Document:

Exhibit 10.1

 

Short-Term Incentive Plan (STI Plan)

 

Amended and Restated as of January 1, 2013

 

Compensation Philosophy

 

The compensation philosophy of Cubist Pharmaceuticals, Inc. (“Company”) is to attract, motivate, retain and reward employees with base pay, short-term and long-term incentives, and benefits that are competitive in the market. The Company’s incentive programs provide employees with the opportunity to earn increased compensation based on the Company’s and the employee’s achievement of pre-established performance targets.

 

Plan Overview and Objective

 

The STI Plan is an annual bonus plan for regular employees of the Company who are in a position to make positive contributions to the Company, thereby increasing the performance of the Company.  The intent of the STI Plan is to provide highly competitive total cash compensation through an annual variable pay program that reflects the Company’s performance and a Participant’s performance against goals and objectives.  Plan Awards are determined on an annual basis, based on the achievement of Annual Goals, Revenue Goals, and a Participant’s Individual Performance during a Performance Period.

 

Administration

 

The STI Plan will be administered, with respect to executive officers who are eligible to participate in the STI Plan, by the Compensation Committee, and with respect to all other employees who are so eligible, by the CEO and his or her delegates.  The Committee and the CEO and his or her delegates hereunder, to the extent of such delegation, and each, as applicable given the context, are referred to herein as the “Administrator.”  The Administrator will have full authority, subject only to the express provisions of the STI Plan, to determine eligibility for participation in the STI Plan as set forth in the paragraph below, select eligible employees to participate in the STI Plan, establish written award forms and agreements, construe the terms of the STI Plan and any Plan Award, determine eligibility for, and the amount of, any payments under the STI Plan, and generally do all things necessary to administer the STI Plan.  Any action taken by the Administrator will be final and binding on all parties and any person claiming benefits through them.

 

Eligibility and Participation

 

For a Performance Period, each regular employee of the Company who is employed by  the Company is eligible to participate in the STI Plan, other than any employee who is (1) a post-doctorate fixed-term employee (or other fixed-term employee), (2) eligible to participate in any other short-term incentive plan or program of the Company, including, but not limited to, the Company’s Performance-Based Management Incentive Plan and the Sales Incentive Compensation Plans, or (3) is hired by the Company after September 30th of a Performance Period.  Employees who transfer to or from an eligible position during a Performance Period (and otherwise satisfy the eligibility criteria) shall be eligible for a prorated Plan Award based on the portion of the Performance Year the employee was in the eligible position.

 

 

Each Plan Award consists of the grant to a Participant of the conditional right to receive an Award Amount as specified in the Plan Award, provided the conditions set forth in this STI Plan are satisfied.

 

Participation in the STI Plan for one Performance Period does not guarantee participation for a future Performance Period.

 

Performance-Based Conditions

 

Annual Goals and Revenue Goal

 

Prior to the beginning of each Performance Period, the Board will establish with respect to such Performance Period (1) the Annual Goals and their respective weightings and (2) the Revenue Goal.  The Company’s failure to achieve at least 70% of the Annual Goals (subject to such thresholds and maximums and interpolation as the Administrator may determine) and 90% of the Revenue Goal, each, as determined by the Board or the Compensation Committee, as applicable, will result in the forfeiture of all Plan Awards for such Performance Period (regardless of Individual Performance).  Payment with respect to the achievement of the Annual Goal component of a Plan Award will be capped at 200% of that portion of a Participant’s Target Award based on Annual Goals.

 

Individual Performance

 

In addition to achievement of Annual Goals and the Revenue Goal, Plan Awards are also determined on the basis of Individual Performance.  A Participant’s Individual Performance rating will be determined by the Administrator.

 

A Participant shall forfeit his or her Plan Award for a Performance Period if (1) the Participant receives an overall annual performance rating of “Fails to meet Expectations” for his or her performance during the Performance Period, or (2) the Participant’s achievement of Individual Performance is zero.

 

Calculating the Amount of a Target Award

 

Each Participant is eligible for a Plan Award with an Award Amount, expressed as a Target Percentage.  A Participant’s “Target Award” is equal to the Participant’s Target Percentage multiplied by his or her Base Salary for the Performance Period.  A Participant’s Target Percentage and Target Award will be set forth in the Participant’s Annual Compensation Statement or offer letter in the case of a new hire during the Performance Period.

 

The Target Award will be prorated based on the portion of the Performance Period worked by the Participant if the Participant (a) commenced employment with the Company after the commencement of the Performance Period, (b) worked part-time during the Performance Period, or (c) took a leave of absence during the Performance Period.  An example comparing a full-time employee to a part-time employee is set forth below in Figure 1.

 

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Figure 1: Target Award Calculation Examples

 

	
Level
    	
 
    	
Annualized
   Base Salary
    	
 
    	
Target
   Percentage
    	
 
    	
Pro Ration
   Factor
    	
 
    	
Target Award
    	
 
    
	
Part-Time Employee (20 hours   /week)
    	
 
    	
$
    	
90,000
    	
 
    	
16
    	
%
    	
50
    	
%
    	
($90,000 x 16% x 50%)= $7,200
    	
 
    
	
Full-Time Employee
    	
 
    	
$
    	
90,000
    	
 
    	
16
    	
%
    	
100
    	
%
    	
($90,000 x 16% x 100%)= $14,400
    	
 
    

 

Calculating Actual Plan Awards

 

If the Revenue Goal is met, the amount paid with respect to a Participant’s Plan Award is determined based on the achievement of two components.  The first component is tied to the Company’s performance against the Annual Goals, as determined by the Board or the Compensation Committee, as applicable, and the second component is tied to the Participant’s Individual Performance, as assessed by the Administrator.  As the Participant’s level of responsibility in the organization increases, the relative weighting of the portion tied to the Annual Goals increases and the portion tied to Individual Performance decreases.

 

Calculation of Annual Goals Component

 

The Participant’s Target Award is multiplied by the percentage tied to the Annual Goals for the Participant’s eligibility group, which will be set forth in the Participant’s Annual Compensation Statement.  The resulting number is then multiplied by the percentage of the Company’s achievement of the Annual Goals, as determined by the Board or the Compensation Committee, as applicable.

 

Calculation of Individual Performance Component

 

The Participant’s Target Award is multiplied by the percentage tied to Individual Performance for the Participant’s eligibility group, which will be set forth in the Participant’s Compensation Statement.  The resulting number is then multiplied by the percentage of achievement of Individual Performance by the Participant as assessed by the Administrator.

 

Calculation of Award Amount

 

The Award Amount is the sum of the Annual Goals component and the Individual Performance component.

 

Reduction or Forfeiture of Award Amount

 

An Award Amount may be reduced (including to zero) if a Participant is not in compliance with all Company policies and guidelines and all applicable laws, as determined in the sole discretion of the Administrator.

 

Notwithstanding other provisions of the Plan, prior to the Company’s calendar year end, the Compensation Committee may determine a minimum amount, but not less than ninety percent, that the Company will be obligated to pay based on the forecasted achievement against annual corporate and individual goals that are objective and measureable at calendar year end.

 

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Figure 2: Actual STI Plan Award Calculation Example

 

	
Level
    	
 
    	
Target
   Award
   from
   Figure 1
    	
 
    	
Annual
   Goals
    	
 
    	
Individual
   Performance
    	
 
    	
Annual Goals
   Component
    	
 
    	
Individual Performance
   Component
    	
 
    	
Award Amount
    	
 
    
	
Full-Time Employee
    	
 
    	
$
    	
14,400
    	
 
    	
100% of target
    	
 
    	
100% achievement
    	
 
    	
$14,400 x 30% x 100% = $4,320
    	
 
    	
$14,400 x 70% x 100% achievement = $10,080
    	
 
    	
$4,320 + $10,080 = $14,400
    	
 
    
															

 

Employment Changes

 

New Hires

 

If a Participant is hired on or before September 30th of a Performance Period, his or her Plan Award will be prorated to reflect the portion of the year actually employed by the Company, subject to the pro rata guidelines as described below.  If a Participant is hired after September 30th of a Performance Period, he or she will not be eligible for a Plan Award for the Performance Period.

 

Leave of Absence

 

If a Participant is on an approved leave of absence for more than seven (7) business days, the Participant’s Plan Award, if any, will be prorated for the number of days the employee was actively at work during the Performance Period, unless otherwise required by applicable law.

 

Part-time Participants

 

If a Participant is not a full-time employee, the Participant’s Plan Award, if any, shall be prorated based on the Participant’s regularly scheduled work hours or percentage of time worked.  If a Participant has a change in regularly scheduled work hours during a Performance Period, the Participant’s Plan Award will be prorated in accordance with the pro rata guidelines below.

 

Pro rata Guidelines

 

All pro rata adjustments occur on a per day basis.

 

Termination of Employment

 

A Participant must remain employed by the Company through the Performance Period to be eligible to earn and be paid a Plan Award.  Therefore, if a Participant’s employment terminates prior to the end of a Performance Period, the Participant shall not be entitled to a Plan Award unless such termination is as a result of Participant’s death or Retirement or Disability, in which case the Participant, or the Participant’s estate (as the case may be) shall be eligible for a prorated Plan Award, to the extent earned based on actual performance, payable on the Payment Date for the Performance Period.

 

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If a Participant’s employment terminates after the completion of the Performance Period but prior to the Payment Date, a Participant shall be eligible for a Plan Award, to the extent earned based on actual performance, payable on the Payment Date for the Performance Period unless such termination of employment is for Cause, as determined by the Administrator in its sole discretion.

 

Changes in Target Percentage

 

During a Performance Period, if a Participant is promoted to a position in an eligibility group with a higher Target Percentage, the Participant will be eligible for the higher Target Percentage for the entire Performance Period.  The Target Percentage will be multiplied by the Base Salary for the Performance Period.

 

During a Performance Period, if a Participant’s position changes to a position in an eligibility group with a lower Target Percentage, the Participant’s Plan Award will be calculated using the average of the applicable Target Percentages in effect for the applicable portions of the year.

 

Plan Award Payout Process

 

Plan Awards, if any, are paid out following the end of the Performance Period and after the measurement of the Company’s achievement of the Annual Goals, the Revenue Goal and Individual Performance has been completed, but in no event later than March 15 following the end of the Performance Period.  Applicable taxes and other withholdings will be deducted from the Plan Award, as appropriate for each jurisdiction.

 

Glossary of Key Terms

 

Administrator: The Compensation Committee and the CEO and his or her delegates hereunder to the extent of such delegation, in each case, as applicable.

 

Annual Goals: The annual corporate and financial goals of the Company for a Performance Period, as set by the Board.

 

Award Amount: The dollar amount specified in a Plan Award, the extent to which such award is earned to be determined in accordance with this STI Plan.

 

Base Salary: A Participant’s rate of base salary or wages earned during the Performance Period, exclusive of any premiums, benefits, or other variable compensation.

 

Board: The Board of Directors of the Company.

 

Cause: “Cause” as defined in the Company’s 2010 Equity Incentive Plan, as it may be amended from time to time.

 

CEO: The Chief Executive Officer of the Company.

 

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Code: The Internal Revenue Code of 1986, as amended.

 

Company: Cubist Pharmaceuticals, Inc. and its wholly-owned direct and indirect subsidiaries.

 

Compensation Committee: The Compensation Committee of the Board.

 

Disability: A medical condition that causes a Participant to cease employment due to an inability to return from (i) Long-Term Disability leave (as defined under the Company’s long-term disability plan) or (ii) an unpaid medical leave, in each case, during the Performance Period.

 

Individual Performance: A Participant’s overall performance rating based on the achievement of individual goals and competencies, as determined by the Administrator upon recommendation of the Participant’s manager and functional manager.

 

Participant: An employee who satisfies the eligibility criteria described under “Eligibility and Participation” above and who participates in the STI Plan.

 

Payment Date: The date that payments, if any, will be made to Participants under the STI Plan, in accordance with the terms of the STI Plan.

 

Performance Period: The twelve month period beginning on January 1 of each calendar year.

 

Plan Award: An award granted under the STI Plan, the amount of which is paid determined based on achievement of an Annual Goals component and an Individual Performance component.

 

Retirement: A Participant’s termination of employment with the Company after attainment of age 55 with at least five (5) years of service as an employee of the Company, but excluding terminations where Cause exists or where the Participant’s employment is terminated for insufficient performance, as determined by the Administrator in its sole discretion.

 

Revenue Goal: The U.S. Cubicin revenue goal of the Company for a Performance Period, as set by the Board.

 

STI Plan: The Cubist Pharmaceuticals, Inc. Short-Term Incentive Plan, as amended from time to time.

 

Target Award:  A Participant’s Target Award Amount, calculated by multiplying the Participant’s Target Percentage by his or her Base Salary for the Performance Period.

 

Target Percentage: The percentage of a Participant’s Base Salary, as determined by the Administrator.

 

All payouts under the Plan are subject to the review and approval of the Administrator.  Notwithstanding anything else in this Plan to the contrary, the Administrator retains the discretion to reduce, increase or eliminate the funding for the STI Plan in accordance with

 

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the Board’s or the Administrator’s, as applicable, assessment of corporate and individual goal achievement.  All decisions made by the Board or the Administrator under the Plan, including the determination of a Participant’s actual Award Amount, shall be final and binding on all Participants and any person claiming benefits through them.

 

General

 

Each Plan Award is intended to qualify for the “short-term deferral” exemption from Section 409A of the Code and shall be construed accordingly.  Notwithstanding the preceding sentence, neither the Administrator nor the Company, nor any person acting on behalf of any of them, shall be liable to a Participant by reason of any acceleration of income, or any tax or additional tax, asserted by reason of any failure of a Plan Award or any portion thereof to satisfy the requirements for exemption from, or compliance with, Section 409A of the Code.

 

To the extent any provision of this STI Plan conflicts with any applicable state or federal law, the Administrator will follow and comply with the applicable law.

 

The Company reserves the right to amend or discontinue the STI Plan at any time without prior notice.  In no event does this STI Plan alter the “employment-at-will” relationship between the Company and its employees.  The Company and its employees are free to terminate the employment relationship at any time, without cause or notice.

 

7Exhibit 10.2

 

Cubist Pharmaceuticals, Inc.

Performance-Based Management Incentive Plan

 

1.              Purpose.  The purpose of the annual/short-term incentive programs of Cubist Pharmaceuticals, Inc. (the “Company”) is to attract and retain persons of outstanding abilities and qualifications and, among other things, to motivate these individuals to focus on the achievement of important short-term business objectives that create and protect shareholder value and that are expected to have a positive long-term impact on the Company’s success, and to reward the accomplishment of such short-term business objectives.

 

2.              Certain Key Terms.

 

a.                                      This Cubist Pharmaceuticals, Inc. Performance-Based Management Incentive Plan (the “MIP”) sets forth the terms of the Company’s annual incentive program for individuals who the Compensation Committee (the “Committee”) of the Company’s Board of Directors determines are “covered employees” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”).

 

b.                                      Payments made pursuant to awards under the MIP are intended to qualify for the performance-based compensation exception under Section 162(m) and will be construed in a manner consistent with Section 162(m).

 

c.                                       Except as otherwise set forth in the MIP, the MIP will be administered by the Committee.

 

d.                                      Any awards granted or amounts paid under the MIP, shall identify, in or more written documents:

 

i.                  the performance period for each award;

 

ii.               the target payouts for each award, which may be expressed as a percentage of the annual base salary of the Participant or as a specified dollar amount; and

 

iii.            one or more applicable objective corporate or individual performance goals applicable to each award for the performance period, and that will be assessed to determine the target payout, based on the Performance Criteria listed in Section 5 below and the relative weighting of such performance goals.

 

3.              Performance Periods.  Performance periods may be a minimum of six (6) months and a maximum of sixty (60) months in length.  Performance periods need not be sequential and may occur simultaneously.  Performance periods under the MIP may overlap, and separate payments may be made to Participants pursuant to awards for overlapping performance periods.

 

 

4.              Target Payouts/Payments

 

a.                                      Payments pursuant to awards under the MIP will be paid in cash and/or Company common stock.  The Company has the right to deduct taxes or other amounts required by law to be withheld from payments made under the MIP.

 

b.                                      The Committee will adopt objective formulas or standards for calculating the payments to be made to a Participant upon the achievement of performance goals based on one or more Performance Criteria listed in Section 5.  The Committee will adopt such formulas or standards for each performance period no later than the latest time permitted by Section 162(m) (generally, for performance periods of one year or more, no later than 90 days after the commencement of the performance period; and, for periods of less than one year, before twenty-five percent (25%) of the performance period has elapsed). The Committee may establish certain specified performance goals as threshold goals, which, if not met, will preclude the Participant from receiving any award for the performance period to which such formula or standard applies.

 

c.                                       Except as provided in Section 6 below, no Participant will be entitled to receive a payment under the MIP unless and until the Committee certifies in writing that the Company and/or the Participant has achieved the established performance goals based upon applicable Performance Criteria and the level of achievement against such performance goals.  The Committee will, as soon as reasonably practicable after the necessary performance results for the performance period become available, determine the final percentage achievement against the corporate and/or individual performance goals based upon applicable Performance Criteria and make the written certification to that effect required by this Section 4(c), and the determinations in the Committee’s written certification will be final and conclusive.  In making its determination and issuing its written certification, the Committee may not waive the achievement of the applicable performance goals, except as provided in Section 6, or under such other conditions where such waiver will not jeopardize the treatment of other payments made under the MIP as “performance-based compensation” under Section 162(m).

 

d.                                      The Committee may not exercise discretion to increase a Participant’s payout as determined under the applicable formula or standard for determining payouts for a performance period and as set forth in the Committee’s certification; however, the Committee may, in its sole discretion, reduce a payment under the MIP on the basis of corporate and/or specific individual goals or for other reasons.

 

e.                                       Except as set forth in Section 6, all payments made under the MIP shall be made within the sooner of 90 days following the end of the performance period or March 15 of the year following the calendar year in which any payment under the MIP was earned.

 

f.                                        The amount payable under the MIP to any Participant during any calendar year may not exceed $2,000,000.

 

g.                                       No payment may be made pursuant to an award under the MIP for a performance period that will end after the Company’s 2016 annual stockholders meeting until the listed performance measures set forth in the definition of “Performance Criteria” in Section 5 (as originally approved or as subsequently amended) have been resubmitted to and reapproved by

 

 

the Company’s stockholders in accordance with the requirements of Section 162(m), unless such payout is made contingent upon such approval.

 

h.                                      In addition to any other terms and conditions set forth in the MIP or other relevant documentation, all or part of the grant, vesting and/or payout of a payment under the MIP may be made subject to future service and such other restrictions and conditions as may be established by the Committee.

 

5.              Performance Goals and Performance Criteria.  Performance goals will be based on objectively determinable measures of performance relating to any of or to any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, functional, subsidiary, line of business, project or geographical basis or in combinations thereof) (“Performance Criteria”): sales; revenues; assets; expenses; earnings or earnings per share; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; income, pre-tax income, net income, operating income, pre-tax profit, operating profit, net operating profit or economic profit; gross margin, operating margin, profit margin, return on operating revenue, return on operating assets, cash from operations, operating ratio or operating revenue; market capitalization; expenses or certain types of expenses; sales of particular products or services; customer acquisition, expansion or retention; acquisitions and divestitures (in whole or in part) and/or integration activities related thereto; joint ventures, collaborations, licenses and strategic alliances, and/or the management and performance of such relationships; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; achievement of clinical trial or research objectives; achievement of manufacturing and/or supply chain objectives; achievement of litigation-related objectives and/or objectives related to litigation expenses; achievement of human resource, organizational and/or personnel objectives; achievement of information technology or information services objectives; or achievement of real estate, facilities or space planning objectives.   A Performance Criterion and any targets with respect thereto determined by the Committee shall be based on achievement of an objectively determinable performance goal.  To the extent consistent with the requirements of the performance-based compensation exception under Section 162(m), the Committee may adjust one or more of the Performance Criteria applicable to a Participant’s payout in an objectively determinable manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the performance period that affect the applicable Performance Criterion or Criteria.

 

6.              Effect of Certain Events.

 

a.                                      Except as set forth in Section 6(b) or (c), if a Participant’s employment terminates during a performance period, then the Participant shall not be entitled to a payment under the MIP for such performance period.

 

b.                                      An award, or otherwise applicable agreement, may provide that the award will be deemed earned as a result of a Participant’s death or disability, even if the award would not constitute “performance-based compensation” under Section 162(m) following the occurrence of

 

 

such an event.  In the absence of any such provision addressing the consequences of a Participant’s death or disability, the Committee may also determine, in its sole discretion, that an award may be deemed earned by a Participant as a result of death or disability even if the award would not constitute “performance-based compensation” under Section 162(m).  Unless the award or otherwise applicable agreement provides otherwise, or the Committee determines otherwise, the amount to be paid under these circumstances shall be determined by multiplying the Participant’s target payout for the performance period by a fraction representing the portion of the performance period that has elapsed prior to the Participant’s death or disability.  Payments under this Section 6(b) will be made within the sooner of 90 days of the Participant’s death or disability or March 15 of the year following the calendar year in which such event occurred.

 

c.                                       An award, or otherwise applicable agreement, may provide that the award will be deemed earned in connection with, or on the basis of termination of employment following, a change of control, even if the award would not constitute “performance-based compensation” under Section 162(m) following the occurrence of such a change of control.  In the absence of any such provision addressing the consequences of a change of control, the Committee may also determine, in its sole discretion, that an award may be deemed earned by a Participant in connection with, or on the basis of termination of employment following, a change of control, even if the award would not constitute “performance-based compensation” under Section 162(m).  Payments under this Section 6(c) will be made within the sooner of 90 days of the change of control, or the Participant’s termination of employment following a change of control, as the case may be, or March 15 of the year following the calendar year in which such event occurred.

 

7.              Administration.

 

a.                                      The Committee shall administer the MIP.  The Committee shall consist solely of two or more members of the Board of Directors that qualify as “outside directors” for purposes of Section 162(m).  Except as set forth in the MIP or as required by the Company’s governance documents and/or applicable laws and regulations with respect to the approval of the Board of Directors, the Committee shall have full power to construe and interpret the MIP, establish and amend rules and regulations for its administration, determine eligibility, determine, modify or waive the terms and conditions of any award, prescribe forms, rules and procedures and perform all other acts relating to the MIP, including the delegation of administrative responsibilities, that it believes reasonable and proper and in conformity with the purposes of the MIP.  All decisions made by the Committee relating to or in connection with the MIP shall be final, conclusive, and binding on all affected persons.  Notwithstanding the above, and except as otherwise provided in Section 6, the Committee will exercise its discretion consistent with qualifying payments under the MIP for the performance-based compensation exception under Section 162(m).  Subject to applicable laws and regulations, including Section 162(m), the Committee may delegate: (i) to one or more of its members such of its duties, powers and responsibilities as it may determine and (ii) to such employees or other persons as it determines, such administrative tasks as it deems appropriate.  The Committee shall provide the Board of Directors with regular reports regarding its administration of the MIP.

 

 

b.                                      The Committee may amend, modify or terminate the MIP or any Participant’s participation in the MIP at any time or on such conditions as the Committee shall deem appropriate.  The rights of the Committee set forth in the preceding sentence are subject to the following: (i) once the Committee has established the performance goals underlying an award under the MIP and except as provided for in Section 5, the Committee may not change such performance goals or the formula for computing whether such goals were met or increase the amount of the target payout, except that the Committee may decrease the amount of a Participant’s actual payout; (ii) no amendment of the MIP shall operate to annul, without the consent of the affected Participant, an award already made under the MIP; and (iii) if stockholder approval is required to effect the Committee’s action, the action will be subject to the receipt of stockholder approval.

 

8.              General.

 

a.                                      The terms and provisions of the MIP will be construed in a manner that is consistent with Section 162(m).

 

b.                                      The MIP is not a contract between the Company and any Participant.  Neither the establishment of the MIP, nor any action taken hereunder, shall be construed as giving any Participant any right to remain in the employ of the Company.

 

c.                                       The Committee may cancel, rescind, withhold or otherwise limit or restrict any payment at any time if a Participant is not in compliance with all applicable provisions of the MIP and any applicable agreement or violates any Company policy.

 

d.                                      The Company may recoup payments made to a Participant under the MIP if required by applicable law or regulation or in accordance with any clawback/recoupment policy implemented by the Company from time to time.

 

e.                                       A Participant’s right and interest under the MIP may not be assigned or transferred, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation to make any payments under the MIP with respect to the Participant.

 

f.                                        The MIP shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure payments under the MIP.

 

g.                                       Payments under the MIP are intended either to be exempt from the rules of Section 409A of the Internal Revenue Code of 1986, or any successor thereto (“Section 409A”) or to satisfy those rules, and shall be construed accordingly. Notwithstanding anything to the contrary in the MIP, the Company, its affiliates and subsidiaries, the Committee, the Board of Directors and any person acting on its or their behalf shall not be liable to any Participant or to the estate or beneficiary of any Participant by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of a payment under the MIP to satisfy the

 

 

requirements of Section 409A or by reason of Section 4999 of the Internal Revenue Code of 1986, or any successor thereto.

 

h.                                      The validity, construction, interpretation and effect of the MIP shall exclusively be governed by and determined in accordance with the laws of the state of Delaware, without giving effect to its conflict of laws provisions.

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