Document:

Exhibit 10.1

 

AGREEMENT REGARDING
 CHANGE IN CONTROL

 

THIS AGREEMENT (“Agreement”), is made and entered into as of the                day of                    2009 (the “Effective Date”) by and between Hospira, Inc. (the “Company”) and                        (the “Executive”).

 

WITNESSETH THAT:

 

WHEREAS, the Company considers it essential to the best interests of its shareholders to foster the continuous employment of key management personnel, and the Board of Directors of the Company (the “Board”) recognizes that, as is the case with many publicly held corporations, a change in control might occur and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders; and

 

WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company;

 

NOW, THEREFORE, to induce the Executive to remain in the employ of the Company and in consideration of the premises and mutual covenants set forth herein, IT IS HEREBY AGREED by and between the parties as follows:

 

1.     AGREEMENT TERM. THE INITIAL “AGREEMENT TERM” SHALL BEGIN ON THE EFFECTIVE DATE AND SHALL CONTINUE THROUGH DECEMBER 31, 2012. AS OF DECEMBER 31, 2009, AND AS OF EACH DECEMBER 31 THEREAFTER, THE AGREEMENT TERM SHALL EXTEND AUTOMATICALLY TO THE THIRD ANNIVERSARY THEREOF UNLESS THE COMPANY GIVES NOTICE TO THE EXECUTIVE PRIOR TO THE DATE OF SUCH EXTENSION THAT THE AGREEMENT TERM WILL NOT BE EXTENDED. NOTWITHSTANDING THE FOREGOING, IF A CHANGE IN CONTROL (AS DEFINED IN SECTION 6 BELOW), OCCURS DURING THE AGREEMENT TERM, THE AGREEMENT TERM SHALL CONTINUE THROUGH AND TERMINATE ON THE SECOND ANNIVERSARY OF THE DATE ON WHICH THE CHANGE IN CONTROL OCCURS.

 

2.     ENTITLEMENT TO CHANGE IN CONTROL BENEFITS. The Executive shall be entitled to the Change in Control Benefits described in Section 3 hereof if the Executive’s employment by the Company is terminated during the Agreement Term but after a Change in Control (i) by the Company for any reason other than Permanent Disability or Cause, or (ii) by the Executive for Good Reason.  For purposes of this Agreement:

 

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(a)           A termination of the Executive’s employment shall be treated as a termination by reason of “Permanent Disability” only if, due to a mental or physical disability, the Executive is absent from the full time performance of duties with the Company for a period of at least twelve consecutive months and fails to return to the full time performance of duties within 30 days after receipt of a demand by the Company to do so.

 

(b)           The term “Cause” shall mean the willful engaging by the Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company. For purposes of this Agreement, no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until the Company delivers to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth above and specifying the particulars thereof in detail.

 

(c)           The term “Good Reason” shall mean the occurrence of any of the following circumstances without the Executive’s express written consent:

 

(i)            a significant adverse change in the nature, scope or status of the Executive’s position, authorities or duties from those in effect immediately prior to the Change in Control, including, without limitation, if the Executive was, immediately prior to the Change in Control, an officer of a public company, the Executive ceasing to be an officer of a public company;

 

(ii)           the failure by the Company to pay the Executive any portion of the Executive’s current compensation;

 

(iii)          a reduction in the Executive’s annual base salary (or a material change in the frequency of payment) as in

 

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effect immediately prior to the Change in Control as the same may be increased from time to time;

 

(iv)          the failure by the Company to award the Executive an annual bonus in any year which is at least equal to the annual bonus, awarded to the Executive under the annual bonus plan of the Company for the year immediately preceding the year of the Change in Control;

 

(v)           the failure by the Company to award the Executive equity-based incentive compensation (such as stock options, shares of restricted stock, or other equity-based compensation) on a periodic basis consistent with the Company’s practices with respect to timing, value and terms prior to the Change in Control;

 

(vi)          the failure by the Company to continue to provide the Executive with the welfare benefits, fringe benefits and perquisites enjoyed by the Executive immediately prior to the Change in Control under any of the Company’s plans or policies, including, but not limited to, those plans and policies providing pension, life insurance, medical, dental, prescription, health and accident, disability, vacation,  and other executive perquisites;

 

(vii)         the relocation of the Company’s principal executive offices to a location more than thirty-five miles from the location of such offices immediately prior to the Change in Control or the Company requiring the Executive to be based anywhere other than the Company’s principal executive offices except for required travel to the Company’s business to an extent substantially consistent with the Executive’s business travel obligations immediately prior to the Change in Control; or

 

(viii)        the failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement as contemplated by Section 15.

 

For purposes of any determination regarding the existence of Good Reason, any good faith determination by the Executive that Good Reason exists shall be conclusive.

 

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3.     CHANGE IN CONTROL BENEFITS. In the event of a termination of employment entitling the Executive to benefits in accordance with Section 2, the Executive shall, subject to the provisions of the last paragraph of this Section 3, receive the following:

 

(a)           The Executive shall be entitled to receive the following employee welfare benefits: medical, health and accident, dental, prescription, disability, and life insurance coverage for the Executive (and, where applicable under the Company’s welfare benefit plans, the Executive’s family) through the second anniversary of the Executive’s date of termination of employment, or, if earlier, the date on which the Executive becomes employed by another employer. The benefits provided by the Company shall be no less favorable in terms of coverage and cost to the Executive than those provided under the Company’s welfare benefit plans applicable to the Executive (and, where applicable, the Executive’s family) prior to the Change in Control, determined as if the Executive remained in the employ of the Company through such second anniversary.

 

(b)           If the Executive’s date of termination occurs after the end of a performance period applicable to an annual incentive (bonus) award, and prior to the payment of the award for the period, the Executive shall be entitled to a lump sum payment in cash no later than twenty (20) business days after the date of termination equal to the greatest of (i) the Executive’s annual incentive (bonus) award for that period, as determined under the terms of that incentive award arrangement, (ii) the Executive’s annual incentive (bonus) award for that period, with the determination of the amount of such award based on an assumption that the target level of performance had been achieved or (iii) the Executive’s average annual incentive (bonus) award for the three annual performance periods preceding that period (provided that if the Executive was not a participant in the incentive award arrangement for any of those three prior years, the averaging period shall be reduced from three years to the number of years during the three year period in which the Executive was a participant; and further provided that if the Executive’s award for any such year was reduced because the Executive was not a participant for the full year, such amount shall be annualized for purposes of the computation in this clause (iii)).

 

(c)           For any annual incentive (bonus) plan or arrangement in which the Executive participates for the performance period

 

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in which the Executive’s termination of employment occurs, the Executive shall be entitled to a lump sum payment in cash no later than twenty (20) business days after the date of termination equal to the greater of (i) the Executive’s annual incentive (bonus) award for the performance period that includes the date of termination, with the determination of the amount of such award based on an assumption that the target level of performance has been achieved or (ii) the Executive’s average annual incentive (bonus) award for the three annual performance periods preceding the performance period that includes the date of termination (provided that if the Executive was not a participant in the incentive award arrangement for any of those three prior years, the averaging period shall be reduced from three years to the number of years during the three year period in which the Executive was a participant; and further provided that if the Executive’s award for any such year was reduced because the Executive was not a participant for the full year, such amount shall be annualized for purposes of the computation in this clause (ii)); provided that such payment shall be subject to a pro-rata reduction to reflect the number of days in the performance period following the date of termination. The amount payable under this paragraph (c) shall be in lieu of any amounts that may otherwise be due to the Executive with respect to any annual incentive (bonus) plan or arrangement in which the Executive participates for the performance period in which the Executive’s date of termination occurs.

 

(d)           The Executive shall be entitled to a lump sum payment in cash no later than twenty (20) business days after the Executive’s date of termination equal to the sum of:

 

(i)            an amount equal to two times the Executive’s annual salary rate in effect on the date of the Change in Control or, if greater, as in effect immediately prior to the date of termination; plus

 

(ii)           an amount equal to two times the greater of (x) the Executive’s annual incentive (bonus) award for the performance period that includes the date of the Executive’s termination of employment, with the determination of the amount of such award based on an assumption that the target level of performance has been achieved or (y) the Executive’s average annual incentive (bonus) award for the three annual performance periods preceding the performance

 

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period that includes the date of termination (provided that if the Executive was not a participant in the incentive award arrangement for any of those three prior years, the averaging period shall be reduced from three years to the number of years during the three year period in which the Executive was a participant; and further provided that if the Executive’s award for any such year was reduced because the Executive was not a participant for the full year, such amount shall be annualized for purposes of the computation in this clause (y)).

 

The amount payable under this paragraph (d) shall be inclusive of the amounts, if any, to which the Executive would otherwise be entitled as severance pay under any severance pay plan, or by law and shall be in addition to (and not inclusive of) any amount payable under any written agreement(s) directly between the Executive and the Company or any of its subsidiaries.

 

(e)           The Company shall provide the Executive with outplacement services suitable to the Executive’s position through the second anniversary of the date of the Executive’s termination of employment, or, if earlier, the date on which the Executive becomes employed by another employer.

 

If the Executive is a participant in the Hospira Performance Incentive Plan, the Hospira 2004 Long-Term Stock Incentive Plan, or any successor thereto, the Executive’s annual incentive (bonus) award for the performance period which includes the date of termination under paragraphs (c) and (d)(ii) above and, if applicable, for the period preceding the date of termination under paragraph (b) shall, be determined under the bonus levels communicated in writing to the Executive by the Company for such year.

 

For purposes of this Agreement, the Executive is deemed a “key employee” within the meaning of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations thereunder (“Specified Employee”). As a Specified Employee, notwithstanding any provision in this Agreement, any payments or benefits under Sections 3(b), (c) or (d) (“Restricted Payments”) shall be provided to the Executive on the first day of the seventh month following the date of the Executive’s termination of employment (the “Delay Period”).  After the Delay Period, any Restricted Payments that constitute reimbursements to the Executive shall be made in accordance with their payment terms under this Agreement but no later than the end of the calendar year following the year in which the expense was incurred.

 

4.     MITIGATION. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or

 

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otherwise. Except as set forth in paragraph 3(a) with respect to benefits, the Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts owed to the Company by the Executive, any amounts earned by the Executive in other employment after the Executive’s termination of employment with the Company, or any amounts which might have been earned by the Executive in other employment had the Executive sought such other employment.

 

5.     TERMINATION DURING POTENTIAL CHANGE IN CONTROL. If a Potential Change in Control (as defined in Section 7) occurs during the Agreement Term, and the Company terminates the Executive’s employment for reasons other than Permanent Disability or Cause during such Potential Change in Control, the Executive shall be entitled to receive the benefits that the Executive would have received under Section 3, such benefits to be calculated based upon the Executive’s compensation prior to the actual termination of employment but paid within 20 business days of the date of such termination.

 

6.     CHANGE IN CONTROL.  For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred on the earliest of a Change in Ownership, a Change in Effective Control, or a Change in Ownership of Assets, each as defined below.

 

(a)           Change in Ownership

 

(i)            In general. Except as provided in paragraph (b)(ii) of this Section, a Change in Ownership of the Company occurs on the date that any one person, or more than one person acting as a group (as defined in paragraph (a)(ii) of this Section), acquires ownership of the Company’s stock that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the Company’s stock. However, if any one person, or more than one person acting as a group, is considered to own more than 50% of the total fair market value or total voting power of the Company’s stock, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Ownership of the Company (or to cause a Change in Effective Control of the Company (within the meaning of paragraph (b) of this Section)). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this Section. This paragraph (a)(i) applies only when there is a transfer of the Company’s stock (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction.

 

(ii) Persons acting as a group. For purposes of paragraph (a)(i) above, persons will not be considered to be acting as a group solely because they purchase or own stock of the Company at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition

 

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of stock, or similar business transaction with the Company. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

(b)           Change in Effective Control

 

(i) In general. Notwithstanding that the Company has not undergone a Change in Ownership under paragraph (a) of this Section, a Change in Effective Control of the Company occurs only on either of the following dates:

 

(1) The date any one person, or more than one person acting as a group (as determined under paragraph (a)(ii) of this Section), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company.

 

(2) The date a majority of members of the Company’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of directors before the date of the appointment or election.

 

(ii) Acquisition of additional control. If any one person, or more than one person acting as a group, is considered to effectively control the Company (within the meaning of this paragraph (b)), the acquisition of additional control of the Company by the same person or persons is not considered to cause a Change in Effective Control of the Company (or to cause a Change in Ownership of the Company within the meaning of paragraph (a) of this Section).

 

(c)           Change in Ownership of Assets

 

(i)            In general. A Change in Ownership of Assets occurs on the date that any one person, or more than one person acting as a group (as determined in paragraph (a)(ii) of this Section), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the Company’s assets immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being

 

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disposed of, determined without regard to any liabilities associated with such assets.

 

(ii)           Transfers to a related person—There is no Change in Control event under this paragraph (c) when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer, as provided in this paragraph (c)(ii). A transfer of assets by the Company is not treated as a Change in Ownership of Assets if the assets are transferred to—

 

(1) A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;

 

(2) An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company;

 

(3) A person, or more than one person acting as a group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or

 

(4) An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (c)(ii)(3) above.

 

For purposes of this paragraph (c)(ii) and except as otherwise provided above, a person’s status is determined immediately after the transfer of the assets.

 

(iii)          Persons acting as a group. Persons will not be considered to be acting as a group solely because they purchase assets of the Company at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction with the Company. If a person, including an entity shareholder, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

7.     POTENTIAL CHANGE IN CONTROL. A “Potential Change in Control” shall exist during any period in which the circumstances described in paragraphs (a), (b), (c) or (d), below, exist (provided, however, that a Potential Change in Control shall cease to exist not later than the occurrence of a Change in Control):

 

(a)           The Company enters into an agreement, the consummation of which would result in the occurrence of a Change in

 

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Control, provided that a Potential Change in Control described in this paragraph (a) shall cease to exist upon the expiration or other termination of all such agreements;

 

(b)           Any Person (without regard to the exclusions set forth in subsections (i) through (iv) of such definition) publicly announces an intention to take or to consider taking actions the consummation of which would constitute a Change in Control; provided that a Potential Change in Control described in this paragraph (b) shall cease to exist upon the withdrawal of such intention, or upon a determination by the Board that there is no reasonable chance that such actions would be consummated;

 

(c)           Any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 10% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates);

 

(d)           The Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control exists; provided that a Potential Change in Control described in this paragraph (d) shall cease to exist upon a determination by the Board that the reasons that gave rise to the resolution providing for the existence of a Potential Change in Control have expired or no longer exist.

 

8.     STOCK AND OPTION AWARDS. With respect to any award granted to the Executive under any of the Company’s stock incentive plans, including the Company’s 2004 Long-Term Stock Incentive Plan or any successor program, the following shall apply:

 

(a)           if the award includes a provision substantially similar to the provision contained in the first paragraph in Appendix A, then after a Change in Control no forfeiture shall be effected pursuant to such provision unless the Executive shall have been terminated for “Cause” within the meaning of paragraph 2(b) above; and

 

(b)           if the award includes a provision substantially similar to the provision contained in the second paragraph in Appendix A, then after a Change in Control no forfeiture shall be effected pursuant to such provision unless the Executive shall have

 

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been terminated for “Cause” within the meaning of paragraph 2(b) above; and

 

9.     WITHHOLDING. All payments to the Executive under this Agreement will be subject to withholding of applicable taxes. The Company shall withhold the applicable taxes in an amount calculated at the minimum statutory rate and shall pay the amount so withheld to the appropriate tax authority.

 

10.  NONALIENATION. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive’s beneficiary.

 

11.  AMENDMENT. This Agreement may be amended or canceled only by mutual agreement of the parties in writing without the consent of any other person. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof.  Any amendment or cancellation of this Agreement shall not accelerate the payment of any compensation or benefit hereunder and shall not otherwise modify or change the time or times when compensation or benefits are payable hereunder.

 

12.  APPLICABLE LAW. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to the conflict of law provisions of any state.

 

13.  SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).

 

14.  WAIVER OF BREACH. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues.

 

15.  SUCCESSORS, ASSUMPTION OF CONTRACT. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. However, to

 

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the extent that rights or benefits under this Agreement otherwise survive the Executive’s death, the Executive’s heirs and estate shall succeed to such rights and benefits pursuant to the Executive’s will or the laws of descent and distribution; provided that the Executive shall have the right at any time and from time to time, by notice delivered to the Company, to designate or to change the beneficiary or beneficiaries with respect to such benefits.

 

16.   NOTICES. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), or sent by facsimile or prepaid overnight courier to the parties at the addresses set forth below. Such notices, demands, claims and other communications shall be deemed given:

 

(a)                                  in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery;

 

(b)                                 in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or

 

(c)                                  in the case of facsimile, the date upon which the transmitting party received confirmation of receipt by facsimile, telephone or otherwise;

 

provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service or two-day delivery service are to be delivered to the addresses set forth below:

 

to the Company:

 

Senior Vice President of  Organizational

Transformation and People Development

Hospira, Inc.

275 North Field Drive

Lake Forest, Illinois 60045

 

with a copy (which shall not constitute notice) to:

 

General Counsel and Secretary

Hospira, Inc.

275 North Field Drive

Lake Forest, Illinois 60045

 

or to the Executive:

 

[INSERT ADDRESS]

 

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Each party, by written notice furnished to the other party, may modify the applicable delivery address, except that notice of change of address shall be effective only upon receipt.

 

17.   RESOLUTION OF ALL DISPUTES. Any controversy or claim arising out of or relating to this Agreement (or the breach thereof) (a “Dispute”) shall be settled by alternative dispute resolution procedures in accordance with Appendix B hereto. During the pendency of any Dispute, the Company shall continue to pay the Executive the full compensation in effect when the notice giving rise to the Dispute was given (including, but not limited to, salary) and continue the Executive (and, where applicable, the Executive’s family) as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the Dispute was given, until such Dispute is resolved.

 

18.   LEGAL AND ENFORCEMENT COSTS. The provisions of this Section 18 shall apply if it becomes necessary or desirable for the Executive to retain legal counsel or incur other costs and expenses in connection with enforcing any and all rights under this Agreement or any other compensation plan maintained by the Company, including, but not limited to, Hospira 2004 Long-Term Stock Incentive Plan, the  Hospira, Inc. Incentive Plan, or, in each case, any trust adopted pursuant thereto:

 

(a)                                  The Executive shall be entitled to recover from the Company reasonable attorneys’ fees, costs and expenses incurred in connection with such enforcement or defense.

 

(b)                                 Payments required under this Section 18 shall be made by the Company to the Executive (or directly to the Executive’s attorney) promptly following submission to the Company of appropriate documentation evidencing the incurrence of such attorneys’ fees, costs, and expenses.

 

(c)                                  The Executive shall be entitled to select legal counsel; provided, however, that such right of selection shall not affect the requirement that any costs and expenses reimbursable under this Section 18 be reasonable.

 

(d)                                 The Executive’s rights to payments under this Section 18 shall not be affected by the final outcome of any dispute with the Company.

 

19.   SURVIVAL OF AGREEMENT. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive’s employment with the Company.

 

20.   ENTIRE AGREEMENT. Except as otherwise provided herein, this Agreement constitutes the entire agreement between the parties concerning the subject

 

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matter hereof and supersedes all prior or contemporaneous agreements, between the parties relating to the subject matter hereof; provided, however, that nothing in this Agreement shall be construed to limit any policy or agreement that is otherwise applicable relating to confidentiality, rights to inventions, copyrightable material, business and/or technical information, trade secrets, solicitation of employees, interference with relationships with other businesses, competition, and other similar policies or agreement for the protection of the business and operations of the Company and the subsidiaries.

 

21.   COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others.

 

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IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed on this            day of                       , 2009, all as of the Effective Date.

 

 

	
 
  	
 
  
	
 
  	
 
  
	
 
  	
HOSPIRA, INC.
  
	
 
  
	
 
  
	
 
  	
By
  	
 
  	
 

	
 
  	
Christopher B. Begley
  	
 

	
 
  	
Its: Chairman and Chief Executive
 Officer
  	
 

ATTEST:

 

 

	
 
  	
 
  
	
Brian J. Smith
  
	
Secretary
  

 

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APPENDIX A

 

AGREEMENT REGARDING CHANGE IN CONTROL
 FORFEITURE PROVISION REFERENCED IN SECTION 8

 

Notwithstanding paragraphs (x*), (y*) and (z*), these options (this restricted stock award, etc.) shall immediately terminate (be forfeited), if in the sole opinion and discretion of the Compensation Committee or its delegate, the employee (a) engages in a material breach of the company’s Code of Business Conduct; (b) commits an act of fraud, embezzlement or theft in connection with the employee’s duties or in the course of employment; or (c) wrongfully discloses secret processes or confidential information of the company or its subsidiaries.

 

Notwithstanding paragraphs (x*), (y*) and (z*), these options shall immediately terminate in the event the employee engages directly or indirectly, for the benefit of the employee or others, in any activity, employment or business during employment or within twelve (12) months after the date of termination or retirement which, in the sole opinion and discretion of the compensation committee or its delegate, is competitive with the company or any of its subsidiaries.

 

* Provisions contained in the agreements pertaining to nonforfeiture for death, disability, etc.

 

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APPENDIX B

 

AGREEMENT REGARDING CHANGE IN CONTROL
 ALTERNATIVE DISPUTE RESOLUTION PROCEDURES

 

The parties to the Agreement Regarding Change in Control dated as of the      day of                   , 2009 (the “Agreement”) recognize that a bona fide dispute as to certain matters may arise from time to time during the term of the Agreement which relates to either party’s rights and/or obligations. To have such a dispute resolved by this Alternative Dispute Resolution (“ADR”) provision, a party first must send written notice of the dispute to the other party for attempted resolution by good faith negotiations between the Executive and the Company within twenty-eight (28) days after such notice is received (all references to “days” in the ADR provision are to calendar days).

 

If the matter has not been resolved within twenty-eight (28) days of the notice of dispute, or if the parties fail to meet within such twenty-eight (28) days, either party may initiate an ADR proceeding as provided herein. The parties shall have the right to be represented by counsel in such a proceeding.

 

1.             To begin an ADR proceeding, a party shall provide written notice to the other party of the issues to be resolved by ADR. Within fourteen (14) days after its receipt of such notice, the other party may, by written notice to the party initiating the ADR, add additional issues to be resolved within the same ADR.

 

2.             Within twenty-one (21) days following receipt of the original ADR notice, the parties shall select a mutually acceptable neutral to preside in the resolution of any disputes in this ADR proceeding. If the parties are unable to agree on a mutually acceptable neutral within such period, either party may request the President of the CPR Institute for Dispute Resolution (“CPR”), 366 Madison Avenue, 14th Floor, New York, New York 10017, to select a neutral pursuant to the following procedures:

 

(a)                                  The CPR shall submit to the parties a list of not less than five (5) candidates within fourteen (14) days after receipt of the request, along with a Curriculum Vitae for each candidate.  No candidate shall be an employee, director or shareholder of either party or any of their subsidiaries or affiliates.

 

(b)                                 Such list shall include a statement of disclosure by each candidate of any circumstances likely to affect his or her impartiality.

 

(c)                                  Each party shall number the candidates in order of preference  (with the number one (1) signifying the greatest preference) and shall deliver the list to the CPR within seven (7) days following receipt of the list of candidates. If a party believes a conflict of interest exists regarding any of the candidates, that party shall provide a written explanation of the conflict to the CPR along with its list showing its order

 

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of preference for the candidates. Any party failing to return a list of preferences on time shall be deemed to have no order of preference.

 

(d)                                 If the parties collectively have identified fewer than three  (3) candidates deemed to have conflicts, the CPR immediately shall designate as the neutral the candidate for whom the parties collectively have indicated the greatest preference. If a tie should result between two candidates, the CPR may designate either candidate. If the parties collectively have identified three (3) or more candidates deemed to have conflicts, the CPR shall review the explanations regarding conflicts and, in its sole discretion, may either (i) immediately designate as the neutral the candidate for whom the parties collectively have indicated the greatest preference, or (ii) issue a new list of not less than five (5) candidates, in which case the procedures set forth in subparagraphs 2(a)-2(d) shall be repeated.

 

3.             No earlier than twenty-eight (28) days or later than fifty-six (56) days after selection, the neutral shall hold a hearing to resolve each of the issues identified by the parties. The ADR proceeding shall take place at a location agreed upon by the parties. If the parties cannot agree, the neutral shall designate a location other than the principal place of business of either party or any of the subsidiaries or affiliates.

 

4.             At least seven (7) days prior to the hearing, each party shall submit the following to the other party and the neutral:

 

(a)                                  a copy of all exhibits on which such party intends to rely in any oral or written presentation to the neutral;

 

(b)                                 a list of any witnesses such party intends to call at the hearing, and a short summary of the anticipated testimony of each witness;

 

(c)                                  a proposed ruling on each issue to be resolved, together with a request for a specific damage award or other remedy for each issue. The proposed rulings and remedies shall not contain any recitation of the facts or any legal arguments and shall not exceed one (1) page per issue.

 

(d)                                 a brief in support of such party’s proposed rulings and remedies, provided that the brief shall not exceed twenty (20) pages. This page limitation shall apply regardless of the number of issues raised in the ADR proceeding. Except as expressly set forth in subparagraphs 4(a) - 4(d), no discovery shall be required or permitted by any means, including

 

2

 

deposition, interrogatories, requests for admissions or production of documents.

 

5.             The hearing shall be conducted on two (2) consecutive days and shall be governed by the following rules:

 

(a)                                  Each party shall be entitled to five (5) hours of hearing time to present its case. The neutral shall determine whether each party has had the five (5) hours to which it is entitled.

 

(b)                                 Each party shall be entitled, but not required, to make an opening statement, to present regular or rebuttal testimony, documents or other evidence, to cross-examine witnesses and to make a closing argument. Cross-examination of witnesses shall occur immediately after their direct testimony, and cross-examination time shall be charged against the party conducting the cross-examination.

 

(c)                                  The party initiating the ADR shall begin the hearing and, if it chooses to make an opening statement, shall address not only issues it raised, but also any issues raised by the responding party. The responding party, if it chooses to make an opening statement, also shall address all issues raised in the ADR. Thereafter, the presentation of regular and rebuttal testimony and documents, other evidence and closing arguments shall proceed in the same sequence.

 

(d)                                 Except when testifying, witnesses shall be excluded from the hearing until closing arguments.

 

(e)                                  Settlement negotiations, including any statements made therein, shall not be admissible under any circumstances. Affidavits prepared for purposes of the ADR hearing also shall not be admissible. As to all other matters, the neutral shall have sole discretion regarding the admissibility of any evidence.

 

6.           Within seven (7) days following completion of the hearing, each party may submit to the other party and the neutral a post-hearing brief in support of its proposed rulings and remedies, provided that such brief shall not contain or discuss any new evidence and shall not exceed ten  (10) pages. This page limitation shall apply regardless of the number of issues raised in the ADR proceeding.

 

7.             The neutral shall rule on each disputed issue within fourteen (14) days following completion of the hearing. Such ruling shall adopt in its entirety the proposed ruling and remedy of one of the parties on each disputed issue but may adopt one party’s proposed rulings and remedies on some issues and the other party’s proposed

 

3

 

rulings and remedies on other issues. The neutral shall not issue any written opinion or otherwise explain the basis of the ruling.

 

8.             The neutral shall be paid a reasonable fee plus expenses by the Company. The Company shall bear its own fees and expenses. The Executive’s fees and expenses shall be paid or reimbursed by the Company to the extent provided by the Agreement.

 

9.             The rulings of the neutral and the allocation of fees and expenses shall be binding, non-reviewable, and non-appealable, and may be entered as a final judgment in any court having jurisdiction.

 

10.           Except as provided in Section 9 or as required by law, the existence of the dispute, any settlement negotiations, the ADR hearing, any submissions (including exhibits, testimony, proposed rulings, and briefs), and the rulings shall be deemed Confidential Information. The neutral shall have the authority to impose sanctions for unauthorized disclosure of Confidential Information.

 

4Exhibit 4.1

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR TRANSFERRED ABSENT SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND APPLICABLE STATE LAWS.

 

FORM OF SUBORDINATED CONVERTIBLE NOTE

 

New York, New York

January 4, 2011

 

FOR VALUE RECEIVED, Information Services Group, Inc. (the “Company”) hereby promises to pay to                    (the “Holder”) in United States dollars in immediately available funds (A) the principal amount of $                       on the seventh anniversary of the date hereof and (B) interest in arrears on the outstanding principal amount hereof, computed daily, at the rate of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date hereof.  The rate of interest on any unpaid principal or interest not paid when due and payable hereunder shall be 2.00% per annum above the rate of interest set forth in the immediately preceding sentence.  Interest shall be calculated on the basis of actual number of days elapsed and in a year of 365 days.  Principal and interest shall be payable by wire transfer pursuant to prior written instructions provided by the Holder.

 

If any day on which a payment is due pursuant to the terms of this Note is not a Business Day, such payment shall be due on the immediately following Business Day.  “Business Day” means any day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York are not required to be open.

 

If after the date hereof the closing price of the Company’s common stock (the “Common Stock”) on the Nasdaq Global Market exceeds $4 per share (as adjusted for stock splits, stock dividends, and the like) for 60 consecutive trading days (the “Trigger Event”), the Holder may at its option convert all (but not less than all) of the outstanding principal amount of this Note into shares of Common Stock at the rate of 1 share for every $4 in principal amount outstanding.  Simultaneously with such conversion the Company shall pay to the Holder all accrued but unpaid interest to the date of such conversion.

 

This Note is one of several notes of similar tenor issued by the Company on the date hereof pursuant to an agreement for the sale and purchase of the entire issued share capital of CCGH Limited dated the date hereof between the Company and the persons listed in the schedule 1 thereto (the “SPA”).  After the Trigger Event, the Company may at its option prepay from time to time all or any portion of the outstanding principal 

 

 

amount of this Note, with accrued but unpaid interest to the date of such prepayment on the amount prepaid, by giving the Holder 30 days written notice.  Notwithstanding the foregoing, the Holder shall have the right during such 30-day period to convert the outstanding principal amount into shares of Common Stock pursuant to the provisions above.

 

So long as                            is the Holder of this Note, the Company may set off any amount owed under this Note in accordance with the specific set-off provisions contained in clauses 7.12 and 8 of the SPA.  If this Note has been transferred in accordance with the terms hereof, the Company may, at its option, reduce any principal amount owed to the Holder under this Note if any amounts are owed to the Company pursuant to clauses 7.12 and 8 of the SPA by the original Holder of this Note.

 

At any time after January 31, 2013, the Holder may, prior to maturity thereof, surrender this Note at the principal office of the Company for transfer or exchange.  Within a reasonable time after notice to the Company from the Holder of its intention to make such exchange and without expense to the Holder, except for any transfer or similar tax which may be imposed on the transfer or exchange, the Company shall issue in exchange therefor another note or notes for the same aggregate principal amount as the unpaid principal amount of this Note, having the same maturity and rate of interest, containing the same provisions and subject to the same terms and conditions as this Note. Each new note or notes shall be made payable to such person or persons as the Holder may designate, and such transfer or exchange shall be made in such a manner that no gain or loss of principal or interest shall result therefrom.  The Company may elect not to permit a transfer of this Note if it has not obtained satisfactory assurance that such transfer: (a) is exempt from the registration requirements of, or covered by an effective registration statement under, the Securities Act of 1933, as amended, and the rules and regulations thereunder, and (b) is in compliance with all applicable state securities laws, including without limitation receipt of an opinion of counsel, which opinion shall be satisfactory to the Company.

 

At any time on or prior to January 31, 2013, without the Company’s prior written consent, the Holder shall not sell, assign or otherwise transfer this Note or any of its rights hereunder (subject to clause 3.9 of the SPA).

 

Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of the Note, the Company will issue a new Note, of like tenor and amount and dated the date to which interest has been paid, in lieu of such lost, stolen, destroyed or mutilated Note, and in such event the Holder agrees to indemnify and hold harmless the Company in respect of any such lost, stolen, destroyed or mutilated Note.

 

This Note shall be subject to the subordination provisions of Exhibit A hereto.

 

This Note shall, at the option of the Holder, become due and payable without notice or demand, upon the happening of any one of the following specified events by or 

 

 

with respect to the Company: (1) failure to pay any amount when due and payable as herein set forth, which failure is not cured within 30 days after written notice of such failure from the Holder; (2) the making of a general assignment for the benefit of creditors; (3) the filing of any petition or the commencement of any proceeding for any relief under any bankruptcy or insolvency laws, or any laws relating to the relief of debtors; or (4) a Change of Control of the Company; provided that if the offer price in any Change of Control transaction is greater than or equal to $4 per share of Common Stock, the Holder shall be permitted to convert all (but not less than all) of the outstanding principal amount of this Note into shares of Common Stock at the rate of 1 share for every $4 in principal amount outstanding.  For purposes of this Note, “Change of Control” shall mean (i) the sale or other disposition in one or a series of related transactions of all or substantially all of the assets of the Company and its subsidiaries to any Person (or group of Persons acting in concert); or (ii) any transaction or series of related transactions (including without limitations a merger or recapitalization or similar transaction by the Company or a sale to a Person (or group of Persons acting in concert) of equity interests in the Company) that, in any case, results in any Person (whether or not such Persons act in concert) directly or indirectly owning or controlling more than 50% of the equity interests of the Company (or any resulting company after a merger).  “Person” means any individual, corporation, company, partnership (limited or general), limited liability company, joint venture, association, trust, unincorporated organization or other entity.

 

The Company shall be entitled to deduct and withhold (or cause to be deducted and withheld) from any interest payment pursuant to this Note such amounts as it is required to deduct and withhold with respect to the making of such payment under any applicable tax laws.  If the Company so deducts or withholds (or causes to be deducted or withheld) any such amounts, such amounts shall be treated for all purposes of this Note as having been paid to the Holder in respect of which the Company made such deduction and withholding.

 

The Company hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever.  The non-exercise by the Holder of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.  No waiver of any obligation of the Company under this Note shall be effective unless it is in a writing signed by the Holder.

 

If this Note is not paid in accordance with its terms, the Company shall pay to the Holder, in addition to principal and accrued interest thereon, all costs of collection of the principal and accrued interest, including, but not limited to, reasonable attorneys’ fees, court costs and other costs for the enforcement of payment of this Note.  All payments received by the Holder hereunder will be applied first to costs of collection, if any, then to interest and the balance to principal.

 

 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

	
 
  	
INFORMATION SERVICES GROUP, INC.
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By:
  	
 
  
	
 
  	
Name:
  
	
 
  	
Title:
  

 

 

EXHIBIT A

 

Subordination Provisions

 

1.  Subordination. The Company covenants and agrees and the Holder, by its acceptance hereof likewise covenants and agrees, that this Note is subject to the provisions of this Exhibit A; and each holder of this Note, whether upon original issue or upon transfer, assignment or exchange thereof accepts and agrees that the payment of the principal amount of and interest on this Note by the Company shall, to the extent and in the manner herein set forth, be subordinated and junior in right of payment, to the prior payment in full of all existing and future secured indebtedness of the Company (“Senior Debt”).

 

2.  No Payment on Note in Certain Circumstances. (a)  If any default in the payment of any principal of or interest on any Senior Debt when due and payable, whether at maturity, upon any redemption, by declaration or otherwise, occurs and is continuing, no payment shall be made by the Company with respect to the principal of or interest on this Note or to acquire this Note for cash or property other than conversion of this Note into Common Stock in accordance with the Note.

 

(b)  If any default or event of default (other than a default in payment of the principal of or interest on any Senior Debt) occurs and is continuing (or if such a default or event of default would occur upon any payment with respect to this Note) with respect to any Senior Debt, as such default or event of default is defined in such Senior Debt, permitting the holders thereof to accelerate the maturity thereof and if the holder or holders or a representative of such holder or holders gives written notice of the default or event of default to the Company (a “Default Notice”), then, unless and until such default or event of default has been cured or waived or has ceased to exist, the Company shall not be obligated to, and shall not, (x) make any payment of or with respect to the principal of or interest on this Note or (y) acquire this Note for cash or property or otherwise other than conversion of this Note into Common Stock in accordance with this Note. After the default or event of default in such Default Notice has been cured or waived or ceases to exist, the Company shall, subject to paragraph 2(a), promptly pay to the Holder of this Note all sums which the Company would have been obligated to pay from the date of the Default Notice but for this paragraph 2(b).

 

(c) Notwithstanding the foregoing, in the event that any payment in cash or property shall be received by the Holder when such payment is prohibited by paragraph 2(a) or 2(b), such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Debt in full after giving effect to any concurrent payment in respect of such Senior Debt; provided, however, that such amounts paid to the holders of Senior Debt shall not be deemed to discharge the amounts owed to the Holder of this Note.

 

 

3  Payment Over of Proceeds Upon Dissolution, Etc. (a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Debt shall first be paid in full, or such payment duly provided for, before any payment is made on account of the principal of or interest on this Note, or any acquisition of this Note for cash or property is made, other than conversion of this Note into Common Stock in accordance with this Note. Upon any such dissolution, winding-up, liquidation or reorganization, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holder of this Note would be entitled, except for the provisions hereof, other than conversion of this Note into Common Stock in accordance with this Note, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the Holder of this Note if received by it, directly to the holders of Senior Debt or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt.

 

(b)  Notwithstanding the foregoing, in the event that any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, other than conversion of this Note into Common Stock in accordance with this Note, shall be received by the Holder when such payment or distribution is prohibited by paragraph 3(a), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt; provided, however, that such amounts paid to the holders of Senior Debt shall not be deemed to discharge the amounts owed to the Holder of this Note.

 

4.  Subrogation. Subject to the payment in full of all Senior Debt, the Holder of this Note shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the principal amount of and interest on this Note shall be paid in full. It is understood that the provisions of this Exhibit A are and are intended solely for the purpose of defining the relative rights of the Holder of this Note, on the one hand, and the holders of the Senior Debt, on the other hand.

 

5.  Obligations of Company Unconditional. Nothing contained in this Note is intended to or shall impair, as between the Company and the Holder of this Note, the

 

 

obligation of the Company, which is absolute and unconditional, to pay to the Holder of this Note the principal amount of and interest on this Note as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holder of this Note and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Holder from exercising all remedies otherwise permitted by applicable law upon default under this Note, subject to the rights under this Exhibit A of the holders of the Senior Debt.

 

6.  Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Exhibit A, the Holder of this Note shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Holder of this Note, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Exhibit A.

 

7.  Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt.  No right of any present or future holders of any Senior Debt to enforce subordination as provided herein will at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Note, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. The holders of Senior Debt may extend, renew, modify or amend the terms of the Senior Debt or any security therefor and release, sell or exchange such security and otherwise deal freely with the Company, all without affecting the liabilities and obligations of the Holder of this Note.

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