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|  | A. | “Change      in Control” shall mean the occurrence of any one of the following      events: |
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|  | (i) | the      sale by the Company of all or substantially all of its assets or the      consummation by the Company of any merger, consolidation, reorganization,      or business combination with any person, in each case, other than in a      transaction: |
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|  | (a) | in      which persons who were shareholders of the Company immediately prior to      such sale, merger, consolidation, reorganization, or business combination      own, immediately thereafter, (directly or indirectly) more than 50% of the      combined voting power of the outstanding voting securities of the      purchaser of the assets or the merged, consolidated, reorganized or other      entity resulting from such corporate transaction (the “Successor      Entity”); |
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|  | (b) | in      which the Successor Entity is an employee benefit plan sponsored or      maintained by the Company or any person controlled by the Company;      or |
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|  | (c) | after      which more than 50% of the members of the board of directors of the      Successor Entity were members of the Board of Directors of the Company      (the “Board”) at the time of the action of the Board approving the      transaction (or whose nominations or elections were approved by at least      2/3 of the members of the Board at thattime); |
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|  | (ii) | the      acquisition directly or indirectly by any “person” or “group” (as those      terms are used in Sections 13(d), and 14(d) of the Securities Exchange Act      of 1934 (the “Exchange Act”), including without limitation, Rule 13d-5(b))      of “beneficial |
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|  |   | ownership”      (as determined pursuant to Rule 13d-3 under the Exchange Act) of      securities entitled to vote generally in the election of directors      (“voting securities”) of the Company that represent 30% or more of the      combined voting power of the Company’s then-outstanding voting securities,      other than: |
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|  | (a) | an      acquisition by a trustee or other fiduciary holding securities under any      employee benefit plan (or related trust) sponsored or maintained by the      Company or any person controlled by the Company or by any employee benefit      plan (or related trust) sponsored or maintained by the Company or any      person controlled by theCompany; |
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|  | (b) | an      acquisition of voting securities by the Company or a person owned,      directly or indirectly, by the holders of at least 50% of the voting power      of the Company’s then outstanding securities in substantially the same      proportions as their ownership of the stock of the  Company; |
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|  | (c) | an      acquisition of voting securities from the Company;  or |
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|        | (d)    | an      acquisition of voting securities pursuant to a transaction described in      clause (i) of this definition that would not be a Change in Control under      clause (i); and                                                                                                                                                                                                                                                                        |
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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | for      purposes of clarification, an acquisition of the Company’s securities by      the Company that causes the Company’s voting securities beneficially owned      by a person or group to represent 30% or more of the combined voting power      of the Company’s then-outstanding voting securities is not to be treated      as an “acquisition” by any person or group for purposes of this clause      (ii);  |

|  | (iii) | a      change in the composition of the Board that causes less than a majority of      the directors of the Company to be directors that meet one or more of the      following descriptions: |
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|  | (a) | a      director who has been a director of the Company for a continuous period of      at least 24 months; |
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|  | (b) | a      director whose election or nomination as director was approved by a vote      of at least 2/3 of the then directors described in clauses (iii)(a), (b)      or (c) of this definition by prior nomination or election, but excluding,      for the purposes of this subclause (b), any director whose initial      assumption of office occurred as a result of an actual or threatened      (i) election      contest with respect to the election or removal of directors or other      actual or threatened solicitation of proxies or consents by or on behalf      of a person or group other than the Board or (ii) tender offer,      merger, sale of substantially all of the Company’s assets, consolidation,      reorganization, or business combination that would be a Change in Control      under clause (i) on the consummation thereof;or |
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|  | (c) | a      director who was serving on the Board as a result of the consummation of a      transaction described in clause (i) that would not be a Change in Control      under clause (i); or |
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|  | (iv) | the      approval by the Company’s shareholders of a liquidation or dissolution of      the Company other than in connection with a transaction described in      clause (i) of this definition that would not be a Change in Control      thereunder. |
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|  | B. | “Discharges”:      terminates the Executive for any reason other than indictment or      conviction for a felony or other crime involving substantial moral      turpitude, disability, death, alcoholism, drug addiction or the gross,      active misfeasance of the Executive with regard to his duties with the      Company. |
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|  | C. | “Constructively      Discharges”: changes location or reduces the Executive’s status, duties,      responsibilities or direct or indirect compensation, (including future      increases commensurate with those given other managers of the Company), or      so alters the style or philosophy of the conduct of the Company’s      business, in the opinion of the Executive, as to cause it to be      undesirable to the Executive to remain in the employ of the Company, any      of which events shall be deemed to occur on the date the Executive      provides |
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|  |   | written      notice to the Company of the circumstances constituting a Constructive      Discharge. |
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|        | D.     | “Severance      Benefit”:  a payment equal to two-hundred ninety-nine (299%)      percent of the Executive’s “annualized includible compensation for the      base period” as defined in Section 280G(d) of the Code.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
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|   |   |     Notwithstanding      the foregoing Severance Benefit formula, any payments to which the      Executive is entitled upon Discharge or Constructive Discharge or      Resignation from the Company shall be adjusted so that the aggregate      present value of all “parachute payments” (as defined in Section      280G(b)(2) of the Code) to which the Executive is entitled is less than      300% of the Executive’s “annualized includible compensation for the base      period” as defined in Section 280G(d) of the Code, unless, taking into      account the applicable federal, state and local income taxes and the      excise tax imposed by Section 4999, the payment of the full Severance      Benefit results in the receipt by the Executive on an after-tax basis of      the greatest amount of benefit under this Section 2D notwithstanding that      all or some portion of such Severance Benefit may be taxable under Section      4999 of the Code.  The determination as to whether there is any      adjustment (and the extent thereof) in the payments due the Executive      because of this paragraph shall be made in writing within thirty (30) days      after Discharge or Constructive Discharge or Resignation, by the Company’s      independent accountants, compensation consultants or legal counsel      (“Independent Advisor”) on the date of the Change in Control and shall be      final and binding on the Executive and the Company.  The Company      shall furnish said Independent Advisor with all data required to make said      determination within ten (10) days after Discharge, or Constructive      Discharge or Resignation.  If there is any such adjustment, the      Executive may request which payments or distributions shall be reduced and      the Company may acquiesce in such request if permitted under applicable      law.  |
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|   |   |     If, in      accordance with the foregoing the Severance Benefit is reduced and,      notwithstanding such reduction, it is established pursuant to the final      determination of a court or the Internal Revenue Service that payments      have been made to, or provided for the benefit of, Executive by the      Company which are subject to the excise tax of Section 4999, the Company      shall reimburse, or pay for the benefit of, the Executive such excise tax      and indemnify and hold the Executive harmless, on an after-tax basis, for      any additional excise, income or employment taxes, including      interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

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|   |   | and      penalties, imposed as a result of such final determination with any such      reimbursements being made no later than the end of the taxable year of the      Executive following the taxable year in which the excise tax is      remitted.  |
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|   |  _____________________________________Zan      GuerryCHATTEM,      INC.By:__________________________________Title:________________________________  |
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