Exhibit 10.45

 

Arena Pharmaceuticals, Inc., 2017 Long-Term Incentive Plan

 

Performance Restricted Stock Unit Grant Agreement

 

 

THIS GRANT AGREEMENT (this “Agreement”), effective as of ________________ (the
“Grant Date”), is entered into by and between Arena Pharmaceuticals, Inc., a
Delaware corporation (the “Company”), and ______________ (the “Participant”) and
evidences the terms of the Company’s grant to the Participant of a performance
restricted stock unit (“PRSU”) award on the terms and conditions set forth
herein (the “Award”).

 

1.Threshold, Target and Maximum Number of PRSUs under the Award.  The Award is
for the below Target PRSUs, with potential to earn 50% of Target PRSUs upon a
designated threshold level of performance below target and additional PRSUs upon
a designated level of performance above target, in all cases up to the maximum
number of PRSUs equal to 200% of Target PRSUs, subject to the conditions and
adjustments specified herein, including the Award Determination, Vesting and
Issuance Criteria attached as Attachment I to this Agreement (the “Vesting and
Issuance Criteria”). Each PRSU represents the right to potentially be issued one
Share on a future date.

 

Number of PRSUs at target performance:   (“Target PRSUs”)

 

2.Subject to the Plan.  This Agreement is subject to the provisions of the Arena
Pharmaceuticals, Inc., 2017 Long-Term Incentive Plan (the “Plan”).  Certain
terms are defined in this Agreement, and, unless the context requires otherwise,
other capitalized terms used herein shall have the same meaning as in the
Plan.  Except as provided herein, in the event of a conflict between the
provisions of the Plan and this Agreement, the Plan shall control.

 

3.Account.  The Company shall credit to a bookkeeping account (the “Account”)
maintained by the Company for the Participant’s benefit the Maximum PRSUs. On
each date that cash dividends are paid on the Shares, the Company will credit
the Account with a number of additional PRSUs equal to the result of dividing
(i) the product of the Maximum PRSUs credited to the Account on the record date
for such dividend and the per Share amount of such dividend by (ii) the Fair
Market Value of one Share on the date such dividend is paid by the Company to
stockholders. The additional PRSUs shall be or become vested to the same extent
as the PRSUs that resulted in the crediting of such additional PRSUs, and Shares
shall not be issued in settlement unless and until the underlying PRSUs vest.

 

4.Vesting.  The number of PRSUs that may vest will be determined based on the
Company’s actual performance against the performance goals specified in the
Vesting and Issuance Criteria, subject to the Participant’s satisfaction of the
service vesting conditions set forth therein. The Target PRSUs represent the
number of PRSUs that would vest if the Participant satisfies the service vesting
conditions set forth in the Vesting and Issuance Criteria and the Company
achieves exactly 100% of the Company’s target goal specified in the Vesting and
Issuance Criteria. In no event will more than the Maximum PRSUs (plus additional
PRSUs representing dividend equivalents set forth in Section 3) vest. With
respect to the Participant, this

  

  

  

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Agreement shall supersede any individually negotiated agreement with Company (or
an Affiliate) and any generally applicable severance or change-in-control plan,
policy, or practice, whether written or unwritten, of the Company (or an
Affiliate) to the extent that such agreement, plan, policy or practice provides
for vesting acceleration of equity awards.

 

5.Capitalization Adjustments.  The number of PRSUs credited to the Account shall
be equitably and appropriately adjusted as provided in Section 12.2 of the Plan.

 

6.Termination of Employment or Service.  In the event the Participant ceases to
be in the continuous service of the Company or an Affiliate as any of an
Employee, a Consultant or a Director, the number of PRSUs that may vest, if at
all, will be determined in accordance with the Vesting and Issuance Criteria.

 

7.Payment of Shares.  The Company shall make a payment to the Participant of
Shares based on the number of the vested PRSUs credited to the Participant’s
Account upon the applicable vesting date specified in the Vesting and Issuance
Criteria.   However, if a scheduled delivery date falls on a date that is not a
trading day, such delivery date shall instead fall on the next following trading
day.  Notwithstanding the foregoing, in the event that the Company determines
that any Shares are scheduled under this Agreement to be delivered on a day (the
“Original Distribution Date”) on which the Company determines that a sale by the
Participant of such Shares would (i) violate the registration requirements under
the Securities Act or (ii) violate any of the provisions of the federal
securities laws (or any Company or, if applicable, Affiliate policy related
thereto) or (iii) violate a “lock-up” agreement undertaken in connection with an
issuance of securities by the Company or (iv) not be permitted under applicable
securities laws or Company policies by the Participant on the open market and
(v) the Company elects, prior to the Original Distribution Date, not to satisfy
its tax withholding obligation by withholding Shares from the Shares otherwise
due to the Participant on the Original Distribution Date under this Agreement,
then such Shares shall not be delivered on such Original Distribution Date and
shall instead be delivered as soon as practicable on the date on which the sale
of such Shares would not be in violation of any of such registration
requirements, the federal securities laws (or any Company or, if applicable,
Affiliate policy related thereto), lock-up agreement or would otherwise be
permitted under applicable securities laws or Company policies by the
Participant on the open market; provided, however, that in no event shall the
delivery of the Shares be delayed pursuant to this provision beyond the later of
(a) December 31 of the calendar year in which the Original Issuance Date occurs
(that is, the last day of the Participant’s taxable year in which the Original
Issuance Date occurs), and (b) if and only if permitted in a manner that
complies with U.S. Treasury Regulation Section 1.409A-1(b)(4), the date that is
the 15th day of the third calendar month of the year following the year in which
the Shares under this Agreement are no longer subject to a “substantial risk of
forfeiture” within the meaning of U.S. Treasury Regulation Section 1.409A-1(d).

 

8.Form of Payment.  Payments pursuant to Section 7 shall be made in Shares (or,
if settlement occurs as a result of vesting of PRSUs pursuant to a Change in
Control, settlement may be made in the same consideration paid to the
stockholders of the Company for Shares pursuant to the Change in Control) equal
to the number of vested PRSUs credited to the Account

 

  

 

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9.Beneficiary.  In the event of the Participant’s death prior to payment of the
PRSUs credited to the Account, payment shall be made to the last beneficiary
designated in writing that is received by the Company prior to the Participant’s
death or, if no designated beneficiary survives the Participant, such payment
shall be made to the Participant’s estate.

 

10.Change in Control; Parachute Payments.  In the event of a Change in Control,
the number of PRSUs that may vest will be determined in accordance with the
Vesting and Issuance Criteria. If any payment or benefit the Participant would
receive in connection with a change in control from the Company or otherwise (a
“Payment”) would (i) constitute a “parachute payment” within the meaning of
Section 280G of the Code, and (ii) but for this sentence, be subject to the
excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such
Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be
either (x) the largest portion of the Payment that would result in no portion of
the Payment being subject to the Excise Tax or (y) the largest portion of the
Payment, up to and including the total Payment, whichever amount, after taking
into account all applicable federal, state and local employment taxes, income
taxes, and the Excise Tax (all computed at the highest applicable marginal
rate), results in the Participant’s receipt, on an after-tax basis, of the
greater amount of the Payment notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax. If a reduction in payments or benefits
constituting “parachute payments” is necessary so that the Payment equals the
Reduced Amount, reduction shall occur in the following order: reduction of cash
payments; cancellation of accelerated vesting of stock awards; reduction of
employee benefits. If acceleration of vesting of stock award compensation is to
be reduced, such acceleration of vesting shall be cancelled in the reverse order
of the date of grant of the Participant’s stock awards. Notwithstanding the
foregoing, to the extent that it is permitted under Sections 409A, 280G and 4999
of the Code, the Participant may designate a different order of reduction in
payments or benefits constituting “parachute payments”.

 

The Company shall appoint a nationally recognized independent accounting firm to
make the determinations required hereunder, which accounting firm shall not then
be serving as accountant or auditor for the individual, entity or group that
effected the Change in Control. The Company shall bear all expenses with respect
to the determinations by such accounting firm required to be made hereunder.

 

The accounting firm engaged to make the determinations hereunder shall provide
its calculations, together with detailed supporting documentation, to the
Company and the Participant within ten (10) calendar days after the date on
which the Participant’s right to a Payment is triggered (if requested at that
time by the Company or the Participant) or such other time as requested by the
Company or the Participant. If the accounting firm determines that no Excise Tax
is payable with respect to a Payment, either before or after the application of
the Reduced Amount, it shall furnish the Company and the Participant with an
opinion reasonably acceptable to the Participant that no Excise Tax will be
imposed with respect to such Payment. Any good faith determinations of the
accounting firm made hereunder shall be final, binding and conclusive upon the
Company and the Participant.

 

 

  

 

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11.Source of Payments.  The Participant’s right to receive payment under this
Agreement shall be an unfunded entitlement and shall be an unsecured claim
against the general assets of the Company. The Participant has only the status
of a general unsecured creditor hereunder, and this Agreement constitutes only a
promise by the Company to pay the value of the Account on the payment date.

 

 

12.

Miscellaneous.

 

(a)Withholding.  The Participant agrees to pay to the Company, or to make
satisfactory arrangement with the Company for payment of, any federal, state or
local taxes, if any, required by law to be withheld in respect of the
PRSUs.  The Participant hereby agrees that the Company or an Affiliate, as
applicable, may withhold the applicable taxes from the Participant’s wages or
other remuneration. At the discretion of the Company, the applicable taxes may
be withheld in kind from the Shares otherwise deliverable to the Participant on
the payment in settlement of the PRUs, up to the lesser of Participant’s minimum
required withholding rate or such other rate that will not trigger a negative
accounting impact. Unless the tax withholding obligations of the Company and/or
any Affiliate are satisfied, the Company shall have no obligation to deliver to
the Participant any Shares. In the event the Company’s obligation to withhold
arises prior to the delivery to the Participant of the Shares or it is
determined after the delivery of Shares to the Participant that the amount of
the Company’s withholding obligation was greater than the amount withheld by the
Company, the Participant agrees to indemnify and hold the Company harmless from
any failure by the Company to withhold the proper amount.

 

(b)No Rights of a Stockholder.  The Participant shall not have any of the rights
of a stockholder with respect to the Shares that may be issued in settlement of
the PRSUs until such Shares have been issued.

 

(c)Nontransferability of PRSUs.  Except to the extent and under such terms and
conditions as determined by the Committee, the PRSUs shall not be transferable
otherwise than by will or the laws of descent and distribution or as provided in
Section 9.

 

(d)Severability.  The provisions of this Agreement shall be deemed severable. If
any provision of this Agreement shall be held unlawful or otherwise invalid or
unenforceable in whole or in part by a court of competent jurisdiction or by
reason of a change in a law or regulation, such provision shall (i) be deemed
limited to the extent that such court of competent jurisdiction deems it lawful,
valid and/or enforceable (or, if applicable, to the extent necessary to comply
with the change in the law or regulation), and as so limited shall remain in
full force and effect, and (ii) not affect any other provision of this Agreement
or part thereof, each of which shall remain in full force and effect.

 

(e)Governing Law.  This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware, other than its conflict of
laws principles.

 

(f)Headings.  The headings in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.

 

  

 

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(g)Notices.  All notices required or permitted under this Agreement shall be in
writing and shall be sufficiently made or given if hand delivered or mailed by
registered or certified mail, postage prepaid. Notice by mail shall be deemed
delivered at the time and on the date on which the same is postmarked.

 

Notices to the Company should be addressed to:

 

Arena Pharmaceuticals, Inc.

6154 Nancy Ridge Drive

San Diego, California 92121

Attention:  Chief Financial Officer

 

With a copy to: General Counsel

 

Notices to the Participant should be addressed to the Participant at the
Participant’s address as it appears on the Company’s records. The Company or the
Participant may by writing to the other party, designate a different address for
notices. If the receiving party consents in advance, notice may be transmitted
and received via facsimile or via such other electronic transmission mechanism
as may be available to the parties. Such notices shall be deemed delivered when
received.

 

(h)Agreement Not a Contract.  This Agreement (and the grant of PRSUs) is not an
employment or service contract, and nothing in this Agreement shall be deemed to
create in any way whatsoever any obligation on the Participant’s part to
continue as an Employee, a Consultant or a Director, or of the Company or an
Affiliate to continue the Participant’s service as an Employee, a Consultant or
a Director.  The Participant’s employment shall remain at-will, if applicable,
and subject to termination by the Company or an Affiliate, as applicable, at any
time, with or without cause or notice.

 

(i)Entire Agreement; Modification.  Except as provided in the next sentence,
this Agreement and the Plan constitute the entire agreement between the parties
with respect to the subject matter contained herein and may not be modified,
except as provided in the Plan or in a written document signed by each of the
parties hereto, and may be rescinded only by a written agreement signed by both
parties. This Agreement and Plan may be modified or superseded by the specific
provisions, if any, of a written agreement, plan or other arrangement
(regardless of whether entered into or established before, concurrently or after
the date of this Agreement) of the Company or an Affiliate that is applicable to
the Participant, to the extent such an agreement, plan or other arrangement
provides a greater benefit to the Participant and otherwise does not cause the
payments hereunder to fail to comply with the provisions of Section 409A of the
Code.

 

(j)Section 409A of the Code.  This Award is intended to be exempt from the
application of Section 409A of the Code, including but not limited to by reason
of complying with the “short-term deferral” rule set forth in Treasury
Regulation Section 1.409A-1(b)(4) and will be construed and administered in such
a manner and any ambiguities herein shall be interpreted
accordingly.  Notwithstanding the foregoing, if it is determined that the Award
fails to satisfy the requirements of the short-term deferral rule and is
otherwise not exempt from, and

  

 

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determined to be deferred compensation subject to Section 409A of the Code, this
Award shall comply with Section 409A to the extent necessary to avoid adverse
personal tax consequences and any ambiguities herein shall be interpreted
accordingly.  Any provision of this Agreement that would cause the payment or
settlement thereof to fail to satisfy Section 409A of the Code shall be amended
to comply with Section 409A of the Code on a timely basis, which may be made on
a retroactive basis, in accordance with regulations and other guidance issued
under Section 409A of the Code.  To the extent that the PRSUs are “deferred
compensation” subject to the requirements of Section 409A of the Code, then
notwithstanding anything contained in this Agreement to the contrary, if the
Company determines that as of the date of payment the Participant is a
“specified employee” (as such term is defined under Section 409A of the Code),
any Shares payable by reason of the Participant’s “separation from service” for
purposes of Section 409A of the Code (“Separation from Service”) with the
Company (or an Affiliate) for any reason other than death or “disability” (as
such term is defined under Section 409A of the Code), if applicable, will not be
paid until the date that is six months following the date of Separation from
Service (or such earlier time permitted under Section 409A of the Code without
the imposition of any accelerated or additional taxes under Section 409A of the
Code).

 

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
Grant Date.

 

                                                      ARENA PHARMACEUTICALS,
INC.

 

 

By: ______________________________________

 

 

     _______________________________________

Participant

  

 

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Attachment I

 

Award Determination, Vesting and Issuance Criteria

 

The PRSUs awarded hereunder shall vest, if at all, based upon achievement of
both (A) Performance Goal(s) related to Share price and (B) Participant’s
continued service to the Company, as described below and subject to the terms
and conditions of the Plan, the Agreement and this Attachment I.

1.Performance Goals and Vesting.

(a)Threshold Performance.  The “Threshold Goal” is met when both (i) during the
Performance Period, the Closing Price equals or exceeds $60.00 on either (1)
five consecutive trading days or (2) ten non-consecutive trading days (such full
condition in (i), the “Threshold Price”) and (ii) Participant continues in
service of the Company or an Affiliate as any of an Employee, a Consultant or a
Director for the Service Period.  Upon achievement of the Threshold Goal, the
Threshold PRSUs shall vest on the last day of the Service Period.

(b)Target Performance.  The “Target Goal” is met when both (i) during the
Performance Period, the Closing Price equals or exceeds $67.50 on either (1)
five consecutive trading days or (2) ten non-consecutive trading days (such full
condition in (i), the “Target Price”) and (ii) Participant continues in service
of the Company or an Affiliate as any of an Employee, a Consultant or a Director
for the Service Period.  Upon achievement of the Target Goal, the Target PRSUs
shall vest on the last day of the Service Period.

(c)Maximum Performance.  The “Maximum Goal” is met when both (i) during the
Performance Period, the Closing Price equals or exceeds $75.00 on either (1)
five consecutive trading days or (2) ten non-consecutive trading days (such full
condition in (i), the “Maximum Price”) and (ii) Participant continues in service
of the Company or an Affiliate as any of an Employee, a Consultant or a Director
for the Service Period.  Upon achievement of the Maximum Goal, the Maximum PRSUs
shall vest on the last day of the Service Period.

(d)Maximum and Cumulative Performance Goal Achievement.  The maximum number of
PRSUs that may vest under the Award is the Maximum PRSUs.  PRSUs may only vest
in respect of a particular Performance Goal upon the first occurrence of such
Performance Goal. In the event that more than one Performance Goal is achieved
during the Performance Period, the total number of PRSUs that vest under the
Award shall in no event be more than the number of PRSUs corresponding to the
highest Performance Goal achieved during the Performance Period.  For example,
if during the Performance Period the Threshold Goal is met and the Threshold
PRSUs vest and subsequently the Target Goal is met, the total number of PRSUs
that are vested upon achievement of the Target Goal (including the previously
vested Threshold PRSUs) is the Target PRSUs (not the Target PRSUs plus the
Threshold PRSUs).  

(e)Dividends.  If additional PRSUs are credited to the Participant’s Account as
a result of cash dividends paid on the Shares, as described in Section 3 of the
Agreement, such additional PRSUs shall vest to the extent the PRSUs that
resulted in the crediting of such additional PRSUs vest, if at all, in
accordance with Section 3 of the Agreement and references in this Attachment I
to Threshold, Target and Maximum PRSUs shall be deemed to also include any such
additional PRSUs credited as dividend equivalents.

  

 

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2.Award Vesting Requirements.  Except as specifically provided below in Section
3 and 4(a), the Participant must remain in the continuous service of the Company
or an Affiliate as any of an Employee, a Consultant or a Director through the
end of the Service Period, including following achievement of a Threshold,
Target or Maximum Price in order for a Performance Goal to be met and for any
PRSUs to vest.  For the avoidance of doubt, once a Threshold, Target or Maximum
Price is met, the PRSUs shall vest on the last day of the Service Period (if
applicable), irrespective of the trading price performance of the Shares
following achievement of such Threshold, Target or Maximum Price.  Shares will
be issued in respect of the number of the vested PRSUs on the vesting date or
such later date pursuant to Section 7 of the Agreement.  Any portion of the
Award that is not vested as of the earlier of (i) the end of the Performance
Period, (ii) the effective time of a Change in Control (after giving effect to
any vesting upon such Change in Control described in Section 3), and (iii) the
Participant’s Termination of Service (after giving effect to any vesting upon a
Qualifying Death/Disability Termination described in Section 4(a)), will
immediately terminate and be forfeited.

3.Impact of a Change in Control.  If a Change in Control occurs during the
Performance Period and prior to the Participant’s Termination of Service, then
the number of PRSUs that will be eligible to become vested under the Award as a
result of the Change in Control, if any, shall be determined based on the Change
in Control Price.  If the Change in Control Price is equal to or greater than
$60, $67.50 or $75, the Threshold Goal, Target Goal or Maximum Goal,
respectively, shall be deemed achieved, and as of immediately prior to, but
subject to the effectiveness of, such Change in Control, the applicable
Threshold, Target or Maximum PRSUs will vest (provided that if the Change in
Control Price falls in between any two of the $60, $67.50 or $75 prices, the
number of PRSUs that vest will be determined by straight line interpolation
between the Threshold PRSUs and Target PRSUs (in the case of a Change in Control
Price above $60 and below $67.50) or Target PRSUs and Maximum PRSUs (in the case
of a Change in Control Price above $67.50 and below $75) as applicable), in each
case reduced by any PRSUs that previously vested under the Award.

For example, if the Change in Control Price is $71.25 per share, and the
Threshold Performance Goal had previously been achieved, then a number of PRSUs
equal to 150% of the Target PRSUs (derived using straight line interpolation
between Target PRSUs and Maximum PRSUs), reduced by the Threshold PRSUs that
previously vested prior to such Change in Control, shall become vested as of
immediately prior to such Change in Control.  

Any PRSUs that do not become vested as of the Change in Control (after giving
effect to the foregoing provisions of this Section 3) shall automatically
terminate and be forfeited, without the payment of any consideration to
Participant, as of the effective time of the Change in Control.  The provisions
of this Section 3 shall govern the terms of the Award upon a Change in Control
in lieu of the provision of Section 11 of the Plan.

4.Impact of Termination of Service.

(a)Death or Disability.  In the event of Participant’s Qualifying
Death/Disability Termination, the Participant shall vest, as of the
Participant’s Qualifying Death/Disability Termination, in number of PRSUs that
would have vested had the Participant remained in the continuous service of the
Company or an Affiliate as any of an Employee, a Consultant or a Director
through the end of the Service Period, and any other PRSUs credited to the
Account that do not so vest will immediately terminate and be forfeited as of
such Qualifying Death/Disability Termination.  In the event of Participant’s
Termination of Service due to death or Disability that is not a Qualifying
Death/Disability Termination (including but not limited to Participant’s
Termination of Service due to death or Disability prior to the date a Threshold
Price, Target Price or Maximum Price is met), any

  

 

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portion of the Award that is not vested as of such Termination of Service will
immediately terminate and be forfeited on such date.  

(b)Other Terminations.  In the event the Participant’s Termination of Service
for any reason other than as a result of a Qualifying Death/Disability
Termination, the PRSUs credited to the Account that were not vested at the
Participant’s Termination of Service will immediately terminate and be forfeited
as of such date.  

 

5.Definitions:

(a) “Change in Control” has the meaning set forth in Section 11.3 of the Plan,
except that: (i) Section 11.3(i) and Section 11.3(iii)(C) of the Plan shall be
excluded and (ii) it shall also include the occurrence of any other event that
the Board determines by an approved resolution constitutes a Change in
Control.  

(b)“Change in Control Price” means the per-Share consideration received by the
Company stockholders in a Change in Control, provided that if such consideration
consists in whole or in part of non-cash consideration, the Committee will
determine the value of the non-cash per-Share consideration for purposes of this
Award in good faith in its sole discretion.  

(c)“Closing Price” means the closing sales price for one (1) Share as reported
by the Nasdaq Stock Market (or, if the Nasdaq Stock Market is not the principal
trading market for the Shares, the closing sales price reported by the principal
trading market for the Shares).

(d)“Disability” means the Participant’s becoming disabled within the meaning of
Section 22(e)(3) of the Code. The Committee may require such proof of Disability
as the Committee in its sole and absolute discretion deems appropriate and the
Committee’s determination as to whether the Participant has incurred a
Disability shall be final and binding on all parties concerned.

(e) “Maximum PRSUs” means the number of PRSUs equal to 200% of the Target PRSUs.

(f)“Performance Goal” means each of the Threshold Goal, Target Goal and Maximum
Goal as described in Section 1 above.  In the event of any stock split, reverse
stock split or other event described in Section 12.2 of the Plan that affects
the Shares, each Performance Goal shall be equitably adjusted as determined
appropriate by the Committee in its sole discretion.

(g) “Performance Period” means the period commencing on January 4, 2019 and
ending on (and including) January 3, 2022.

(h)“Qualifying Death/Disability Termination” means a Participant’s Termination
of Service due to such Participant’s death or Disability that occurs at a time
when the Participant is an Employee and upon or after the date a Threshold
Price, Target Price or Maximum Price is met but before the end of the Service
Period.

(i)“Service Period” means the period commencing on January 4, 2019 and ending on
the date that is the earlier of (i) 90 calendar days following the achievement
of the Threshold Price, Target Price or Maximum Price, as applicable and (ii)
immediately prior to the effective time of a Change in Control.

  

 

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(j)“Target PRSUs” means the number of PRSUs set forth in Section 1 of the
Agreement.

(k)“Termination of Service” means the date the Participant ceases to be in the
continuous service of the Company or an Affiliate as any of an Employee, a
Consultant or a Director for any reason.

(l)“Threshold PRSUs” means the number of PRSUs equal to 50% of the Target PRSUs.