Document:

a51132260ex4_1.htm

Exhibit 4.1

 

 

 

PORTER BANCORP, INC.

TAX BENEFITS PRESERVATION PLAN

This is a TAX BENEFITS PRESERVATION PLAN dated as of June 25, 2015 (this “Plan”), between Porter Bancorp, Inc., a Kentucky corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agent”).

RECITALS

A.   The Company (i) has generated certain Tax Benefits (as defined below) for United States federal income tax purposes; (ii) desires to avoid an “ownership change” within the meaning of Section 382 (as defined below), and thereby preserve the Company's ability to utilize its Tax Benefits, and (iii) in furtherance of such objective, desires to enter into this Plan.

 

B.   As of June 24, 2015, the Board of Directors of the Company has adopted resolutions creating a series of preferred stock designated as the “Series G Participating Preferred Shares” and has authorized and declared a dividend of one preferred stock purchase right (a “Right”) in respect to each share of Common Stock (as defined below) outstanding at the Close of Business (as defined below) on July 10, 2015 (the “Record Date”) and authorized the issuance, upon the terms and subject to the conditions herein, of one Right (subject to adjustment) in respect of each share of Common Stock issued after the Record Date, each Right representing the right to purchase, upon the terms and subject to the conditions herein, one one-thousandth (subject to adjustment) of a share of Preferred Stock (as defined below);

NOW, THEREFORE, the parties to this Plan agree as follows:

Section 1.          Definitions. The following terms, as used herein, have the following meanings:

“5% Shareholder” means (i) a Person or group of Persons that is a “5-percent shareholder” of the Company pursuant to Treasury Regulation Section 1.382-2T(g) or (ii) a Person that is a “first tier entity” or “higher tier entity” (as such terms are defined in Treasury Regulation Section 1.382-2T(f)) of the Company if that Person has a “public group” or individual, or a “higher tier entity” of that Person has a “public group” or individual, that is treated as a “5-percent shareholder” of the Company pursuant to Treasury Regulation Section 1.382-2T(g).

“Acquire” (or “Own”) means to obtain (or have, respectively) ownership for purposes of Section 382 of the Code without regard to the constructive ownership rules described in Treasury Regulation Section 1.382-2T(h)(2), (h)(3) and (k) (and “Acquisition” shall have a correlative meaning).

“Acquiring Person” means any Person who or which is or becomes a 5% Shareholder (other than by reason of Treasury Regulation Section 1.382-2T(j)(3)(i), or solely as a result of a transaction in which no “5-percent shareholder” (as defined in Section 382 of the Code and Treasury Regulations thereunder) experiences an increase in its percentage stock ownership interest of the Company, as determined in accordance with Treasury Regulation Sections 1.382-2(a), 1.382- 2T(g), (h), (j) and (k) and other pertinent Internal Revenue Service guidance), whether or not such Person continues to be a 5% Shareholder, but shall not include:

 

  

  

  

 

(i)             any Exempt Person;

(ii)            any Grandfathered Person;

(iii)           any Person who or which the Board determines, in its sole discretion, has inadvertently become a 5% Shareholder (or has inadvertently failed to continue to qualify as a Grandfathered Person), so long as such Person promptly enters into, and delivers to the Company, an irrevocable commitment promptly to divest and thereafter promptly divests (without exercising or retaining any power, including voting, with respect to such securities), sufficient Company Securities so that such Person's Percentage Stock Ownership is less than 5% (or, in the case of any Person who or which has inadvertently failed to continue to qualify as a Grandfathered Person, the Company Securities that caused such Person to so fail to qualify as a Grandfathered Person);

(iv)          any Person that has become a 5% Shareholder if the Board in good faith determines that such Person's attainment of 5% Shareholder status has not jeopardized or endangered the Company's utilization of the Tax Benefits or is otherwise in the best interests of the Company; provided that such Person does not increase its Percentage Stock Ownership over such Person's lowest Percentage Stock Ownership immediately following such determination by the Board, other than any increase pursuant to or as a result of (A) a stock dividend, stock split, reverse stock split or similar transaction effected by the Company, (B) transfers to such Person of Company Securities by the Company, if the Board determines, in its sole discretion, that such transfer would not jeopardize or endanger the Company's utilization of the Tax Benefits or is otherwise in the best interests of the Company, or (C) any redemption of Company Securities by the Company; and provided further that such Person shall be an “Acquiring Person” if the Board makes a contrary determination in good faith;

(v)           any Person if, on the date that would have been (absent this clause (v) of the definition of “Acquiring Person”) a Stock Acquisition Date with respect to such Person, such Person does not Beneficially Own any Company Securities; and

(vi)           any Person that Beneficially Owns at least a majority of the Common Stock following consummation of a Qualified Offer.

“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with, such other Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any Person, means the possession, directly or indirectly, of the power to cause the direction of management and/or policies of such Person, whether through the ownership of voting securities by contract or otherwise.

 

  

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A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own,” any securities (i) which such Person directly owns or (ii) which such Person would be deemed to constructively own pursuant to Section 382 of the Code and the Treasury Regulations promulgated thereunder.

“Board” means the Board of Directors of the Company.

“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in the State of Kentucky or the city in which the principal office of the Rights Agent is located are authorized or obligated by law or executive order to close.

“Close of Business” on any given date means 5:00 p.m., Eastern standard time, on such date; provided that if such date is not a Business Day “Close of Business” means 5:00 p.m., Eastern standard time, on the next succeeding Business Day.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.

“Common Stock” means (i) Common Shares with respect to a holder of the Company’s Common Shares, and (ii) Non-Voting Common Shares with respect to a holder of the Company’s Non-Voting Common Shares.

“Company Securities” means (i) shares of Common Stock, (ii) shares of preferred stock (other than Straight Preferred Stock) of the Company (iii) warrants, rights, or options (including any interest treated as an option pursuant to Treasury Regulation Section 1.382-4(d)(9)) to acquire stock (other than Straight Preferred Stock) of the Company and (iv) any other interest that would be treated as “stock” of the Company pursuant to Treasury Regulation Section 1.382-2T(f)(18).

“Distribution Date” means the earlier of (i) the Close of Business on the tenth Business Day after a Stock Acquisition Date and (ii) the Close of Business on the tenth Business Day (or such later day as may be designated prior to a Stock Acquisition Date by the Board) after the date of the commencement of a tender or exchange offer by any Person if, upon consummation thereof, such Person would or could be an Acquiring Person; provided, however, that if either of such dates occurs after the public announcement of this Plan and on or prior to the Record Date, then the Distribution Date shall be the Record Date.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, unless otherwise expressly specified.

“Exempt Person” means the Company, any Subsidiary of the Company (in each case including, without limitation, in any fiduciary capacity), any employee benefit plan or compensation arrangement of the Company or any Subsidiary of the Company, or any entity or trustee holding Company Securities to the extent organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such employee benefit plan or compensation arrangement.

 

  

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“Expiration Date” means the earliest of (i) the Final Expiration Date, (ii) the time at which all Rights are redeemed as provided in Section 19 or exchanged as provided in Section 20, (iii) the first day of a taxable year of the Company as to which the Board of Directors determines that no Tax Benefits may be carried forward, (iv) a date prior to a Stock Acquisition Date on which the Board of Directors determines that a limitation on the use of the Tax Benefits under Section 382 would no longer be material to the Company, (v) the repeal or amendment of Section 382 or any successor statute, if the Board of Directors determines that this Plan is no longer necessary for the preservation of Tax Benefits, and (vi) the effective date of an amendment to the Company's articles of incorporation to preserve the Company's Tax Benefits that has been approved by the Company's shareholders entitled to vote on such amendment.

“Final Expiration Date” means June 29, 2018.

“Grandfathered Person” means:

	
  

	
(i)

	
any Person who would otherwise qualify as an Acquiring Person as of immediately prior to the public announcement of this Plan, unless and until such Person's Percentage Stock Ownership shall be increased by more than one-tenth of one percentage point over such Person's lowest Percentage Stock Ownership immediately prior to the public announcement of this Plan or thereafter, other than any increase pursuant to or as a result of (A) the exercise of any option, warrant or convertible instrument to purchase Company Securities that such Person held as of immediately prior to the public announcement of this Plan, (B) a stock dividend, stock split, reverse stock split or similar transaction effected by the Company, (C) any redemption or repurchase of Company Securities by the Company, or (D) any transfer to such Person of Company Securities by the Company, if the Board determines, in its sole discretion, that such transfer would not jeopardize or endanger the Company's utilization of the Tax Benefits or is otherwise in the best interests of the Company; and

	
  

	
(ii)

	
any Person who would otherwise qualify as an Acquiring Person as a result of a redemption or repurchase of Company Securities by the Company, unless and until such Person's Percentage Stock Ownership shall be increased by more than one-tenth of one percentage point over such Person's lowest Percentage Stock Ownership on or after the date of such redemption or repurchase, other than any increase pursuant to or as a result of (A) a stock dividend, stock split, reverse stock split or similar transaction effected by the Company or (B) any subsequent redemption or repurchase of Company Securities by the Company.

“Percentage Stock Ownership” means the percentage stock ownership interest of the Company, as determined in accordance with Treasury Regulation Sections 1.382-2 (a)(3), 1.382-2T(g), (h), (j) and (k) and other pertinent Internal Revenue Service guidance; provided, however, that for the sole purpose of determining the percentage stock ownership of any entity (and not for the purpose of determining the percentage stock ownership of any other Person), Company Securities held by such entity shall not be treated as no longer owned by such entity pursuant to Treasury Regulation Section 1.382-2T(h)(2)(i)(A).

 

  

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“Person” means any individual, firm, corporation, partnership, trust association, limited liability company, limited liability partnership, governmental entity, or other entity, or any group of Persons making a “coordinated acquisition” of shares or otherwise treated as an entity within the meaning of Treasury Regulation Section 1.382-3(a)(1)(i) and shall include any successor (by merger or otherwise) of any such entity.

“Preferred Stock” means the Series G Participating Preferred Shares, no par value, of the Company, having the terms set forth in the form of articles amendment attached hereto as Exhibit A.

“Purchase Price” means the price (subject to adjustment as provided herein) at which a holder of a Right may purchase one one-thousandth of a share of Preferred Stock (subject to adjustment as provided herein) upon exercise of a Right, which price shall initially be $10.00.

“Qualified Offer” means an offer determined by a majority of the Board to have each of the following characteristics with respect to the Common Stock:

	
  

	
(i)

	
a tender or exchange offer for all of the outstanding shares of Common Stock at the same per-share consideration;

	
  

	
(ii)

	
an offer that has commenced within the meaning of Rule 14d-2(a) under the Exchange Act;

	
  

	
(iii)

	
an offer that is conditioned on a minimum of at least a majority of the outstanding shares of the Common Stock being tendered and not withdrawn as of the offer's expiration date, which condition shall not be waivable;

	
  

	
(iv)

	
an offer pursuant to which the Person making such offer has announced that it intends, as promptly as practicable upon successful completion of the offer, to consummate a second step transaction whereby all shares of the Common Stock not tendered into the offer will be acquired at the same form and amount of consideration per share actually paid pursuant to the offer, subject to shareholders' statutory appraisal rights, if any.

“Section 382” means Section 382 of the Code, or any comparable successor provision.

“Securities Act” means the Securities Act of 1933, as amended, unless otherwise expressly specified.

“Stock Acquisition Date” means the date of the first public announcement (including the filing of a report on Schedule 13D or Schedule 13G under the Exchange Act (or any similar or successor report)) by the Company or an Acquiring Person indicating that an Acquiring Person has become such.

  

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“Straight Preferred Stock” means preferred stock that is not treated as stock pursuant to Treasury Regulation Section 1.382-2(a)(3).

“Subsidiary” of any Person means any other Person of which securities or other ownership interests having ordinary voting power, in the absence of contingencies, to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by such first Person.

“Tax Benefits” means the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382, of the Company or any of its Subsidiaries.

“Trading Day” means a day on which the principal national securities exchange or over-the-counter market on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange or over-the-counter market, a Business Day.

“Treasury Regulation” means any final, proposed or temporary regulation of the Department of Treasury under the Code and any successor regulation.

Each of the following terms is defined in the Section set forth opposite such term:

 

	
Term

	
Section

	
Company

	
Preamble

	
Exchange Ratio

	
20

	
Ownership Statement

	
3(a)

	
Plan

	
Preamble

	
Record Date

	
Recitals

	
Redemption Price

	
19

	
Rights

	
Recitals

	
Rights Agent

	
Preamble

	
Right Certificate

	
4

	
Trust

	
20

	
Trust Agreement

	
20

Section 2.          Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Plan shall refer to this Plan as a whole and not to any particular provision of this Plan. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Sections and Exhibits are to Sections and Exhibits of this Plan unless otherwise specified. All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Plan as if set forth in full herein. Any capitalized terms used in any Exhibit but not otherwise defined therein, shall have the meaning as defined in this Plan. Any singular term in this Plan shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Plan, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to any statute, rules or regulations shall be deemed to refer to such statute, rules or regulations as amended from time to time and to any successors thereto.

 

  

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Section 3.          Issuance of Rights and Right Certificates.

(a)           As soon as practicable after the Record Date, the Company will send a summary of the Rights substantially in the form of Exhibit B hereto, by first class mail, postage prepaid, to each record holder of the Common Stock as of the Close of Business on the Record Date. Certificates for the Common Stock, or current ownership statements issued with respect to uncertificated shares of Common Stock in lieu of such a certificate (an “Ownership Statement”) (which Ownership Statements shall be deemed to be Right Certificates), issued after the Record Date but prior to the earlier of a Distribution Date and the Expiration Date shall have printed or written on or otherwise affixed to them the following legend:

This [certificate] [statement] also evidences certain Rights as set forth in a Tax Benefits Preservation Plan between Porter Bancorp, Inc. (the “Company”) and American Stock Transfer & Trust Company, LLC, as Rights Agent, dated as of June 25, 2015, and as amended from time to time (the “Plan”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. The Company will mail to the holder of this [certificate] [statement] a copy of the Plan without charge promptly after receipt of a written request therefor. Under certain circumstances, as set forth in the Plan, such Rights may be evidenced by separate [certificate] [statements] instead of by this [certificate] [statement] and may be redeemed or exchanged or may expire.

As set forth in the Plan, Rights issued or transferred to, or Beneficially Owned by, any Person who is, was or becomes an Acquiring Person (as such terms are defined in the Plan), whether currently Beneficially Owned by or on behalf of such Person or by any subsequent holder, may be null and void.

(b)           Prior to a Distribution Date, (i) the Rights will be evidenced by certificates for the Common Stock or Ownership Statements and not by separate Right Certificates (as hereinafter defined) and the registered holders of the Common Stock shall be deemed to be the registered holders of the associated Rights, and (ii) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock.

 

  

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(c)           From and after a Distribution Date, the Rights will be evidenced solely by separate Right Certificates or Ownership Statements and will be transferable only in connection with the transfer of the Right Certificates pursuant to Section 5. As soon as practicable after the Company has notified the Rights Agent of the occurrence of a Distribution Date, the Rights Agent will send, by first class, insured, postage prepaid mail, to each record holder of the Common Stock as of the Close of Business on the Distribution Date (other than any Acquiring Person), one or more Right Certificates evidencing one Right (subject to adjustment as provided herein) for each share of Common Stock so held. If an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 9, the Company shall, at the time of distribution of the Right Certificates, make the necessary and appropriate rounding adjustments in accordance with Section 11(a) so that Right Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights.

(d)           Rights shall be issued in respect of all shares of Common Stock outstanding as of the Record Date or issued (on original issuance or out of treasury) after the Record Date but prior to the earlier of a Distribution Date and the Expiration Date. In addition, in connection with the issuance or sale of shares of Common Stock following a Distribution Date and prior to the Expiration Date, the Company

 

(i)            shall, with respect to shares of Common Stock so issued or sold

 

(x)           pursuant to the exercise of stock options or under any employee plan or arrangement, or

 

(y)           upon the exercise, conversion or exchange of other securities issued by the Company prior to the Distribution Date, and

(ii)           may, in any other case, if deemed appropriate by the Board,

issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided that no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise be made in lieu of the issuance thereof.

Section 4.          Form of Right Certificates.

(a)           The certificates evidencing the Rights (and the forms of assignment, election to purchase and certificates to be printed on the reverse thereof) (the “Right Certificates”) shall be printed on standard certificate paper compatible with the Rights Agent's printing specifications with the content substantially in the form of Exhibit C hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Plan, or as may be required to comply with any applicable law, rule or regulation or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. The Right Certificates, whenever distributed, shall be dated as of the Record Date.

 

  

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(b)           The Right Certificates shall be executed on behalf of the Company by its Chief Executive Officer, its President, or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary, an Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, either manually or by facsimile signature. The Right Certificates shall be countersigned, either manually or by facsimile signature, by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company whose manual or facsimile signature is affixed to the Right Certificates ceases to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates may, nevertheless, be countersigned by the Rights Agent and issued and delivered with the same force and effect as though the Person who signed such Right Certificates had not ceased to be such officer of the Company. Any Right Certificate may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Plan any such Person was not such an officer.

(c)           Notwithstanding any of the provisions of this Plan or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares of stock issuable upon exercise of the Rights made in accordance with the provisions of this Plan.

Section 5.          Registration; Transfer and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.

(a)           Following a Distribution Date, the Rights Agent shall keep or cause to be kept, at its principal office or offices designated as the place for surrender of Right Certificates upon exercise, transfer or exchange, books for registration and transfer of the Right Certificates. Such books shall show with respect to each Right Certificate the name and address of the registered holder thereof, the number of Rights indicated on the certificate and the certificate number.

(b)           At any time after a Distribution Date and prior to the Expiration Date, any Right Certificate or Certificates may, upon the terms and subject to the conditions set forth in this Plan, be transferred or exchanged for another Right Certificate or Certificates evidencing a like number of Rights as the Right Certificate or Certificates surrendered. Any registered holder desiring to transfer or exchange any Right Certificate or Certificates shall surrender such Right Certificate or Certificates (with, in the case of a transfer, the form of assignment and certificate on the reverse side thereof duly executed) to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate or Certificates until the registered holder of the Rights has complied with the requirements of Section 6(f). Upon satisfaction of the foregoing requirements, the Rights Agent shall, subject to Sections 6(e), 6(f), 8(e), 11 and 20, countersign and deliver to the Person entitled thereto a Right Certificate or Certificates as so requested. The Company may require payment of a sum sufficient to cover any transfer tax or other governmental charge that may be imposed in connection with any transfer or exchange of any Right Certificate or Certificates.

 

  

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(c)           Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will issue and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.

Section 6.          Exercise of Rights.

(a)           The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein, including Sections 6(e), 6(f) and 8(c)) in whole or in part at any time after a Distribution Date and prior to the Expiration Date upon surrender of the Right Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment (in lawful money of the United States of America by certified check or bank draft payable in immediately available or next day funds to the order of the Company) of the aggregate Purchase Price with respect to the Rights then to be exercised and an amount equal to any applicable transfer tax or other governmental charge.

(b)           Upon satisfaction of the requirements of Section 6(a) and subject to Section 17(k), the Rights Agent shall thereupon promptly

 

(i)            (A) requisition from any transfer agent of the Preferred Stock (or make available, if the Rights Agent is the transfer agent therefor) certificates for the total number of one one-thousandths of a share of Preferred Stock to be purchased (and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests) or

 

(B) if the Company shall have elected to deposit the shares of Preferred Stock issuable upon exercise of the Rights with a depositary agent, requisition from the depositary agent depositary receipts representing interests in such number of one one-thousandths of a share of Preferred Stock to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent and the Company will direct the depositary agent to comply with such request),

 

(ii)           requisition from the Company the amount of cash, if any, to be paid in lieu of issuance of fractional shares in accordance with Section 11 and

 

(iii)         after receipt of such certificates or depositary receipts and cash, if any, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate (with such certificates or receipts registered in such name or names as may be designated by such holder).

 

  

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If the Company is obligated to deliver Common Stock or other securities or assets pursuant to this Plan, the Company will make all arrangements necessary so that such securities and assets are available for delivery by the Rights Agent, if and when appropriate.

 

(c)           Each Person (other than the Company) in whose name any certificate for Preferred Stock is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such Preferred Stock represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any transfer taxes or other governmental charges) was made; provided that if the date of such surrender and payment is a date upon which the transfer books of the Company relating to the Preferred Stock are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the applicable transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Rights shall be exercisable, including the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company except as provided herein.

(d)           In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing the number of Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 12.

(e)           Notwithstanding anything in this Plan to the contrary, any Rights Beneficially Owned by

 

(i)           an Acquiring Person from and after the date on which the Acquiring Person becomes such, or

 

(ii)           a transferee of Rights Beneficially Owned by an Acquiring Person who

 

(A)           becomes a transferee after the Stock Acquisition Date with respect to such Acquiring Person, or

 

(B)           becomes a transferee prior to or concurrently with the Stock Acquisition Date with respect to such Acquiring Person and receives such Rights

 

(I)     with actual knowledge that the transferor is or was an Acquiring Person, or

 

(II)    pursuant to either (x) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (y) a transfer which the Board determines in good faith is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 6(e), shall become null and void without any further action, and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under this Plan or otherwise.

 

  

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The Company shall use all reasonable efforts to insure that the provisions of this Section 6(e) are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any transferee of an Acquiring Person hereunder.

(f)           Notwithstanding anything in this Plan to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to any purported transfer pursuant to Section 5 or exercise pursuant to this Section 6 unless the registered holder of the applicable Rights

 

(i)          has completed and signed the certificate contained in the form of assignment or election to purchase, as the case may be, set forth on the reverse side of the Right Certificate surrendered for such transfer or exercise, as the case may be,

 

(ii)          has not indicated an affirmative response to clause (1) or (2) of the above-referenced certificate, and

 

(iii)         has provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) thereof as the Company reasonably requests.

Section 7.             Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for exercise, transfer or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by this Plan. The Company shall deliver to the Rights Agent for cancellation, and the Rights Agent shall cancel, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

Section 8.             Reservation and Availability of Capital Stock.

(a)           The Company covenants and agrees that it will cause to be reserved and kept available a number of authorized but not outstanding shares of Preferred Stock sufficient to permit the exercise in full of all outstanding Rights as provided in this Plan.

(b)           So long as the Preferred Stock or other securities issuable upon the exercise of Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all securities reserved for such issuance to be listed on any such exchange upon official notice of issuance upon such exercise.

 

  

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(c)           The Company shall

 

(i)           file, as soon as practicable following the earliest date after a Stock Acquisition Date and determination of the consideration to be delivered by the Company upon exercise of the Rights in accordance with Section 9(a)(ii), or as soon as is required by law following a Distribution Date, as the case may be, a registration statement under the Securities Act with respect to the securities issuable upon exercise of the Rights,

 

(ii)          cause such registration statement to become effective as soon as practicable after such filing, and

 

(iii)         cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of

 

(A)          the date as of which the Rights are no longer exercisable for such securities, and

 

(B)           the Expiration Date.

The Company shall also take such action as may be appropriate to ensure compliance with the securities or blue sky laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed 90 days after the date set forth in Section 8(c)(i), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement when the suspension is no longer in effect. Notwithstanding anything contained in this Plan to the contrary, the Rights shall not be exercisable for securities in any jurisdiction if the requisite qualification in such jurisdiction has not been obtained, such exercise is not permitted under applicable law or a registration statement in respect of such securities has not been declared effective.

(d)           The Company shall take all such action as may be necessary to ensure that all one one-thousandths of a share of Preferred Stock or other securities issuable upon exercise of Rights shall, at the time of delivery of the certificates for such securities (subject to payment of the Purchase Price), be duly authorized, validly issued, fully paid and nonassessable.

(e)           The Company shall pay when due and payable any and all federal and state transfer taxes and other governmental charges that may be payable in respect of the issuance or delivery of the Right Certificates and of any certificates for Preferred Stock or other securities upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax or other governmental charge that may be payable in respect of any transfer involved in the issuance or delivery of any Right Certificates or any certificates for Preferred Stock or other securities to a Person other than the registered holder of the applicable Right Certificate. Prior to any such issuance or delivery of any Right Certificates or any certificates for Preferred Stock or other securities, any such transfer tax or other governmental charge shall have been paid by the holder of such Right Certificate or it shall have been established to the Company's satisfaction that no such tax or other governmental charge is due.

 

  

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Section 9.             Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.

(a)           (i)          To preserve the actual or potential economic value of the Rights, if at any time after the date hereof there shall be any change in the Common Stock or the Preferred Stock, whether by reason of stock dividends, stock splits, reverse stock splits, recapitalization, mergers, consolidations, combinations or exchanges of securities, split-ups, split-offs, spin-offs, liquidations, other similar changes in capitalization, any distribution or issuance of cash, assets, evidences of indebtedness or subscription rights, options or warrants to holders of Common Stock or Preferred Stock, as the case may be (other than distribution of the Rights or regular quarterly cash dividends) or otherwise, then, in each such event the Board shall make such appropriate adjustments in the number of shares of Preferred Stock (or the number and kind of other securities) issuable upon exercise of each Right (or in exchange for any Right pursuant to Section 20), the Purchase Price and Redemption Price in effect at such time and/or the number of Rights outstanding at such time (including the number of Rights or fractional Rights associated with each share of Common Stock) such that following such adjustment such event shall not have had the effect of reducing or limiting the benefits the holders of the Rights would have had absent such event. If an event occurs that requires an adjustment under both this Section 9(a)(i) and Section 9(a)(ii), the adjustment provided for in this Section 9(a)(i) shall be made prior to, and in addition to, any adjustment required pursuant to Section 9(a)(ii).

 

(ii)           If any Person becomes at any time after the public announcement of this Plan an Acquiring Person, then each holder of a Right shall (except as otherwise provided herein, including Section 6(e)) be entitled to receive upon exercise thereof (in accordance with the provisions of Section 6) at the then current Purchase Price, in accordance with the terms of this Plan and in lieu of shares of Preferred Stock, such number of shares of Common Stock equal to the result obtained by dividing:

 

(x)           the product obtained by multiplying the then current Purchase Price by the number of one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such first occurrence (such product being from such time on the “Purchase Price” for each Right and for all purposes of this Plan) by

 

(y)          50% of the current market price per share of Common Stock (determined pursuant to Section 9(b)(i)) on the date of such first occurrence.

(iii)           In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights as contemplated in accordance with subparagraph (ii) above, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exercise of the Rights. In the event the Company shall, after good faith effort, be unable to take such action as may be necessary to authorize such additional shares of Common Stock, the Company shall substitute, for each share of Common Stock that would otherwise be issuable upon exercise of a Right, a number of shares of Preferred Stock or fraction thereof such that the current market price of one share of Preferred Stock multiplied by such number or fraction is equal to the current market price of one share of Common Stock as of the date of issuance of such shares of Preferred Stock or fraction thereof.

 

  

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(b)           (i)           For purposes of computations hereunder other than computations made pursuant to Section 12, the “current market price” per share of Common Stock on any date shall be the average of the daily closing prices per share of such Common Stock at the close of the regular session of trading for the 30 Trading Days immediately prior to such date; and for purposes of computations made pursuant to Section 11, the “current market price” per share of Common Stock for any Trading Day shall be the closing price per share of Common Stock at the close of the regular session of trading for such Trading Day; provided that if the current market price per share of the Common Stock is determined during a period that is in whole or in part following the announcement by the issuer of such Common Stock of

 

(A)           a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities exercisable for or convertible into shares of such Common Stock (other than the Rights), or

 

(B)           any subdivision, combination or reclassification of such Common Stock, and prior to the ex-dividend date for such dividend or distribution or the record date for such subdivision, combination or reclassification, then, and in each such case, the “current market price” shall be properly adjusted to take into account ex-dividend trading.

The closing price for each day shall be the last sale price, regular way, at the close of the regular session of trading or, if no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system at the close of the regular session of trading with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the- counter market, as reported by the Nasdaq Stock Market or such other system then in use or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board (in each case prices which are not identified as having been reported late to such system). If on any such date, no market maker is making a market in the Common Stock or the Common Stock is not publicly held or not so listed or traded, the “current market value” of such shares on such date shall be as determined in good faith by the Board (or, if at the time of such determination there is an Acquiring Person, by a nationally recognized investment banking firm selected by the Board) which determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

 

  

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(ii)           For the purpose of any computation hereunder, the “current market price” per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in Section 9(b)(i) (other than the last sentence thereof). If the current market price per share of Preferred Stock cannot be determined in such manner, the “current market price” per share of Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as such number may be appropriately adjusted for such events as stock splits, reverse stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Plan) multiplied by the current market price per share of Common Stock (as determined pursuant to Section 9(b)(i)). For all purposes of this Plan, the “current market price” of one one-thousandth of a share of Preferred Stock shall be equal to the “current market price” of one share of Preferred Stock divided by 1,000.

 

(iii)           For the purpose of any computation hereunder, the value of any securities or assets other than Common Stock or Preferred Stock shall be the fair value as determined in good faith by the Board, or, if at the time of such determination there is an Acquiring Person, by a nationally recognized investment banking firm selected by the Board, which determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

(c)           Notwithstanding any provision of this Plan to the contrary, no adjustment of any item described in Section 9(a)(i) (e g , the Purchase Price, the Redemption Price, the number of shares of Preferred Stock issuable upon exercise of the Rights) shall be required unless such adjustment would require an increase or decrease of at least 1% in the relevant item; provided that any adjustments which by reason of this Section 9(c) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 9 shall be made to the nearest cent or to the nearest one-thousandth of a share of Common Stock or other share or one-hundred millionth of a share of Preferred Stock, as the case may be.

(d)           All Rights originally issued by the Company subsequent to any adjustment made hereunder shall evidence the right to purchase, at the Purchase Price then in effect, the then applicable number of one-thousandths of a share of Preferred Stock and other capital stock issuable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

(e)            Irrespective of any adjustment or change in the Purchase Price or the number of one-thousandths of a share of Preferred Stock or other securities issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-thousandth of a share and the number of shares which were expressed in the initial Right Certificates issued hereunder.

 

(f)            In any case in which this Section 9 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one-thousandths of a share of Preferred Stock or other capital stock, if any, issuable upon such exercise over and above the number of one-thousandths of a share of Preferred Stock or other capital stock, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.

 

  

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(g)           Anything in this Section 9 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 9, as and to the extent that it, in its sole discretion, determines to be advisable so that any consolidation or subdivision of the Preferred Stock or Common Stock, issuance wholly for cash of any Preferred Stock or Common Stock at less than the current market price, issuance wholly for cash of any Preferred Stock, Common Stock or securities which by their terms are convertible into or exercisable for Preferred Stock or Common Stock, stock dividends or issuance of rights, options or warrants referred to in this Section 9 hereafter made by the Company to the holders of its Preferred Stock or Common Stock shall not be taxable to such shareholders.

(h)           The Company agrees that after a Distribution Date, it will not, except as permitted by Sections 19, 20 or 23, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights.

Section 10.        Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 9, the Company shall (i) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (ii) promptly file with the Rights Agent and with each transfer agent for the Preferred Stock and the Common Stock a copy of such certificate and (iii) mail a brief summary thereof to each holder of a Right Certificate (or, if prior to a Distribution Date, to each holder of a certificate representing shares of Common Stock) in the manner set forth in Section 22. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained.

Section 11.        Fractional Rights and Fractional Shares.

(a)           The Company is not required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of any such fractional Rights, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market price of a whole Right. For purposes of this Section 11(a), the current market price of a whole Right shall be the closing price of a Right at the close of the regular session of trading for the Trading Day immediately prior to the date on which such fractional Rights would otherwise have been issuable. The closing price of a Right for any day shall be determined in the manner set forth for the Common Stock in Section 9(b)(i).

(b)           The Company is not required to issue fractions of shares of Preferred Stock (other than fractions which are multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or upon exchange of the Rights pursuant to Section 20(a), and the Company is not required to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are multiples of one one-thousandth of a share of Preferred Stock). Fractions of shares of Preferred Stock in integral multiples of one one-thousandth of a share of Preferred Stock may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Stock represented by such depositary receipts. In lieu of any such fractional shares of Preferred Stock, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market price of one one-thousandth of a share of Preferred Stock. For purposes of this Section 11(b), the current market price of one one-thousandth of a share of Preferred Stock shall be one one-thousandth of the closing price of a share of Preferred Stock (as determined pursuant to Section 9(b)) for the Trading Day immediately prior to the date of such exercise.

 

  

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(c)           Upon any exchange pursuant to Section 20(c), the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the current market price of a share of Common Stock. For purposes of this Section 11(c), the current market price of a share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to Section 9(b)) for the Trading Day immediately prior to the date of such exercise or exchange.

(d)           Each holder of a Right, by his acceptance of the Right, expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right except as permitted by this Section 11.

Section 12.        Rights of Action. All rights of action in respect of this Plan, excepting the rights of action given to the Rights Agent under Section 15 hereof, are vested in the respective registered holders of the Right Certificates (and, before the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Right Certificate (or, before the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, before the Distribution Date, of the Common Stock), on such holder's own behalf and for such holder's own benefit, may enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise the Rights evidenced by such Right Certificate (or, before the Distribution Date, such Common Stock) in the manner provided in such Rights Certificate and in this Plan. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Plan and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Plan.

 

  

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Section 13.        Agreement of Right Holders. Each holder of a Right, by his acceptance of the Right, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

(a)           prior to a Distribution Date, the Rights will be evidenced by and transferable only in connection with the transfer of Common Stock;

(b)           after a Distribution Date, the Rights will be evidenced by Right Certificates and transferable only on the registry books of the Rights Agent pursuant to Section 5;

(c)           subject to Sections 5 and 6, the Company and the Rights Agent may deem and treat the Person in whose name a Right Certificate (or, prior to a Distribution Date, a certificate representing shares of Common Stock or an Ownership Statement) is registered as the absolute owner of such certificate and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificate or the certificate representing shares of Common Stock or Ownership Statement made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 6(e), shall be affected by any notice to the contrary; and

(d)           notwithstanding anything in this Plan to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Plan by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation; provided that the Company must use its reasonable best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible.

Section 14.        Right Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the shares of capital stock which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Company (including any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, to give or withhold consent to any corporate action, to receive notice of meetings or other actions affecting shareholders (except as provided in Section 21), or to receive dividends or subscription rights, or otherwise) until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.

Section 15.        Appointment of Rights Agent.

(a)           The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable, upon 10 days prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-rights agent. If the Company appoints one or more co-rights agents, the respective duties of the Rights Agent and any co-rights agents shall be as the Company shall determine.

 

  

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(b)           The Company shall pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the execution or administration of this Plan and the exercise and performance of its duties hereunder. The Company also shall indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the administration of this Plan or the exercise or performance of its duties hereunder, including the costs and expenses of defending against any claim of liability.

Section 16.        Merger or Consolidation or Change of Name of Rights Agent.

(a)           Any corporation into or with which the Rights Agent or any successor Rights Agent may be merged, consolidated or combined, any corporation resulting from any merger, consolidation or combination to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Plan without the execution or filing of any paper or any further act on the part of any party hereto; provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 18. If at the time such successor Rights Agent succeeds to the agency created by this Plan any of the Right Certificates have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Right Certificates so countersigned; and if at that time any of the Right Certificates have not been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Plan.

(b)           If at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and if at that time any of the Right Certificates have not been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Plan.

 

Section 17.       Duties of the Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Plan upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:

 

  

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(a)           The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.

(b)           Whenever in the performance of its duties under this Plan the Rights Agent deems it necessary that any fact or matter (including the identity of any “Acquiring Person” and the determination of “current market price”) be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chief Executive Officer, the President or any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken, suffered or omitted in good faith by it under the provisions of this Plan in reliance upon such certificate.

(c)           The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct.

(d)           The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Plan or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.

(e)           The Rights Agent shall not be responsible

 

(i)           in respect of the validity of this Plan or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof),

 

(ii)          for any breach by the Company of any covenant or condition contained in this Plan or in any Right Certificate,

 

(iii)         for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 6(e)), or

 

(iv)         any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided herein or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment).

The Rights Agent shall not by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Preferred Stock or other securities to be issued pursuant to this Plan or any Right Certificate or as to whether any shares of Preferred Stock or other securities will, when issued, be duly authorized, validly issued, fully paid and nonassessable.

 

  

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(f)            The Company agrees that it will perform, execute, acknowledge and deliver, or cause to be performed, executed, acknowledged and delivered, all such acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Plan.

(g)           The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken, suffered or omitted to be taken by it in good faith in accordance with instructions of any such officer.

(h)           The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Plan. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.

(i)            The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or to any holders of Rights resulting from any such act, default, neglect or misconduct; provided that reasonable care was exercised in the selection and continued employment thereof.

(j)            No provision of this Plan shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

(k)           If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the cases may be, has either not been completed or indicates an affirmative response to clause 1 or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

(l)            The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with the administration of this Plan or the exercise or performance of its duties hereunder in reliance upon any Right Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, instruction, direction, consent, certificate, statement or other paper or document reasonably believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons.

 

  

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Section 18.        Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Plan upon 30 days notice to the Company and to each transfer agent of the Common Stock and Preferred Stock. In the event the transfer agency relationship in effect between the Company and the Rights Agent terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination, and the Company shall be responsible for sending any required notice. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days notice to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock by registered or certified mail, and, after a Distribution Date, to the holders of the Right Certificates. If the Rights Agent resigns or is removed or otherwise becomes incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company fails to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be

(a)           a corporation organized, in good standing and doing business under the laws of the United States or of any state of the United States, authorized under such laws to exercise stock transfer or corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000, or

(b)           an affiliate of a corporation described in Section 18(a).

After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and, subsequent to a Distribution Date, mail a notice thereof to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 18, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

Section 19.        Redemption.

(a)           At any time prior to a Distribution Date, the Board may, at its option, redeem all but not less than all of the then outstanding Rights at a redemption price of 0.00001 per Right, as such amount may be appropriately adjusted pursuant to Section 9(a)(i) (such redemption price being hereinafter referred to as the “Redemption Price”). The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. The Redemption Price shall be payable, at the option of the Company, in cash, shares of Common Stock, or such other form of consideration as the Board shall determine.

 

  

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(b)           Immediately upon the action of the Board electing to redeem the Rights (or at such later time as the Board may establish for the effectiveness of such redemption) and without any further action and without any notice, the right to exercise the Rights will terminate and thereafter the only right of the holders of Rights shall be to receive the Redemption Price for each Right so held. The Company shall promptly thereafter give notice of such redemption to the Rights Agent and the holders of the Rights in the manner set forth in Section 22; provided that the failure to give, or any defect in, such notice shall not affect the validity of such redemption. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made.

Section 20.        Exchange.

(a)           At any time on or after a Stock Acquisition Date, with respect to all or any part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to Section 6(e)), the Board may, at its option, exchange for each Right two shares of Common Stock, subject to adjustment pursuant to Section 9(a)(i) (such exchange ratio being hereinafter referred to as the “Exchange Ratio”). The exchange of the Rights by the Board may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Notwithstanding the foregoing, the Board shall not be empowered to effect such exchange at any time after an Acquiring Person becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.

(b)           Immediately upon the effectiveness of the action of the Board to exchange any Rights pursuant to Section 20(a) (or at such later time as the Board may establish) and without any further action and without any notice, the right to exercise such Rights will terminate and thereafter the only right of a holder of such Rights shall be to receive that number of fractional shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly thereafter give notice of such exchange to the Rights Agent and the holders of the Rights to be exchanged in the manner set forth in Section 22; provided that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of Rights for shares of Common Stock will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to Section 6(e)) held by each holder of Rights.

 

  

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(c)           In lieu of exchanging all or any part of the then outstanding and exercisable Rights for shares of Common Stock in accordance with Section 20(a), the Board may, at its option, substitute, for each share of Common Stock that would otherwise be issuable upon exchange of a Right, a number of shares of Preferred Stock or fraction thereof such that the current market price of one share of Preferred Stock multiplied by such number or fraction is equal to the current market price of one share of Common Stock as of the date of issuance of such shares of Preferred Stock or fraction thereof.

(d)           Prior to effecting an exchange pursuant to this Section 20, the Board may direct the Company to enter into a Trust Agreement in such form and with such terms as the Board of Directors shall then approve (the “Trust Agreement”). If the Board so directs, the Company shall enter into the Trust Agreement and shall issue to the trust created by such agreement (the “Trust”) all of the fractional shares of Preferred Stock, or shares of Common Stock or other securities, if any, issuable pursuant to the exchange, and all Persons entitled to receive shares or other securities pursuant to the exchange shall be entitled to receive such shares or other securities (and any dividends or distributions made thereon after the date on which such shares or other securities are deposited in the Trust) only from the Trust and solely upon compliance with the relevant terms and provisions of the Trust Agreement.

Section 21.        Notice of Proposed Actions and Certain Other Matters.

(a)           If the Company proposes, at any time after a Distribution Date,

 

(i)        to pay any dividend payable in stock of any class or to make any other distribution (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company) to the holders of Preferred Stock,

 

(ii)       to offer to the holders of its Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options,

 

(iii)      to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision or combination of outstanding shares of Preferred Stock),

 

(iv)     to effect, or permit any of its Subsidiaries to effect, any consolidation, merger or combination with any other unaffiliated Person, or to effect any sale or other transfer, in one transaction or a series of related transactions, of assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries, taken as a whole,

 

(v)      to effect the liquidation, dissolution or winding-up of the Company, or

 

(vi)     to declare or pay any dividend on the Common Stock payable in Common Stock or to effect a subdivision, combination or consolidation of the Common Stock (by reclassification or otherwise than by payment of dividends in Common Stock),

 

  

25

  

 

then, in each such case, the Company shall give to each holder of a Right, a notice of such proposed action specifying the record date for the purposes of any such dividend, distribution or offering of rights or warrants, or the date on which any such reclassification, consolidation, merger, combination, sale, transfer, liquidation, dissolution or winding-up is to take place and the date of participation therein by the holders of Preferred Stock or Common Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by Section 21(a)(i) or 21(a)(ii) above at least 20 days prior to the record date for determining holders of the Preferred Stock entitled to participate in such dividend, distribution or offering, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Preferred Stock, whichever shall be earlier. The failure to give notice required by this Section or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action.

(b)           (i) The Company shall as soon as practicable after a Stock Acquisition Date give to each holder of a Right, in accordance with Section 22, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 9(a)(ii), and (ii) all references in Section 21 to Preferred Stock shall be deemed thereafter to refer to Common Stock or other capital stock, as the case may be.

Section 22.        Notices. Except as set forth below, all notices, requests and other communications to any party hereunder and to the holder of any Right shall be in writing unless otherwise expressly specified herein. Notices or demands authorized by this Plan to be given or made to or on the Company or (subject to Section 18) the Rights Agent shall be sufficiently given or made if sent by overnight delivery service or registered or certified mail (postage prepaid) to the addresses set forth below (or such other address as such party specifies in writing to the other party):

 

If to the Company, to:

 

Porter Bancorp, Inc.

2500 Eastpoint Parkway

Louisville, KY 40223

Attention: John T. Taylor

Telephone: (502) 499-4800

Facsimile: (888) 832-9724

If to the Rights Agent, to:

 

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Attention: Relationship Management

Telephone:

Facsimile:

 

  

26

  

 

Except as otherwise expressly set forth in this Plan, notices or demands authorized by this Plan to be given or made by the Company or the Rights Agent to the holder of any Right Certificate any certificate representing shares of Common Stock is sufficiently given or made if sent by first class mail (postage prepaid) to each record holder of such Certificate at the address of such holder shown on the registry books of the Company. Notwithstanding anything in this Plan to the contrary, prior to a Distribution Date a public filing by the Company with the Securities and Exchange Commission shall constitute sufficient notice to the holders of securities of the Company, including the Rights, for purposes of this Plan and no other notice need be given to such holders.

Section 23.        Supplements and Amendments. At any time on or prior to a Distribution Date, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Plan in any respect without the approval of any holders of Rights. At any time after the occurrence of a Distribution Date, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend this Plan without the approval of any holders of Rights; provided, however, that no such supplement or amendment may (a) adversely affect the interests of the holders of Rights as such (other than an Acquiring Person), (b) cause this Plan again to become amendable other than in accordance with this sentence, or (c) cause the Rights again to become redeemable. Upon the delivery of a certificate from the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company stating that the proposed supplement or amendment is in compliance with the terms of this Plan, the Rights Agent shall execute such supplement or amendment; provided, however, that the Rights Agent may, but shall not be required to, execute any supplement or amendment that adversely affects its rights, duties or obligations under this Agreement.

Section 24.        Successors. All the covenants and provisions of this Plan by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

Section 25.        Determinations and Actions by the Board, etc. The Board shall have the exclusive power and authority to administer this Plan and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Plan, including the right and power to (i) interpret the provisions of this Plan and (ii) make all determinations deemed necessary or advisable for the administration of this Plan (including a determination to redeem or exchange or not to redeem or exchange the Rights or to amend the Plan). All such actions, calculations, interpretations and determinations which are done or made by the Board in good faith shall be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties.

Section 26.        Benefits of This Plan. Nothing in this Plan shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to a Distribution Date, the certificates or ownership statements representing the shares of Common Stock) any legal or equitable right, remedy or claim under this Plan; but this Plan shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to a Distribution Date, the certificates representing the shares of Common Stock).

 

  

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Section 27.        Severability. If any term, provision, covenant or restriction of this Plan is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

 

Section 28.       Governing Law. This Plan, each Right and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the Commonwealth of Kentucky and for all purposes shall be governed by and construed in accordance with the laws of Kentucky applicable to contracts to be made and performed entirely within Kentucky.

Section 29.        Counterparts. This Plan may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.

Section 30.        Descriptive Headings. Descriptive headings of the several sections of this Plan are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

[Signature Page Follows]

  

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IN WITNESS WHEREOF, the parties hereto have caused this Plan to be duly executed by their respective authorized officers as of the day and year first above written.

 

	 	Porter Bancorp, Inc.
	 	 	 
	 	 	 
	 	 	 
	 	By: 	/s/ Phillip W. Barnhouse
	 	Name: 	Phillip W. Barnhouse 
	 	Title: 	Chief Financial Officer 
	 	 	 
	 	 	 
	 	 	 
	 	
American Stock Transfer & Trust Company, LLC,

As Rights Agent

	 	 
	 	 
	 	 
	 	By: 	/s/ Paula Caroppoli
	 	Name: 	Paula Caroppoli 
	 	Title: 	Senior Vice President 

 

  

29

  

 

EXHIBIT A

FORM OF

ARTICLES OF AMENDMENT

TO THE

ARTICLES OF INCORPORATION

FOR

PORTER BANCORP, INC.

Porter Bancorp, Inc. (the “Corporation”) files these Articles of Amendment pursuant to KRS 271B.6-020.

1.           The name of the corporation is Porter Bancorp, Inc. (the “Corporation”)

 

2.           The Amended and Restated Articles of Incorporation of the Corporation are hereby amended as follows:

 

(a)           Current Article IV, Section I is redesignated as Article IV, Section E.

 

(b)           A new Article IV, Section F is added to state the number, designation, relative rights, preferences and limitations of a new series of the Company’s Preferred Shares as fixed by the board of directors, which article shall read in its entirety as follows:

 

 

F.      Series G Participating Preferred Shares

 

Section 1.   Designation and Number of Shares. The shares of such series shall be designated as “Series G Participating Preferred Shares” (the “Series G Preferred Shares”), and the number of shares constituting such series shall be 35,200. Such number of shares of the Series G Preferred Shares may be increased or decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of Series G Preferred Shares to a number less than the number of shares then outstanding plus the number of shares issuable upon exercise or conversion of outstanding rights, options or other securities issued by the Corporation.

Section 2.        Dividends and Distributions. (a) Subject to the prior and superior rights of the holders of any shares of any class or series of stock of the Corporation ranking prior and superior to the Series G Preferred Shares with respect to dividends, the holders of Series G Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, regular quarterly dividends payable on such dates each year as designated by the Board of Directors (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of any share or fraction of a Series G Preferred Share, in an amount per share (rounded to the nearest cent) equal to the Multiplier Number times the aggregate per share amount of all cash dividends or other distributions and the Multiplier Number times the aggregate per share amount of all non-cash dividends or other distributions (other than (i) a dividend payable in Common Shares or Non-Voting Common Shares, or (ii) a subdivision of the outstanding Common Shares or Non-Voting Common Shares (by reclassification or otherwise)), declared on the Common Shares or Non-Voting Common Shares since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a Series G Preferred Share. As used herein, the “Multiplier Number” shall be 1,000; provided that if, at any time after June 29, 2015, there shall be any change in the Common Shares or Non-Voting Common Shares, whether by reason of stock dividends, stock splits, reverse stock splits, recapitalization, mergers, consolidations, combinations or exchanges of securities, split-ups, split-offs, spin-offs, liquidations or other similar changes in capitalization, or any distribution or issuance of shares of its capital stock in a merger, share exchange, reclassification, or change of the outstanding Common Shares or Non-Voting Common Shares, then in each such event the Board of Directors shall adjust the Multiplier Number to the extent appropriate such that following such adjustment each Series G Preferred Share shall be in the same economic position as prior to such event.

 

  

  

  

  

 

(b)      The Corporation shall declare a dividend or distribution on the Series G Preferred Shares as provided in Section 2(a) immediately after it declares a dividend or distribution on the Common Shares or Non-Voting Common Shares (other than as described in Sections 2(a)(i) and 2(a)(ii)).

 

(c)       Dividends, to the extent payable as provided in Sections 2(a) and 2(b), shall begin to accrue and be cumulative on outstanding Series G Preferred Shares from the Quarterly Dividend Payment Date immediately preceding the date of issuance of such Series G Preferred Shares, unless the date of issuance of such shares is on or before the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue and be cumulative from the date of issue of such shares, or unless the date of issue is a date after the record date for the determination of holders of Series G Preferred Shares entitled to receive a quarterly dividend and on or before such Quarterly Dividend Payment Date, in which case dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on Series G Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of Series G Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall not be more than 60 days prior to the date fixed for the payment thereof.

 

  

  

  

 

Section 3.        Voting Rights. In addition to any other voting rights required by law, the holders of Series G Preferred Shares shall have the following voting rights:

(a)       Each Series G Preferred Share shall entitle the holder thereof to a number of votes equal to the Multiplier Number on all matters submitted to a vote of shareholders of the Corporation.

(b)     Except as otherwise provided herein or by law, the holders of Series G Preferred Shares and the holders of Common Shares shall vote together as a single class on all matters submitted to a vote of shareholders of the Corporation.

(c)     The Articles of Incorporation of the Corporation shall not be amended in any manner (whether by merger or otherwise) so as to adversely affect the powers, preferences or special rights of the Series G Preferred Shares without the affirmative vote of the holders of a majority of the outstanding Series G Preferred Shares, voting separately as a class.

(d)     Except as otherwise expressly provided herein, holders of Series G Preferred Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Shares as set forth herein) for taking any corporate action.

Section 4.        Certain Restrictions. (a) Whenever quarterly dividends or other dividends or distributions payable on the Series G Preferred Shares as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on outstanding Series G Preferred Shares shall have been paid in full, the Corporation shall not:

 

(i)       declare or pay dividends on, or make any other distributions on, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding-up) to the Series G Preferred Shares;

 

(ii)       declare or pay dividends on, or make any other distributions on, any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding-up) with the Series G Preferred Shares, except dividends paid ratably on the Series G Preferred Shares and all such other parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

 

(iii)      redeem, purchase or otherwise acquire for value any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding-up) to the Series G Preferred Shares; provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation or winding-up) to the Series G Preferred Shares; or

 

  

  

  

 

(iv)      redeem, purchase or otherwise acquire for value any Series G Preferred Shares, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding-up) with the 

Series G Preferred Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series G Preferred Shares and all such other parity stock upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(b)      The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for value any shares of stock of the Corporation unless the Corporation could, under Section 4(a), purchase or otherwise acquire such shares at such time and in such manner.

Section 5.        Reacquired Shares. Any Series G Preferred Shares purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired promptly after the acquisition thereof. All such shares shall upon their retirement become authorized but unissued shares of Preferred Stock without designation as to series and may be reissued as part of a new series of Preferred Stock to be created by the Board of Directors as permitted by the certificate of incorporation of the Corporation or as otherwise permitted under Kentucky law.

Section 6.        Liquidation, Dissolution and Winding-up. Upon any liquidation, dissolution or winding-up of the Corporation, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding-up) to the Series G Preferred Shares unless, prior thereto, the holders of Series G Preferred Shares shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment; provided that the holders of Series G Preferred Shares shall be entitled to receive an aggregate amount per share equal to (x) the Multiplier Number times (y) the aggregate amount to be distributed per share to holders of Common Shares or Non-Voting Common Shares, or (b) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding-up) with the Series G Preferred Shares, except distributions made ratably on the Series G Preferred Shares and all such other parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding-up.

Section 7.       Consolidation, Merger, etc. If the Corporation shall enter into any consolidation, merger, combination or other transaction in which the Common Shares or Non-Voting Common Shares are exchanged for or changed into other stock or securities, cash or any other property, then in any such case the Series G Preferred Shares shall at the same time be similarly exchanged for or changed into an amount per share equal to (x) the Multiplier Number times (y) the aggregate amount of stock, securities, cash or any other property, as the case may be, into which or for which each Common Share or Non-Voting Common Shares is changed or exchanged.

 

  

  

  

  

 

Section 8.        No Redemption. The Series G Preferred Shares shall not be redeemable.

Section 9.        Rank. The Series G Preferred Shares shall rank junior to all other series of the Preferred Shares as to the payment of dividends and the distribution of assets upon liquidation, dissolution and winding-up, unless the terms of such series shall specifically provide otherwise, and shall rank senior to the Common Shares and Non-Voting Common Shares as to such matters.

Section 10.      Fractional Shares. Series G Preferred Shares may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series G Preferred Shares.”

4.             The Amendment was duly adopted on June 24, 2015 by the board of directors of the Company without shareholder approval, which was not required.

5.             The foregoing amendment will be effective upon filing the Articles of Amendment with the Secretary of State of the Commonwealth of Kentucky.

IN WITNESS WHEREOF, the undersigned has executed these Articles of Amendment on this 26th day of June 2015.

	 	 	PORTER BANCORP, INC.	 
	 	 	 	 
	 	 	 	 
	
  

	
By: 

	 	 
	 	Name:	John T Taylor 	 
	 	Title:	President and Chief Executive Officer 	 

  

  

  

EXHIBIT B

As set forth in the Plan, rights issued or transferred to, or beneficially owned by, any person who is, was or becomes an acquiring person as such terms are defined in the Plan), whether currently beneficially owned by or on behalf of such person or by any subsequent holder, may be null and void.

SUMMARY OF TERMS

PORTER BANCORP, INC.

TAX BENEFITS PRESERVATION PLAN

	
Purpose

	
The purpose of the Tax Benefits Preservation Plan (“Plan”) described in this summary of terms is to help preserve the value of the deferred tax assets (“Tax Benefits”) of Porter Bancorp, Inc. (the “Company”) for U.S. federal income tax purposes.

	 	 
	
Form of Security

	
The Board of Directors has declared a dividend of one preferred stock purchase right for each outstanding Common Share of the Company, payable to holders of record as of the Close of Business on July 10, 2015 (each a “Right” and collectively, the “Rights”).

	 	 
	
Exercise

	
Prior to a Distribution Date1, the Rights are not exercisable.

After a Distribution Date, each right is exercisable to purchase, for $10.00 (the Purchase Price), one one-thousandth of a share of the Company’s Series G Participating Preferred Shares (the “Preferred Shares”).

	 	 
	
Flip-In

	
If any person or group becomes a “5-percent shareholder” (an “Acquiring Person”) (subject to certain exceptions described in the Plan), then on a Distribution Date, each Right (other than Rights beneficially owned by the Acquiring Person and certain affiliated persons) will entitle the holder to purchase, for the Purchase Price, a number of Common Shares of the Company equal to the quotient of (x) two times the Purchase Price divided by (y) the then current market price of the Company's Common Shares; provided that (i) none of the Company and certain affiliates of the Company shall be an Acquiring Person, (ii) none of certain existing “5-percent shareholders” (including certain persons who are “5-percent shareholders” following specified exchange offers with the Company) shall be an Acquiring Person unless and until any such “5-percent shareholder” increases its percentage stock ownership in the Company by more than one-tenth of one percentage point, (iii) none of certain other “grandfathered persons” (as described in the Plan) shall be an Acquiring Person so long as any such “grandfathered person” satisfies the applicable requirements set forth in the Plan, (iv) no person or group who or which the Board determines, in its sole discretion, has inadvertently become a “5-percent shareholder” (or inadvertently failed to continue to qualify as a “grandfathered person”) shall be an Acquiring Person so long as such Person promptly enters into, and delivers to the Company, an irrevocable commitment promptly to divest, and thereafter promptly divests (without exercising or retaining any power, including voting, with respect to such securities), sufficient securities of the Company so that such person's (or such group's) percentage stock ownership in the Company is less than 5 percent (or, in the case of any person or group that has inadvertently failed to qualify as a “grandfathered person,” the securities of the Company that caused such person or group to fail to qualify as a “grandfathered person”) , (v) no person or group that has become a “5-percent shareholder” shall be an Acquiring Person if the Board in good faith determines that such person's or group's attainment of “5-percent shareholder” status has not jeopardized or endangered the Company's utilization of the Tax Benefits or is otherwise in the best interests of the Company; provided that such a person or group shall be an “Acquiring Person” if the Board makes a contrary determination in good faith, and (vi) an acquisition by a person or group of at least a majority of the Company's Common Shares made by that person or group as part of a “qualified offer” (as defined in the Plan) shall not result in any person or group becoming an Acquiring Person.

	 	 

1 Distribution Date means the earlier of:

	●	the 10th business day after public announcement that any person or group has become an Acquiring Person; and
	●	the 10th business day after the date of the commencement of a tender or exchange offer by any person which would or could, if consummated, result in such person becoming an Acquiring Person, subject to extension by the Board of Directors of the Company.

 

  

  

  

 

	
Exchange

	
At any time after any person has become an Acquiring Person (but before any person becomes the beneficial owner of 50% or more of the Company's Common Shares), the Board may elect to exchange all or part of the Rights (other than the Rights beneficially owned by the Acquiring Person and certain affiliated persons) for two Common Shares (or, at the option of the Board, fractional Preferred Shares with an aggregate current market price that equals the current market price of two Common Shares) per Right, subject to adjustment.

	 	 
	
Redemption

	
The Board of Directors may, at its option, redeem all, but not less than all, of the then outstanding Rights at a redemption price of $0.00001 per Right at any time prior to a Distribution Date.

	 	 
	
Expiration

	
The Rights will expire on the earliest of (i) June 29, 2018, (ii) the time at which all Rights are redeemed or exchanged, (iii) the first day of a taxable year of the Company as to which the Board of Directors determines that no Tax Benefits may be carried forward, (iv) a date on which the Board of Directors determines that a limitation on the use of the Tax Benefits under Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), would no longer be material to the Company, provided that such date is prior to public disclosure that a person became an Acquiring Person, (v) the repeal or amendment of Section 382 or any successor statute, if the Board of Directors determines that the Plan is no longer necessary for the preservation of Tax Benefits, (vi) the effective date of an amendment to the Company’s Articles of Incorporation to preserve the Company’s tax benefits that has been approved by the Company’s shareholders entitled to vote on such an amendment.

  

  

  

 

	
Amendments

	
At any time on or prior to a Distribution Date, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend any provision of the Plan without the approval of any holders of Rights.

	 	 
	 	
After a Distribution Date, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend the Plan without the approval of any holders of Rights; provided however, that no such supplement or amendment may (a) adversely affect the interests of the holders of Rights as such (other than an Acquiring Person), (b) cause the Plan again to become amendable other than in accordance with this sentence or (c) cause the Rights again to become redeemable.

	 	 
	
Shareholder Rights

	
Rights holders, in their capacity as such, have no rights as a shareholder of the Company, including the right to vote and to receive dividends.

	 	 
	
Antidilution Provisions

	
The Plan includes antidilution provisions designed to prevent efforts to diminish the efficacy of the Rights.

  

A copy of the Plan has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A copy of the Plan is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Plan, as amended from time to time, the complete terms of which are hereby incorporated by reference.

  

  

  

EXHIBIT C

[FORM OF RIGHT CERTIFICATE]

No. R - [Number of] Rights

NOT EXERCISABLE AFTER JUNE 29, 2018 OR SUCH EARLIER DATE AS PROVIDED BY THE TAX BENEFITS PRESERVATION PLAN OR EARLIER IF THE RIGHTS EVIDENCED HEREBY ARE REDEEMED OR EXCHANGED BY THE COMPANY AS SET FORTH IN THE RIGHTS PLAN. AS SET FORTH IN THE RIGHTS PLAN, RIGHTS ISSUED TO, OR BENEFICIALLY OWNED BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS PLAN), WHETHER CURRENTLY BENEFICIALLY OWNED BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BE NULL AND VOID.

RIGHT CERTIFICATE

PORTER BANCORP, INC.

This Right Certificate certifies that__________________________, or registered assigns, is the registered holder of the number of Rights set forth above, each of which entitles the holder (upon the terms and subject to the conditions set forth in the Tax Benefits Preservation Plan dated as of June 25, 2015 (the “Plan”) between Porter Bancorp, Inc., a Kentucky corporation (the “Company”), and American Stock Transfer & Trust Company, LLC (the “Rights Agent”)) to purchase from the Company, at any time after a Distribution Date and prior to the Expiration Date, one-one thousandths of a fully paid, nonassessable share of the Company’s Series G Participating Preferred Shares (the “Preferred Shares”) of at a purchase price of $10.00 per one one-thousandth of a share (the “Purchase Price”), payable in lawful money of the United States of America, upon surrender of this Right Certificate, with the form of election to purchase and related certificate duly executed, and payment of the Purchase Price at an office of the Rights Agent designated for such purpose.

Terms used herein and not otherwise defined herein shall have the meanings given to them in the Plan.

The number of Rights evidenced by this Right Certificate (and the number and kind of shares issuable upon exercise of each Right) and the Purchase Price set forth above are as of June 25, 2015, and may have been or in the future be adjusted as a result of the occurrence of certain events, as more fully provided in the Plan.

If the Rights evidenced by this Right Certificate are Beneficially Owned by an Acquiring Person after an Acquiring Person has become such, such Rights shall become null and void without any further action, and no holder hereof shall have any rights whatsoever with respect to such Rights. If the Rights evidenced by this Right Certificate are beneficially owned by (a) a transferee of Rights Beneficially Owned by such Acquiring Person who (i) becomes a transferee after a Stock Acquisition Date or (ii) becomes a transferee prior to or concurrently with a Stock Acquisition Date and receives such Rights (A) with actual knowledge that the transferor is or was an Acquiring Person or (B) pursuant to either (I) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (II) a transfer which is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of these transfer restrictions, such Rights shall become null and void without any further action, and no holder hereof shall have any rights whatsoever with respect to such Rights.

 

  

  

  

 

This Right Certificate is subject to all of the terms, provisions and conditions of the Plan, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Plan reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Plan.

At any time after a Distribution Date and prior to the Expiration Date, any Right Certificate or Certificates may, upon the terms and subject to the conditions set forth below in the Plan, be transferred or exchanged for another Right Certificate or Certificates evidencing a like number of Rights as the Right Certificate or Certificates surrendered. Any registered holder desiring to transfer or exchange any Right Certificate or Certificates shall surrender such Right Certificate or Certificates (with, in the case of a transfer, the form of assignment and certificate on the reverse side thereof duly executed) to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose.

Subject to the provisions of the Plan, the Board of Directors of the Company may, at its option,

(a)       at any time on or prior to a Distribution Date redeem all but not less than all of the then outstanding Rights at a redemption price of $0.00001 per Right, as may be adjusted pursuant to the Plan; or

(b)      at any time after a Distribution Date exchange all or part of the then outstanding Rights (which shall not include Rights that have become void pursuant to Section 6 (e)) for Common Shares at an exchange ratio of two Common Shares (or, at the option of the Board, fractional Preferred Shares with an aggregate current market price that equals the current market price of two Common Shares) per Right, as may be adjusted pursuant to the Plan. If the Rights shall be exchanged in part, the holder of this Right Certificate shall be entitled to receive upon surrender hereof another Right Certificate or Certificates for the number of whole Rights not exchanged.

The Company shall not be required to issue fractions of a Preferred Share (other than fractions which are multiples of one one-thousandth of a Preferred Shares) upon the exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are multiples of one one-thousandth of a Preferred Shares which may, at the election of the Company, be evidenced by depositary receipts). In lieu of any such fractional Preferred Shares, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised an amount in cash equal to the same fraction of the current market price of one one-thousandth of a Preferred Share. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Certificates for the number of whole Rights not exercised.

 

  

  

  

 

No holder of this Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the shares of capital stock which may at any time be issuable on the exercise hereof, nor shall anything contained in the Plan or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company (including any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, to receive notice of meetings or other actions affecting shareholders (except as provided in the Plan), to receive dividends or subscription rights, or otherwise) until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Plan.

This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal by its authorized officers.

Dated as of ______________, 201_

 

  

  

  

 

	PORTER BANCORP, INC	 
	 	 	 
	 	 	 
	By:	 	 
	Name:	 	 
	Title: 	 	 
	 	 	 
	
[SEAL]

	 	 
	 	 	 
	
Attest:

	 	 
	 	 	 
	 	 	 
	By:	 	 
	Name:	 	 
	Title:	Secretary	 
	 	 	 
	
Countersigned:

	 	 
	 	 	 
	AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC	 
	
As Rights Agent

	 
	 	 	 
	 	 	 
	By:	 	 
	Name:	 	 
	Title:	 	 

 

  

  

  

 

Form of Reverse Side of Right Certificate

FORM OF ASSIGNMENT

(To be executed if the registered holder desires to transfer the Right Certificate)

FOR VALUE RECEIVED _________________________________ hereby sells, assigns and transfers unto _____________________________________________

                                                                                                                                                                                                               (Please print name and address of transferee)

________________________________________________________________________________________________________________________________

this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ________________________ Attorney, to

transfer the within Right Certificate on the books of the within named Company, with full power of substitution.

Dated: __________, 201__

 

 

	 	 
	 	Signature

Medallion Signature Guaranteed:

  

  

  

 

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

(1)       the Rights evidenced by this Right Certificate _____ are _____ are not Beneficially Owned by an Acquiring Person and _____ are _____ are not being assigned by or on behalf of a Person who is or was an Acquiring Person (as such terms are defined in the Plan); and

(2)       after due inquiry and to the best knowledge of the undersigned, it _____ did _____ did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or became an Acquiring Person.

Dated: __________, 201__

 

	 	 
	 	Signature

 

The signatures to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

  

  

  

 

FORM OF ELECTION TO PURCHASE

  

(To be executed if the registered holder desires to exercise Rights represented by the Right Certificate)

To: Porter Bancorp, Inc.

The undersigned hereby irrevocably elects to exercise _____________________ Rights represented by this Right Certificate to purchase Preferred Shares issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such securities be issued in the name of and delivered to:

Please insert social security or other identifying number _________________________

 

                      

	 	 
	 	 
	 	 
	 	(Please print name and address)

 

 

If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance of such Rights shall be registered in the name of and delivered to:

Please insert social security or other identifying number _________________________

 

	 	 
	 	 
	 	 
	 	(Please print name and address)

 

                               

Dated: __________, 201___

 

 

	 	 
	 	Signature

 

                       

Medallion Signature Guaranteed:

 

  

  

  

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

(1)       the Rights evidenced by this Right Certificate _____ are _____ are not Beneficially Owned by an Acquiring Person and _____ are _____ are not being assigned by or on behalf of a Person who is or was an Acquiring Person (as such terms are defined in the Plan); and

(2)       after due inquiry and to the best knowledge of the undersigned, it _____ did _____ did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or became an Acquiring Person.

Dated: __________, 201___

 

 

	 	 
	 	Signature

 

The signatures to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.EX-4.1

 Exhibit 4.1 

BAXALTA INCORPORATED AND SUBSIDIARIES 

DEFERRED COMPENSATION PLAN 

(Effective July 1, 2015) 

 TABLE OF CONTENTS 

 

							
	ARTICLE I — PURPOSE, EFFECTIVE DATE, EMPLOYER		 	1	  
	 1.1
		 PURPOSE
		 	1	  
	 1.2
		 EMPLOYER
		 	1	  
	 1.3
		 FORMER PARTICIPANTS IN BAXTER PLAN
		 	1	  
		
	ARTICLE II — DEFINITIONS		 	3	  
	 2.1
		 ACCOUNTS
		 	3	  
	 2.2
		 BENEFIT COMMITTEE
		 	3	  
	 2.3
		 BENEFICIARY
		 	3	  
	 2.4
		 BONUS
		 	3	  
	 2.5
		 BONUS DEFERRAL
		 	3	  
	 2.6
		 CODE
		 	3	  
	 2.7
		 COMPENSATION
		 	3	  
	 2.8
		 COMPENSATION COMMITTEE
		 	3	  
	 2.9
		 DEFERRAL ELECTION FORM
		 	4	  
	 2.10
		 DISTRIBUTION ELECTION FORM
		 	4	  
	 2.11
		 ELIGIBLE EMPLOYEE
		 	4	  
	 2.12
		 EMPLOYER
		 	4	  
	 2.13
		 EMPLOYER NON-MATCHING CONTRIBUTION
		 	5	  
	 2.14
		 EXCESS MATCHING CONTRIBUTION
		 	5	  
	 2.15
		 MATCHING CONTRIBUTION
		 	5	  
	 2.16
		 PARTICIPANT
		 	5	  
	 2.17
		 PAY DEFERRAL CONTRIBUTION
		 	5	  
	 2.18
		 PLAN YEAR
		 	5	  
	 2.19
		 SECTION 409A
		 	5	  
	 2.20
		 TERMINATION OF EMPLOYMENT
		 	5	  
	 2.21
		 UNFORESEEABLE EMERGENCY
		 	6	  
	 2.22
		 VESTING
		 	7	  
		
	ARTICLE III — ELIGIBILITY FOR CONTRIBUTIONS AND DEFERRALS		 	8	  
	 3.1
		 EXCESS MATCHING CONTRIBUTIONS
		 	8	  
	 3.2
		 BONUS DEFERRAL ELECTIONS
		 	8	  
	 3.3
		 PAY DEFERRAL ELECTIONS
		 	8	  
	 3.4
		 DISCRETIONARY CONTRIBUTIONS
		 	9	  
	 3.5
		 EMPLOYER NON-MATCHING CONTRIBUTION
		 	9	  
	 3.6
		 CONTRIBUTIONS FOLLOWING MILITARY SERVICE
		 	9	  
	 3.7
		 MID-YEAR DEFERRAL ELECTIONS
		 	10	  
		
	ARTICLE IV — CREDITING OF ACCOUNTS		 	11	  
	 4.1
		 CREDITING OF ACCOUNTS
		 	11	  
	 4.2
		 EARNINGS
		 	11	  
	 4.3
		 ACCOUNT STATEMENTS
		 	12	  
	 4.4
		 VESTING
		 	12	  

  
 - i - 

							
		
	ARTICLE V — DISTRIBUTION OF BENEFITS		 	13	  
	 5.1
		 DISTRIBUTION OF BENEFITS
		 	13	  
	 5.2
		 DISTRIBUTION
		 	13	  
	 5.3
		 EFFECT OF PAYMENT
		 	15	  
	 5.4
		 TAXATION OF PLAN BENEFITS
		 	16	  
	 5.5
		 WITHHOLDING AND PAYROLL TAXES
		 	16	  
	 5.6
		 DISTRIBUTION DUE TO UNFORESEEABLE EMERGENCY
		 	16	  
	 5.7
		 DISTRIBUTION DUE TO INCLUSION IN TAXABLE
INCOME
		 	16	  
	 5.8
		 DISTRIBUTION OF DE MINIMIS AMOUNTS
		 	16	  
	 5.9
		 CORRECTION OF ERRORS
		 	17	  
		
	ARTICLE VI — BENEFICIARY DESIGNATION		 	18	  
	 6.1
		 BENEFICIARY DESIGNATION
		 	18	  
	 6.2
		 AMENDMENTS TO BENEFICIARY DESIGNATION
		 	18	  
	 6.3
		 NO BENEFICIARY DESIGNATION
		 	18	  
	 6.4
		 FORM OF PAYMENT TO BENEFICIARY
		 	18	  
		
	ARTICLE VII — ADMINISTRATION		 	19	  
	 7.1
		 BENEFIT COMMITTEE
		 	19	  
	 7.2
		 BENEFIT COMMITTEE POWERS
		 	19	  
	 7.3
		 EFFECT OF BENEFIT COMMITTEE DECISIONS
		 	20	  
	 7.4
		 CLAIMS PROCEDURE
		 	20	  
	 7.5
		 ACTION BY BENEFIT COMMITTEE
		 	21	  
	 7.6
		 INDEMNITY
		 	21	  
		
	ARTICLE VIII — AMENDMENT AND TERMINATION OF PLAN		 	22	  
	 8.1
		 AMENDMENT
		 	22	  
	 8.2
		 RIGHT TO TERMINATE
		 	23	  
	 8.3
		 PAYMENT AT TERMINATION
		 	23	  
		
	ARTICLE IX — MISCELLANEOUS		 	24	  
	 9.1
		 UNFUNDED PLAN
		 	24	  
	 9.2
		 UNSECURED GENERAL CREDITOR
		 	24	  
	 9.3
		 NONASSIGNABILITY
		 	24	  
	 9.4
		 NOT A CONTRACT OF EMPLOYMENT
		 	24	  
	 9.5
		 PROTECTIVE PROVISIONS
		 	25	  
	 9.6
		 GOVERNING LAW
		 	25	  
	 9.7
		 SEVERABILITY
		 	25	  
	 9.8
		 NOTICE
		 	25	  
	 9.9
		 SUCCESSORS
		 	25	  
	 9.10
		 ACTION BY BAXALTA
		 	26	  
	 9.11
		 EFFECT ON BENEFIT PLANS
		 	26	  
	 9.12
		 PARTICIPANT LITIGATION
		 	26	  
		
	APPENDIX A — PARTICIPATING EMPLOYERS		 	27	  
	APPENDIX B — SUPPLEMENTAL PAY DEFERRALS UNDER SECTION 3.3		 	28	  
	APPENDIX C — DISCRETIONARY EMPLOYER CONTRIBUTIONS UNDER SECTION 3.5		 	29	  

  
 - ii - 

 BAXALTA INCORPORATED AND SUBSIDIARIES 

DEFERRED COMPENSATION PLAN 

(Effective July 1, 2015) 

ARTICLE I — PURPOSE, EFFECTIVE DATE, EMPLOYER 
  

	1.1	PURPOSE. 

 Baxalta Incorporated (“Baxalta”) hereby adopts
the Baxalta Incorporated and Subsidiaries Deferred Compensation Plan (the “Plan”). The Plan is intended to be an unfunded arrangement to provide deferred compensation for the benefit of a select group of management and highly compensated
employees. The Plan is designed to enable eligible participants to defer compensation and receive matching contributions under the provisions of the Baxalta Incorporated and Subsidiaries Incentive Investment Plan (“IIP”), a tax-qualified
defined contribution plan, in excess of the limitations imposed by the Internal Revenue Code (“Code”). Capitalized terms not defined in this Plan are deemed to have the meaning given them in the IIP. 

 

	1.2	EMPLOYER. 

 The Plan is adopted for the benefit of a select group of
management or highly compensated employees of Baxalta or of any subsidiaries or affiliates of Baxalta, as set forth below. The Plan may be adopted by any subsidiaries or affiliates of Baxalta with the consent of the Benefit Committee. Participating
Employers are listed on Appendix A as attached and updated from time to time. 
  

	1.3	FORMER PARTICIPANTS IN BAXTER PLAN. 

AS OF THE DATE OF ADOPTION OF THIS
PLAN, BAXALTA IS A WHOLLY-OWNED SUBSIDIARY OF BAXTER INTERNATIONAL INC.
(“Baxter”). Baxter has announced its plan to distribute at least 80.1 percent of Baxalta’s stock to the shareholders of Baxter in a spin-off transaction (the “Spin-Off”), on or about July 1, 2015. This Plan is being adopted by Baxalta in anticipation of the Spin-Off, and in connection with Baxalta’s adoption of the IIP in anticipation of the Spin-Off,
and the effective date of the Plan (the “Effective Date”) shall be the effective date of the Spin-Off. In the event that the Spin-Off does not occur, this Plan will be null and void and no person shall have any rights or obligations
hereunder. In accordance with the Employee Matters Agreement between Baxalta and Baxter (the “Employee Matters Agreement”), the following provisions shall apply to persons who become employees of Baxalta or its subsidiaries in connection
with the Spin-Off and who, immediately prior to the Effective Date, had an account balance in the Baxter International Inc. and Subsidiaries Deferred Compensation Plan (the “Baxter Plan”): 

 

	 	(a)	An employee of Baxter who is a participant in the Baxter Plan, and whose employment is transferred, or is scheduled to be transferred, from Baxter to Baxalta, or one of its subsidiaries, on or before the Spin-Off Date
shall become a Participant on the Effective Date; 

	 	(b)	An employee of Baxter who is a participant in the Baxter Plan, and who is identified as a Post-Distribution Baxalta Employee as defined in the Employee Matters Agreement shall become a Participant on the date on which
he becomes an employee of Baxalta; 

  

	 	(c)	The Plan shall assume the liability to pay all benefits accrued under the Baxter Plan on behalf of Participants described in (a) or (b) (“Baxter Participants”) as of the date on which they become a
Participant, and Baxter and the Baxter Plan shall be relieved of all liability to pay such benefits, and any election made by an Baxter Participant with respect to the payment of his or her benefit under the Baxter Plan shall apply to his or her
benefit under this Plan (including the portion accrued after he becomes a Participant); 

  

	 	(d)	Any election made by a Participant to defer any portion of his or her compensation from Baxter under the Baxter Plan during 2015 shall also apply to his or her compensation paid by Baxalta following the Effective Date;

  

	 	(e)	To the maximum extent permitted by Treas. Reg. §1.409A-1(h)(4), a Baxalta Participant shall not be considered to have incurred a Termination of Employment for purposes of the Plan or a separation from service as
defined in Section 409A solely as a result of the transfer describe above. 

  
 - 2 - 

 ARTICLE II — DEFINITIONS 

 

	2.1	ACCOUNTS. 

 Accounts mean the sum of the Participant’s Excess
Matching Contribution Account balance, Bonus Deferral Account balance, Pay Deferral Account balance, and Deferred Compensation Account balance. 
  

	2.2	BENEFIT COMMITTEE. 

 For purposes of the Plan,
Benefit Committee has the same meaning as the Benefit Committee in the IIP. 
  

	2.3	BENEFICIARY. 

 A Participant’s Beneficiary, as defined in
Article VI, is the Beneficiary designated to receive the Participant’s Accounts, if any, from the Plan, upon the death of the Participant. 
  

	2.4	BONUS. 

 The term Bonus means those bonuses that are included in the
definition of Compensation in the IIP and also includes any other bonus which is approved by the Benefit Committee and listed on Attachment A to this Plan. Attachment A may be updated from time to time to accurately reflect the approved bonuses for
purpose of this definition. 
  

	2.5	BONUS DEFERRAL. 

 The Bonus Deferral is the amount of the
Participant’s Bonus which the Participant elected to defer and contribute to the Plan which, but for such election, would have otherwise been paid to him or her. 
  

	2.6	CODE. 

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

	2.7	COMPENSATION. 

 For purposes of the Plan, Compensation has the same
meaning as Compensation in the IIP without regard to Section 401(a)(17) of the Code, except that any amounts deferred under the Plan that would have been included in Compensation had such amounts not been deferred shall be included in
Compensation in the Plan Year in which such amounts would be paid if they were not deferred and not in the Plan Year in which such amounts are actually paid. In no event shall Compensation include any amount payable after a Participant has
terminated employment. 
  

	2.8	COMPENSATION COMMITTEE. 

 The Compensation Committee of the Board of
Directors of Baxalta. 

  
 - 3 - 

	2.9	DEFERRAL ELECTION FORM. 

 The form
which a Participant must complete and return to the Benefit Committee or its designee, in accordance with the rules and procedures as may be established by the Benefit Committee, in order to elect to defer a portion of his or her Bonus into the Plan
and to designate his or her Pay Deferral Election. 
  

	2.10	DISTRIBUTION ELECTION FORM. 

 The form which a Participant
must complete and return to the Benefit Committee or its designee, in accordance with the rules and procedures as may be established by the Benefit Committee. This form is to be used by both (a) Participants who are not eligible to defer a
portion of their Bonus or make a Pay Deferral Contribution to the Plan; and (b) Participants who are electing distributions with respect to a Deferred Compensation Account. 

 

	2.11	ELIGIBLE EMPLOYEE. 

 For any Plan Year, an Eligible
Employee is anyone who: 
  

	(a)	is a Corporate Officer of Baxalta, a member of Baxalta’s Global Leadership Team and/or is a participant in the Baxalta Incorporated Long Term Incentive Plan for the Plan Year to which deferrals relate;

  

	(b)	is a former participant in the Baxalta Incorporated Long Term Incentive Plan; 

  

	(c)	solely for purposes of Section 3.5, is designated by the Benefit Committee to be a Participant in the Plan and eligible to receive discretionary benefits under Section 3.5 for the Plan Year, subject to the
terms and conditions imposed by the Benefit Committee in accordance with Section 3.5; or 

  

	(d)	solely for purposes of Section 3.6, is eligible to receive an Employer Non-Matching Contribution into the IIP for the Plan Year and has Compensation for the Plan Year in excess of the limitations of
Section 401(a)(17) of the Code. An Employee who has never previously been an Eligible Employee shall be treated as becoming an Eligible Employee on the last day of the first Plan Year in which he meets the requirements of this paragraph (d).

  

	2.12	EMPLOYER. 

 The term Employer means Baxalta and any entity that is a
member of a controlled group or affiliated service group that includes Baxalta, or is otherwise required to be considered as a single employer with Baxalta under Section 414 of the Code. A “Participating Employer” is an Employer that
has adopted the Plan for the benefit of its Eligible Employees as provided in Section 1.3, and a Non-Participating Employer is an Employer that is not a Participating Employer. 

  
 - 4 - 

	2.13	EMPLOYER NON-MATCHING CONTRIBUTION. 

 The
term Employer Non-Matching Contribution has the same meaning in the Plan as it does in the IIP. 
  

	2.14	EXCESS MATCHING CONTRIBUTION. 

 The Excess Matching
Contribution is the difference between the Matching Contributions allocated to a Participant’s IIP Account during the Plan Year and the amount that would have been allocated if the limitations of Sections 415, 401(k), 402(g),
401(m) or 401(a)(17) of the Code, were disregarded. 
  

	2.15	MATCHING CONTRIBUTION. 

 The term Matching Contribution has the same
meaning in the Plan as it does in the IIP. 
  

	2.16	PARTICIPANT. 

 A Participant is any Eligible Employee who has an Account balance in the
Plan. 
  

	2.17	PAY DEFERRAL CONTRIBUTION. 

 The term Pay Deferral
Contribution has the same meaning as Pay Deferral Contribution in the IIP. The Pay Deferral Contribution is the amount of the Participant’s Compensation, which the Participant elected to defer into the Plan which, but for such election, would
have otherwise been paid to him or her. 
  

	2.18	PLAN YEAR. 

 The Plan Year is the calendar year. 

 

	2.19	SECTION 409A. 

 Section 409A means Section 409A of the Code, as enacted by
the American Jobs Creation Act of 2004 and as interpreted by Treasury Regulations or other authority issued thereunder. 
  

	2.20	TERMINATION OF EMPLOYMENT. 

 For purposes of the Plan,
Termination of Employment has the same meaning as Termination of Employment in the IIP; provided that for purposes of determining when a Participant’s benefit becomes payable, Termination of Employment shall not be considered to have occurred
until the Participant incurs a separation from service as defined in Treasury Regulations issued pursuant to Section 409A. The following rules are intended to implement the requirements of Section 409A, and may be adjusted by the Benefit
Committee as required to comply with any guidance issued under Section 409A: 
  

	(a)	The Participant shall not be considered to have separated from service so long as the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six
months, or if longer, so long as the Participant retains a right to reemployment with a Participating Employer under an applicable statute or by contract. 

  
 - 5 - 

	(b)	Regardless of whether his or her employment has been formally terminated, the Participant will be considered to have separated from service as of the date it is reasonably anticipated that no further services will be
performed by the Participant for any Participating Employer, or that the level of bona fide services the Participant will perform after such date will permanently decrease to no more than 20 percent of the average level of bona fide services
performed over the immediately preceding 36-month period (or the full period of employment if the Participant has been employed for less than 36 months). For purposes of the preceding test, during any paid leave of absence the Participant shall
be considered to have been performing services at the level commensurate with the amount of compensation received, and unpaid leaves of absence shall be disregarded. 

 

	(c)	For purposes of determining whether the Participant has separated from service, all services provided for any Employer, or for any entity that is a member of the Controlled Group, shall be taken into account, whether
provided as an employee or as a consultant or other independent contractor; provided that the Participant shall not be considered to have not separated from service solely by reason of service as a non-employee director of the Corporation or any
other such entity. Solely for purposes of this Section 2.19, the term “Controlled Group” shall be modified by substituting “50 percent” for “80 percent” for all purposes of section 414(b) and (c) of the
Code (and Section 1563 to the extent incorporated therein). 

  

	(d)	A Participant who is employed by a Participating Employer, and continues to be employed by the Participating Employer following a stock sale, spin-off, or other transaction that causes the Participant’s employer to
cease to be a member of the Controlled Group, shall not be considered to have incurred a Termination of Employment as a result of such transaction. A Participant who ceases to be employed by the Corporation or any member of the Controlled Group as a
result of a sale of substantially all of the assets constituting a division, facility, or separate line of business, shall be considered to have incurred a Termination of Employment unless the Corporation (or Participating Employer selling such
assets) and the purchaser agree in writing, not later than the closing date of such transaction, that all Participants affected by such transaction shall not be considered to have incurred a Termination of Employment, and that the purchaser agrees
to assume the obligation for payment of the Benefits of all such Participants in accordance with the Plan. 

  

	2.21	UNFORESEEABLE EMERGENCY. 

 A severe financial hardship resulting from a
sudden or unexpected illness or accident of the Participant or one of his or her dependents, loss of the Participant’s property due to casualty or similar extraordinary and unforeseeable circumstances arising as a result of one or more recent
events beyond the control of the Participant, as determined by the Benefit Committee. 

  
 - 6 - 

	2.22	VESTING. 

 For purposes of the Plan, Vesting has the same meaning as Vesting in the IIP.

  
 - 7 - 

 ARTICLE III — ELIGIBILITY FOR CONTRIBUTIONS AND DEFERRALS 

 

	3.1	EXCESS MATCHING CONTRIBUTIONS. 

 The Excess Matching
Contributions Account of an Eligible Employee who makes either a Bonus Deferral or Pay Deferral Election for a Plan Year shall be credited with Excess Matching Contributions equal to the lesser of the total amount deferred pursuant to
Sections 3.2 and 3.3 (not including any Supplemental Pay Deferral) for the Plan Year or three and one half percent (3.5%) of the excess of the Participant’s total Compensation for the Plan Year over the portion of the
Participant’s Compensation taken into account under the IIP for the Plan Year. The Excess Matching Contributions made to the Account of a Baxter Participant in 2015 shall be equal to the Excess Matching Contributions he would have received had
all of his or her elective deferrals under the Baxter Plan and the Baxter International Inc. and Subsidiaries Incentive Investment Plan been made under this Plan and the IIP, and all of his Compensation paid by Baxter prior to the Effective Date
been paid by Baxalta, reduced by the amount of Excess Matching Contributions credited to his or her account in the Baxter Plan. 
  

	3.2	BONUS DEFERRAL ELECTIONS. 

 An Eligible Employee for a Plan
Year may elect to defer all or a portion of his or her Bonus for the Plan Year through the Plan until his or her Termination of Employment, or such other time as specified on his or her Deferral Election Form, by completing a Deferral Election Form
in accordance with applicable rules and procedures established by the Benefit Committee. A Participant may elect to defer up to 100% of his or her Bonus, in whole percentages. Beginning January 1 of the year to which the Deferral Election Form
applies, the Deferral Election Form is irrevocable, except as provided in Section 5.6. The Deferral Election Form must be filed in accordance with the rules established by the Benefit Committee before January 1 of the Plan Year in which
the Bonus is earned, except as otherwise provided in Section 3.7 or in the following sentence. The Benefit Committee may also permit Eligible Employees to make an election to defer their Bonuses not later than six months prior to the end of the
Bonus determination period, provided that the Benefit Committee determines that the Bonus satisfies the requirements for performance based compensation under Section 409A of the Code. 

 

	3.3	PAY DEFERRAL ELECTIONS. 

 An Eligible Employee may make a
Pay Deferral Election under the Plan if he or she elects to defer a portion of his or her Compensation under the IIP for a Plan Year, and the amount of Compensation that he or she has elected to defer exceeds the amount that is permitted to be
deferred under the IIP by reason of the annual contribution limit under Section 415 or 402(g) of the Code (as increased, if applicable, by the limit on catch-up contributions pursuant to Section 414(v) of the Code), or the fact that the
Eligible Employee’s Compensation exceeds the annual limit under Section 401(a)(17) of the Code, A Pay Deferral Election shall be made by the last day of the Plan Year preceding the Plan Year to which it relates, except as otherwise
provided in Section 3.7, in accordance with applicable rules and procedures established by the Benefit Committee, and shall thereafter be irrevocable (except as provided in Section 5.6). If an Eligible Employee makes a Pay Deferral
Election for a Plan Year, then all amounts that the Eligible Employee elected to defer under the IIP (based upon the Eligible Employee’s IIP deferral 

  
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election at the beginning of the Plan Year, which cannot be changed during the Plan Year) that exceed one or more of the limits described above shall instead be credited to his or her Account in
this Plan, commencing with the first payment of Compensation that would cause the amount deferred to exceed such limits. Notwithstanding the foregoing provisions of this Section 3.3, the Benefit Committee, in its sole discretion, may permit a
Participant to defer a percentage of his or her Compensation to the Plan for any Plan Year that exceeds the percentage that the Participant elects to defer under the IIP for such Plan Year (a “Supplemental Pay Deferral”), provided that the
Supplemental Pay Deferral election is made when the Participant is otherwise eligible to make a Pay Deferral Election as described above and is thereafter irrevocable (except as provided in Section 5.6). To the extent that the Benefit Committee
exercises its discretionary authority under the prior sentence, such exercise shall be reflected in Appendix B to the Plan which shall identify each Participant designated as eligible to make Supplemental Pay Deferrals, specify the Plan Year(s)
for which Supplemental Pay Deferrals may be made, and reflect any other conditions and limitations applicable with respect to such Supplemental Pay Deferrals. In no event shall Supplemental Pay Deferrals be eligible for Excess Matching
Contributions. 
  

	3.4	DISCRETIONARY CONTRIBUTIONS. 

 The Benefit Committee may, in its sole
discretion, specify such additional amounts in the form of employer contributions to be credited to the Account of a Participant or another employee who is a member of a select group of management and highly compensated employees, subject to such
terms and conditions as the Benefit Committee may establish. To the extent that the Benefit Committee exercises its discretionary authority under this Section 3.5, such exercise shall be reflected in Appendix C to the Plan, which shall
identify each Participant credited with such discretionary employer contributions, specify the Plan Year(s) for which contributions relate, and reflect any other limitations applicable with respect to such discretionary contributions, including any
applicable Vesting requirements. Discretionary employer contributions authorized under this section shall be treated as deferrals authorized under Section 3.2 for purposes of accounting and distribution. 

 

	3.5	EMPLOYER NON-MATCHING CONTRIBUTION. 

 An
Eligible Employee who (i) is eligible to receive an Employer Non-Matching Contribution into the IIP for the Plan Year and (ii) has Compensation for the Plan Year in excess of the limitations of Section 401(a)(17) of the Code, shall
receive a contribution equal to 3% of the Eligible Employee’s Compensation in excess of the limitations of Section 401(a)(17) of the Code. For the 2015 Plan Year, the Employer Non-Matching Contribution shall be based upon a Baxter
Participant’s total Compensation paid by both Baxter and Baxalta during the Plan Year. 
  

	3.6	CONTRIBUTIONS FOLLOWING MILITARY SERVICE. 

 A
Participant who incurs a Termination of Employment, or a leave of absence, in order to serve in the armed forces of the United States, who is entitled to re-employment rights under the Uniformed Services Employment and Reemployment Rights Act
(“USERRA”), and who is re-employed during the period in which such re-employment rights are protected, shall be entitled to increase the percentage of his or her Compensation subject to a Pay Deferral Election in order to make up the Pay
Deferral Contributions missed during the period of military service, in 

  
 - 9 - 

 
accordance with rules established by the Benefit Committee in accordance with USERRA and Section 409A. Such a Participant shall also be entitled to receive the same amount of Excess Matching
Contributions he or she would have received had the additional Pay Deferral Contributions been made during the period of military service. A Participant who is otherwise eligible for Employer Non-Matching Contributions shall be entitled to receive
the Employer Non-Matching Contributions he or she would have received had he or she been employed at the same rate of Compensation during the period of military service, which shall be credited to the Deferred Compensation Account not later than
90 days after re-employment. 
  

	3.7	MID-YEAR DEFERRAL ELECTIONS. 

 If a person
becomes an Eligible Employee as defined in Section 2.11(a) during a plan year, and such person has not been eligible to elect to defer compensation under this Plan or any other nonqualified deferred compensation maintained by any Employer for
the period of twenty-four months ending on the date he becomes an Eligible Employee (or the period beginning on the date any balance in this Plan or any such other plan was distributed to him and ending on the date he becomes an Eligible Employee),
such Eligible Employee may be eligible to make either a Pay Deferral Election or Bonus Deferral Election in accordance with this Section. After the Compensation Committee has identified the persons who have become Eligible Employees as defined in
Section 2.11(a), the Benefit Committee shall establish a period during which such elections may be made, which election period shall be no more than thirty (30) days in length and end on or prior to the first day of a payroll period
specified by the Benefit Committee. During such election period, each such Eligible Employee may make a Pay Deferral Election that will apply to all Compensation earned during such Plan Year commencing with such specified payroll period. During such
period, each such Eligible Employee may also make a Bonus Deferral Election for his or her Bonus for such Plan Year, provided that, unless such election is also permissible pursuant to Section 3.5(c), the portion of his or her Bonus deferred
shall not exceed a fraction, the numerator of which is the number of days in the Plan Year commencing with the first day of the specified payroll period and the denominator of which is the total number of days in the Plan Year. The Benefit Committee
may also permit other deferral elections to be made in the Plan Year during which a person first becomes an Eligible Employee in accordance with Treas. Reg. §1.409A-2(a)(7). 

  
 - 10 - 

 ARTICLE IV — CREDITING OF ACCOUNTS 

 

	4.1	CREDITING OF ACCOUNTS. 

 A. Deferred
Compensation Account. Except as otherwise provided below, all Excess Matching Contributions, Pay Deferral Contributions, Bonus Deferrals, Supplemental Pay Deferrals and Employer Non-Matching Contributions made on by or on behalf of a Participant
shall be credited to a single Deferred Compensation Account, which shall be adjusted for investment return under Section 4.2 and distributed as provided in Article V. 

B. Baxter Plan Accounts. Prior to 2002, the Baxter Plan provided for separate accounts for Excess Matching Contributions, Bonus
Deferrals, and Pay Deferrals, which provided for different forms of payment. When the accounts were combined beginning in 2002, participants in the Baxter Plan were permitted to elect whether to combine their pre-2002 accounts into a single Deferred
Compensation Account or keep them separate. To the extent any such separate accounts of a Baxter Participant are transferred to this Plan, they shall be continue to be accounted for separately to the extent necessary to preserve the forms of payment
elected under the Baxter Plan. Except as otherwise provided above, all amounts transferred on behalf of a Baxter Participant Plan shall be credited to such Participant’s Deferred Compensation Account, adjusted for investment return under
Section 4.2 and distributed as provided in Article V. 
 C. Supplemental and Discretionary Contribution Accounts. To the
extent that the Benefit Committee permits a Participant to make Supplemental Pay Deferrals, or provides for Discretionary Contributions to be made on behalf of a Participant, and such Supplemental Pay Deferrals or Discretionary Contributions are
subject to different vesting or payment provisions, separate Accounts shall be maintained for such contributions, and the investment return attributed to them under Section 4.2, as necessary to enable the Plan to properly administer and
distribute the balance in such Accounts. 
  

	4.2	EARNINGS. 

 Each Participant’s Accounts will be adjusted for investment return, on a
daily basis, in accordance with the following provisions of this Section 4.2: 
 A. Amounts in a Participant’s Excess Matching
Account, Bonus Deferral Account and Pay Deferral Account will be credited with earnings at a rate determined by the Benefit Committee from time to time. Until the Benefit Committee determines otherwise, such earnings will be credited at the same
rate as the Stable Income Fund in the IIP. 
 B. Amounts in a Participant’s Deferred Compensation Account shall be adjusted upward or
downward to reflect the investment return that would have been realized had such amounts been invested in one or more investments selected by the Participant from among the assumed investment alternatives designated by the Benefit Committee for use
under the Plan. Prior to the first day of each month, or at such other times as the Benefit Committee may permit, Participants may change the assumed investment alternatives in which their Deferred Compensation Account will be deemed invested for
such Plan Year. Participant elections of assumed investment alternatives shall be made at the time and in the form determined by the Benefit Committee, and shall be subject to such other restrictions and limitations as the Benefit

  
 - 11 - 

 
Committee shall determine. In the event that a Participant fails to make an investment election, his or her Deferred Compensation Account shall be credited with earnings in the same manner as
provided in paragraph A above. 
  

	4.3	ACCOUNT STATEMENTS. 

 Account Statements will be generated effective at
such intervals as the Benefit Committee may determine and transmitted to each Participant as soon as administratively feasible. Account Statements will reflect all Account activity during the reporting period, including Account contributions,
distributions and earnings credits. 
  

	4.4	VESTING. 

 Subject to Sections 9.1 and 9.2, and any Vesting
requirements specified by the Benefit Committee with respect to Discretionary Contributions, a Participant is always 100% Vested in his or her Accounts in the Plan at all times; provided, however, that if a Participant who incurs a Termination of
Employment is not 100% Vested in his or her Employer Non-Matching Contribution Account in the IIP, the portion of his or her Deferred Compensation Account attributable to Employer Non-Matching Contributions and the earnings thereon shall be
forfeited, and no Participating Employer shall have any obligation to the Participant with respect to such portion. 

  
 - 12 - 

 ARTICLE V — DISTRIBUTION OF BENEFITS 

 

	5.1	DISTRIBUTION OF BENEFITS. 

 Subject to Section 5.2,
distribution of a Participant’s Accounts, if any, will commence in accordance with the Participant’s Distribution Election Form or Deferral Election Form as soon as administratively feasible after the Participant’s Termination of
Employment. Any spousal consent requirements under the IIP will not apply to distributions under the Plan. 
 Anything else in this Plan to the contrary
notwithstanding, (i) in no event shall the distribution of any Account be accelerated to a time earlier than which it would otherwise have been paid, whether by amendment of the Plan, exercise of the Benefit Committee’s discretion, or
otherwise, except as permitted by Treasury Regulations issued pursuant to Section 409A, and (ii) in the event that the Benefit Committee, in its sole discretion, determines that any time or form of distribution provided for in the Plan, or
the existence of a right to elect a different time or form of distribution, would cause the Plan to fail to meet the requirements of Section 409A, or otherwise cause Participants to be subject to any adverse federal income tax consequences, the
Benefit Committee shall amend the Plan to modify or remove the form of distribution or election right. The distribution restrictions under Section 409A shall apply to Participant’s entire account balances under the Plan, including any
portion deferred before or after January 1, 2005, under the Baxter Plan. 
  

	5.2	DISTRIBUTION. 

 A. Distribution Election Form
— Termination of Employment. A Participant’s Deferred Compensation Account and, if the Participant is not eligible for Pay Deferrals or Bonus Deferrals, his or her Excess Matching Contribution Account, will be paid after the
Participant’s Termination of Employment, in accordance with the form of payment designated in such Participant’s Distribution Election Form. Distribution Election Forms shall be filed in accordance with rules established by the Benefit
Committee, subject to the following: 
  

	 	(a)	A Participant who has not previously been described in paragraph (b) may submit a Distribution Election Form at the time he or she first makes a Bonus Deferral or Pay Deferral Election pursuant to Section 3.2
or 3.3. Except as otherwise provided in subparagraph (b) below, only one Distribution Election Form shall be filed, which shall apply to the Participant’s entire Deferred Compensation Account balance at his or her Termination of
Employment. A Distribution Election Form must be filed by the end of the period for making the Participant’s first Bonus Deferral or Pay Deferral Election, and if the Participant fails to file a Distribution Election Form at such time his or
her entire Deferred Compensation Account balance shall be distributed in a lump sum at his or her Termination of Employment, or in accordance with a Distribution Election Form previously filed pursuant to subparagraph (b) if applicable.

  

	 	(b)	 An Eligible Employee who first becomes eligible to receive an Employer Non-Matching Contribution pursuant to Section 3.5, or to receive a
Discretionary Contributions pursuant to Section 3.4 prior to the first Plan Year for which he or 

  
 - 13 - 

	 	
she has made a Bonus Deferral or Pay Deferral Election, may file a Distribution Election Form not later than 30 days after his or her first day of eligibility to receive such Contributions.
Except as provided in the following sentence, only one Distribution Election Form shall be filed, which shall apply to the Participant’s entire Deferred Compensation Account balance at his or her Termination of Employment, and if the
Participant fails to file a Distribution Election Form at such time his or her entire Deferred Compensation Account balance shall be distributed in a lump sum at his or her Termination of Employment. Notwithstanding the foregoing, if such a
Participant subsequently becomes eligible to make a Bonus Deferral or Pay Deferral Election, he or she may file a new Distribution Election Form pursuant to subparagraph (a) above. In such event, the portion of the Participant’s Deferred
Compensation Account that represents amounts credited to the Deferred Compensation Account under all provisions of Article III beginning with the first Plan Year to which the Bonus Deferral or Pay Deferral Election applies (and all earnings
thereon) shall be distributed in accordance with such Distribution Election Form, and the remaining portion of the Deferred Compensation Account shall continue to be governed by this subparagraph (b). 

 

	 	B.	Forms of Distribution. The forms of distribution are: 

  

	 	(a)	a lump sum payment, or 

  

	 	(b)	annual installments of at least 2 years, but not to exceed 15 years. 

 If annual installments are
elected, the amount of each installment will be equal to the remaining balance in the Participant’s Account prior to payment of the installment, divided by the remaining number of installments to be paid (including the installment being
calculated). 
 Except as provided below lump sum payments will be paid, and annual installments will commence, in the first quarter of the Plan Year as
specified in the Participant’s Deferral Election Form or Distribution Election Form (or, if the Distribution Election Form provides for payments following a Termination of Employment, in the first quarter of the Plan Year following the Plan
Year in which the Termination of Employment occurs). Subsequent installments will be paid annually in the first quarter of subsequent Plan Years. 
 If a
Participant does not elect a form of distribution by the time the Deferral Election Form or the Distribution Election Form is required to be completed, the Participant’s election will default to a lump sum payment in the first quarter of the
Plan Year following the Plan Year in which the Participant incurs a Termination of Employment. 
  

	 	C.	Special Rules. Notwithstanding the foregoing: 

  

	 	(a)	A Participant whose Accounts under the Plan total less than $50,000 as of the last day of the Plan Year in which he or she incurs a Termination of Employment will receive lump sum payment of his or her Accounts in the
first quarter of the Plan Year following the Plan Year in which the Participant incurs a Termination of Employment. 

  
 - 14 - 

	 	(b)	If a Participant who has made a Bonus Deferral election for a Plan Year incurs a Termination of Employment during the Plan Year, but is still eligible for a Bonus for the Plan Year, the deferred portion of his or her
Bonus shall be distributed during March of the subsequent year, regardless of the form of distribution otherwise elected, and shall not be taken into account in determining whether the Participant’s Account Balance is less than $50,000. Such
amount shall not be credited with any earnings unless paragraph (c) applies. 

  

	 	(c)	Anything else contained herein to the contrary notwithstanding, in no event shall any payment of a benefit made in connection with the Termination of Employment of a “specified employee”, as hereinafter
defined, be made until at least six months following such Termination of Employment, and any amounts that would otherwise have been paid during such six month period shall be accumulated and paid in a lump sum, without interest, on
the first business day following the expiration of such period. For purposes of this Plan, the term “specified employee shall have the meaning set forth in Treas. Reg. §1.409A-1(i), using the safe harbor
definition of compensation contained in Treas. Reg. §1.415(c)-2(d)(4) (compensation required to be reported on Form W-2 plus elective deferrals) and excluding compensation paid to a nonresident alien that is not effectively connected with
the conduct of a trade or business within the United States shall be excluded. The status of Participants as specified employees shall be determined as of December 31 of each year, and if a Participant is determined to be a specified employee
on any December 31, the restriction of clause (ii) shall apply if and only if he incurs a termination of employment at any time during the twelve month period commencing on the following February 1. For the period commencing
February 1, 2015, and ending January 31, 2016, only Participants who were determined to be specified employees of Baxter as of December 31, 2014, shall be considered specified employees of Baxalta. 

 

	5.3	EFFECT OF PAYMENT. 

 Payment to the person or trust
reasonably and in good faith determined by the Benefit Committee to be the Participant’s Beneficiary will completely discharge any obligations Baxalta or any other Employer may have under the Plan. If a Plan benefit is payable to a minor or a
person declared to be incompetent or to a person the Benefit Committee in good faith believes to be incompetent or incapable of handling the disposition of property, the Benefit Committee may direct payment of such Plan benefit to the guardian,
legal representative or person having the care and custody of such minor and such decision by the Benefit Committee is binding on all parties. The Benefit Committee may initiate whatever action it deems appropriate to ensure that benefits are
properly paid to an appropriate guardian. 
 The Benefit Committee may require proof of incompetence, minority, incapacity or guardianship as it may deem
appropriate prior to distribution of the Plan benefit. Such distribution will completely discharge the Benefit Committee and the Employer from all liability with respect to such benefit. 

  
 - 15 - 

	5.4	TAXATION OF PLAN BENEFITS. 

 It is intended
that each Participant will be taxed on amounts credited to him or her under the Plan at the time such amounts are received, and the provisions of the Plan will be interpreted consistent with that intention. 

 

	5.5	WITHHOLDING AND PAYROLL TAXES. 

 Baxalta will
withhold from payments made hereunder any taxes required to be withheld for the payment of taxes to the Federal, or any state or local government. 
  

	5.6	DISTRIBUTION DUE TO UNFORESEEABLE EMERGENCY. 

Upon written request of a Participant and the showing of Unforeseeable Emergency, the Benefit Committee may authorize distribution of all or a portion of the
Participant’s Accounts, and or the acceleration of any installment payments being made from the Plan, but only to the extent reasonably necessary to relieve the Unforeseeable Emergency, taking into account the tax imposed on such distribution.
In any event, payment may not be made to the extent such Unforeseeable Emergency is or may be satisfied through reimbursement by insurance or otherwise, including, but not limited to, liquidation of the Participant’s assets, to the extent that
such liquidation would not in and of itself cause severe financial hardship. If a Participant has an Unforeseeable Emergency, the Participant’s Pay Deferral Election and Bonus Deferral Election, if any, shall be revoked for the Plan Year (and
no subsequent Pay Deferral or Bonus Deferral may be made for the same Plan Year), and the additional income resulting from such revocation shall be taken into account in determining the amount of distribution reasonably necessary to relieve the
Unforeseeable Emergency. A Participant shall not be required to take any hardship withdrawal or loan to which he is entitled under the IIP or any other tax qualified retirement plan as a condition of receiving a distribution pursuant to this
Section 5.6, but if a Participant receives a hardship withdrawal from the IIP or any other tax-qualified §401(k) plan maintained by an Employer and the terms of such plan require a suspension of the Participant’s deferrals for six
months following the date of the distribution, then the Participant’s Deferral Elections shall be permanently revoked with respect to any compensation paid or payable to the Participant during such six month period. 

 

	5.7	DISTRIBUTION DUE TO INCLUSION IN TAXABLE INCOME. 

In the event that any portion of a Participant’s Account is included in his or her taxable income prior to distribution pursuant to Section 409A, the
amount so included shall be distributed to the Participant as soon as administratively possible. 
  

	5.8	DISTRIBUTION OF DE MINIMIS AMOUNTS. 

The Benefit Committee may at any time direct that the entire balance of a Participant’s Account be distributed to the Participant in full liquidation of
his or her benefit under the Plan; provided that the Participant’s entire account balance in all other separate account nonqualified deferred compensation plans maintained by any Employer is also distributed at the same time, and that the total
amount so distributed (including all such other plans) does not exceed the limit in effect under Section 402(g) of the Code at the time of the distribution. 

  
 - 16 - 

	5.9	CORRECTION OF ERRORS. 

 THE
BENEFIT COMMITTEE SHALL HAVE THE AUTHORITY TO CORRECT ANY ERROR IN
THE CALCULATION OF A PARTICIPANT’S ACCOUNT OR THE AMOUNT DISTRIBUTED
TO A PARTICIPANT, REGARDLESS OF THE REASON FOR THE ERROR AND
REGARDLESS OF WHETHER DISTRIBUTION OF THE ACCOUNT HAS COMMENCED. By his or her participation in
the Plan and acceptance of benefits hereunder, each Participant agrees that he will promptly repay to the Plan any payment that exceeds the amount to which he was entitled under the Plan (an “excess payment”), and will hold any excess
payment, and any proceeds of any excess payment, or property acquired with any excess payment, in trust for the benefit of the Plan, which trust shall remain in effect, and shall continue to apply to any excess payment, proceeds or other property
even if transferred to a third party, until the total amount of the excess payment has been repaid to the Plan. The Benefit Committee may, on behalf of the Plan, commence an action to enforce such trust, or take any other available action in law or
equity, including setting off any other amount owed to the Participant, to recover such excess payment. 

  
 - 17 - 

 ARTICLE VI — BENEFICIARY DESIGNATION 

 

	6.1	BENEFICIARY DESIGNATION. 

 Each Participant has the right to designate one
or more persons or trusts as the Participant’s Beneficiary, primary as well as secondary, to whom benefits under this Plan will be paid in the event of the Participant’s death prior to complete distribution to the Participant of the
benefits due under the Plan. Each Beneficiary designation will be in a written form prescribed by the Benefit Committee and will be effective only when filed with the Benefit Committee during the Participant’s lifetime. The Beneficiary
designated by a Baxter Participant under the Baxter Plan shall continue to be the Participant’s Beneficiary under this Plan until changed by the Participant. 
  

	6.2	AMENDMENTS TO BENEFICIARY DESIGNATION. 

 Any
Beneficiary designation may be changed by a Participant without the consent of any Beneficiary by the filing of a new Beneficiary designation with the Benefit Committee. Filing a Beneficiary designation as to any benefits available under the Plan
revokes all prior Beneficiary designations effective as of the date such Beneficiary designation is received by the Benefit Committee. If a Participant’s Accounts are community property, any Beneficiary designation will be valid or effective
only as permitted under applicable law. 
  

	6.3	NO BENEFICIARY DESIGNATION. 

 In the absence of an effective
Beneficiary designation, or if all Beneficiaries predecease the Participant, the Participant’s estate will be the Beneficiary. If a Beneficiary dies after the Participant and before payment of benefits under this Plan has been completed, and no
secondary Beneficiary has been designated to receive such Beneficiary’s share, the remaining benefits will be payable to the Beneficiary’s estate. 
  

	6.4	FORM OF PAYMENT TO BENEFICIARY. 

The Account of a Participant who dies prior to Termination of Employment shall be paid to his or her Beneficiary in a single lump sum as soon as
administratively feasible following the date of death, regardless of the form of payment elected by the Participant The Account of a Participant who dies after Termination of Employment, but before his or her Account has been fully distributed,
shall be distributed in the same manner and at the same time as it would have been distributed to the Participant, except that the six month delay in distributions to a specified employee pursuant to the last paragraph of Section 5.2 shall not
apply to the Beneficiary of a specified employee who dies during the six month period following his or her Termination of Employment. 

  
 - 18 - 

 ARTICLE VII — ADMINISTRATION 

 

	7.1	BENEFIT COMMITTEE. 

 The Plan is administered by the Benefit Committee,
which is the Plan Administrator for purposes of Section 3(16)(A) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Prior to the Spin-Off Date, the Administrative Committee of Baxter shall be the Benefit
Committee. Effective as of the Spin-Off Date, the Benefit Committee shall consist of such persons as the Compensation Committee of the Corporation’s Board of Directors (or such other committee or person as the Board of Directors may designate)
may appoint from time to time. Members of the Benefit Committee may be Participants in the Plan. 
  

	7.2	BENEFIT COMMITTEE POWERS. 

 The Benefit Committee has such
powers as may be necessary to discharge its duties hereunder, including, but not by way of limitation, the following powers, rights and duties: 
  

	(a)	Interpretation of Plan. The Benefit Committee has the power, right and duty to construe, interpret and enforce the Plan provisions and to determine all questions arising under the Plan including, but not by way
of limitation, questions of Plan participation, eligibility for Plan benefits and the rights of employees, Participants, Beneficiaries and other persons to benefits under the Plan and to determine the amount, manner and time of payment of any
benefits hereunder; 

  

	(b)	Plan Procedures. The Benefit Committee has the power, right and duty to adopt procedures, rules, regulations and forms to be followed by employees, Participants, Beneficiaries and other persons or to be otherwise
utilized in the efficient administration of the Plan which may alter any procedural provision of the Plan without the necessity of an amendment, and which procedures may provide for any election or consent to be made (including without limitation
the filing of a Deferral Election Form or Distribution Election Form), or any other action to be taken (including without limitation filing claims and requesting review of denied claims), by electronic mail, internet website, telephone or voice
response system or other electronic method to the extent permitted by applicable law; 

  

	(c)	Benefit Determinations. The Benefit Committee has the power, right and duty to make determinations as to the rights of employees, Participants, Beneficiaries and other persons to benefits under the Plan and to
afford any Participant or Beneficiary dissatisfied with such determination with rights pursuant to a claims procedure adopted by the Committee; and 

  

	(d)	Allocation of Duties. The Benefit Committee is empowered to employ agents (who may also be employees of Baxalta) and to delegate to them any of the administrative duties imposed upon the Benefit Committee or
Baxalta. 

  

	(e)	Plan Amendments. The Benefit Committee is empowered to amend the Plan as provided in Section 8.1(b). 

  
 - 19 - 

	7.3	EFFECT OF BENEFIT COMMITTEE DECISIONS. 

Any ruling, regulation, procedure or decision of the Benefit Committee will be conclusive and binding upon all persons affected by it. There will be no appeal
from any ruling by the Benefit Committee which is within its authority, except as provided in Section 7.4 below. When making a determination or a calculation, the Benefit Committee will be entitled to rely on information supplied by any
Employer, accountants and other professionals including, but not by way of limitation, legal counsel for Baxalta or any Employer. 
  

	7.4	CLAIMS PROCEDURE. 

 Each person entitled to benefits under the Plan (the
“Applicant”) must submit a written claim for benefits to the Benefit Committee. Such claim shall be filed not more than one year after the Applicant knows, or with the exercise of reasonable diligence would know, if the basis for the
claim. A formal claim shall not be required for the distribution of a Participant’s Accounts in the ordinary course of business, but in any case a claim that relates to a dispute over the amount of a distribution shall be filed not more than
one year after the distribution is paid. The Benefit Committee may, in its sole discretion (and notwithstanding the first sentence of Section 7.3) accept a claim that is filed late if it determines that special circumstances warrant acceptance
of the claim. 
 If a claim for benefits by the Applicant is denied, in whole or in part, the Benefit Committee, or its delegate, shall furnish the
Applicant within 90 days after receipt of such claim, a written notice which specifies the reason for the denial, refers to the pertinent provisions of the Plan on which the denial is based, describes any additional material or information
necessary for properly completing the claim and explains why such material or information is necessary, and explains the claim review procedures of this Section 7.4. Such notice will further describe that the Applicant has a right to bring a
civil action under Section 502 of ERISA if his or her claim is denied after an appeal and review. The 90 day period may be extended by up to an additional 90 days if special circumstances required, in which event the Applicant shall be
notified in writing by the end of the initial 90 day period of the reason for the extension and an estimate of when the claim will be processed. 
 Any
Applicant whose claim is denied under the provisions described above, or who has not received from the Benefit Committee a response to his or her claim within the time periods specified in the provisions described above may request a review of the
denied claim by written request to the Benefit Committee within 60 days after receiving notice of the denial. If such a request is made, the Benefit Committee shall make a full and fair review of the denial of the claim and shall make a
decision not later than 60 days after receipt of the request, unless special circumstances (such as the need to hold a hearing) require an extension of time, in which case a decision shall be made as soon as possible but not later than
120 days after receipt of the request for review, and written notice of the reason for the extension and an estimate of when the review will be complete shall be given to the Applicant before the commencement of the extension. The decision on
review shall be in writing and shall include specific reasons for the decision and specific references to the pertinent provisions of the Plan on which the decision is based. Such notice will further describe that the Applicant has a right to bring
a civil action under Section 502 of ERISA. 

  
 - 20 - 

 No person entitled to benefits under the Plan shall have any right to seek review of a denial of benefits, or to
bring any action to enforce a claim for benefits, in any court or administrative agency prior to his or her filing a claim for benefits and exhausting all of his or her rights under this Section 7.4, or more than 180 days after he receives
the Benefit Committee’s decision on review of the denial of his or her claim. Although not required to do so, an Applicant, or his or her representative, may choose to state the reason or reasons he believes he is entitled to benefits, and may
choose to submit written evidence, during the initial claim process or review of claim denial process. However, failure to state any such reason or submit such evidence during the initial claim process or review of claim denial process, shall
permanently bar the Applicant, and his or her successors in interest, from raising such reason or submitting such evidence in any forum at any later date. An Applicant whose claim is denied initially or on review is entitled to receive, on request
and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to such claim for benefits. 
  

	7.5	ACTION BY BENEFIT COMMITTEE. 

 Action by the
Benefit Committee will be subject to the following special rules: 
  

	(a)	Meetings and Documents. The Benefit Committee may act by meeting or by document signed without meeting and documents may be signed through the use of a single document or concurrent documents. 

 

	(b)	Action by Majority. The Benefit Committee will act by a majority decision which action will be as effective as if such action had been taken by all Benefit Committee members, provided that by majority action one
or more Benefit Committee members or other persons may be authorized to act with respect to particular matters on behalf of all Benefit Committee members. 

  

	(c)	Resolving Deadlocks. If there is an equal division among the Benefit Committee members with respect to any question a disinterested party may be selected by a majority vote to decide the matter. Any decision by
such disinterested party will be binding. 

  

	7.6	INDEMNITY. 

 To the extent permitted by applicable law and to the extent that they are not
indemnified or saved harmless under any liability insurance contracts, any present or former Benefit Committee members, officers, or directors of Baxalta, the Employers or their subsidiaries or affiliates, if any, will be indemnified and saved
harmless by the Employers from and against any and all liabilities or allegations of liability to which they may be subjected by reason of any act done or omitted to be done in good faith in the administration of the Plan, including all expenses
reasonably incurred in their defense in the event that Baxalta fails to provide such defense after having been requested in writing to do so. 

  
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 ARTICLE VIII — AMENDMENT AND TERMINATION OF PLAN 

 

	8.1	AMENDMENT. 

  

	(a)	The Compensation Committee may amend the Plan at any time, except that no amendment will decrease or restrict the Accounts of Participants and Beneficiaries at the time of the amendment. The Company’s authority to
amend the Plan has been delegated to the Benefit Committee to the extent provided in Section 8.1(b). The authority to amend the Plan in any respect (whether or not such amendment is within the authority delegated to the Benefit Committee) may
also be exercised by the Board of Directors, the Compensation Committee or any other person to whom the Board or Compensation Committee delegates such authority. 

  

	(b)	The Benefit Committee has been delegated the authority to adopt any amendments to the Plan as the Benefit Committee may determine to be necessary or appropriate, except that no amendment shall be made to any Plan
without approval of the Compensation Committee unless the Benefit Committee determines that such amendment will not significantly change the overall level of benefits provided by such Plan; significantly change the requirements for eligibility for
participation in the Plan; or add any material new benefit that would significantly increase the cost of the Plan. In illustration but not limitation of the foregoing, the Benefit Committee is authorized to adopt any amendment to a Plan that it
determines to be: 

  

	 	(i)	an amendment that provides for the Plan to be adopted by any business entity acquired by the Company, including providing any special rules applicable to the employees of such business entity; 

 

	 	(ii)	an amendment that the Benefit Committee determines to be of an administrative, ministerial or technical nature only; 

  

	 	(iii)	an amendment that the Benefit Committee determines to be necessary or appropriate to carry out any amendment approved by, or other resolution adopted by, the Board; 

 

	 	(iv)	an amendment that the Benefit Committee determines to be necessary or appropriate to comply with any applicable law, or necessary to conform the terms of the Plan to established administrative practices or procedures;
or 

  

	 	(v)	an amendment that the Benefit Committee determines to be necessary or appropriate to clarify or to resolve any inconsistency or ambiguity in the terms of the Plan. 

The adoption by the Benefit Committee of any amendment to the Plan shall constitute conclusive evidence that the Benefit Committee has
determined such amendment to be authorized under the terms of the foregoing resolution, which determination shall be conclusive and binding on all employees, participants, beneficiaries and other persons claiming any benefit under the Plan. 

  
 - 22 - 

	8.2	RIGHT TO TERMINATE. 

 The Compensation Committee may at any
time terminate the Plan. Any Employer may terminate its participation in the Plan by notice to Baxalta. The Plan may also be terminated with respect to a group of Eligible Employees only, and the provisions of Section 8.3 shall apply to such
group of Eligible Employees only. 
  

	8.3	PAYMENT AT TERMINATION. 

 If the Plan is terminated all
Accounts shall continue to be held and distributed in accordance with the terms of the Plan; provided that the Benefit Committee may, to the extent permitted under Section 409A, provide for the immediate distribution of Accounts. 

  
 - 23 - 

 ARTICLE IX — MISCELLANEOUS 

 

	9.1	UNFUNDED PLAN. 

 This Plan is intended to be an unfunded retirement plan
maintained primarily to provide retirement benefits for a select group of management or highly compensated employees. All credited amounts are unfunded, general obligations of the appropriate Employer. This Plan is not intended to create an
investment contract, but to provide retirement benefits to eligible employees who participate in the Plan. Eligible employees are members of a select group of management or are highly compensated employees, who, by virtue of their position with an
Employer, are uniquely informed as to such Employer’s operations and have the ability to affect materially Employer’s profitability and operations. The Benefit Committee shall establish, but shall not be obligated to establish, one or more
trusts of the type commonly referred to as “rabbi trusts” and cause funds representing all or a portion of the amounts deferred under the Plan to be deposited in such trusts, provided that the terms of such trusts provide that, upon the
insolvency of the an Employer, the funds held in such trusts are subject to the claims of the Employer’s creditors, in accordance with applicable Internal Revenue Service guidance. 

 

	9.2	UNSECURED GENERAL CREDITOR. 

 In the event of an
Employer’s insolvency, Participants and their Beneficiaries, heirs, successors and assigns will have no legal or equitable rights, interest or claims in any property or assets of such Employer, nor will they be Beneficiaries of, or have any
rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by such Employer (the “Policies”), or any trust established pursuant to Section 9.1, greater than
those of any other unsecured general creditors. In that event, any and all of the Employer’s assets and Policies will be, and remain, the general, unpledged, unrestricted assets of Employer. Employer’s obligation under the Plan will be
merely that of an unfunded and unsecured promise of Employer to pay money in the future. 
  

	9.3	NONASSIGNABILITY. 

 Neither a Participant nor any other person will have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are,
expressly declared to be nonassignable and nontransferable. No part of the amounts payable will, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency. Nothing contained herein will preclude an Employer from offsetting any amount owed to
it by a Participant against payments to such Participant or his or her Beneficiary. 
  

	9.4	NOT A CONTRACT OF EMPLOYMENT. 

The terms and conditions of this Plan will not be deemed to constitute a contract of employment between a Participant and such Participant’s Employer, and
neither the Participant nor the Participant’s Beneficiary will have any rights against such Participant’s Employer except as may 

  
 - 24 - 

 
otherwise be specifically provided herein. Moreover, nothing in this Plan is deemed to give a Participant the right to be retained in the service of his or her Employer or to interfere with the
right of such Employer to discipline or discharge him or her at any time. 
  

	9.5	PROTECTIVE PROVISIONS. 

 A Participant will cooperate with Baxalta by
furnishing any and all information requested by Baxalta, in order to facilitate the payment of benefits hereunder. 
  

	9.6	GOVERNING LAW. 

 The provisions of this Plan will be construed and
interpreted according to the laws of the State of Illinois, to the extent not preempted by ERISA. 
  

	9.7	SEVERABILITY. 

 In the event any provision of the Plan is held invalid or illegal for any
reason, any illegality or invalidity will not affect the remaining parts of the Plan, but the Plan will be construed and enforced as if the illegal or invalid provision had never been inserted, and Baxalta will have the privilege and opportunity to
correct and remedy such questions of illegality or invalidity by amendment as provided in the Plan, including, but not by way of limitation, the opportunity to construe and enforce the Plan as if such illegal and invalid provision had never been
inserted herein. 
  

	9.8	NOTICE. 

 Any notice or filing required or permitted to be given to Baxalta or the Benefit
Committee under the Plan will be sufficient if in writing and hand delivered, or sent by registered or certified mail to any member of the Benefit Committee, or to Baxalta’s Chief Financial Officer and, if mailed, will be addressed to the
principal executive offices of Baxalta. Notice to a Participant or Beneficiary may be hand delivered or mailed to the Participant or Beneficiary at his or her most recent address as listed in the employment records of Baxalta. Notices will be deemed
given as of the date of delivery or mailing or, if delivery is made by certified or registered mail, as of the date shown on the receipt for registration or certification. Any person entitled to notice hereunder may waive such notice. 

 

	9.9	SUCCESSORS. 

 The provisions of this Plan will bind and inure to the benefit of Baxalta,
each Employer, the Participants and Beneficiaries, and their respective successors, heirs and assigns. The term successors as used herein will include any corporate or other business entity, which, whether by merger, consolidation, purchase or
otherwise acquires all or substantially all of the business and assets of Baxalta, and successors of any such corporation or other business entity. 

  
 - 25 - 

	9.10	ACTION BY BAXALTA. 

 Except as otherwise provided herein,
any action required of or permitted by Baxalta under the Plan will be by resolution of the Compensation Committee or any person or persons authorized by resolution of the Compensation Committee. 

 

	9.11	EFFECT ON BENEFIT PLANS. 

 Amounts paid under
this Plan, will not by operation of this Plan be considered to be compensation for the purposes of any benefit plan maintained by any Employer. The treatment of such amounts under other employee benefit plans will be determined pursuant to the
provisions of such plans. 
  

	9.12	PARTICIPANT LITIGATION. 

 In any action or proceeding regarding the Plan,
employees or former employees of Baxalta or an Employer, Participants, Beneficiaries or any other persons having or claiming to have an interest in this Plan will not be necessary parties and will not be entitled to any notice or process. Any final
judgment which is not appealed or appealable and may be entered in any such action or proceeding will be binding and conclusive on the parties hereto and all persons having or claiming to have any interest in this Plan. To the extent permitted by
law, if a legal action is begun against Baxalta, an Employer, the Benefit Committee, or any member of the Benefit Committee by or on behalf of any person and such action results adversely to such person or if a legal action arises because of
conflicting claims to a Participant’s or other person’s benefits, the costs to such person of defending the action will be charged to the amounts, if any, which were involved in the action or were payable to the Participant or other person
concerned. To the extent permitted by applicable law, acceptance of participation in this Plan will constitute a release of Baxalta, each Employer, the Benefit Committee and each member thereof, and their respective agents from any and all liability
and obligation not involving willful misconduct or gross neglect. 
 *    *    * 

IN WITNESS WHEREOF, the undersigned has caused this Plan to be executed this 29th day of
June, 2015. 
  

			
	BAXALTA INCORPORATED
	BENEFIT COMMITTEE
		
	By:		 /s/ Salvatore Dadouche

			Benefit Committee Member

  
 - 26 - 

 APPENDIX A 

PARTICIPATING EMPLOYERS 
 Participating
Employers in the Plan include all participating Employers in the Baxalta Incorporated and Subsidiaries Incentive Investment Plan. 

  
 - 27 - 

 APPENDIX B 

SUPPLEMENTAL PAY DEFERRALS UNDER SECTION 3.3 

None. 

  
 - 28 - 

 APPENDIX C 

DISCRETIONARY EMPLOYER CONTRIBUTIONS UNDER SECTION 3.5 

Contribution on Behalf of Dagmar Rosa-Bjorkeson 
  

	1.	Dagmar Rosa-Bjorkeson (“Bjorkeson”) is a Baxter Participant who was originally employed by Baxter on October 15, 2014. On or about November 4, 2014, Baxter credited a discretionary contribution in
the amount of one million dollars ($1,000,000.00) to a special employer contribution account in the Baxter Plan (the “Account”). 

  

	2.	In the event Bjorkeson voluntarily resigns from employment with Baxalta prior to the first anniversary of Bjorkeson’s first day of employment with Baxter, the entire balance in the Account, including earnings,
shall be forfeited. 

  

	3.	In the event Bjorkeson voluntarily resigns from employment with Baxalta on or after the first anniversary of Bjorkeson’s first day of employment, but prior to the second anniversary of Bjorkeson’s first day of
employment with Baxter, fifty percent (50%) of the balance in the Account on the date of resignation, including earnings, shall be forfeited. 

  

	4.	Bjorkeson may elect the manner of distribution of the Account by completing a Deferral Election Form in accordance with Section 5.2 of the Plan not later than Bjorkeson’s first day of employment, which
Deferral Election Form shall subsequently apply to all other amounts deferred by Bjorkeson in the manner provided by Section 5.2.B(b) of the Plan. 

  

	5.	Except as otherwise provided above, the Account shall be treated in the same manner as any other bonus deferral under the Plan, and the establishment of the Account shall not otherwise affect Bjorkeson’s
eligibility to participate in the Plan. 

  
 - 29 -

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