Document:

EX-10.1

 Exhibit 10.1 
 SANTARUS, INC. 
 2013 BONUS PLAN* 

 

	*	Excludes those covered under the Field Sales Incentive Plans 

 Santarus, Inc. 
 2013 Bonus Plan 
 The Santarus, Inc. (“Santarus” or the “Company”) 2013
Bonus Plan (the “Plan”) is designed to offer employees a performance-based plan that rewards the achievement of corporate goals, as well as individual goals that are consistent with the corporate goals. 

Purpose of the Plan 
 The Plan is
designed to: 
  

	 	•	 	 Provide a bonus program that helps achieve overall corporate goals and enhances shareholder value 

 

	 	•	 	 Reward individuals for achievement of corporate and individual goals 

 

	 	•	 	 Encourage teamwork among all disciplines within the Company 

 

	 	•	 	 Offer an attractive bonus program to help attract and retain key employees 

 Plan Governance 
 The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the Plan and any proposed modifications to the Plan. The President and CEO of Santarus is responsible for administration of the Plan; provided that the Compensation Committee of the Board of Directors is responsible for
reviewing and approving all compensation, including compensation under this Plan, for all officers, vice presidents, executive directors and any other employees with an annual base salary greater than or equal to $250,000. 

Eligibility 
 All regular employees of
the Company who are regularly scheduled to work at least 20 hours per week will be eligible to participate in the Plan, other than any employee eligible to participate in the Company’s Field Sales Incentive Plans. Temporary employees and
part-time employees (who are regularly scheduled to work less than 20 hours per week) are not included in this Plan. In order to be eligible to receive any bonus award (or “Bonus”) under this Plan, a participant: (a) must have
commenced their employment with the Company prior to November 15, 2013 and remained continuously employed through December 31, 2013 and until the time Bonuses are paid; and (b) must be an employee in good standing (e.g., not on a
performance improvement plan as of December 31, 2013 or an Unacceptable performer as determined during the 2013 review cycle), as determined by the Compensation Committee of the Board of Directors or the President and CEO of Santarus, as
applicable in their sole discretion. Employees joining during the bonus plan year will have their actual bonus amount prorated based on their actual time with the Company during the Plan year. 

 A participant whose employment terminates voluntarily prior to the payment of a Bonus award will not be
eligible to receive a Bonus award. Continued employment is a condition of vesting. If a participant’s employment is terminated involuntarily during the Plan year, or prior to payment of Bonus awards, it will be at the absolute discretion of the
Company whether or not a Bonus award payment is made. 
 Corporate and Individual Performance 

The President and CEO will present to the Compensation Committee of the Board of Directors a list of the overall corporate goals for the Plan year, which
is subject to approval by both the Compensation Committee and the independent members of the Board of Directors. All participants in the Plan will then develop a list of key individual goals, which will be approved by their manager and used for the
basis of the performance review and individual performance rating. 
 The total bonus pool for the Plan will be based on achievement of the 2013
corporate goals and, where applicable, the individual’s annual performance review rating. 
 Bonus Awards 

The Bonus will be paid in cash and is based on achievement of the 2013 corporate goals and achievement of individual goals. The Bonus will be calculated
by using the base salary as of December 31, 2013, weighting factor, target bonus percentage and goal multipliers as identified below: 

Weighting Factor 
 The relative weight
between the corporate and individual Bonus components will vary based on levels within the organization. The weighting factors will be reviewed annually and adjusted, as necessary or appropriate. The weighting for 2013 will be as follows:

  

					
	 Position
	  	Corporate	 	Individual
	 President and CEO
	  	100%	 	
	 Group K (EVP Level Officer)
	  	100%	 	
	 Group J (SVP Officers)
	  	100%	 	
	 Group I (Non-Officer VPs)
	  	80%	 	20%
	 Group H (Executive Directors)
	  	80%	 	20%
	 Group G (Senior Directors)
	  	80%	 	20%
	 Group F (Directors)
	  	80%	 	20%
	 Group E (Senior Managers)
	  	60%	 	40%
	 Group D (Managers)
	  	60%	 	40%
	 Group C
	  	40%	 	60%
	 Group A & B
	  	20%	 	80%

 Target Bonus Percentages 
 Bonus amounts will be determined by applying a “target bonus percentage” to the base salary of employees in the Plan. Following are the 2013 target bonus percentages: 

 

			
	 Position
	  	Target Bonus Percentages
	 President and CEO
	  	70%
	 Group K
	  	50%
	 Group J
	  	40%
	 Group I
	  	35%
	 Group H
	  	30%
	 Group G
	  	25%
	 Group F
	  	22%
	 Group E
	  	17%
	 Group D
	  	15%
	 Group C
	  	12%
	 Group B
	  	8%
	 Group A
	  	7%

 The base salary as of December 31, 2013 times the target bonus percentage will be used to establish the target Bonus
amount for the 2013 year. 
 Goal Multipliers 
 Corporate Goal Multiplier: The following scale will be used by the Compensation Committee of the Board of Directors and the independent members of the Board of Directors to determine the
“total corporate goal multiplier” based upon measurement of actual corporate performance versus the pre-established corporate goals. The Compensation Committee will evaluate each corporate goal as follows: 

 

					
	 Performance Category
	  	Goal Multiplier	 
		
	1. Performance for the year significantly exceeded the goal or was excellent in view of prevailing conditions	  	 	110% - 200%	  
		
	2. Performance fully met the year’s goal or is considered achieved in view of prevailing conditions	  	 	100% - 150%	  
		
	3.Performance for the year met some aspects of the goal but not all or met most aspects in view of prevailing conditions.	  	 	75% - 100%	  
		
	4. The performance met at least 50% of the goal or met at least 50% in view of prevailing conditions.	  	 	50% - 75%	  
		
	5. The goal was not achieved and performance was not acceptable in view of prevailing conditions.	  	 	0%	  

 Each goal is evaluated separately, weighting applied and a total corporate goal multiplier is reached. A
total corporate goal multiplier of at least 50% is required prior to any payout of Bonuses under the Plan and the total corporate goal multiplier may not exceed 150%. 
 Individual Goal Multiplier: The “individual goal multiplier” will be determined by taking into account the performance rating (Pinnacle, Standing Ovation, Great Performance, etc.) given
to the individual through the 2013 review cycle as well as any other relevant criteria relating to the individual’s job performance during 2013. The specific multipliers for each performance rating level are as follows: 

 

			
	 Performance Rating:
	  	Multiplier
	 Pinnacle
	  	125%
	 Standing Ovation
	  	115%
	 Great Performance
	  	100%
	 Too New
	  	70%
	 Fair Performance
	  	50%

 Calculation of Bonus Amount 
 The example below shows a sample Bonus amount calculation under the Plan. First, a target Bonus amount is calculated for each Plan participant by multiplying the employee’s base salary by the target
bonus percentage. This dollar figure is then divided between the corporate component and the individual component based on the weighting factor for that position. This calculation establishes specific dollar target Bonus amounts for the performance
period for each of the corporate and individual components. 
 At the end of the performance period, corporate and individual goal multipliers
will be established using the criteria described above. The corporate goal multiplier, which is based on overall corporate performance, is used to calculate the corporate component of the Bonus amount for all Plan participants. This is accomplished
by multiplying the target corporate Bonus amount established for each individual by the total corporate goal multiplier. The individual goal multiplier, which is based on an individual’s performance rating, is used in the same way to calculate
the actual individual component of the Bonus amount. 

 Example:    Actual Bonus Amount Calculation 

 

					
	 Group Level
	  	 	B	  
	 Position
	  	 	Executive Assistant	  
	 Base Salary as of December 31
	  	$	50,000	  
	 Target Bonus Percentage
	  	 	8	% 
	 Performance Rating
	  	 	Standing Ovation	  
	 Target Bonus Amount
	  	$	4,000	  
		
	 Target Bonus Amount Components:
	  			
	 Target Bonus Amount based on corporate performance (20%):
	  	$	800	  
	 Target Bonus Amount based on individual performance (80%):
	  	$	3,200	  
		
	 Corporate Goal Multiplier
	  	 	80	% 
	 Individual Goal Multiplier
	  	 	105	% 
		
	 Actual Bonus Amount Calculation:
	  			
	 Corporate Bonus Amount
	  	$	640 ($800 x 80	%) 
	 Individual Bonus Amount
	  	$	3,360 ($3,200 x 105	%) 
	 Total Actual Cash Bonus Amount
	  	$	4,000	  

 Payment of the Bonus Amounts 
 Annual performance reviews for Plan participants will be completed by February 28, 2014. Payments of actual Bonus amounts will be made as soon as practical, but not later than March 15, 2014.
Participants’ entitlement to Bonuses under this Plan does not vest until the Bonuses are actually paid. This plan is not intended to be subject to Section 409A of the Internal Revenue Code of 1986, as amended. 

Company’s Absolute Right to Alter or Abolish the Plan 
 The Compensation Committee of the Board of Directors reserves the right in its absolute discretion to terminate and/or abolish all or any portion of the Plan at any time or to alter the terms and
conditions under which a Bonus will be paid. In the event of the Plan’s termination prior to the payment of a Bonus, such Bonus will not be payable under this Plan. Such discretion may be exercised any time before, during, and after the Plan
year is completed. No participant shall have any vested right to receive any payment until actual delivery of such compensation. Notwithstanding the generality of the foregoing, at the Company’s discretion all or a portion of a Bonus payment
may be made in shares of the Company’s common stock. 

 The Compensation Committee, in its discretion, may also determine whether to increase the payout under the
Plan for extraordinary achievement or to reduce payout if economic and business conditions warrant such action. 
 Employment
Duration/Employment Relationship 
 This Plan does not, and the Company’s policies and practices in administering this Plan do not,
constitute an express or implied contract or other agreement concerning the duration of any participant’s employment with the Company. The employment relationship of each participant is “at will” and may be terminated at any time by
the Company or by the participant with or without cause.EX-4.3

 Exhibit 4.3 
 Inter-Business Transfer and Allocation Policies relating to the Financial 

Services Businesses and the Closed Block Business 
 of 
 PRUDENTIAL FINANCIAL, INC. 

(the “Corporation”) 
 The Corporation’s Board of Directors has adopted the following policies relating to its Financial Services Businesses and the Closed Block Business (in each case as defined in the Corporation’s
Amended and Restated Certificate of Incorporation, each a “Business” and collectively the “Businesses”) to be established upon the issuance and sale of the Corporation’s Class B Stock, par value $0.01 per share
(“Class B Stock”), and the related indebtedness (the “IHC Debt”) of Prudential Holdings, LLC, a New Jersey limited liability company which is a wholly-owned subsidiary of the Corporation. These policies shall be
effective upon issuance of the Class B Stock. The Board of Directors may modify, rescind or add to these policies in its discretion, subject to its fiduciary duty to the Corporation’s shareholders and covenants substantially limiting such
discretion agreed, or to be agreed, with investors in the Class B Stock and the Bond Insurer (as defined below) for, and/or the holders of, the IHC Debt. 
 Definitions 
 “Administrative Services Fee” means the administrative
services fees paid by the Closed Block Business within Prudential Insurance to the Financial Services Businesses within Prudential Insurance, for services performed by the Financial Services Businesses for the benefit of the Closed Block Business,
based on the charges set forth in the statement of Closed Block Business Administrative Expense Charges attached as an exhibit to the Indenture. 
 “Bond Insurer” means Financial Security Assurance Inc., in its capacity as insurer of the insured portion of the IHC Debt. 
 “Closed Block Assets” has the meaning set forth in Article I of the Plan of Reorganization. 
 “Closed Block Memorandum” means the memorandum attached as Exhibit G to the Plan of Reorganization, as amended from time to time. 
 “Closed Block Policies” has the meaning set forth in Article I of the Plan of Reorganization. 
 “Effective Date” means the date as of which the Amended and Restated Certificate of Incorporation of the Corporation becomes effective under New Jersey law, which shall be the same date
as the “Effective Date” as defined under the Plan of Reorganization. 
 “Effective Time” means 12:01 a.m., Eastern
Standard Time or Eastern Daylight Time, as the case may be, in Newark, New Jersey, on the Effective Date. 
 “GAAP” means
United States generally accepted accounting principles. 
 “Indenture” means the indenture, dated as of December 18, 2001,
between Prudential Holdings, LLC, as issuer of the IHC Debt, and U.S. Bank National Association, as trustee for the holders of the IHC Debt. 

“Insurance and Indemnity Agreement” means the agreement, dated as of December 18, 2001, between Prudential Holdings, LLC and the
Bond Insurer, governing the issuance of the financial guaranty insurance policy with respect to the insured portion of the IHC Debt. 

 “Plan of Reorganization” means the Plan of Reorganization of The Prudential Insurance
Company of America under Chapter 17C of Title 17 of the New Jersey Revised Statutes, dated as of December 15, 2000, as amended and restated, and as it may be further amended from time to time. 

“Pre-Closing Tax Attributes” means any items of income, deduction, gain, loss, credit, tax cost or tax benefit determined under the Plan
of Reorganization with respect to any period prior to the Effective Date. 
 “Prudential Insurance” means the stock successor
of The Prudential Insurance Company of America. 
 “Regulatory Closed Block” means the “closed block” established pursuant to
Article IX of the Plan of Reorganization. 
 “Surplus and Related Assets” means those assets segregated outside the Regulatory
Closed Block held to meet capital requirements related to the Closed Block Business within Prudential Insurance (the “Surplus Assets”) as well as those assets that represent the difference between assets of the Regulatory Closed
Block and the sum of the liabilities of the Regulatory Closed Block and the applicable statutory interest maintenance reserve (the “Related Assets”), as designated by the Corporation. 

“Subscription Agreement” means the agreement, dated as of April 25, 2001, between the Corporation and the subscribers to the Class
B Stock, as named in Schedule I to such agreement, setting forth terms and conditions related to the issuance and sale of the Class B Stock. 

“Tax Agreements” means agreements, dated as of December 18, 2001, between the Corporation and Prudential Holdings, LLC that
establish arrangements for the payments of the amounts due to and from Prudential Insurance and its subsidiaries under the consolidated federal income tax sharing agreement of the Corporation and its affiliates and providing for the allocation and
payment of certain income tax benefits and income tax liabilities attributed to Prudential Holdings, LLC. 
 Policies with Respect to
Inter-Business Transactions and Transfers (Excluding Taxation) 
 The transactions in subparagraphs (a) through
(h) below will be permitted between the Closed Block Business and the Financial Services Businesses. Any such transfers (including lending) by the Closed Block Business may be out of either Closed Block Assets, Surplus and Related Assets or
assets of Prudential Holdings, LLC’s or the Corporation’s Closed Block Business; provided that any transfer (including lending) of Closed Block Assets to Prudential Insurance’s Financial Services Businesses remains subject to
compliance with applicable regulatory requirements and is subject to the terms of the Indenture. 
  

	 	(a)	The Closed Block Business may lend to the Financial Services Businesses(but the Closed Block Business within Prudential Insurance may not lend to the Financial
Services Businesses outside Prudential Insurance), and the Financial Services Businesses (inside or outside Prudential Insurance) may lend to the Closed Block Business, in either case (i) on terms no less favorable to the Closed Block Business
than the terms for a comparable loan among any other portions of Prudential Insurance’s general account; (ii) if Prudential Holdings, LLC is the lender, from the Debt Service Coverage Account (as defined in the Indenture) within Prudential
Holdings, LLC subject to the limitations in the Indenture; (iii) for cash management purposes only in the ordinary course of business and on market terms pursuant to the internal short-term cash management facility (“short-term cash
management” means the management of daily positive or negative cash balances for all participating segments, profit centers and legal entities that are pooled in the Corporation’s money market investment pool on a daily basis); or
(iv) as contemplated for the management of Prudential Holdings, LLC’s assets. 

  

	 	(b)	 Other transfers, exchanges, investments, purchases or sales of assets between the Regulatory Closed Block and businesses outside of the Regulatory
Closed Block, including the Financial Services Businesses, are permitted if such transactions (x) (i) benefit the Regulatory Closed Block, 

  
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(ii) are consistent with the Closed Block Memorandum, (iii) are executed at demonstrable fair market values and (iv) do not exceed, in any calendar year, more than 10% of the
statutory statement value of the invested assets of the Regulatory Closed Block as of the beginning of that year or (y) are pursuant to the Tax Agreements. 

 

	 	(c)	Any lending pursuant to any inter-business loan that may be established to reflect usage of the funds held in the DSCA—Subaccount FSB or the DSCA -Subaccount FSB
(Deposit) (each as defined in the Indenture) to pay Debt Service(as defined in the Indenture) on the IHC Debt and any other amounts owed to the Bond Insurer is permitted. 

 

	 	(d)	In addition to the foregoing, the Financial Services Businesses in any legal entity may lend to the Closed Block Business in the same or any other legal entity on
market terms on either a subordinated or non-subordinated basis, as may be approved by the Corporation’s Board of Directors and, if applicable, the Board of Directors of Prudential Insurance. 

 

	 	(e)	The Corporation’s and Prudential Insurance’s respective Boards of Directors may designate: (i) that a capital contribution to Prudential Insurance be for
the benefit of the Closed Block Business within Prudential Insurance; or (ii) that assets of the Financial Services Businesses within Prudential Insurance be transferred to the Closed Block Business within Prudential Insurance in the form of a
loan on market terms that is subordinated to all existing obligations of the Closed Block Business within Prudential Insurance. In the absence of the specific designation referred to in clause (i), any capital contribution to Prudential Insurance
will be for the benefit of the Financial Services Businesses. 

  

	 	(f)	The respective Boards of Directors of the Corporation and Prudential Insurance have discretion to transfer assets of the Financial Services Businesses to the Regulatory
Closed Block, or use such assets for the benefit of Regulatory Closed Block policyholders, if they (as applicable) believe such transfer or usage is in the best interests of the Financial Services Businesses, and such transfers or usage may be made
without requiring any repayment of the amounts transferred to the Regulatory Closed Block or so used or the payment of any other consideration from the Closed Block Business. 

 

	 	(g)	Such other transactions on market terms as may be approved by the Board of Directors of the Corporation and if applicable, the Board of Directors of Prudential
Insurance. 

  

	 	(h)	Cash payments for Administrative Services Fees from the Closed Block Business to the Financial Services Businesses will be based on the charges set forth in the
Indenture. Cash payments for expenses of the Regulatory Closed Block that are paid from within the Regulatory Closed Block to the portion of the Closed Block Business that is outside of the Regulatory Closed Block within Prudential Insurance will be
calculated on a formulaic basis consistent with the Closed Block Memorandum as set forth in the Indenture. 

 Accounting
Policies with Respect to the Allocation of Assets, Liabilities and Expenses 
  

	 	(a)	The Corporation will allocate all its assets, liabilities, equity and earnings between the Financial Services Businesses and the Closed Block Business, and the
Corporation will account for them as if they were separate legal entities, in accordance with GAAP. 

  

	 	(b)	For financial reporting purposes, revenues, administrative, overhead, and investment expenses, taxes other than federal income taxes and certain commissions and
commission-related expenses associated with the Closed Block Business will be allocated between the Closed Block Business and the Financial Services Businesses in accordance with GAAP. Interest expense and routine maintenance and administrative
costs generated by the IHC Debt will be considered directly attributable to the Closed Block Business and will therefore be allocated in their entirety to the Closed Block Business except as indicated below. 

  
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	 	(c)	Any transfers of funds between the Closed Block Business and the Financial Services Businesses will typically be accounted for as either reimbursement of expense,
investment income, return of principal or a subordinated loan, except as contemplated under “—Polices with Respect to Inter-Business Transactions and Transfers (Excluding Taxation)” above and “-Policies with Respect to
Inter-Business Transactions and Transfers Regarding Taxation” below. 

  

	 	(d)	The Closed Block Business will exclude any expenses and liabilities from litigation affecting the Closed Block Policies, and these expenses and liabilities will be part
of, and borne by, the Financial Services Businesses. The Financial Services Businesses will bear any expenses and liabilities from litigation affecting the Closed Block Policies and the consequences of certain adverse tax determinations related to
the IHC Debt, as noted below. These expenses will therefore be reflected in the Financial Services Businesses, and not in the Closed Block Business. In connection with the sale of the Class B Stock and the issuance of the IHC Debt, the Corporation
has agreed to indemnify the investors in the Class B Stock pursuant to the Subscription Agreement and may agree to indemnify other persons with respect to certain matters, and such indemnification will be borne by the Financial Services Businesses.
For the nine months ended September 30, 2001, a reserve of $160 million was recorded in the Traditional Participating Products segment for death and other benefits due with respect to policies for which no death claim has been received but
where death has occurred; upon demutualization this reserve will become a liability of the Financial Services Businesses, and any subsequent re estimation of this reserve(upward or downward) will be included in adjusted operating income of the
Financial Services Businesses. 

  

	 	(e)	For financial reporting purposes, administrative expenses recorded by the Closed Block Business, and the related income tax effect, will be based upon actual expenses
incurred under GAAP. Any difference between the cash amount transferred from the Closed Block Business to the Financial Services Businesses as described in paragraph (h) under “—Policies with Respect to Inter-Business Transactions and
Transfers (Excluding Taxation)” above and actual expenses incurred as recorded under GAAP will be recorded, on an after-tax basis at the applicable current rate, as direct adjustments to the respective GAAP equity balances of the Closed Block
Business and the Financial Services Businesses without the issuance of shares of either Business to the other Business. Statutory expenses will be calculated based upon the actual cash payments. Internal investment expenses recorded and paid by the
Closed Block Business, and the related income tax effect, will be based upon actual expenses incurred under GAAP and in accordance with an investment management agreement between Prudential Insurance and Prudential Investment Management, Inc. and
other agreements governing record keeping, bank fees, accounting and reporting, asset allocation, investment policy and planning and analysis. 

 Tax Allocations/Tax Treatment 
 For financial reporting purposes, the Closed
Block Business within each legal entity will be treated as if it were a consolidated subsidiary under the consolidated federal income tax sharing agreement of the Corporation and its affiliates. Accordingly, if the Closed Block Business within any
legal entity has taxable income, it will recognize its share of income tax as if it were a consolidated subsidiary of the Corporation. If the Closed Block Business within any legal entity has losses or credits, it will recognize a current income tax
benefit. 
 Policies with Respect to Inter-Business Transactions and Transfers Regarding Taxation 

If the Closed Block Business has taxable income attributable to tax periods (or portions of periods) after the Effective Time, it will pay
its share of federal income tax in cash to the Financial Services Businesses. If 

  
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the Closed Block Business has losses or credits attributable to tax periods (or portions of periods) after the Effective Time, it will receive its federal income tax benefit in cash from the
Financial Services Businesses. If any losses or credits cannot be utilized in the consolidated federal income tax return of the Corporation for the year in which such losses or credits arise, the Closed Block Business will still receive the full
benefit in cash, it being understood that the Financial Services Businesses will be entitled to subsequently recover such benefit for itself if the losses or credits are ultimately actually utilized in computing estimated payments or in the
consolidated federal income tax returns of the Corporation, but the failure to recover such benefit will have no effect on the Closed Block Business (and will not affect the Corporation’s obligations under the Tax Agreements, reflecting these
policies). 
 Certain tax costs and benefits are determined under the Plan of Reorganization with respect to the Regulatory
Closed Block using statutory accounting rules that may give rise to tax costs or tax benefits prior to the time that those costs or benefits are actually realized for tax purposes. If at any time the Closed Block Business is allocated any such tax
cost or a tax benefit under the Plan of Reorganization that is not realized at that same time under the relevant tax rules but will be realized in the future, the Closed Block Business will pay such tax cost or receive such tax benefit at that time,
but it shall be paid to or paid by the Financial Services Businesses. When such tax cost or tax benefit is subsequently realized under the relevant tax rules, the tax cost or tax benefit shall be allocated to the Financial Services Businesses. The
foregoing principles will be applied so as to prevent any item of income, deduction, gain, loss, credit, tax cost or tax benefit being taken into account more than once by the Closed Block Business (including the Regulatory Closed Block) or the
Financial Services Businesses. For this purpose, Pre-Closing Tax Attributes shall be taken into account with any such Pre-Closing Tax Attributes relating to the Regulatory Closed Block being attributed to the Closed Block Business and all other
Pre-Closing Tax Attributes being attributed to the Financial Services Businesses. 
 The Closed Block Business will also pay or
receive its appropriate share of tax and related interest resulting from adjustments attributable to the settlement or other resolution of tax controversies or the filing of amended tax returns to the extent that such amounts relate to controversies
or amended returns arising with respect to the Closed Block Business and attributable to tax periods (or portions of periods) after the Effective Time, except to the extent that such tax is directly attributable to the characterization of the IHC
Debt as other than debt for tax purposes, in which case the tax will be borne solely by the Financial Services Businesses. If a change of law after the Effective Time, including any change in the interpretation of any law, results in the re
characterization of all or part of the IHC Debt as other than debt for tax purposes or a significant reduction in the income tax benefit associated with the interest expense on all or part of the IHC Debt, the Financial Services Businesses will
continue to pay the foregone income tax benefit to the Closed Block Business for as long as the IHC Debt remains outstanding or any amounts are owed to the Bond Insurer as if such re characterization or reduction of actual benefit has not occurred.
The Financial Services Businesses will bear all tax liabilities not properly attributable to the Closed Block Business. Any settlement involving the Closed Block Business will be made in good faith and with due regard to the merits of the position
taken by the Closed Block Business. 
 Charges for premium taxes, guaranty fund payments as well as state and local income taxes
and franchise taxes will be allocated between the Closed Block Business and the Financial Services Businesses in the manner in which they are allocated between the Regulatory Closed Block and other than the Regulatory Closed Block within Prudential
Insurance, in accordance with the Closed Block Memorandum. For purposes of calculating the state and local income tax for the Closed Block Business within Prudential Insurance, the actual Prudential Insurance state and local income tax rates will be
used. For purposes of calculating the state and local income tax on the Closed Block Business outside Prudential Insurance (including the state and local income tax benefits related to the interest payable on the IHC Debt) a fixed rate of 1% will be
used. 

  
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