Document:

CHK-EX_10.8_2014.12.31_10K

Exhibit 10.8

EMPLOYMENT AGREEMENT
 
 
between
 
 
CHESAPEAKE ENERGY CORPORATION
 

and
 
 
JAMES R. WEBB
 
 
 
 
Effective January 1, 2013

EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective January 1, 2013, between CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation (the "Company") and JAMES R. WEBB, an individual (the "Executive"). 

W I T N E S S E T H:

WHEREAS, the Company desires to retain the services of the Executive and the Executive desires to make the Executive's services available to the Company.
 
NOW, THEREFORE, in consideration of the mutual promises herein contained, the Company and the Executive agree as follows:
 
		
	1.
	Employment.  The Company hereby employs the Executive and the Executive hereby accepts such employment subject to the terms and conditions contained in this Agreement.  The Executive is engaged as an Executive of the Company, and the Executive and the Company do not intend to create a joint venture, partnership or other relationship which might impose a fiduciary obligation on the Executive or the Company in the performance of this Agreement.

 
		
	2.
	Executive's Duties.  The Executive is employed on a full-time basis.  Throughout the term of this Agreement, the Executive will use the Executive's best efforts and due diligence to assist the Company in achieving the most profitable operation of the Company and the Company's affiliated entities consistent with developing and maintaining a quality business operation.  The Executive shall also devote all of Executive's working time, attention and energies to the performance of Executive's duties and responsibilities under this Agreement. 

 
		
	2.1
	Specific Duties.  The Executive will serve as Senior Vice President – Legal and General Counsel for the Company, and in such other positions as might be mutually agreed upon by the parties.  The Executive shall perform all of the duties required to fully and faithfully execute the office and position to which the Executive is appointed, and such other duties as may be reasonably requested by the Executive's supervisor.  During the term of this Agreement, the Executive may be nominated for election or appointed to serve as a director or officer of any of the Company's affiliated entities as determined in such affiliates' Board of Directors' sole discretion.  The services of the Executive will be requested and directed by the Company's Chief Executive Officer, Mr. Aubrey K. McClendon.

 
		
	2.2
	Rules and Regulations.  The Company has issued various policies and procedures applicable to employees and the Executive including an Employment Policies Manual which sets forth the general human 

resources policies of the Company and addresses frequently asked questions regarding the Company.  The Executive agrees to comply with such policies and procedures except to the extent inconsistent with this Agreement.  Such policies and procedures may be changed or adopted in the sole discretion of the Company without advance notice. 

		
	3.
	Other Activities.  Except as provided in this Agreement or approved by the Compensation Committee, or its designee, as applicable, in writing, the Executive agrees not to:  (a) engage in other operating business activities independent of the Company; (b) serve as a general partner, officer, executive, director or member of any corporation, partnership, company or firm; or (c) directly or indirectly invest, participate or engage in the Oil and Gas Business.  For purposes of this Agreement the term "Oil and Gas Business" means:  (i) producing oil and gas; (ii) drilling, owning or operating an interest in oil and gas leases or wells; (iii) providing material or services to the Oil and Gas Business; (iv) refining, processing, gathering, compressing, transporting or marketing oil or gas; or (v) owning an interest in or assisting any corporation, partnership, company, entity or person in any of the foregoing.  The foregoing will not prohibit: (v) ownership of publicly traded securities; (w) ownership of royalty interests where the Executive owns or previously owned the surface of the land covered in whole or in part by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate; (x) ownership of royalty interests, overriding royalty interests, working interests or other interests in oil and gas owned prior to the Executive's date of first employment with the Company and disclosed to the Company in writing; (y) ownership of royalty interests, overriding royalty interests, working interests or other interests in oil and gas acquired by the Executive through a bona fide gift or inheritance subject to disclosure by Executive to the Company in writing; or (z) service as an officer or director of a not-for-profit organization so long as such activity does not materially interfere with Executive’s obligations under this Agreement.  If the Executive serves as a director or officer of a not-for-profit organization, the Executive shall disclose the name of the organization and their involvement in an annual disclosure statement, the form of which shall be provided by the Company.

 
		
	 4.
	Executive's Compensation.  The Company agrees to compensate the Executive as follows: 

		
	4.1
	Base Salary.  A base salary (the "Base Salary"), at the initial annual rate of not less than Four Hundred Fifty Thousand Dollars ($450,000.00) will be paid to the Executive in regular installments in accordance with the Company's designated payroll schedule increasing to not less than Four Hundred Seventy-Five Thousand Dollars ($475,000.00) not later than July 31, 2013, and increasing to not less than Five Hundred Thousand Dollars ($500,000.00) not later than July 31, 2014, assuming the Executive’s continued employment with the Company at the time of any salary increase.

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	4.2
	Bonus.  In addition to the Base Salary described in paragraph 4.1 of this Agreement, the Executive shall be eligible for an annual bonus for each fiscal year during the Term on the same basis as other executive officers under the Company’s then current annual incentive plan which shall be payable in accordance with the terms of such plan.

		
	4.3
	Equity Compensation.  In addition to the compensation set forth in paragraphs 4.1 and 4.2 of this Agreement, the Executive may periodically receive grants of Chesapeake Energy Corporation restricted stock or other awards from the Company's various equity compensation plans (generally referred to as “Equity Compensation Plans”), subject to the terms and conditions thereof.

		
	4.4
	Benefits.  The Company will provide the Executive such retirement benefits, and such other benefits as are customarily provided to similarly situated executives of the Company and as are set forth in and governed by the Company's Employment Policies Manual.  The Executive will be entitled to take one hundred seventy-six (176) hours of Paid Time Off (“PTO”) annually, calculated from the Executive's anniversary date, during the term of this Agreement.  No additional compensation will be paid for failure to take PTO.  The Company will also provide the Executive the opportunity to apply for coverage under the Company's medical, life and disability plans, if any.  If the Executive is accepted for coverage under such plans, the Company will make such coverage available to the Executive on the same terms as is customarily provided by the Company to the plan participants as modified from time to time.  The Executive is subject to all of the terms and provisions of the Company's benefit plans or policies.  Executive will be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in accordance with the Company’s expense reimbursement policy.  All payments for reimbursement under this Section 4.4 shall be paid promptly but in no event later than the last day of Executive’s taxable year following the taxable year in which Executive incurred such expenses.

 
		
	5.
	Term.  The term of Executive’s employment under the provisions of this Agreement shall be for a period commencing on the Effective Date and ending on December 31, 2015 (the "Term"); provided, however, if during the Term of this Agreement a Change of Control occurs, the Term of this Agreement shall be extended to the later of the original expiration date of the Term or the expiration of the Change of Control Period.  For purposes of this Agreement, a "Change of Control" means the occurrence of any of the following:

		
	(a)
	the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of either (i) the then outstanding shares of Chesapeake Energy Corporation 

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common stock (the "Outstanding CHK Common Stock") or (ii) the combined voting power of the then outstanding voting securities of Chesapeake Energy Corporation entitled to vote generally in the election of directors (the "Outstanding CHK Voting Securities").  For purposes of this paragraph, the following acquisitions by a Person will not constitute a Change of Control: (i) any acquisition by Chesapeake Energy Corporation; (ii) any redemption, share acquisition or other purchase of shares directly or indirectly by Chesapeake Energy Corporation; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Chesapeake Energy Corporation or any corporation controlled by Chesapeake Energy Corporation; or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (c) below;

		
	(b)
	during any period of not more than twenty-four (24) months, the individuals who constitute the Board of Directors (the "Incumbent Board") of Chesapeake Energy Corporation as of the beginning of the period cease for any reason to constitute at least a majority of the Board of Directors.  Any individual becoming a director whose election, or nomination for election by Chesapeake Energy Corporation's shareholders, is approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered a member of the Incumbent Board, but any such individual whose initial assumption of office occurs as a result of an actual or threatened 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 other than the Incumbent Board will not be deemed a member of the Incumbent Board.

		
	(c)
	the consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of Chesapeake Energy Corporation (a "Business Combination"), unless following such Business Combination: (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding CHK Common Stock and Outstanding CHK Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Chesapeake Energy Corporation or all or substantially all of Chesapeake Energy Corporation's assets either directly or through 

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one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding CHK Common Stock and Outstanding CHK Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Chesapeake Energy Corporation or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the Board of Directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Incumbent Board, providing for such Business Combination; or,
		
	(d)
	the approval by the shareholders of Chesapeake Energy Corporation of a complete liquidation or dissolution of Chesapeake Energy Corporation.

For purposes of this Agreement, “Change of Control Period” means the twenty‐four (24) month period commencing on the effective date of a Change of Control.
		
	6.
	Termination.  This Agreement will continue in effect until the expiration of the term stated in Section 5 of this Agreement unless earlier terminated pursuant to this Section 6.  For purposes of this Agreement, “Termination Date” shall mean (a) if Executive’s employment is terminated by death, the date of death; (b) if Executive’s employment is terminated pursuant to Section 6.4 due to a disability, thirty (30) days after notice of termination is provided to Executive in accordance with Section 6.4; (c) if Executive’s employment is terminated by Company without Cause or by Executive for Good Reason pursuant to Section 6.1.1 or 6.1.2, on the effective date of termination specified in the notice required by Section 6.1.1 or 6.1.2 respectively; (d) if Executive’s employment is terminated by Company for Cause pursuant to Section 6.1.3, the date on which the notice of termination required by Section 6.1.3 is given; or (e) if Executive’s employment is terminated by Executive pursuant to Section 6.2, on the effective date of termination specified by Executive in the notice of termination required by Section 6.2 unless the Company rejects such date as allowed by Section 6.2, in which case it would be the date specified by the Company.

 
		
	6.1
	Termination by Company. The Executive’s employment under this Agreement may be terminated prior to the expiration of the Term under the following circumstances:

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	6.1.1
	Termination without Cause or for Good Reason Outside of a Change of Control Period.

		
	(a)
	Termination by the Company without Cause.  The Company may terminate the Executive’s employment without Cause at any time by the service of written notice of termination to the Executive specifying an effective date of such termination not sooner than thirty (30) business days after the date of such notice.

		
	(b)
	Termination by the Executive for Good Reason.  Executive may terminate employment with the Company for “Good Reason” and such termination will not be a breach of this Agreement by Executive.  For purposes of this paragraph 6.1.1(b), Good Reason shall mean the occurrence of one of the events set forth below:

		
	(i)
	elimination of the Executive's job position or material reduction in duties and/or reassignment of the Executive to a new position of materially less authority; or

		
	(ii)
	a material reduction in the Executive’s Base Salary.

Notwithstanding the foregoing, the Executive will not be deemed to have terminated for Good Reason unless (A) the Executive provides written notice to the Company of the existence of one of the conditions described above within ninety (90) days after the Executive has knowledge of the initial existence of the condition, (B) the Company fails to remedy the condition so identified within thirty (30) days after receipt of such notice (if capable of correction), (C) the Executive provides a notice of termination to the Company within thirty (30) days of the expiration of the Company’s period to remedy the condition specifying an effective date for the Executive’s termination, and (D) the effective date of the Executive’s termination of employment is within ninety (90) days after the Executive provides written notice to the Company of the existence of the condition referred to in clause (A).
		
	(c)
	Obligations of the Company.  In the event the Executive is Terminated without Cause or terminates employment for Good Reason outside of a Change of Control Period, the Executive will receive as termination compensation within thirty (30) days of the Termination Date: (a) a payment of one (1) times the sum of Base Salary and Annual Bonus in a lump sum payment; (b) all unvested awards granted to Executive prior to January 1, 2013 under the Equity 

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Compensation Plans shall be immediately vested (provided performance share units shall only be payable subject to the attainment of the performance measures for the applicable performance period as provided under the terms of the applicable award agreement); (c) pro rata vesting through the last day of the month in which the Termination Date occurs of all unvested awards granted to Executive on or after January 1, 2013 under the Equity Compensation Plans (provided performance share units shall only be payable subject to the attainment of the performance measures for the applicable performance period as provided under the terms of the applicable award agreement); (d) any Supplemental Matching Contributions to the Chesapeake Energy Corporation Amended and Restated Deferred Compensation Plan (the “401(k) Make-Up Plan”) shall be immediately vested; and (e) a lump sum payment of any PTO pay accrued but unused through the Termination Date.  For purposes of this Agreement “Annual Bonus” shall be defined as the average of the annual bonus payments the Executive has received during the immediately preceding three (3) calendar years unless the Executive has been employed by the Company or held the position listed in section 2.1 for less than fifteen (15) months prior to the Termination Date, in which case, “Annual Bonus” shall be defined as the greater of (i) the Executive’s target bonus for the year in which the Termination Date occurs or (ii) the average of the annual bonus payments the Executive has received during the immediately preceding three (3) calendar years.  The right to the foregoing termination compensation described under clauses (a), (b) and (c) above is subject to the Executive's execution of the Company's severance agreement which will operate as a release of all legally waivable claims against the Company and the Executive's compliance with all of the provisions of this Agreement, including all post-employment obligations.
		
	6.1.2
	Termination without Cause or for Good Reason During a Change of Control Period.

		
	(a)
	Termination by the Company without Cause.  The Company may terminate the Executive’s employment without Cause during a Change of Control Period at any time by the service of written notice of termination to the Executive specifying an effective date of such termination 

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not sooner than thirty (30) business days after the date of such notice.
		
	(b)
	Termination by the Executive for Good Reason.  Executive may terminate employment with the Company for “Good Reason” and such termination will not be a breach of this Agreement by Executive.  For purposes of this paragraph 6.1.2(b), Good Reason during a Change of Control Period  shall mean the occurrence of one of the events set forth below:

		
	(i)
	elimination of the Executive's job position or material reduction in duties and/or reassignment of the Executive to a new position of materially less authority;

		
	(ii)
	a material reduction in Executive’s Base Salary; or

		
	(iii)
	a requirement that the Executive relocate to a location outside of a fifty (50) mile radius of the location of his/her office or principal base of operation immediately prior to the effective date of a Change of Control.

Notwithstanding the foregoing, Executive will not be deemed to have terminated for Good Reason unless (A) Executive provides written notice to the Company of the existence of one of the conditions described above within ninety (90) days after Executive has knowledge of the initial existence of the condition, (B) the Company fails to remedy the condition so identified within thirty (30) days after receipt of such notice (if capable of correction), (C) Executive provides a Notice of Termination to the Company within thirty (30) days of the expiration of the Company’s period to remedy the condition specifying an effective date for the Executive’s termination, and (D) the effective date of the Executive’s termination of employment is within ninety (90) days after Executive provides written notice to the Company of the existence of the condition referred to in clause (A).
		
	(c)
	Obligations of the Company.  In the event the Executive is Terminated without Cause or terminates employment for Good Reason during a Change of Control Period, the Executive will receive as termination compensation within thirty (30) days of the Termination Date: (a) a payment of two (2) times the sum of Base Salary and Annual Bonus in a lump sum payment; (b) all unvested awards granted under the Equity Compensation Plans shall be immediately vested (provided performance share units 

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shall only be payable subject to the attainment of the performance measures for the applicable performance period as provided under the terms of the applicable award agreement); (c) any Supplemental Matching Contributions to the Chesapeake Energy Corporation Amended and Restated Deferred Compensation Plan (the “401(k) Make-Up Plan”) shall be immediately vested; and (d) a lump sum payment of any PTO pay accrued but unused through the Termination Date.  The right to the foregoing termination compensation described under clauses (a), (b) and (c) above is subject to the Executive's execution of the Company's severance agreement which will operate as a release of all legally waivable claims against the Company and the Executive's compliance with all of the provisions of this Agreement, including all post-employment obligations.
		
	6.1.3
	Termination for Cause.  The Company may terminate the employment of the Executive hereunder at any time for Cause (as hereinafter defined) (such a termination being referred to in this Agreement as a "Termination For Cause") by giving the Executive written notice of such termination.  As used in this Agreement, "Cause" means:

		
	(i)
	the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties, or

		
	(ii)
	the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.  For purposes of this provision, no act, or failure to act, on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or based upon the advice of counsel for the Company shall be conclusively presumed 

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to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.
In the event this Agreement is terminated for Cause, the Company will not have any obligation to provide any further payments or benefits to the Executive after the Termination Date other than a lump sum payment within thirty (30) days of the Termination Date of any PTO pay accrued but unused through the Termination Date. 
		
	6.2
	Termination by Executive.  The Executive may voluntarily terminate employment under this Agreement for any reason by the service of written notice of such termination to the Company specifying an effective date of termination no sooner than thirty (30) days and no later than sixty (60) days after the date of such notice; provided, however, if less than thirty (30) days remain in the Term, the minimum notice required from Executive under this Section 6.2 shall be reduced from thirty (30) to seven (7) days.  The Company reserves the right to end the employment relationship at any time after the date such notice is given to the Company and to pay Executive through the Termination Date.  

 
		
	6.3
	Retirement by Executive.  In the event the Executive is fifty-five (55) years or older and the Executive’s employment is terminated under Sections 6.1.1 or 6.2 of this Agreement, the Executive will be (a) eligible for accelerated vesting of the unvested awards granted to the Executive prior to January 1, 2013 under the Equity Compensation Plans (provided performance share units shall only be payable subject to the attainment of the performance measures for the applicable performance period as provided under the terms of the applicable award agreement); (b) eligible for continued post-retirement vesting of the unvested awards granted to the Executive on or after January 1, 2013 under the Equity Compensation Plans (provided performance share units shall only be payable subject to the attainment of the performance measures for the applicable performance period as provided under the terms of the applicable award agreement); and (c) eligible for accelerated vesting of the unvested Supplemental Matching Contributions to the Chesapeake Energy Corporation Amended and Restated Deferred Compensation Plan (the "401(k) Make-Up Plan").  The vesting under clauses (a), (b) and (c) of this Section 6.3 will be in accordance with the retirement matrix (the "Retirement Matrix") attached to this Agreement.  The right to acceleration and continued vesting is subject to the Executive’s execution of the Company’s severance agreement which will include a release of all legally waivable claims between the parties as of the effective date of the release except for the Company’s obligation to pay the foregoing severance compensation and the Executive’s obligation to comply with all post-employment obligations under this Agreement.

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	6.4
	Disability.  If the Executive suffers from a physical or mental condition which in the reasonable judgment of the Company's management prevents the Executive from being able to perform the duties specified herein for a period of twelve (12) consecutive weeks, the Executive may be terminated by the Company.  In the event the Executive is terminated due to Disability (a) all unvested awards granted to the Executive under the Equity Compensation Plans shall be immediately vested (provided performance share units shall only be payable subject to the attainment of the performance measures for the applicable performance period as provided under the terms of the applicable award agreement); and (b) any Supplemental Matching Contributions to the Chesapeake Energy 401(k) Make-Up Plan shall be immediately vested.  Executive shall also receive a lump sum payment within thirty (30) days of the Termination Date of any PTO pay accrued but unused through the Termination Date.  The right to the foregoing compensation due under clauses (a) and (b) above is subject to the execution by the Executive or the Executive's legal representative of the Company's severance agreement which will operate as a release of all legally waivable claims against the Company.  In applying this Section 6.4, the Company will comply with any applicable legal requirements, including the Americans with Disabilities Act.

 
		
	6.5
	Death of Executive.  If the Executive dies during the term of this Agreement, the Company may thereafter terminate this Agreement without compensation. In the event of the Executive’s death the Company will (a) immediately vest all unvested awards granted to the Executive under the Equity Compensation Plans (provided performance share units shall only be payable subject to the attainment of the performance measures for the applicable performance period as provided under the terms of the applicable award agreement); and (b) immediately vest any Supplemental Matching Contributions to the Chesapeake Energy 401(k) Make-Up Plan.  Executive’s beneficiaries/estate shall also receive a lump sum payment within thirty (30) days of death of any PTO pay accrued but unused through the Termination Date.  Amounts payable under this Section 6.5 shall be paid to the beneficiary designated on the Company's universal beneficiary designation form in effect on the date of the Executive's death.  If the Executive fails to designate a beneficiary or if such designation is ineffective, in whole or in part, any payment that would otherwise have been paid under this Section 6.5 shall be paid to the Executive's estate. The right to the foregoing compensation due under clauses (a) and (b) above is subject to the execution by the beneficiary, or as applicable, the administrator of the Executive's estate of the Company's severance agreement which will operate as a release of all legally waivable claims against the Company.

 
		
	6.6
	Effect of Termination.  The termination of this Agreement, when accompanied by the termination of Executive’s employment with the 

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Company, will terminate all obligations of the Executive to render services on behalf of the Company from and after the Termination Date, provided that upon termination of this Agreement and termination of employment for any reason (other than by reason of Executive’s death), the Executive will maintain the confidentiality of all information acquired by the Executive during the term of Executive's employment in accordance with the terms and provisions of the Company’s Confidentiality Agreement and the Executive shall comply with all other post employment requirements including Section 6.6 and Sections 7, 8, 9, 10, 11, 12 and 13.  Except as otherwise provided in Sections 4.5 and 6 of this Agreement and payment of any PTO pay accrued but unused through the Termination Date, no accrued bonus, severance pay or other form of compensation will be payable by the Company to the Executive by reason of the termination of this Agreement.  All keys, entry cards, credit cards, files, records, financial information, Confidential Information, research, results, test data, instructions, drawings, sketches, specifications, product data sheets, products, books, DVDs, disks, memory devices, business plans, marketing plans, documents, correspondence, furniture, furnishings, equipment, supplies and other items relating to the Company in the Executive's possession will remain the property of the Company.  Upon termination of employment, the Executive will have the right to retain and remove all personal property and effects which are owned by the Executive and located in the offices of the Company at a time determined by the Company.  All such personal items will be removed from such offices no later than two (2) days after the Termination Date, and the Company is hereby authorized to discard any items remaining and to reassign the Executive's office space after such date.  Prior to the Termination Date, the Executive will render such services to the Company as might be reasonably required to provide for the orderly termination of the Executive's employment.  Notwithstanding the foregoing and without discharging any obligations to pay compensation to the Executive under this Agreement, after notice of the termination, the Company may request that the Executive not provide any other services to the Company and not enter the Company's premises before or after the Termination Date.  In the event that the Executive separates employment with the Company, Executive hereby grants consent to notification by the Company to Executive's new employer about Executive's rights and obligations under this Agreement.  Upon such termination of employment, the Executive further agrees to acknowledge compliance with this Agreement in a form reasonably provided by the Company.

If this Agreement is not terminated pursuant to any of the preceding provisions of Section 6 or extended by mutual written agreement of the parties prior to the expiration of the Term, this Agreement and Executive’s employment under this Agreement will end and Company will have no further obligation to provide any further payments or benefits to Executive under this Agreement after the expiration of the 

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Term other than any PTO pay accrued but unused through the expiration of the Term.  Upon expiration of this Agreement, Executive will continue to be employed with Company on an at will basis until such employment is terminated by either party, with or without any reason.
 
		
	7.
	Non-Competition.  For a period of one (1) year after the Executive is no longer employed by the Company for any reason, the Executive will not knowingly acquire, attempt to acquire or aid another in the acquisition or attempted acquisition of an interest in oil and gas assets, oil and gas production, oil and gas leases, mineral interests, oil and gas wells or other such oil and gas exploration, development or production activities within any spacing unit in which the Company owns an oil and gas interest on the date of the resignation or termination of the Executive.

 
		
	8.
	Non-Solicitation.  The Executive agrees that during his/her employment hereunder, and for the one (1) year period immediately following the termination of employment for any reason, the Executive shall not solicit or contact any established client or customer of the Company with a view to inducing or encouraging such established client or customer to discontinue or curtail any business relationship with the Company.  The Executive further agrees that the Executive will not request or advise any established clients, customers or suppliers of the Company to withdraw, curtail or cancel its business with the Company.

 
		
	9.
	Non-Solicitation of Employees.  The Executive covenants that during the term of employment and for the one (1) year period immediately following the termination of employment for any reason, Executive will neither directly nor indirectly induce nor attempt to induce any executive or employee of the Company to terminate his or her employment with the Company to go to work for any other company.

 
		
	10.
	Reasonableness.  The Company and the Executive have attempted to specify a reasonable period of time and reasonable restrictions to which this Agreement shall apply.  The Company and Executive agree that if a court or administrative body should subsequently determine that the terms of this Agreement are greater than reasonably necessary to protect the Company's interest, the Company agrees to waive those terms which are found by a court or administrative body to be greater than reasonably necessary to protect the Company's interest and to request that the court or administrative body reform this Agreement specifying a reasonable period of time and such other reasonable restrictions as the court or administrative body deems necessary.

 
		
	11.
	Equitable Relief.  The Executive acknowledges that the services to be rendered by Executive are of a special, unique, unusual, extraordinary, and intellectual character, which gives them a peculiar value, and the loss of which cannot reasonably or adequately be compensated in damages in an action at law; and that a breach by the Executive of any of the provisions contained in this Agreement will cause the Company irreparable injury and damage.  The Executive further acknowledges that the Executive possesses unique skills, knowledge and ability 

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and that any material breach of the provisions of this Agreement would be extremely detrimental to the Company.  By reason thereof, the Executive agrees that the Company shall be entitled, in addition to any other remedies it may have under this Agreement or otherwise, to injunctive and other equitable relief to prevent or curtail any breach of this Agreement by him/her.

		
	12.
	Continued Litigation Assistance.  The Executive will cooperate with and assist the Company and its representatives and attorneys as requested, during and after the Term, with respect to any litigation, arbitration or other dispute resolutions by being available for interviews, depositions and/or testimony in regard to any matters in which the Executive is or has been involved or with respect to which the Executive has relevant information.  The Company will reimburse the Executive for any reasonable business expenses the Executive may have incurred in connection with this obligation.

		
	13.
	Arbitration.  Any disputes, claims or controversies between the Company and Executive including, but not limited to those arising out of or related to this Agreement or out of the parties' employment relationship (together, “Employment Matter”), shall be settled by arbitration as provided herein.  This agreement shall survive the termination or rescission of this Agreement.  All arbitration shall be in accordance with Rules of the American Arbitration Association, including discovery, and shall be undertaken pursuant to the Federal Arbitration Act.  Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree to another location.  The decision of the arbitrator will be enforceable in any court of competent jurisdiction.  The parties, however, agree that the Company shall be entitled to obtain injunctive or other equitable relief to enforce the provisions of this Agreement in a court of competent jurisdiction.  The parties further agree that this arbitration provision is not only applicable to the Company but its affiliates, officers, directors, employees and related parties.  Executive agrees that he/she shall have no right or authority for any dispute to be brought, heard or arbitrated as a class or collective action, or in a representative or a private attorney general capacity on behalf of a class of persons or the general public.  No class, collective or representative actions are thus allowed to be arbitrated and Executive agrees that he/she must pursue any claims that he/she may have solely on an individual basis through arbitration.  The Company will reimburse the Executive for all legal fees and expenses reasonably incurred (provided such legal fees are calculated on an hourly, and not on a contingency fee basis), as well as costs and expenses reasonably incurred in connection with an Employment Matter.  Reimbursement by the Company shall be made as soon as practicable following final resolution of the Employment Matter to the extent the Company receives appropriate documentation of such attorney’s fees, costs and expenses which shall be provided no later than December 31 of the year in which the Employment Matter is resolved, provided, however, the Executive will only be entitled to reimbursement if the Executive is successful in respect of one or more material claims or defenses brought, raised or pursued in connection with such Employment Matter.  Payment of reimbursement for such fees and expenses 

-14-

shall be made no later than December 31 of the year immediately following the year of resolution.

		
	14
	Miscellaneous.  The parties further agree as follows:

		
	14.1
	Time.  Time is of the essence of each provision of this Agreement.

		
	14.2
	Notices.  Any notice, payment, demand or communication required or permitted to be given by any provision of this Agreement will be in writing and will be deemed to have been given when delivered personally or by express mail to the party designated to receive such notice, or on the date following the day sent by overnight courier, or on the third business day after the same is sent by certified mail, postage and charges prepaid, directed to the following address or to such other or additional addresses as any party might designate by written notice to the other party:

	
		
	To the Company:
	Chesapeake Energy Corporation

	 
	6100 N. Western Ave.

	 
	Oklahoma City, OK  73118

	 
	Attn:  Lisa M. Phelps

	 
	 

	To the Executive:
	James R. Webb

	 
	516 Meadow Run Court

	 
	Yukon, OK  73099

 
		
	14.3
	Assignment.  Neither this Agreement nor any of the parties' rights or obligations hereunder can be transferred or assigned without the prior written consent of the other parties to this Agreement; provided, however, the Company may assign this Agreement to any wholly owned affiliate or subsidiary of Chesapeake Energy Corporation without Executive's consent as well as to any purchaser of the Company.

 
		
	14.4
	Construction.  If any provision of this Agreement or the application thereof to any person or circumstances is determined, to any extent, to be invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which the same is held invalid or unenforceable, will not be affected thereby, and each term and provision of this Agreement will be valid and enforceable to the fullest extent permitted by law.  Except as provided for in Section 13, this Agreement is intended to be interpreted, construed and enforced in accordance with the laws of the State of Oklahoma.

 
		
	14.5
	Entire Agreement.  This Agreement, any documents executed in connection with this Agreement, any documents specifically referred to in this Agreement and the Employment Policies Manual constitute the entire agreement between the parties hereto with respect to the subject matter 

-15-

herein contained, and no modification hereof will be effective unless made by a supplemental written agreement executed by all of the parties hereto.
 
		
	14.6
	Binding Effect.  This Agreement will be binding on the parties and their respective successors, legal representatives and permitted assigns.  In the event of a merger, consolidation, combination, dissolution or liquidation of the Company, the performance of this Agreement will be assumed by any entity which succeeds to or is transferred the business of the Company as a result thereof, and the Executive waives the consent requirement of Section 14.3 to effect such assumption.

 
		
	14.7
	Supersession.  On execution of this Agreement by the Company and the Executive, the relationship between the Company and the Executive will be bound by the terms of this Agreement, any documents executed in connection with this Agreement, any documents specifically referred to in this Agreement and the Employment Policies Manual.  In the event of a conflict between the Employment Policies Manual and this Agreement, this Agreement will control in all respects.

 
		
	14.8
	Third-Party Beneficiary.  The Company's affiliated entities and partnerships are beneficiaries of all terms and provisions of this Agreement and entitled to all rights hereunder.

 
		
	14.9 
	Section 409A.  This Agreement is intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and related U.S. Treasury regulations or official pronouncements (“Section 409A”) and any ambiguous provision will be construed in a manner that is compliant with such exemption; provided, however, if and to the extent that any compensation payable pursuant to this Agreement is determined to be subject to Section 409A, this Agreement will be construed in a manner that will comply with Section 409A.  Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed on his/her Termination Date to be a “specified employee” within the meaning of that term under Section 409A, then any payments and benefits under this Agreement that are subject to Section 409A and paid by reason of a termination of employment shall be made or provided on the later of (a) the payment date set forth in this Agreement or (b) the date that is the earliest of (i) the expiration of the six-month period measured from the date of the Executive’s termination of employment or (ii) the date of the Executive’s death (the “Delay Period”).  Payments and benefits subject to the Delay Period shall be paid or provided to the Executive without interest for such delay.  Termination of employment as used throughout this Agreement shall refer to a separation from service within the meaning of Section 409A.  To the extent required to comply with Section 409A, references to a “resignation,” “termination,” “termination of employment” or like terms 

-16-

throughout this Agreement shall be interpreted consistent with the meaning of “separation from service” as defined in Section 409A.
		
	14.10
	Dodd-Frank Act.  Notwithstanding anything in this Agreement or any other agreement between the Company and/or its related entities and Executive to the contrary, Executive acknowledges that the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Act”) may have the effect of requiring certain executives of the Company and/or its related entities to repay the Company, and for the Company to recoup from such executives, erroneously awarded amounts of incentive-based compensation.  If, and only to the extent, the Act, any rules and regulations promulgated by thereunder by the Securities and Exchange Commission or any similar federal or state law requires the Company to recoup any erroneously awarded incentive-based compensation that the Company has paid or granted to Executive, Executive hereby agrees, even if Executive has terminated his employment with the Company, to promptly repay such erroneously awarded incentive compensation to the Company upon its written request.  This Section shall survive the termination of this Agreement.

		
	14.11
	Maximum Payments by the Company.

		
	(a)
	It is the objective of this Agreement to maximize Executive’s Net After-Tax Benefit (as defined herein) if payments or benefits provided under this Agreement are subject to excise tax under Section 4999 of the Code.  Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company or otherwise of the date of vesting or payment or rate of payment under any plan, program, arrangement or agreement of the Company (all such payments and benefits, including the payments and benefits under Section 6 hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments shall be subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax 

-17-

to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).
		
	(b)
	The Total Payments shall be reduced by the Company in the following order: (i) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (ii) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting or payments with respect to any equity award with respect to the Company’s common stock that is exempt from Section 409A of the Code, (iii) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting and payments with respect to any equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, and (iv) reduction of any payments attributable to the acceleration of vesting or payments with respect to any other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

		
	(c)
	For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing (“Independent Advisors”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The costs of obtaining such determination shall be borne by the Company.

-18-

IN WITNESS WHEREOF, the undersigned have executed this Agreement effective the date first above written.
	
			
	 
	 
	CHESAPEAKE ENERGY CORPORATION, an

	 
	 
	Oklahoma corporation

	 
	 
	 

	 
	By:
	/s/ Aubrey K. McClendon

	 
	 
	Aubrey K. McClendon, Chief Executive Officer

	 
	 
	(the "Company")

	 
	 
	 

	 
	By:
	/s/ James R. Webb

	 
	 
	James R. Webb, Individually

	 
	 
	(the "Executive")

	 
	 
	 

	 
	 
	 

-19-

RETIREMENT MATRIX

	
					
	Executive Vice President

	Service Yrs
	<55
	55-59
	60-64
	>=65

	0-5
	0%
	0%
	0%
	0%

	5-10
	0%
	60%
	80%
	100%

	10-15
	0%
	80%
	100%
	100%

	15-20
	0%
	100%
	100%
	100%

	20+
	0%
	100%
	100%
	100%Exhibit 10.2

 

ABBOTT LABORATORIES

 

DEFERRED COMPENSATION PLAN

 

ARTICLE I

 

Introduction

 

Section 1.1            Purpose.  The Plan is designed to assist the Employers in attracting and retaining key employees by providing those employees with the opportunity to defer the receipt of a portion of their compensation and to have that deferred compensation treated as if it were invested pending its distribution by the Plan.

 

Section 1.2            ERISA.  The Plan is intended to be exempt from Parts 2, 3, and 4 of Title I of ERISA and, therefore, participation in the Plan is limited to a select group of management and highly compensated employees, within the meaning of Sections 201(2), 301(a)3 and 401(a)(1) of ERISA.

 

Section 1.3            Employers.

 

(a)           After the Effective Date, any Subsidiary of the Company that is not then an Employer may adopt the Plan with the Company’s consent as described in Section 13.12.

 

(b)          Each Employer shall be liable to the Company for an amount equal to the Plan benefits earned by its Eligible Employees.  Where an Eligible Employee has been employed by more than one Employer, the Plan Administrator shall allocate the liability to the Company associated with that Eligible Employee’s Plan benefits among his or her Employers.  The Plan Administrator shall establish procedures for determining the time at which and manner in which the Employers shall pay this liability to the Company.

 

Section 1.4            Grandfathered Amounts.  Notwithstanding anything in this Plan to the contrary, any amounts under this Plan that were earned and vested before January 1, 2005 (as determined in accordance with Code Section 409A) (“Grandfathered Amounts”) shall be subject to the terms and conditions of the Plan as administered and as in effect on October 3, 2004.  Amendments made to the Plan pursuant to this amendment and restatement or otherwise shall not affect the Grandfathered Amounts unless expressly provided for in the amendment.  The terms and conditions applicable to the Grandfathered Amounts are set forth in Appendix A attached hereto.

 

1

 

Section 1.5            Effective Date.  The Plan has been amended and restated, effective as of August 12, 2014.

 

ARTICLE II

 

Definitions

 

When used in this Plan, unless the context clearly requires a different meaning, the following words and terms shall have the meanings set forth below.  Whenever appropriate, words used in the singular shall be deemed to include the plural, and vice versa, and the masculine gender shall be deemed to include the feminine gender.

 

Section 2.1            Account.  “Account(s)” means the account(s) established for record keeping purposes for each Participant pursuant to Article VI.

 

Section 2.2            Base Compensation.  “Base Compensation” means the Participant’s total compensation earned in a Plan Year for personal service actually rendered to an Employer, including sales bonuses, sales incentives and sales commissions (excluding Eligible Bonuses, all other bonuses, commissions, relocation expenses, reimbursements, expense allowances, fringe benefits (cash or noncash), welfare benefits (whether or not those amounts are includible in gross income) and other non-regular forms of compensation) before deductions for (i) Deferral Elections made pursuant to Section 4.1 or (ii) contributions made on the Participant’s behalf to any Employer 401(k) Plan or to any cafeteria plan under Section 125 of the Internal Revenue Code of 1986, as amended (the “Code”) maintained by an Employer. Notwithstanding the foregoing, the Plan Administrator or its delegate may designate amounts to be included in or excluded from Base Compensation.

 

Section 2.3            Beneficiary.  “Beneficiary” means the person, persons or entity designated by the Participant to receive any benefits payable under the Plan pursuant to Article IX.

 

Section 2.4            Board of Review.  “Board of Review” means the Abbott Laboratories Employee Benefit Board of Review appointed and acting under the Abbott Laboratories Annuity Retirement Plan and having the powers and duties described in this Plan.

 

Section 2.5            Company.  “Company” means Abbott Laboratories, its successors, any organization into which or with which Abbott Laboratories may merge or consolidate or to which all or substantially all of its assets may be transferred.

 

Section 2.6            Deferral Election.  “Deferral Election” means an election under the Plan by a Participant to defer the receipt of a portion of his or her Eligible Compensation made on a Deferral Election Form.

 

Section 2.7            Deferral Election Form.  “Deferral Election Form” means the form provided to the Participant by the Plan pursuant to Section 4.1 on which the Participant makes his or her Deferral Election.

 

Section 2.8            Deferral Account.  “Deferral Account(s)” means the account(s) established for record keeping purposes for each Participant’s Deferral Election pursuant to Section 6.1.

 

2

 

Section 2.9            Disability.  The date of “Disability” of a Participant means that, the date on which the Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, eligible to receive income replacement benefits under the terms of the Abbott Laboratories Extended Disability Plan (“EDP”) or, for a Participant whose Employer does not participate in the EDP, such similar accident and health plan, providing income replacement benefits, in which his or her Employer participates, for a period of six months.

 

Section 2.10          Distribution Election.  “Distribution Election” is defined in Section 4.3(a).

 

Section 2.11          Distribution Election Form.  “Distribution Election Form” means the form provided to the Participant by the Plan pursuant to Section 4.3 on which the Participant specifies the time at which the amounts credited to one of the Participant’s Account(s) are to be distributed and their method of payment.

 

Section 2.12          Effective Date.  “Effective Date” is defined in Section 1.5.

 

Section 2.13          Eligibility Date.  “Eligibility Date” is defined in Section 3.1(b).

 

Section 2.14          Eligible Bonus.  “Eligible Bonus” means an annual cash incentive bonus for a Plan Year that the Plan Administrator, or its delegate, has designated as being eligible for deferral under the Plan.  As of the Effective Date, cash bonuses paid under the Abbott Laboratories Cash Profit Sharing Plan or any Employer’s annual incentive bonus plan with a performance period commencing on January 1 and ending on December 31 of the applicable Plan Year are eligible for deferral under the Plan.

 

Section 2.15          Eligible Compensation.  “Eligible Compensation” means the Participant’s Base Compensation and Eligible Bonuses.

 

Section 2.16          Eligible Employee.  “Eligible Employee” means any person employed by an Employer who is both

 

(i)            a United States employee or an expatriate who is based and paid in the United States, and

 

(ii)           shown as having a grade level of 20 (or equivalent level of compensation if on a different pay grade system) or higher on his or her Employer’s Human Resource System

 

and who is not (a) both an officer of the Company and eligible to participate in the Abbott Laboratories 401(k) Supplemental Plan, except as contemplated by Section 3.1 hereof for the Plan Year in which the person is first named an officer, (b) an individual who provides services to an Employer under a contract, arrangement or understanding with either the individual directly or with an agency or leasing organization that treats the individual as either an independent contractor or an employee of such agency or leasing organization, even if such individual is subsequently determined (by an Employer, the Internal Revenue Service, any other governmental agency, judicial action, or otherwise) to have been a common law employee of an 

 

3

 

Employer rather than an independent contractor or employee of such agency or leasing organization, or (c) any Employee who is employed by an Employer located in Puerto Rico, other than any person designated as a “U.S. Expatriate” on the records of an Employer.

 

For all Plan purposes, an individual shall be an “Eligible Employee” for any Plan Year only if during that Plan Year an Employer treats that individual as its employee for purposes of employment taxes and wage withholding for Federal income taxes, even if such individual is subsequently determined (by an Employer, the Internal Revenue Service, any other governmental agency, judicial action, or otherwise) to have been a common law employee of an Employer in that Plan Year.

 

Section 2.17          Employer.  “Employer” shall mean the Company, the participating Employers on the Effective Date, and any Subsidiary of the Company that subsequently adopts the Plan in the manner provided in Section 13.12.

 

Section 2.18          Employer Contribution.  “Employer Contribution” means the contribution deemed to have been made by an Employer pursuant to Section 5.1.

 

Section 2.19          Employer Contribution Account.  “Employer Contribution Account(s)” means the account(s) established for record keeping purposes for each Participant’s Employer Contributions pursuant to Section 6.1.

 

Section 2.20          Employer 401(k) Plan.  “Employer 401(k) Plan” means any defined contribution retirement plan that is maintained by an Employer, qualified under Code Section 401(a), and includes a cash or deferred arrangement under Code Section 401(k).  The term shall specifically include, but not be limited to, the Abbott Laboratories 401(k) Plan and the Abbott Laboratories Stock Retirement Plan.

 

Section 2.21          ERISA.  “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

Section 2.22          Hardship Distribution.  “Hardship Distribution” is defined in Section 8.5(a).

 

Section 2.23          In-Service Distribution.  “In-Service Distribution” is defined in Section 4.3.

 

Section 2.24          Initial Election.  “Initial Election” is defined in Section 4.3(a).

 

Section 2.25          Investment Election.  “Investment Election” is defined in Section 4.2(a).

 

Section 2.26          Investment Election Form.  “Investment Election Form” means the form provided to the Participant by the Plan pursuant to Section 4.2 on which the Participant specifies the Investment Funds in which the Participant’s Account(s) are to be deemed to be invested.

 

Section 2.27          Investment Fund(s).  “Investment Fund(s)” means one or more of the funds selected by the Plan Administrator pursuant to Section 4.2.

 

4

 

Section 2.28          Investment Fund Subaccounts.  “Investment Fund Subaccounts” is defined in Section 6.1(b).

 

Section 2.29          Matching DCP Deferral.  “Matching DCP Deferral” for a Participant for a Plan Year is an amount equal to the total dollar amount of the Participant’s deferrals for the Plan Year pursuant to Employee Deferral Elections under Section 4.1(b), but in no event shall a Participant’s Matching DCP Deferral for a Plan Year exceed the amount by which (a) the Participant’s Base Compensation for the Plan Year up to the limit on compensation as defined in Code Section 401(a)(17) exceeds (b) the Participant’s Base Compensation for the Plan Year less the total dollar amount deferred pursuant to Employee Deferral Elections under Section 4.1(b) for the Plan Year.

 

Section 2.30          Participant.  “Participant” means any Eligible Employee who elects to participate in this Plan by filing a Deferral Election, Investment Fund Election, and Distribution Election as provided in Article IV.

 

Section 2.31          Plan.  “Plan” means the Abbott Laboratories Deferred Compensation Plan.

 

Section 2.32          Plan Administrator.  “Plan Administrator” means the Board of Review.

 

Section 2.33          Plan Year.  “Plan Year” means a twelve-month period beginning January 1 and ending the following December 31.

 

Section 2.34          Rate of Return.  “Rate of Return” means, for each Investment Fund, an amount equal to the net gain or net loss (expressed as a percentage) on the assets of that Investment Fund.

 

Section 2.35          Retirement.  “Retirement” means a Termination of Employment after having satisfied the age and service requirements of Subsection (a) or (b) below, as applicable:

 

(a)           With respect to Participants covered by the Abbott Laboratories Annuity Retirement Plan:

 

(i)            for the Participant hired before 2004, the date on which the Participant attains age 50 and completes 10 years of “vesting service” (as such term is described in the Abbott Laboratories Annuity Retirement Plan); or

 

(ii)           for the Participant hired after 2003, the date on which the Participant attains age 55 and completes 10 years of vesting service; or age 65.

 

(b)           With respect to Participants covered by the Abbott Laboratories Pension Plan for Former BASF Employees, the date on which the Participant attains age 55 and completes 5 years of vesting service (as such term is described in the Abbott Laboratories Pension Plan for Former BASF Employees).

 

Section 2.36          Subsequent Election.  “Subsequent Election” is defined in Section 4.2(a).

 

5

 

Section 2.37          Subsidiary.  “Subsidiary” shall mean any corporation, limited liability company, partnership, joint venture, or business trust organized in the United States 50 percent or more of the voting stock of which is owned, directly or indirectly, by the Company.

 

Section 2.38          Termination of Employment.  “Termination of Employment” means the cessation of a Participant’s services as an employee, whether voluntary or involuntary, for any reason other than death; provided, that the Participant shall not be considered to have terminated employment for purposes of the Plan until he or she would be considered to have incurred a “separation from service” from the Employer within the meaning of Code Section 409A.

 

Section 2.39          Unforeseeable Emergency.  “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse or a dependent of the Participant, loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster), or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant as determined by the Plan Administrator.

 

ARTICLE III

 

Participation

 

Section 3.1            Participation.

 

(a)           Except as provided in Sections 3.1(b) and (c), an Eligible Employee may become a Participant by making a Deferral Election, Investment Fund Election, and Distribution Election pursuant to Article IV on or before the deadline set by the Plan Administrator pursuant to Section 4.4.

 

(b)           A newly hired individual who is an Eligible Employee shall become eligible to participate in the Plan on the first day of the month next following the month after the individual’s date of hire (the “Eligibility Date”); provided, that in no event shall such individual begin to participate in the plan later than 90 days following his or her date of hire.  Notwithstanding the election requirements of Section 3.1(a), a newly Eligible Employee who was not eligible to participate in any other plan that would be aggregated with the Plan under Treasury Regulation §1.409A-1(c) may make a Deferral Election, Investment Fund Election and Distribution Election pursuant to Article IV within the thirty (30) day period immediately following the Eligibility Date.  Any such election shall become effective for Eligible Compensation earned no earlier than the first payroll period commencing after receipt of the election by the Plan Administrator and shall be irrevocable for the remainder of the Plan Year.

 

(c)           An individual who becomes an Eligible Employee as a result of a job promotion or transfer may only make a Deferral Election, Investment Fund Election and Distribution Election pursuant to Article IV with respect to Eligible Compensation to be earned in the Plan Year next following the year of such promotion or transfer.  Any such election shall be made in accordance with Article IV and shall become effective for Eligible Compensation earned in the Plan Year following the year in which the election is made.

 

6

 

Section 3.2            Termination of Participation.  A Participant who ceases to be an Eligible Employee due to a Termination of Employment will remain a Participant but (i) may no longer make Deferral Elections with respect to any Plan Year following the year of such termination and (ii) all deferrals under the Plan shall cease as of the date of the Participant’s Termination of Employment.  A Participant who ceases to be an Eligible Employee due to a job promotion (or demotion) may no longer make Deferral Elections with respect to any Plan Year following the year of such promotion or demotion but the Participant’s Deferral Elections for the Plan Year in which such promotion or demotion occurs shall remain irrevocable.  A Participant shall remain a Participant until (i) his or her death or (ii) his or her Accounts have been distributed.

 

ARTICLE IV

 

Election Forms

 

Section 4.1            Deferral Elections.

 

(a)           Participants shall make their Deferral Elections annually on a form provided by the Plan Administrator (a “Deferral Election Form”). Each Deferral Election shall apply to only a single Plan Year.

 

(b)           On his or her Deferral Election Form, the Participant shall specify the amount (expressed as a percentage) of his or her Base Compensation and the amount (also expressed as a percentage) of his or her Eligible Bonuses that the Participant elects to defer for that Plan Year together with such other information as the Plan Administrator may, in its sole and absolute discretion, require.

 

(c)           For any Plan Year, a Participant may elect to defer:

 

(i)            between five percent (5%) and seventy-five percent (75%) of his or her Base Compensation (in whole percentage increments), and

 

(ii)           between five percent (5%) and one hundred percent (100%) of his or her Eligible Bonus (in whole percentage increments);

 

provided, however, that in no event may a Participant elect to defer his or her Eligible Compensation to the extent that his or her remaining compensation would be insufficient to satisfy all applicable withholding taxes and contributions required under Employer sponsored benefit plans in which the Participant participates.

 

(d)           A Participant may not revoke his or her Deferral Election at any time after the deadline for making such Deferral Election set by the Plan Administrator pursuant to Section 4.4.

 

Section 4.2            Investment Elections.  The Plan Administrator shall, from time to time, make available investment options (the “Investment Funds”) that serve as benchmark funds for the amounts a Participant defers under the Plan.  A Participant’s Plan deferrals shall not actually be invested in the Investment Funds and the Participant shall not be considered a shareholder of any of the Investment Funds he or she selects by virtue of participation in the Plan.  Instead, the Participant’s Plan deferrals shall be considered invested in, and his or her Plan Account shall 

 

7

 

reflect such Investment Fund’s Rate of Return. A Participant’s election of investments shall be subject to the following rules:

 

(a)           Participants shall make their investment elections on an Investment Election Form provided by the Plan Administrator (an “Investment Election”).

 

(b)           The Investment Election Form completed by the Participant shall apply only to the Eligible Compensation being deferred in a single Plan Year and shall specify the Investment Funds in which the deferrals for each such Plan Year are to be deemed to be invested, and the portion (expressed in whole percentage increments) of the deferrals for such Plan Year that are to be deemed to be invested in each such Investment Fund, and shall continue in effect until revoked or changed as permitted by the Plan Administrator.

 

Section 4.3            Distribution Elections.

 

(a)           Participants shall make their distribution elections in accordance with the Distribution Election Form provided by the Plan Administrator (a “Distribution Election”) as permitted or required by such form.  Each Distribution Election (the “Initial Election”) shall apply only to the Eligible Compensation being deferred in a single Plan Year and must be made by the deadline set by the Plan Administrator pursuant to Section 4.4, at which time the Initial Election shall be irrevocable, subject to Section 4.3(c).

 

(b)           On the Distribution Election Form:

 

(i)            Mandatory Retirement Election.  In all cases, the Participant shall select the method of payment from among the methods of payment described in Section 8.3(a) to apply in the event payment is made upon Retirement pursuant to this Distribution Election in accordance with Sections 8.3 or 8.4 or upon Disability in accordance with Section 8.7.

 

(ii)           Optional In-Service Distribution Election.  The Participant shall also have the option to elect that the Eligible Compensation being deferred for that Plan Year shall be paid to the Participant while he or she is still employed by an Employer (an “In-Service Distribution”).  If the Participant elects to receive an In-Service Distribution of the Eligible Compensation being deferred, then the Participant shall also select the year in which the payments are to be made.  A Participant may not elect to receive an In-Service Distribution in a Plan Year that is less than two (2) years after the end of the Plan Year in which the Eligible Compensation is earned.

 

(c)           Notwithstanding anything to the contrary in Section 4.3, a Participant may change the form of distribution or his or her Distribution Election (a “Subsequent Election”) to the extent permitted by the Plan Administrator and Code Section 409A(a)(4)(C), including the requirements that such Subsequent Election:

 

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(i)            shall not take effect until at least 12 months after the date on which the Subsequent Election is filed with the Plan Administrator;

 

(ii)           shall result in the first distribution subject to such Subsequent Election being made at least five years after the date such distribution would otherwise have been paid pursuant to the previous election; and

 

(iii)          shall be filed with the Plan Administrator at least 12 months before the date the first scheduled distribution is to be paid pursuant to the previous election.

 

Section 4.4            Deadline for Submitting Election Forms.  The Plan Administrator may set a deadline or deadlines for the receipt of the election forms required under the Plan; provided, however, that, except as provided in Section 3.1(b), such forms must be filed on or before the end of the year immediately preceding the Plan Year for which it is to be effective.

 

ARTICLE V

 

Employer Contributions

 

Section 5.1            Employer Contributions.  Each Participant who makes a Deferral Election will be credited with an Employer Contribution equal to 5% of the Participant’s Matching DCP Deferral.  The Plan Administrator may, however, in his or her discretion, otherwise set the amount of the Employer Contribution, subject to and not in excess of applicable limits imposed by the Internal Revenue Service.

 

Section 5.2            Allocation of Employer Contributions.  A Participant’s Employer Contribution for a Plan Year shall be allocated among the same Investment Funds and in the same proportion as the Participant has elected for his or her deferrals for that Plan Year.

 

Section 5.3            Distribution of Employer Contributions.  An Employer Contribution for a Plan Year shall be distributed to the Participant according to the election made by the Participant governing his or her deferrals for that same Plan Year.

 

ARTICLE VI

 

Maintenance and Crediting of Accounts

 

Section 6.1            Maintenance of Accounts.

 

(a)           The Plan shall maintain a separate Account for each Deferral Election (a “Deferral Account”) made by and each Employer Contribution (an “Employer Contribution Account”) made for a Participant.  A Participant’s Accounts shall reflect the Participant’s Investment Fund Elections and Distribution Elections made pursuant to Article IV, any Employer Contributions made on behalf of the Participant pursuant to Article V, adjustments to the Account made pursuant to this Article VI, and distributions made with respect to the Account pursuant to Article VIII.  The Accounts shall be used solely as a device for the 

 

9

 

measurement and determination of the amounts to be paid to the Participants pursuant to this Plan and shall not constitute or be treated as a trust fund of any kind.

 

(b)           Each Account shall be divided into separate subaccounts (“Investment Fund Subaccounts”), each of which corresponds to the Investment Fund selected by the Participant pursuant to Section 4.2(b).

 

Section 6.2            Crediting of Accounts.

 

(a)           No later than five (5) business days following the end of each pay period, the Plan shall credit each Participant’s Investment Fund Subaccounts to reflect amounts deferred from the Participant’s Eligible Compensation during that pay period and the Investment Fund Election made by the Participant with respect to that Eligible Compensation.

 

(b)           At the end of each Plan Year, the Plan shall credit each Participant’s Investment Fund Subaccounts to reflect any Employer Contribution deemed to have been made on behalf of the Participant for that Plan Year and the allocation of that contribution among the Investment Funds pursuant to Section 4.2.

 

(c)           The Plan Administrator shall adjust each Investment Fund Subaccount to reflect any transfers under the Plan to or from that Investment Fund Subaccount, as of the end of each business day to reflect any distributions under the Plan made with respect to that Investment Fund Subaccount, and the Rate of Return on the related Investment Fund.

 

Section 6.3            Statement of Accounts.  Each Participant shall be issued quarterly statements of his or her Account(s) in such form as the Plan Administrator deems desirable, setting forth the balance to the credit of such Participant in his or her Account(s) as of the end of the most recently completed quarter.

 

ARTICLE VII

 

Vesting and Forfeitures

 

Section 7.1            Deferral Accounts.  A Participant’s Deferral Accounts shall be one hundred percent (100%) vested and non-forfeitable at all times.

 

Section 7.2            Employer Contribution Account.

 

(a)           A Participant’s Employer Contribution Account shall become one hundred percent (100%) vested and non-forfeitable when the matching contributions made by the Participant’s Employer on behalf of the Participant under the Employer 401(k) Plan in which the Participant participates become one hundred percent (100%) vested and non-forfeitable.

 

(b)           If a Participant’s employment with the Employers terminates (whether voluntarily or involuntarily) before the matching contributions made by the Participant’s Employer on behalf of the Participant under the Employer 401(k) Plan in which the Participant participates become one hundred percent (100%) vested and non-forfeitable, then the Participant shall forfeit his or her related Employer Contribution Account.

 

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ARTICLE VIII

 

Distribution of Benefits

 

Section 8.1                                    Distribution of Benefits in the Event of a Termination of Employment.  If a Participant elects to receive his or her Plan benefits as an In-Service Distribution, then in the event of that Participant’s Termination of Employment (other than due to Retirement) prior to receiving that In-Service Distribution, the Company shall pay that Participant’s Plan benefits in a lump-sum to the Participant within 90 days following his or her Termination of Employment.  If a Participant elects to receive his or her Plan benefits upon Retirement, then in the event of that Participant’s Termination of Employment prior to the date the Participant attains eligibility for Retirement, the Company shall pay that Participant’s Plan benefits in a lump-sum to the Participant within 90 days following his or her Termination of Employment.

 

Section 8.2                                    In-Service Distributions.  Subject to the provisions of Section 8.6, the Company shall pay In-Service Distributions in a lump-sum to the Participant on the first business day in February of the year designated by the Participant on his or her Distribution Election Form.

 

Section 8.3                                    Distribution of Benefits in the Event of Retirement.

 

(a)                                 If, pursuant to Section 4.3, a Participant has elected to receive his or her Plan benefits for a Plan Year upon his or her Retirement, then the Company shall pay the Participant his or her Plan benefits commencing on the first business day in February next following the date of the Participant’s Retirement in any of the following forms pursuant to the Participant’s Initial Election or Subsequent Election, as applicable:

 

(i)                                     in substantially equal quarterly or annual installments to the Participant over fifteen (15) years; or

 

(ii)                                  in substantially equal quarterly or annual installments to the Participant over ten (10) years; or

 

(iii)                               in substantially equal quarterly or annual installments to the Participant over five (5) years; or

 

(iv)                              in a lump-sum; or

 

(v)                                 if no such election is on file with the Plan Administrator, in substantially equal quarterly installments to the Participant over ten (10) years.

 

Quarterly installments shall be paid on the first business day of each calendar quarter and annual installments shall be paid on the first business day of each calendar year.

 

(b)                                 Notwithstanding the foregoing, if the total sum of (i) a Participant’s Deferral Accounts (as adjusted for amounts accrued but not yet credited) in this Plan and (ii) deferrals of compensation under any other agreement, method, program or arrangement which must be aggregated with this Plan under Treasury Regulations section 1.409A-1(c)(2), is less than the applicable dollar amount under Code Section 402(g)(1)(B) in effect for the Plan Year in which such date occurs ($17,500 for the 2014 Plan Year), the balance of such Participant’s Deferral Accounts in this Plan shall be paid in a single lump sum as soon as administratively practicable following such date. Payment shall terminate and liquidate the Participant’s interest in the Plan and any other aggregated agreement, method, program or arrangement.

 

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Section 8.4                                    Distribution of Benefits on the Earlier to Occur of a Participant’s Retirement or a Specified Date.

 

If a Participant has elected to receive his or her Plan benefits on a specified date pursuant to Section 4.3(b)(ii), if the Participant’s Retirement occurs prior to such specified date,

 

(a)                                 For amounts deferred with respect to Plan Years beginning prior to January 1, 2008, the Company shall pay the Participant his or her Plan benefits in a lump sum on the first business day in February next following the Participant’s Retirement; and

 

(b)                                 For amounts deferred with respect to Plan Years beginning on or after January 1, 2008, the Company shall pay the Participant his or her Plan benefits in accordance with Section 8.3(a), subject to Section 8.3(b).

 

Section 8.5                                    Distributions Due to Unforeseeable Emergency.

 

(a)                                 A Participant may receive the early payment of all or part of the balance in his or her Account(s) in the event of an Unforeseeable Emergency (a “Hardship Distribution”) subject to the following restrictions:

 

(i)                                     The Participant has requested the Hardship Distribution from the Plan Administrator on a form provided by or in the format requested by the Plan Administrator;

 

(ii)                                  The Plan Administrator has determined that an Unforeseeable Emergency has occurred;

 

(iii)                               The Plan Administrator determines the amount of the Hardship Distribution, which amount will be limited to the amount reasonably necessary to satisfy the emergency need (including any amounts necessary to pay any Federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the Hardship Distribution); and

 

(iv)                              The Hardship Distribution shall be distributed in a lump-sum within 30 days following determination by the Plan Administrator of the amount of the Hardship Distribution.

 

(b)                                 The circumstances that would constitute a Unforeseeable Emergency will depend on the facts and circumstances of each case, but, in any case, a Hardship Distribution may not be made to the extent that such hardship may be relieved through (i) reimbursement or compensation by insurance or otherwise, (ii) liquidation of the Participant’s assets, to the extent that liquidation of the Participant’s assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under this Plan in compliance with Code Section 409A.

 

Section 8.6                                    Distribution of Benefits in the Event of Death.  In the event of a Participant’s death prior to the complete distribution of his or her Accounts, the Company shall

 

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distribute his or her total Plan benefits to his or her Beneficiary in a lump sum within 90 days after the date of the Participant’s death.

 

Section 8.7                                    Distribution of Benefits in the Event of Disability.

 

In the event of a Participant’s Disability, the Company shall pay the Participant his or her Plan benefits commencing on the first business day in February next following the date of the Participant’s Disability in the form set forth below:

 

(a)                                 For any Participant who has elected to receive his or her Plan benefits upon Retirement, pursuant to the Participant’s Distribution Election to receive his or her Plan benefits in one of the Retirement forms permitted under Section 8.3(a), subject to Section 8.3(b).

 

(b)                                 For a Participant who has elected to receive his or her Plan benefits as an In-Service Distribution, if the Participant’s Disability occurs prior to the date specified in such Distribution Election:

 

(i)                                     For amounts deferred with respect to Plan Years beginning on or subsequent to January 1, 2008, pursuant to the Participant’s Distribution Election to receive his or her Plan benefits in one of the Retirement forms permitted under Section 8.3(a), subject to Section 8.3(b).

 

(ii)                                  For amounts deferred with respect to all Plan Years beginning prior to January 1, 2008, pursuant to the Participant’s Distribution Election to receive his or her Plan benefits in a lump sum under Section 4.3(b)(ii).

 

Section 8.8                                    Postponing or Amending Distributions.  A Participant may postpone a scheduled distribution or amend the form of distribution specified in Section 8.2,  Section 8.3(a) or Section 8.4 only by making a Subsequent Election pursuant to the terms of Section 4.3(c).

 

Section 8.9                                    Distribution of Benefits Pursuant to a Domestic Relations Order. The Company shall pay all or a portion of a Participant’s Plan benefits in a lump sum to any person other than the Participant pursuant to the terms of a domestic relations order. For this purpose, a domestic relations order means a judgment, decree or order (including approval of a property settlement agreement) which relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of the Participant and which is made pursuant to a state domestic relations law (including a community property law).

 

ARTICLE IX

 

Beneficiary Designation

 

Section 9.1                                    Beneficiary Designation.  Each Participant shall have the right, at any time, to designate any person, persons or entity as his or her Beneficiary or Beneficiaries. A Beneficiary designation shall be made, and may be amended, by the Participant by filing a designation with the Plan Administrator, on such form and in accordance with such procedures as the Plan Administrator may establish from time to time.

 

Section 9.2                                    Failure to Designate a Beneficiary.  If a Participant or Beneficiary fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or his or her Beneficiary, then the Participant’s Beneficiary shall be deemed to be, in the following order:

 

(i)                                     to the spouse of such person, if any; or

 

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(ii)                                  to the deceased person’s estate.

 

Section 9.3                                    Facility of Payment.  When, in the Plan Administrator’s opinion, a Participant or Beneficiary is under a legal disability or is incapacitated in any way so as to be unable to manage his or her financial affairs, the Plan Administrator may make any benefit payments to the Participant or Beneficiary’s legal representative, or spouse, or the Plan Administrator may apply the payment for the benefit of the Participant or Beneficiary in any way the Plan Administrator considers advisable, in each case, without subjecting the Participant or Beneficiary to accelerated taxation and/or tax penalties under Code Section 409A.

 

ARTICLE X

 

Administration of Plan

 

Section 10.1                             Plan Administrator.  The Board of Review, or such person as the Board of Review shall designate pursuant to Section 10.3,  shall serve as the Plan Administrator of the Plan. The administration of the Plan shall be under the supervision of the Plan Administrator. It shall be a principal duty of the Plan Administrator to see that the Plan is carried out, in accordance with its terms, for the exclusive benefit of persons entitled to participate in the Plan without discrimination  among them. Benefits under the Plan shall be paid only if the Plan Administrator decides, in his or her discretion, that the applicant is entitled to them. The Plan Administrator will have full power to administer the Plan in all of its details, subject to applicable requirements of law. For this purpose, the Plan Administrator’s powers will include but will not be limited to, the following authority, in addition to all other powers provided by this Plan:

 

(i)                                     To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the establishment of any claims procedures that may be required by applicable provisions of law;

 

(ii)                                  To exercise discretion in interpreting the Plan, any interpretation to be reviewed under the arbitrary and capricious standard;

 

(iii)                               To exercise discretion in deciding all questions concerning the Plan and the eligibility of any person to participate in the Plan; such decision to be reviewed under the arbitrary and capricious standard;

 

(iv)                              To appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan;

 

(v)                                 To allocate and delegate its responsibilities under the Plan and to designate other persons to carry out any of its responsibilities under the Plan, any such allocations, delegation or designation to be in writing;

 

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(vi)                              To determine the amount and type of benefits to which any Participant or Beneficiary shall be entitled hereunder, including the method and date for all valuations under the Plan;

 

(vii)                           To receive from the Employers and from Participants such information as shall be necessary for the proper administration of the Plan or any of its programs;

 

(viii)                        To maintain or cause to be maintained all the necessary records for the administration of the Plan;

 

(ix)                              To receive, review and keep on file (as it deems convenient and proper) reports of benefit payments made by the Plan;

 

(x)                                 To determine and allocate among the Employers the liability to the Company associated with Plan benefits in accordance with Section 1.3 and to determine the time at which and manner in which that liability shall be paid to the Company;

 

(xi)                              To make, or cause to be made, equitable adjustments for any mistakes or errors made in the administration of the Plan; and

 

(xii)                           To do all other acts which the Plan Administrator deems necessary or proper to accomplish and implement its responsibilities under the Plan.

 

Section 10.2                             Reliance on Tables, etc.  In administering the Plan, the Plan Administrator will be entitled to the extent permitted by law to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by, or in accordance with the instructions of accountants, counsel, or other experts employed or engaged by the Plan Administrator.

 

Section 10.3                             Delegation.  The Board of Review shall have the authority to appoint another corporation or one or more other persons to serve as the Plan Administrator hereunder, in which event such corporation or person (or persons) shall exercise all of the powers, duties, responsibilities, and obligations of the Plan Administrator hereunder.

 

Section 10.4                             Operations.  The day to day operation of the Plan will be handled by the person or persons designated by the Plan Administrator.

 

Section 10.5                             Uniform Rules.  The Plan Administrator shall administer the Plan on a reasonable and nondiscriminatory basis and shall apply uniform rules to all similarly situated Participants.

 

Section 10.6                             Plan Administrator’s Decisions Final.  Any interpretation of the provisions of the Plan (including but not limited to the provisions of any of its Programs) and any decision on any matter within the discretion of the Plan Administrator made by the Plan Administrator in good faith shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known and the Plan Administrator shall make such adjustment on 

 

15

 

account thereof as it considers equitable and practicable. Neither the Plan Administrator nor any Employer shall be liable in any manner for any determination of fact made in good faith.

 

ARTICLE XI

 

Claims for Benefits

 

Section 11.1                             Claims and Review Procedures.  The Plan Administrator shall adopt procedures for the filing and review of claims in accordance with Section 503 of ERISA.

 

ARTICLE XII

 

Amendment and Termination of Plan

 

Section 12.1                             Amendment.  The Company may amend this Plan, in whole or in part, at any time provided, however, that no amendment shall be effective to decrease the balance in any Account as accrued at the time of such amendment. Any amendment which would allow officers of the Company to participate in the Plan shall require the approval of the Abbott Laboratories Board of Directors. Any amendment which increases the total cost of the Plan to the Employers in excess of $250,000 in each of the three full calendar years next following the date of the amendment shall be approved by the Board of Review.  The Executive Vice President, Human Resources of the Company shall approve all other amendments to the Plan and the extension of the Plan to any division or Subsidiary of the Company.

 

Section 12.2                          Termination.  The Board of Review may at any time terminate the Plan with respect to future Deferral Elections.  The Board of Review may also terminate and liquidate the Plan in its entirety; provided that such termination and liquidation are consistent with the provisions of Code Section 409A.  Upon any such termination, the Company shall pay to the Participant the benefits the Participant is entitled to receive under the Plan, determined as of the termination date, in compliance with Code Section 409A.

 

ARTICLE XIII

 

Miscellaneous

 

Section 13.1                             Unfunded Plan.  This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201, 301 and 401 of ERISA and therefore meant to be exempt from Parts 2, 3 and 4 of Title I of ERISA.  All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan.

 

Section 13.2                             Nonassignability.  Except as specifically set forth in the Plan with respect to the designation of Beneficiaries, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or 

 

16

 

any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

 

Section 13.3                             Validity and Severability.  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, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 13.4                             Governing Law.  The validity, interpretation, construction and performance of this Plan shall in all respects be governed by the laws of the State of Illinois, without reference to principles of conflict of law, except to the extent preempted by federal law.

 

Section 13.5                             Employment Status.  This Plan does not constitute a contract of employment or impose on the Participant or the Company any obligation for the Participant to remain an employee of the Company or change the status of the Participant’s employment or the policies of the Company and its affiliates regarding termination of employment.

 

Section 13.6                             Underlying Incentive Plans and Programs.  Nothing in this Plan shall prevent the Company from modifying, amending or terminating the compensation or the incentive plans and programs pursuant to which Eligible Bonuses or Eligible Compensation are earned and which are deferred under this Plan.

 

Section 13.7                             Successors of the Company.  The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.

 

Section 13.8                             Waiver of Breach.  The waiver by the Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

 

Section 13.9                             Notice.  Any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of the Company, directed to the attention of the Plan Administrator. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.

 

Section 13.10                      Waiver of Notice. Any notice required under the Plan may be waived by the person entitled to such notice.

 

Section 13.11                      Evidence.  Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

 

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Section 13.12                      Additional Employers. Subject to the consent of the Board of Review, any Subsidiary of the Company may adopt the Plan by filing a written instrument to that effect with the Company.

 

Section 13.13                      Separation and Distribution Agreement of 2004.  The provisions of this Section 13.13 shall apply to an Eligible Employee who is a Participant in the Plan and who transfers from employment with the Company or an Employer to Hospira, Inc. or to a subsidiary of Hospira, Inc. (collectively, the “Hospira Companies”) as a result of the transactions contemplated by that certain Separation and Distribution Agreement by and between Abbott Laboratories and Hospira, Inc., dated as of April 12, 2004 (the “Distribution Agreement”), and such transfer of employment is made in accordance with and subject to the terms of the Employee Benefits Agreement as described in the Distribution Agreement (each such transferred Participant referred to herein as a “Transferred Hospira Participant”).

 

(a)                                 A Transferred Hospira Participant’s transfer of employment to the Hospira Companies will not be considered as a termination of employment as a result of Termination of Employment, Retirement or Disability for purposes of determining eligibility for distributions under Article VII of the Plan.  Such Transferred Hospira Participant’s termination of employment resulting from Termination of Employment, Retirement or Disability shall occur only upon his or her subsequent termination of employment from the Hospira Companies (and Termination of Employment, Retirement and Disability with respect to such Transferred Hospira Participants shall mean such events in relation to the Hospira Companies rather than in relation to the Company and the Employers);

 

(b)                                 Following his or her transfer to employment with the Hospira Companies, a Transferred Hospira Participant will remain a participant but will not be eligible to make Deferral Elections.  A Transferred Hospira Participant shall remain a Participant until (i) his or her death or (ii) his or her Accounts have been distributed in accordance with the Plan and in accordance with the Transferred Hospira Participant’s elections regarding the manner of distribution of such Accounts.

 

Section 13.14                      Section 409A.  To the extent applicable, it is intended that the Plan comply with the provisions of Code Section 409A.  The Plan will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Plan to fail to satisfy Code Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Code Section 409A).  Notwithstanding anything contained herein to the contrary, to the extent required to avoid accelerated taxation and/or tax penalties under Code Section 409A and applicable guidance issued thereunder, amounts that would otherwise be payable pursuant to the Plan  during the six-month period immediately following the Participant’s Termination of Employment or Retirement shall instead be paid on the first business day after the date that is six months following the Participant’s Termination of Employment or Retirement (or upon the Participant’s death, if earlier), plus, to the extent subject to a six-month delay, a return equal to the Rate of Return that would be achieved if such amounts were invested in accordance with the Participant’s Investment Elections under Section 4.2 from the respective dates on which such amounts would otherwise have been paid until the actual date of payment.

 

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SUPPLEMENT B

 

TRANSFER OF LIABILITIES FROM THE

ABBOTT DEFERRED COMPENSATION PLAN FOR FORMER EMPLOYEES OF SOLVAY

 

B-1.                         Purpose and Effect.  The purpose of this Supplement B is to provide for the transfer of liabilities from the Abbott Deferred Compensation Plan for Former Employees of Solvay, as it may be amended (the “Solvay DCP”), to this Plan with respect to certain Abbott Retained Employees and Abbott LTD Participants as set forth in the EMA (the “Solvay DCP Participants”).  The Solvay DCP is not open to new contributions, so the purpose of this Supplement B is to facilitate the administration of any Abbott Retained Employee and Abbott LTD Participant accounts that are transferred into the Plan (the “Deferred Compensation Accounts”) from the Solvay DCP until such time as they are fully distributed.  Except as specifically provided in this Supplement B to document certain benefits, rights and features of the Solvay DCP Plan, the Plan terms shall apply to the Deferred Compensation Accounts.

 

B-2.                         Transfer of Liabilities from Solvay DCP.  As soon as practicable on or after January 1, 2013, and subject to such terms and conditions as the Plan Administrator may establish, all liabilities attributable to the Solvay DCP Participants shall be transferred from the Solvay DCP to this Plan.  The Plan shall credit each such Solvay DCP Participant’s account with (a) the amount deferred by such individual into the Solvay DCP as of the applicable transfer date, plus (b) any employer contributions, whether vested or unvested, deemed to have been made in relation to the amount described in (a), including, in each case, any earnings thereon.

 

B-3.                         Distribution Elections.  Distribution elections made under the Solvay DCP with respect to transferred amounts described in Section B-2 above shall be recognized, implemented and honored by the Plan and such amounts shall be distributable to the applicable Solvay DCP Participant in accordance with such elections.  Elections with respect to amounts deferred under this Plan on or after January 1, 2013 shall be in accordance with Article IV and other applicable provisions of this Plan.

 

B-4.                         Earnings Equivalents.  Earnings equivalents shall be credited to each Deferred Compensation Account on the basis determined by the Plan Administrator from time to time.  A Solvay DCP Participant’s election for the deemed investment of the amounts in his or her Deferred Compensation Account shall be made in accordance with such rules and procedures as the Plan Administrator may adopt from time to time.

 

B-5.                         Vesting and Forfeiture.

 

(a)                                 A Solvay DCP Participant’s right to future payment of his or her Deferred Compensation Account attributable to deferral contributions, together with the earnings equivalents thereon, shall always be 100% vested and nonforfeitable.  Subject to paragraph (b) below, a Solvay DCP Participant’s right to future payment of his or her Deferred Compensation Account attributable to employer contributions, together with the earnings equivalents thereon, shall be vested and nonforfeitable based on his or her service with Abbott Laboratories.

 

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(b)                                 If a Solvay DCP Participant is terminated for cause, including but not limited to conviction of a felony, acts involving moral turpitude, offensive personal conduct, dishonesty, disloyalty, disorderly conduct, vandalism, violation of the rules of the Company, revealing trade secrets, insubordination, interference with production, or any other act or course of action deemed detrimental to the Company by the Plan Administrator, then the only amount which the Solvay DCP Participant will receive will be that amount attributable to his or her deferral contributions and the earnings equivalents attributable thereto. This amount, valued as of the most recent valuation date administratively practicable before the distribution, will be distributed in accordance with the provisions of the Plan.  The balance of his or her Deferred Compensation Account will be forfeited concurrent with the distribution.

 

B-6.                      Distributions.

 

(a)                                 Unless otherwise provided in the Plan or in paragraph (b) below, in the event that a Solvay DCP Participant has a Termination of Employment, he or she shall receive, in the form of a lump sum distribution 75 days after the date of Termination of Employment, an amount equal to the value of his or her vested Deferred Compensation Account as of the most recent valuation date administratively practicable before the distribution. Notwithstanding the foregoing, but subject to the Plan terms and paragraph (b) below, the Solvay DCP Participant may elect to receive the value of his or her vested Deferred Compensation Account in any one of the following alternative forms:

 

(1)                                 a lump sum distribution 75 days after the date of Termination of Employment or, if later, January 1 of the calendar year following the calendar year in which he or she has a Termination of Employment;

 

(2)                                 annual installments over a five year period beginning 75 days after the date of Termination of Employment; or

 

(3)                                 annual installments over a ten year period beginning 75 days after the date of Termination of Employment.

 

Any election (or any change or revocation of an election) shall not be effective unless it is accepted by the Plan Administrator at least 12 months prior to the date of Termination of Employment and results in a further deferral of payment (or the commencement of payment) of the Solvay DCP Participant’s Deferred Compensation Account of at least five years (unless payment is on account of death).  In the event the value of a Deferred Compensation Account is not distributed in a lump sum within 75 days after a Solvay DCP Participant’s Termination of Employment, the amounts credited to such Deferred Compensation Account shall continue to be credited for earnings equivalents in accordance with Section B-4 until the latest valuation date administratively practicable before such amounts are distributed;

 

(b)                                 In the event that there is a change of control of the Company, as defined under Code Section 409A, then each Solvay DCP Participant shall receive, in the form of a lump sum distribution made 75 days after the change of control occurs, an amount equal to the value of his or her vested Deferred Compensation Account as of the most recent valuation date administratively practicable before distribution.  Notwithstanding the foregoing, accelerated 

 

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distributions under this paragraph (b) shall be limited to the extent necessary to prevent the Solvay DCP Participant from receiving any “excess parachute payment” as described in Code Section 280 or any successor section thereto, provided that the determination of what shall constitute an “excess parachute payment” shall be made by the Plan Administrator, and provided further that such limitation may be applied by the Plan Administrator only if and to the extent such limitation of acceleration does not cause a violation of Code Section 409A.  In the event that a portion of the benefit otherwise payable under this paragraph (b) may not be accelerated pursuant to the limitations of the immediately preceding sentence, the payments which would be due latest in time shall be accelerated first, to the extent required to comply with Code Section 409A.

 

B-7.                         Use of Terms.  Terms used in this Supplement B have the meanings of those terms as set forth in the Plan, unless they are defined in this Supplement B.  All of the terms and provisions of the Plan shall apply to this Supplement B except that where the terms of the Plan and this Supplement B conflict, the terms of this Supplement B shall govern.

 

1.                                      The Plan shall otherwise remain unchanged and in full force and effect.

 

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