Document:

exv10w1

Exhibit 10.1

SIXTH AMENDMENT

          This Sixth Amendment (the “Sixth Amendment”), dated as of August 9, 2010, but
effective as set forth in Paragraph 10 below, to the Amended and Restated Strategic Alliance
Agreement (as amended) is entered into by and between PENWEST PHARMACEUTICALS CO., a corporation
organized and existing under the laws of the State of Washington, with its principal place of
business at 39 Old Ridgebury Road, Danbury, Connecticut 06810 (“Penwest”), and ENDO
PHARMACEUTICALS INC., a corporation organized and existing under the laws of the State of Delaware,
with its principal place of business at 100 Painters Drive, Chadds Ford, Pennsylvania 19317
(“Endo”) (each, a “Party” and collectively, the “Parties”).

WITNESSETH:

          WHEREAS, Endo and Penwest are parties to that certain Amended and Restated Strategic Alliance
Agreement, dated as of April 2, 2002, as amended by that certain Amendment Agreement, dated as of
January 7, 2007, that certain Second Amendment, effective as of July 14, 2008, that certain Third
Amendment, effective as of January 1, 2009, that certain Consent Agreement, dated as of June 8,
2009, that certain Fourth Amendment, effective as of April 8, 2010 and that certain Fifth
Amendment, dated as of June 8, 2010 (collectively, the “Agreement”);

          WHEREAS, Endo, Penwest and West Acquisition Corp. (“Merger Sub”), concurrently with
the execution and delivery of this Sixth Amendment, have entered into an Agreement and Plan of
Merger (the “Merger Agreement”), pursuant to which (i) Merger Sub will commence an Offer
(as defined in the Merger Agreement) to purchase all of the outstanding shares of common stock of
Penwest upon the terms and subject to the conditions set forth in the Merger Agreement, and (ii)
following the consummation of the Offer, Merger Sub will merge with and into Penwest in accordance
with the Washington Business Corporation Act and the General Corporation Law of the State of
Delaware;

          WHEREAS, following the Offer Closing (as defined in the Merger Agreement), Endo will be the
beneficial owner of a majority of the issued and outstanding shares of common stock of Penwest and
will be entitled to designate a majority of the directors on the Company Board (as defined in the
Merger Agreement); and

          WHEREAS, if Merger Sub consummates the Offer, Penwest and Endo desire to further amend the
Agreement as specified herein, effective as of the Offer Closing, to reflect the ownership of
Penwest following the Offer Closing.

          NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants and undertakings
set forth below, and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Parties hereby agree as follows:

	1.	 	Certain Defined Terms. Words and phrases that are introduced by initial capitals and
which are not otherwise defined in this Sixth Amendment shall have the same meaning as in the
Agreement. All references to “Section”, unless otherwise specified, are intended to refer to
a

 

 

	 	 	section of the Agreement and all references to “Paragraph”, unless otherwise specified, are
intended to refer to a paragraph of this Sixth Amendment.

	2.	 	Penwest’s Rights to Receive Royalties. Endo shall continue to pay, and Penwest shall
continue to have the right to receive, royalties or other payments as specified in the
Agreement.

	3.	 	Control of the Product. The Parties hereby agree that, and notwithstanding anything
to the contrary in the Agreement (but subject to Paragraphs 2 and 4), from and after the Offer
Closing, Endo shall have sole discretion with respect to all decisions and actions pertaining
to the Product and the Licensed Oxymorphone Products.

	4.	 	Committee Action; Alliance Committee. Notwithstanding anything to the contrary in
the Agreement, from and after the Offer Closing, any and all matters under the Agreement that
are to be determined, decided, approved or accepted by Committee Action, the Alliance
Committee, Penwest or both Parties, or for which the Alliance Committee’s or Penwest’s consent
is required, shall be determined, decided, approved or accepted by or consented to (as the
case may be) by Endo in its sole discretion (except amendments of, or modifications to, the
Agreement, which shall continue to require a writing signed by both Parties). In connection
with the foregoing, from and after the Offer Closing, all provisions of the Agreement that
specify procedures required to obtain any such determination, decision, approval, acceptance
or consent by Committee Action, the Alliance Committee, Penwest or both Parties shall be
automatically deleted from the Agreement (including, for clarity, the existence and powers of
the Alliance Committee, which, from and after the Offer Closing, shall be automatically
disbanded and shall have no further rights or obligations under the Agreement).

	5.	 	Termination By Penwest. Notwithstanding anything to the contrary in the Agreement,
from and after the Offer Closing, Penwest shall not have any right to terminate the Agreement,
except with Endo’s prior written consent.

	6.	 	Best Commercial Efforts. Notwithstanding anything to the contrary in the Agreement,
from and after the Offer Closing, Endo shall have no obligations to Penwest under Section 4.1
of the Agreement (including no obligations to exercise Best Commercial Efforts during the
Marketing Period), or any other obligations, to manufacture, market, promote and sell the
Product and the Licensed Oxymorphone Products.

	7.	 	Non-Solicitation Obligations. Notwithstanding anything to the contrary in the
Agreement, from and after the Offer Closing, neither Party shall have any obligations to the
other Party under the Agreement with respect to non-solicitation of employees and consultants
under the Agreement.

	8.	 	Other Provisions. From and after the Offer Closing, if any provisions of the
Agreement are rendered meaningless or irrelevant in light of the amendments specified herein,
such provisions shall be deleted from the Agreement.

2

 

	9.	 	Conflicts. For clarity, in the event of any conflict between the terms of this Sixth
Amendment and the Agreement, this Sixth Amendment shall control.
	 
	10.	 	Effective Date. This Sixth Amendment shall be effective immediately following the
Offer Closing (as defined in the Merger Agreement). For the sake of clarity, if the Offer
Closing does not occur in accordance with the terms of the Merger Agreement and the Merger
Agreement is terminated, then this Sixth Amendment shall not take effect. For the sake of
further clarity, the Parties agree and acknowledge that the execution of this Sixth Amendment,
and the possibility that this Sixth Amendment would become effective on the Offer Closing as
set forth herein, will not, at any time prior to the Offer Closing, prejudice either Party’s
rights under the Agreement .

	11.	 	Counterparts. This Sixth Amendment may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original of the Party or Parties who executed
such counterpart, but all of which together shall constitute one and the same instrument. In
making proof of this Sixth Amendment, it shall not be necessary to produce or account for more
than one counterpart evidencing execution by each Party. Facsimile or scanned copies of
original signatures by either Party shall be deemed to be originals of such signatures.

	12.	 	Entire Agreement. This Sixth Amendment, together with the Agreement, contains the
Parties’ entire understanding with regard to the subject matter hereof and thereof and
supersedes, revokes, terminates, and cancels any and all other arrangements and agreements,
whether oral or written, between the Parties relating to the subject matter hereof and
thereof.

	13.	 	Severability. If any provision of this Sixth Amendment shall be held invalid,
illegal or unenforceable, such provision shall be enforced (from and after the Offer Closing)
to the maximum extent permitted by law and the Parties’ fundamental intentions hereunder and
the remaining provisions shall not be affected or impaired.

	14.	 	Governing Law. This Sixth Amendment and all actions arising out of or in connection
with this Sixth Amendment shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the conflict of law principles of any other
jurisdiction. Any disputes arising out of or relating to this Sixth Amendment shall be
resolved in accordance with Section 12.2 and Article 13 of the Agreement as if such dispute
were a dispute under the Agreement.

[Signature Page Follows]

3

 

IN WITNESS WHEREOF, the Parties have caused this Sixth Amendment to be executed in duplicate as of
the date written above by their duly authorized officers.

	 	 	 	 	 
	 	PENWEST PHARMACEUTICALS CO.

 	 
	 	By:  	/s/ Jennifer L. Good
 	 
	 	 	Name:  	Jennifer L. Good 	 
	 	 	Title:  	President and
Chief Executive  Officer 	 
	 

	 	 	 	 	 
	 	ENDO PHARMACEUTICALS INC.

 	 
	 	By:  	/s/ David P. Holveck
 	 
	 	 	Name:  	David P. Holveck 	 
	 	 	Title:  	President and
Chief Executive Officer 	 
	 

SIGNATURE PAGEexv10w1

    EXHIBIT 10.1

 

    THIS
    DOCUMENT CONSTITUTES PART OF A PROSPECTUS

    COVERING SECURITIES THAT HAVE BEEN REGISTERED

    UNDER THE SECURITIES ACT OF 1933, AS AMENDED

 

    

    Cliff Restricted Performance
    Share Unit Award

    Fiscal 2011 —
    Overview

 

 

    July 16, 2010

 

    THIS OVERVIEW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
    THE MEMORANDUM TO PARTICIPANTS IN THE POLO RALPH LAUREN
    CORPORATION 1997 LONG-TERM STOCK INCENTIVE PLAN AND TO THE PLAN
    ITSELF. COPIES OF THE MEMORANDUM AND THE PLAN ARE AVAILABLE FROM
    YOUR HUMAN RESOURCES DEPARTMENT.

 

    OVERVIEW

 

    The Polo Ralph Lauren Corporation (the “Company”) 1997
    Long-Term Stock Incentive Plan (the “Plan”) authorizes
    the Compensation Committee & Organizational
    Development Committee of the Board of Directors (the
    “Compensation Committee”) to grant equity awards to
    officers and other employees of the Company and its
    Subsidiaries, and Affiliates. 

 

    As determined by the Compensation Committee, the Company may
    grant one or more types of Restricted Performance Share Unit
    awards (RPSUs). This Overview describes one type of RPSU that
    has three-year cliff vesting (“Cliff RPSU”). This is
    referred to as “cliff” vesting since all units in a
    given Cliff RPSU award are eligible to vest at the same time.

 

    A Cliff RPSU award provides a participant the opportunity to
    receive shares of the Company’s Class A Common Stock
    (traded on the New York Stock Exchange under the symbol RL) at a
    later date contingent upon achievement of performance goals over
    a specified period, generally three fiscal years, and contingent
    upon continued service with the Company.

 

    AWARD
    OBJECTIVES

 

    Objectives of RPSUs are to:

 

    1. Motivate achievement of performance goals by linking
    equity-based compensation to Company results

 

    2. Attract and retain individuals of superior talent

 

    3. Enable individuals to participate in the long-term
    growth and financial success of the Company

 

    PLAN
    ADMINISTRATION

 

    The Company’s Human Resources Department administers the
    program and Merrill Lynch is the recordkeeper. Participants
    must have an open brokerage account at Merrill Lynch in order to
    facilitate distribution of shares of the Company’s
    Class A Common Stock upon the vesting of Cliff RPSUs.
    To open a brokerage account, or for questions regarding your
    account and account transactions, please contact Merrill Lynch
    at
    (609) 818-8908
    or (877) 765-POLO (7656).

 

    The Company’s Board of Directors reserves the right to
    amend, modify or terminate the Plan at any time. No such
    amendment to the Plan would adversely affect any Cliff RPSU
    awards then outstanding.

 

    Nothing contained herein may be construed as creating a promise
    of future benefits or a binding contract with the Company.
    Further, an individual’s employment continues to be at will.

 

    For questions regarding the Plan and its provisions, please
    contact Human Resources.

 

    ELIGIBILITY
    FOR GRANT

 

    Equity awards, including Cliff RPSU awards, may be granted
    annually to designated, key executives who have a significant
    impact on the strategic direction and business results of the
    Company, and who are actively employed on April 1 of the year
    when the grant is made.

 

    Guidelines have been established for the number and type of
    equity awards that eligible participants may receive. The
    guidelines reflect a position’s scope, accountability and
    impact on the organization, and may also reflect changes in the
    value of the Company’s Class A Common Stock.

    

    2

 

    Please note that the guidelines do not constitute a guarantee
    that any specific individual will receive an equity award in any
    given year, or guarantee the type or the size of any grant, if a
    grant is made. 

 

    An
    eligible employee who receives a Below Expectations (B) or
    Unsatisfactory (U) rating on his or

    her annual performance appraisal is not eligible for an equity
    award in the fiscal year

    following that performance appraisal period.

 

    STRUCTURE
    OF GRANTS AND PAYOUT SCHEDULE

 

    The target number of units in a Cliff RPSU award is set at the
    grant date. Applicable Threshold, Target and Maximum levels of
    Company financial performance are established at the beginning
    of the performance period.

 

    PERFORMANCE
    AND PAYOUT SCHEDULE

 

	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
 
	
    % of Target

    
	
 

	
 
	
 
	
    % of Goal

    
	
 
	
 
	
    Cliff RPSUs

    
	
 

	
    Performance Level
	
 
	
    Achieved
	
 
	
 
	
    Vested
	
 

	 

	

    Threshold

	
 
	
 
	
    70
	
    %
	
 
	
 
	
    75
	
    %

	

    Target

	
 
	
 
	
    100
	
    %
	
 
	
 
	
    100
	
    %

	

    Maximum

	
 
	
 
	
    110
	
    %
	
 
	
 
	
    150
	
    %

 

    No payout
    will be earned for performance below Threshold

 

 

    Note: Cliff RPSU vesting is interpolated for performance
    between 70% — 110% of target

 

    Once a Cliff RPSU award is granted, the performance measure(s),
    performance goals, vesting and payout schedule will not be
    modified during the term for that particular award. However, in
    determining performance against the goal, the Company’s
    results may be adjusted to exclude the effects of certain events
    and transactions as specified by the Compensation Committee at
    the time of grant. For any future awards, the Compensation
    Committee may change the performance measure(s), goals, vesting
    and payout schedule(s).

 

    PERFORMANCE
    MEASURES FOR CLIFF VESTING

 

    The Company’s performance measure(s) are set by the
    Compensation Committee at the time of grant from a list of
    performance criteria set forth in the Plan. Such measure(s) may
    include, for example, one or more of the following:

 

    • Net Earnings or Net Income (before or after taxes)

 

    • Basic or Diluted Earnings Per Share

 

    • Net Operating Profit

 

    • Net Revenue or Net Revenue Growth

 

    • Gross Profit or Gross Profit Growth

 

    • Return on Assets

 

    • Other measures of economic value added or other
    “value creation” metrics

 

    Fiscal
    2011 Grant Performance Measure, Performance Levels and
    Vesting

 

    The performance measure for fiscal 2011 Cliff RPSU awards is
    Cumulative Net Earnings for fiscal years
    2011-2013.
    Vesting of Cliff RPSUs, and the distribution of the
    Company’s Class A Common Stock, will occur as soon as
    administratively practical following certification of
    achievement of the performance goals by the Compensation
    Committee. The vesting date typically occurs in June of each
    year, but may be earlier or later.

    

    3

 

    If Threshold or better performance is achieved, and the
    participant has had continuous service with the Company through
    the vesting date, shares of the Company’s Class A
    Common Stock will be distributed to participants upon the
    vesting of Cliff RPSUs. Upon vesting, the participant will own
    the shares and as a shareholder of the Company’s
    Class A Common Stock, will have voting rights and will
    receive dividends on such shares. Prior to the vesting date,
    dividends are not earned on Cliff RPSUs and the participant does
    not have voting rights. If performance is below Threshold at the
    end of the performance period, all Cliff RPSUs granted for that
    award will be forfeited.

 

    Cliff RPSUs granted in fiscal 2011 are scheduled to vest after
    fiscal 2013, subject to the Company’s achievement of the
    cumulative performance goals specified, and the
    participant’s continuous service with the Company.

 

    EXAMPLE
    OF PERFORMANCE LEVEL, VESTING AND PAYOUT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	
 
	
    # Cliff

    
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
    RPSUs

    
	
 
	
    Performance

    
	
 
	
    Performance

    
	
 
	
    Vested

    
	
 
	
    Year

    
	
 
	
    # Shares

    

	
    Year Granted
	
 
	
    Granted
	
 
	
    Period
	
 
	
    Level(1)

	
 
	
    Percentage(1)

	
 
	
    Vested
	
 
	
    Vested

	 

	

    FY09 (Aug ‘08)

	
 
	
 
	
    1,000
	
 
	
 
	
    Q2, Q3, Q4 FY09

    FY10-FY11
	
 
	
 
	
    110
	
    %
	
 
	
 
	
    150
	
    %
	
 
	
    FY12

    (June ‘11)
	
 
	
 
	
    1,500
	
 

	

    FY10 (July ‘09)

	
 
	
 
	
    1,000
	
 
	
 
	
    FY10 - FY12
	
 
	
 
	
    100
	
    %
	
 
	
 
	
    100
	
    %
	
 
	
    FY13

    (June ‘12)
	
 
	
 
	
    1,000
	
 

	

    FY11 (July ‘10)

	
 
	
 
	
    1,000
	
 
	
 
	
    FY11 - FY13
	
 
	
 
	
    70
	
    %
	
 
	
 
	
    75
	
    %
	
 
	
    FY14

    (June ‘13)
	
 
	
 
	
    750
	
 

 

 

			
	
    (1)		
    Example is hypothetical and is not
    a forecast of future performance and payout percentages
    

 

    In the U.S. and in many other jurisdictions, vesting of
    RPSUs and the delivery of shares of Class A Common Stock is
    a taxable event. When shares are distributed, a portion of the
    shares is withheld to satisfy withholding requirements, and the
    net shares are delivered to participants in their Merrill Lynch
    account.

 

    VALUE OF
    RESTRICTED PERFORMANCE SHARE UNITS

 

    If Threshold or better performance against the applicable goal
    is achieved, Cliff RPSUs can provide participants with ownership
    of the Company’s Class A Common Stock and offer the
    opportunity to recognize value in several ways:

 

			
	 	    • 
	
    Receive shares of RL Class A Common Stock without paying
    any exercise price

	 
	 	    • 
	
    The number of Cliff RPSUs vesting can range from 75% (Threshold)
    to 150% (Maximum) of the target shares granted

	 
	 	    • 
	
    Any increases in the Company’s Class A Common Stock
    price above the price on the grant date increases the value of
    the award

 

    The example below illustrates the opportunity for gains in the
    value of the award at various Company Class A Common Stock
    prices.

 

    EXAMPLE:
    POTENTIAL VALUE

    Award of 1,000 Cliff RPSUs

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
 
	
    If Stock Price Reaches:
	
 

	
    Value At:
	
 
	
    # of Shares
	
 
	
 
	
    $85
	
 
	
 
	
    $95
	
 
	
 
	
    $100
	
 
	
 
	
    $110
	
 

	 

	

    Threshold Performance

	
 
	
 
	
    750
	
 
	
 
	
    $
	
    63,750
	
 
	
 
	
    $
	
    71,250
	
 
	
 
	
    $
	
    75,000
	
 
	
 
	
    $
	
    82,500
	
 

	

    Target Performance

	
 
	
 
	
    1,000
	
 
	
 
	
    $
	
    85,000
	
 
	
 
	
    $
	
    95,000
	
 
	
 
	
    $
	
    100,000
	
 
	
 
	
    $
	
    110,000
	
 

	

    Maximum Performance

	
 
	
 
	
    1,500
	
 
	
 
	
    $
	
    127,500
	
 
	
 
	
    $
	
    142,500
	
 
	
 
	
    $
	
    150,000
	
 
	
 
	
    $
	
    165,000
	
 

    

    4

 

 

		
	    Note: 	
    Value is before tax and a portion of the shares will be
    withheld in satisfaction of withholding
    taxes          
    Example is hypothetical and is not a forecast of growth in the
    Company’s Class A Common Stock price

 

    SALE OF
    SHARES SUBSEQUENT TO DISTRIBUTION

 

    Shares received from the vesting of a Cliff RPSU award may be
    sold subject to the Company’s trading restrictions as set
    forth in the Company’s Securities Trading policy beginning
    on page 8. In certain circumstances, certain Executive
    Officers may sell shares pursuant to Rule 144 or another
    applicable exemption under the U.S. Securities Act of 1933,
    as amended.

 

    In the U.S. and in many other jurisdictions, sale of such
    shares after vesting has tax implications. Contact your
    financial advisor for important information about how a
    subsequent sale of shares impacts you.

 

    Once Cliff RPSUs have vested and you receive shares of the
    Company’s Class A Common Stock from the vesting of a
    particular Cliff RPSU award, you retain all rights to those
    shares, regardless of employment status with the Company.

 

    IF YOU
    LEAVE THE COMPANY

 

    This chart explains what happens to your Cliff RPSUs if you
    leave Polo Ralph Lauren.

 

	 	 	 
	
    Event
	
 
	
    Status of Awards

	 

	
    Retirement (at Age 65)
	
 
	

    •   In the case of retirement, disability or
    death, a
    pro-rated(1)

    target number of Cliff RPSUs will be determined

	

Early Retirement (Age 55 through age 64 with 7 or more years of service)

Disability

Death

	
 
	

    •   These pro-rated Cliff RPSUs will vest at
    the end of the applicable performance period based on the actual
    degree of achievement. If performance against the cumulative
    performance goal does not reach the Threshold level, then the
    pro-rated Cliff RPSUs will be forfeited.

    

    •   All remaining Cliff RPSUs are
    forfeited

	

    Voluntary Resignation

	
 
	

    •   All unvested Cliff RPSUs are
    forfeited

	
    Involuntary Termination (without cause)
	
 
	

    •   All unvested Cliff RPSUs are
    forfeited

	
    Dismissal for Cause (as defined by the Company and if
    applicable, the participant’s employment agreement)
	
 
	

    •   All vested Cliff RPSUs not yet
    distributed into shares of the Company’s Class A Common
    Stock are forfeited

    

    •   All unvested Cliff RPSUs are
    forfeited

 

 

			
	
    (1)		
    The pro-rata portion will be determined by taking the number
    of months worked during the corresponding performance period,
    dividing it by the number of months in the performance period,
    and then multiplying the resulting decimal by the number of
    Cliff RPSUs granted for that performance period

 

    SECURITIES
    TRADING POLICY

 

    INSIDER
    TRADING

 

    As provided in the Polo Ralph Lauren (The Company) Employee
    Handbook, employees are prohibited by law from buying or selling
    securities if an employee has or is aware of any material,
    non-public information about the Company and its
    subsidiaries. This is commonly referred to as “insider
    information.” Material, non-public information is any
    information that has not been disclosed to the public that could
    affect the price of Company Common Stock — either
    positively or negatively - or affect a person’s decision to
    buy, hold or sell securities. The

    

    5

 

    prohibition on insider trading applies to all transactions in
    the Company’s securities, including cash exercises,
    cashless exercises of Stock Options and sales and purchases of
    the Company’s stock.

 

    Examples of what might be considered “insider
    information” include but are not limited to the following:

 

			
	 	    • 
	
    Earnings or other financial information

	 
	 	    • 
	
    Changes in dividend policy

	 
	 	    • 
	
    Stock splits

	 
	 	    • 
	
    Mergers and acquisitions

	 
	 	    • 
	
    Major new contracts or product-line introductions

	 
	 	    • 
	
    Litigation involving substantial amounts of money

	 
	 	    • 
	
    Changes in management

 

    These insider-trading rules are applicable to employees of Polo
    Ralph Lauren and its Subsidiaries and Affiliates, worldwide.

 

    COMPANY
    BLACKOUT PERIODS

 

    To avoid even the appearance of “insider trading,” our
    Company’s Securities Trading policy prohibits members of
    the Board of Directors, all employees and their “Related
    Parties” (as such term is defined in the Company’s
    Securities Trading Policy) from making trades involving stock of
    the Company during certain “blackout periods.” This
    prohibition covers buying or selling shares, including shares of
    Class A Common Stock received upon the vesting of Cliff
    RPSUs. These blackout periods generally begin two weeks before
    the end of each of our fiscal quarters and continue through one
    trading day after the Company issues its earnings release for
    the fiscal quarter or year just ended. If the earnings release
    is issued before the opening of the market on a trading day,
    trading may begin the next day. The blackout periods are
    announced at the start of each year. The Company may prohibit
    trading of the Company’s stock at any time it deems such
    trading to be inappropriate, even outside the regular blackout
    periods. Individuals who receive a specific notification
    prohibiting them from trading the Company’s stock should
    note that such notification takes precedence over pre-announced
    blackout periods. In addition, members of the Board of
    Directors, Officers (any employee who is a Vice President or
    above), and all employees in the Finance, Legal and Human
    Resources departments must clear all trades with the Corporate
    Counsel, whether they occur within a blackout period or not.

 

    ADDITIONAL
    PROHIBITED TRANSACTIONS

 

    Because we believe it is inappropriate for any Company personnel
    to engage in short-term or speculative transactions involving
    the Company’s Common Stock, it is Company policy that
    employees do not engage in any of the following activities with
    respect to the securities of the Company:

 

			
	 	    • 
	
    “In and out” trading in securities of the Company.
    Any Company stock purchased in the market must be held for a
    minimum of six months, and ideally longer. Note that the
    Securities and Exchange Commission (SEC) has a “short-swing
    profit recapture” rule that effectively prohibits Executive
    Officers and members of the Board of Directors from selling any
    Company stock within six months of a purchase. The Company has
    extended this prohibition to all employees. The receipt of
    shares pursuant to the vesting of Cliff RPSU awards is not
    considered a purchase under the SEC’s rule.

	 
	 	    • 
	
    Short sales (i.e., selling stock one does not own and
    then borrowing the shares to make delivery)

	 
	 	    • 
	
    Buying or selling “puts” or “calls”
    (i.e., making commitments to buy or sell securities at a
    specified price for a fixed period of time)

    

    6

 

 

    CLEARANCE
    OF ALL TRADES BY DIRECTORS, OFFICERS AND OTHER KEY
    PERSONNEL

 

    All transactions in Company stock (purchases, sales, transfers,
    etc.) by members of the Board of Directors, Officers (any
    employee who is a Vice President or above), and personnel in the
    Finance, Legal and Human Resources departments must be
    pre-cleared by the Corporate Counsel. If you contemplate a
    transaction, please provide a written request via
    e-mail to
    the Corporate Counsel, specifying the number of shares that you
    wish to purchase or sell, before contacting Merrill Lynch
    or taking any other step to initiate a transaction.

 

    COMPLIANCE
    WITH SECTION 409A

 

    To the extent applicable, the Plan shall be interpreted in
    accordance with Section 409A of the Internal Revenue Code
    of 1986 and the Department of Treasury Regulations and other
    interpretive guidance issued hereunder
    (“Section 409A”). Notwithstanding any provision
    of the Plan to the contrary, it is intended that this Plan
    comply with Section 409A and all provision of this Plan
    shall be construed and interpreted in a manner consistent with
    the requirements for avoiding taxes or penalties under
    Section 409A . Each Participant is solely responsible and
    liable for the satisfaction of all taxes and penalties that may
    be imposed on or in respect of such Participant in connection
    with this Plan or any other plan maintained by the Company
    (including any taxes and penalties under Section 409A), and
    neither the Company nor any Affiliate shall have any obligation
    to indemnify or otherwise hold such Participant (or any
    beneficiary) harmless from any or all of such taxes or
    penalties.

 

 

    In the event of any discrepancy between this Cliff RPSU
    Overview and either the Plan or the provision under which the
    Plan is administered by the Compensation Committee, the Plan and
    the determination of the Compensation Committee will govern, as
    applicable. This Overview is qualified in its entirety based on
    the determinations, interpretations and other decisions made
    within the sole discretion of the Compensation Committee.

    

    7

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