Document:

mcft-ex1010_294.htm

 

Exhibit 10.10

EXECUTION VERSION 

 

 

Employment Agreement

 

This Employment Agreement (the “Agreement”), effective as of October 1st, 2018 (the “Effective Date”), is made and entered into by and between Patrick May (the “Executive”) and Crest Marine, LLC, a Michigan limited liability company whose principal place of business is located at 2710 South M-52, Owosso, MI 48867 (the “Company”).  Together the Executive and the Company shall be referred to as the “Parties.” 

 

RECITALS

 

A. The Company desires to assure itself of the services of the Executive by engaging the Executive to perform services under the terms hereof. 

 

B. The Executive desires to provide services to the Company on the terms herein provided. 

 

C. The Parties entered into an Employment Agreement, effective as of April 13, 2010, and the Parties now desire to enter into this Agreement which terminates and supersedes the April 13, 2010 Employment Agreement and any other prior agreements related to Executive’s employment with Company in their entirety. 

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth in this Agreement, the Parties hereto agree as follows: 

 

1. Certain Definitions. 

 

(a) “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. 

 

(b) “Agreement” shall have the meaning set forth in the preamble hereto. 

 

(c) “Annual Base Salary” shall have the meaning set forth in Section 3(a). 

 

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(d) “Cause” shall mean: (i) the Executive’s material failure to substantially perform the duties set forth herein (other than any such failure resulting from the Executive’s Disability); (ii) the Executive’s material failure to carry out, or comply with, in any material respect any lawful directive of the CEO; (iii) the Executive’s conviction, plea of no contest, or plea of nolo contendere for any felony involving moral turpitude; (iv) the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing the Executive’s duties and responsibilities hereunder; (v) the Executive’s commission of any act of fraud, embezzlement, misappropriation, conversion of assets of the Company, or breach of fiduciary duty against the Company (or any or successor thereof); or (vi) the Executive’s material breach of this Agreement or other agreements with the Company (including, without limitation, any breach of the restrictive covenants of any such agreement); and which, in the case of clauses (i), (ii) and (vi), continues beyond thirty (30) days after the Company has provided the Executive written notice of such failure or breach (to the extent that, in the reasonable judgment of the Company, such failure or breach can be cured by the Executive).  Whether or not an event giving rise to “Cause” occurs will be determined by the Company in its sole discretion.  

 

(e) “Code” shall mean the Internal Revenue Code of 1986, as amended. 

 

(f) “Company” shall, except as otherwise provided in Section 6(l), have the meaning set forth in the preamble hereto. 

 

(g) “Company Employee” shall have the meaning set forth in Section 6(b). 

 

(h) “Competitive Product” shall have the meaning set forth in Section 6(a). 

 

(i) “Date of Termination” shall mean (i) if the Executive’s employment is terminated due to the Executive’s death, the date of the Executive’s death; (ii) if the Executive’s employment is terminated due to the Executive’s Disability, the date determined pursuant to Section 4(a)(ii); and (iii) if the Executive’s employment is terminated pursuant to Sections 4(a)(iii)-(v), the date indicated in the Notice of Termination. 

 

(j) “Disability” shall mean the Executive’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that can be expected to last for a continuous period of not less than six (6) months. 

 

(k) “Effective Date” shall have the meaning set forth in the preamble hereto. 

 

(l) “Executive” shall have the meaning set forth in the preamble hereto. 

 

(m) “Good Reason” shall mean, without the Executive’s written consent, (i) a material and adverse change in Executive’s responsibilities, duties, or reporting relationship, (ii) a  material reduction in the Annual Base Salary, or (iii) a change in control transaction, defined as (A) any transaction or series of related transactions to which the Company is a party in which an excess of fifty percent (50%) of the Company’s voting power or equity interests are transferred; or (B) a sale, lease, transfer or other disposition of all or substantially all of the assets of the Company and its subsidiaries taken as a whole, in a single transaction or series of related transactions, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly-owned subsidiary of the Company. 

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(n) “Installment Payments” shall have the meaning set forth in Section 5(b)(iii). 

 

(o) “LTIP” shall mean any Long-Term Incentive Plan as may be adopted by the Board of Directors of MCBC Holdings, Inc. (the “Board”) from time to time to provide appropriate incentive compensation to the Company’s executives based upon performance targets established by the Board (or the Compensation Committee thereof). 

 

(p) “Notice of Termination” shall have the meaning set forth in Section 4(a)(iii). 

 

(q) “Person” shall mean any individual, natural person, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), incorporated or unincorporated association, governmental authority, firm, society or other enterprise, organization or other entity of any nature. 

 

(r) “Proprietary Information” shall have the meaning set forth in Section 6(f). 

 

(s) “Restricted Period” shall mean the twelve (12) month period immediately following the termination of the Executive’s employment for any reason. 

 

(t) “Section 409A” shall mean Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. 

 

(u) “Severance Pay” shall have the meaning set forth in Section 5(a)(ii). 

 

(v) “Severance Period” shall have the meaning set forth in Section 5(a)(ii). 

 

(w) “Solicit” shall have the meaning set forth in Section 6(b). 

 

(x) “STIP” shall mean any Short-Term Incentive Plan as may be adopted by the Board from time to time to provide appropriate incentive compensation to the Company’s executives based upon annual performance targets established by the Board (or the Compensation Committee thereof). 

 

(y) “STIP Bonus” shall have the meaning set forth in Section 3(b). 

 

(z) “Term” shall have the meaning set forth in Section 2(b). 

 

2. Employment.

 

(a) In General.  The Company shall employ the Executive, and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided. 

 

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(b) Term of Employment.  Subject to the terms of Sections 4 and 5, the Executive’s employment shall begin on the Effective Date and shall continue for one (1) year from the Effective Date, unless earlier terminated pursuant to Section 4 (the “Term”).  Notwithstanding the foregoing, neither the expiration of the Term nor the termination of the Executive’s employment prior to the end of the Term pursuant to Section 4, shall in any way diminish the Executive’s post-employment obligations set forth in Sections 6 and 7. The Executive understands and agrees that, neither his job performance nor promotions, commendations, bonuses or the like from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication or otherwise, of his employment with the Company. 

 

(c) Position and Duties.  During the Term, the Executive: (i) shall serve as the Chief Operating Officer of the Company with responsibilities, duties and authority customary for such position, subject to direction by of the Chief Executive Officer (the “CEO”); (ii) until such time as Company appoints a CEO, shall serve as Interim CEO, with responsibilities, duties, and authority customary for such position, reporting to such person as the Company may designate from time to time; (iii) shall devote substantially all the Executive’s working time and efforts to the business and affairs of the Company and its subsidiaries and affiliates; (iv) agrees to observe and comply with the Company’s lawful rules and policies as adopted by the Company from time to time; and (v) agrees that his duties, responsibilities and authorities may include services for one or more subsidiaries and affiliates of MCBC Holdings, Inc.  

 

(d) Work Location.  During the Term, the primary place for performance of the Executive’s duties and responsibilities shall be the Company’s headquarters in Owosso, Michigan.  The Executive further acknowledges that his position may require business travel from time to time. 

 

3. Compensation and Related Matters.

 

(a) Annual Base Salary.  During the Term, the Executive shall receive a base salary at an annual rate of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) per annum (the “Annual Base Salary”).  The Annual Base Salary shall be paid in accordance with the customary payroll practices of the Company and shall be reduced by any mandatory federal or state withholdings.  

 

(b) Short-Term Incentive Plan.  Beginning on June 30, 2019, the Executive shall be eligible to receive a cash bonus of sixty percent (60%) of the Annual Base Salary (the “STIP Bonus”) in accordance with the terms of the STIP adopted by the Board, from time to time, based upon annual performance targets established by the Board (or the Compensation Committee thereof) in connection with the STIP.  The STIP Bonus shall be payable on such date as is determined by the Board (or the Compensation Committee thereof) in its sole discretion.  The Board shall have the authority to adopt, modify or change the terms of any STIP from time to time in the Board’s sole discretion. 

 

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(c) Long-Term Incentive Plan.  During the Term, the Executive shall be eligible to participate in any LTIP as may be adopted by the Board, from time to time, based upon performance targets established by the Board (or the Compensation Committee thereof) in connection with the LTIP at a rate of sixty percent (60%) of the Annual Base Salary.  The vesting and granting of any form of equity (including, without limitation, shares of stock, performance shares, restricted shares, and/or options to acquire shares of stock) shall be in accordance with the terms of the LTIP as determined by the Board (or the Compensation Committee thereof) in its sole discretion.  The Board shall have the authority to adopt, modify, or change the terms of any LTIP from time to time in the Board’s sole discretion. 

 

(d) Use of Company Watercraft.  During the Term, the Executive will be eligible for use of an executive boat, pursuant to the terms of the Company’s Executive Boat program. 

 

(e) Benefits.  During the Term, the Executive shall be eligible to participate in employee benefit plans, programs and arrangements of the Company, as in effect from time to time, including without limitation, health care, dental, vision, prescription, flexible spending, short-term and long-term disability, life insurance and 401(k) plans, programs and arrangements.  The Company reserves the right to modify, amend, or terminate any particular employee benefit plan, program, or arrangement in its sole discretion, except for those benefits that are vested pursuant to the specific terms and conditions of the benefit plan, program, or arrangement. 

 

(f) Vacation.  From the Effective Date until December 31, 2018, the Executive shall be eligible to take up to three (3) weeks (fifteen (15) workdays) of paid vacation (the “Vacation”) provided that the Executive will take such Vacation in maximum increments of one (1) week (five (5) workday) increments (the “2018 Vacation”).  The 2018 Vacation must be used by December 31, 2018, and any part of the 2018 Vacation that is unused on December 31, 2018 is forfeited.  From January 1, 2019, to the last day of the Term, the Executive shall be eligible to take up to five (5) weeks (twenty-five (25) workdays) Vacation (the “2019 Vacation”).  

 

(g) Business Expenses.  During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures. 

 

4. Termination of Employment.

 

(a) Termination During the Term.  During the Term, the Executive’s employment hereunder may be terminated by the Company or the Executive, as follows: 

 

(i) Death. The Executive’s employment hereunder shall terminate immediately upon the Executive’s death. 

 

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(ii) Disability. If the Executive incurs a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s employment.  In that event, the Executive’s employment with the Company shall terminate, effective on the later of the thirtieth (30th) day after receipt of such notice by the Executive or the date specified in such notice; provided that within the thirty (30)-day period following receipt of such notice, the Executive shall not have returned to full-time performance of the Executive’s duties hereunder. 

 

(iii) Termination for Cause.  The Company may terminate the Executive’s employment immediately for Cause upon giving Executive written notice of termination (the “Notice of Termination”). The Notice of Termination shall set forth in reasonable detail the facts and circumstances which constitute Cause claimed to provide a basis for termination of the Executive’s employment. The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company hereunder or preclude the Company from asserting such fact or circumstance in enforcing the Company’s rights hereunder. 

 

(iv) Resignation for Good Reason.  The Executive may terminate his employment immediately for Good Reason upon giving the Company written Notice of Termination within sixty (60) days of the occurrence of the event which constitutes “Good Reason” as defined in Section 1(m).  The Notice of Termination shall set forth in reasonable detail the facts and circumstances which constitute Good Reason claimed to provide a basis for the Executive’s resignation.  

 

(v) Termination Without Cause or Resignation Without Good Reason.  Either the Company or the Executive may terminate the Executive’s employment for any reason upon giving the other written Notice of Termination at least thirty (30) days prior to the Date of Termination specified in the Notice of Termination (the “Notice Period”). Notwithstanding the foregoing, if the Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, terminate the Executive’s employment at any time after receiving the Notice of Termination provided that the Company pays the Executive the Annual Base Salary through the last day of the Notice Period. 

 

5. Company Obligations Upon Termination of Employment.  During the Term of this Agreement, the Company shall have the following obligations upon the termination of the Executive’s employment with the Company as described in this Section 5:  

 

(a) Termination During the Term.

 

(i) If Executive’s employment is terminated during the Term pursuant to Sections 4(a)(i) (Death), 4(a)(ii) (Disability), or 4(a)(iii) (for Cause), or if Executive terminates his employment pursuant to Section 4(a)(v) (Resignation Without Good Reason), the Company agrees to pay the Executive (or the Executive’s estate): (i) a prorated portion of the Annual Base Salary through the Date of Termination and (ii) any preapproved expenses incurred by the Executive prior to the date of termination in accordance with Section 3(g) (the “Accrued Obligations”). Executive shall not be eligible for any other payments or benefits (such as the Severance Pay or any part of the STIP) other than any vested interest under the LTIP in accordance with the terms of the LTIP as determined by the Board (or the Compensation Committee thereof) in its sole discretion. The Board shall have the authority to adopt, modify or change the terms of any LTIP from time to time, in the Board’s sole discretion. 

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(ii) If Company terminates Executive’s employment during the Term pursuant to Section 4(a)(v) (Without Cause), Company agrees to pay the Executive (i) a prorated portion of the Annual Base Salary for the duration of the Notice Period, (ii) all accrued, unused Vacation, and (iii) any preapproved expenses incurred by the Executive prior to the Date of Termination in accordance with Section 3(g).  In addition to the foregoing, and subject to Section 5(b), the Company agrees to pay the Executive continuing payments of severance pay at a rate equal to the Annual Base Salary, as then in effect, for a period of twelve (12) months (the “Severance Period”), to be paid in accordance with the Company’s regular payroll procedures and subject to any mandatory federal or state withholdings (the “Severance Pay”). 

 

(iii) If Executive resigns during the Term pursuant to Section 4(a)(v) (With Good Reason), Company agrees to pay the Executive (i) a prorated portion of the Annual Base Salary for the duration of the Notice Period, (ii) all accrued, unused Vacation, (iii) any preapproved expenses incurred by the Executive prior to the Date of Termination in accordance with Section 3(g), and (iv) the Severance Pay, as provided in Section 5(a)(ii).  

 

(iv) In addition to the foregoing payments outlined in Section 5(a)(ii)-(iii), if Company terminates Executive’s employment during the Term pursuant to Section 4(a)(v) (Without Cause) or the Executive resigns his employment during the Term pursuant to Section 4(a)(iv) (with Good Reason), then Executive shall remain eligible for, and shall receive, a pro-rated portion of the STIP Bonus under the terms of the STIP in accordance with the Company’s actual financial performance compared to the applicable targets, on a pro rata basis for the fiscal year in which Executive’s employment terminates, based upon the relative percentage of the total number of days of Executive’s employment from the beginning of the fiscal year through the Date of Termination in comparison to the total number of days in the fiscal year.  Likewise, Executive shall remain eligible for, and shall receive, a pro-rated portion of the compensation under the terms of the LTIP in existence as of the Date of Termination.  With regard to any performance or restricted shares to be granted under the terms of the LTIP, such shares shall be granted in accordance with the Company’s actual financial performance compared to the applicable targets, on a pro rata basis for the fiscal years covered by each unvested LTIP award.  The pro rata calculation shall take the number of days since the start of the first fiscal year for each specific award under the LTIP to the date of termination divided by the total number of days for the entire plan horizon for each specific award under the LTIP.  The Board shall have the authority to adopt, modify or change the terms of any LTIP from time to time, in the Board’s sole discretion.  

 

(v) Unless the Executive’s employment is terminated prior to the last day of the Term, Executive’s employment shall automatically terminate at 5:00 p.m. on the last day of the Term, and the Parties’ obligations under this Agreement shall also automatically expire at the same time except for the Parties’ obligations under Sections 6, 7, and 21, which shall continue for the time periods stated therein. 

 

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(b) Conditions to the Receipt of the Severance Pay.

 

(i) Separation Agreement and Release of Claims.  The receipt of the Severance Pay pursuant to Sections 5(a)(ii)-(iii) will be subject to the Executive’s signing and not revoking a separation agreement and release of claims in a form reasonably satisfactory to the Company (the “Release”) and provided that such Release becomes effective and irrevocable no later than sixty (60) days following the date of termination (the “Release Deadline”).  If the Release does not become effective and irrevocable by the Release Deadline, the Executive will forfeit any rights to severance or benefits under this Agreement if the failure of the Release to become effective and irrevocable by the Release Deadline is solely attributable to the Executive.  In no event will severance payments or benefits be paid or provided until the Release becomes effective and irrevocable. 

 

(ii) Compliance with Restrictive Covenants.  The payment of any Severance Pay pursuant to Section 5(a)(ii)-(iii) is subject to the Executive’s continued compliance with the provisions of Section 6 hereof.  If the Executive breaches the provisions of Section 6, all continuing payments to which the Executive may otherwise be entitled pursuant to Section 5(a)(ii)-(iii) will immediately cease, the Company’s obligation to pay any part of the Severance Pay shall terminate immediately, and the Executive agrees to repay to the Company any part of the Severance Pay that was paid to the Executive prior to the Executive’s breach. 

 

(iii) Compliance with Section 409A.  For purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), the Executive’s right to receive the Severance Pay in the form of installment payments (the “Installment Payments”) shall be treated as a right to receive a series of separate payments and, accordingly, each Installment Payment shall at all times be considered a separate and distinct payment.  In addition, to the extent the Executive shall earn compensation during the Severance Period (without regard to when such compensation is paid), the Severance Pay to be made by the Company pursuant to Section 5(a)(ii)-(iii) shall be correspondingly reduced in compliance with Section 409A.  In order to implement the provisions of this Section 5(a)(ii)-(iii), the Executive shall promptly notify the Company of any subsequent employment during the Severance Period and provide the Company with information regarding the Executive’s compensation. 

 

(iv) Severance Provisions of this Agreement Control.  The provisions of this Section 5 shall supersede in their entirety any severance payment provisions in any severance plan, policy, program or other arrangement maintained by the Company.  

 

6. Restrictive Covenants. 

 

(a) Non-Competition.  The Executive hereby agrees that, during the Term and the Restricted Period, the Executive shall not, directly or indirectly engage in, have any interest in (including, without limitation, through the investment of capital or lending of money or property), or manage, operate or otherwise render any services to, any Person, whether on his own or in association with others, as a principal, director, officer, employee, agent, representative, partner, member, security holder, consultant, advisor, independent contractor, owner, investor, participant or in any other capacity, that engages in (either directly or through any subsidiary or affiliate thereof) any business or activity: (i) relating to the design, development, manufacture, 

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engineering, building, assembly, marketing, supply, sale or provision of a Competitive Product (as defined below) anywhere in the world; or (ii) which the Company engages in or has taken active steps to engage in or acquire during the Term.  For purposes of this Agreement, the term “Competitive Product” shall mean any product or component thereof, product line or service that has been, is being, or during the Executive’s term of employment may be, designed, developed, manufactured, engineered, built, assembled, marketed, supplied, sold or provided by any Person other than the Company and that is of the same general type, performs a similar function, or is used for the same general purpose as a product, product line, component thereof, or service provided by the Company, including, without limitation, boats primarily used for towed watersports (such as waterskiing, wakeboarding, wakesurfing, etc.), bay boats, deck boats, offshore center console boats, or pontoon boats.  Notwithstanding the foregoing, the Executive shall be permitted to acquire a passive stock or equity interest in such a business; provided that such stock or other equity interest acquired is not more than five percent (5%) of the outstanding interest in such business.

 

(b) Non-Solicitation of Company Employees.  The Executive hereby agrees that, during the Term and the Restricted Period, the Executive shall not, directly or indirectly, either for himself or on behalf of any other Person:  (i) Solicit (as defined below) any Person who was employed by the Company at any time during the twenty-four (24) month period immediately prior to the date of termination of employment or who thereafter becomes employed by the Company during the Restricted Period (a “Company Employee”) or encourage any such Company Employee to leave such employment, except for solicitation pursuant to a general solicitation which is not directed specifically to any such Company Employees, provided that neither the Executive nor any entity in which Executive has any ownership interest may not hire any such Company Employee as a result of such solicitation; provided, however, that nothing in this Section 6(b) shall prevent the Executive from soliciting or hiring any employee whose employment was terminated by the Company more than one (1) year before the solicitation or hire.  For purposes of this Agreement, the term “Solicit” shall mean to recruit, offer, induce, or otherwise persuade (or to assist or encourage any other Person to do so), directly or indirectly, a Company Employee to terminate his or her employment with the Company and/or to perform services for the Executive or for any other Person, whether as a principal, director, officer, employee, agent, representative, partner, member, security holder, consultant, advisor, independent contractor, owner, investor, participant or in any other capacity. 

 

(c) Non-Solicitation of Customers, Dealers, Vendors, Etc.  The Executive hereby agrees that, during the Term and the Restricted Period, the Executive shall not, directly or indirectly, either for himself or on behalf of any other Person:  (i) call upon, accept business from, or solicit the business of any Person who is or who had been at any time during the twenty-four (24) month period immediately prior to the date of termination of employment, a customer, dealer, supplier or vendor of the Company; provided, however, that the Executive may contact any such supplier or vendor where such contact does not relate to the design, development, manufacture, engineering, building, assembly, marketing, supply, sale or provision of a Competitive Product; or (ii) divert business, supplies, services or materials from, or otherwise interfere with, the business relationship between the Company and any customer, dealer, supplier or vendor.  The Executive further agrees that if any such customer, dealer, supplier or vendor contacts the Executive during the Term or the Restricted Period in respect of doing business with the Executive related to the design, development, manufacture, engineering, building, assembly, marketing, supply, sale or provision of a Competitive Product, the Executive will advise such customer, dealer, supplier or vendor of the restrictions on his ability to do business with such customer, dealer supplier or vendor contained herein.  

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(d) Ownership in National Composites, LLC.  The Company acknowledges that the Executive maintains an ownership interest in National Composites LLC. The Company agrees that Executive’s retaining an ownership interest in National Composites LLC or participation in the operations of National Composites LLC shall not violate Section 6(a), (b) or (c) provided that such ownership or activity (i) does not relate to the design, development, manufacture, engineering, building, assembly, marketing, supply, sale or provision of boats (and not their components or parts) primarily used for towed watersports (such as waterskiing, wakeboarding, wakesurfing, etc.), bay boats, deck boats, offshore center console boats, or pontoon boats; (ii) does not breach any of Executive’s fiduciary duties or his duty of loyalty to the Company, and (iii) does not breach Executive’s obligations under Section 6(f) of this Agreement.  

 

(e) Company Marks.  The Executive shall not at any time, directly or indirectly, use or purport to authorize any Person, other than a Company employee acting within the scope of his or her employment, to use any name, mark, logo, trade dress or identifying words or images which are the same as or similar to those used at any time by the Company in connection with any product or service, whether or not such use would relate to a Competitive Product. 

 

(f) Confidentiality of Company Proprietary Information.  Except as the Executive reasonably and in good faith determines to be required in the faithful performance of the Executive’s duties hereunder or in accordance with Section 6(h), the Executive shall, during the Term and thereafter, maintain in confidence and shall not directly or indirectly, use, disseminate, disclose or publish, or use for the Executive’s own benefit or the benefit of any other Person, any confidential or proprietary information or trade secrets of or relating to the Company, including, without limitation, information with respect to the Company’s operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment (“Proprietary Information”), or deliver to any other Person, any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information.  The Executive’s obligation to maintain and not use, disseminate, disclose or publish, or use for the Executive’s benefit or the benefit of any other Person, any Proprietary Information after the date of termination of employment will continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and in the public domain (other than by means of the Executive’s direct or indirect disclosure of such Proprietary Information) and continues to be maintained as Proprietary Information by the Company.  The Parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company, any successor or assignee of the Company. 

 

(g) Return of Proprietary Information & Company Property.  Upon termination of the Executive’s employment with the Company for any reason, the Executive will promptly deliver to the Company (i) all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents that are Proprietary Information, including all physical and digital copies thereof, and (ii) all other Company property (including, without limitation, any personal computer or wireless device and related accessories, keys, credit cards and other similar items) which is in his possession, custody or control. 

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(h) Response to Legal Document Requests.  Following the termination of Executive’s employment with the Company for any reason, the Executive may respond to a lawful and valid subpoena or other legal process but, where legally permitted, shall give the Company the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. 

 

(i) Mutual Non-Disparagement.  The Executive agrees not to disparage the Company, any of its products or practices, or any of its directors, officers, agents, representatives, equity holders or affiliates, either orally or in writing, at any time; provided that the Executive may confer in confidence with the Executive’s legal representatives and make truthful statements as required by law.  The Company reciprocally agrees not to disparage the Executive orally or in writing.  

 

(j) Delivery of Covenants to Potential Future Employers.  Prior to accepting other employment or any other service relationship during the Restricted Period, the Executive shall provide a copy of this Section 6 to any recruiter who assists the Executive in obtaining other employment or any other service relationship and to any employer or other Person with which the Executive discusses potential employment or any other service relationship. 

 

(k) Judicial Modification & Interpretation; Tolling of Time Periods Due to Breach by Executive.  In the event the terms of this Section 6 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.  Any breach or violation by the Executive of the provisions of this Section 6 shall toll the running of any time periods set forth in this Section 6 for the duration of any such breach or violation. The Executive’s compliance with this Section 6(j) does not constitute a violation of any other restrictive covenants contained herein. 

 

(l) Company.  As used in this Section 6, the term “Company” shall include MasterCraft Boat Company, LLC, Nautic Star, LLC, Crest Marine, LLC, their parent and related entities, including MCBC Holdings, Inc., and any of their direct or indirect subsidiaries. 

 

7. Injunctive Relief.  The Executive recognizes and acknowledges that a breach of the covenants contained in Section 6 will cause irreparable damage to the Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate.  Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Section 6, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief (without any requirement to post a bond or other security).  In the event action is brought by the Company or the Executive to enforce the provisions of Section 6,, including an action for declaratory relief, if the Company or the Executive prevails in such 

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action, then the prevailing party (whether the Company or the Executive) shall be entitled to reimbursement of the costs incurred by the prevailing party in such action (including reasonable attorneys’ fees and expenses).  The provisions of Section 6 and Section 7 of this Agreement shall survive any expiration or termination of this Agreement.  

 

8. Section 409A.  

 

(a) General.  The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A.  Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be immediately taxable to the Executive under Section 409A, the Company reserves the right to (without any obligation to do so or to indemnify the Executive for failure to do so) (i) adopt such amendments to this Agreement or adopt such other policies and procedures (including amendments, policies and procedures with retroactive effect) that it determines to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company and/or (ii) take such other actions it determines to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder.  Notwithstanding anything herein to the contrary, no provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from the Executive or any other individual to the Company or any of its affiliates, employees or agents. 

 

(b) Separation from Service under Section 409A.  Notwithstanding anything herein to the contrary: (i) no termination or other similar payments and benefits hereunder that are considered “nonqualified deferred compensation” within the meaning of Section 409A shall be payable upon the Executive’s termination of employment hereunder unless such termination constitutes a “separation from service” within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations; (ii) if the Executive is deemed at the time of the Executive’s separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of any, termination or other similar payments and benefits to which the Executive may be entitled hereunder (after taking into account all exclusions applicable to such payments or benefits under Section 409A) is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of such payments and benefits shall not be provided to the Executive prior to the earlier of (x) the expiration of the six (6) month period measured from the date of the Executive’s “separation from service” with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A) or (y) the date of the Executive’s death; provided that upon the earlier of such dates, all payments and benefits deferred pursuant to this Section 8(b)(ii) shall be paid in a lump sum to the Executive, and any remaining payments and benefits due hereunder shall be provided as otherwise specified herein; (iii) the determination of whether the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of the Executive’s separation from service shall be made by the Company in accordance with the terms of Section 409A (including, without limitation, Section 1.409A-1(i) of 

12

 

the Department of Treasury Regulations and any successor provision thereto); (iv) to the extent that any Installment Payments under this Agreement are deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A, for purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), each such payment that the Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment; (v) to the extent that any reimbursements or corresponding in-kind benefits provided to the Executive under this Agreement are deemed to constitute “deferred compensation” under Section 409A, such reimbursements or benefits shall be provided reasonably promptly, but in no event later than December 31 of the year following the year in which the expense was incurred, and in any event in accordance with Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations; and (vi) the amount of any such payments or expense reimbursements in one calendar year shall not affect the expenses or in-kind benefits eligible for payment or reimbursement in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and the Executive’s right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit. 

 

9. Assignment & Successors; Binding Effect.  The Company may assign its rights and obligations under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its affiliates.  The Executive may not assign the Executive’s rights or obligations under this Agreement to any individual or entity.  This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, devisees, and legatees, as applicable. 

 

10. Governing Law; Forum.  This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Tennessee, without reference to the principles of conflicts of law of Tennessee or any other jurisdiction, and where applicable, the laws of the United States.  The parties further expressly agree that jurisdiction and exclusive venue for any actions concerning the enforcement, construction or interpretation of this Agreement shall be in the Chancery Court for Knox County, Tennessee, or the Federal District Court for the Eastern District of Tennessee, Northern Division, sitting in Knoxville, Tennessee. 

 

11. Severability.  If any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of the other provisions shall not be affected thereby, and if at any time any one or more of the provisions of this Agreement (or any Section, sub-section or any part thereof) is held to be or becomes void or otherwise unenforceable for any reason, the parties hereto shall use their best efforts to agree upon a replacement for such invalid or unenforceable provision in terms which correspond as closely as possible to the original provision.  However, if such replacement is unable to be accomplished, then the same will be deemed omitted, and the validity and/or enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby. 

 

13

 

12. Notices.  Any notice, request, claim, demand, document and other communication hereunder to any party hereto shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivery may be in person, by mail, by electronic mail, by facsimile transmission, or by nationally-recognized courier service.  Notice by mail shall be properly addressed with proper postage affixed and (i) if sent first class, with delivery deemed to occur five (5) days after mailing or, (ii) if sent registered, certified or express return receipt requested, with delivery deemed to have occurred on the date shown on the return receipt.  Notice sent by any of the other methods of delivery shall be deemed effective (i) when delivered, if delivered personally; (ii) when sent (with confirmation received), if sent by electronic mail or facsimile transmission on a business day; (iii) on the first business day after dispatch (with confirmation received), if sent by electronic mail or facsimile transmission on a day other than a business day; and (iv) on the first business day after dispatch, if sent by overnight air courier.  Notices shall be sent to the following address (or at any other address as any party hereto shall have specified by notice in writing to the other party hereto): 

 

	
	
If to the Company:

	
 

	
Crest Marine, LLC

	
2710 South M-52

	
Owosso, MI 48867

	
Attn:  Director of Human Resources

	
Facsimile: (939) 725-5188

	
E-Mail:  terry.mcnew@mastercraft.com

	
 

	
with a copy to:

	
 

	
Egerton, McAfee, Armistead & Davis, P.C.

	
900 S. Gay Street, 14th Floor

	
Knoxville, Tennessee 37902

	
Attn:  Norman G. Templeton, Esq.

	
Facsimile:  (865) 525-5293

	
E-Mail:  ntempleton@emlaw.com

	
 

	
If to the Executive:  

	
 

	
At the then-current address in the Company’s records.

	
 

	
with a copy to:

	
 

	
Jaffe, Raitt, Heuer & Weiss, P.C.

	
27777 Franklin Road, Suite 2500

	
Southfield, Michigan 48034

	
Attn: Aaron Sherbin, Esq.

	
Email: asherbin@jaffelaw.com

 

14

 

13. Counterparts; Electronic Delivery.  This Agreement may be executed in two (2) or more counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument.  It shall be permissible for any party, after execution of this Agreement, to transmit and deliver a copy of the Agreement as executed by that party, to the other party hereto (or their respective counsel) by facsimile, electronic mail or any other electronic means, and delivery by any such electronic means shall constitute delivery of the executed Agreement for all purposes and shall be legally binding on the party transmitting the Agreement by any such means.

 

14. Entire Agreement.  The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) are intended by the parties hereto to be the final expression of their agreement with respect to the subject matter hereof and may not be contradicted by evidence of (and supersede) any prior or contemporaneous agreement with respect to the subject matter hereof (including, without limitation, that certain prior Employment Agreement between the Company and the Executive dated April 13, 2010 ).  All prior agreements between the Parties related to Executive’s employment, are hereby terminated. The Parties hereto further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. 

 

15. Amendments; Waivers.  This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and the CEO of the Company, which expressly identifies the amended provision of this Agreement.  By an instrument in writing similarly executed and approved by the CEO, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties hereto with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of or estoppel with respect to, any other or subsequent failure to comply or perform.  No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity. 

 

16. No Inconsistent Actions.  The Parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the Parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement. 

 

17. Construction.  This Agreement shall be deemed drafted equally by both of the Parties hereto.  Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any party hereto shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and 

15

 

other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require. 

 

18. Withholding.  The Company shall be entitled to withhold from any amounts payable under this Agreement, any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise. 

 

19. Absence of Conflicts.  The Executive hereby represents (i) that from and after the Effective Date the performance of the Executive’s duties contemplated hereunder will not breach any other agreement to which the Executive is a party and (ii) that Executive has provided the Company with true and correct copies of any agreements to which Executive is a party that could reasonably be construed so as to limit the performance of the Executive’s duties hereunder.  To the extent requested by the Company, the Executive shall provide evidence reasonably satisfactory to the Company that demonstrates the Executive’s ability to perform his duties hereunder without breaching any other agreement to which the Executive may be a party. 

 

20. Executive Acknowledgement.  The Executive acknowledges that the Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on the Executive’s own judgment. 

 

21. Limitation on Legal Action.  To the extent the law allows the Executive to bring legal action against the Company, the Executive agrees to file suit or, if required by applicable law, an administrative charge, within the time prescribed by law or six (6) months from the date of the event forming the basis of Executive’s dispute, claim, or cause of action, whichever expires first. 

 

22. Survival.  Neither the expiration or termination of the Term nor the termination of the Executive’s employment with the Company shall impair the rights or obligations of any party hereto which shall have accrued prior to such expiration or termination (including, without limitation, the Company’s right to enforce the restrictive covenants contained in Section 6 of this Agreement). 

 

[Signature page follows]

 

16

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement effective as of the date and year first above written. 

 

	
CREST MARINE, LLC

	
 

	
By:
	
 
	
/s/ Terry McNew

	
Name:
	
 
	
Terry McNew

	
Title:
	
 
	
Chief Executive Officer

	
 

	
EXECUTIVE:

	
 

	
/s/ Patrick May

	
Patrick May, individually

 

 

[Signature Page to Employment Agreement]Exhibit

Exhibit 10.1

PDL BIOPHARMA, INC.
CONVERTIBLE NOTES EXCHANGE AGREEMENT

September 12, 2019

___________________ (the “Undersigned”), for itself and on behalf of the beneficial owners listed on Exhibit A hereto (“Accounts”) for whom the Undersigned holds contractual and investment authority (each Account, as well as the Undersigned if it is exchanging Outstanding Notes (as defined below) hereunder, a “Holder”), enters into this Exchange Agreement (this “Agreement”) with PDL BioPharma, Inc., a Delaware corporation (the “Company”), as of the date first written above whereby the Holders will exchange for each $1,000 principal amount of the Company’s 2.75% Convertible Senior Notes due 2021 (the “Outstanding Notes”), (a) $1,000 principal amount of the Company’s new 2.75% Convertible Senior Notes due 2024 (the “New Notes”) that will be issued pursuant to the provisions of a base indenture (the “Base Indenture”) dated as of the Closing Date, as supplemented by a supplemental indenture to be dated as of the Closing Date (the “Supplemental Indenture” and together with the Base Indenture, the “Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “Trustee”), and (b) a cash payment equal to $70 for each $1,000 principal amount of the Outstanding Notes.

On and subject to the terms hereof, the parties hereto agree as follows:

Article I

Exchange of Notes

Section 1.1 Exchange.  Subject to the terms and conditions set forth in this Agreement, at the Closing (as defined herein), the Undersigned hereby agrees to deliver to the Company and to cause each Holder to deliver to the Company the aggregate principal amount of the Company’s Outstanding Notes specified on Exhibit A under the heading “Exchanged Notes” in exchange for, and the Company hereby agrees to issue to each Holder, the principal amount of New Notes specified on Exhibit A under the heading “Holder New Notes,” and the aggregate cash payment specified on Exhibit A under the heading “Holder Cash Payment.”  The terms “Exchanged Notes,” “Holder New Notes,” and “Holder Cash Payment” as used herein with respect to each Holder mean the amounts specified on Exhibit A for such Holder.  The transactions contemplated by this Agreement, including the issuance, delivery and acceptance of the Holder New Notes, the Holder Cash Payment and the exchange and sale of the Exchanged Notes are collectively referred to herein as the “Transactions.”  

Section 1.2 Closing.  Subject to the satisfaction (or waiver by the applicable parties) of the conditions set forth in Section 4.1, the closing of the Transactions (the “Closing”) shall occur on September 17, 2019 or such other date as the parties may agree (the “Closing Date”).  At the Closing, (a) each Holder shall deliver or cause to be delivered to the Company all right, title and interest in and to its Exchanged Notes as specified on Exhibit A hereto, free and clear of any mortgage, lien, pledge, charge, security interest, encumbrance, title retention agreement, option, equity or other adverse claim thereto (collectively, “Liens”), together with any documents of conveyance or transfer that the Company may deem necessary or desirable to transfer to and confirm in the Company all right, title and interest in and to the Exchanged Notes, free and clear of any Liens and (b) the Company shall deliver to each Holder principal amount of the Holder New Notes and the Holder Cash Payment, as specified on Exhibit A hereto (or, if there are no Accounts, the Company shall deliver to the Undersigned, as the sole Holder, the Holder New Notes specified above); provided, that the parties acknowledge that the delivery of the Holder New Notes may be delayed due to procedures and mechanics within the system of The Depository Trust Company or the NASDAQ Global Select Market (the “NASDAQ”) (including the procedures and mechanics regarding the listing of the Conversion Shares (as defined below) on such exchange) or other events beyond the Company’s control and that such delay will not be a default under this Agreement so long as (i) the Company is using its reasonable best efforts to effect the issuance of one or more global notes representing the New Notes and (ii) such delay is no longer than five business days.  For the avoidance of doubt, in the event of any delay in the Closing pursuant to the prior sentence the Holders shall not be required to deliver the Exchanged Notes until the Closing occurs.  The cancellation of the Exchanged Notes and the delivery of the Holder New Notes shall be effected via DWAC and the Holder Cash Payment will be made by wire transfer, in each case pursuant to the instructions provided by the Undersigned set forth in Exhibit C hereto, which the Undersigned agrees to provide no later than the business day immediately following the date of this Agreement.

Article II

Covenants, Representations and Warranties of the Holders

Each Holder (and where specified below, the Undersigned) hereby covenants as follows, and makes the following representations and warranties (severally and not jointly), each of which is and shall be true and correct on the date hereof and at the Closing, to the Company and Piper Jaffray & Co. (“Piper Jaffray”), and all such covenants, representations and warranties shall survive the Closing; provided, however, that any 

representation and warranty in this Article II that speaks of a specified date shall be true and correct as of that date only.

Section 2.1 Power and Authorization.  Each of the Undersigned and each Holder is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, and the Undersigned has the power, authority and capacity to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the Transactions, in each case on behalf of itself and each Account.  If the Undersigned is executing this Agreement on behalf of Accounts, (a) the Undersigned has all requisite discretionary and contractual authority to enter into this Agreement on behalf of, and bind, each Account, (b) Exhibit A hereto is a true, correct and complete list of (i) the name of each Account and (ii) the principal amount of such Account’s Exchanged Notes and (c) the Undersigned agrees with the amount of the principal amount of Holder New Notes to be issued, and the amount of the Holder Cash Payment to be paid, to such Account in respect of its Exchanged Notes.

Section 2.2 Valid and Enforceable Agreement; No Violations.  This Agreement has been duly executed and delivered by the Undersigned and constitutes a legal, valid and binding obligation of the Undersigned and each Holder, enforceable against the Undersigned and each Holder in accordance with its terms, except that such enforcement may be subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (b) general principles of equity, whether such enforceability is considered in a proceeding at law or in equity (the “Enforceability Exceptions”).  The execution and delivery of this Agreement and consummation of the Transactions will not violate, conflict with or result in a breach of or default under (i) the Undersigned’s or the applicable Holder’s organizational documents (or any similar documents governing each Account), (ii) any agreement or instrument to which the Undersigned or the applicable Holder is a party or by which the Undersigned or the applicable Holder or any of their respective assets are bound, or (iii) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to the Undersigned or the applicable Holder.

Section 2.3 Title to the Exchanged Notes.  Each Holder is the sole legal and beneficial owner of the Exchanged Notes set forth opposite its name on Exhibit A hereto (or, if there are no Accounts, the Undersigned is the sole legal and beneficial owner of the Exchanged Notes).  Each Holder has good, valid and marketable title to its Exchanged Notes, free and clear of any Liens (other than pledges or security interests that the Holder may have created in favor of a prime broker under and in accordance with its prime brokerage agreement with such broker).  No Holder has, in whole or in part, except as described in the preceding sentence, (a) assigned, transferred, hypothecated, pledged, exchanged or otherwise disposed of any of its Exchanged Notes or its rights, title or interest in and to its Exchanged Notes or (b) given any person or entity (other than the Undersigned) any transfer order, power of attorney or other authority of any nature whatsoever with respect to its Exchanged Notes.  Upon the Holder’s delivery of its Exchanged Notes to the Company pursuant to the Transactions, such Exchanged Notes shall be free and clear of all Liens created by the Holder or any other person acting for the Holder.

Section 2.4 Qualified Institutional Buyer.  Each Holder is a “qualified institutional buyer” within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended (the “Securities Act”).  Each Holder is acquiring the Holder New Notes solely for its own account, for investment purposes, and not with a view to, or for resale in connection with, any distribution of the Holder New Notes in a manner that would violate the registration requirements of the Securities Act.

Section 2.5 No Affiliates.  No Holder is, or has been at any time during the consecutive three-month period preceding the date hereof, a director, officer or other “affiliate” within the meaning of Rule 144 

promulgated under the Securities Act (an “Affiliate”) of the Company.  To each Holder’s knowledge, such Holder did not acquire the Exchanged Notes, directly or indirectly, from an Affiliate of the Company.

Section 2.6 No Illegal Transactions.  Each of the Undersigned and each Holder has not, directly or indirectly, and no person acting on behalf of or pursuant to any understanding with it has, disclosed to a third party any information regarding the Transactions or the Anticipated Disclosure (as defined in Section 2.7), nor engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales (as defined below) involving any of the Company’s securities) since the time that the Undersigned was first contacted by any of the Company, Piper Jaffray or any other person regarding the Transactions, this Agreement or an investment in the New Notes or the Company.  Each of the Undersigned and the Holder covenants that neither it nor any person acting on its behalf or pursuant to any understanding with it will disclose to a third party any information regarding the Transactions or the Anticipated Disclosure or engage, directly or indirectly, in any transactions in the securities of the Company (including Short Sales) prior to the time the Anticipated Disclosure is publicly disclosed by the Company.  “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 of Regulation SHO promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers.  Solely for purposes of this Section 2.6, subject to the Undersigned’s and each Holder’s compliance with their respective obligations under the U.S. federal securities laws and the Undersigned’s and the Holder’s respective internal policies, (a) the terms “Undersigned” and “Holder” shall not be deemed to include any employees, subsidiaries, desks, groups or Affiliates of the Undersigned or the applicable Holder that are effectively walled off by appropriate “Fire Wall” information barriers approved by the Undersigned’s or such Holder’s respective legal or compliance department (and thus such walled off parties have not been privy to any information concerning the Transactions or the Anticipated Disclosure), and (b) the foregoing representations and covenants of this Section 2.6 shall not apply to any transaction by or on behalf of an Account that was effected without the advice or participation of, or such Account’s receipt of information regarding the Transactions or the Anticipated Disclosure provided by, the Undersigned or the applicable Holder.

Section 2.7 Adequate Information; No Reliance.  The Undersigned is a registered investment adviser with the Securities and Exchange Commission (the “SEC”) acting on behalf of itself and the Accounts that are Holders who are its investment advisory clients.  The Undersigned acknowledges and agrees on behalf of itself and each Holder that (a) the Undersigned has been furnished with all materials it considers relevant to making an investment decision to enter into the Transactions and has had the opportunity to review (i) the Company’s filings and submissions with the SEC, including, without limitation, all information filed or furnished pursuant to the Exchange Act, and (ii) a draft press release or form of Current Report on Form 8-K disclosing material terms of the Transactions and certain information concerning the Company (the “Anticipated Disclosure”), the substance of which will be publicly issued or filed or furnished with the SEC in accordance with Section 3.6, (b) the Undersigned has had a full opportunity to ask questions of the Company concerning the Company, its business, operations, financial performance, financial condition and prospects and the terms and conditions of the Transactions, (c) the Undersigned and each Holder have had the opportunity to consult with their respective accounting, tax, financial and legal advisors to be able to evaluate the risks and consequences involved in the Transactions and to make an informed investment decision with respect to such Transactions, including, if applicable, the consequences to the Holder of the issuance of the New Notes with significant original issue discount for U.S. federal income tax purposes, (d) neither the Company nor Piper Jaffray is acting as a fiduciary or financial or investment advisor to the Undersigned or any Holder and (e) neither the Undersigned nor any Holder is relying, and none of them have relied, upon any statement, advice (whether accounting, tax, financial, legal or other), representation or warranty made 

by the Company, Piper Jaffray or any of their respective Affiliates or representatives, except for (i) the publicly available filings and submissions made by the Company with the SEC under the Exchange Act, (ii) the Anticipated Disclosure and (iii) the representations and warranties made by the Company in this Agreement.  Each of the Undersigned and each Holder is able to fend for itself in the Transactions; has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the New Notes; has the ability to bear the economic risks of its prospective investment and can afford the complete loss of such investment; and acknowledges that investment in the New Notes involves a high degree of risk.  Each of the Undersigned and each Holder has had a sufficient amount of time to consider whether to participate in the Transactions, and neither the Company nor Piper Jaffray, nor any of their respective affiliates or agents, has placed any pressure on the Undersigned of and Holder to respond to the opportunity to participate in the Transactions.

Section 2.8 No Public Market.  The Undersigned acknowledges and agrees on behalf of itself and each Holder that no public market exists for the New Notes, and that there is no assurance that a public market will ever develop for the New Notes.

Section 2.9    Taxpayer Information.  The Undersigned agrees that it will obtain from each Holder and deliver to the Company a complete and accurate IRS Form W-9 or IRS Form W-8BEN, W-8BEN E or W-8ECI, as appropriate.

Section 2.10    Further Action.  Each of the Undersigned and each Holder agrees that it will, upon request, execute and deliver any additional documents deemed by the Company or Trustee to be necessary or desirable to complete the Transactions.

Section 2.11.  Financial Advisor.  The Undersigned acknowledges that it and each Holder understands that the Company intends to pay Piper Jaffray a fee in respect of the Transactions.

Article III

Covenants, Representations and Warranties of the Company

The Company hereby covenants as follows, and makes the following representations and warranties, each of which is and shall be true and correct on the date hereof and at the Closing, to the Holders and Piper Jaffray, and all such covenants, representations and warranties shall survive the Closing; provided, however, that any representation and warranty in this Article III that speaks of a specified date shall be true and correct as of that date only.

Section 3.1 Power and Authorization.  The Company has been duly incorporated and is validly existing and in good standing under the laws of its state of incorporation, and has the power, authority and capacity to execute and deliver this Agreement and the Indenture, to perform its obligations hereunder and thereunder, and to consummate the Transactions.  Assuming the accuracy of each Holder’s representations and warranties hereunder, no consent, approval, order or authorization of, or registration, declaration or filing with any governmental entity is required on the part of the Company in connection with the execution, delivery and performance by it of this Agreement and the consummation by the Company of the Transactions, except as may be required under any state or federal securities laws or that may be obtained, and the Company covenants to obtain, after the Closing or such that would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect on (i) the financial position or results of operations of the Company and its subsidiaries, taken as a whole or (ii) the Company’s ability to consummate the Transactions.

Section 3.2 Valid and Enforceable Agreements; No Violations.  This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to the Enforceability Exceptions.  At the Closing, each of the Base Indenture and the Supplemental Indenture substantially in the form attached hereto as Exhibit B will have been duly executed and delivered by the Company.  The Indenture will govern the terms of the New Notes (including the terms under which the Conversion Shares will be issued), and the Indenture, upon execution and delivery of the Base Indenture and the Supplemental Indenture by each of the parties thereto, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to the Enforceability Exceptions.  This Agreement, the Indenture and consummation of the Transactions will not violate, conflict with or result in a breach of or default under (a) the charter, bylaws or other organizational documents of the Company, (b) any agreement or instrument to which the Company is a party or by which the Company or any of its assets are bound, or (c) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to the Company, except in the case of clauses (b) or (c), where such violations, conflicts, breaches or defaults would not, individually or in the aggregate, reasonably be expected to be adverse in any material respect on (i) the financial position or results of operations of the Company and its subsidiaries, taken as a whole or (ii) the Company’s ability to consummate the Transactions.

Section 3.3 Validity of the Holder New Notes.  The Holder New Notes have been duly authorized by the Company and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to the applicable Holder pursuant to the Transactions against delivery of the Exchanged Notes therefor in accordance with the terms of this Agreement, the Holder New Notes will be legal, valid and binding obligations of the Company, enforceable in accordance with their terms, except that such enforcement may be subject to the Enforceability Exceptions, and the Holder New Notes will not be subject to any preemptive, participation, rights of first refusal or other similar rights.  Assuming the accuracy of the Undersigned and each Holder’s representations and warranties hereunder, the Holder New Notes (a) will be issued in the Transactions exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act, (b) will, at the Closing, be free of any restrictions on resale by such Holder pursuant to Rule 144 promulgated under the Securities Act, and (c) will be issued in compliance with all applicable state and federal laws concerning the issuance of the Holder New Notes.

Section 3.4 Validity of Conversion Shares.  The Holder New Notes will at the Closing be convertible into cash, shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), or a combination of cash and shares of Common Stock, at the Company’s election (any such shares issuable upon conversion of the New Notes, the “Conversion Shares”), in accordance with, and subject to, the terms of the Indenture.  Upon execution and delivery of the Base Indenture and the Supplemental Indenture by the Company and the Trustee, any Conversion Shares initially issuable upon conversion of the New Notes (assuming the Company elects to physically settle the New Notes upon conversion and the maximum conversion rate under any make-whole adjustment applies) shall have been duly authorized and reserved by the Company for issuance upon conversion of the Holder New Notes.  When issued upon conversion of the Holder New Notes in accordance with the terms of the Holder New Notes and the Indenture, the Conversion Shares will be validly issued, fully paid and non-assessable, and the issuance of any such Conversion Shares will not be subject to any preemptive, participation, rights of first refusal or other similar rights.

Section 3.5 Listing Approval.  At the Closing, the Conversion Shares shall be approved for listing on the NASDAQ.

Section 3.6 Disclosure.  On or before the first business day following the date of this Agreement, the Company shall issue a publicly available press release or file with the SEC a Current Report on Form 8-

K disclosing the Anticipated Disclosure (to the extent not previously publicly disclosed).  Without the prior written consent of the Undersigned, the Company shall not disclose the name of the Undersigned or any Holder in any filing or announcement, unless such disclosure is required by applicable law, rule, regulation or legal process based on advice of counsel.

Section 3.7 No Litigation.  There is no action, lawsuit, arbitration, claim or proceeding pending or, to the knowledge of the Company, threatened, against the Company that would reasonably be expected to impede the consummation of the Transactions contemplated hereby.

Article IV

Closing Conditions & Notification

Section 4.1 Conditions to Obligations of the Undersigned, each Holder and the Company.  The obligations of the Undersigned to cause each Holder to deliver the Exchanged Notes and of the Company to deliver the Holder New Notes and the Holder Cash Payment are subject to the satisfaction at or prior to the Closing of the conditions precedent that (a) the representations and warranties of the Undersigned, the Holders and the Company contained in Articles II and III, respectively, shall be true and correct as of the Closing in all material respects with the same effect as though such representations and warranties had been made as of the Closing and unless notice is given pursuant to Section 4.2, each of the representations and warranties contained therein shall be deemed to have been reaffirmed and confirmed as of the Closing Date and (b) solely as to the obligations of the Undersigned, the Base Indenture and the Supplemental Indenture shall have been duly executed and delivered by the Company and the Trustee.

Section 4.2 Notification.  The Undersigned hereby covenants and agrees to notify the Company and Piper Jaffray upon the occurrence of any event prior to the Closing that would cause any representation, warranty, or covenant contained in Article II to be false or incorrect in any material respect.  The Company hereby covenants and agrees to notify the Undersigned, the Holders and Piper Jaffray upon the occurrence of any event prior to the Closing that would cause any representation, warranty, or covenant contained in Article III to be false or incorrect in any material respect.

Article V

Miscellaneous

Section 5.1 Entire Agreement.  This Agreement and any documents and agreements executed in connection with the Transactions embody the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda and understandings between or among the parties or any of their agents, representatives or Affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents.

Section 5.2 Construction.  References in the singular shall include the plural, and vice versa, unless the context otherwise requires.  References in the masculine shall include the feminine and neuter, and vice versa, unless the context otherwise requires.  Headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meanings of the provisions hereof.  Neither party, nor its respective counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions of this Agreement, and all language in all parts of this Agreement shall be construed in accordance with its fair meaning, and not strictly for or against either party.

Section 5.3 Governing Law; Waiver of Jury Trial.  This Agreement shall in all respects be construed in accordance with and governed by the substantive laws of the State of New York, without reference to its choice of law rules that would result in the application of the laws of another jurisdiction.  Each of the Company and the Undersigned, on behalf of itself and on behalf of each Holder, irrevocably waives any and all right to trial by jury with respect to any legal proceeding arising out of the Transactions.

Section 5.4 Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.  Any counterpart or other signature hereon delivered by facsimile or any standard form of telecommunication or e-mail shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party.

Section 5.5 Third Party Beneficiaries.  This Agreement is also intended for the immediate benefit of Piper Jaffray.  Piper Jaffray may rely on the provisions of this Agreement, including, but not limited to, the respective covenants, representations and warranties of the Undersigned, each Holder and the Company.

[Signature Page Follows]

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first above written.

	
			
	 
	PDL BIOPHARMA, INC.

	 
	 
	 

	 
	By:
	 

	 
	Name:
	 

	 
	Title:
	 

Signature Page to
Convertible Notes Exchange Agreement

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first above written.

	
			
	 
	"UNDERSIGNED":

	 
	 

	 
	(in its capacities described in the first paragraph hereof)

	 
	 
	 

	 
	By:
	 

	 
	Name:
	 

	 
	Title:
	 

Signature Page to
Convertible Notes Exchange Agreement

EXHIBIT A

Holders
	
				
	Holder Name and Address*
	Exchanged Notes 
(principal amount of 
Outstanding Notes to be 
exchanged for New Notes)
	Holder New Notes 
(principal amount of New 
Notes to be issued in 
exchange for Exchanged 
Notes)
	Holder Cash Payment (cash payment payable in exchange for Exchanged Notes of $70 per $1,000 of Exchanged Notes)

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

* Address to be provided no later than the date of settlement.

EXHIBIT B

BASE AND SUPPLEMENTAL INDENTURES

Exhibit C
Holder Information
(Complete the Following Form for Each Holder)

	
					
	Legal Name of Holder:
	 

	 
	 
	 
	 
	 

	Aggregate principal amount of Outstanding Notes to be exchanged (must be a multiple of $1,000):
	 

	 
	 
	 
	 
	 

	Holder's Address:
	 

	 
	 
	 
	 
	 

	Telephone:
	 

	 
	 
	 
	 
	 

	Country (and, if applicable, State) of Residence:
	 

	 
	 
	 
	 
	 

	Taxpayer Identification Number:
	 

	 
	 
	 
	 
	 

	Account for Outstanding Notes
	 
	Account for New Notes
	 
	Wire Instructions for Holder Cash Payment

	 
	 
	 
	 
	 

	DTC Participant Number:
	 
	DTC Participant Number:
	 
	Bank Routing #:

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	DTC Participant Name:
	 
	DTC Participant Name:
	 
	SWIFT Code:

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	DTC Participant Phone Number:
	 
	DTC Participant Phone Number:
	 
	Bank Address:

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	DTC Participant Contact Email:
	 
	DTC Participant Contact Email:
	 
	Account Number:

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	Account # at DTC Participant:
	 
	Account Name:

	 
	 
	 
	 
	 

	
							
	The Holder hereby instructs the Company to effect the Transactions in accordance with the instructions provided above.

	 
	 
	 
	 
	 
	 
	 

	Date:
	 
	 
	 
	By:
	 
	 

	 
	 
	 
	 
	 
	 
	Name:

	 
	 
	 
	 
	 
	 
	Title:

[Exhibit C to Exchange Agreement]

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