Exhibit 10.2

 

PDL BIOPHARMA, INC.

RETENTION AND SEVERANCE PLAN

FOR CHIEF EXECUTIVE OFFICER

 

1.             ESTABLISHMENT AND PURPOSE OF PLAN

 

1.1           ESTABLISHMENT.  THE PDL BIOPHARMA, INC. RETENTION AND SEVERANCE
PLAN FOR CHIEF EXECUTIVE OFFICER (THE “PLAN”) IS HEREBY ESTABLISHED BY THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF PDL BIOPHARMA, INC.,
EFFECTIVE OCTOBER 1, 2008 (THE “EFFECTIVE DATE”).

 

1.2           PURPOSE.  THE COMPANY DRAWS UPON THE KNOWLEDGE, EXPERIENCE AND
ADVICE OF ITS OFFICERS IN ORDER TO MANAGE ITS BUSINESS FOR THE BENEFIT OF THE
COMPANY’S STOCKHOLDERS.  DUE TO THE WIDESPREAD AWARENESS OF THE POSSIBILITY OF
MERGERS, ACQUISITIONS AND OTHER STRATEGIC ALLIANCES IN THE COMPANY’S INDUSTRY,
THE TOPICS OF COMPENSATION AND OTHER EMPLOYEE BENEFITS IN THE EVENT OF A CHANGE
IN CONTROL OR OTHER CIRCUMSTANCES THAT MAY RESULT IN TERMINATION OF EMPLOYMENT
ARE ISSUES IN COMPETITIVE RECRUITMENT AND RETENTION EFFORTS.  THE COMMITTEE
RECOGNIZES THAT THE POSSIBILITY OR PENDING OCCURRENCE OF A CHANGE IN CONTROL
COULD LEAD TO UNCERTAINTY REGARDING THE CONSEQUENCES OF SUCH AN EVENT AND COULD
ADVERSELY AFFECT THE COMPANY’S ABILITY TO ATTRACT, RETAIN AND MOTIVATE PRESENT
AND FUTURE OFFICERS.  THE COMMITTEE HAS THEREFORE DETERMINED THAT IT IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS TO PROVIDE FOR THE CONTINUED
DEDICATION OF ITS OFFICERS NOTWITHSTANDING THE POSSIBILITY OR OCCURRENCE OF
CIRCUMSTANCES THAT MAY RESULT IN TERMINATION OF EMPLOYMENT BY ESTABLISHING THIS
PLAN TO PROVIDE THE CHIEF EXECUTIVE WITH ENHANCED FINANCIAL SECURITY IN THE
EVENT OF A TERMINATION OF EMPLOYMENT.  THE PURPOSE OF THIS PLAN IS TO PROVIDE
ITS PARTICIPANT WITH SPECIFIED COMPENSATION AND BENEFITS IN THE EVENT OF
TERMINATION OF EMPLOYMENT UNDER CIRCUMSTANCES SPECIFIED HEREIN.

 

2.             DEFINITIONS AND CONSTRUCTION

 

2.1           DEFINITIONS.  WHENEVER USED IN THIS PLAN, THE FOLLOWING TERMS
SHALL HAVE THE MEANINGS SET FORTH BELOW:

 

(A)           “APPLICABLE BENEFIT PERIOD” MEANS:

 

(1)           WITH RESPECT TO THE PARTICIPANT’S INVOLUNTARY TERMINATION ABSENT A
CHANGE IN CONTROL, A PERIOD OF EIGHTEEN (18) MONTHS; AND

 

(2)           WITH RESPECT TO THE PARTICIPANT’S INVOLUNTARY TERMINATION
FOLLOWING A CHANGE IN CONTROL, A PERIOD OF TWENTY-FOUR (24) MONTHS.

 

(B)           “BASE SALARY RATE” MEANS, AS APPLICABLE, EITHER:

 

(1)           WITH RESPECT TO THE PARTICIPANT’S INVOLUNTARY TERMINATION ABSENT A
CHANGE IN CONTROL, THE PARTICIPANT’S MONTHLY BASE SALARY RATE IN EFFECT
IMMEDIATELY

 

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PRIOR TO SUCH TERMINATION OF EMPLOYMENT (WITHOUT GIVING EFFECT TO ANY REDUCTION
IN THE PARTICIPANT’S BASE SALARY RATE CONSTITUTING GOOD REASON); OR

 

(2)           WITH RESPECT TO THE PARTICIPANT’S INVOLUNTARY TERMINATION
FOLLOWING A CHANGE IN CONTROL, THE GREATER OF (I) THE PARTICIPANT’S MONTHLY BASE
SALARY RATE IN EFFECT IMMEDIATELY PRIOR TO SUCH TERMINATION OF EMPLOYMENT
(WITHOUT GIVING EFFECT TO ANY REDUCTION IN THE PARTICIPANT’S BASE SALARY RATE
CONSTITUTING GOOD REASON) OR (II) THE PARTICIPANT’S MONTHLY BASE SALARY RATE IN
EFFECT IMMEDIATELY PRIOR TO THE APPLICABLE CHANGE IN CONTROL.

 

For this purpose, base salary does not include any bonuses, commissions, fringe
benefits, car allowances, other irregular payments or any other compensation
except base salary.

 

(C)           “BOARD” MEANS THE BOARD OF DIRECTORS OF THE COMPANY.

 

(D)           “BONUS RATE” MEANS THE QUOTIENT DETERMINED BY DIVIDING WHICHEVER
OF THE FOLLOWING AMOUNTS IS THE GREATEST BY TWELVE (12):

 

(1)           THE AGGREGATE OF ALL ANNUAL INCENTIVE BONUSES EARNED BY THE
PARTICIPANT (WHETHER OR NOT ACTUALLY PAID) UNDER THE TERMS OF THE PROGRAMS,
PLANS OR AGREEMENTS PROVIDING FOR SUCH BONUSES FOR THE FISCAL YEAR OF THE
COMPANY IMMEDIATELY PRECEDING THE FISCAL YEAR OF THE CHANGE IN CONTROL; OR

 

(2)           THE AGGREGATE OF ALL ANNUAL INCENTIVE BONUSES EARNED BY THE
PARTICIPANT (WHETHER OR NOT ACTUALLY PAID) UNDER THE TERMS OF THE PROGRAMS,
PLANS OR AGREEMENTS PROVIDING FOR SUCH BONUSES FOR THE FISCAL YEAR OF THE
COMPANY IMMEDIATELY PRECEDING THE FISCAL YEAR OF THE PARTICIPANT’S INVOLUNTARY
TERMINATION FOLLOWING A CHANGE IN CONTROL; OR

 

(3)           THE AGGREGATE OF ALL ANNUAL INCENTIVE BONUSES THAT WOULD BE EARNED
BY THE PARTICIPANT AT THE PARTICIPANT’S ANNUAL INCENTIVE BONUS TARGET RATE
(ASSUMING ATTAINMENT OF 100% OF ALL APPLICABLE PERFORMANCE GOALS) UNDER THE
TERMS OF THE PROGRAMS, PLANS OR AGREEMENTS PROVIDING FOR SUCH BONUSES IN WHICH
THE PARTICIPANT WAS PARTICIPATING FOR THE FISCAL YEAR OF THE PARTICIPANT’S
INVOLUNTARY TERMINATION FOLLOWING A CHANGE IN CONTROL (WITHOUT GIVING EFFECT TO
ANY REDUCTION IN THE PARTICIPANT’S ANNUAL INCENTIVE BONUS TARGET RATE
CONSTITUTING GOOD REASON);

 

provided, however, that for the purposes of this definition, “annual incentive
bonuses” shall not include signing bonuses, retention bonuses or other
nonrecurring cash awards that are not part of an annual incentive bonus program.

 

(E)           “CAUSE” MEANS THE OCCURRENCE OF ANY OF THE FOLLOWING:

 

(1)           THE PARTICIPANT’S INTENTIONAL THEFT, DISHONESTY, WILLFUL
MISCONDUCT, BREACH OF FIDUCIARY DUTY FOR PERSONAL PROFIT, OR FALSIFICATION OF
ANY COMPANY GROUP DOCUMENTS OR RECORDS; OR

 

(2)           THE PARTICIPANT’S MATERIAL FAILURE TO ABIDE BY THE COMPANY’S CODE
OF CONDUCT OR OTHER WRITTEN POLICIES (INCLUDING, WITHOUT LIMITATION, POLICIES
RELATING TO CONFIDENTIALITY AND REASONABLE WORKPLACE CONDUCT); OR

 

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(3)           THE PARTICIPANT’S MATERIAL AND INTENTIONAL UNAUTHORIZED USE,
MISAPPROPRIATION, DESTRUCTION OR DIVERSION OF ANY TANGIBLE OR INTANGIBLE ASSET
OR CORPORATE OPPORTUNITY OF THE COMPANY GROUP (INCLUDING, WITHOUT LIMITATION,
THE PARTICIPANT’S IMPROPER USE OR DISCLOSURE OF COMPANY GROUP CONFIDENTIAL OR
PROPRIETARY INFORMATION); OR

 

(4)           ANY INTENTIONAL ACT BY THE PARTICIPANT WHICH HAS A MATERIAL
DETRIMENTAL EFFECT ON THE COMPANY GROUP’S REPUTATION OR BUSINESS; OR

 

(5)           THE PARTICIPANT’S REPEATED FAILURE OR INABILITY TO PERFORM ANY
REASONABLE ASSIGNED DUTIES AFTER WRITTEN NOTICE FROM THE BOARD OF, AND A
REASONABLE OPPORTUNITY TO CURE, SUCH FAILURE OR INABILITY; OR

 

(6)           ANY MATERIAL BREACH BY THE PARTICIPANT OF ANY EMPLOYMENT, SERVICE,
NON-DISCLOSURE, NON-COMPETITION, NON-SOLICITATION OR OTHER SIMILAR AGREEMENT
BETWEEN THE PARTICIPANT AND A MEMBER OF THE COMPANY GROUP, WHICH BREACH IS NOT
CURED PURSUANT TO THE TERMS OF SUCH AGREEMENT OR WITHIN TWENTY (20) DAYS OF
RECEIVING WRITTEN NOTICE OF SUCH BREACH; OR

 

(7)           THE PARTICIPANT’S CONVICTION (INCLUDING ANY PLEA OF GUILTY OR NOLO
CONTENDERE) OF ANY CRIMINAL ACT INVOLVING FRAUD, DISHONESTY, MISAPPROPRIATION OR
MORAL TURPITUDE, OR WHICH IMPAIRS THE PARTICIPANT’S ABILITY TO PERFORM HIS OR
HER DUTIES WITH THE COMPANY GROUP.

 

(F)            “CHANGE IN CONTROL” MEANS THE OCCURRENCE OF ANY OF THE FOLLOWING:

 

(1)           ANY “PERSON” (AS SUCH TERM IS USED IN SECTIONS 13(D) AND 14(D) OF
THE EXCHANGE ACT) BECOMES THE “BENEFICIAL OWNER” (AS SUCH TERM IS DEFINED IN
RULE 13D-3 PROMULGATED UNDER THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF
SECURITIES OF THE COMPANY REPRESENTING MORE THAN FIFTY PERCENT (50%) OF THE
TOTAL FAIR MARKET VALUE OR TOTAL COMBINED VOTING POWER OF THE COMPANY’S
THEN-OUTSTANDING SECURITIES ENTITLED TO VOTE GENERALLY IN THE ELECTION OF
DIRECTORS OF THE COMPANY; PROVIDED, HOWEVER, THAT A CHANGE IN CONTROL SHALL NOT
BE DEEMED TO HAVE OCCURRED IF SUCH DEGREE OF BENEFICIAL OWNERSHIP RESULTS FROM
ANY OF THE FOLLOWING: (I) AN ACQUISITION BY ANY PERSON WHO ON THE EFFECTIVE DATE
IS THE BENEFICIAL OWNER OF MORE THAN FIFTY PERCENT (50%) OF SUCH VOTING POWER,
(II) ANY ACQUISITION DIRECTLY FROM THE COMPANY, INCLUDING, WITHOUT LIMITATION,
PURSUANT TO OR IN CONNECTION WITH A PUBLIC OFFERING OF SECURITIES, (III) ANY
ACQUISITION BY THE COMPANY, (IV) ANY ACQUISITION BY A TRUSTEE OR OTHER FIDUCIARY
UNDER AN EMPLOYEE BENEFIT PLAN OF A MEMBER OF THE COMPANY GROUP OR (V) ANY
ACQUISITION BY AN ENTITY OWNED DIRECTLY OR INDIRECTLY BY THE STOCKHOLDERS OF THE
COMPANY IN SUBSTANTIALLY THE SAME PROPORTIONS AS THEIR OWNERSHIP OF THE VOTING
SECURITIES OF THE COMPANY; OR

 

(2)           THE COMPANY IS PARTY TO A MERGER, CONSOLIDATION OR SIMILAR
CORPORATE TRANSACTION, OR SERIES OF RELATED TRANSACTIONS, WHICH RESULTS IN THE
HOLDERS OF THE VOTING SECURITIES OF THE COMPANY OUTSTANDING IMMEDIATELY PRIOR TO
SUCH TRANSACTION(S) FAILING TO RETAIN IMMEDIATELY AFTER SUCH
TRANSACTION(S) DIRECT OR INDIRECT BENEFICIAL OWNERSHIP OF MORE THAN FIFTY
PERCENT (50%) OF THE TOTAL COMBINED VOTING POWER OF THE SECURITIES ENTITLED TO
VOTE GENERALLY IN THE ELECTION OF DIRECTORS OF THE COMPANY OR THE SURVIVING
ENTITY OUTSTANDING IMMEDIATELY AFTER SUCH TRANSACTION(S); OR

 

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(3)           THE SALE, EXCHANGE OR TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE
ASSETS OF THE COMPANY OR CONSUMMATION OF ANY TRANSACTION, OR SERIES OF RELATED
TRANSACTIONS, HAVING SIMILAR EFFECT (OTHER THAN A SALE OR DISPOSITION TO ONE OR
MORE SUBSIDIARIES OF THE COMPANY); OR

 

(4)           A CHANGE IN THE COMPOSITION OF THE BOARD WITHIN ANY CONSECUTIVE
TWELVE-MONTH PERIOD AS A RESULT OF WHICH FEWER THAN A MAJORITY OF THE DIRECTORS
ARE INCUMBENT DIRECTORS;

 

provided, however, that a Change in Control shall be deemed not to include (i) a
transaction described in subsections (1) or (2) of this Section in which a
majority of the members of the board of directors of the continuing, surviving
or successor entity, or parent thereof, immediately after such transaction is
comprised of Incumbent Directors, or (ii) a transaction described in subsection
(3) in which the holders of the voting securities of the Company outstanding
immediately prior to such transaction(s) retain immediately after such
transaction(s) direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the securities entitled to
vote generally in the election of directors of the entity to which the assets of
the Company were transferred, or (iii) a transaction described in subsection
(3) involving the sale, exchange, transfer, pledge or other disposition of all
or a portion of the Company Group’s rights to receive antibody humanization
royalties or a distribution of the proceeds of such monetization or sale.

 

(G)           “CHANGE IN CONTROL PERIOD” MEANS A PERIOD COMMENCING UPON THE
CONSUMMATION OF A CHANGE IN CONTROL AND ENDING ON THE DATE OCCURRING EIGHTEEN
(18) MONTHS THEREAFTER.

 

(H)           “CHIEF EXECUTIVE OFFICER” MEANS THE INDIVIDUAL APPOINTED BY THE
BOARD AS THE CHIEF EXECUTIVE OFFICER OF THE COMPANY AND WHO IS SERVING IN SUCH
CAPACITY IMMEDIATELY PRIOR TO THE FIRST TO OCCUR OF: (1) A CONDITION
CONSTITUTING GOOD REASON WITH RESPECT TO SUCH INDIVIDUAL, (2) SUCH INDIVIDUAL’S
TERMINATION OF EMPLOYMENT WITH THE COMPANY GROUP, OR (3) THE COMMENCEMENT OF THE
APPLICABLE CHANGE IN CONTROL PERIOD.

 

(I)            “COBRA” MEANS THE GROUP HEALTH PLAN CONTINUATION COVERAGE
PROVISIONS OF THE CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF 1985 AND ANY
APPLICABLE REGULATIONS PROMULGATED THEREUNDER.

 

(J)            “CODE” MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND
ANY APPLICABLE REGULATIONS OR ADMINISTRATIVE GUIDELINES PROMULGATED THEREUNDER.

 

(K)           “COMMITTEE” MEANS THE COMPENSATION COMMITTEE OF THE BOARD.

 

(L)            “COMPANY” MEANS PDL BIOPHARMA, INC., A DELAWARE CORPORATION, AND,
FOLLOWING A CHANGE IN CONTROL, A SUCCESSOR THAT AGREES TO ASSUME ALL OF THE
RIGHTS AND OBLIGATIONS OF THE COMPANY UNDER THIS PLAN OR A SUCCESSOR WHICH
OTHERWISE BECOMES BOUND BY OPERATION OF LAW UNDER THIS PLAN.

 

(M)          “COMPANY GROUP” MEANS THE GROUP CONSISTING OF THE COMPANY AND EACH
PRESENT OR FUTURE PARENT AND SUBSIDIARY CORPORATION OR OTHER BUSINESS ENTITY
THEREOF.

 

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(N)           “EQUITY AWARD” MEANS ANY STOCK OPTION (EXCLUDING, HOWEVER, AN
OPTION DESCRIBED IN SECTION 423 OF THE CODE), STOCK APPRECIATION RIGHT, STOCK
BONUS, STOCK PURCHASE, RESTRICTED STOCK, RESTRICTED STOCK UNIT, PERFORMANCE
SHARE, PERFORMANCE UNIT, PHANTOM STOCK OR OTHER STOCK-BASED COMPENSATION AWARD
OF ANY KIND GRANTED BY ANY MEMBER OF THE COMPANY GROUP AND HELD BY THE
PARTICIPANT, INCLUDING ANY SUCH AWARD WHICH IS ASSUMED BY, OR FOR WHICH A
REPLACEMENT AWARD IS SUBSTITUTED BY, THE SUCCESSOR OR ANY OTHER MEMBER OF THE
COMPANY GROUP IN CONNECTION WITH A CHANGE IN CONTROL.

 

(O)           “EXCHANGE ACT” MEANS THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

(P)           “GOOD REASON” MEANS THE OCCURRENCE OF ANY OF THE FOLLOWING
CONDITIONS WITHOUT THE PARTICIPANT’S INFORMED WRITTEN CONSENT:

 

(1)           A MATERIAL DIMINUTION IN THE PARTICIPANT’S AUTHORITY, DUTIES OR
RESPONSIBILITIES, CAUSING THE PARTICIPANT’S POSITION TO BE OF MATERIALLY LESSER
RANK OR RESPONSIBILITY WITHIN THE COMPANY GROUP; OR

 

(2)           A REQUIREMENT THAT THE PARTICIPANT REPORT TO A CORPORATE OFFICER
OR OTHER EMPLOYEE RATHER THAN DIRECTLY TO THE BOARD OR THE BOARD OF DIRECTORS OF
THE COMPANY’S PARENT; OR

 

(3)           A MATERIAL REDUCTION IN THE PARTICIPANT’S BASE SALARY RATE OR
ANNUAL INCENTIVE BONUS TARGET RATE, UNLESS REDUCTIONS COMPARABLE IN AMOUNT AND
DURATION ARE CONCURRENTLY MADE FOR ALL OTHER OFFICERS OF THE COMPANY GROUP; OR

 

(4)           A CHANGE IN THE PARTICIPANT’S WORK LOCATION THAT INCREASES THE
REGULAR ONE-WAY COMMUTE DISTANCE BETWEEN THE PARTICIPANT’S RESIDENCE PRIOR TO
SUCH CHANGE AND WORK LOCATION BY MORE THAN THIRTY (30) MILES; OR

 

(5)           ANY ACTION OR INACTION BY A MEMBER OF THE COMPANY GROUP THAT
CONSTITUTES, WITH RESPECT TO THE PARTICIPANT, A MATERIAL BREACH OF THIS PLAN OR
AN EMPLOYMENT AGREEMENT UNDER WHICH THE PARTICIPANT PROVIDES SERVICES TO THE
COMPANY GROUP, INCLUDING A BREACH DESCRIBED IN SECTION 14.2.

 

(Q)           “INCUMBENT DIRECTOR” MEANS A DIRECTOR WHO EITHER (1) IS A MEMBER
OF THE BOARD AS OF THE EFFECTIVE DATE, OR (2) IS ELECTED, OR NOMINATED FOR
ELECTION, TO THE BOARD WITH THE AFFIRMATIVE VOTES OF AT LEAST A MAJORITY OF THE
INCUMBENT DIRECTORS AT THE TIME OF SUCH ELECTION OR NOMINATION, BUT (3) WHO WAS
NOT ELECTED OR NOMINATED IN CONNECTION WITH AN ACTUAL OR THREATENED PROXY
CONTEST RELATING TO THE ELECTION OF DIRECTORS OF THE COMPANY.

 

(R)            “INVOLUNTARY TERMINATION” MEANS THE OCCURRENCE OF ANY OF THE
FOLLOWING EVENTS:

 

(1)           TERMINATION BY THE COMPANY GROUP OF THE PARTICIPANT’S EMPLOYMENT
FOR ANY REASON OTHER THAN CAUSE, THE PARTICIPANT’S DEATH, OR THE PARTICIPANT’S
PERMANENT DISABILITY; OR

 

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(2)           FAILURE BY THE COMPANY GROUP TO RENEW AN EMPLOYMENT AGREEMENT
UNDER WHICH THE PARTICIPANT PROVIDES SERVICES TO THE COMPANY GROUP, PROVIDED
THAT THE PARTICIPANT WAS WILLING AND ABLE TO EXECUTE A NEW EMPLOYMENT AGREEMENT
PROVIDING TERMS AND CONDITIONS SUBSTANTIALLY SIMILAR TO THOSE OF THE EXPIRING
EMPLOYMENT AGREEMENT AND TO CONTINUE PROVIDING SUCH SERVICES; OR

 

(3)           THE PARTICIPANT’S RESIGNATION FOR GOOD REASON FROM EMPLOYMENT WITH
THE COMPANY GROUP WITHIN ONE HUNDRED EIGHTY (180) DAYS FOLLOWING THE INITIAL
EXISTENCE OF A CONDITION CONSTITUTING GOOD REASON, PROVIDED THAT THE PARTICIPANT
DELIVERED WRITTEN NOTICE TO THE COMPANY OF SUCH CONDITION WITHIN NINETY (90)
DAYS AFTER ITS INITIAL EXISTENCE AND THE COMPANY FAILED TO CURE SUCH CONDITION
WITHIN THIRTY (30) DAYS FOLLOWING SUCH WRITTEN NOTICE;

 

provided, however, that Involuntary Termination shall not include any voluntary
resignation from employment by the Participant for any reason other than Good
Reason.

 

(S)           “INVOLUNTARY TERMINATION ABSENT A CHANGE IN CONTROL” MEANS AN
INVOLUNTARY TERMINATION THAT DOES NOT OCCUR DURING A CHANGE IN CONTROL PERIOD.

 

(T)            “INVOLUNTARY TERMINATION FOLLOWING A CHANGE IN CONTROL” MEANS AN
INVOLUNTARY TERMINATION THAT OCCURS DURING A CHANGE IN CONTROL PERIOD.

 

(U)           “PARTICIPANT” MEANS THE CHIEF EXECUTIVE OFFICER, PROVIDED THE
CHIEF EXECUTIVE OFFICER HAS EXECUTED A PARTICIPATION AGREEMENT.

 

(V)           “PARTICIPATION AGREEMENT” MEANS AN AGREEMENT TO PARTICIPATE IN THE
PDL BIOPHARMA, INC. RETENTION AND SEVERANCE PLAN FOR CHIEF EXECUTIVE OFFICER IN
THE FORM ATTACHED HERETO AS EXHIBIT A OR IN SUCH OTHER FORM AS THE COMMITTEE MAY
APPROVE FROM TIME TO TIME; PROVIDED, HOWEVER, THAT, AFTER A PARTICIPATION
AGREEMENT HAS BEEN ENTERED INTO BETWEEN THE PARTICIPANT AND THE COMPANY, IT MAY
BE MODIFIED ONLY BY A SUPPLEMENTAL WRITTEN AGREEMENT EXECUTED BY BOTH THE
PARTICIPANT AND THE COMPANY.

 

(W)          “PERFORMANCE-BASED EQUITY AWARD” MEANS AN EQUITY AWARD THE VESTING
OR EARNING OF WHICH IS CONDITIONED IN WHOLE OR IN PART UPON THE ACHIEVEMENT OF
ONE OR MORE PERFORMANCE GOALS (E.G., THE ATTAINMENT OF A TARGET STOCK PRICE,
ACHIEVEMENT OF A CORPORATE FINANCIAL GOAL OR ACHIEVEMENT OF AN INDIVIDUAL GOAL
OTHER THAN CONTINUED PERFORMANCE OF SERVICES FOR A SPECIFIED PERIOD OF TIME),
NOTWITHSTANDING THAT THE VESTING OR EARNING OF SUCH EQUITY AWARD MAY ALSO BE
CONDITIONED UPON THE CONTINUED PERFORMANCE OF SERVICES FOR THE COMPANY GROUP.

 

(X)            “PERMANENT DISABILITY” MEANS THE PARTICIPANT’S INCAPACITY DUE TO
BODILY INJURY OR PHYSICAL OR MENTAL ILLNESS WHICH (1) PREVENTS THE PARTICIPANT
FROM ENGAGING IN THE FULL-TIME PERFORMANCE OF THE PARTICIPANT’S DUTIES FOR A
PERIOD OF SIX (6) CONSECUTIVE MONTHS AND (2) WILL, IN THE OPINION OF A QUALIFIED
PHYSICIAN, BE PERMANENT AND CONTINUOUS DURING THE REMAINDER OF THE PARTICIPANT’S
LIFE.

 

(Y)           “RELEASE” MEANS A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS
AGAINST THE COMPANY AND ITS AFFILIATES AND THEIR STOCKHOLDERS, DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS SUBSTANTIALLY IN THE FORM
ATTACHED HERETO AS EXHIBIT B

 

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(“GENERAL RELEASE OF CLAIMS AGE 40 AND OVER”), WITH ANY MODIFICATIONS THERETO
DETERMINED BY LEGAL COUNSEL TO THE COMPANY TO BE NECESSARY OR ADVISABLE TO
COMPLY WITH APPLICABLE LAW OR TO ACCOMPLISH THE INTENT OF SECTION 8 (EXCLUSIVE
REMEDY) HEREOF.

 

(Z)            “SECTION 409A” MEANS SECTION 409A OF THE CODE.

 

(AA)         “SECTION 409A DEFERRED COMPENSATION” MEANS COMPENSATION, BENEFITS
OR ARRANGEMENTS PROVIDED BY THE PLAN OR OTHERWISE THAT CONSTITUTE OR WOULD GIVE
RISE TO DEFERRED COMPENSATION SUBJECT TO AND NOT EXEMPTED FROM THE REQUIREMENTS
OF SECTION 409A.

 

(BB)         “SEPARATION FROM SERVICE” MEANS A SEPARATION FROM SERVICE WITHIN
THE MEANING OF SECTION 409A.

 

(CC)         “SERVICE-BASED EQUITY AWARD” MEANS AN EQUITY AWARD THE VESTING OR
EARNING OF WHICH IS CONDITIONED SOLELY UPON THE CONTINUED PERFORMANCE OF
SERVICES FOR THE COMPANY GROUP.

 

(DD)         “SPECIFIED EMPLOYEE” MEANS A SPECIFIED EMPLOYEE WITHIN THE MEANING
OF SECTION 409A.

 

(EE)         “SUCCESSOR” MEANS ANY SUCCESSOR IN INTEREST TO SUBSTANTIALLY ALL OF
THE BUSINESS AND/OR ASSETS OF THE COMPANY.

 

(FF)           “TARGET BONUS RATE” MEANS, WITH RESPECT TO THE PARTICIPANT’S
INVOLUNTARY TERMINATION ABSENT A CHANGE IN CONTROL, THE QUOTIENT DETERMINED BY
DIVIDING THE FOLLOWING AMOUNT BY TWELVE (12):  THE AGGREGATE OF ALL ANNUAL
INCENTIVE BONUSES THAT WOULD BE EARNED BY THE PARTICIPANT AT THE PARTICIPANT’S
ANNUAL INCENTIVE BONUS TARGET RATE (ASSUMING ATTAINMENT OF 100% OF ALL
APPLICABLE PERFORMANCE GOALS) UNDER THE TERMS OF THE PROGRAMS, PLANS OR
AGREEMENTS PROVIDING FOR SUCH BONUSES IN WHICH THE PARTICIPANT WAS PARTICIPATING
FOR THE FISCAL YEAR OF THE PARTICIPANT’S INVOLUNTARY TERMINATION ABSENT A CHANGE
IN CONTROL (WITHOUT GIVING EFFECT TO ANY REDUCTION IN THE PARTICIPANT’S ANNUAL
INCENTIVE BONUS TARGET RATE CONSTITUTING GOOD REASON); PROVIDED, HOWEVER, THAT
FOR THE PURPOSES OF THIS DEFINITION, “ANNUAL INCENTIVE BONUSES” SHALL NOT
INCLUDE SIGNING BONUSES, RETENTION BONUSES OR OTHER NONRECURRING CASH AWARDS
THAT ARE NOT PART OF AN ANNUAL INCENTIVE BONUS PROGRAM.

 

2.2           CONSTRUCTION.  THE COMPANY INTENDS THAT ALL PAYMENTS AND BENEFITS
PROVIDED BY THIS PLAN BE EXEMPT FROM OR COMPLY WITH ALL APPLICABLE REQUIREMENTS
OF SECTION 409A, AND ANY AMBIGUITIES IN THE PLAN SHALL BE CONSTRUED IN A MANNER
CONSISTENT WITH SUCH INTENT.  CAPTIONS AND TITLES CONTAINED HEREIN ARE FOR
CONVENIENCE ONLY AND SHALL NOT AFFECT THE MEANING OR INTERPRETATION OF ANY
PROVISION OF THE PLAN.  EXCEPT WHEN OTHERWISE INDICATED BY THE CONTEXT, THE
SINGULAR SHALL INCLUDE THE PLURAL AND THE PLURAL SHALL INCLUDE THE SINGULAR. 
USE OF THE TERM “OR” IS NOT INTENDED TO BE EXCLUSIVE, UNLESS THE CONTEXT CLEARLY
REQUIRES OTHERWISE.

 

3.             ELIGIBILITY AND PARTICIPATION

 

The individual eligible to be designated to participate in the Plan shall be the
Chief Executive Officer.  The Chief Executive Officer shall become a Participant
upon such individual’s execution of a Participation Agreement.

 

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4.             PAYMENTS AND BENEFITS UPON TERMINATION OF EMPLOYMENT.

 

In the event of the Participant’s termination of employment with the Company
Group, the Participant shall be entitled to receive the applicable compensation
and benefits described in this Section 4.

 

4.1           INVOLUNTARY TERMINATION ABSENT A CHANGE IN CONTROL.  IN THE EVENT
OF THE PARTICIPANT’S INVOLUNTARY TERMINATION ABSENT A CHANGE IN CONTROL, THE
PARTICIPANT SHALL BE ENTITLED TO RECEIVE THE FOLLOWING COMPENSATION AND
BENEFITS:

 

(A)           ACCRUED OBLIGATIONS.  THE PARTICIPANT SHALL BE ENTITLED TO
RECEIVE:

 

(1)           ALL SALARY, COMMISSIONS, BONUSES AND ACCRUED BUT UNUSED VACATION
EARNED THROUGH THE DATE OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT, WHICH
SHALL BE PAID AT THE TIME REQUIRED BY APPLICABLE LAW OR PURSUANT TO THE TERMS
AND CONDITIONS OF THE PLANS OR AGREEMENTS PROVIDING FOR SUCH PAYMENTS; AND

 

(2)           REIMBURSEMENT WITHIN TEN (10) BUSINESS DAYS OF SUBMISSION OF
PROPER REPORTS, SUCH SUBMISSION TO BE MADE WITHIN THIRTY (30) DAYS FOLLOWING THE
PARTICIPANT’S TERMINATION OF EMPLOYMENT, OF ALL BUSINESS EXPENSES REASONABLY AND
NECESSARILY INCURRED BY THE PARTICIPANT IN CONNECTION WITH THE BUSINESS OF THE
COMPANY GROUP PRIOR TO HIS OR HER TERMINATION OF EMPLOYMENT IN ACCORDANCE WITH
THE COMPANY GROUP’S BUSINESS EXPENSE POLICY; AND

 

(3)           THE BENEFITS, IF ANY, UNDER ANY COMPANY GROUP RETIREMENT PLAN,
NONQUALIFIED DEFERRED COMPENSATION PLAN, EQUITY AWARD PLAN OR AGREEMENT, WELFARE
BENEFIT PLAN OR OTHER COMPANY GROUP COMPENSATION OR BENEFIT PLAN TO WHICH THE
PARTICIPANT MAY BE ENTITLED PURSUANT TO THE TERMS AND CONDITIONS OF SUCH PLANS
OR AGREEMENTS.

 

(B)           SEVERANCE BENEFITS.  PROVIDED THAT THE PARTICIPANT RESIGNS UPON
SUCH INVOLUNTARY TERMINATION ABSENT A CHANGE IN CONTROL FROM ALL CAPACITIES IN
WHICH THE PARTICIPANT IS THEN RENDERING SERVICE TO THE COMPANY GROUP (INCLUDING,
WITHOUT LIMITATION, SERVICE AS A MEMBER OF THE BOARD), EXECUTES THE RELEASE AND
SUCH RELEASE BECOMES EFFECTIVE IN ACCORDANCE WITH ITS TERMS ON OR BEFORE THE
SIXTIETH (60TH) DAY FOLLOWING THE DATE OF THE PARTICIPANT’S INVOLUNTARY
TERMINATION ABSENT A CHANGE IN CONTROL, THE PARTICIPANT SHALL BE ENTITLED TO
RECEIVE THE FOLLOWING SEVERANCE PAYMENTS AND BENEFITS TO WHICH THE PARTICIPANT
WOULD NOT OTHERWISE BE ENTITLED:

 

(1)           CASH SEVERANCE PAYMENTS.  SUBJECT TO SECTION 6.2, THE COMPANY
SHALL PAY TO THE PARTICIPANT IN A LUMP SUM CASH PAYMENT ON THE SIXTIETH (60TH)
DAY FOLLOWING THE DATE OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT AN AMOUNT
EQUAL TO (I) THE SUM OF THE PARTICIPANT’S APPLICABLE BASE SALARY RATE AND THE
PARTICIPANT’S TARGET BONUS RATE MULTIPLIED BY (II) THE NUMBER OF MONTHS
CONTAINED IN THE PARTICIPANT’S APPLICABLE BENEFIT PERIOD.

 

(2)           HEALTH AND LIFE INSURANCE BENEFITS.  SUBJECT TO SECTION 6.2, FOR
THE PERIOD COMMENCING IMMEDIATELY FOLLOWING THE PARTICIPANT’S TERMINATION OF
EMPLOYMENT AND CONTINUING FOR THE DURATION OF THE APPLICABLE BENEFIT PERIOD, THE
COMPANY SHALL ARRANGE TO PROVIDE THE PARTICIPANT AND HIS OR HER DEPENDENTS WITH
HEALTH BENEFITS (INCLUDING MEDICAL AND DENTAL) AND LIFE INSURANCE BENEFITS
SUBSTANTIALLY SIMILAR TO THOSE PROVIDED TO THE

 

8

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PARTICIPANT AND HIS OR HER DEPENDENTS IMMEDIATELY PRIOR TO THE DATE OF SUCH
TERMINATION OF EMPLOYMENT OR SHALL REIMBURSE THE PARTICIPANT FOR THE COST OF
OBTAINING SUCH BENEFITS TO THE EXTENT DESCRIBED BELOW.  SUCH BENEFITS SHALL BE
PROVIDED TO THE PARTICIPANT AT THE SAME PREMIUM COST TO THE PARTICIPANT AND AT
THE SAME COVERAGE LEVEL AS IN EFFECT AS OF THE PARTICIPANT’S TERMINATION OF
EMPLOYMENT; PROVIDED, HOWEVER, THAT THE PARTICIPANT SHALL BE SUBJECT TO ANY
CHANGE IN THE PREMIUM COST AND/OR LEVEL OF COVERAGE APPLICABLE GENERALLY TO ALL
EMPLOYEES HOLDING THE POSITION OR COMPARABLE POSITION WITH THE COMPANY GROUP
WHICH THE PARTICIPANT HELD IMMEDIATELY PRIOR TO TERMINATION OF EMPLOYMENT.  THE
COMPANY MAY SATISFY ITS OBLIGATION TO PROVIDE A CONTINUATION OF HEALTH BENEFITS
BY PAYING THAT PORTION OF THE PARTICIPANT’S PREMIUMS REQUIRED UNDER COBRA THAT
EXCEEDS THE AMOUNT OF PREMIUMS THAT THE PARTICIPANT WOULD HAVE BEEN REQUIRED TO
PAY FOR CONTINUING COVERAGE HAD HE OR SHE CONTINUED IN EMPLOYMENT.  IF THE
COMPANY IS NOT REASONABLY ABLE TO CONTINUE SUCH COVERAGE UNDER THE COMPANY’S
HEALTH BENEFIT PLANS, THE COMPANY SHALL PROVIDE SUBSTANTIALLY EQUIVALENT
COVERAGE UNDER OTHER SOURCES OR WILL REIMBURSE (WITHOUT A TAX GROSS-UP) THE
PARTICIPANT FOR PREMIUMS (IN EXCESS OF THE PARTICIPANT’S PREMIUM COST DESCRIBED
ABOVE) INCURRED BY THE PARTICIPANT TO OBTAIN HIS OR HER OWN SUCH COVERAGE.  IF
THE PARTICIPANT AND/OR THE PARTICIPANT’S DEPENDENTS BECOME ELIGIBLE TO RECEIVE
SUCH COVERAGE UNDER ANOTHER EMPLOYER’S HEALTH BENEFIT PLANS DURING THE
APPLICABLE BENEFIT PERIOD, THE PARTICIPANT SHALL REPORT SUCH ELIGIBILITY TO THE
COMPANY, AND THE COMPANY’S OBLIGATIONS UNDER THIS SUBSECTION SHALL BE SECONDARY
TO THE COVERAGE PROVIDED BY SUCH OTHER EMPLOYER’S PLANS.  FOR THE BALANCE OF ANY
PERIOD IN EXCESS OF THE APPLICABLE BENEFIT PERIOD DURING WHICH THE PARTICIPANT
IS ENTITLED TO CONTINUATION COVERAGE UNDER COBRA, THE PARTICIPANT SHALL BE
ENTITLED TO MAINTAIN COVERAGE FOR HIMSELF OR HERSELF AND THE PARTICIPANT’S
ELIGIBLE DEPENDENTS AT THE PARTICIPANT’S OWN EXPENSE.

 

(3)           OUTPLACEMENT BENEFITS.  SUBJECT TO SECTION 6.2, FOR THE PERIOD
COMMENCING IMMEDIATELY FOLLOWING THE PARTICIPANT’S TERMINATION OF EMPLOYMENT AND
CONTINUING FOR A PERIOD OF SIX (6) MONTHS, THE COMPANY WILL PROVIDE THE
PARTICIPANT WITH REASONABLE OUTPLACEMENT SERVICES FROM VENDORS DESIGNATED BY THE
COMPANY.

 

(4)           ACCELERATION OF VESTING OF EQUITY AWARDS.

 

(I)            SERVICE-BASED EQUITY AWARDS.  NOTWITHSTANDING ANY PROVISION TO
THE CONTRARY CONTAINED IN ANY PLAN OR AGREEMENT EVIDENCING A SERVICE-BASED
EQUITY AWARD, BUT SUBJECT TO SECTION 6.2 AND SUBSECTIONS (IV) AND (V) BELOW,
EACH OF THE PARTICIPANT’S SERVICE-BASED EQUITY AWARDS OUTSTANDING AT THE TIME OF
THE PARTICIPANT’S TERMINATION OF EMPLOYMENT WITH THE COMPANY GROUP SHALL VEST
EFFECTIVE AS OF THE TIME OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT TO THE
SAME EXTENT THAT SUCH EQUITY AWARD WOULD HAVE VESTED IN ACCORDANCE WITH ITS
TERMS OVER THE PERIOD OF EIGHTEEN (18) MONTHS FOLLOWING THE DATE OF THE
PARTICIPANT’S TERMINATION OF EMPLOYMENT HAD THE PARTICIPANT’S EMPLOYMENT WITH
THE COMPANY GROUP CONTINUED THROUGHOUT SUCH PERIOD.

 

(II)           PERFORMANCE-BASED EQUITY AWARDS OTHER THAN SECTION 162(M) EXEMPT
AWARDS.  NOTWITHSTANDING ANY PROVISION TO THE CONTRARY CONTAINED IN ANY PLAN OR
AGREEMENT EVIDENCING A PERFORMANCE-BASED EQUITY AWARD, BUT SUBJECT TO
SECTION 6.2 AND SUBSECTION (IV) BELOW, EACH OF THE PARTICIPANT’S
PERFORMANCE-BASED EQUITY AWARDS, OTHER THAN ANY SUCH EQUITY AWARD INTENDED TO
RESULT IN “QUALIFIED PERFORMANCE-BASED COMPENSATION” WITHIN THE MEANING OF
SECTION 162(M) OF THE CODE (A “SECTION 162(M) EXEMPT AWARD”),

 

9

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OUTSTANDING AT THE TIME OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT WITH THE
COMPANY GROUP SHALL VEST EFFECTIVE AS OF THE TIME OF THE PARTICIPANT’S
TERMINATION OF EMPLOYMENT AS FOLLOWS:

 

(A)          IF THE PERFORMANCE PERIOD OF SUCH AWARD IS SCHEDULED TO END WITHIN
EIGHTEEN (18) MONTHS FOLLOWING THE DATE OF THE PARTICIPANT’S TERMINATION OF
EMPLOYMENT, SUCH AWARD SHALL VEST TO THE SAME EXTENT THAT IT WOULD HAVE VESTED
HAD ONE HUNDRED PERCENT (100%) OF THE TARGET LEVEL OF PERFORMANCE BEEN ACHIEVED
AND HAD THE PARTICIPANT’S EMPLOYMENT WITH THE COMPANY GROUP CONTINUED THROUGH
THE DATE ON WHICH SUCH AWARD WAS TO BE SETTLED IN ACCORDANCE WITH ITS TERMS.

 

(B)           IF THE PERFORMANCE PERIOD OF SUCH AWARD IS SCHEDULED TO END MORE
THAN EIGHTEEN (18) MONTHS FOLLOWING THE DATE OF THE PARTICIPANT’S TERMINATION OF
EMPLOYMENT, SUCH AWARD SHALL VEST IN AN AMOUNT EQUAL TO THE PRODUCT OF: (1) THE
AMOUNT OF SUCH AWARD THAT WOULD HAVE VESTED HAD ONE HUNDRED PERCENT (100%) OF
THE TARGET LEVEL OF PERFORMANCE BEEN ACHIEVED AND HAD THE PARTICIPANT’S
EMPLOYMENT WITH THE COMPANY GROUP CONTINUED THROUGH THE DATE ON WHICH SUCH AWARD
WAS TO BE SETTLED IN ACCORDANCE WITH ITS TERMS, AND (2) A FRACTION (NOT GREATER
THAN ONE), THE NUMERATOR OF WHICH IS THE NUMBER OF DAYS FROM THE COMMENCEMENT OF
THE PERFORMANCE PERIOD UNTIL THE DATE EIGHTEEN (18) MONTHS FOLLOWING THE DATE OF
THE PARTICIPANT’S TERMINATION OF EMPLOYMENT AND THE DENOMINATOR OF WHICH IS THE
TOTAL NUMBER OF DAYS CONTAINED IN THE PERFORMANCE PERIOD.

 

(III)          PERFORMANCE-BASED EQUITY AWARDS WHICH ARE SECTION 162(M) EXEMPT
AWARDS.  NOTWITHSTANDING ANY PROVISION TO THE CONTRARY CONTAINED IN ANY PLAN OR
AGREEMENT EVIDENCING A PERFORMANCE-BASED EQUITY AWARD, BUT SUBJECT TO
SECTION 6.2, EACH OF THE PARTICIPANT’S PERFORMANCE-BASED EQUITY AWARDS WHICH IS
A SECTION 162(M) EXEMPT AWARD AND IS OUTSTANDING AT THE TIME OF THE
PARTICIPANT’S TERMINATION OF EMPLOYMENT WITH THE COMPANY GROUP SHALL CONTINUE TO
REMAIN OUTSTANDING AND SHALL VEST AND BE SETTLED AS FOLLOWS:

 

(A)          THE PARTICIPANT SHALL VEST IN AND BE ENTITLED TO RECEIVE AN AMOUNT
EQUAL TO THE PRODUCT OF: (1) THE AMOUNT OF SUCH AWARD THAT WOULD ACTUALLY VEST
BASED UPON THE EXTENT TO WHICH THE APPLICABLE PERFORMANCE GOALS ARE ACTUALLY
ATTAINED AS OF THE COMPLETION OF THE APPLICABLE PERFORMANCE PERIOD AND HAD THE
PARTICIPANT’S EMPLOYMENT WITH THE COMPANY GROUP CONTINUED THROUGH THE DATE ON
WHICH SUCH AWARD WAS TO BE SETTLED IN ACCORDANCE WITH ITS TERMS, AND (2) A
FRACTION (NOT GREATER THAN ONE), THE NUMERATOR OF WHICH IS THE NUMBER OF DAYS
FROM THE COMMENCEMENT OF THE PERFORMANCE PERIOD UNTIL THE DATE EIGHTEEN (18)
MONTHS FOLLOWING THE DATE OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT AND THE
DENOMINATOR OF WHICH IS THE TOTAL NUMBER OF DAYS CONTAINED IN THE PERFORMANCE
PERIOD.

 

(B)           PAYMENT OF THE AMOUNT DETERMINED UNDER SUBSECTION (A) ABOVE SHALL
BE MADE AT THE SAME TIME PAYMENTS ARE MADE TO OTHER PARTICIPANTS IN THE PLAN OR
ARRANGEMENT GOVERNING SUCH AWARD IN ACCORDANCE WITH ITS TERMS, BUT IN ANY EVENT
NO LATER THAN THE 15TH DAY OF THE THIRD MONTH FOLLOWING THE LATER OF (X) END OF
THE PARTICIPANT’S TAXABLE YEAR IN WHICH THE PERFORMANCE PERIOD ENDS OR (Y) THE
END OF THE COMPANY’S TAXABLE YEAR IN WHICH THE PERFORMANCE PERIOD ENDS.

 

10

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(C)           NOTWITHSTANDING THE FOREGOING, IN THE EVENT OF THE CONSUMMATION OF
A CHANGE IN CONTROL PRIOR TO THE DATE ON WHICH PAYMENT WOULD OTHERWISE BE MADE
IN ACCORDANCE WITH SUBSECTION (B) ABOVE, THEN SUCH AWARD SHALL VEST AND BE
SETTLED AS PROVIDED BY SECTION 5.2, BUT SUBJECT IN ANY EVENT TO SECTION 6.2.

 

(IV)          SETTLEMENT OF CERTAIN EQUITY AWARDS NOT SUBJECT TO EXERCISE.  ANY
EQUITY AWARD THE VESTING OF WHICH IS ACCELERATED BY THIS SECTION 4.1(B)(4),
OTHER THAN A SECTION 162(M) EXEMPT AWARD, WHICH IS AN AWARD OF RESTRICTED STOCK
UNITS, PERFORMANCE SHARES, PERFORMANCE UNITS, PHANTOM STOCK OR SIMILAR
STOCK-BASED COMPENSATION REPRESENTING A FUTURE RIGHT TO RECEIVE SHARES OR OTHER
CONSIDERATION THE SETTLEMENT OF WHICH IS NOT DETERMINED BY ITS HOLDER’S ELECTION
TO EXERCISE SUCH AWARD SHALL BE SETTLED IN FULL ON THE FIRST TO OCCUR OF (A) THE
SIXTIETH (60TH) DAY FOLLOWING THE DATE OF THE PARTICIPANT’S TERMINATION OF
EMPLOYMENT, AND (B) THE EFFECTIVE TIME OF A CHANGE IN CONTROL, BUT SUBJECT IN
EITHER CASE TO SECTION 6.2.

 

(V)           EXTENSION OF STOCK OPTION EXERCISE PERIOD.  NOTWITHSTANDING ANY
PROVISION TO THE CONTRARY CONTAINED IN THE AGREEMENT EVIDENCING ANY EQUITY AWARD
WHICH IS A STOCK OPTION, THE STOCK OPTION, TO THE EXTENT UNEXERCISED ON THE DATE
ON WHICH THE PARTICIPANT’S EMPLOYMENT TERMINATED, MAY BE EXERCISED BY THE
PARTICIPANT (OR THE PARTICIPANT’S GUARDIAN OR LEGAL REPRESENTATIVE) AT ANY TIME
PRIOR TO THE EXPIRATION OF ONE (1) YEAR AFTER THE DATE ON WHICH THE
PARTICIPANT’S EMPLOYMENT TERMINATED, BUT IN ANY EVENT NO LATER THAN THE DATE OF
EXPIRATION OF THE STOCK OPTION’S TERM AS SET FORTH IN THE AGREEMENT EVIDENCING
SUCH STOCK OPTION.

 

(5)           FORFEITURE OF BENEFITS.  IF THE RELEASE WHICH IS A CONDITION TO
THE PARTICIPANT’S RIGHT TO PAYMENTS AND BENEFITS PURSUANT TO THIS
SECTION 4.1(B) DOES NOT BECOME EFFECTIVE ON OR BEFORE THE SIXTIETH (60TH) DAY
FOLLOWING THE DATE OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT, THEN THE
COMPANY SHALL HAVE THE RIGHT TO: (I) TERMINATE ANY FURTHER PROVISION OF SUCH
SEVERANCE BENEFITS PURSUANT TO THIS PLAN, (II) SEEK REIMBURSEMENT FROM THE
PARTICIPANT FOR ALL SUCH SEVERANCE BENEFITS PREVIOUSLY PROVIDED TO THE
PARTICIPANT PURSUANT TO THIS PLAN, (III) RECOVER FROM THE PARTICIPANT ALL SHARES
OF THE COMPANY’S STOCK OWNED BY THE PARTICIPANT (OR THE PROCEEDS THEREFROM,
REDUCED BY ANY EXERCISE OR PURCHASE PRICE PAID TO ACQUIRE SUCH SHARES) THE
VESTING OF WHICH WAS ACCELERATED PURSUANT TO THIS PLAN, AND (IV) TO IMMEDIATELY
CANCEL ALL EQUITY AWARDS THE VESTING OF WHICH WAS ACCELERATED PURSUANT TO THIS
PLAN.

 

4.2           INVOLUNTARY TERMINATION FOLLOWING A CHANGE IN CONTROL.  IN THE
EVENT OF THE PARTICIPANT’S INVOLUNTARY TERMINATION FOLLOWING A CHANGE IN
CONTROL, THE PARTICIPANT SHALL BE ENTITLED TO RECEIVE THE FOLLOWING COMPENSATION
AND BENEFITS:

 

(A)           ACCRUED OBLIGATIONS.  THE PARTICIPANT SHALL BE ENTITLED TO RECEIVE
ALL OF THE ACCRUED OBLIGATIONS DESCRIBED IN SECTION 4.1(A), WHICH SHALL BE
PROVIDED IN THE SAME MANNER AS DESCRIBED IN SUCH SECTION.

 

(B)           SEVERANCE BENEFITS.  PROVIDED THAT THE PARTICIPANT RESIGNS UPON
SUCH INVOLUNTARY TERMINATION FOLLOWING A CHANGE IN CONTROL FROM ALL CAPACITIES
IN WHICH THE PARTICIPANT IS THEN RENDERING SERVICE TO THE COMPANY GROUP
(INCLUDING, WITHOUT LIMITATION, SERVICE AS A MEMBER OF THE BOARD), EXECUTES THE
RELEASE AND SUCH RELEASE BECOMES EFFECTIVE IN

 

11

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ACCORDANCE WITH ITS TERMS ON OR BEFORE THE SIXTIETH (60TH) DAY FOLLOWING THE
DATE OF THE PARTICIPANT’S INVOLUNTARY TERMINATION FOLLOWING A CHANGE IN CONTROL,
THE PARTICIPANT SHALL BE ENTITLED TO RECEIVE THE FOLLOWING SEVERANCE PAYMENTS
AND BENEFITS TO WHICH THE PARTICIPANT WOULD NOT OTHERWISE BE ENTITLED:

 

(1)           CASH SEVERANCE PAYMENTS.  SUBJECT TO SECTION 6.2, THE COMPANY
SHALL PAY TO THE PARTICIPANT IN A LUMP SUM CASH PAYMENT ON THE SIXTIETH (60TH)
DAY FOLLOWING THE DATE OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT AN AMOUNT
EQUAL TO (I) THE SUM OF THE PARTICIPANT’S APPLICABLE BASE SALARY RATE AND THE
PARTICIPANT’S APPLICABLE BONUS RATE MULTIPLIED BY (II) THE NUMBER OF MONTHS
CONTAINED IN THE PARTICIPANT’S APPLICABLE BENEFIT PERIOD.

 

(2)           HEALTH AND LIFE INSURANCE BENEFITS.  SUBJECT TO SECTION 6.2, FOR
THE PERIOD COMMENCING IMMEDIATELY FOLLOWING THE PARTICIPANT’S TERMINATION OF
EMPLOYMENT AND CONTINUING FOR THE DURATION OF THE APPLICABLE BENEFIT PERIOD, THE
COMPANY SHALL ARRANGE TO PROVIDE THE PARTICIPANT AND HIS OR HER DEPENDENTS WITH
HEALTH BENEFITS (INCLUDING MEDICAL AND DENTAL) AND LIFE INSURANCE BENEFITS
SUBSTANTIALLY SIMILAR TO THOSE PROVIDED TO THE PARTICIPANT AND HIS OR HER
DEPENDENTS IMMEDIATELY PRIOR TO THE DATE OF SUCH TERMINATION OF EMPLOYMENT OR
SHALL REIMBURSE THE PARTICIPANT FOR THE COST OF OBTAINING SUCH BENEFITS TO THE
EXTENT DESCRIBED BELOW.  SUCH BENEFITS SHALL BE PROVIDED TO THE PARTICIPANT AT
THE SAME PREMIUM COST TO THE PARTICIPANT AND AT THE SAME COVERAGE LEVEL AS IN
EFFECT AS OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT; PROVIDED, HOWEVER,
THAT THE PARTICIPANT SHALL BE SUBJECT TO ANY CHANGE IN THE PREMIUM COST AND/OR
LEVEL OF COVERAGE APPLICABLE GENERALLY TO ALL EMPLOYEES HOLDING THE POSITION OR
COMPARABLE POSITION WITH THE COMPANY GROUP WHICH THE PARTICIPANT HELD
IMMEDIATELY PRIOR TO TERMINATION OF EMPLOYMENT.  THE COMPANY MAY SATISFY ITS
OBLIGATION TO PROVIDE A CONTINUATION OF HEALTH BENEFITS BY PAYING THAT PORTION
OF THE PARTICIPANT’S PREMIUMS REQUIRED UNDER COBRA THAT EXCEEDS THE AMOUNT OF
PREMIUMS THAT THE PARTICIPANT WOULD HAVE BEEN REQUIRED TO PAY FOR CONTINUING
COVERAGE HAD HE OR SHE CONTINUED IN EMPLOYMENT.  IF THE COMPANY IS NOT
REASONABLY ABLE TO CONTINUE SUCH COVERAGE UNDER THE COMPANY’S HEALTH BENEFIT
PLANS, THE COMPANY SHALL PROVIDE SUBSTANTIALLY EQUIVALENT COVERAGE UNDER OTHER
SOURCES OR WILL REIMBURSE (WITHOUT A TAX GROSS-UP) THE PARTICIPANT FOR PREMIUMS
(IN EXCESS OF THE PARTICIPANT’S PREMIUM COST DESCRIBED ABOVE) INCURRED BY THE
PARTICIPANT TO OBTAIN HIS OR HER OWN SUCH COVERAGE.  IF THE PARTICIPANT AND/OR
THE PARTICIPANT’S DEPENDENTS BECOME ELIGIBLE TO RECEIVE SUCH COVERAGE UNDER
ANOTHER EMPLOYER’S HEALTH BENEFIT PLANS DURING THE APPLICABLE BENEFIT PERIOD,
THE PARTICIPANT SHALL REPORT SUCH ELIGIBILITY TO THE COMPANY, AND THE COMPANY’S
OBLIGATIONS UNDER THIS SUBSECTION SHALL BE SECONDARY TO THE COVERAGE PROVIDED BY
SUCH OTHER EMPLOYER’S PLANS.  FOR THE BALANCE OF ANY PERIOD IN EXCESS OF THE
APPLICABLE BENEFIT PERIOD DURING WHICH THE PARTICIPANT IS ENTITLED TO
CONTINUATION COVERAGE UNDER COBRA, THE PARTICIPANT SHALL BE ENTITLED TO MAINTAIN
COVERAGE FOR HIMSELF OR HERSELF AND THE PARTICIPANT’S ELIGIBLE DEPENDENTS AT THE
PARTICIPANT’S OWN EXPENSE.

 

(3)           OUTPLACEMENT BENEFITS.  SUBJECT TO SECTION 6.2, FOR THE PERIOD
COMMENCING IMMEDIATELY FOLLOWING THE PARTICIPANT’S TERMINATION OF EMPLOYMENT AND
CONTINUING FOR A PERIOD OF SIX (6) MONTHS, THE COMPANY WILL PROVIDE THE
PARTICIPANT WITH REASONABLE OUTPLACEMENT SERVICES FROM VENDORS DESIGNATED BY THE
COMPANY.

 

12

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(4)           ACCELERATION OF VESTING OF EQUITY AWARDS; EXTENSION OF STOCK
OPTION EXERCISE PERIOD.

 

(I)            NOTWITHSTANDING ANY PROVISION TO THE CONTRARY CONTAINED IN ANY
PLAN OR AGREEMENT EVIDENCING AN EQUITY AWARD GRANTED TO THE PARTICIPANT, BUT
SUBJECT TO SECTION 6.2, THE VESTING OF EACH OF THE PARTICIPANT’S EQUITY AWARDS
OUTSTANDING AT THE TIME OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT WITH THE
COMPANY GROUP SHALL BE ACCELERATED IN FULL EFFECTIVE AS OF THE TIME OF THE
PARTICIPANT’S TERMINATION OF EMPLOYMENT.

 

(II)           IN DETERMINING THE EXTENT OF SUCH ACCELERATION OF VESTING OF ANY
PERFORMANCE-BASED EQUITY AWARD, IT SHALL BE ASSUMED THAT ONE HUNDRED PERCENT
(100%) OF THE TARGET LEVEL OF PERFORMANCE HAS BEEN ACHIEVED.

 

(III)          ANY EQUITY AWARDS THE VESTING OF WHICH IS ACCELERATED BY THIS
SECTION 4.2(B)(4) WHICH IS AN AWARD OF RESTRICTED STOCK UNITS, PERFORMANCE
SHARES, PERFORMANCE UNITS, PHANTOM STOCK OR SIMILAR STOCK-BASED COMPENSATION
REPRESENTING A FUTURE RIGHT TO RECEIVE SHARES OR OTHER CONSIDERATION THE
SETTLEMENT OF WHICH IS NOT DETERMINED BY ITS HOLDER’S ELECTION TO EXERCISE SUCH
AWARD SHALL BE SETTLED IN FULL ON THE SIXTIETH (60TH) DAY FOLLOWING THE DATE OF
THE PARTICIPANT’S TERMINATION OF EMPLOYMENT, SUBJECT TO SECTION 6.2.

 

(IV)          NOTWITHSTANDING ANY PROVISION TO THE CONTRARY CONTAINED IN THE
AGREEMENT EVIDENCING ANY EQUITY AWARD WHICH IS A STOCK OPTION, THE STOCK OPTION,
TO THE EXTENT UNEXERCISED ON THE DATE ON WHICH THE PARTICIPANT’S EMPLOYMENT
TERMINATED, MAY BE EXERCISED BY THE PARTICIPANT (OR THE PARTICIPANT’S GUARDIAN
OR LEGAL REPRESENTATIVE) AT ANY TIME PRIOR TO THE EXPIRATION OF ONE (1) YEAR
AFTER THE DATE ON WHICH THE PARTICIPANT’S EMPLOYMENT TERMINATED, BUT IN ANY
EVENT NO LATER THAN THE DATE OF EXPIRATION OF THE STOCK OPTION’S TERM AS SET
FORTH IN THE AGREEMENT EVIDENCING SUCH STOCK OPTION.

 

(5)           FORFEITURE OF BENEFITS.  IF THE RELEASE WHICH IS A CONDITION TO
THE PARTICIPANT’S RIGHTS TO PAYMENTS AND BENEFITS PURSUANT TO THIS
SECTION 4.2(B) DOES NOT BECOME EFFECTIVE ON OR BEFORE THE SIXTIETH (60TH) DAY
FOLLOWING THE DATE OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT, THEN THE
COMPANY SHALL HAVE THE RIGHT TO: (I) TERMINATE ANY FURTHER PROVISION OF SUCH
SEVERANCE BENEFITS PURSUANT TO THIS PLAN, (II) SEEK REIMBURSEMENT FROM THE
PARTICIPANT FOR ALL SUCH SEVERANCE BENEFITS PREVIOUSLY PROVIDED TO THE
PARTICIPANT PURSUANT TO THIS PLAN, (III) RECOVER FROM THE PARTICIPANT ALL SHARES
OF THE COMPANY’S STOCK OWNED BY THE PARTICIPANT (OR THE PROCEEDS THEREFROM,
REDUCED BY ANY EXERCISE OR PURCHASE PRICE PAID TO ACQUIRE SUCH SHARES) THE
VESTING OF WHICH WAS ACCELERATED PURSUANT TO THIS PLAN, AND (IV) TO IMMEDIATELY
CANCEL ALL EQUITY AWARDS THE VESTING OF WHICH WAS ACCELERATED PURSUANT TO THIS
PLAN.

 

4.3           OTHER TERMINATION.  IN THE EVENT OF THE PARTICIPANT’S TERMINATION
OF EMPLOYMENT WITH THE COMPANY GROUP WHICH IS NOT AN INVOLUNTARY TERMINATION,
THE PARTICIPANT SHALL BE ENTITLED TO RECEIVE ONLY THE ACCRUED OBLIGATIONS
DESCRIBED IN SECTION 4.1(A), WHICH SHALL BE PROVIDED IN THE SAME MANNER AS
DESCRIBED IN SUCH SECTION.

 

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4.4           INDEMNIFICATION; INSURANCE.

 

(A)           IN ADDITION TO ANY RIGHTS THE PARTICIPANT MAY HAVE UNDER ANY
INDEMNIFICATION AGREEMENT PREVIOUSLY ENTERED INTO BETWEEN THE COMPANY AND SUCH
PARTICIPANT (A “PRIOR INDEMNITY AGREEMENT”), FROM AND AFTER THE DATE OF THE
PARTICIPANT’S INVOLUNTARY TERMINATION ABSENT A CHANGE IN CONTROL OR INVOLUNTARY
TERMINATION FOLLOWING A CHANGE IN CONTROL, THE COMPANY SHALL INDEMNIFY AND HOLD
HARMLESS THE PARTICIPANT AGAINST ANY COSTS OR EXPENSES (INCLUDING ATTORNEYS’
FEES), JUDGMENTS, FINES, LOSSES, CLAIMS, DAMAGES OR LIABILITIES INCURRED IN
CONNECTION WITH ANY CLAIM, ACTION, SUIT, PROCEEDING OR INVESTIGATION, WHETHER
CIVIL, CRIMINAL, ADMINISTRATIVE OR INVESTIGATIVE, BY REASON OF THE FACT THAT THE
PARTICIPANT IS OR WAS A DIRECTOR, OFFICER, EMPLOYEE OR AGENT OF THE COMPANY
GROUP, OR IS OR WAS SERVING AT THE REQUEST OF THE COMPANY GROUP AS A DIRECTOR,
OFFICER, EMPLOYEE OR AGENT OF ANOTHER CORPORATION, PARTNERSHIP, JOINT VENTURE,
TRUST OR OTHER ENTERPRISE, WHETHER ASSERTED OR CLAIMED PRIOR TO, AT OR AFTER THE
DATE OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT, TO THE FULLEST EXTENT
PERMITTED UNDER APPLICABLE LAW, AND THE COMPANY SHALL ALSO ADVANCE FEES AND
EXPENSES (INCLUDING ATTORNEYS’ FEES) AS INCURRED BY THE PARTICIPANT TO THE
FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW.  IN THE EVENT OF A CONFLICT
BETWEEN THE PROVISIONS OF A PRIOR INDEMNITY AGREEMENT AND THE PROVISIONS OF THIS
PLAN, THE PARTICIPANT MAY ELECT WHICH PROVISIONS SHALL GOVERN.

 

(B)           FOR A PERIOD OF SIX (6) YEARS FROM AND AFTER THE DATE OF THE
PARTICIPANT’S INVOLUNTARY TERMINATION FOLLOWING A CHANGE IN CONTROL, THE COMPANY
SHALL USE ITS BEST EFFORTS TO MAINTAIN A POLICY OF DIRECTORS’ AND OFFICERS’
LIABILITY INSURANCE FOR THE BENEFIT OF SUCH PARTICIPANT WHICH PROVIDES HIM OR
HER WITH COVERAGE NO LESS FAVORABLE THAN THAT PROVIDED FOR THE COMPANY’S
CONTINUING OFFICERS AND DIRECTORS.

 

5.             TREATMENT OF EQUITY AWARDS UPON A CHANGE IN CONTROL

 

5.1           ACCELERATION OF VESTING UPON NON-ASSUMPTION OF SERVICE-BASED
EQUITY AWARDS.  NOTWITHSTANDING ANY PROVISION TO THE CONTRARY CONTAINED IN ANY
PLAN OR AGREEMENT EVIDENCING A SERVICE-BASED EQUITY AWARD HELD BY THE
PARTICIPANT, BUT SUBJECT TO SECTION 6.2, IN THE EVENT OF A CHANGE IN CONTROL IN
WHICH THE SURVIVING, CONTINUING, SUCCESSOR, OR PURCHASING CORPORATION OR OTHER
BUSINESS ENTITY OR PARENT THEREOF, AS THE CASE MAY BE (THE “ACQUIRING
CORPORATION”), DOES NOT ASSUME OR CONTINUE THE COMPANY’S RIGHTS AND OBLIGATIONS
UNDER SUCH THEN-OUTSTANDING SERVICE-BASED EQUITY AWARD OR SUBSTITUTE FOR SUCH
THEN-OUTSTANDING SERVICE-BASED EQUITY AWARD A SUBSTANTIALLY EQUIVALENT EQUITY
AWARD FOR THE ACQUIRING CORPORATION’S STOCK, THEN THE VESTING, EXERCISABILITY
AND SETTLEMENT OF SUCH SERVICE-BASED EQUITY AWARD WHICH IS NOT ASSUMED,
CONTINUED OR SUBSTITUTED FOR SHALL BE ACCELERATED IN FULL EFFECTIVE IMMEDIATELY
PRIOR TO BUT CONDITIONED UPON THE CONSUMMATION OF THE CHANGE IN CONTROL,
PROVIDED THAT THE PARTICIPANT REMAINS AN EMPLOYEE OR OTHER SERVICE PROVIDER WITH
THE COMPANY GROUP IMMEDIATELY PRIOR TO THE CHANGE IN CONTROL.

 

5.2           ACCELERATION OF VESTING OF PERFORMANCE-BASED EQUITY AWARDS. 
NOTWITHSTANDING ANY PROVISION TO THE CONTRARY CONTAINED IN ANY PLAN OR AGREEMENT
EVIDENCING A PERFORMANCE-BASED EQUITY AWARD HELD BY THE PARTICIPANT, BUT SUBJECT
TO SECTION 6.2, IN THE EVENT OF A CHANGE IN CONTROL THE VESTING, EXERCISABILITY
AND SETTLEMENT OF SUCH THEN-OUTSTANDING PERFORMANCE-BASED EQUITY AWARD SHALL BE
ACCELERATED IN FULL IMMEDIATELY PRIOR TO BUT CONDITIONED UPON THE CONSUMMATION
OF THE CHANGE IN CONTROL (ASSUMING FOR THE PURPOSE OF

 

14

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DETERMINING THE EXTENT OF SUCH ACCELERATION, IF APPLICABLE, THAT ONE HUNDRED
PERCENT (100%) OF THE TARGET LEVEL OF PERFORMANCE HAS BEEN ACHIEVED), PROVIDED
THAT THE PARTICIPANT REMAINS AN EMPLOYEE OR OTHER SERVICE PROVIDER WITH THE
COMPANY GROUP IMMEDIATELY PRIOR TO THE CHANGE IN CONTROL OR AS OTHERWISE
PROVIDED BY SECTION 4.1(B)(4)(III)(C).

 

6.             CERTAIN FEDERAL TAX CONSIDERATIONS

 

6.1           FEDERAL EXCISE TAX UNDER SECTION 4999 OF THE CODE.

 

(A)           ADDITIONAL PAYMENT.  IN THE EVENT THAT ANY PAYMENT OR BENEFIT
RECEIVED OR TO BE RECEIVED BY THE PARTICIPANT PURSUANT TO THIS PLAN OR OTHERWISE
PAYABLE TO THE PARTICIPANT (COLLECTIVELY, THE “PAYMENTS”) WOULD BE SUBJECT TO
THE EXCISE TAX IMPOSED BY SECTION 4999 OF THE CODE, OR ANY SIMILAR OR SUCCESSOR
PROVISION (THE “EXCISE TAX”), THE COMPANY SHALL PAY TO THE PARTICIPANT WITHIN
NINETY (90) DAYS FOLLOWING THE DATE ON WHICH THE PARTICIPANT REMITS THE EXCISE
TAX, AN ADDITIONAL AMOUNT (THE “GROSS-UP PAYMENT”) SUCH THAT THE NET AMOUNT
RETAINED BY THE PARTICIPANT FROM THE PAYMENTS AND THE GROSS-UP PAYMENT, AFTER
DEDUCTION OF (A) ANY EXCISE TAX ON THE PAYMENTS, (B) ANY FEDERAL, STATE AND
LOCAL INCOME OR EMPLOYMENT TAX AND EXCISE TAX ON THE GROSS-UP PAYMENT AND
(C) ANY INTEREST, PENALTIES OR ADDITIONS TO TAX PAYABLE BY THE PARTICIPANT WITH
RESPECT THERETO, SHALL BE EQUAL TO THE PAYMENTS.  NOTWITHSTANDING THE FOREGOING,
IF THE PAYMENTS THAT WOULD OTHERWISE BE SUBJECT TO THE EXCISE TAX DO NOT EXCEED
THE GREATEST AMOUNT OF PAYMENTS THAT COULD BE PAID TO THE PARTICIPANT WITHOUT
GIVING RISE TO THE EXCISE TAX (THE “REDUCED AMOUNT”) BY MORE THAN AN AMOUNT
EQUAL TO THE LESSER OF $100,000 OR FIVE PERCENT OF THE PAYMENTS, THEN NO
GROSS-UP PAYMENT SHALL BE PAYABLE TO THE PARTICIPANT AND THE PAYMENTS, IN THE
AGGREGATE, SHALL BE REDUCED TO THE REDUCED AMOUNT.

 

(B)           DETERMINATION OF AMOUNTS.

 

(1)           DETERMINATION BY ACCOUNTANTS.  ALL COMPUTATIONS AND DETERMINATIONS
CALLED FOR BY THIS SECTION 6.1 SHALL BE PROMPTLY DETERMINED AND REPORTED IN
WRITING TO THE COMPANY AND THE PARTICIPANT BY INDEPENDENT PUBLIC ACCOUNTANTS
SELECTED BY THE COMPANY AND REASONABLY ACCEPTABLE TO THE PARTICIPANT (THE
“ACCOUNTANTS”).  FOR THE PURPOSES OF SUCH DETERMINATIONS, THE ACCOUNTANTS MAY
RELY ON REASONABLE, GOOD FAITH INTERPRETATIONS CONCERNING THE APPLICATION OF
SECTIONS 280G AND 4999 OF THE CODE.  THE COMPANY AND THE PARTICIPANT SHALL
FURNISH TO THE ACCOUNTANTS SUCH INFORMATION AND DOCUMENTS AS THE ACCOUNTANTS MAY
REASONABLY REQUEST IN ORDER TO MAKE THEIR REQUIRED DETERMINATIONS.  THE COMPANY
SHALL BEAR ALL FEES AND EXPENSES CHARGED BY THE ACCOUNTANTS IN CONNECTION WITH
SUCH SERVICES.

 

(2)           DETERMINATION OF APPLICABILITY OF REDUCED AMOUNT.  FOR PURPOSES OF
DETERMINING WHETHER THE PAYMENTS WILL BE REDUCED TO THE REDUCED AMOUNT, ANY
PAYMENTS OR BENEFITS RECEIVED OR TO BE RECEIVED BY THE PARTICIPANT IN CONNECTION
WITH TRANSACTIONS CONTEMPLATED BY A CHANGE IN CONTROL EVENT OR THE PARTICIPANT’S
TERMINATION OF EMPLOYMENT (WHETHER PURSUANT TO THE TERMS OF THIS PLAN OR ANY
OTHER PLAN, ARRANGEMENT OR AGREEMENT WITH THE COMPANY), SHALL BE TREATED AS
“PARACHUTE PAYMENTS” WITHIN THE MEANING OF SECTION 280G OF THE CODE OR ANY
SIMILAR OR SUCCESSOR PROVISION (“SECTION 280G”), AND ALL “EXCESS PARACHUTE
PAYMENTS” WITHIN THE MEANING OF SECTION 280G SHALL BE TREATED AS SUBJECT TO THE
EXCISE TAX, EXCEPT TO THE EXTENT THAT, IN THE OPINION OF THE ACCOUNTANTS, SUCH
PAYMENTS OR BENEFITS OTHERWISE CONSTITUTING EXCESS PARACHUTE PAYMENTS REPRESENT
(IN WHOLE OR IN PART) REASONABLE COMPENSATION

 

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FOR SERVICES ACTUALLY RENDERED WITHIN THE MEANING OF SECTION 280G, OR ARE
OTHERWISE NOT SUBJECT TO THE EXCISE TAX.

 

(C)           NOTICE AND CONTEST OF CLAIM.

 

(1)           THE PARTICIPANT SHALL NOTIFY THE COMPANY IN WRITING OF ANY CLAIM
BY THE INTERNAL REVENUE SERVICE THAT, IF SUCCESSFUL, WOULD REQUIRE THE PAYMENT
BY THE COMPANY OF A GROSS-UP PAYMENT.  SUCH NOTIFICATION SHALL BE GIVEN AS SOON
AS PRACTICABLE BUT NO LATER THAN SIXTY (60) CALENDAR DAYS AFTER THE PARTICIPANT
IS INFORMED IN WRITING OF SUCH CLAIM AND SHALL APPRISE THE COMPANY OF THE NATURE
OF SUCH CLAIM AND THE DATE ON WHICH SUCH CLAIM IS REQUESTED TO BE PAID.  THE
PARTICIPANT SHALL NOT PAY SUCH CLAIM PRIOR TO THE EXPIRATION OF THE THIRTY
(30) DAY PERIOD FOLLOWING THE DATE ON WHICH THE PARTICIPANT GIVES SUCH NOTICE TO
THE COMPANY (OR SUCH SHORTER PERIOD ENDING ON THE DATE THAT ANY PAYMENT OF TAXES
WITH RESPECT TO SUCH CLAIM IS DUE).  IF THE COMPANY NOTIFIES THE PARTICIPANT IN
WRITING PRIOR TO THE EXPIRATION OF SUCH PERIOD THAT IT DESIRES TO CONTEST SUCH
CLAIM, THE PARTICIPANT SHALL:

 

(I)            GIVE THE COMPANY ANY INFORMATION REASONABLY REQUESTED BY THE
COMPANY RELATING TO SUCH CLAIM;

 

(II)           TAKE SUCH ACTION IN CONNECTION WITH CONTESTING SUCH CLAIM AS THE
COMPANY SHALL REASONABLY REQUEST IN WRITING FROM TIME TO TIME, INCLUDING,
WITHOUT LIMITATION, ACCEPTING LEGAL REPRESENTATION WITH RESPECT TO SUCH CLAIM BY
AN ATTORNEY REASONABLY SELECTED BY THE COMPANY AND REASONABLY SATISFACTORY TO
THE PARTICIPANT;

 

(III)          COOPERATE WITH THE COMPANY IN GOOD FAITH IN ORDER TO EFFECTIVELY
CONTEST SUCH CLAIM; AND

 

(IV)          PERMIT THE COMPANY TO PARTICIPATE IN ANY PROCEEDINGS RELATING TO
SUCH CLAIM;

 

provided, however, that the Company shall bear and pay directly all costs and
expenses (including, but not limited to, additional interest and penalties and
related legal, consulting or other similar fees) incurred in connection with
such contest and shall indemnify and hold the Participant harmless, on an
after-tax basis, for any Excise Tax or other tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses.

 

(2)           THE COMPANY SHALL CONTROL ALL PROCEEDINGS TAKEN IN CONNECTION WITH
SUCH CONTEST AND, AT ITS SOLE OPTION, MAY PURSUE OR FOREGO ANY AND ALL
ADMINISTRATIVE APPEALS, PROCEEDINGS, HEARINGS AND CONFERENCES WITH THE TAXING
AUTHORITY IN RESPECT OF SUCH CLAIM AND MAY, AT ITS SOLE OPTION, EITHER DIRECT
THE PARTICIPANT TO PAY THE TAX CLAIMED AND SUE FOR A REFUND OR CONTEST THE CLAIM
IN ANY PERMISSIBLE MANNER, AND THE PARTICIPANT AGREES TO PROSECUTE SUCH CONTEST
TO A DETERMINATION BEFORE ANY ADMINISTRATIVE TRIBUNAL, IN A COURT OF INITIAL
JURISDICTION AND IN ONE OR MORE APPELLATE COURTS, AS THE COMPANY SHALL
DETERMINE; PROVIDED, HOWEVER, THAT IF THE COMPANY DIRECTS THE PARTICIPANT TO PAY
SUCH CLAIM AND SUE FOR A REFUND, THE COMPANY SHALL ADVANCE THE AMOUNT OF SUCH
PAYMENT TO THE PARTICIPANT ON AN INTEREST-FREE BASIS, AND SHALL INDEMNIFY AND
HOLD THE PARTICIPANT HARMLESS, ON AN AFTER-TAX BASIS, FROM ANY EXCISE TAX OR
OTHER TAX (INCLUDING INTEREST OR PENALTIES WITH RESPECT THERETO) IMPOSED WITH
RESPECT

 

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TO SUCH ADVANCE OR WITH RESPECT TO ANY IMPUTED INCOME WITH RESPECT TO SUCH
ADVANCE; AND PROVIDED, FURTHER, THAT IF THE PARTICIPANT IS REQUIRED TO EXTEND
THE STATUTE OF LIMITATIONS TO ENABLE THE COMPANY TO CONTEST SUCH CLAIM, THE
PARTICIPANT MAY LIMIT THIS EXTENSION SOLELY TO SUCH CONTESTED AMOUNT.  THE
COMPANY’S CONTROL OF THE CONTEST SHALL BE LIMITED TO ISSUES WITH RESPECT TO
WHICH A GROSS-UP PAYMENT WOULD BE PAYABLE HEREUNDER AND THE PARTICIPANT SHALL BE
ENTITLED TO SETTLE OR CONTEST, AS THE CASE MAY BE, ANY OTHER ISSUE RAISED BY THE
INTERNAL REVENUE SERVICE OR ANY OTHER TAXING AUTHORITY.  IN ADDITION, NO
POSITION MAY BE TAKEN NOR ANY FINAL RESOLUTION BE AGREED TO BY THE COMPANY
WITHOUT THE PARTICIPANT’S CONSENT IF SUCH POSITION OR RESOLUTION COULD
REASONABLY BE EXPECTED TO ADVERSELY AFFECT THE PARTICIPANT (INCLUDING ANY OTHER
TAX POSITION OF THE PARTICIPANT UNRELATED TO THE MATTERS COVERED HEREBY).

 

(3)           EXCEPT FOR AMOUNTS TO BE ADVANCED BY THE COMPANY IN ACCORDANCE
WITH THIS SECTION 6.1(C), ALL PAYMENTS REQUIRED TO BE MADE BY THE COMPANY TO THE
PARTICIPANT PURSUANT TO THIS SECTION 6.1(C) SHALL BE MADE PRIOR TO THE END OF
THE PARTICIPANT’S TAXABLE YEAR FOLLOWING THE PARTICIPANT’S TAXABLE YEAR IN WHICH
THE TAXES WHICH ARE THE SUBJECT OF THE CLAIM ARE REMITTED BY THE PARTICIPANT TO
THE TAXING AUTHORITY, OR WHERE NO TAXES ARE REQUIRED TO BE REMITTED, THE END OF
THE PARTICIPANT’S TAXABLE YEAR FOLLOWING THE PARTICIPANT’S TAXABLE YEAR IN WHICH
THE AUDIT IS COMPLETED OR THERE IS A FINAL AND NONAPPEALABLE SETTLEMENT OR OTHER
RESOLUTION OF THE LITIGATION.

 

(D)           ADJUSTMENTS.

 

(1)           IN THE EVENT THAT THE EXCISE TAX IS SUBSEQUENTLY DETERMINED TO BE
LESS THAN THE AMOUNT TAKEN INTO ACCOUNT HEREUNDER, THE PARTICIPANT SHALL REPAY
TO THE COMPANY, AT THE TIME THAT THE AMOUNT OF SUCH REDUCTION IN EXCISE TAX IS
FINALLY DETERMINED, THE PORTION OF THE GROSS-UP PAYMENT ATTRIBUTABLE TO SUCH
REDUCTION (PLUS THE PORTION OF THE GROSS-UP PAYMENT ATTRIBUTABLE TO THE EXCISE
TAX AND FEDERAL, STATE AND LOCAL INCOME AND EMPLOYMENT TAXES IMPOSED ON THE
GROSS-UP PAYMENT BEING REPAID BY THE PARTICIPANT TO THE EXTENT THAT SUCH
REPAYMENT RESULTS IN A REDUCTION IN EXCISE TAX AND/OR A FEDERAL, STATE OR LOCAL
INCOME OR EMPLOYMENT TAX DEDUCTION) PLUS INTEREST ON THE AMOUNT OF SUCH
REPAYMENT AT THE RATE PROVIDED IN SECTION 1274(B)(2)(B) OF THE CODE.

 

(2)           IN THE EVENT THAT THE EXCISE TAX IS SUBSEQUENTLY DETERMINED TO
EXCEED THE AMOUNT TAKEN INTO ACCOUNT HEREUNDER (INCLUDING BY REASON OF ANY
PAYMENT THE EXISTENCE OR AMOUNT OF WHICH CANNOT BE DETERMINED AT THE TIME OF THE
GROSS-UP PAYMENT), THE COMPANY SHALL MAKE AN ADDITIONAL GROSS-UP PAYMENT IN
RESPECT OF SUCH EXCESS (PLUS ANY INTEREST, PENALTIES OR ADDITIONS TO TAX PAYABLE
BY THE PARTICIPANT WITH RESPECT TO SUCH EXCESS) WITHIN NINETY (90) DAYS
FOLLOWING THE DATE ON WHICH THE PARTICIPANT REMITS SUCH ADDITIONAL EXCISE TAX.

 

(3)           IN THE EVENT THAT IT IS SUBSEQUENTLY DETERMINED THAT,
NOTWITHSTANDING THE ACCOUNTANTS’ GOOD FAITH DETERMINATION OF THE REDUCED AMOUNT
PURSUANT TO SECTION 6.1(B), IF APPLICABLE, THE AGGREGATE “PARACHUTE PAYMENTS”
WITHIN THE MEANING OF SECTION 280G PAID TO THE PARTICIPANT ARE IN AN AMOUNT THAT
WOULD RESULT IN ANY PORTION OF SUCH PARACHUTE PAYMENTS NOT BEING DEDUCTIBLE BY
REASON OF SECTION 280G, THEN THE PARTICIPANT SHALL PAY TO THE COMPANY AN AMOUNT
EQUAL TO THE SUM OF (1) THE EXCESS OF THE AGGREGATE PARACHUTE PAYMENTS PAID TO
THE PARTICIPANT OVER THE AGGREGATE PARACHUTE PAYMENTS THAT COULD HAVE BEEN PAID
TO THE

 

17

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PARTICIPANT WITHOUT ANY PORTION OF SUCH PARACHUTE PAYMENTS NOT BEING DEDUCTIBLE
BY REASON OF SECTION 280G; AND (2) INTEREST ON THE AMOUNT DETERMINED PURSUANT TO
CLAUSE (1) OF THIS SENTENCE AT THE RATE PROVIDED IN SECTION 1274(B)(2)(B) OF THE
CODE FROM THE DATE OF THE PARTICIPANT’S RECEIPT OF SUCH EXCESS UNTIL THE DATE OF
SUCH PAYMENT.  NOTWITHSTANDING THE FOREGOING, IF THE AGGREGATE REDUCTION IN
PAYMENTS RESULTING FROM THE INITIAL APPLICATION OF SECTION 6.1(A) AND THE
SUBSEQUENT APPLICATION OF THIS SECTION 6.1(D)(3) WOULD EXCEED THE LESSER OF
$100,000 OR FIVE PERCENT OF THE PAYMENTS, THEN THIS SECTION 6.1(D)(3) SHALL NOT
APPLY, AND THE COMPANY SHALL DIRECT THE ACCOUNTANTS TO COMPUTE AND SHALL PAY THE
GROSS-UP PAYMENT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.1(A).

 

6.2           COMPLIANCE WITH SECTION 409A.  NOTWITHSTANDING ANY OTHER PROVISION
OF THE PLAN TO THE CONTRARY, THE PROVISION, TIME AND MANNER OF PAYMENT OR
DISTRIBUTION OF ALL COMPENSATION AND BENEFITS PROVIDED BY THE PLAN THAT
CONSTITUTE SECTION 409A DEFERRED COMPENSATION SHALL BE SUBJECT TO, LIMITED BY
AND CONSTRUED IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 409A, INCLUDING BUT
NOT LIMITED TO THE FOLLOWING:

 

(A)           INSTALLMENT PAYMENTS TREATED AS SERIES OF SEPARATE PAYMENTS.  IT
IS THE INTENT OF THIS PLAN THAT ANY RIGHT OF THE PARTICIPANT TO RECEIVE
INSTALLMENT PAYMENTS HEREUNDER SHALL, FOR PURPOSES OF SECTION 409A, BE TREATED
AS A RIGHT TO A SERIES OF SEPARATE PAYMENTS.

 

(B)           SEPARATION FROM SERVICE.  PAYMENTS AND BENEFITS CONSTITUTING
SECTION 409A DEFERRED COMPENSATION OTHERWISE PAYABLE OR PROVIDED PURSUANT TO THE
PLAN AS A RESULT OF THE PARTICIPANT’S TERMINATION OF EMPLOYMENT SHALL BE PAID OR
PROVIDED ONLY AT OR FOLLOWING THE TIME THAT THE PARTICIPANT HAS EXPERIENCED A
SEPARATION FROM SERVICE.

 

(C)           SIX-MONTH DELAY APPLICABLE TO SPECIFIED EMPLOYEES.  PAYMENTS AND
BENEFITS CONSTITUTING SECTION 409A DEFERRED COMPENSATION TO BE PAID OR PROVIDED
PURSUANT TO THE PLAN UPON OR FOLLOWING AND DUE TO THE SEPARATION FROM SERVICE OF
THE PARTICIPANT WHO IS A SPECIFIED EMPLOYEE SHALL BE PAID OR PROVIDED ONLY UPON
THE LATER OF (1) THE DATE THAT IS SIX (6) MONTHS AND ONE (1) DAY AFTER THE DATE
OF SUCH SEPARATION FROM SERVICE OR, IF EARLIER, THE DATE OF DEATH OF THE
PARTICIPANT (IN EITHER CASE, THE “DELAYED PAYMENT DATE”), OR (2) THE DATE OR
DATES ON WHICH SUCH SECTION 409A DEFERRED COMPENSATION WOULD OTHERWISE BE PAID
OR PROVIDED IN ACCORDANCE WITH THE PLAN.  ALL SUCH AMOUNTS THAT WOULD, BUT FOR
THIS SECTION, BECOME PAYABLE PRIOR TO THE DELAYED PAYMENT DATE SHALL BE
ACCUMULATED AND PAID ON THE DELAYED PAYMENT DATE.

 

(D)           LIMITATION ON HEALTH AND LIFE INSURANCE BENEFITS.  TO THE EXTENT
THAT ALL OR ANY PORTION OF THE COMPANY’S PAYMENT OR REIMBURSEMENT TO THE
PARTICIPANT FOR THE COST OF THE COMPANY’S OBLIGATION TO PROVIDE HEALTH BENEFITS
OR LIFE INSURANCE BENEFITS PURSUANT TO SECTION 4.1(B)(2) OR
SECTION 4.2(B)(2) (IN EITHER CASE, THE “COMPANY-PROVIDED BENEFITS”) WOULD EXCEED
AN AMOUNT FOR WHICH, OR CONTINUE FOR A PERIOD OF TIME IN EXCESS OF WHICH, SUCH
COMPANY PROVIDED BENEFITS WOULD QUALIFY FOR AN EXEMPTION FROM TREATMENT AS
SECTION 409A DEFERRED COMPENSATION, THE COMPANY SHALL, FOR THE DURATION OF THE
APPLICABLE BENEFIT PERIOD, PAY OR REIMBURSE THE PARTICIPANT FOR THE
COMPANY-PROVIDED BENEFITS IN AN AMOUNT NOT TO EXCEED $150,000 PER CALENDAR YEAR
OR ANY PORTION THEREOF INCLUDED IN THE APPLICABLE BENEFIT PERIOD.  THE AMOUNT OF
COMPANY-PROVIDED BENEFITS FURNISHED IN ANY TAXABLE YEAR OF THE PARTICIPANT SHALL
NOT AFFECT THE AMOUNT OF COMPANY-PROVIDED BENEFITS FURNISHED IN

 

18

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ANY OTHER TAXABLE YEAR OF THE PARTICIPANT.  ANY RIGHT OF THE PARTICIPANT TO
COMPANY-PROVIDED BENEFITS SHALL NOT BE SUBJECT TO LIQUIDATION OR EXCHANGE FOR
ANOTHER BENEFIT.  ANY REIMBURSEMENT FOR COMPANY-PROVIDED BENEFITS TO WHICH THE
PARTICIPANT IS ENTITLED SHALL BE PAID NO LATER THAN THE LAST DAY OF THE
PARTICIPANT’S TAXABLE YEAR FOLLOWING THE TAXABLE YEAR IN WHICH THE PARTICIPANT’S
EXPENSE FOR SUCH COMPANY-PROVIDED BENEFITS WAS INCURRED.

 

(E)           PAYMENT UPON A CHANGE IN CONTROL.  NOTWITHSTANDING ANY PROVISION
OF THE PLAN TO THE CONTRARY, TO THE EXTENT THAT ANY AMOUNT CONSTITUTING
SECTION 409A DEFERRED COMPENSATION WOULD BECOME PAYABLE UNDER THIS PLAN SOLELY
BY REASON OF A CHANGE IN CONTROL, SUCH AMOUNT SHALL BECOME PAYABLE ONLY IF THE
EVENT CONSTITUTING A CHANGE IN CONTROL WOULD ALSO CONSTITUTE A CHANGE IN
OWNERSHIP OR EFFECTIVE CONTROL OF THE COMPANY OR A CHANGE IN THE OWNERSHIP OF A
SUBSTANTIAL PORTION OF THE ASSETS OF THE COMPANY WITHIN THE MEANING OF
SECTION 409A.

 

(F)            EQUITY AWARDS CONSTITUTING SECTION 409A DEFERRED COMPENSATION. 
THE FOLLOWING SHALL APPLY TO ANY EQUITY AWARD HELD BY THE PARTICIPANT WHICH
CONSTITUTES SECTION 409A DEFERRED COMPENSATION:

 

(1)           THE VESTING OF ANY EQUITY AWARD WHICH CONSTITUTES SECTION 409A
DEFERRED COMPENSATION AND WHICH IS HELD BY THE PARTICIPANT WHO IS A SPECIFIED
EMPLOYEE SHALL BE ACCELERATED UPON THE PARTICIPANT’S INVOLUNTARY TERMINATION IN
ACCORDANCE WITH SECTION 4.1(B)(4) OR 4.2(B)(4) TO THE EXTENT APPLICABLE;
PROVIDED, HOWEVER, THAT THE PAYMENT IN SETTLEMENT OF SUCH EQUITY AWARD SHALL
OCCUR ON THE DELAYED PAYMENT DATE OR ON SUCH LATER DATE AS PROVIDED BY SUCH
APPLICABLE SECTION.

 

(2)           ANY EQUITY AWARD WHICH CONSTITUTES SECTION 409A DEFERRED
COMPENSATION AND WHICH WOULD VEST AND BECOME PAYABLE UPON A CHANGE IN CONTROL IN
ACCORDANCE WITH SECTION 5.1 (SUBJECT TO THE REQUIREMENT OF SECTION 6.2(E)) SHALL
VEST IN FULL AS PROVIDED BY SECTION 5.1 BUT SHALL BE CONVERTED AUTOMATICALLY AT
THE EFFECTIVE TIME OF SUCH CHANGE IN CONTROL INTO A RIGHT TO RECEIVE IN CASH ON
THE DATE OR DATES SUCH AWARD WOULD HAVE BEEN SETTLED IN ACCORDANCE WITH ITS THEN
EXISTING SETTLEMENT SCHEDULE (OR ON SUCH EARLIER DATE AS PROVIDED IN
SECTION 4.2(B)(4) OR AS REQUIRED BY SECTION 6.2(C)) AN AMOUNT OR AMOUNTS EQUAL
IN THE AGGREGATE TO THE INTRINSIC VALUE OF THE EQUITY AWARD AT THE TIME OF THE
CHANGE IN CONTROL.

 

(3)           EQUITY AWARDS CONSTITUTING SECTION 409A DEFERRED COMPENSATION
WHICH VEST AND BECOME PAYABLE UPON A CHANGE IN CONTROL IN ACCORDANCE WITH
SECTION 5.2 SHALL NOT BE SUBJECT TO THIS SECTION BUT SHALL BE SUBJECT TO
SECTION 6.2(E).

 

7.             CONFLICT IN BENEFITS; NONCUMULATION OF BENEFITS

 

7.1           EFFECT OF PLAN.  THE TERMS OF THIS PLAN, WHEN ACCEPTED BY THE
PARTICIPANT PURSUANT TO AN EXECUTED PARTICIPATION AGREEMENT, SHALL SUPERSEDE ALL
PRIOR ARRANGEMENTS, WHETHER WRITTEN OR ORAL, AND UNDERSTANDINGS REGARDING THE
SUBJECT MATTER OF THIS PLAN AND, SUBJECT TO SECTION 7.2, SHALL BE THE EXCLUSIVE
AGREEMENT FOR THE DETERMINATION OF ANY PAYMENTS AND BENEFITS DUE TO THE
PARTICIPANT UPON THE EVENTS DESCRIBED IN SECTION 4 AND SECTION 5.  IT IS THE
EXPRESS INTENT OF THE COMPANY AND THE PARTICIPANT THAT THE PROVISIONS OF THIS
PLAN APPLICABLE TO EQUITY AWARDS SHALL BE DEEMED INCORPORATED INTO ANY AGREEMENT
EVIDENCING AN EQUITY AWARD GRANTED

 

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TO THE PARTICIPANT SUBSEQUENT TO THE DATE OF THE PARTICIPANT’S PARTICIPATION
AGREEMENT, NOTWITHSTANDING ANY “INTEGRATION” OR OTHER PROVISION OF SUCH EQUITY
AWARD AGREEMENT TO THE CONTRARY OR THE FAILURE OF SUCH EQUITY AWARD AGREEMENT TO
MAKE REFERENCE TO THIS PLAN, EXCLUDING ONLY AN EQUITY AWARD AGREEMENT WHICH
EXPRESSLY REFERS TO THIS PLAN AND DISCLAIMS SUCH INCORPORATION.

 

7.2           NONCUMULATION OF BENEFITS.  EXCEPT AS EXPRESSLY PROVIDED IN A
WRITTEN AGREEMENT BETWEEN THE PARTICIPANT AND THE COMPANY ENTERED INTO AFTER THE
DATE OF SUCH PARTICIPANT’S PARTICIPATION AGREEMENT AND WHICH EXPRESSLY DISCLAIMS
THIS SECTION 7.2 AND IS APPROVED BY THE BOARD OR THE COMMITTEE, THE TOTAL AMOUNT
OF PAYMENTS AND BENEFITS THAT MAY BE RECEIVED BY THE PARTICIPANT AS A RESULT OF
THE EVENTS DESCRIBED IN SECTION 4 AND SECTION 5 PURSUANT TO (A) THE PLAN,
(B) ANY AGREEMENT BETWEEN THE PARTICIPANT AND THE COMPANY OR (C) ANY OTHER PLAN,
PRACTICE OR STATUTORY OBLIGATION OF THE COMPANY, SHALL NOT EXCEED THE AMOUNT OF
PAYMENTS AND BENEFITS PROVIDED BY THIS PLAN UPON SUCH EVENTS (PLUS ANY PAYMENTS
AND BENEFITS PROVIDED PURSUANT TO A PRIOR INDEMNITY AGREEMENT, AS DESCRIBED IN
SECTION 4.4(A)), AND THE AGGREGATE AMOUNTS PAYABLE UNDER THIS PLAN SHALL BE
REDUCED TO THE EXTENT OF ANY EXCESS (BUT TO NOT LESS THAN ZERO).

 

8.             EXCLUSIVE REMEDY

 

The payments and benefits provided by Section 4 (plus any payments and benefits
provided pursuant to a Prior Indemnity Agreement, as described in
Section 4.4(a)), if applicable, shall constitute the Participant’s sole and
exclusive remedy for any alleged injury or other damages arising out of the
cessation of the employment relationship between the Participant and the Company
in the event of the Participant’s termination of employment with the Company
Group.  The Participant shall be entitled to no other compensation, benefits, or
other payments from the Company Group as a result of the Participant’s
termination of employment with respect to which the payments and benefits
provided by this Plan (plus any payments and benefits provided pursuant to a
Prior Indemnity Agreement) have been provided to the Participant, except as
expressly set forth in this Plan or, subject to the provisions of Section 7.2,
in a duly executed employment agreement between Company and the Participant.

 

9.             PROPRIETARY AND CONFIDENTIAL INFORMATION

 

The Participant agrees to continue at all times, during the Participant’s
employment with the Company Group and following the termination thereof, to
abide by the terms and conditions of the confidentiality and/or proprietary
rights agreement between the Participant and the Company or any other member of
the Company Group.

 

10.           NONSOLICITATION

 

If the Company performs its obligations to deliver the payments and benefits set
forth in Section 4 (plus any payments and benefits provided pursuant to an
agreement evidencing an Equity Award or a Prior Indemnity Agreement), then for a
period equal to the Applicable Benefit Period applicable to the Participant
following the Participant’s Involuntary Termination, the Participant shall not,
directly or indirectly, recruit, solicit or invite the solicitation of any

 

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employees of any member of the Company Group to terminate their employment
relationship with the Company Group.

 

11.           NO CONTRACT OF EMPLOYMENT

 

Neither the establishment of the Plan, nor any amendment thereto, nor the
payment or provision of any benefits shall be construed as giving any person the
right to be retained by the Company, a Successor or any other member of the
Company Group.  Except as otherwise established in an employment agreement
between the Company and the Participant, the employment relationship between the
Participant and the Company is an “at-will” relationship.  Accordingly, either
the Participant or the Company may terminate the relationship at any time, with
or without cause, and with or without notice except as otherwise provided by
Section 15.  In addition, nothing in this Plan shall in any manner obligate any
Successor or other member of the Company Group to offer employment to any
Participant or to continue the employment of any Participant which it does hire
for any specific duration of time.

 

12.           CLAIMS FOR BENEFITS

 

12.1         ERISA PLAN.  THIS PLAN IS INTENDED TO BE (A) AN EMPLOYEE WELFARE
PLAN AS DEFINED IN SECTION 3(1) OF EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974 (“ERISA”) AND (B) A “TOP-HAT” PLAN MAINTAINED FOR THE BENEFIT OF A SELECT
GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES OF THE COMPANY GROUP.

 

12.2         APPLICATION FOR BENEFITS.  ALL APPLICATIONS FOR PAYMENTS AND/OR
BENEFITS UNDER THE PLAN (“BENEFITS”) SHALL BE SUBMITTED TO THE COMPANY’S CHIEF
HUMAN RESOURCES OFFICER (THE “CLAIMS ADMINISTRATOR”), WITH COPIES TO THE
COMPANY’S CHIEF LEGAL OFFICER AND THE COMMITTEE.  APPLICATIONS FOR BENEFITS MUST
BE IN WRITING ON FORMS ACCEPTABLE TO THE CLAIMS ADMINISTRATOR AND MUST BE SIGNED
BY THE PARTICIPANT OR BENEFICIARY.  THE CLAIMS ADMINISTRATOR RESERVES THE RIGHT
TO REQUIRE THE PARTICIPANT OR BENEFICIARY TO FURNISH SUCH OTHER PROOF OF THE
PARTICIPANT’S EXPENSES, INCLUDING WITHOUT LIMITATION, RECEIPTS, CANCELED CHECKS,
BILLS, AND INVOICES AS MAY BE REQUIRED BY THE CLAIMS ADMINISTRATOR.

 

12.3         APPEAL OF DENIAL OF CLAIM.

 

(A)           IF A CLAIMANT’S CLAIM FOR BENEFITS IS DENIED, THE CLAIMS
ADMINISTRATOR SHALL PROVIDE NOTICE TO THE CLAIMANT IN WRITING OF THE DENIAL
WITHIN NINETY (90) DAYS AFTER ITS SUBMISSION.  THE NOTICE SHALL BE WRITTEN IN A
MANNER CALCULATED TO BE UNDERSTOOD BY THE CLAIMANT AND SHALL INCLUDE:

 

(1)           THE SPECIFIC REASON OR REASONS FOR THE DENIAL;

 

(2)           SPECIFIC REFERENCES TO THE PLAN PROVISIONS ON WHICH THE DENIAL IS
BASED;

 

(3)           A DESCRIPTION OF ANY ADDITIONAL MATERIAL OR INFORMATION NECESSARY
FOR THE APPLICANT TO PERFECT THE CLAIM AND AN EXPLANATION OF WHY SUCH MATERIAL
OR INFORMATION IS NECESSARY; AND

 

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(4)           AN EXPLANATION OF THE PLAN’S CLAIMS REVIEW PROCEDURES AND A
STATEMENT OF CLAIMANT’S RIGHT TO BRING A CIVIL ACTION UNDER ERISA
SECTION 502(A) FOLLOWING AN ADVERSE BENEFIT DETERMINATION.

 

(B)           IF SPECIAL CIRCUMSTANCES REQUIRE AN EXTENSION OF TIME FOR
PROCESSING THE INITIAL CLAIM, A WRITTEN NOTICE OF THE EXTENSION AND THE REASON
THEREFOR SHALL BE FURNISHED TO THE CLAIMANT BEFORE THE END OF THE INITIAL NINETY
(90) DAY PERIOD.  IN NO EVENT SHALL SUCH EXTENSION EXCEED NINETY (90) DAYS.

 

(C)           IF A CLAIM FOR BENEFITS IS DENIED, THE CLAIMANT, AT THE CLAIMANT’S
SOLE EXPENSE, MAY APPEAL THE DENIAL TO THE COMMITTEE (THE “APPEALS
ADMINISTRATOR”) WITHIN SIXTY (60) DAYS OF THE RECEIPT OF WRITTEN NOTICE OF THE
DENIAL.  IN PURSUING SUCH APPEAL THE APPLICANT OR HIS DULY AUTHORIZED
REPRESENTATIVE:

 

(1)           MAY REQUEST IN WRITING THAT THE APPEALS ADMINISTRATOR REVIEW THE
DENIAL;

 

(2)           MAY REVIEW PERTINENT DOCUMENTS; AND

 

(3)           MAY SUBMIT ISSUES AND COMMENTS IN WRITING.

 

(D)           THE DECISION ON REVIEW SHALL BE MADE WITHIN SIXTY (60) DAYS OF
RECEIPT OF THE REQUEST FOR REVIEW, UNLESS SPECIAL CIRCUMSTANCES 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 AFTER RECEIPT
OF THE REQUEST FOR REVIEW.  IF SUCH AN EXTENSION OF TIME IS REQUIRED, WRITTEN
NOTICE OF THE EXTENSION SHALL BE FURNISHED TO THE CLAIMANT BEFORE THE END OF THE
ORIGINAL SIXTY (60) DAY PERIOD.  THE DECISION ON REVIEW SHALL BE MADE IN
WRITING, SHALL BE WRITTEN IN A MANNER CALCULATED TO BE UNDERSTOOD BY THE
CLAIMANT, AND, IF THE DECISION ON REVIEW IS A DENIAL OF THE CLAIM FOR BENEFITS,
SHALL INCLUDE:

 

(1)           THE SPECIFIC REASON OR REASONS FOR THE DENIAL;

 

(2)           SPECIFIC REFERENCES TO THE PLAN PROVISIONS ON WHICH THE DENIAL IS
BASED;

 

(3)           A DESCRIPTION OF ANY ADDITIONAL MATERIAL OR INFORMATION NECESSARY
FOR THE APPLICANT TO PERFECT THE CLAIM AND AN EXPLANATION OF WHY SUCH MATERIAL
OR INFORMATION IS NECESSARY; AND

 

(4)           AN EXPLANATION OF THE PLAN’S CLAIMS REVIEW PROCEDURES AND A
STATEMENT OF CLAIMANT’S RIGHT TO BRING A CIVIL ACTION UNDER ERISA
SECTION 502(A) FOLLOWING AN ADVERSE BENEFIT DETERMINATION.

 

13.           ARBITRATION

 

13.1         DISPUTES SUBJECT TO ARBITRATION.  ANY CLAIM, DISPUTE OR CONTROVERSY
ARISING OUT OF THIS PLAN, THE INTERPRETATION, VALIDITY OR ENFORCEABILITY OF THIS
PLAN OR THE ALLEGED BREACH THEREOF SHALL BE SUBMITTED BY THE PARTIES TO BINDING
ARBITRATION BY THE AMERICAN

 

22

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ARBITRATION ASSOCIATION OR AS OTHERWISE REQUIRED BY ERISA; PROVIDED, HOWEVER,
THAT (A) THE ARBITRATOR SHALL HAVE NO AUTHORITY TO MAKE ANY RULING OR JUDGMENT
THAT WOULD CONFER ANY RIGHTS WITH RESPECT TO TRADE SECRETS, CONFIDENTIAL AND
PROPRIETARY INFORMATION OR OTHER INTELLECTUAL PROPERTY; AND (B) THIS ARBITRATION
PROVISION SHALL NOT PRECLUDE THE PARTIES FROM SEEKING LEGAL AND EQUITABLE RELIEF
FROM ANY COURT HAVING JURISDICTION WITH RESPECT TO ANY DISPUTES OR CLAIMS
RELATING TO OR ARISING OUT OF THE MISUSE OR MISAPPROPRIATION OF INTELLECTUAL
PROPERTY.  JUDGMENT MAY BE ENTERED ON THE AWARD OF THE ARBITRATOR IN ANY COURT
HAVING JURISDICTION.

 

13.2         SITE OF ARBITRATION.  THE SITE OF THE ARBITRATION PROCEEDING SHALL
BE IN SAN MATEO COUNTY, CALIFORNIA OR ANY OTHER SITE MUTUALLY AGREED TO BY THE
COMPANY AND THE PARTICIPANT.

 

13.3         COSTS AND EXPENSES BORNE BY COMPANY.  ALL COSTS AND EXPENSES OF
ARBITRATION, INCLUDING BUT NOT LIMITED TO REASONABLE ATTORNEYS’ FEES AND OTHER
COSTS REASONABLY INCURRED BY THE PARTICIPANT IN CONNECTION WITH ARBITRATION IN
ACCORDANCE WITH THIS SECTION 13, SHALL BE PAID BY THE COMPANY.  NOTWITHSTANDING
THE FOREGOING, IF THE PARTICIPANT INITIATES THE ARBITRATION, AND THE ARBITRATOR
FINDS THAT THE PARTICIPANT’S CLAIMS WERE TOTALLY WITHOUT MERIT OR FRIVOLOUS,
THEN THE PARTICIPANT SHALL BE RESPONSIBLE FOR THE PARTICIPANT’S OWN ATTORNEYS’
FEES AND COSTS

 

14.           SUCCESSORS AND ASSIGNS

 

14.1         SUCCESSORS OF THE COMPANY.  THE COMPANY SHALL REQUIRE ANY SUCCESSOR
OR ASSIGN (WHETHER DIRECT OR INDIRECT, BY PURCHASE, MERGER, CONSOLIDATION OR
OTHERWISE) TO ALL OR SUBSTANTIALLY ALL OF THE BUSINESS AND/OR ASSETS OF THE
COMPANY, EXPRESSLY, ABSOLUTELY AND UNCONDITIONALLY TO ASSUME AND AGREE 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 OR ASSIGNMENT HAD TAKEN
PLACE.

 

14.2         ACKNOWLEDGMENT BY COMPANY.  IF, AFTER A CHANGE IN CONTROL, THE
COMPANY FAILS TO REASONABLY CONFIRM IN WRITING TO THE PARTICIPANT THAT IT HAS
PERFORMED THE OBLIGATION DESCRIBED IN SECTION 14.1 WITHIN TWENTY (20) DAYS AFTER
A WRITTEN REQUEST FOR SUCH CONFIRMATION IS DELIVERED BY THE PARTICIPANT TO THE
COMPANY IN THE MANNER PROVIDED BY SECTION 15.1, SUCH FAILURE SHALL CONSTITUTE A
MATERIAL BREACH OF THIS PLAN AND SHALL ENTITLE THE PARTICIPANT TO RESIGN FOR
GOOD REASON AND TO RECEIVE THE BENEFITS PROVIDED UNDER THIS PLAN UPON AN
INVOLUNTARY TERMINATION FOLLOWING A CHANGE IN CONTROL.

 

14.3         HEIRS AND REPRESENTATIVES OF PARTICIPANT.  THIS PLAN SHALL INURE TO
THE BENEFIT OF AND BE ENFORCEABLE BY THE PARTICIPANT’S PERSONAL OR LEGAL
REPRESENTATIVES, EXECUTORS, ADMINISTRATORS, SUCCESSORS, HEIRS, DISTRIBUTEES,
DEVISES, LEGATEES OR OTHER BENEFICIARIES.  IF THE PARTICIPANT SHOULD DIE WHILE
ANY AMOUNT WOULD STILL BE PAYABLE TO THE PARTICIPANT HEREUNDER (OTHER THAN
AMOUNTS WHICH, BY THEIR TERMS, TERMINATE UPON THE DEATH OF THE PARTICIPANT) IF
THE PARTICIPANT HAD CONTINUED TO LIVE, THEN ALL SUCH AMOUNTS, UNLESS OTHERWISE
PROVIDED HEREIN, SHALL BE PAID IN ACCORDANCE WITH THE TERMS OF THIS PLAN TO THE
EXECUTORS, PERSONAL REPRESENTATIVES OR ADMINISTRATORS OF THE PARTICIPANT’S
ESTATE.

 

23

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15.           NOTICES

 

15.1         GENERAL.  FOR PURPOSES OF THIS PLAN, NOTICES AND ALL OTHER
COMMUNICATIONS PROVIDED FOR HEREIN SHALL BE IN WRITING AND SHALL BE DEEMED TO
HAVE BEEN DULY GIVEN WHEN PERSONALLY DELIVERED OR WHEN MAILED BY UNITED STATES
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY OVERNIGHT COURIER, POSTAGE
PREPAID, AS FOLLOWS:

 

(A)           IF TO THE COMPANY:

 

PDL BioPharma, Inc.

1400 Seaport Boulevard

Redwood City, California 94063

Attention: General Counsel

 

(B)           IF TO THE COMMITTEE:

 

Compensation Committee of the

Board of Directors of

PDL BioPharma, Inc.

1400 Seaport Boulevard

Redwood City, California 94063

Attention: Corporate Secretary

 

(C)           IF TO THE PARTICIPANT, AT THE HOME ADDRESS WHICH THE PARTICIPANT
MOST RECENTLY COMMUNICATED TO THE COMPANY IN WRITING.

 

Either party may provide the other with notices of change of address, which
shall be effective upon receipt.

 

15.2         NOTICE OF TERMINATION.  ANY TERMINATION BY THE COMPANY OF THE
PARTICIPANT’S EMPLOYMENT OR ANY RESIGNATION OF EMPLOYMENT BY THE PARTICIPANT
SHALL BE COMMUNICATED BY A NOTICE OF TERMINATION OR RESIGNATION TO THE OTHER
PARTY HERETO GIVEN IN ACCORDANCE WITH SECTION 15.1.  SUCH NOTICE SHALL INDICATE
THE SPECIFIC TERMINATION PROVISION IN THIS PLAN RELIED UPON, SHALL SET FORTH IN
REASONABLE DETAIL THE FACTS AND CIRCUMSTANCES CLAIMED TO PROVIDE A BASIS FOR
TERMINATION UNDER THE PROVISION SO INDICATED, AND SHALL SPECIFY THE TERMINATION
DATE.

 

16.           TERMINATION AND AMENDMENT OF PLAN

 

This Plan and/or any Participation Agreement executed by the Participant may not
be terminated with respect to such Participant without the written consent of
the Participant and the approval of the Board or the Committee.  This Plan
and/or any Participation Agreement executed by the Participant may be modified,
amended or superseded with respect to such Participant only by a supplemental
written agreement between the Participant and the Company approved by the Board
or the Committee.  Notwithstanding any other provision of the Plan to the
contrary, the Committee may, in its sole and absolute discretion and without the
consent of any Participant, amend the Plan or any Participation Agreement, to
take effect retroactively or otherwise, as it deems necessary or advisable for
the purpose of conforming the Plan or such

 

24

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Participation Agreement to any present or future law relating to plans of this
or similar nature (including, but not limited to, Section 409A of the Code), and
to the administrative regulations and rulings promulgated thereunder.

 

17.           MISCELLANEOUS PROVISIONS

 

17.1         ADMINISTRATION.  THE PLAN SHALL BE ADMINISTERED BY THE COMMITTEE. 
THE COMMITTEE SHALL HAVE THE EXCLUSIVE DISCRETION AND AUTHORITY TO ESTABLISH
RULES, FORMS AND PROCEDURES FOR THE ADMINISTRATION OF THE PLAN, TO CONSTRUE AND
INTERPRET THE PLAN, AND TO DECIDE ALL QUESTIONS OF FACT, INTERPRETATION,
DEFINITION, COMPUTATION OR ADMINISTRATION ARISING IN CONNECTION WITH THE PLAN,
INCLUDING, BUT NOT LIMITED TO, ELIGIBILITY TO PARTICIPATE IN THE PLAN AND THE
TYPE AND AMOUNT OF BENEFITS PAID UNDER THE PLAN.  THE RULES, INTERPRETATIONS AND
OTHER ACTIONS OF THE COMMITTEE SHALL BE BINDING AND CONCLUSIVE ON ALL PERSONS.

 

17.2         UNFUNDED OBLIGATION.  ANY AMOUNTS PAYABLE TO THE PARTICIPANT
PURSUANT TO THE PLAN ARE UNFUNDED OBLIGATIONS.  THE COMPANY SHALL NOT BE
REQUIRED TO SEGREGATE ANY MONIES FROM ITS GENERAL FUNDS, OR TO CREATE ANY
TRUSTS, OR ESTABLISH ANY SPECIAL ACCOUNTS WITH RESPECT TO SUCH OBLIGATIONS.  THE
COMPANY SHALL RETAIN AT ALL TIMES BENEFICIAL OWNERSHIP OF ANY INVESTMENTS,
INCLUDING TRUST INVESTMENTS, WHICH THE COMPANY MAY MAKE TO FULFILL ITS PAYMENT
OBLIGATIONS HEREUNDER.  ANY INVESTMENTS OR THE CREATION OR MAINTENANCE OF ANY
TRUST OR ANY PARTICIPANT ACCOUNT SHALL NOT CREATE OR CONSTITUTE A TRUST OR
FIDUCIARY RELATIONSHIP BETWEEN THE BOARD OR THE COMPANY AND THE PARTICIPANT, OR
OTHERWISE CREATE ANY VESTED OR BENEFICIAL INTEREST IN ANY PARTICIPANT OR THE
PARTICIPANT’S CREDITORS IN ANY ASSETS OF THE COMPANY.

 

17.3         NO DUTY TO MITIGATE; OBLIGATIONS OF COMPANY.  THE PARTICIPANT SHALL
NOT BE REQUIRED TO MITIGATE THE AMOUNT OF ANY PAYMENT OR BENEFIT CONTEMPLATED BY
THIS PLAN BY SEEKING EMPLOYMENT WITH A NEW EMPLOYER OR OTHERWISE, NOR SHALL ANY
SUCH PAYMENT OR BENEFIT (EXCEPT FOR BENEFITS TO THE EXTENT DESCRIBED IN
SECTION 4.1(B)(2) OR SECTION 4.2(B)(2)) BE REDUCED BY ANY COMPENSATION OR
BENEFITS THAT THE PARTICIPANT MAY RECEIVE FROM EMPLOYMENT BY ANOTHER EMPLOYER. 
EXCEPT AS OTHERWISE PROVIDED BY THIS PLAN, INCLUDING, WITHOUT LIMITATION, THE
FORFEITURE OF BENEFITS PROVISIONS CONTAINED IN SECTION 4.1(B)(5) AND
SECTION 4.2(B)(5), THE OBLIGATIONS OF THE COMPANY TO MAKE PAYMENTS TO THE
PARTICIPANT AND TO MAKE THE ARRANGEMENTS PROVIDED FOR HEREIN ARE ABSOLUTE AND
UNCONDITIONAL AND MAY NOT BE REDUCED BY ANY CIRCUMSTANCES, INCLUDING WITHOUT
LIMITATION ANY SET-OFF, COUNTERCLAIM, RECOUPMENT, DEFENSE OR OTHER RIGHT WHICH
THE COMPANY MAY HAVE AGAINST THE PARTICIPANT OR ANY THIRD PARTY AT ANY TIME.

 

17.4         NO REPRESENTATIONS.  BY EXECUTING A PARTICIPATION AGREEMENT, THE
PARTICIPANT ACKNOWLEDGES THAT IN BECOMING THE PARTICIPANT IN THE PLAN, THE
PARTICIPANT IS NOT RELYING AND HAS NOT RELIED ON ANY PROMISE, REPRESENTATION OR
STATEMENT MADE BY OR ON BEHALF OF THE COMPANY WHICH IS NOT SET FORTH IN THIS
PLAN.

 

17.5         WAIVER.  NO WAIVER BY THE PARTICIPANT OR THE COMPANY OF ANY BREACH
OF, OR OF ANY LACK OF COMPLIANCE WITH, ANY CONDITION OR PROVISION OF THIS PLAN
BY THE OTHER PARTY SHALL BE CONSIDERED A WAIVER OF ANY OTHER CONDITION OR
PROVISION OR OF THE SAME CONDITION OR PROVISION AT ANOTHER TIME.

 

25

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17.6         CHOICE OF LAW.  THE VALIDITY, INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS PLAN SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE
OF CALIFORNIA, WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS.

 

17.7         VALIDITY.  THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF
THIS PLAN SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION
OF THIS PLAN, WHICH SHALL REMAIN IN FULL FORCE AND EFFECT.

 

17.8         BENEFITS NOT ASSIGNABLE.  EXCEPT AS OTHERWISE PROVIDED HEREIN OR BY
LAW, NO RIGHT OR INTEREST OF ANY PARTICIPANT UNDER THE PLAN SHALL BE ASSIGNABLE
OR TRANSFERABLE, IN WHOLE OR IN PART, EITHER DIRECTLY OR BY OPERATION OF LAW OR
OTHERWISE, INCLUDING, WITHOUT LIMITATION, BY EXECUTION, LEVY, GARNISHMENT,
ATTACHMENT, PLEDGE OR IN ANY OTHER MANNER, AND NO ATTEMPTED TRANSFER OR
ASSIGNMENT THEREOF SHALL BE EFFECTIVE.  NO RIGHT OR INTEREST OF ANY PARTICIPANT
UNDER THE PLAN SHALL BE LIABLE FOR, OR SUBJECT TO, ANY OBLIGATION OR LIABILITY
OF SUCH PARTICIPANT.

 

17.9         TAX WITHHOLDING.  ALL PAYMENTS MADE PURSUANT TO THIS PLAN WILL BE
SUBJECT TO WITHHOLDING OF APPLICABLE INCOME AND EMPLOYMENT TAXES.

 

17.10       CONSULTATION WITH LEGAL AND FINANCIAL ADVISORS.  BY EXECUTING A
PARTICIPATION AGREEMENT, THE PARTICIPANT ACKNOWLEDGES THAT THIS PLAN CONFERS
SIGNIFICANT LEGAL RIGHTS, AND MAY ALSO INVOLVE THE WAIVER OF RIGHTS UNDER OTHER
AGREEMENTS; THAT THE COMPANY HAS ENCOURAGED THE PARTICIPANT TO CONSULT WITH THE
PARTICIPANT’S PERSONAL LEGAL AND FINANCIAL ADVISORS; AND THAT THE PARTICIPANT
HAS HAD ADEQUATE TIME TO CONSULT WITH THE PARTICIPANT’S ADVISORS BEFORE
EXECUTING THE PARTICIPATION AGREEMENT.

 

17.11       FURTHER ASSURANCES.  FROM TIME TO TIME, AT THE COMPANY’S REQUEST AND
WITHOUT FURTHER CONSIDERATION, THE PARTICIPANT SHALL EXECUTE AND DELIVER SUCH
ADDITIONAL DOCUMENTS AND TAKE ALL SUCH FURTHER ACTION AS REASONABLY REQUESTED BY
THE COMPANY TO BE NECESSARY OR DESIRABLE TO MAKE EFFECTIVE, IN THE MOST
EXPEDITIOUS MANNER POSSIBLE, THE TERMS OF THE PLAN, THE PARTICIPANT’S
PARTICIPATION AGREEMENT AND THE RELEASE, AND TO PROVIDE ADEQUATE ASSURANCE OF
THE PARTICIPANT’S DUE PERFORMANCE THEREUNDER.

 

18.           AGREEMENT

 

By executing a Participation Agreement, the Participant acknowledges that the
Participant has received a copy of this Plan and has read, understands and is
familiar with the terms and provisions of this Plan.  This Plan shall constitute
an agreement between the Company and the Participant executing a Participation
Agreement.

 

26

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EXHIBIT A

 

FORM OF

 

AGREEMENT TO PARTICIPATE IN THE

 

PDL BIOPHARMA, INC.

 

RETENTION AND SEVERANCE PLAN FOR CHIEF EXECUTIVE OFFICER

 

--------------------------------------------------------------------------------

 

AGREEMENT TO PARTICIPATE IN THE

PDL BIOPHARMA, INC. RETENTION AND SEVERANCE PLAN

FOR CHIEF EXECUTIVE OFFICER

Effective October 1, 2008

 

In consideration of the benefits provided by the PDL BioPharma, Inc. Retention
and Severance Plan for Chief Executive Officer (the “Plan”), the undersigned
employee of PDL BioPharma, Inc. (the “Company”) and the Company agree that, as
of the date written below, the undersigned shall become the Participant in the
Plan and shall be fully bound by and subject to all of its provisions.  All
references to the “Participant” in the Plan shall be deemed to refer to the
undersigned.

 

The undersigned employee acknowledges that the Plan confers significant legal
rights and may also constitute a waiver of rights under other agreements with
the Company; that the Company has encouraged the undersigned to consult with the
undersigned’s personal legal and financial advisors; and that the undersigned
has had adequate time to consult with the undersigned’s advisors before
executing this agreement.

 

The undersigned employee acknowledges that he has received a copy of the Plan
and has read, understands and is familiar with the terms and provisions of the
Plan.  The undersigned employee further acknowledges that (1) by accepting the
arbitration provision set forth in Section 13 of the Plan, the undersigned is
waiving any right to a jury trial in the event of any dispute covered by such
provision and (2) except as otherwise established in an employment agreement
between a member of the Company Group and the undersigned, the employment
relationship between the undersigned and the Company Group is an “at-will”
relationship.

 

Executed on                                                   .

 

Participant

 

PDL BioPharma, Inc.

 

 

 

 

 

 

 

 

By:

 

Faheem Hasnain

 

 

 

 

 

Address

 

Name:

 

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

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EXHIBIT B

 

FORM OF

 

GENERAL RELEASE OF CLAIMS

[Age 40 and over]

 

--------------------------------------------------------------------------------

 

GENERAL RELEASE OF CLAIMS

[Age 40 and over]

 

This Agreement is by and between [Employee Name] (“Employee”) and [PDL
BioPharma, Inc. or successor that agrees to assume the Retention and Severance
Plan for Chief Executive Officer following a Change in Control] (the
“Company”).  This Agreement will become effective on the eighth (8th) day after
it is signed by Employee (the “Effective Date”), provided that the Company has
signed this Agreement and Employee has not revoked this Agreement (by written
notice to [Company Contact Name] at the Company) prior to that date.

 

RECITALS

 

A.            Employee was employed by the Company or its
                                     subsidiary as of                       ,
        .

 

B.            Employee and the Company entered into an Agreement to Participate
in the PDL BioPharma, Inc. Retention and Severance Plan for Chief Executive
Officer (such agreement and plan being referred to herein as the “Plan”)
effective as of                     ,          wherein Employee is entitled to
receive certain benefits in the event of an Involuntary Termination (as defined
by the Plan), provided Employee signs and does not revoke a Release (as defined
by the Plan).

 

C.            [A Change in Control (as defined by the Plan) has occurred as a
result of [briefly describe change in control]

 

D.            Employee’s employment is being terminated as a result of an
[Involuntary Termination Absent a Change in Control] [Involuntary Termination
Following a Change in Control].  Employee’s last day of work and termination are
effective as of                               ,         .  Employee desires to
receive the payments and benefits provided by the Plan by executing this
Release.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             The Company shall provide Employee with the applicable payments
and benefits set forth in the Plan in accordance with the terms of the Plan. 
Employee acknowledges that the payments and benefits made pursuant to this
paragraph are made in full satisfaction of the Company’s obligations under the
Plan.  Employee further acknowledges that Employee has been paid all wages and
accrued, unused vacation that Employee earned during his or her employment with
the Company or its subsidiary.

 

2.             Employee and Employee’s successors release the Company, its
respective subsidiaries, stockholders, investors, directors, officers,
employees, agents, attorneys, insurers, legal successors and assigns of and from
any and all claims, actions and causes of action, whether now known or unknown,
which Employee now has, or at any other time had, or shall or may have against
those released parties based upon or arising out of any matter, cause, fact,
thing, act or omission whatsoever related to Employee’s employment by the
Company or a subsidiary or the termination of such employment and occurring or
existing at any time up to and

 

1

--------------------------------------------------------------------------------

 

including the date on which Employee signs this Agreement, including, but not
limited to, any claims of breach of written, oral or implied contract, wrongful
termination, retaliation, fraud, defamation, infliction of emotional distress,
or national origin, race, age, sex, sexual orientation, disability or other
discrimination or harassment under the Civil Rights Act of 1964, the Age
Discrimination In Employment Act of 1967, the Americans with Disabilities Act,
the Fair Employment and Housing Act or any other applicable law. 
Notwithstanding the foregoing, this release shall not apply to (a) any right of
the Employee pursuant to Section 4.4 of the Plan or pursuant to a Prior
Indemnity Agreement (as such term is defined by the Plan) or (b) any rights or
claims that cannot be released by Employee as a matter of law, including, but
not limited to, any claims for indemnity under California Labor Code
Section 2802.

 

3.             Employee acknowledges that he or she has read Section 1542 of the
Civil Code of the State of California, which states in full:

 

A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.

 

Employee waives any rights that Employee has or may have under Section 1542 and
comparable or similar provisions of the laws of other states in the United
States to the full extent that he or she may lawfully waive such rights
pertaining to this general release of claims, and affirms that Employee is
releasing all known and unknown claims that he or she has or may have against
the parties listed above.

 

4.             Employee and the Company acknowledge and agree that they shall
continue to be bound by and comply with the terms and their obligations under
the following agreements: (i) any proprietary rights or confidentiality
agreements between the Company and Employee, (ii) the Plan, (iii) any Prior
Indemnity Agreement (as such term is defined by the Plan) to which Employee is a
party, and (iv) any agreement between the Company or its subsidiary and Employee
evidencing an Equity Award (as such term is defined by the Plan), as modified by
the Plan.

 

5.             This Agreement shall be binding upon, and shall inure to the
benefit of, the parties and their respective successors, assigns, heirs and
personal representatives.

 

6.             The parties agree that any and all disputes that both (i) arise
out of the Plan, the interpretation, validity or enforceability of the Plan or
the alleged breach thereof and (ii) relate to the enforceability of this
Agreement or the interpretation of the terms of this Agreement shall be subject
to binding arbitration pursuant to Section 13 of the Plan.

 

7.             The parties agree that any and all disputes that (i) do not arise
out of the Plan, the interpretation, validity or enforceability of the Plan or
the alleged breach thereof and (ii) relate to the enforceability of this
Agreement, the interpretation of the terms of this Agreement or any of the
matters herein released or herein described shall be subject to binding
arbitration, to the extent permitted by law, in San Mateo County, California or
any other site mutually agreed to by the Company and Employee, before the
American Arbitration Association, as provided in this

 

2

--------------------------------------------------------------------------------

 

paragraph.  The parties agree to and hereby waive their rights to jury trial as
to such matters to the extent permitted by law; provided however, that (a) the
arbitrator shall have no authority to make any ruling or judgment that would
confer any rights with respect to trade secrets, confidential and proprietary
information or other intellectual property; and (b) this arbitration provision
shall not preclude the parties from seeking legal and equitable relief from any
court having jurisdiction with respect to any disputes or claims relating to or
arising out of the misuse or misappropriation of intellectual property.  The
Company shall bear the costs of the arbitrator, forum and filing fees and each
party shall bear its own respective attorney fees and all other costs, unless
otherwise provided by law and awarded by the arbitrator.

 

8.             This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations and agreements, whether written or oral, with the exception of any
agreements described in paragraph 4 of this Agreement.  This Agreement may not
be modified or amended except by a document signed by an authorized officer of
the Company and Employee.  If any provision of this Agreement is deemed invalid,
illegal or unenforceable, such provision shall be modified so as to make it
valid, legal and enforceable, and the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected.

 

EMPLOYEE UNDERSTANDS THAT EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO
SIGNING THIS AGREEMENT AND THAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE
HAS AGAINST THE PARTIES RELEASED ABOVE BY SIGNING THIS AGREEMENT.  EMPLOYEE
FURTHER UNDERSTANDS THAT EMPLOYEE MAY HAVE UP TO [Insert as applicable: [45
DAYS] [21 DAYS] TO CONSIDER THIS AGREEMENT, THAT EMPLOYEE MAY REVOKE IT AT ANY
TIME DURING THE 7 DAYS AFTER EMPLOYEE SIGNS IT, AND THAT IT SHALL NOT BECOME
EFFECTIVE UNTIL THAT 7-DAY PERIOD HAS PASSED.  EMPLOYEE ACKNOWLEDGES THAT
EMPLOYEE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN
EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBED IN PARAGRAPH 1.

 

 

Dated:

 

 

 

 

 

[Employee Name]

 

 

 

 

 

 

 

 

[Company]

 

 

 

 

 

 

Dated:

 

 

By:

 

 

3

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