Exhibit 10.01
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Scripps Networks Interactive, Inc.
Executive Change in Control Plan

 

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TABLE OF CONTENTS

                      Page    
 
        ARTICLE 1.  
INTRODUCTION
    1      
 
        ARTICLE 2.  
DEFINITIONS
    1      
 
        ARTICLE 3.  
PLAN PARTICIPATION
    4      
 
        ARTICLE 4.  
ACCELERATION OF VESTING OF EQUITY AWARDS UPON CHANGE IN CONTROL
    4      
 
        ARTICLE 5.  
TERMINATION PAYMENT AND OTHER BENEFITS UPON CERTAIN TERMINATIONS
OF EMPLOYMENT AFTER CHANGE IN CONTROL
    5      
 
        ARTICLE 6.  
NON-DUPLICATION OF PAYMENTS AND BENEFITS
    8      
 
        ARTICLE 7.  
SOURCE OF PAYMENTS
    9      
 
        ARTICLE 8.  
PLAN ADMINISTRATION AND CLAIMS PROCEDURE
    9      
 
        ARTICLE 9.  
ARBITRATION OF DISPUTES
    10      
 
        ARTICLE 10.  
MISCELLANEOUS PROVISIONS
    10  

 
 

 

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ARTICLE 1.   INTRODUCTION

Scripps Networks Interactive, Inc., an Ohio corporation (“Company”), adopted the
Scripps Networks Interactive, Inc. Executive Change in Control Plan (“Plan”),
effective immediately prior to the Distribution Date as defined in the Employee
Matters Agreement by and between The E. W. Scripps Company and the Company (the
“Effective Date”).
The Plan generally provides for certain potential termination payments and other
benefits for covered executives if their employment terminates under prescribed
circumstances after a change in control, all as specifically described in the
following provisions of the Plan. The Company believes that it will derive
substantial benefits by adopting the Plan because its existence will:

  •   Allow covered executives to focus on the Company’s business and
objectively evaluate any future proposals during potential change in control
transactions,     •   Assist the Company in attracting and retaining selected
executives,     •   Provide for greater consistency of protection for selected
executives, and     •   Avoid problems associated with adopting change in
control agreements during any future potential change in control transaction.

ARTICLE 2.   DEFINITIONS

2.1   “Board” means the board of directors of the Company.   2.2   “Cause”
means:

  (a)   Commission of a felony or an act or series of acts that results in
material injury to the business or reputation of the Company or any subsidiary;
    (b)   Willful failure to perform duties of employment, if such failure has
not been cured in all material respects within twenty (20) days after the
Company or any subsidiary, as applicable, gives notice thereof; or     (c)  
Breach of any material term, provision or condition of employment, which breach
has not been cured in all material respects within twenty (20) days after the
Company or any subsidiary, as applicable, gives notice thereof.

2.3   “Change in Control” means the occurrence, after the Distribution Date, of
any of the following with respect to the Company:

 

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  (a)   Any Person becomes a Beneficial Owner of a majority of the outstanding
Common Voting Shares, $.01 par value, of the Company (or shares of capital stock
of the Company with comparable or unlimited voting rights), excluding, however,
The Edward W. Scripps Trust (the “Trust") and the trustees thereof, and any
Person that is or becomes a party to the Scripps Family Agreement, dated
October 15, 1992, as amended currently and as it may be amended from time to
time in the future (the “Family Agreement"); or     (b)   Assets of the Company
accounting for 90% or more of the Company’s revenues are disposed of pursuant to
a merger, consolidation, sale, or plan of liquidation and dissolution (unless
the Trust or the parties to the Family Agreement have Beneficial Ownership of,
directly or indirectly, a controlling interest (defined as owning a majority of
the voting power) in the entity surviving such merger or consolidation or
acquiring such assets upon such sale or in connection with such plan of
liquidation and dissolution).

For purposes of this Section 2.3, “Person” has the meaning provided in section
3(a)(9) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and
as used in sections 13(d) and 14(d) of the Exchange Act, including a “group”
within the meaning of section 13(d) of the Exchange Act; and “Beneficial
Ownership” and “Beneficial Owner” have the meanings provided in Rule 13d-3
promulgated under the Exchange Act.

2.4   “Code” means the Internal Revenue Code of 1986, as amended.   2.5  
“Committee” means the Board’s Compensation Committee.   2.6   “Company” means
Scripps Networks Interactive, Inc., an Ohio corporation, and any successor.  
2.7   “Covered Executive” means an employee of the Company or its subsidiaries
who is employed as an executive and who is listed in Appendix A at the time of a
Change in Control.   2.8   “Disability” means a Covered Executive’s termination
or suspension of employment accompanied by his/her actual receipt of a
Disability Retirement Benefit under the Pension Plan or a Disability Benefit
under the Long Term Disability Income Plan. A Covered Executive will be deemed
to be in actual receipt of the aforementioned benefits during any waiting
period, of up to ninety (90) days duration, that is a prerequisite for the
commencement of benefit payments.   2.9   “Good Reason” means any of the
following actions on or after a Change in Control, without the Covered
Executive’s consent:

 

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  (a)   A material diminution in a Covered Executive’s annual salary or target
annual incentive opportunity below the amount of annual salary or target annual
incentive opportunity in effect immediately prior to such Change in Control;    
(b)   A material diminution in a Covered Executive’s authority, duties, or
responsibilities as compared to his or her authority, duties, or
responsibilities immediately prior to such Change in Control;     (c)   A
material diminution in the authority, duties, or responsibilities of the
supervisor to whom the Covered Executive is required to report, including a
requirement that the Covered Executive report to a corporate officer or employee
instead of reporting directly to the Board;     (d)   A material diminution in
the budget over which a Covered Executive retains authority as compared to the
budget over which he or she had authority immediately prior to such Change in
Control;     (e)   A material change in geographic location at which a Covered
Executive is principally employed as compared to the geographic location
immediately prior to such Change in Control; or     (f)   The Company’s (or
successor’s) material breach of this Plan or of any material term, provision or
condition of employment of a Covered Executive, unless the Covered Executive’s
employment is terminated for Cause within the applicable cure period set forth
below.

A termination of a Covered Executive’s employment by a Covered Executive shall
not be deemed to be for Good Reason unless (1) the Covered Executive gives
notice to the Company of the existence of the event or condition constituting
Good Reason within thirty (30) days after such event or condition initially
occurs or exists, (2) the Company fails to cure such event or condition within
thirty (30) days after receiving such notice, and (3) Executive’s “separation
from service” within the meaning of Section 409A of the Code occurs not later
than ninety (90) days after such event or condition initially occurs or exists
(or, if earlier, the last day of the 24-month period following a Change in
Control).

2.10   “Retirement” means a Covered Executive’s termination of employment
accompanied by his/her actual receipt of a Normal Retirement Benefit or Early
Retirement Benefit under the Pension Plan.   2.11   “Long Term Disability Income
Plan” means the employee benefit plan of that name sponsored by the Company,
including any amended, restated or successor version of that plan.   2.12  
“Pension Plan” means the tax-qualified employee pension plan of that name
sponsored by the Company (or in which the Company is a participating company),
including any amended, restated or successor version of that plan.

 

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“Supplemental Executive Retirement Plan” means the non-tax-qualified excess
retirement plan sponsored by the Company (or in which the Company is a
participating company), including any amended, restated or successor version of
that plan.

2.13   “Termination Payment” is the payment described in Section 5.2 to which a
Covered Executive may become entitled following termination of his/her
employment under the circumstances described in Section 5.1.   2.14   In
addition to the foregoing, certain other terms of more limited usage are defined
in other Articles of the Plan. All terms defined in the Plan are designated with
initial capital letters.   2.15   Whenever appropriate, words used herein in the
singular may be read as the plural and the plural may be read as the singular.
Unless otherwise clear from the context, words used herein in the masculine
shall also be deemed to include the feminine.

ARTICLE 3.   PLAN PARTICIPATION

An individual must be a Covered Executive in order to participate in the Plan.
The names of all Covered Executives are listed in Appendix A. The Committee may
revise Appendix A at any time(s) by adding or deleting names (or changing
Termination Pay Multiples), provided that the deletion of any name (or reduction
of any Termination Pay Multiple) shall require sixty (60) days’ advance written
notice to each affected Covered Executive. Only those employees listed in
Appendix A at the time of a Change in Control are eligible to receive any
rights, termination payment or other benefits under the Plan.

ARTICLE 4.   ACCELERATION OF VESTING OF EQUITY AWARDS UPON CHANGE IN CONTROL

Upon a Change in Control, the terms of the Scripps Networks Interactive, Inc.
2008 Long-Term Incentive Plan (or any successor plan) and the applicable award
agreements shall govern the treatment of all outstanding equity awards of a
Covered Executive, including but not limited to any incentive or nonqualified
stock options, stock appreciation rights in tandem with or independent of
options (“SARs”), restricted or nonrestricted share awards, performance-based
restricted shares, restricted stock units and performance units.
 

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ARTICLE 5.   TERMINATION PAYMENT AND OTHER BENEFITS UPON CERTAIN TERMINATIONS OF
EMPLOYMENT AFTER CHANGE IN CONTROL

5.1   Eligibility for Termination Payment. A Covered Executive will be entitled
to receive a Termination Payment (described in Section 5.2) if, within
twenty-four (24) months after a Change in Control, his/her employment with the
Company is terminated either (i) by the Company without Cause, or (ii) by the
Covered Executive for Good Reason. Notwithstanding the foregoing, a Covered
Executive will not be entitled to any Termination Payment if his/her termination
of employment is (i) of his/her own initiative for any reason other than Good
Reason, or (ii) on account of his/her Retirement, Disability or death. A
Termination Payment is in lieu of any further salary, bonus, annual incentive or
other payments to a Covered Executive for periods subsequent to the date of
his/her termination of employment; but the Covered Executive still will retain
any and all of his/her vested rights under the Company’s employee pension and
benefit plans and arrangements, including, without limitation, the Pension Plan
and the Supplemental Executive Retirement Plan.   5.2   Amount of Termination
Payment. A Covered Executive’s Termination Payment is a cash lump sum equal to
the amount computed by multiplying (i) the sum of his/her Base Salary plus
Annual Incentive, by (ii) his/her Termination Pay Multiple. A Covered
Executive’s Termination Payment will be paid by the Company within thirty
(30) days following his/her termination of employment.

As used herein, the following terms have the following meanings:

  (a)   “Base Salary” means a Covered Executive’s highest annualized rate of
basic salary in effect at any time during the then current partial calendar
year, if applicable, and three (3) full prior calendar years preceding his/her
termination of employment;     (b)   “Annual Incentive” means the higher of
(i) a Covered Executive’s target annual incentive in the then partial calendar
year, if applicable, of his/her termination of employment, or (ii) his/her
highest actual annual incentive earned in the three (3) full prior calendar
years preceding his/her termination of employment under an annual incentive plan
sponsored by the Company or any comparable plans of The E. W. Scripps Company
(and annualized in the case of any pro rata annual incentive earned for a
partial calendar year); and     (c)   “Termination Pay Multiple” is the number
set forth beside a Covered Executive’s name in Appendix A under the column so
named Termination Pay Multiple.

5.3   Other Benefit Coverage. If a Covered Executive qualifies for a Termination
Payment under Section 5.1, his/her Benefit Coverage shall be continued for the

 

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Maximum Benefit Period or, if less, until the Covered Executive obtains
full-time employment providing benefits substantially similar to his/her Benefit
Coverage. To receive such Benefit Coverage, the Covered Executive must continue
to pay the same percentage of the total benefit premiums or contributions
required from similarly situated executive employees at the time of the Covered
Executive’s termination of employment (or, if materially less, at the time of
the prior Change in Control).
As used herein, the following terms have the following meanings:

  (a)   “Benefit Coverage” means the medical, dental, disability, life and
accidental death insurance benefits which the Covered Executive and his/her
eligible dependents, if any, were receiving at the time of his/her termination
of employment (or, if materially greater, at the time of the prior Change in
Control); and     (b)   “Maximum Benefit Period” is the number of months
following the Covered Executive’s termination of employment equal to twelve
(12) times his/her Termination Pay Multiple. The Maximum Benefit Period
automatically shall end if a Covered Executive dies, but only with respect to
his/her own coverage, with coverage of any eligible dependent(s) continuing as
though the Covered Executive had not died so long as all required employee
premiums or contributions continue to be paid by the eligible dependent(s).

5.4   Pension Enhancement. If a Covered Executive qualifies for a Termination
Payment under Section 5.1, he/she will receive a cash lump sum equal to the
actuarially determined value of a Pension Enhancement. The Pension Enhancement
will be paid by the Company at the same time as the Termination Payment.

For purposes of this Section 5.4, “Pension Enhancement” is the excess, if any,
of:

  (a)   The present value of the assumed pension the Covered Executive would be
entitled to receive under the Pension Plan and the Supplemental Executive
Retirement Plan if his/her age and years of credited service at the time of
his/her termination of employment were increased by a number equal to his/her
Termination Pay Multiple and if he/she continued to earn compensation equal to
the sum of his/her Base Salary and Annual Incentive for a period of years equal
to his/her Termination Multiple; over     (b)   The present value of the actual
pension the Covered Executive is entitled to receive under the Pension Plan and
the Supplemental Executive Retirement Plan based upon his/her actual age and
years of credited service at the time of his/her termination of employment.

 

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In calculating the Pension Enhancement, the same actuarial assumptions and
factors shall be used as are prescribed under the Pension Plan for computing
lump sum benefit payments.

5.5   Gross-Up Payment. A Covered Executive also shall be entitled to a Gross-Up
Payment, if applicable. The Company’s obligation to make Gross-Up Payments under
this Section 5.5 shall be conditioned upon a Covered Executive’s termination of
employment. “Gross-Up Payment” is the lump sum benefit payment hereinafter
described in this Section 5.5.

If it is determined (as hereinafter provided) that any payment, benefit or
distribution to or for such Covered Executive’s benefit, whether paid or payable
or distributed or distributable pursuant to the terms of the Plan or otherwise
pursuant to or by reason of any other agreement, policy, plan, program,
arrangement or similar right (a “Payment”), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code (or any successor provision
thereto), or any interest or penalties with respect to such excise tax (such
tax, together with any such interest and penalties, hereafter collectively
referred to as the “Excise Tax”), then the Covered Executive shall be entitled
to receive a cash lump sum Gross-Up Payment(s) in an amount such that, after
payment by the Covered Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment(s), the Covered Executive retains an amount of the
Gross-Up Payment(s) equal to the Excise Tax imposed upon the Payments. The
Gross-Up Payment, if any, shall be paid in full to the Covered Executive at the
same time as any Payment (or first installment thereof) subject to the Excise
Tax is paid or provided to the Covered Executive; provided that the Company, in
its sole discretion, may withhold and pay over to the Internal Revenue Service
or any other applicable taxing authority, for the benefit of the Covered
Executive, all or any portion of any Gross-Up Payment, and the Covered Executive
consents to such withholding.
All determinations required to be made under this Section 5.5, including whether
an Excise Tax is payable by the Covered Executive, the amount of such Excise
Tax, whether a Gross-Up Payment is required and the amount of such Gross-Up
Payment, shall be made by a nationally-recognized legal or accounting firm (the
“Firm”) (which may be the Company’s independent auditor) selected by the Company
in its sole discretion. The Firm shall submit its determination and detailed
supporting calculations to the Covered Executive and the Company as promptly as
practicable. If the Firm determines that any Excise Tax is payable by the
Covered Executive and that a Gross-Up Payment is required, the Company shall pay
the Covered Executive the required Gross-Up Payment as provided herein. Any
determination by the Firm as to the amount of the Gross-Up Payment shall be
binding upon the Covered Executive and the Company. As a result of the
uncertainty in the application of Section 4999 of the Internal Revenue Code (or
any successor provision thereto) at the time of the initial determination by the
Firm hereunder, it is possible that the Company may fail to pay a Gross-Up
 

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Payment which should have been paid (an “Underpayment”). If the Covered
Executive thereafter is required to make a payment of any Excise Tax, the Firm
shall determine the amount of the Underpayment, if any, that has occurred and
submit its determination and detailed supporting calculations to the Covered
Executive and the Company as promptly as possible. Any such Underpayment shall
be promptly paid by the Company to the Covered Executive, or for his/her
benefit, within thirty (30) days of receipt of such determination and
calculations.
The Covered Executive and the Company shall each provide the Firm access to and
copies of any books, records or documents in the possession of the Company or
the Covered Executive, as the case may be, reasonably requested by the Firm, and
shall each otherwise cooperate with the Firm in connection with the preparation
and issuance of the determinations contemplated by this Section 5.5. The fees
and expenses of the Firm that are incurred at any time from the date of this
Plan through 10th anniversary of the date of the Change in Control for services
in connection with the determinations and calculations contemplated by this
Section 5.5 shall be paid by the Company. The Company shall pay such fees and
expenses not later than the end of the calendar year following the calendar year
in which the related work is performed or the expenses are incurred by the Firm.
The amount of such fees and expenses that the Company is obligated to pay in any
given calendar year shall not affect the fees and expenses that the Company is
obligated to pay in any other calendar year, and the Covered Executive’s right
to have the Company pay such fees and expenses may not be liquidated or
exchanged for any other benefit.
Notwithstanding any other provision of this Section 5.5 to the contrary, and in
order to comply with Section 409A of the Code, the Company and the Covered
Executive shall take all steps reasonably necessary to ensure that any Gross-Up
Payment, Underpayment or other payment or reimbursement made to the Covered
Executive pursuant to this Section 5.5 will be paid or reimbursed on the earlier
of (i) the date specified for payment under this Section 5.5, or
(ii) December 31st of the year following the year in which the applicable taxes
are remitted or, in the case of reimbursement of expenses incurred due to a tax
audit or litigation to which there is no remittance of taxes, the end of the
calendar year following the year in which the audit is completed or there is a
final and nonappealable settlement or other resolution of the litigation in
accordance with Treasury Regulation Section 1.409A-3(i)(1)(v).

ARTICLE 6.   NON-DUPLICATION OF PAYMENTS AND BENEFITS

Notwithstanding any contrary provision of the Plan, there shall be no
duplication of rights, payments and benefits under the Plan with rights,
payments and benefits granted to a Covered Executive, in the event of a
termination of his/her employment after a Change in Control, under any other
agreement, plan or arrangement (“Alternate Plan”). In order to prevent such
duplication, if the Covered Executive is entitled to payments or benefits under
Article 5 upon termination of employment, the Covered Executive shall not be
entitled to any severance pay or benefits under any Alternate
 

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Plan unless otherwise specifically provided in this Plan or in the Alternative
Plan (in a specific reference to this Plan). Notwithstanding the foregoing, any
payments due under the Executive Annual Incentive Plan upon a Covered
Executive’s termination of employment following a Change in Control shall be in
addition to (and shall not be considered duplicative of) any payments or
benefits provided under this Plan.

ARTICLE 7.   SOURCE OF PAYMENTS

All payments required under the terms of the Plan shall be paid in cash from the
general assets of the Company. A Covered Executive shall have the status of a
general creditor of the Company with respect to any and all claims for payments
under the Plan.

ARTICLE 8.   PLAN ADMINISTRATION AND CLAIMS PROCEDURE

8.1   Plan Administration. The Plan shall be administered by the Committee
and/or its designee(s). The Committee shall have rights, powers and duties with
respect to the Plan that are comparable to those granted to the designated
pension board under the Pension Plan. Without limiting the generality of the
foregoing, the Committee has full authority to (i) interpret the Plan,
(ii) determine all questions relating to the rights and status of Covered
Executives and their Termination Payments, Benefit Coverage, Pension
Enhancements and Gross-Up Payments, and (iii) make such rules and regulations
for the administration of the Plan as are not inconsistent with its express
terms and provisions. This provision is included in the Plan for the express
purpose of giving and granting to the Committee the maximum discretionary
authority possible under Firestone Tire and Rubber Company v. Bruch, 489 U.S.
101 (1989). Decisions by the Committee shall be made by majority vote of all
members of the Committee.   8.2   Claims Procedure. If any Covered Executive’s
claim for payments or benefits under the Plan is denied, the Committee shall
cause a written notice to be sent to the Covered Executive setting forth the
specific reasons for the denial, specific reference to the provisions of the
Plan on which the denial is based, a description of any material or information
necessary to perfect the denied claim (together with an explanation of why such
material or information is necessary), and an explanation of the review
procedure described below. Within sixty (60) days after receipt of such notice
of denial from the Committee, the Covered Executive, or his/her duly authorized
representative, may request a review of the denied claim by written application
to the Committee. In connection with such request for review, the Covered
Executive, or his/her duly authorized representative, shall be entitled to
review any and all documents pertinent to the claim or its denial and also shall
be entitled to submit issues and comments in writing. The decision of the
Committee upon such review shall be made not later than sixty (60) days after
the receipt of such request for review, unless special circumstances shall
require an extension of time for processing, in which case a decision shall be
rendered as soon as possible, but not later than one hundred twenty (120) days

 

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after the Committee’s receipt of the request for review. The decision of the
Committee upon review of the denied application shall be in writing and shall
include specific reasons for the decision and specific references to the
pertinent Plan provisions on which the decision is based. All written
communications from the Committee under this Section 8.2 shall be written in a
manner calculated to be understood by the recipient.

ARTICLE 9.   ARBITRATION OF DISPUTES

Any controversy or claim arising out of or relating to the Plan that cannot be
resolved pursuant to Section 9.2 shall be settled by binding arbitration in the
City of Cincinnati, Ohio, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then pertaining in such city; and judgment
upon the award rendered by the arbitrator or arbitrators may be entered in any
court in Hamilton County, Ohio having jurisdiction thereof. The arbitrator or
arbitrators shall have powers to issue mandatory orders and restraining orders
in connection with such arbitration. Neither the Company nor a Covered Executive
shall be liable for punitive or exemplary damages. Each party shall be
responsible for its/his/her own costs and expenses (including attorneys’ fees).
The federal and state courts in Hamilton County, Ohio shall have exclusive
jurisdiction with respect to the entry of judgment upon any arbitration award
hereunder or the granting of any order; and such courts shall have exclusive
jurisdiction with respect to any other controversy or claim arising out of or
relating to the Plan that may properly be brought therein if the provisions
herein mandating arbitration are held to be unenforceable.

ARTICLE 10.   MISCELLANEOUS PROVISIONS

10.1   ERISA and Governing Law. The Plan is an unfunded deferred compensation
plan for a select group of management or highly compensated employees, as
defined in Section 201(2) and 401(a)(1) of the Employee Retirement Security Act
of 1974, as amended (“ERISA”). As such, the Plan is expressly excluded from all,
or substantially all, of the provisions of ERISA, including but not limited to
Parts 2 and 3 of Title I thereof. None of the statutory rights and protections
conferred on participants by ERISA are conferred under the terms of this Plan,
except as expressly noted or required by operation of law. To the extent not
superseded by federal law, the laws of the State of Ohio shall control in any
and all matters relating to the Plan.   10.2   Benefits Are Nonassignable. No
right, payment or benefit under the Plan may be pledged, assigned, anticipated
or alienated in any way by any Covered Executive, otherwise than by will or the
laws of descent and distribution. This Plan shall inure to the benefit of and be
enforceable by the legal representatives of a Covered Executive. The Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree

 

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to perform this Plan in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place. “Company”
means the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid that assumes and agrees to perform this Plan by
operation of law or otherwise. This Plan shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

10.3   Amendment, Suspension or Termination of Plan. The Company hereby reserves
the right and power to amend, suspend or terminate the Plan, in whole or in
part, at any time and from time to time; provided, however, that any action
taken after a Change in Control or within sixty (60) days prior to a Change in
Control cannot materially adversely affect the rights, payments or benefits of
any employee who then is a Covered Executive without his/her express written
consent. All actions pursuant to this Section 10.3 shall be set forth in a
written instrument adopted by the Committee and approved or ratified by the
Board.   10.4   No Guarantee Of Employment. Nothing contained in the Plan shall
be construed as a contract of employment between the Company or any Covered
Executive, or as a right of any Covered Executive to continue in the employment
of the Company, or as a limitation of the right of the Company to discharge any
Covered Executive, with or without cause, at any time.   10.5   Severability. If
any provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining provisions hereof;
instead, each provision shall be fully severable and the Plan shall be construed
and enforced as if the illegal or invalid provision had never been included
herein.   10.6   Section 409A of the Code.

  (a)   Section 409A of the Code (“Section 409A”) imposes payment restrictions
on “separation pay” (i.e., payments owed to a Covered Executive upon termination
of employment). Failure to comply with these restrictions could result in
negative tax consequences to the Covered Executive, including immediate
taxation, interest and a 20% penalty tax. It is the Company’s intent that this
Plan be exempt from the application of, or otherwise comply with, the
requirements of Section 409A. Specifically, any taxable benefits or payments
provided under this Plan are intended to be separate payments that qualify for
the “short-term deferral” exception to Section 409A to the maximum extent
possible, and to the extent they do not so qualify, are intended to qualify for
the involuntary separation pay exceptions to Section 409A of the Code, to the
maximum extent possible. If neither of these exceptions applies, then
notwithstanding any provision in this Plan to the contrary:

  (i)   All amounts that would otherwise be paid or provided during the first
six months following the date of termination shall instead be accumulated
through and paid or provided (together with interest

 

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on any delayed payment at the applicable federal rate under the Code), on the
first business day following the six-month anniversary of the Covered
Executive’s termination of employment.

  (ii)   Any expense eligible for reimbursement must be incurred, or any
entitlement to a benefit must be used, during the applicable expense
reimbursement or benefit continuation period provided in this Plan. The amount
of the reimbursable expense or benefit to which a Covered Executive is entitled
during a calendar year will not affect the amount to be provided in any other
calendar year, and a Covered Executive’s right to receive the reimbursement or
benefit is not subject to liquidation or exchange for another benefit. Provided
the requisite documentation is submitted, the Company will reimburse the
eligible expenses on or before the last day of the calendar year following the
calendar year in which the expenses were incurred.

  (b)   For purposes of this Plan, “termination of employment” or words or
phrases to that effect shall mean a “separation from service” within the meaning
of Section 409A.

 

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APPENDIX A
 
 

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