Document:

Exhibit
10.32

 

New York & Company, Inc.

 

PERFORMANCE UNIT AWARD

 

Under the 2006 Long-Term
Incentive Plan

 

January 28, 2009

 

Richard P. Crystal

Chairman and CEO

New York & Company, Inc.

450 West 33rd Street

New York, NY 10001

 

Re:                               New York & Company, Inc. Grant
of Performance Unit Award

 

Dear Richard:

 

New York & Company, Inc.
(the “Company”) is pleased to advise you that the independent
Subcommittee of the Compensation Committee of its Board of Directors has
granted to you a performance award (“Performance Units”),
as provided below, under the New York & Company, Inc. 2006
Long-Term Incentive Plan (the “Plan”), a copy of which is attached
hereto and incorporated herein by reference. 
Any capitalized terms used but not defined herein shall have the meaning
given such terms in the Plan.

 

1.                                       Definitions.  For the purposes of this
Agreement, the following terms shall have the meanings set forth below:

 

“Board” shall mean
the board of directors of the Company.

 

“Common Stock” shall
mean the Company’s Common Stock, par value $0.001 per share, together with any
other class or series of common stock issued by the Company, or in the event
that the outstanding Common Stock is hereafter changed into or exchanged for
different stock or securities of the Company, such other stock or securities.

 

“Participant” shall
mean Richard P. Crystal.

 

“Securities Act”
shall mean the Securities Act of 1933, as amended, and any successor statute.

 

 

2.                                       Grant and Issuance of Stock. 
Subject to the terms and conditions of this Agreement and of the Plan,
the Company hereby grants to Participant (the “Award”) 1,000 Performance
Units, subject to all of the
restrictions hereinafter set forth.  The Performance
Units are hereby granted in contemplation of receipt of future services of the
Participant.

 

3.                                       Vesting Requirements.  This
Award a subject to a performance vesting
requirement and a continued employment requirement.  In order to meet the performance vesting
requirement the average closing stock price of the Common Stock for the 30
trading days prior to February 11, 2011 (the “Average Closing Stock
Price”) shall be equal to or greater than $11.00 per share.  If such performance vesting requirement is
not met, then all of the Performance Units issued under this award shall
immediately be cancelled and the Participant (and the Participant’s estate,
designated beneficiary or other legal representative) shall forfeit any rights
or interests in and with respect to any such unvested Performance Units. In addition, in order for the interest of Participant in the Performance
Units to become fully vested,
Participant must be continuously employed by the Company or one of its
subsidiaries from the date of this Award through the end of the
Performance Period.  If the Participant’s
employment with the Company and its subsidiaries terminates for any reason
prior to the full vesting of the Performance Units awarded under this
Agreement, such unvested Performance Units shall immediately be cancelled and
the Participant (and the Participant’s estate, designated beneficiary or other
legal representative) shall forfeit any rights or interests in and with respect
to any such unvested Performance Units. 
Notwithstanding the above, if Participant’s employment with the Company
and its subsidiaries terminates for any reason other than for Cause within six (6) months
of February 11, 2011, such Performance Units shall vest in accordance with
Section 3 as if Participant had still been employed by the Company
on February 11, 2011 and the performance conditions are satisfied.

 

4.                                       No
Stockholder Rights.  Participant shall not
have the rights of a stockholder in respect of the shares of Common Stock
underlying this Award until such Common Stock is delivered to Participant in
accordance with Section 5 hereof.

 

5.                                       Delivery
of Award Stock.  Subject to the terms of
the Plan, if the Performance Units awarded by this Agreement become vested on February 11,
2011, the Company shall promptly distribute to the Participant the number of
shares Common Stock (the “Award Stock”) equal to (i) $3,000,000
divided by the Average Closing Stock Price if such Average Closing Stock Price
is equal or greater to $11.00 per share but less than $20.00 per share or (ii) $5,000,000
divided by the Average Closing Stock Price if the Average Closing Stock Price
is greater or equal to $20.00 per share. 
In any case, the Award Stock if earned shall be delivered no later than
the end of calendar year 2011.  The
Participant shall not have any rights as a stockholder in respect of the Award
Stock until such Award Stock is delivered to Participant in accordance with
this Section 5.

 

6.                                       Taxes.

 

(a)                                  The issuance of the Award Stock pursuant to Section 3
hereof shall be conditioned on Participant or the Representative having made
such 

 

 

arrangements with the Company as the Company
may require to provide for the withholding of any taxes required to be withheld
by federal, state or local law with respect to such grant or lapse (including
without limitation, for all purposes of this Section 6, FICA and
other payroll taxes and social insurance contributions).

 

(b)                                 Participant shall
be liable for any and all taxes, including withholding taxes, arising out of
the grant or vesting of this Award or the grant of Award Stock
hereunder.  Participant may satisfy any
such obligation by surrendering (or the Company may withhold from delivery to
Participant) a sufficient number of whole shares of Award Stock as may be
necessary to cover all applicable withholding taxes at the time that the
restrictions on the Performance Units lapses, unless alternative procedures for
such payment are established by the Company. 
To the extent that any surrender of Award Stock or alternative procedure for such
payment is insufficient, Participant authorizes the Company, its affiliates and
subsidiaries to deduct all applicable withholding taxes from any other payments
made by the Company to Participant. 
Participant agrees to pay to the Company any amount of withholding taxes
that cannot be satisfied from wages or other cash compensation and that are not
otherwise provided for hereunder.

 

(c)                                  Regardless of any action that the Company
takes with respect to any item of income tax, social insurance contribution,
payroll tax, payment or other tax-related item (“Tax-Related Items”),
Participant acknowledges and agrees that the ultimate liability for all
Tax-Related Items legally due by Participant is and remains Participant’s
responsibility, and that the Company (i) makes no representations or
undertakings regarding the treatment of any Tax-Related Items in connection
with any aspect of this Award,
including the grant or vesting of the Award or the issuance of Award Stock, or the subsequent sale of
unrestricted shares of Award Stock and (ii) does not commit to structure
the terms or any aspect of this grant of Award Stock to reduce or eliminate Participant’s liability for Tax-Related
Items.  Participant shall pay the Company
any amount of Tax-Related Items that the Company or its subsidiaries may be
required to withhold as a result of Participant’s participation in the Plan or
Participant’s receipt of the Award or any Award Stock that cannot be satisfied by the means previously described.  The Company may refuse to deliver the Award
Stock if Participant fails to comply
with Participant’s obligations in connection with the Tax-Related Items.

 

(d)                                 It is the Committee’s intention that this
Award and any Award Stock shall not be
treated as a payment of deferred compensation for purposes of Section 409A
of the Code, as amended from time to time, and that any ambiguities in
construction be interpreted to effectuate such intent.

 

7.                                       Securities Laws Restrictions and Other
Restrictions on Transfer.  Participant understands and acknowledges, in
addition to any Restrictions contained in this Agreement, that federal and
state securities laws govern and restrict Participant’s right to offer, sell or
otherwise dispose of any shares of stock of the Company unless Participant’s
offer, sale or other disposition thereof is registered under the Securities 

 

 

Act and state securities laws, or, in the
opinion of the Company’s counsel, such offer, sale or other disposition is
exempt from registration or qualification thereunder.  The Company shall not be obligated to issue
any shares of Award Stock pursuant to this Agreement if such issuance would
violate any applicable laws and regulations or the requirements of any exchange
pursuant to which the Common Stock is traded. 
Participant agrees not to offer, sell or otherwise dispose of any shares
of stock of the Company in any manner which would violate or cause the Company
to violate the Securities Act, the rules and regulations promulgated
thereunder or any other state or federal law.

 

8.                                       Conformity with Plan.  The
Award is intended to conform in all respects with, and is subject to all applicable
provisions of, the Plan (which is incorporated herein by reference).  Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan.  By executing and returning the enclosed copy
of this Agreement, Participant acknowledges receipt of this Agreement and the
Plan and agrees to be bound by all of the terms of this Agreement and the Plan.

 

9.                                       Rights of Participants. 
Nothing in this Agreement shall interfere with or limit in any way the
right of the Company or any of its subsidiaries to terminate Participant’s
employment at any time (with or without Cause), nor confer upon Participant any
right to continue in the employ of the Company or any of its subsidiaries for
any period of time or to continue Participant’s present (or any other) rate of
compensation.  Nothing in this Agreement
shall confer upon Participant any right to be selected again as a Plan
participant.

 

10.                                 Adjustments.  In the event of a
reorganization, recapitalization, stock dividend or stock split, or combination
or other change in the shares of Common Stock, the Board or the Committee may,
in order to prevent the dilution or enlargement of rights under the Award, make
such adjustments in the number and type of shares authorized by the Plan, the
number and type of shares covered by the Award as may be determined to be
appropriate and equitable and consistent with the treatment afforded to all
other Common Stock, including the substitution of equity interests in other
entities involved in such transactions, to provide for cash payments in lieu of
restricted or unrestricted shares, and to determine whether continued
employment with any entity resulting from such a transaction will or will not
be treated as continued employment by the Company or a subsidiary or
affiliate.  Unless otherwise determined
by the Committee, such stock, securities, cash, property or other consideration
shall remain subject to all of the conditions, restrictions and other criteria contained
herein that were applicable to the Award prior to such adjustment.

 

11.                                 Further Assurances.  The parties hereto hereby agree to execute
such further instruments and to take such action as may reasonably be necessary
to carry out the intent of this Agreement.

 

12.                                 Remedies.  The parties hereto shall be
entitled to enforce their rights under this Agreement specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor.  The parties hereto acknowledge and agree that
money damages would not be an adequate remedy for any breach of the provisions
of this Agreement and that any 

 

 

party hereto may, in its sole discretion,
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.

 

13.                                 Amendment.  Except as otherwise provided
herein, any provision of this Agreement may be amended or waived only with the
prior written consent of Participant and the Company.

 

14.                                 Arbitration.  If any dispute or claim arises
out of this Agreement, or as to the rights and liabilities of the parties
hereunder, or as to the breach or invalidity hereof, including any dispute,
claim or difference as to whether an issue is arbitrable, the parties shall
settle such dispute exclusively by binding arbitration in accordance with the
then prevailing rules of the American Arbitration Association (or other
organization of national reputation mutually acceptable to the parties).  The arbitration shall be administered by one
independent and impartial arbitrator jointly selected by the parties to the
dispute and shall be held in New York, New York, or such other location mutually
acceptable to the parties.  The
arbitrator shall have the power and authority in his sole discretion to order
pre-arbitration discovery.  The
arbitrator shall render its decision and award within 30 days after the
conclusion of the arbitration hearing, which hearing shall be conducted on an
expedited schedule.  At the conclusion of
the arbitration, the arbitrator shall award costs and expenses to the
prevailing party (including the costs of the arbitration but not the fees and
expenses of attorneys, accountants and other experts).  The award rendered by the arbitrator shall be
final and not subject to judicial review, and judgment thereon may be entered
in any court having competent jurisdiction. 
Notwithstanding anything to the contrary contained in this Section 14
and without prejudice to the procedures described herein, either party to the
dispute shall be entitled to specific performance and/or other injunctive
relief (without posting any bond or deposit) from any court of law or equity of
competent jurisdiction in order to enforce or prevent any violations of the
provisions of this Agreement.

 

15.                                 Successors and Assigns. 
Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
permitted assigns of the parties hereto whether so expressed or not.

 

16.                                 Severability. 
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 is held to 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 this
Agreement.

 

17.                                 Counterparts.  This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall constitute an original, but all of which taken together shall
constitute one and the same Agreement.

 

18.                                 Descriptive Headings.  The
descriptive headings of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.

 

 

19.                                 Governing Law.  The
corporate law of the State of Delaware shall govern all issues and questions
concerning the relative rights of the Company and its stockholders.  All other issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
any choice of law or conflicts of law rules or provisions (whether of the
State of New York or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of New York.

 

20.                                 Notices.  All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
delivered personally or mailed by certified or registered mail, return receipt
requested and postage prepaid, to the recipient.  Such notices, demands and other
communications shall be sent to Participant at the address set forth in the
Company’s books and record, and to the Company at the addresses indicated
below:

 

(a)                                  If to the Company:

 

New York & Company, Inc.

450 West 33rd Street, 5th Floor

New York, New York 10001

Attention:  Linda Gormezano

Tel.:                         212-884-2026

Fax:                           212-884-2396

 

With
a copy, which shall not constitute notice, to:

 

Kirkland & Ellis
LLP

153 East 53rd Street

Citigroup Center

New York, New York 10022-4611

Attention:  Susan J. Zachman, Esq.

Tel.:                         212-446-4947

Fax:                           212-446-4900

 

(b)                                 if to Participant, to the address first set
forth above.

 

or to such other address or to the attention of such
other person as the recipient party has specified by prior written notice to
the sending party.

 

21.                                 Entire Agreement.  This
Agreement, as awarded under and governed by the Plan, constitutes the entire
understanding between Participant and the Company and supersedes all other
agreements, whether written or oral, with respect to the grant to Participant
of this Award.

 

*          *          *

 

[signature pages follow]

 

 

Please execute the extra copy
of this Agreement in the space below and return it to the Company’s Vice
President of Human Resources at its executive offices to confirm your
understanding and acceptance of the agreements contained in this
Agreement.  If you are married your
spouse must also sign the consent form attached hereto.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  NEW YORK & COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
             /s/
  SANDRA BROOSLIN VIVIANO

  
	
   

  	
   

  	
  Name:
  Sandra Brooslin Viviano

  
	
   

  	
   

  	
  Its:
  Executive Vice President,

       
  Human Resources

  

 

 

The undersigned hereby
acknowledges having read this Agreement and the Plan and hereby agrees to be
bound by all provisions set forth herein and in the Plan.

 

	
  Date:

  	
          January 28,
  2009

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
             /s/
  RICHARD P. CRYSTAL

  
	
   

  	
   

  	
   

  	
             RICHARD
  P. CRYSTAL

  

 

	
  Enclosures:

  	
   

  	
  1.        Extra
  copy of this Agreement

  	
   

  	
  2.        Copy
  of the Planexhibit10-1rm.htm

    EMPLOYMENT SEPARATION
AGREEMENT

    

    This
Employment Separation Agreement (the “Agreement”) is effective as of February 2,
2009, by and between PDI, Inc., a Delaware corporation (the “Company”), having
its principal place of business at 1 Route 17 South, Saddle River, New Jersey
07458, and Richard P. Micali, residing at  (the “Executive”),
pursuant to which the aforementioned parties agree:

    

    
      	
              1.

            	
              Employment.

            	
              In
      connection with the Executive’s continued employment, the Company shall
      employ the Executive as Senior Vice President – Sales Services of the
      Company, which employment shall terminate upon notice by either party, for
      any reason.  Executive
      understands and agrees that Executive’s employment with the Company is at
      will and can be terminated at any time by either party, and for any or no
      reason.

            

    

    

    
      	
              2.

            	
              Compensation
      and Benefits Payable Upon Involuntary Termination without Cause or
      Resignation for Good Reason.

            

    

    

    
      	
               
      

            	
              a.

            	
              Triggering
      Event.  In further consideration for Executive’s
      continued employment, Executive will receive the compensation and benefits
      set forth in Section 2(b) if the following requirements are
      met:

            

    

    

    
      	
               
      

            	
              i.

            	
              Executive’s
      employment is terminated involuntarily by the Company at any time for
      reasons other than death, total disability or Cause, or Executive resigns
      from employment for Good Reason;
and

            

    

    

    
      	
               
      

            	
              ii.

            	
              As
      of the 30th day following his or her termination date, Executive has
      executed the Agreement and General Release in substantially the form
      attached to this Agreement or in such form as may be provided by the
      Company (the “Release”), any applicable revocation period has expired and
      Executive has not revoked the
Release.

            

    

    

    
      	
               
      

            	
              b.

            	
              Compensation
      and Benefits.  The Company will provide the following
      compensation and benefits to
Executive:

            

    

    

    
      	
               
      

            	
              i.

            	
              The
      Company will pay Executive a lump sum payment equal to the product of
      twelve (12) times Executive’s Base Monthly Salary (excluding incentives,
      bonuses, and other compensation), plus the average of the cash incentive
      compensation paid to Executive during the three (3) calendar years immediately
      preceding the termination date (or, if the Executive was not employed by
      the Company during the three (3) immediately preceding calendar years, the
      average of or actual cash incentive compensation paid to Executive during
      the two (2) preceding calendar years or one (1) preceding calendar year, as
      applicable)..  Subject to Section 2(c) below, such payment shall
      be made within forty-five (45) days after Executive’s termination
      date.

            

    

    
      	
               
      

            	
              ii.

            	
              The
      Company will reimburse Executive for the cost of the premiums for COBRA
      group health continuation coverage under the Company’s group health plan
      paid by Executive for coverage during the period beginning following
      Executive’s termination date and ending on the earlier of
      either:  (A) first anniversary of Executive’s termination date;
      or (B) the date on which Executive becomes eligible for other group health
      coverage, provided that no reimbursement shall be paid unless and until
      Executive submits proof of payment acceptable to the Company within 90
      days after Executive incurs such expense.  Any reimbursements of
      the COBRA premium that are taxable to the Executive shall be made on or
      before the last day of the year following the year in which the COBRA
      premium was incurred, the
amount

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              of
      the COBRA premium eligible for reimbursement during one year shall not
      affect the amount of COBRA premium eligible for reimbursement in any other
      year, and the right to reimbursement shall not be subject to liquidation
      or exchange for another benefit.

            

    

    

    
      	
               
      

            	
              c.

            	
              Delay
      of Payment to Comply with Code Section
      409A.  Notwithstanding anything herein to the contrary,
      if at the time of Executive’s termination of employment with the Company,
      Executive is a “specified employee” within the meaning of Code Section
      409A and the regulations promulgated thereunder, then the Company shall
      delay the commencement of such payments (without any reduction) by a
      period of six (6) months after Executive’s termination of employment and
      any payments so deferred shall earn interest calculated at the prime rate
      of interest reported by The Wall Street Journal as of the date of
      termination.  Any payments that would have been paid during such
      six (6) month period but for the provisions of the preceding sentence
      (including interest thereon as provided in the foregoing provisions of
      this Section 2(c)) shall be paid in a lump sum to Executive six (6) months
      and one (1) day after Executive’s termination of
      employment.  The 6-month payment delay requirement of this
      Section 2(c) shall apply only to the extent that the payments under this
      Section 2 are subject to Code Section 409A.  With respect to
      payments or benefits under this Agreement that are subject to Code Section
      409A, whether Executive has had a termination of employment shall be
      determined in accordance with Code Section 409A and applicable guidance
      issued thereunder.

            

    

    

    3.           Other
Compensation.

    

    
      	
               
      

            	
              a.

            	
              Except
      as may be provided under this Agreement, any benefits to which Executive
      may be entitled pursuant to the plans, policies and arrangements of the
      Company shall be determined and paid in accordance with the terms of such
      plans, policies and arrangements, and Executive shall have no right to
      receive any other compensation or benefits, or to participate in any other
      plan or arrangement, following the termination of Executive’s employment
      by either party for any reason.

            

    

    

    
      	
               
      

            	
              b.

            	
              Notwithstanding
      any provision contained herein to the contrary, in the event of any
      termination of employment, the Company shall pay Executive his or her
      earned, but unpaid, base salary within 10 days of Executive’s termination
      date and shall reimburse Executive for any accrued, but unpaid, reasonable
      business expenses, in each case, earned or accrued as of the date of
      termination.  Executive shall submit documentation of any
      business expenses within 90 days of his or her termination date and any
      reimbursements of such expenses that are taxable to the Executive shall be
      made on or before the last day of the year following the year in which the
      expense was incurred, the amount of the expense eligible for reimbursement
      during one year shall not affect the amount of reimbursement in any other
      year, and the right to reimbursement shall not be subject to liquidation
      or exchange for another benefit.

            

    

    

    
      	
              4.

            	
              Withholding.  All
      amounts otherwise payable under this Agreement shall be subject to
      customary withholding and other employment taxes, and shall be subject to
      such other withholding as may be required in accordance with the terms of
      this Agreement or applicable law.

            

    

    

    
      	
              5.

            	
              Confidentiality,
      Non-Solicitation and Covenant Not to Compete
      Agreement.  In the event Executive’s employment with the
      Company is terminated by either party for any reason, Executive shall
      continue to be bound by the Company’s Confidentiality, Non-Solicitation
      and Covenant Not to Compete Agreement for the periods set forth therein (a
      copy of which is attached to this
Agreement).

            

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    6.           Definitions.

    

    
      	
               
      

            	
              a.

            	
              Cause
      shall mean: (i) the failure of Executive to use Executive’s best efforts
      in accordance with Executive’s position, skill and abilities to achieve
      Executive’s goals as periodically set by the Company that continues
      unremedied for a period of ten (10) business days after the Chief
      Executive Officer and/or his designee has given written notice to
      Executive specifying in reasonable detail Executive’s failure; (ii) the
      failure by Executive to comply with the reasonable instructions of the
      Chief Executive Officer and/or his designee and which such refusal
      continues unremedied for a period of ten (10) business days after the
      Chief Executive Officer and/or his designee has given written notice to
      Executive specifying in reasonable detail the instructions Executive has
      failed to comply with; (iii) the failure by Executive to adhere to the
      Company’s documented policies and procedures that continues unremedied for
      a period of ten (10) business days after the Chief Executive Officer
      and/or his designee has given written notice to Executive specifying in
      reasonable detail Executive’s breach of such policies and/or procedures;
      (iv) the failure of Executive to adhere to moral and ethical business
      principles consistent with the Company’s Code of Business Conduct and
      Guidelines on Corporate Governance as in effect from time to time that
      continues unremedied for a period of ten (10) business days after the
      Chief Executive Officer and/or his designee has given written notice to
      Executive specifying in reasonable detail Executive’s failure; (v)
      Executive's conviction of a criminal offense (including the entry of a
      nolo contendere plea); or (vi) any documented act of material dishonesty
      or fraud by the Executive in the commission of his or her duties; or (vii)
      Executive engages in an act or series of acts constituting misconduct
      resulting in a misstatement of the Company’s financial statements due to
      material non-compliance with any financial reporting requirement within
      the meaning of Section 304 of The Sarbanes-Oxley Act of
    2002.

            

    

    

    
      	
               
      

            	
              b.

            	
              Base
      Monthly Salary shall mean an amount equal to one-twelfth of
      Executive’s then current annual base salary.  Base Monthly
      Salary shall not include incentives, bonus(es), health and welfare
      benefits, car allowances, long term disability insurance or any other
      compensation or benefit provided to executive employees of the
      Company.

            

    

    

    
      	
               
      

            	
              c.

            	
              Change
      of Control shall mean: (i) any merger by the Company into another
      corporation or corporations which results in the stockholders of the
      Company immediately prior to such transaction owning less than 51% of the
      surviving corporation; (ii) any acquisition (by purchase, lease or
      otherwise) of all or substantially all of the assets of the Company by any
      person, corporation or other entity or group thereof acting jointly; (iii)
      the acquisition of beneficial ownership of voting securities of the
      Company (defined as common stock of the Company or any securities having
      voting rights that the Company may issue in the future) or rights to
      acquire voting securities of the Company (defined as including, without
      limitation, securities that are convertible into voting securities of the
      Company (as defined above) and rights, options, warrants and other
      agreements or arrangements to acquire such voting securities) by any
      person, corporation or other entity or group thereof acting jointly, in
      such amount or amounts as would permit such person, corporation or other
      entity or group thereof acting jointly to elect a majority of the members
      of the Board, as then constituted; or (iv) the acquisition of beneficial
      ownership, directly or indirectly, of voting securities and rights to
      acquire voting securities having voting power equal to 51% or more of the
      combined voting power of the Company’s then outstanding voting securities
      by any person, corporation or other entity or group thereof acting
      jointly. Notwithstanding the preceding sentence, any transaction that
      involves a mere change in identity form or place of organization within
      the

            

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              meaning
      of Section 368(a)(1)(F) of the Code, or a transaction of similar effect,
      shall not constitute a Change of
Control.

            

    

    
 

    d.           Good
Reason.  Executive’s termination of employment with the Company
shall be for Good Reason if (i) Executive  notifies the Company in
writing that one of the Good Reason Events (as defined below) has occurred,
which notice shall be provided within ninety (90) days after he or she first
becomes aware of the occurrence of such Good Reason Event, (ii) the Company
fails to cure such Good Reason Event within thirty (30) days after receipt of
the written notice from Executive, and (iii) Executive resigns employment within
thirty (30) days following expiration of the cure period.  For
purposes of this Agreement, a “Good Reason Event” shall mean any of the
following which occur without Executive’s consent:

    

    i.           Prior
to a Change in Control,

    

    
      	
               
      

            	
              A.

            	
              The
      failure by the Company to pay Executive any material amount of his or her
      current salary, or any material amount of his or her compensation deferred
      under any plan, agreement or arrangement of or with the Company that is
      currently due and payable;

            

    

    

    
      	
               
      

            	
              B.

            	
              A
      material reduction in Executive’s annual base salary; provided that a
      reduction consistent with reductions made to the annual base salaries for
      similarly situated senior executives of no more than 15% shall not
      constitute Good Reason; or

            

    

    

    
      	
               
      

            	
              C.

            	
              The
      relocation of Executive’s principal place of employment to a location more
      than 50 miles from Executive’s current principal place of
      employment.

            

    

    

    ii.           During
the two (2) year period following any Change in Control,

    

    
      	
               
      

            	
              A.

            	
              The
      failure by the Company to pay Executive any material amount of his or her
      current salary, or any material amount of his or her compensation deferred
      under any plan, agreement or arrangement of or with the Company that is
      currently due and payable;

            

    

    

    
      	
               
      

            	
              B.

            	
              A
      material reduction in Executive’s annual base salary; provided that a
      reduction consistent with reductions made to the annual base salaries for
      similarly situated senior executives of no more than 15% shall not
      constitute Good Reason;

            

    

    

    
      	
               
      

            	
              C.

            	
              The
      relocation of Executive’s principal place of employment to a location more
      than 50 miles from Executive’s current principal place of
      employment;

            

    

    

    
      	
               
      

            	
              D.

            	
              A
      material adverse alteration of Executive’s duties and responsibilities
      from those in effect immediately prior to the Change in
      Control;

            

    

    

    
      	
               
      

            	
              E.

            	
              An
      intentional, material reduction by the Company of Executive’s aggregate
      target incentive awards under any short-term and/or long-term incentive
      plans; and

            

    

    

    
      	
               
      

            	
              F.

            	
              The
      material failure of the Company to maintain Executive’s relative level of
      coverage under its material employee benefit, retirement, or fringe
      benefit

            

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              plans,
      policies, practices, or arrangements in which Executive participates, both
      in terms of the amount of benefits provided and the relative level of
      Executive’s participation as in effect immediately before a Change in
      Control and with all improvements therein subsequent thereto (other than
      those plans or improvements that have expired thereafter in accordance
      with their original terms), or the taking of any action which would
      materially reduce Executive’s benefits under such plans or deprive him of
      any material fringe benefit enjoyed by him immediately before a Change in
      Control.  For this purpose, the Company may eliminate and/or
      modify existing employee benefit plans and coverage levels on a consistent
      and non-discriminatory basis applicable to all such executives; provided,
      however, that Executive’s level of coverage under all such programs must
      be at least as great as is such coverage provided to employees who have
      the same or lesser levels of reporting responsibilities within the
      organization.

            

    

    

    
      	
               
      

            	
              e.

            	
              Code
      shall mean the Internal Revenue Code of 1986, as
  amended.

            

    

    

    
      	
              7.

            	
              Integration;
      Amendment.  This Agreement, the Company’s
      Confidentiality, Non-Solicitation and Covenant Not to Compete Agreement,
      and the Executive’s Individual Stock Agreement (if any) (a copy of which
      are attached to this Agreement) constitute the entire agreement between
      the parties hereto with respect to the matters set forth herein and
      supersede and render of no force and effect all prior understandings and
      agreements between the parties with respect to the matters set forth
      herein.  No amendments or additions to such agreements shall be
      binding unless in writing and signed by both parties, provided, however,
      that this Agreement may be unilaterally amended by the Company where
      necessary to ensure any benefits payable hereunder are either excepted
      from Code Section 409A or otherwise comply with Code Section
      409A.

            

    

    

    
      	
              8.

            	
              Governing
      Law; Headings.  This Agreement and its construction,
      performance and enforceability shall be governed by, and construed in
      accordance with, the laws of the State of New Jersey, without regard to
      its conflicts of law provisions.  Headings and titles herein are
      included solely for convenience and shall not affect, or be used in
      connection with, the interpretation of this
  Agreement.

            

    

    

    
      	
              9.

            	
              Jurisdiction.  Except
      as otherwise provided for herein, each of the parties: (a) irrevocably
      submits to the exclusive jurisdiction of any state court sitting in Bergen
      County, New Jersey or federal court sitting in New Jersey in any action or
      proceeding arising out of or relating to this Agreement; (b) agrees that
      all claims in respect of the action or proceeding may be heard and
      determined in any such court; (c) agrees not to bring any action or
      proceeding arising out of or relating to this Agreement in any other
      court; and (d) waives any right such party may have to a trial by jury
      with respect to any action or proceeding arising out of or relating to
      this Agreement.  Each of the parties waives any defense of
      inconvenient forum to the maintenance of any action or proceedings so
      brought and waives any bond, surety or other security that might be
      required of any other party with respect thereto.  Any party may
      make service on another party by sending or delivering a copy of the
      process to the party to be served at the address set forth above or such
      updated address as may be provided to the other party. Nothing in this
      Section 9, however, shall affect the right of any party to serve legal
      process in any other manner permitted by
law.

            

    

    

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF the parties
have duly executed this Employment Separation Agreement as of the date first
above written.

    

    EXECUTIVE

    

    

    By:   /s/ Richard P.
Micali                                                                           

    Richard P. Micali

    

    

    PDI, INC.

    

    

    By:   /s/ Nancy
Lurker                                                                           

    Nancy Lurker

    Chief Executive Officer

    

    
      
         

      

      
        6

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