Mendelsohn (or his successor), Deputy Chief, Fraud Section, Criminal
Division, U.S. Department of Justice, fourth floor, 1400 New

 

13

 

York Avenue, N.W.,
Washington, D.C. 20005 and, for AGA, addressed to Ronald E. Lund, General
Counsel, AGA Medical Corporation. Notice shall be effective upon actual receipt
by AGA.

 

AGREED:

 

FOR
AGA MEDICAL CORPORATION:

 

	
   

  	
   

  	
  /s/ Stanley Soya

  
	
   

  	
   

  	
  Stanley Soya

  
	
   

  	
   

  	
  Jackson Kelly,
  LLP

  
	
   

  	
   

  	
  Counsel for AGA
  Medical Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  FOR
  THE DEPARTMENT OF JUSTICE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  STEVEN A.
  TYRRELL

  
	
   

  	
   

  	
  Chief, Fraud
  Section

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Bybee

  
	
   

  	
   

  	
  David Bybee

  
	
   

  	
   

  	
  Trial Attorney,
  Fraud Section

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  William B.
  Jacobson

  
	
   

  	
   

  	
  Assistant Chief

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  United States
  Department of Justice

  
	
   

  	
   

  	
  Fraud Section,
  Criminal Division

  
	
   

  	
   

  	
  10th &
  Constitution Avenue, NW

  
	
   

  	
   

  	
  Washington, D.C.
  20530

  
	
   

  	
   

  	
  (202) 514-7023

  

 

 

Filed at
Minneapolis, Minnesota, on this 2nd day of June, 2008.

 

14

 

ATTACHMENT
A

 

STATEMENT OF FACTS

 

The following Statement of Facts is incorporated by this reference as
part of the Deferred Prosecution Agreement (“the Agreement”) between the United
States Department of Justice, Criminal Division, Fraud Section (“the Department”)
and AGA Medical Corporation (“AGA”) and the parties hereby agree and stipulate
that the following information is true and accurate. As set forth in Paragraph
2 of the Agreement, AGA accepts and acknowledges that it is responsible for the
acts of its officers, employees and agents as set forth below.

 

Should the Department initiate the prosecution that is deferred by this
Agreement, AGA agrees that it will neither contest the admissibility of, nor
contradict, this Statement of Facts in any such proceeding.

 

If this matter were to proceed to trial, the United States would prove
beyond a reasonable doubt, by admissible evidence, the facts alleged in the
Criminal Information filed contemporaneously with this Agreement. This evidence
would establish the following:

 

1. AGA MEDICAL CORPORATION (“AGA”) was incorporated in 1995 in
Minnesota, had its principal place of business in Golden Valley, Minnesota, and
was a “domestic concern” as that term is used in the FCPA, 15 U.S.C.§
78dd-2(h)(l)(B).

 

2. AGA manufactured and sold medical devices for the minimally invasive
treatment of congenital heart defects. AGA marketed and sold its products in
over 90 countries, including the People’s Republic of China (“China”), through
a network of local distributors and direct sales.

 

3. AGA maintained email servers at its Golden Valley, Minnesota,
headquarters and all email directed to AGA employees was sent to these email
servers.

 

 

4. From at least March 2000, through in or about late 2002, AGA
applied to the State Intellectual Property Office of the People’s Republic of
China (“the Chinese Patent Office”), an agency of the Chinese government, for
patents on several of its products.

 

5. From in or about 1995 to the present, “Officer A,” a U.S. citizen,
was a high-ranking officer and part owner of AGA, who had authority to set
company policy, contract with distributors, hire and fire employees, set sales
prices, and approve sales practices in foreign countries.

 

6. From in or about 1997, through in or about November 2001, “Employee
B,” a U.S. citizen, was the head of international sales for AGA.

 

7. From in or about December 2001, through in or about early-2007,
“Employee C,” a U.S. citizen, was the head of international sales for AGA.

 

8. In or about December 1998, AGA entered into an agreement with a
Chinese company to be the sole distributor of AGA products in China. An
employee of that company, “the Chinese Distributor,” a Chinese citizen, was
responsible for the AGA account at that company and was the main point of contact
for AGA. In or about 1999, the Chinese Distributor left his employer to form
his own company. AGA moved its business from the initial company to the Chinese
Distributor’s new company and AGA maintained a business relationship with the
Chinese Distributor and his company until AGA suspended the shipment of
products to the Chinese Distributor in June 2005. On or about April 12,
2006, AGA terminated its agreement with the Chinese Distributor.

 

2

 

9. The Chinese Distributor was authorized to sell AGA products,
negotiate prices, and employ salespeople. The Chinese Distributor’s primary
customers were hospitals owned and operated by the government of China and
government-employee physicians working at those hospitals.

 

10. Government-owned and controlled hospitals in China are “instrumentalities”
of the Chinese government and physicians employed by such hospitals are “foreign
officials,” as those terms are used in the FCPA, 15 U.S.C. § 78dd-2(h)(2)(A).

 

11. In or about December 1997, Officer A, on behalf of AGA, signed
and executed a distributorship agreement with the company that then employed
the Chinese Distributor.

 

12. On or about December 20, 1997, the Chinese Distributor sent an
email from China to Officer A in Minnesota informing Officer A that hospitals
in China were asking for a 10% “discount” and physicians were asking for a 10% “commission”
on products sold. The Chinese Distributor further informed Officer A that if
AGA did not accept those terms, the hospitals and physicians would not purchase
AGA’s products.

 

13. In or about January 1998, the Chinese Distributor traveled
from China to Minnesota to discuss with Officer A, among other things, the
prices that the Chinese Distributor would charge for AGA’s products and the
kickbacks that the Chinese Distributor would pay to physicians in China in
order to induce them to purchase AGA’s products.

 

14. On or about July 16,1998, Officer A sent an e-mail to the
Chinese Distributor stating: “I understand that the fee you must pay each
physician was to be included in your selling price. It should therefore not be
an issue.”

 

3

 

15. In or about December 1998, Officer A, on behalf of AGA, signed
and executed a second distributorship agreement with the company that then
employed the Chinese Distributor.

 

16. In or about 1999, after the Chinese Distributor left his original
employer to start his own company, Officer A, on behalf of AGA, entered into a
distributorship agreement with the Chinese Distributor’s new company.

 

17. On or about February 1, 2000, the Chinese Distributor again
traveled from China to Minnesota to discuss with Officer A, among other things,
the prices that the Chinese Distributor would charge in China for AGA’s
products and the kickbacks that the Chinese Distributor would pay to physicians
in China to induce them to purchase AGA’s products.

 

18. On or about March 19, 2001, the Chinese Distributor sent an
email from China to Employee B in Minnesota stating that the Chinese
Distributor had, to that point, paid $460,000 in “commissions” to physicians in
China and had also contacted a Chinese patent official to whom he would have to
pay money. The Chinese Distributor wrote, “This week I have maken [sic] an
appointment with one key person in China knowledge and Patent Protection
Bureau. Any action in China I must pay money to do.”

 

19. On or about May 11, 2001, the Chinese Distributor sent an
email from China to Officer A in Minnesota stating that the Chinese Distributor
had met with a Chinese patent official regarding AGA’s patent application and
that the official had agreed to speed up the review of AGA’s application and to
“solve some problems in different departments in her bureau” related to the
application. The Chinese Distributor explained in the email that he would

 

4

 

have to “sponsor”
the patent official for this work and asked Officer A if AGA would agree to
cover that cost. By return email on or about that same day, Officer A agreed,
on behalf of AGA, to cover the fee to be paid to the Chinese patent official by
the Chinese Distributor, stating, “I am still in agreement with our prior
discussions and will cover her fee as long as we can get the [sic] patent
issued in a timely manner.”

 

20. On or about July 24, 2001, the Chinese Distributor sent an
email from China to Officer A in Minnesota stating: “Very good news that your
patents have been taken out from the stock and begun to check by the
observation people. My friends told me that if there are any news, they will
tell me. I think we will win this war if we can get the patent approvenment
[sic]. I contacted with two officials working in different departments. They
will help us from different ways. They don’t know each other and don’t know I
asked two people to help us ... About your new product, my friend told me that
you should ask your agent to apply the invent and practical patents sametime
[sic]. I can ask my friend to help to approve the practical patent in one year
and get 10 years protection.”

 

21. On or about February 6, 2002, the Chinese Distributor sent an
email from China to Employee C in Minnesota stating: “Please inform [Officer A]
don’t give up the application for the first three patents in China. I will
contact with the officials of China patent bureau again after Chinese new year.
Maybe money will help us.”

 

22. On or about March 20, 2002, the Chinese Distributor sent an
email from China informing Officer A that the Chinese Distributor had paid
$20,000 to the patent official to

 

5

 

approve patents
for AGA products and that: “I just need the results of patents approved no
matter what way he do.”

 

23. On or about April 17, 2002, the Chinese Distributor sent an
email from China to Officer A stating: “Today my friend tells me that one of
your last two patents have been approved and the other one will be approved
soon.”

 

24. On or about October 18, 2002, the Chinese Distributor sent an
email from China to Officer A stating that the Chinese Distributer was
currently paying a “reward” to each physician who purchased an AGA product in
an amount ranging from $300 to $1,000 per product purchased.

 

25. On or about October 31, 2002, Employee C sent a memo to
Officer A listing the then-current prices for various AGA products in China and
including a column entitled “Reward to Physicians,” with dollar amounts listed
for each product. On or about this same date, Employee C hand-wrote a notation
reading, “OK, effective immediately,” at the top of this memo.

 

26. On or about October 21, 2003, Employee C wrote a memorandum to
Officer A and other AGA employees reporting on his recent trip to China. The
memorandum contained a chart of then-current prices being charged for various
AGA products in China and contained a notation reflecting the amount of the “rebates”
given by the Chinese Distributor to physicians.

 

27. On or about December 2, 2003, the Chinese Distributor sent an
email to Employee C regarding pricing for AGA products in China which stated: “My
company also need to provide 20% kickback for physicians and sometimes 10%
discount to hospitals.”

 

6

 

28. On about December 5, 2003, the Chinese Distributer sent an email
from China to Employee C, explaining how physicians at hospitals in China
selected products for purchase: “The physicians suggest the patient to use
which device according [to] the patient’s family economic ability and the
kickback.”

 

29. On or about February 26, 2005, the Chinese Distributor sent an
email from China to Employee C providing Employee C with a list of then-current
prices being charged for various AGA products in China and informing Employee C
that the Chinese Distributor was paying physicians kickbacks of 15% to 25% of
the purchase price.

 

30. Between 1997 and 2005, AGA regularly shipped its products from
Minnesota to the Chinese Distributor in China, via interstate and international
freight carriers, for sale by the Chinese Distributor at the prices, and
pursuant to the terms, discussed and agreed to by AGA, Officer A, Employee B,
Employee C, the Chinese Distributor and others.

 

31. Between 1997 and 2005, AGA sales in China totaled approximately
$13.5 million.

 

7

 

ATTACHMENT
B

 

CERTIFICATE OF CORPORATE RESOLUTION

 

WHEREAS, AGA MEDICAL CORPORATION (“AGA” or, “the Company”) has been
engaged in discussions with the United States Department of Justice, Criminal
Division, Fraud Section (“the Department”) in connection with issues
arising in relation to certain corrupt payments to foreign officials to
facilitate the award of contracts and obtaining business for the Company; and

 

WHEREAS, in order to resolve such discussions, it is proposed that the
Company enter into a certain agreement with the Department; and

 

WHEREAS the Company’s General Counsel, together with investigative and
outside counsel for the Company, have advised the Board of Directors of the
Company’s rights, possible defenses, the Sentencing Guidelines’ provisions, and
the consequences of entering into such agreement with the Department;

 

Therefore, this Board hereby RESOLVES that:

 

1. The Company (i) consents to the filing in the United States
District Court for the District of Minnesota of a two-count Information
charging AGA with conspiracy to commit an offense against the United States,
namely, to violate the Foreign Corrupt Practices Act (“FCPA”) (15 U.S.C. §
78dd-2(a)(1), in violation of 18 U.S.C. § 371 (Count One); and the payment of
bribes, in violation of 15 U.S.C. § 78dd-2 and 18 U.S.C. § 2 (Count Two); (ii) waives
indictment on such charges and enters into a Deferred Prosecution Agreement
with the Department; and (iii) agrees to accept a monetary penalty against
AGA of $2,000,000, and to pay $2,000,000 to the United States Treasury with
respect to the conduct described in the Information.

 

 

2. The General Counsel, or his delegate, is hereby authorized,
empowered and directed, on behalf of the Company, to execute the Deferred
Prosecution Agreement substantially in such form as reviewed by this Board of
Directors at this meeting with such changes as the General Counsel, or his
delegate, may approve;

 

3. The General Counsel, or his delegate, is hereby authorized,
empowered and directed to take any and all actions as may be necessary or
appropriate, and to approve the forms, terms or provisions of any agreement or
other documents as may be necessary or appropriate to carry out and effectuate
the purpose and intent of the foregoing resolutions; and

 

4. All of the actions of the General Counsel, which actions would have
been authorized by the foregoing resolutions except that such actions were
taken prior to the adoption of such resolutions, are hereby severally ratified,
confirmed, approved and adopted as actions on behalf of the Company.

 

 

	
  Date:
  June 2, 2008

  	
   

  	
  /s/ Ronald E.
  Lund

  
	
   

  	
   

  	
  Ronald E. Lund,
  Secretary

  Board of Directors

  AGA Medical Corporation

  

 

2

 

ATTACHMENT
C

 

CORPORATE COMPLIANCE PROGRAM

 

In order to address deficiencies in its internal controls, policies and
procedures regarding compliance with the Foreign Corrupt Practices Act (“FCPA”),
15 U.S.C §§ 78dd-l, et seq., and
other applicable anti-corruption laws, AGA Medical Corporation (“AGA”) agrees
to conduct, in a manner consistent with this Agreement, a review of its
existing internal controls, policies and procedures.

 

Where necessary and appropriate, AGA further agrees to adopt new or to
modify existing internal controls, policies and procedures in order to ensure
that it maintains: (a) a system of internal accounting controls designed
to ensure that AGA makes and keeps fair and accurate books, records and
accounts; and (b) a rigorous anti-corruption compliance code, standards
and procedures designed to detect and deter violations of the FCPA and other
applicable anti-corruption laws. At a minimum, this should include, but ought
not be limited to, the following elements:

 

1. A clearly articulated corporate policy against violations of the
FCPA and other applicable anti-corruption laws.

 

2. A system of financial and accounting procedures, including a system
of internal accounting controls, designed to ensure the maintenance of fair and
accurate books, records and accounts.

 

3. Promulgation of compliance standards and procedures designed to
reduce the prospect of violations of the FCPA, other applicable anti-corruption
laws and AGA’s compliance code. These standards and procedures should apply to
all directors, officers and employees and, where necessary and appropriate,
outside parties acting on behalf of AGA in foreign

 

 

jurisdictions,
including agents, consultants, representatives, distributors, teaming partners
and joint venture partners (collectively referred to as “agents and business
partners”).

 

4. The assignment of responsibility to one or more senior corporate
officials of AGA for the implementation and oversight of compliance with
policies, standards and procedures regarding the FCPA and other applicable
anti-corruption laws. Such corporate official(s) shall have the authority
to report matters directly to AGA’s Board of Directors.

 

5. Mechanisms designed to ensure that the policies, standards and
procedures of AGA regarding the FCPA and other applicable anti-corruption laws
are effectively communicated to all directors, officers, employees and, where
necessary and appropriate, agents and business partners. These mechanisms shall
include: (A) periodic training for all such directors, officers,
employees, agents and business partners; and (B) annual certifications by
all such directors, officers, employees, agents and business partners,
certifying compliance with the training requirements.

 

6. An effective system for reporting suspected criminal conduct and/or
violations of the compliance policies, standards and procedures regarding the
FCPA and other applicable anti- corruption laws for directors, officers,
employees, agents and business partners.

 

7. Appropriate disciplinary procedures to address, among other things,
violations of the FCPA, other applicable anti-corruption laws or AGA’s
compliance code by directors, officers, employees, agents and business
partners.

 

8. Appropriate due diligence requirements pertaining to the retention
and oversight of agents and business partners.

 

2

 

9. Standard provisions in agreements, contracts, and renewals thereof
with all agents and business partners which are designed to prevent violations
of the FCPA and other applicable anti-corruption laws, which provisions may,
depending upon the circumstances, include: (A) anti-corruption
representations and undertakings relating to compliance with the FCPA and other
applicable anti-corruption laws; (B) rights to conduct audits of the books
and records of the agent or business partner to ensure compliance with the
foregoing; and (C) rights to terminate an agent or business partner as a
result of any breach of anti-corruption laws, and regulations or
representations and undertakings related to such matters.

 

3

 

ATTACHMENT
D

 

INDEPENDENT CORPORATE MONITOR

 

1. Within sixty (60) calendar days of the execution of this Agreement,
AGA MEDICAL CORPORATION (“AGA” or “the Company”) agrees to engage an
independent corporate monitor (the “Monitor”) for a period of three (3) years.
The Monitor’s primary responsibility is to assess and monitor the Company’s
compliance with the terms of this Agreement so as to specifically address and
reduce the risk of any recurrence of the Company’s misconduct, including
evaluating the Company’s corporate compliance program with respect to the
Foreign Corrupt Practices Act (“FCPA”), 15 U.S.C. §§ 78dd-l, et seq., and other relevant
anti-corruption laws. Within thirty (30) calendar days after the signing of
this Agreement, and after consultation with the Department, AGA will propose to
the Department a candidate to serve as the Monitor. The Monitor shall have, at
a minimum, the following qualifications:

 

a. demonstrated expertise with respect to the FCPA, including
experience counseling on FCPA issues;

 

b. experience designing and/or reviewing corporate compliance policies,
procedures and internal controls, including FCPA-specific policies, procedures
and controls;

 

c. the ability to access and deploy resources as necessary to discharge
the Monitor’s duties as described in the Agreement; and

 

d. sufficient independence from AGA to ensure effective and impartial
performance of the Monitor’s duties as described in the Agreement.

 

2. The Department retains the right, in its sole discretion, to accept
or reject the Monitor proposed by AGA pursuant to the Agreement. In the event
the Department rejects a proposed monitor, AGA shall propose another candidate
within ten (10) calendar days after

 

 

receiving notice
of the rejection. This process shall continue until a Monitor acceptable to all
parties is chosen. The Monitor’s term shall be three (3) years from the
date on which this Agreement was signed, subject to extension or early
termination as described in Paragraph 3 of the Agreement. The Monitor’s duties
and authority, and the obligations of AGA with respect to the Monitor and the
Department, are set forth below.

 

3. AGA agrees that it will not employ or be affiliated with the Monitor
for a period of not less than one year from the date the Monitor’s work has
ended.

 

4. The Monitor will review and evaluate the effectiveness of AGA’s
internal controls, record-keeping, and financial reporting policies and
procedures as they relate to AGA’s compliance with the books and records,
internal accounting controls and anti-bribery provisions of the FCPA, and other
applicable anti-corruption laws. This review and evaluation shall include an
assessment of those policies and procedures as actually implemented. The
retention agreement between AGA and the Monitor will reference this Agreement
and include this Agreement as an attachment so the Monitor is fully apprised of
his or her duties and responsibilities.

 

5. AGA shall cooperate fully with the Monitor and the Monitor shall
have the authority to take such reasonable steps as, in his or her view, may be
necessary to be fully informed about the compliance program of AGA within the
scope of his or her responsibilities under this Agreement. To that end, AGA
shall provide the Monitor with access to all information, documents, records,
facilities and/or employees that fall within the scope of responsibilities of
the Monitor under this Agreement. Any such disclosure by AGA to the

 

2

 

Monitor concerning
corrupt payments, related books and records and related internal controls shall
not relieve AGA of its obligation truthfully to disclose such matters to the
Department.

 

a. The parties agree that the Monitor is an independent third-party,
not an employee or agent of AGA or the Department, and that no attorney-client
relationship shall be formed between AGA and the Monitor.

 

b. In the event that AGA seeks to withhold from the Monitor access to
information, documents, records, facilities and/or employees of AGA on grounds
that the information, documents, records, facilities and/or employees are
protected from disclosure by the attorney-client privilege or the attorney
work-product doctrine, AGA shall promptly provide written notice of this
determination to the Monitor and the Department. Such notice shall include a
general description of the nature of the information, documents, records,
facilities and/or employees that are being withheld, as well as the basis for
the claim. The Department may then consider whether to make a further request
for access to such information, documents, records, facilities and/or
employees, as provided in Paragraph 5(a) of the Agreement.

 

c. Except as provided in this paragraph, AGA shall not withhold from
the Monitor any information, documents, records, facilities and/or employees on
the basis of an attorney-client privilege or work product claim.

 

6. AGA agrees that:

 

a. The Monitor shall assess whether AGA’s existing policies and
procedures are reasonably designed to detect and prevent violations of the FCPA
and other applicable anti-corruption laws.

 

3

 

b. The Monitor shall evaluate AGA’s compliance with this Agreement.

 

c. The Monitor shall oversee AGA’s implementation of and adherence to
all existing, modified or new policies and procedures relating to FCPA
compliance (the “Policies and Procedures”), including the minimum policies and
procedures set forth in Attachment C.

 

d. The Monitor shall ensure that the Policies and Procedures are
appropriately designed to accomplish their goals.

 

e. During the three (3) year term, the Monitor shall conduct an
initial review and prepare an initial report, followed by two follow-up reviews
and reports as described below:

 

(i) With respect to each of the three (3) reviews, after
initial consultations with AGA and the Department, the Monitor shall prepare a
written work plan for each review, which shall be submitted in advance to AGA
and the Department for comment. In order to conduct an effective initial review
and to understand fully any existing deficiencies in controls, policies and
procedures related to the FCPA and other applicable anti-corruption laws, the
Monitor’s initial work plan shall include such steps as are reasonably
necessary to develop an understanding of the facts and circumstances
surrounding any violations that may have occurred, but the parties do not
intend that the Monitor will conduct his or her own inquiry into those
historical events. Any disputes between AGA and the Monitor with respect to the
work plan shall be decided by the Department in its sole discretion.

 

(ii) In connection with the initial review, the Monitor shall
issue a written report within one hundred twenty (120) calendar days of his or
her retention setting forth the Monitor’s assessment and, if appropriate and
necessary, making recommendations reasonably designed to improve the policies
and procedures of AGA for ensuring compliance

 

4

 

with the FCPA and
other applicable anti-corruption laws. The Monitor shall provide the report to
the Board of Directors of AGA and contemporaneously transmit copies to Mark F.
Mendelsohn (or his successor), Deputy Chief, Fraud Section, Criminal Division,
U.S. Department of Justice, 10th and Constitution Ave., N.W., Bond
Building, Fourth Floor, Washington, DC 20530. The Monitor may extend the time
period for issuance of the report with prior written approval of the
Department.

 

(iii) Within one-hundred twenty (120) calendar days after
receiving the Monitor’s report, AGA shall adopt the recommendations set forth
in the report; provided, however, that within sixty (60) calendar days after
receiving the report, AGA shall advise the Monitor and the Department in
writing of any recommendations that AGA considers unduly burdensome,
impractical, costly or otherwise inadvisable. With respect to any
recommendation that AGA considers unduly burdensome, impractical, costly or
otherwise inadvisable, AGA need not adopt that recommendation; instead, AGA may
propose in writing an alternative policy, procedure or system designed to
achieve the same objective or purpose. As to any recommendation on which AGA
and the Monitor ultimately do not agree, the views of AGA and the Monitor shall
promptly be brought to the attention of the Department. The Department may
consider the Monitor’s recommendation and the Company’s reasons for not
adopting the recommendation in determining whether AGA has fully complied with
its obligations under this Agreement.

 

(iv) The Monitor shall undertake two follow-up reviews to further
monitor and assess whether the policies and procedures of AGA are reasonably
designed to detect and prevent violations of the FCPA and other applicable
anti-corruption laws.

 

5

 

(v) Within sixty (60) calendar days of initiating each follow-up
review, the Monitor shall: (A) complete the review; (B) certify
whether the anti-bribery compliance program of AGA, including its policies and
procedures, is appropriately designed and implemented to ensure compliance with
the FCPA and other applicable anti-corruption laws; and (C) report on the
Monitor’s findings in the same fashion as with respect to the initial review.

 

(vi) The first follow-up review and report shall be completed by
one year after the initial review. The second follow-up review and report shall
be completed by one year after the completion of the first follow-up review.

 

(vii) The Monitor may extend the time period for submission of the
follow-up reports with prior written approval of the Department.

 

7. In undertaking the assessments and reviews described above, the
Monitor shall formulate conclusions based on, among other things: (a) inspection
of relevant documents, including all the policies and procedures relating to
AGA’s anti-corruption compliance program; (b) onsite observation of AGA’s
systems and procedures, including its internal controls, record-keeping and
internal audit procedures; (c) meetings with, and interviews of, relevant
employees, officers, directors and other persons at mutually convenient times
and places; and (d) analyses, studies and testing of AGA’s anti-corruption
compliance program.

 

8. Should the Monitor, during the course of his or her engagement,
discover credible evidence that questionable or corrupt payments or
questionable or corrupt transfers of property or interests may have been
offered, promised, paid or authorized by any AGA entity or person, or any
entity or person working directly or indirectly for AGA, or that related false
books and records have been maintained, the Monitor shall promptly report such
conduct to

 

6

 

AGA’s General
Counsel, its Board of Directors, and its outside counsel for further
investigation, unless the Monitor believes, in the exercise of his or her
discretion, that such disclosure should be made directly to the Department. If
the Monitor refers the matter only to AGA’s General Counsel, its Board of
Directors, and its outside counsel, AGA shall promptly report the same to the
Department and contemporaneously notify the Monitor that such report has been
made. If AGA fails to make disclosure to the Department within ten (10) calendar
days of the Monitor’s report of such conduct to AGA, the Monitor shall
independently disclose his or her findings to the Department at the address
listed in Paragraph 6(e)(ii) above. Further, in the event that AGA, or any
entity or person working directly or indirectly for AGA, refuses to provide
information necessary for the performance of the Monitor’s responsibilities,
the Monitor shall promptly disclose that fact to the Department. AGA shall not
take any action to retaliate against the Monitor for any such disclosures or
for any other reason. The Monitor may report other criminal or regulatory
violations discovered in the course of performing his or her duties, in the
same manner as described above.

 

7

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