Document:

Limited Waiver Agreement, dated September 14, 2012

 Exhibit 10.2 
 LIMITED WAIVER AGREEMENT 
 This LIMITED WAIVER AGREEMENT (this
“Agreement”), dated as of September 14, 2012, is entered into by and among LIFECARE HOLDINGS, INC. (the “Company”), each direct or indirect subsidiary of the Company that is a Guarantor (as defined in the Indenture (as
defined below)), and each Holder (as defined in the Indenture) of Notes (as defined below) signatory hereto (the “Waiving Noteholders”). Unless otherwise defined herein, capitalized terms used herein and defined in the Indenture referred
to below are used herein as therein defined. 

W I T N E S S E T 
H : 
 WHEREAS the Company (as successor in interest to Rainier Acquisition Corp.) and U.S. BANK
NATIONAL ASSOCIATION, as trustee (the “Trustee”), have entered into an Indenture, dated as of August 11, 2005 (as amended, supplemented or otherwise modified from time to time, the “Indenture”), pursuant to which the Company
issued 9  1/4% Senior Subordinated Notes Due 2013 (the “Notes”); 
 WHEREAS the
Company acknowledges that a Default has occurred under the Indenture as a result of the Company’s failure to pay interest on the Notes pursuant to Section 301 of the Indenture and Section 1 of the Notes on August 15, 2012 (such
Default, the “Specified Event”); 
 WHEREAS the Company has requested that the Holders agree to waive, during the
Limited Waiver Period (as defined herein), the Specified Event and any Event of Default arising from the Specified Event; and 

WHEREAS subject to the terms and conditions hereof, the Noteholders have agreed to such limited waiver, solely during the Limited Waiver
Period; 
 NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the
Company, the Guarantors and the Waiving Noteholders agree as follows: 
  

	A.	Defined Terms 

 1. As used
in this Agreement, the following terms shall have the meanings set forth below: 
 a. “Advisor Engagement
Letters” shall mean the fee reimbursement letter with Wachtell, Lipton, Rosen & Katz, counsel to the Waiving Noteholders, and the engagement letter of Houlihan Lokey Capital, Inc., financial advisor to the Waiving Noteholders.

 b. “Limited Waiver Agreement Default” shall mean (i) the
occurrence of any Event of Default other than an Event of Default resulting from the Specified Event, (ii) the failure of the Company or any Guarantor to timely comply with any term, condition or covenant set forth in this Agreement, or
(iii) the failure of any representation or warranty made by the Company or any Guarantor in this Agreement to be true and correct in any material respect as of the date when made. 

b. “Limited Waiver Period” shall mean the period (i) commencing on and including September 15, 2012
and (ii) ending on, but not including, the date that is the earlier to occur of (x) November 1, 2012 and (y) the date of occurrence of a Termination Event. 

c. “Secured Agent” shall mean JPMorgan Chase Bank, N.A., as administrative agent and collateral agent for the
Secured Lenders pursuant to the Secured Credit Agreement. 
 d. “Secured Credit Agreement” shall mean
that certain Credit Agreement, dated as of February 1, 2011, by and among the Company, LCI Holdco, LLC, the lenders from time to time party thereto and the Secured Agent, as such agreement has been amended, supplemented or otherwise modified
prior to the date of this Agreement. 
 e. “Secured Lenders” shall mean the lenders from time to time
party to the Secured Credit Agreement. 
 f. “Secured Limited Waiver Agreement” shall mean that certain
Limited Waiver and First Amendment to Credit Agreement and Termination of Revolving Commitments, dated as of September 14, 2012, by and among the Company, LCI Holdco, LLC, the Secured Agent and Secured Lenders constituting Required Lenders (as
defined in the Secured Credit Agreement), pursuant to which the Secured Agent and the Secured Lenders party thereto have agreed to waive, subject to the terms thereof, until no earlier than November 1, 2012, any Default or Event of Default
(each such term as defined in the Secured Credit Agreement) arising under clause (f) or clause (g) of Article VII of the Secured Credit Agreement as a direct or indirect result of the occurrence of the Specified Event. 

g. “Sponsor” shall mean TC Group, L.L.C., together with its Affiliates. 

h. “Termination Event” shall mean (i) the occurrence of a Limited Waiver Agreement Default and
(ii) the termination of the Waiver Period under the Secured Limited Waiver Agreement (as such term is defined therein) without taking into account any waiver of any termination event thereunder by the Secured Lenders. 

 

	B.	Limited Waiver; Termination; Reservation of Rights 

 1. Upon the terms and conditions set forth in this Agreement, and so long as no Termination Event shall have occurred, the Waiving Noteholders hereby waive, solely for the duration of the Limited Waiver
Period, the occurrence of the Specified Event and of any Event of Default arising from the Specified Event and the Company’s obligation to pay interest on the Notes, and agree to forbear, solely for the duration of the Limited Waiver Period,
from 

  
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exercising the rights and remedies available to them as a direct result of the occurrence of any Event of Default arising from the Specified Event; provided, however, that the
Company and each Guarantor shall comply with all limitations, restrictions or prohibitions that would otherwise be effective or applicable under the Indenture or the Notes during the continuance of any Default or Event of Default; provided
further that, notwithstanding the Waiving Noteholders’ waiver of the Company’s obligation to pay interest on the Notes during the Limited Waiver Period, interest shall continue to accrue on the Notes in accordance with the terms of the
Indenture during the Limited Waiver Period, such interest shall be due and payable immediately upon the expiration of the Limited Waiver Period and the Company’s failure to pay such interest immediately upon the expiration of the Limited Waiver
Period shall be an immediate Event of Default under the Indenture. 
 2. Any Limited Waiver Agreement Default shall constitute
an immediate Event of Default under the Indenture and the Notes without the requirement of any demand, presentment, protest or notice of any kind to the Company or any Guarantor (all of which the Company and each Guarantor waive). 

3. Upon the expiry of the Limited Waiver Period, the agreement of the Waiving Noteholders hereunder to waive the Specified Event and the
Company’s obligation to pay interest on the Notes shall immediately terminate without the requirement of any demand, presentment, protest, or notice of any kind, all of which the Company and each of the Guarantors hereby unconditionally and
irrevocably waive and all of which rights and remedies are fully reserved by the Waiving Noteholders, subject to the provisions of the Indenture. The Company and each of the Guarantors agree that, subject to the provisions of the Indenture, any or
all of the Waiving Noteholders may at any time thereafter proceed to exercise any and all of their respective rights and remedies under the Indenture or the Notes, under any other document related thereto, under applicable law and/or at equity,
including, without limitation, their respective rights and remedies with respect to the Specified Event, none of which rights or remedies or the Specified Event is or shall be deemed to be waived in any respect. 

 

	C.	Covenants of the Company 

1. The Company shall promptly pay all fees and expenses of Wachtell, Lipton, Rosen & Katz and Houlihan Lokey Capital, Inc. in
accordance with the terms of the Advisor Engagement Letters. The Company shall otherwise comply with its obligations under the Advisor Engagement Letters; provided that, notwithstanding any other provision of this Agreement, the
Company’s failure to adhere to the provisions of the Advisor Engagement Letters (other than its obligation to pay the fees and expenses of Wachtell, Lipton, Rosen & Katz and Houlihan Lokey Capital, Inc.) shall not constitute a Limited
Waiver Agreement Default unless such failure is not cured within five (5) Business Days after the Company’s receipt of notice of such failure from any Waiving Noteholder. 

2. Notwithstanding any provision to the contrary in the Indenture or the Notes, the Company and each Subsidiary of the Company shall not
make any payment to the Secured Agent or any Secured Lender (a) as consideration for such party’s agreement to enter into the Secured Limited Waiver Agreement or (b) during the Limited Waiver Period, in each case other than principal,
interest, fees and expenses required to be paid pursuant to the Secured Credit Agreement (as in effect on the date of this Agreement, as modified by the Secured Limited 

  
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Waiver Agreement); provided that, notwithstanding anything to the contrary contained in this Agreement, none of the Company and its Subsidiaries may make payments of any Additional
Interest (as defined in the Secured Limited Waiver Agreement) under the Secured Limited Waiver Agreement at a rate in excess of 1% per annum payable in cash and an additional 1% per annum payable in kind. 

3. Notwithstanding any provision to the contrary in the Indenture or the Notes, during the Limited Waiver Period, the Company and each of
the Guarantors shall not, and shall not permit any of their respective Restricted Subsidiaries to, declare, pay or make any Restricted Payment or any other distribution on account of any of their respective Equity Interests (including, without
limitation, any purchase, redemption, acquisition or retirement for value of any such Equity Interests) or to the direct or indirect holders of any of their respective Equity Interests in their capacity as such, other than Restricted Payments paid
to the Company or a Guarantor. 
 4. Notwithstanding any provision to the contrary in the Indenture or the Notes, the Company
and each of the Guarantors shall not, and shall not permit any of their respective Restricted Subsidiaries to, during the Limited Waiver Period, (a) make any payment or reimbursement of fees to the Sponsor (other than reimbursement of fees,
costs and expenses as required by the Management Agreement in an aggregate amount not to exceed $15,000) or to any other Affiliate (other than the Company and the Guarantors), (b) make any loans or advances to employees in excess of $5,000
individually or $25,000 in the aggregate at any one time outstanding, or (c) make any other payment to any officer, director or employee other than (1) base salary (excluding any bonus) paid in the ordinary course of business, consistent
with past practice and (2) with respect to employees who are not eligible for the existing key employee retention plan, amounts owed under the existing management incentive plan. 

5. Notwithstanding any provision in the Indenture or the Notes to the contrary, during the Limited Waiver Period, the Company and each of
the Guarantors shall not, and shall not permit any of their respective Restricted Subsidiaries to, (i) sell, lease, convey, transfer or otherwise dispose of any assets or property of the Company, of the Guarantors or any of their respective
Restricted Subsidiaries, (ii) issue or sell any Equity Interests or (iii) enter into any intellectual property licensing agreements, in each case outside the ordinary course of business. 

 

	D.	Conditions to Effectiveness 

 This Agreement shall become effective as of the first date (the “Agreement Effective Date”) on or after September 14, 2012 upon which each of the conditions set forth below shall have been
fulfilled to the satisfaction of each of the Waiving Noteholders: 
 1. The Company, the Guarantors, and Waiving Noteholders
constituting the Holders of greater than 70% in outstanding principal amount of the Notes shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of telecopier or electronic
delivery) the same to the Trustee. 
 2. The Waiving Noteholders shall have received reimbursement or other payment of all of
the respective reasonable out-of-pocket fees and expenses of Wachtell, Lipton, Rosen & Katz and Houlihan Lokey Capital, Inc. incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and all other
documents to be delivered in connection herewith, to the extent invoiced at least one (1) Business Day prior to the date hereof. 

  
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 3. All representations and warranties made by the Company and the Guarantors hereunder shall
be true and correct in all material respects. 
 4. The Company shall have furnished to the Waiving Noteholders (i) an
executed copy of the Secured Limited Waiver Agreement and (ii) an executed copy of the Secured Credit Agreement, each of which shall be in full force and effect and shall not have been further amended, supplemented or otherwise modified in any
fashion (other than the amendment of the Secured Credit Agreement by the Secured Limited Waiver Agreement). 
  

	E.	Miscellaneous Provisions 

1. In order to induce the Waiving Noteholders to enter into this Agreement, the Company and the Guarantors hereby represent and warrant
that (i) other than the Specified Event, there exists no Default or Event of Default under the Indenture or the Notes on the Agreement Effective Date, (ii) the Company and the Guarantors have the power and authority (a) to enter into
this Agreement and (b) to do all acts and things as are required or contemplated hereunder to be done, observed and performed by them and (iii) this Agreement has been duly authorized, validly executed and delivered by an authorized
officer of the Company and each Guarantor, and constitutes the legal, valid and binding obligation of the Company and each Guarantor, enforceable against it in accordance with its terms. 

2. By its signature below, the Company and each of the Guarantors hereby acknowledge and consent to this Agreement and the terms and
provisions hereof. The Company and each of the Guarantors hereby reaffirm the covenants and agreements contained in the Indenture (including, without limitation, any supplemental indenture to which it is a party) and the Notes. The Company and each
of the Guarantors further confirm that the Indenture (including, without limitation, any supplemental indenture to which it is a party) and the Notes are and shall continue to be in full force and effect and the same are hereby ratified and
confirmed in all respects. 
 3. The Company hereby agrees that it will take any action that from time to time may be reasonably
necessary to effectuate the agreements contemplated herein. 
 4. Except as expressly set forth herein, this Agreement shall not
by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Waiving Noteholders under the Indenture, the Notes or any other document related thereto, and shall not alter, modify, amend or in
any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Indenture, the Notes or any other document related thereto, all of which are ratified and affirmed in all respects and shall continue in full force
and effect. Nothing herein shall be deemed to entitle the Company or any Guarantor to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the
Indenture, the Notes or any other document related thereto in similar or different circumstances. 

  
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 6. This Agreement may be executed in any number of separate counterparts, each of which,
when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by telecopy or other
electronic transmission shall be effective as delivery of a manually executed counterpart hereof. 
 7. This Agreement sets
forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. 

8. This Agreement shall be binding upon and inure to the benefit of each of the Company, the Guarantors, the Waiving Noteholders, and
their respective successors and assigns; provided, that the Company shall not be entitled to delegate any of its duties hereunder and shall not assign any of its rights or remedies set forth in this Agreement without the prior written consent of
each of the Waiving Noteholders in their sole discretion. 
 9. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law; but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 
 10. The
parties hereto agree that the running of all statutes of limitation or doctrine of laches applicable to all claims or causes of action that any Waiving Noteholder may be entitled to take or bring in order to enforce its rights and remedies against
the Company or any Guarantor shall be, to the fullest extent permitted by law, tolled and suspended during the Limited Waiver Period. 
 11. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OR
CHOICE OF LAW PRINCIPLES THEREOF. 
 *  *  * 

  
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 IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and
delivered as of the date first above written. 
  

			
	LIFECARE HOLDINGS, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel

 [Note Limited Waiver Agreement Signature Page] 

 
			
	GUARANTORS,
	
	CAREREHAB SERVICES, L.L.C.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	CRESCENT CITY HOSPITALS, L.L.C.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	NEXTCARE HOSPITALS/MUSKEGON, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	NEXTCARE SPECIALTY HOSPITAL OF DENVER, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel

 [Note Limited Waiver Agreement Signature Page] 

 
			
	LIFECARE HOLDING COMPANY OF TEXAS, LLC
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS, LLC
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF CHESTER COUNTY, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF DAYTON, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF FT. WORTH, L.P.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel

 [Note Limited Waiver Agreement Signature Page] 

 
			
	LIFECARE HOSPITALS OF MILWAUKEE, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF NEW ORLEANS, L.L.C.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF NORTH CAROLINA, L.L.C.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF NORTH TEXAS, L.P.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel

 [Note Limited Waiver Agreement Signature Page] 

 
			
	LIFECARE HOSPITALS OF NORTHERN NEVADA, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF PITTSBURGH, L.L.C.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF SOUTH TEXAS, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE INVESTMENTS, L.L.C.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel

 [Note Limited Waiver Agreement Signature Page] 

 
			
	LIFECARE MANAGEMENT SERVICES, L.L.C.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	SAN ANTONIO SPECIALTY HOSPITAL, LTD.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel

 [Note Limited Waiver Agreement Signature Page] 

 
			
	LIFECARE HOSPITAL AT TENAYA, LLC
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF MECHANICSBURG, LLC
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE HOSPITALS OF SARASOTA, LLC
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE REIT 1, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel

 [Note Limited Waiver Agreement Signature Page] 

 
			
	LIFECARE REIT 2, INC.
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	LIFECARE SPECIALTY HOSPITAL OF NORTH LOUISIANA, LLC
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel
	
	PITTSBURGH SPECIALTY HOSPITAL, LLC
		
	By:	 	/s/ Erik C. Pahl
		 	Name: Erik C. Pahl
		 	Title: General Counsel

 [Note Limited Waiver Agreement Signature Page] 

 
			
	Highland Credit Opportunities CDO, Ltd.
	
	By: Highland Capital Management L.P., As Collateral Manager
		
	By:	 	/s/ Carter Chism
		 	Name: Carter Chism
		 	Title: Authorized Signatory
	
	Highland Crusader Offshore Partners, L.P.
	
	By: Highland Crusader Fund GP, L.P., its general partner
		
	By:	 	Highland Crusader GP, LLC., its general partner
	
	By: Highland Capital Management L.P., its sole member
		
	By:	 	/s/ Carter Chism
		 	Name: Carter Chism
		 	Title: Authorized Signatory
	
	Highland Restoration Capital Partners Master, L.P.
	
	By: Highland Restoration Capital Partners GP, LLC, its General Partner
		
	By:	 	/s/ Carter Chism
		 	Name: Carter Chism
		 	Title: Authorized Signatory
	
	Highland Restoration Capital Partners, L.P.
	
	By: Highland Restoration Capital Partners GP, LLC, its General Partner
		
	By:	 	/s/ Carter Chism
		 	Name: Carter Chism
		 	Title: Authorized Signatory
	
	Longhorn Credit Funding, LLC
	
	By: Highland Capital Management, L.P., As Collateral Manager
		
	By:	 	/s/ Carter Chism
		 	Name: Carter Chism
		 	Title: Authorized Signatory

 [Note Limited Waiver Agreement Signature Page] 

 
			
	Tunstall Opportunities Master Fund, LP
		
	By:	 	Tunstall GP, LLC, its general partner
		
	By:	 	/s/ Carter Chism
		 	Name: Carter Chism
		 	Title: Authorized Signatory
	
	JLP Credit Opportunity Master Fund Ltd
		
	By:	 	/s/ Robert Youree
		 	Name: Robert Youree
		 	Title: Chief Financial Officer of Phoenix Investment Adviser LLC in its capacity as Investment Manager
	
	JLP Stressed Credit Fund LP
		
	By:	 	/s/ Robert Youree
		 	Name: Robert Youree
		 	Title: Chief Financial Officer of Phoenix Investment Adviser LLC in its capacity as Investment Manager
	
	SPNY MP II LLC - A
		
	By:	 	/s/ Robert Youree
		 	Name: Robert Youree
		 	Title: Chief Financial Officer of Phoenix Investment Adviser LLC in its capacity as Investment Manager

 [Note Limited Waiver Agreement Signature Page]Offer Letter between the Company and John M. Donovan

 Exhibit 10.1 

 
 

 
 September 14, 2012 
 Mr. John Donovan 
 c/o AT&T, Inc. 
 208 South Akard Street 
 Dallas, TX 75202 
 Dear John: 
 On behalf of the Board of Directors (the “Board”) of Palo Alto
Networks, Inc. (the “Company”), we are pleased to inform you that it is the intention of the Nominating and Governance Committee of our Board to nominate you for election as a member of our Board and our Audit Committee. 

As you are aware, the Company is a Delaware corporation and therefore your rights and duties as a Board member of the Company are prescribed by Delaware
law, our charter documents as well as by the policies established by our Board from time to time. As a result of the Company’s recent initial public offering of its common stock, you should anticipate that your duties and responsibilities would
be commensurate of those of a director of a publicly traded company. In addition, you may also be requested to serve as a director of one or more of our subsidiaries in which case you may be subject to other laws while serving in such a capacity.

 From time to time, our Board may establish certain other committees to which it may delegate certain duties. You will be appointed by the
Board to serve on at least one committee (initially, the Audit Committee). In addition to committee meetings, which shall be convened as needed, our Board meetings are generally held quarterly at the Company’s offices in Santa Clara,
California. We would hope that your schedule would permit you to attend all of the meetings of the Board and any committees of which you are a member. In addition, from time to time, there may be telephonic meetings to address special matters.

 It is expected that during the term of your Board membership with the Company you will not engage in any other employment, occupation,
consulting or other business activity that competes with the business in which the Company is now involved in or becomes involved in during the term of your service to the Company, nor will you engage in any other activities that conflict with your
obligations to the Company. 
 If you decide to join the Board, it will be recommended at the time of your election as a member of the Board
that the Company grant you a restricted stock unit award in the amount of 15,000 shares of common stock (the “Award”) in consideration for your service as a member of the Board. The Award shares will vest over three years, with 1/3
of the shares subject to the Award grant vesting on the first anniversary of the grant date, and the remaining shares vesting equally over the next two years on a quarterly basis, subject to you continuing to serve as a Board member on each vesting
date. 
 Additionally, we anticipate that it will be recommended at the time of the Company’s next annual stockholder meeting, and at each
subsequent annual stockholder meeting, that the Company grant you a restricted stock unit award in the amount of 1,000 shares of common stock in consideration for your continuing services as a member of the Company’s Audit Committee. We
anticipate that, with respect to each such grant, 100% of such shares will vest on the one year anniversary of the grant date. 
 Following a
Change in Control (defined below), all shares subject to the Award granted in accordance with the foregoing provisions shall fully vest and become immediately exercisable. “Change of Control” shall mean: (i) the sale or other
disposition of all or substantially all of the assets of the Company; (ii) any sale or exchange of the capital stock of the Company by the stockholders of the Company in one transaction or series of related transactions where more than fifty
percent (50%) of the outstanding voting power of the Company is acquired by a person or entity or group of related persons or entities; (iii) any reorganization, consolidation or merger of the Company where

  
 

 

			
	 Mr. John Donovan

September 14, 2012
  Page
 2

	  	

  

 
the outstanding voting securities of the Company immediately before the transaction represent or are converted into less than fifty percent (50%) of the outstanding voting power of the
surviving entity (or its parent corporation) immediately after the transaction; or (iv) the consummation of the acquisition of fifty-one percent (51%) or more of the outstanding stock of the Company pursuant to a tender offer validly made
under any federal or state law (other than a tender offer by the Company). 
 The payment of compensation to Board members is subject to many
restrictions under applicable law, and as such, you should be aware that the compensation set forth above is subject to such future changes and modifications as the Board or its committees may deem necessary or appropriate. In addition, please note
that unless otherwise approved by our Board or required under applicable law, directors of our subsidiaries shall not be entitled to any compensation. 
 You shall be entitled to reimbursement for reasonable expenses incurred by you in connection with your service to the Company and attendance of Board and committee meetings in accordance with the
Company’s established policies. 
 Please note that nothing in this letter or any agreement granting you equity should be construed to
interfere with or otherwise restrict in any way the rights of the Company, its Board or stockholders from removing you from the Board or any committee in accordance with the provisions of applicable law. Furthermore, except as otherwise provided to
other non-employee Board members or required by law, the Company does not intend to afford you any rights as an employee, including without limitation, the right to further employment or any other benefits. 

We hope that you find the foregoing terms acceptable. You may indicate your agreement with these terms by signing and dating both the enclosed duplicate
and original letter and returning them to me. By signing this letter you also represent that the execution and delivery of this agreement and the fulfillment of the terms hereof will not require the consent of another person, constitute a default
under or conflict with any agreement or other instrument to which you are bound or a party. 
 On behalf of the Company it gives us great
pleasure to welcome you as a member of our Board. We anticipate your leadership and experience shall make a key contribution to our success at this critical time in our growth and development. 

Yours very truly, 
 /s/ Mark McLaughlin

 Mark McLaughlin 
 Chief Executive
Officer 
 Palo Alto Networks, Inc. 

Acknowledged and agreed to 
 September 17,
2012 
  

			
	
		
		 	/s/ John Donovan
		 	John Donovan

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