Document:

EX-10.1

Exhibit 10.1

Reynolds American Inc.

Executive Severance Plan

As Amended and Restated Effective August 1, 2009

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	Article 1.

	 	Establishment and Term of the Plan
	 	 	1	 
	 
	 	 	 	 	 	 
	          1.1

	 	Establishment of the Plan
	 	 	1	 
	 
	 	 	 	 	 	 
	          1.2

	 	Plan Term
	 	 	1	 
	 
	 	 	 	 	 	 
	          1.3

	 	Change in Control and Plan Term
	 	 	1	 
	 
	 	 	 	 	 	 
	Article 2.

	 	Definitions
	 	 	2	 
	 
	 	 	 	 	 	 
	Article 3.

	 	Severance Eligibility/Conditions
	 	 	8	 
	 
	 	 	 	 	 	 
	          3.1

	 	Qualifying Termination
	 	 	8	 
	 
	 	 	 	 	 	 
	          3.2

	 	Specified Employees
	 	 	9	 
	 
	 	 	 	 	 	 
	          3.3

	 	No Severance Benefits
	 	 	9	 
	 
	 	 	 	 	 	 
	          3.4

	 	General Release and Non-Competition Agreement
	 	 	9	 
	 
	 	 	 	 	 	 
	          3.5

	 	No Duplication of Severance Benefits
	 	 	10	 
	 
	 	 	 	 	 	 
	          3.6

	 	Notice of Termination
	 	 	10	 
	 
	 	 	 	 	 	 
	          3.7

	 	Disability
	 	 	10	 
	 
	 	 	 	 	 	 
	Article 4.

	 	Pre-2010 Severance Benefits
	 	 	10	 
	 
	 	 	 	 	 	 
	          4.1

	 	Pre-2010 Change in Control Severance Benefits
	 	 	10	 
	 
	 	 	 	 	 	 
	          4.2

	 	Pre-2010 General Severance Benefits
	 	 	14	 
	 
	 	 	 	 	 	 
	          4.3

	 	Expiration of Article 4
	 	 	17	 
	 
	 	 	 	 	 	 
	Article 5.

	 	Post-2009 Severance Benefits
	 	 	18	 
	 
	 	 	 	 	 	 
	          5.1

	 	Post-2009 Change in Control Severance Benefits
	 	 	18	 
	 
	 	 	 	 	 	 
	          5.2

	 	Post-2009 General Severance Benefits
	 	 	19	 
	 
	 	 	 	 	 	 
	Article 6.

	 	Excise Taxes
	 	 	21	 
	 
	 	 	 	 	 	 
	          6.1

	 	Applicable Provisions if Excise Tax Applies
	 	 	21	 
	 
	 	 	 	 	 	 
	          6.2

	 	Eligibility for Gross-Up Payment
	 	 	23	 
	 
	 	 	 	 	 	 
	Article 7.

	 	Contractual Rights and Legal Remedies
	 	 	23	 
	 
	 	 	 	 	 	 
	          7.1

	 	Payment Obligations Absolute
	 	 	23	 
	 
	 	 	 	 	 	 
	          7.2

	 	Contractual Rights to Benefits
	 	 	24	 
	 
	 	 	 	 	 	 
	          7.3

	 	Legal Fees and Expenses
	 	 	24	 
	 
	 	 	 	 	 	 
	          7.4

	 	Return of Severance Benefits
	 	 	24	 

-i-

 

 

TABLE
OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	Article 8.

	 	Successors
	 	 	25	 
	 
	 	 	 	 	 	 
	          8.1

	 	Successors to the Company
	 	 	25	 
	 
	 	 	 	 	 	 
	          8.2

	 	Assignment by the Executive
	 	 	25	 
	 
	 	 	 	 	 	 
	Article 9.

	 	Miscellaneous
	 	 	25	 
	 
	 	 	 	 	 	 
	          9.1

	 	Employment Status
	 	 	25	 
	 
	 	 	 	 	 	 
	          9.2

	 	Entire Plan
	 	 	25	 
	 
	 	 	 	 	 	 
	          9.3

	 	Adoption Procedure for a Participating Company
	 	 	26	 
	 
	 	 	 	 	 	 
	          9.4

	 	Notices
	 	 	26	 
	 
	 	 	 	 	 	 
	          9.5

	 	Includable Compensation
	 	 	26	 
	 
	 	 	 	 	 	 
	          9.6

	 	Tax Withholding
	 	 	26	 
	 
	 	 	 	 	 	 
	          9.7

	 	Internal Revenue Code Section 409A
	 	 	26	 
	 
	 	 	 	 	 	 
	          9.8

	 	Severability
	 	 	27	 
	 
	 	 	 	 	 	 
	          9.9

	 	Modification
	 	 	27	 
	 
	 	 	 	 	 	 
	          9.10

	 	Gender and Number
	 	 	27	 
	 
	 	 	 	 	 	 
	          9.11

	 	Applicable Law
	 	 	27	 

-ii-

 

 

Reynolds American Inc.

Executive Severance Plan

Article 1. Establishment and Term of the Plan

     1.1 Establishment of the Plan. Reynolds American Inc. hereby amends and restates the
severance plan known as the “Reynolds American Inc. Executive Severance Plan” effective as of
August 1, 2009. The Plan was originally effective January 1, 2007, and was subsequently amended
and restated effective January 1, 2008, January 1, 2009 and February 1, 2009. The Plan provides
severance benefits to specified senior executives of the Company and any other entity that adopts
this Plan in accordance with the provisions of Section 9.3 upon certain terminations of employment
from a Participating Company.

     The Company considers the establishment and maintenance of a sound management to be essential
to protecting and enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held corporations, the
possibilities of a Change in Control or a termination of an Executive’s employment by a
Participating Company may arise and that such possibilities, and the uncertainty and questions
which they may raise among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders.

     Accordingly, the Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Participating Companies’
management to their assigned duties without distraction in circumstances arising from the
possibility of a Change in Control of the Company or a termination of an Executive’s employment by
a Participating Company.

     1.2 Plan Term. This Plan commenced on January 1, 2007, and shall continue in effect until
terminated by the Company. The Company may terminate this Plan entirely or terminate any
individual Executive’s participation in the Plan at any time by: (a) giving all Executives twelve
(12) months prior written notice of Plan termination if terminating the Plan in its entirety or (b)
giving the affected Executive twelve (12) months prior written notice if terminating the affected
Executive’s participation in the Plan. Upon delivery of such notice by the Company, this Plan or
the Executive’s participation in the Plan, as the case may be, along with all corresponding rights,
duties, and covenants, shall terminate on the date indicated in such notice, which date shall not
be less than twelve (12) months from the date the Executive received such notice.

     1.3 Change in Control and Plan Term. Notwithstanding Section 1.2, in the event of a Change in
Control during the term of the Plan, the Company may not terminate the Plan or any individual
Executive’s participation in the Plan during the period beginning on the date of the Change in
Control through the second anniversary of the Change in Control, whereupon the provisions of the
Plan pertaining to Change in Control Severance Benefits shall automatically terminate;
provided, however, that such automatic termination shall not apply to the payment
of any Change in Control Severance Benefits commenced prior to such automatic termination. The
Company shall cause any successor entity in a Change in Control to expressly assume the Plan, as
further provided in Article 8.

 

 

Article 2. Definitions

     Wherever used in this Plan, the following capitalized terms shall have the meanings set forth
below:

	 	(a)	 	“Accounting Firm” means a nationally recognized accounting firm, or actuarial,
benefits or compensation consulting firm (with experience in performing the
calculations regarding the applicability of Section 280G of the Code and of the tax
imposed by Section 4999 of the Code) selected by the Company.
	 
	 	(b)	 	“B&W” means Brown & Williamson Tobacco Corporation.
	 
	 	(c)	 	“Base Salary” means, at any time, the then regular annual rate of pay which the
Executive is receiving as annual salary, excluding amounts: (i) received under
short-term or long-term incentive or other bonus plans, regardless of whether the
amounts are deferred, or (ii) designated by the Participating Company as payment toward
reimbursement of expenses.
	 
	 	(d)	 	“BAT” means, collectively, British American Tobacco p.l.c., a public limited
company incorporated under the laws of England and Wales, and its affiliates, other
than the Participating Companies.
	 
	 	(e)	 	“BCA” has the meaning set forth in Section 2(i).
	 
	 	(f)	 	“Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
	 
	 	(g)	 	“Board” means the Board of Directors of the Company.
	 
	 	(h)	 	“Cause” means the occurrence of any one or more of the following:

	 	(i)	 	The Executive’s criminal conduct;
	 
	 	(ii)	 	The Executive’s deliberate and continual refusal to
substantially perform his or her employment duties;
	 
	 	(iii)	 	The Executive’s deliberate and continual refusal to act in
accordance with any specific lawful instructions of an authorized officer or
employee more senior than the Executive or a majority of the Board of Directors
of the Participating Company;
	 
	 	(iv)	 	The Executive’s deliberate misconduct which could be materially
damaging to the Participating Company or any of its business operations without
a reasonable good faith belief by the Executive that such conduct was in the
best interests of the Participating Company;

2

 

	 	(v)	 	The Executive’s material violation of the Company’s Code of
Conduct or any policy of a Participating Company; or
	 
	 	(vi)	 	The Executive’s material breach of any non-competition,
non-disclosure of confidential information or commitment to provide assistance
agreement or obligation to a Participating Company.

	 	 	 	Notwithstanding the foregoing, a Tier I or Tier II Executive shall not be deemed to
have been terminated for “Cause” hereunder unless and until there shall have been
delivered to the Tier I or Tier II Executive a copy of a resolution duly adopted by
the affirmative vote of not less than two thirds of the Board then in office at a
meeting of the Board called and held for such purpose (after reasonable notice to
the Tier I or Tier II Executive and an opportunity for the Tier I or Tier II
Executive, together with the Tier I or Tier II Executive’s counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board, the Tier I
or Tier II Executive had committed an act constituting “Cause” as herein defined and
specifying the particulars thereof in detail. Nothing herein will limit the right
of the Tier I or Tier II Executive or his beneficiaries to contest the validity or
propriety of any such determination.
	 
	 	(i)	 	“Change in Control” shall occur if any of the following events occur:

	 	(i)	 	An individual, corporation, partnership, group, associate or
other entity or Person, other than any employee benefit plans sponsored by the
Company, is or becomes the Beneficial Owner, directly or indirectly, of thirty
percent (30%) or more of the combined voting power of the Company’s outstanding
securities ordinarily having the right to vote at elections of directors;
provided, however, that the acquisition of Company securities
by BAT pursuant to the Business Combination Agreement, dated as of October 27,
2003, between RJR and B&W, as thereafter amended (the “BCA”), or as expressly
permitted by the Governance Agreement, dated as of July 30, 2004, among British
American Tobacco p.l.c., B&W and the Company, as thereafter amended (the
“Governance Agreement”), shall not be considered a Change in Control for
purposes of this subsection (i);
	 
	 	(ii)	 	Individuals who constitute the Board (or who have been
designated as directors in accordance with Section 1.09 of the BCA) on July 30,
2004 (the “Incumbent Board”) cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to
such date whose election, or nomination for election by the Company’s
shareholders, was (A) approved by a vote of at least three-quarters (3/4) of
the directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as
a nominee of the Company for director) or (B) made in accordance with Section
2.01 of the Governance Agreement, but excluding for this purpose any such
individual whose initial assumption of office occurs as a result of either an
actual or threatened election contest

3

 

	 	 	 	with respect to the election or removal of a director or other actual or
threatened solicitation of proxies or consents by or on behalf of an
individual, corporation, partnership, group, associate or other entity or
Person other than the Board, shall be, for purposes of this paragraph (ii),
considered as though such person were a member of the Incumbent Board; or
	 
	 	(iii)	 	The consummation of (A) a merger or consolidation of the
Company other than with a wholly owned Subsidiary and other than a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a sale, exchange or
other disposition of all or substantially all of the assets of the Company,
other than any such transaction where the transferee of all or substantially
all of the assets of the Company is a wholly owned Subsidiary or an entity more
than fifty percent (50%) of the combined voting power of the voting securities
of which is represented by voting securities of the Company outstanding
immediately prior to the transaction (either remaining outstanding or by being
converted into voting securities of the transferee entity).

	 	(j)	 	“Change in Control Good Reason” means the occurrence after a Change in Control
of any one (1) or more of the following:

	 	(i)	 	A material reduction of the Tier I or Tier II Executive’s
authorities, duties, or responsibilities as an executive and/or officer of a
Participating Company from those in effect as of ninety (90) calendar days
prior to the Change in Control, other than an inadvertent reduction that is
remedied by the Participating Company as provided below; provided,
however, that any change in reporting relationship, title or de minimis
reduction in such authorities, duties or responsibilities resulting merely from
the acquisition of the Participating Company and its existence as a subsidiary
or division of another entity shall not be sufficient to constitute a Change in
Control Good Reason;
	 
	 	(ii)	 	A Participating Company’s requiring a Tier I or Tier II
Executive to be based at a location that exceeds the minimum distance under
Section 217(c) of the Code (for purposes of a moving expense deduction), from
the location of the Tier I or Tier II Executive’s principal job location or
office immediately prior to the Change in Control, except for required travel
on the Participating Company’s business to an extent substantially consistent
with the Tier I or Tier II Executive’s then present business travel
obligations;

4

 

	 	(iii)	 	A reduction by a Participating Company in excess of twenty
percent (20%) of the aggregate value of (A) a Tier I or Tier II Executive’s
Base Salary and target annual bonus amount (both as in effect on the date of
the Change in Control) and (B) the long-term incentive opportunities provided
to a Tier I or Tier II Executive (as compared to the value of aggregate
long-term incentive opportunities provided as of the date of the Change in
Control), except for across-the-board reductions generally applicable to all
Tier I or Tier II Executives;
	 
	 	(iv)	 	A reduction by a Participating Company in aggregate employee
benefits provided to a Tier I or Tier II Executive as compared to the value of
aggregate employee benefits provided as of the date of the Change in Control,
except for across-the-board reductions generally applicable to all Tier I or
Tier II Executives;
	 
	 	(v)	 	The failure of the Company to obtain a satisfactory agreement
from any successor to the Company to assume and agree to perform the Company’s
obligations under this Plan, as contemplated in Article 8 herein; and
	 
	 	(vi)	 	A material breach of this Plan by a Participating Company which
is not remedied by the Participating Company within ten (10) business days of
receipt of written notice of such breach delivered by a Tier I or Tier II
Executive to the Participating Company.

	 	 	 	Notwithstanding the foregoing, (A) Change in Control Good Reason shall cease to
exist for an event on the ninetieth (90th) day following the later of its
occurrence or the Tier I or Tier II Executive’s knowledge thereof, unless the Tier I
or Tier II Executive has given a Participating Company written notice thereof prior
to such date, (B) a Participating Company shall have thirty (30) days from receipt
of such written notice to remedy the facts and circumstances claimed to provide the
basis for the Tier I or Tier II Executive’s Change in Control Good Reason and (C)
the Tier I or Tier II Executive shall be deemed to have terminated employment for
Change in Control Good Reason on the thirtieth (30th) day following the
Participating Company’s receipt of the written notice described in clause (A) if the
Participating Company fails to remedy such circumstances by such thirtieth
(30th) day. Unless a Tier I or Tier II Executive becomes Disabled, a
Tier I or Tier II Executive’s right to terminate employment for a Change in Control
Good Reason shall not be affected by the Tier I or Tier II Executive’s incapacity
due to physical or mental illness. A Tier I or Tier II Executive’s continued
employment shall not constitute consent to, or a waiver of rights with respect to,
any circumstance constituting a Change in Control Good Reason herein.
Notwithstanding anything in this Plan to the contrary, a Tier III Executive shall
have no right to terminate employment for a Change in Control Good Reason.
	 
	 	(k)	 	“Change in Control Severance Benefits” mean the severance benefits as provided
in Section 4.1(b) or 5.1(b), as applicable.

5

 

	 	(l)	 	“CIP” has the meaning set forth in Section 4.1(b)(viii).
	 
	 	(m)	 	“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder.
	 
	 	(n)	 	“Committee” means the Compensation and Leadership Development Committee of the
Board, or another committee of the Board appointed by the Board to administer this
Plan.
	 
	 	(o)	 	“Company” means Reynolds American Inc., a North Carolina corporation, and any
successor thereto as provided in Article 8.
	 
	 	(p)	 	“Disability” or “Disabled” shall have the meaning ascribed to such term in the
Company’s governing long-term disability plan, or if no such plan exists, at the
discretion of the Board.
	 
	 	(q)	 	“Effective Date” means August 1, 2009.
	 
	 	(r)	 	“Effective Date of Termination” means the date on which a Qualifying
Termination occurs, as provided in Section 3.1, which triggers the payment of Severance
Benefits, or such other date upon which the Executive’s employment with a Participating
Company terminates for reasons other than a Qualifying Termination.
	 
	 	(s)	 	“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder, as such law, rules and regulations may be amended
from time to time.
	 
	 	(t)	 	“Excise Tax” means, collectively, (i) the tax imposed by Section 4999 of the
Code by reason of being “contingent on a change in ownership or control” of the
Company, within the meaning of Section 280G of the Code, or (ii) any similar tax
imposed by state or local law, or (iii) any interest or penalties with respect to any
excise tax described in clause (i) or (ii).
	 
	 	(u)	 	“Executive” means a Tier I, Tier II or Tier III Executive who is initially
hired or rehired by a Participating Company on or after January 1, 2007, or who was
hired before that date and is not a party to an effective agreement with a
Participating Company providing for severance benefits.
	 
	 	(v)	 	“General Release” has the meaning set forth in Section 3.4.
	 
	 	(w)	 	“General Severance Benefits” mean the severance benefits as provided in Section
4.2(b) or 5.2(b), as applicable.
	 
	 	(x)	 	“General Good Reason” means a reduction by a Participating Company in excess of
twenty percent (20%) of the aggregate value of (i) the Executive’s Base Salary and
target annual bonus amount (as in effect on the date of such reduction) and (ii) the
long-term incentive opportunities provided to the Executive (as in

6

 

	 	 	 	effect on the date of such reduction), except for across-the-board reductions
generally applicable to all Executives. Notwithstanding the foregoing, (A) General
Good Reason shall cease to exist for an event on the ninetieth (90th) day
following the later of its occurrence or the Executive’s knowledge thereof, unless
the Executive has given a Participating Company written notice thereof prior to such
date, (B) a Participating Company shall have thirty (30) days from receipt of such
written notice to remedy the facts and circumstances claimed to provide the basis
for the Executive’s General Good Reason and (C) the Executive shall be deemed to
have terminated employment for General Good Reason on the thirtieth
(30th) day following the Participating Company’s receipt of the written
notice described in clause (A) if the Participating Company fails to remedy such
circumstances by such thirtieth (30th) day. Unless the Executive becomes
Disabled, the Executive’s right to terminate employment for a General Good Reason
shall not be affected by the Executive’s incapacity due to physical or mental
illness. The Executive’s continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting a General Good
Reason herein.
	 
	 	(y)	 	“Governance Agreement” has the meaning set forth in Section 2(i).
	 
	 	(z)	 	“Gross-Up Payment” has the meaning set forth in Section 6.1.
	 
	 	(aa)	 	“Incumbent Board” has the meaning set forth in Section 2(i).
	 
	 	(bb)	 	“Insurance Adjustment Payment” has the meaning set forth in Section 4.1(b)(vi).
	 
	 	(cc)	 	“Non-Competition Agreement” has the meaning set forth in Section 3.4.
	 
	 	(dd)	 	“Notice of Termination” means a written notice provided by a Participating
Company or the Executive indicating that the Executive’s employment is being
terminated. In the event the Executive provides such notice, the Notice of Termination
shall indicate the specific termination provision in this Plan relied upon and, if the
Executive’s employment is being terminated by the Executive pursuant to Section 3.1(a)
or 3.1(c), the Notice of Termination shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for the Executive’s termination of the
Executive’s employment under the provision so indicated.
	 
	 	(ee)	 	“Other Severance Arrangement” has the meaning set forth in Section 9.2.
	 
	 	(ff)	 	“Participating Company” or “Participating Companies” means the Company and/or
any other entity that adopts this Plan in accordance with the provisions of Section
9.3. “Participating Company” includes any successor(s) to a Participating Company,
whether by merger, consolidation or otherwise. All Participating Companies are listed
on Appendix A.
	 
	 	(gg)	 	“Payment” has the meaning set forth in Section 6.1.

7

 

	 	(hh)	 	“Payment Date” means the last day of the month after the sixtieth
(60th) calendar day following the date of the Executive’s Qualifying
Termination.
	 
	 	(ii)	 	“Person” shall have the meaning ascribed to such term in Section 14(d) of the
Exchange Act.
	 
	 	(jj)	 	“Plan” means this Reynolds American Inc. Executive Severance Plan.
	 
	 	(kk)	 	“Qualifying Termination” means any of the events described in Section 3.1, the
occurrence of which triggers the payment of Severance Benefits.
	 
	 	(ll)	 	“RJR” means R.J. Reynolds Tobacco Holdings, Inc.
	 
	 	(mm)	 	“Separation from Service” has the meaning set forth in Section 3.1.
	 
	 	(nn)	 	“Severance Benefits” means the payout of Change in Control Severance Benefits
or General Severance Benefits as provided in Article 4 or Article 5, as applicable.
	 
	 	(oo)	 	“Subsidiary” means any corporation or other entity in which the Company has a
significant equity or other interest as determined by the Committee.
	 
	 	(pp)	 	“Subsidized COBRA Period” has the meaning set forth in Section 5.1(b)(vi).
	 
	 	(qq)	 	“Tier I Executive” means the Chief Executive Officer of the Company.
	 
	 	(rr)	 	“Tier II Executive” means an individual employed by a Participating Company at
job level eleven (11) through fourteen (14), inclusive (within the meaning of the
Company’s payroll structure).
	 
	 	(ss)	 	“Tier III Executive” means an individual employed by a Participating Company at
job level ten (10) (within the meaning of the Company’s payroll structure).

Article 3. Severance Eligibility/Conditions.

     3.1 Qualifying Termination. The Participating Company shall pay Severance Benefits to the
Executive, as such benefits are described under Article 4 or Article 5, as applicable, upon the
occurrence of any one or more of the following events (a “Qualifying Termination”):

	 	(a)	 	Within twenty-four (24) calendar months following a Change in Control, the
Executive incurs a Separation from Service other than:

	 	(i)	 	By a Participating Company for Cause; or
	 
	 	(ii)	 	By reason of death or Disability; or
	 
	 	(iii)	 	By the Tier I or Tier II Executive without Change in Control
Good Reason.

8

 

	 	(b)	 	Within twelve (12) calendar months prior to a Change in Control, the Executive
incurs a Separation from Service by a Participating Company without Cause if such
Separation from Service occurs at the request of any party involved in the Change in
Control transaction; in such event, the date of the Qualifying Termination shall be
deemed to be the date of the Change in Control.
	 
	 	(c)	 	At any time other than as described in Section 3.1(a) or 3.1(b), the Executive
incurs a Separation from Service other than:

	 	(i)	 	By a Participating Company for Cause; or
	 
	 	(ii)	 	By reason of death or Disability; or
	 
	 	(iii)	 	By the Executive without General Good Reason.

     A “Separation from Service” shall be deemed to have occurred on the date on which the level of
bona fide services reasonably anticipated to be performed by the Executive is forty-five percent
(45%) or less of the average level of bona fide services performed by such Executive during the
immediately preceding thirty-six (36) month period (or the full period of services if the Executive
has been providing services for less than thirty-six (36) months).

     3.2 Specified Employees. Notwithstanding anything in this Plan to the contrary, in the event
that the Executive is deemed to be a “specified employee” on the date of the Qualifying
Termination, determined pursuant to identification methodology adopted by the Company in compliance
with Code Section 409A, and if any portion of the payments or benefits to be received by the
Executive upon separation from service would constitute a “deferral of compensation” subject to
Code Section 409A, then to the extent necessary to comply with Code Section 409A, amounts that
would otherwise be payable pursuant to this Plan during the six (6) month period immediately
following the date of the Executive’s Qualifying Termination and benefits that would otherwise be
provided pursuant to this Plan during the six (6) month period immediately following the date of
the Executive’s Qualifying Termination will instead be paid or made available on the earlier of (i)
within ten (10) days following the first business day of the seventh month after the date of the
Executive’s Qualifying Termination, provided that the Executive shall not have the right to
designate the payment date or (ii) the Executive’s death.

     3.3 No Severance Benefits. The Executive shall not be entitled to receive Severance Benefits
if the Executive’s employment with a Participating Company ends for reasons other than a Qualifying
Termination.

     3.4 General Release and Non-Competition Agreement. As a condition to receiving Severance
Benefits under Article 4 or Article 5, as applicable, prior to the 60th day following
the date of the Executive’s Qualifying Termination, the Executive shall be obligated to execute (i)
a general release of claims in favor of the Company, its current and former subsidiaries,
affiliates and shareholders, and the current and former directors, officers, employees, and agents
thereof in the form prescribed by the Company (a “General Release”), and any period for revocation
will have expired and (ii) a Non-Competition, Non-Disclosure of Confidential Information and
Commitment to Provide Assistance Agreement in the form prescribed by the Company (a
“Non-Competition Agreement”) or, with respect to an Executive

9

 

who has previously executed a Non-Competition Agreement, and at the Company’s option, a
written affirmation of the Executive’s obligations thereunder.

     3.5 No Duplication of Severance Benefits.

	 	(a)	 	If the Executive becomes entitled to Pre-2010 Change in Control Severance
Benefits, the Severance Benefits provided for under Section 4.1 shall be in lieu of the
benefits provided to the Executive under Section 4.2. Similarly, if the Executive
becomes entitled to Pre-2010 General Severance Benefits, the Severance Benefits
provided under Section 4.2 shall be in lieu of the benefits provided to the Executive
under Section 4.1.
	 
	 	(b)	 	If the Executive becomes entitled to Post-2009 Change in Control Severance
Benefits, the Severance Benefits provided for under Section 5.1 shall be in lieu of the
benefits provided to the Executive under Section 5.2. Similarly, if the Executive
becomes entitled to Post-2009 General Severance Benefits, the Severance Benefits
provided under Section 5.2 shall be in lieu of the benefits provided to the Executive
under Section 5.1.
	 
	 	(c)	 	Notwithstanding anything in this Section 3.5 to the contrary, if the Executive
incurs a Qualifying Termination described in Section 3.1(b), the Executive will be
entitled to the Change in Control Severance Benefits provided for under Section 4.1 or
5.1, as applicable, in lieu of the General Severance Benefits provided under Section
4.2 or 5.2, as applicable.

     3.6 Notice of Termination. Any termination of the Executive’s employment by a Participating
Company or by the Executive shall be communicated by Notice of Termination to the other party. In
the event an Executive provides written notice to the Participating Company of an alleged Change in
Control Good Reason or General Good Reason and subsequently is deemed to have terminated his/her
employment pursuant to Section 2(j) or 2(x), as applicable, then such notice shall constitute a
Notice of Termination.

     3.7 Disability. Notwithstanding any provision of the Plan to the contrary, if an Executive
becomes Disabled after the date of the Executive’s Qualifying Termination, such Executive shall not
be entitled to benefits under any short-term or long-term disability plan of a Participating
Company.

Article 4. Pre-2010 Severance Benefits

     4.1 Pre-2010 Change in Control Severance Benefits.

	 	(a)	 	Subject to Section 3.4, the Participating Company shall pay the Executive
Change in Control Severance Benefits, as described in Section 4.1(b), if, prior to
January 1, 2010, the Executive receives or delivers a Notice of Termination of a
Qualifying Termination of the Executive’s employment pursuant to Section 3.1(a) or
3.1(b).

10

 

	 	(b)	 	The Change in Control Severance Benefits to be provided to the Executive
pursuant to Section 4.1(a) shall be the following:

	 	(i)	 	An amount equal to the Executive’s unpaid Base Salary,
unreimbursed business expenses, and all other items earned by and owed to the
Executive through and including the date of the Qualifying Termination shall be
paid in cash to the Executive in a single lump sum on the Payment Date. Such
payment shall constitute full satisfaction for these amounts owed to the
Executive.
	 
	 	(ii)	 	An amount equal to the unpaid, accrued vacation pay owed to the
Executive through and including the date of the Qualifying Termination shall be
paid in cash to the Executive in a single lump sum with the last payment
described in Section 4.1(b)(iv). Such payment shall constitute full
satisfaction for this amount owed to the Executive and in no event shall the
Executive accrue additional vacation time after the date of the Executive’s
Qualifying Termination.
	 
	 	(iii)	 	Any amount payable to the Executive under the annual bonus
plan then in effect in respect of the most recently completed fiscal year, to
the extent not theretofore paid, shall be made in cash to the Executive in a
single lump sum at the applicable time provided in the annual bonus plan then
in effect. Such payment shall constitute full satisfaction for this amount
owed to the Executive.
	 
	 	(iv)	 	An amount equal to: (A) three (3) for Tier I Executives, (B)
two (2) for Tier II Executives or (C) one and one-half (11/2) for Tier III
Executives times the sum of: (1) the Executive’s annual rate of Base Salary in
effect upon the date of the Qualifying Termination or, if greater, the
Executive’s annual rate of Base Salary in effect immediately prior to the
occurrence of the Change in Control plus (2) the Executive’s then current
target bonus opportunity established under the annual bonus plan in effect for
the bonus plan year in which the date of the Executive’s Qualifying Termination
occurs or, if greater, the Executive’s target bonus opportunity in effect prior
to the occurrence of the Change in Control. Such amount shall be paid in cash
in equal monthly installments (or more frequent installments as determined by
the Company) over a period of: (x) thirty-six (36) months for Tier I
Executives, (y) twenty-four (24) months for Tier II Executives or (z) eighteen
(18) months for Tier III Executives, commencing on the Payment Date;
provided, however, that if the Qualifying Termination of
Executive’s employment occurs after December 31, 2009, the Participating
Company shall pay such amount in cash to the Executive in a single lump sum on
the Payment Date.
	 
	 	(v)	 	An amount equal to the annual bonus the Executive would have
earned under the annual bonus plan for the plan year in which the Qualifying
Termination occurs, determined based on the actual performance achieved

11

 

	 	 	 	under such annual bonus plan for such plan year and adjusted on a pro rata
basis based on the number of months the Executive was actually employed
during such plan year (full credit is given for partial months of
employment), shall be paid in cash to the Executive in a single lump sum at
the applicable time provided in the annual bonus plan then in effect. Such
payment shall constitute full satisfaction for this amount owed to the
Executive.
	 
	 	(vi)	 	Subject to the following paragraph, the Company shall provide,
at the same cost structure as applicable to active employees, continuation of
the coverage of the Executive (and the Executive’s eligible dependents) under
the Company’s medical, life, dental and vision insurance benefit plans for:
(A) thirty-six (36) months for Tier I Executives, (B) twenty-four (24) months
for Tier II Executives or (C) eighteen (18) months for Tier III Executives,
from the date of the Qualifying Termination; provided, however,
that following the date of the Qualifying Termination the Executive will be
covered by the fully insured medical, dental and vision plans maintained by the
Company. The Executive’s required payments, if any, towards the cost for such
continuation coverage shall be made on an after-tax basis. The applicable
COBRA medical insurance benefit continuation period shall begin at the end of
the period of continued medical insurance coverage described in this paragraph.
	 
	 	 	 	If the Executive becomes covered under the medical, dental and/or vision
insurance coverage of a subsequent employer that does not contain any
exclusion or limitation with respect to any preexisting condition of the
Executive or the Executive’s eligible dependents, the medical, dental and/or
vision insurance benefit coverage by the Company under this Section
4.1(b)(vi) shall be discontinued prior to the end of the applicable benefit
continuation period.
	 
	 	 	 	In the event that any medical, life, dental and/or vision insurance benefit
plan coverage provided under this Section 4.1(b)(vi) is subject to federal,
state, or local income or employment taxes, the Company shall provide the
Executive with an additional payment (the “Insurance Adjustment Payment”) in
the amount necessary such that after payment by the Executive of all such
taxes (calculated assuming the Executive pays such taxes for the year in
which the payment or benefit occurs at the highest marginal tax rate
applicable), including the taxes imposed on the additional payments, the
Executive effectively received coverage on a tax-free basis. Such Insurance
Adjustment Payment shall be made no later than December 31 of the year
following the year in which the Executive incurs the tax.
	 
	 	(vii)	 	If the Executive is eligible to participate in a Participating
Company’s defined benefit pension plan as of the date of the Executive’s
Qualifying Termination, the Participating Company shall provide the Executive
with

12

 

	 	 	 	an additional pension benefit determined as if the Executive’s employment
with the Participating Company had continued for an additional: (A) three
(3) years for Tier I Executives, (B) two (2) years for Tier II Executives or
(C) one and one-half (11/2) years for Tier III Executives, and calculated as
if the Executive’s relevant Base Salary and target bonus for such additional
period is at the same level as on the date of the Qualifying Termination,
which benefit shall be provided under and paid pursuant to the Participating
Company’s qualified retirement plans to the extent permitted thereunder or
under a nonqualified plan established and maintained by the Participating
Company or an affiliated company.
	 
	 	(viii)	 	An amount equal to the matching contributions and/or retirement enhancement
contributions, if any, that would be contributed by the Participating Company
on the Executive’s behalf under the Participating Company’s qualified defined
contribution plan (the “CIP”) and nonqualified defined contribution benefit
plans assuming that (A) the Executive had continued to be employed as an active
participant in the CIP for an additional: (1) three (3) years for Tier I
Executives, (2) two (2) years for Tier II Executives or (3) one and one-half
(11/2) years for Tier III Executives following the date of the Qualifying
Termination, (B) the Executive’s Base Salary was equal to the amount determined
in Section 4.1(b)(iv) above and (C) the Executive contributed in an amount that
would have provided for the maximum matching contributions during such
additional period (without regard to any amendment to the CIP made subsequent
to the date of the Qualifying Termination which modifies the matching
contributions and/or retirement enhancement contributions thereunder). Such
amount shall be paid in cash to the Executive in a single lump sum on the
Payment Date.
	 
	 	(ix)	 	If the Executive is eligible for retiree health and life
insurance coverage on the date of the Executive’s Qualifying Termination, a
Participating Company shall provide the Executive with additional age and
service credit towards eligibility for retiree health and life insurance
coverage determined as if the Executive’s employment with the Participating
Company had continued for an additional: (A) three (3) years for Tier I
Executives, (B) two (2) years for Tier II Executives or (C) one and one-half
(11/2) years for Tier III Executives following the date of the Qualifying
Termination.
	 
	 	(x)	 	If the Executive is eligible to participate in the Company’s
MedSave Plan on the date of the Qualifying Termination, an amount equal to the
contributions that would have been credited as Company contributions to the
Executive’s notional account under the MedSave Plan assuming that (A) the
Executive had continued to be employed as an active participant in the MedSave
Plan for an additional: (1) three (3) years for Tier I Executives, (2) two (2)
years for Tier II Executives or (3) one and one-half (11/2) years for Tier III
Executives following the date of the Qualifying

13

 

	 	 	 	Termination and (B) the Company had credited the Executive’s notional
account thereunder with the maximum amount of matching contributions each
year during such additional period. Such amount shall be paid in cash to
the Executive in a single lump sum on the Payment Date.
	 
	 	(xi)	 	If the Executive actively participates in any of the Company’s
voluntary, employee pay-all plans or programs on the date of the Executive’s
Qualifying Termination, the Executive may continue to participate in such plan
or program, pursuant to the terms and conditions set forth therein, for an
additional: (A) three (3) years for Tier I Executives, (B) two (2) years for
Tier II Executives or (C) one and one-half (11/2) years for Tier III Executives
following the date of the Qualifying Termination.

	 	(c)	 	Notwithstanding the foregoing, if the Qualifying Termination giving rise to the
payment of Change in Control Severance Benefits under this Section 4.1 is due to a
Change in Control Good Reason as defined in Section 2(j)(iii), then the Executive’s
Base Salary and target bonus opportunity in effect immediately prior to the occurrence
of such Change in Control Good Reason shall be used for purposes of calculating any
amounts to be paid based thereupon under Section 4.1(b).

     4.2 Pre-2010 General Severance Benefits.

	 	(a)	 	Subject to Section 3.4, the Participating Company shall pay the Executive
General Severance Benefits, as described in Section 4.2(b), if, prior to January 1,
2010, the Executive receives or delivers a Notice of Termination of a Qualifying
Termination of the Executive’s employment pursuant to Section 3.1(c).
	 
	 	(b)	 	The General Severance Benefits to be provided to the Executive pursuant to
Section 4.2(a) shall be the following:

	 	(i)	 	An amount equal to the Executive’s unpaid Base Salary,
unreimbursed business expenses, and all other items earned by and owed to the
Executive through and including the date of the Qualifying Termination shall be
paid in cash to the Executive in a single lump sum on the Payment Date. Such
payment shall constitute full satisfaction for these amounts owed to the
Executive.
	 
	 	(ii)	 	An amount equal to the unpaid, accrued vacation pay owed to the
Executive through and including the date of the Qualifying Termination shall be
paid in cash to the Executive in a single lump sum with the last payment
described in Section 4.2(b)(iv). Such payment shall constitute full
satisfaction for this amount owed to the Executive and in no event shall the
Executive accrue additional vacation time after the date of the Executive’s
Qualifying Termination.
	 
	 	(iii)	 	Any amount payable to the Executive under the annual bonus
plan then in effect in respect of the most recently completed fiscal year, to
the extent

14

 

	 	 	 	not theretofore paid shall be paid in cash to the Executive in a single lump
sum at the applicable time provided in the annual bonus plan then in effect.
Such payment shall constitute full satisfaction for this amount owed to the
Executive.
	 
	 	(iv)	 	An amount equal to: (A) two and one-half (21/2) for Tier I
Executives, or (B) one and one-half (11/2) for Tier II and III Executives, times
the sum of: (1) the Executive’s annual rate of Base Salary in effect upon the
date of the Qualifying Termination plus (2) the Executive’s then current target
bonus opportunity established under the annual bonus plan in effect for the
bonus plan year in which the date of the Executive’s Qualifying Termination
occurs. Such amount shall be paid in cash in equal monthly installments (or
more frequent installments as determined by the Company) over a period of: (x)
thirty (30) months for Tier I Executives or (y) eighteen (18) months for Tier
II or Tier III Executives, commencing on the Payment Date; provided,
however, that if the Qualifying Termination of Executive’s employment
occurs after December 31, 2009, the Participating Company shall pay such amount
in cash to the Executive in a single lump sum on the Payment Date.
	 
	 	(v)	 	An amount equal to the annual bonus the Executive would have
earned under the annual bonus plan for the plan year in which the Qualifying
Termination occurs, determined based on the actual performance achieved under
such annual bonus plan for such plan year and adjusted on a pro rata basis
based on the number of months the Executive was actually employed during such
plan year (full credit is given for partial months of employment), shall be
paid in cash to the Executive in a single lump sum at the applicable time
provided in the annual bonus plan then in effect. Such payment shall
constitute full satisfaction for this amount owed to the Executive.
	 
	 	(vi)	 	Subject to the following paragraph, the Company shall provide,
at the same cost structure as applicable to active employees, continuation of
the coverage of the Executive (and the Executive’s eligible dependents) under
the Company’s medical, life, dental and vision insurance benefit plans for:
(A) thirty (30) months for Tier I Executives, or (B) eighteen (18) months for
Tier II and III Executives, from the date of the Qualifying Termination;
provided, however, that following the date of the Qualifying
Termination the Executive will be covered by the fully insured medical, dental
and vision plans maintained by the Company. The Executive’s required payments,
if any, towards the cost for such continuation coverage shall be made on an
after-tax basis. The applicable COBRA medical insurance benefit continuation
period shall begin at the end of the period of continued medical insurance
coverage described in this paragraph.
	 
	 	 	 	If the Executive becomes covered under the medical, dental and/or vision
insurance coverage of a subsequent employer that does not contain any

15

 

	 	 	 	exclusion or limitation with respect to any preexisting condition of the
Executive or the Executive’s eligible dependents, the medical, dental and/or
vision insurance benefit coverage by the Company under this Section
4.2(b)(vi) shall be discontinued prior to the end of the applicable benefit
continuation period.
	 
	 	 	 	In the event that any medical, life, dental and/or vision insurance benefit
plan coverage provided under this Section 4.2(b)(vi) is subject to federal,
state, or local income or employment taxes, the Company shall provide the
Executive with an Insurance Adjustment Payment in the amount necessary such
that after payment by the Executive of all such taxes (calculated assuming
the Executive pays such taxes for the year in which the payment or benefit
occurs at the highest marginal tax rate applicable), including the taxes
imposed on the additional payments, the Executive effectively received
coverage on a tax-free basis. Such Insurance Adjustment Payment shall be
made no later than December 31 of the year following the year in which the
Executive incurs the tax.
	 
	 	(vii)	 	If the Executive is eligible to participate in a Participating
Company’s defined benefit pension plan as of the date of the Executive’s
Qualifying Termination, the Participating Company shall provide the Executive
with an additional pension benefit determined as if the Executive’s employment
with the Participating Company had continued for an additional: (A) thirty
(30) months for Tier I Executives, or (B) eighteen (18) months for Tier II and
III Executives, and calculated as if the Executive’s relevant Base Salary and
target bonus for such additional period is at the same level as on the date of
the Qualifying Termination, which benefit shall be provided under and paid
pursuant to the Participating Company’s qualified retirement plans to the
extent permitted thereunder or under a nonqualified plan established and
maintained by the Participating Company or an affiliated company.
	 
	 	(viii)	 	An amount equal to the matching contributions and/or retirement enhancement
contributions, if any, that would be contributed by the Participating Company
on the Executive’s behalf under the CIP and the Participating Company’s
nonqualified defined contribution benefit plans assuming that (A) the Executive
had continued to be employed as an active participant in the CIP for an
additional: (1) thirty (30) months for Tier I Executives or (2) eighteen (18)
months for Tier II and III Executives following the date of the Qualifying
Termination, (B) the Executive’s Base Salary was equal to the amount determined
in Section 4.2(b)(iv) above and (C) the Executive contributed in an amount that
would have provided for the maximum matching contributions during such
additional period (without regard to any amendment to the CIP made subsequent
to the date of the Qualifying Termination which modifies the matching
contributions and/or retirement enhancement contributions thereunder).

16

 

	 	 	 	Such amount shall be paid in cash to the Executive in a single lump sum on
the Payment Date.
	 
	 	(ix)	 	If the Executive is eligible for retiree health and life
insurance coverage on the date of the Executive’s Qualifying Termination, a
Participating Company shall provide the Executive with additional age and
service credit towards eligibility for retiree health and life insurance
coverage determined as if the Executive’s employment with the Participating
Company had continued for an additional: (A) thirty (30) months for Tier I
Executives or (B) eighteen (18) months for Tier II and III Executives,
following the date of the Qualifying Termination.
	 
	 	(x)	 	If the Executive is eligible to participate in the Company’s
MedSave Plan on the date of the Qualifying Termination, an amount equal to the
contributions that would have been credited as Company contributions to the
Executive’s notional account under the MedSave Plan assuming that (A) the
Executive had continued to be employed as an active participant in the MedSave
Plan for an additional: (1) thirty (30) months for Tier I Executives or (2)
eighteen (18) months for Tier II and III Executives following the date of the
Qualifying Termination and (B) the Company had credited the Executive’s
notional account thereunder with the maximum amount of matching contributions
each year during such additional period. Such amount shall be paid in cash to
the Executive in a single lump sum on the Payment Date.
	 
	 	(xi)	 	If the Executive actively participates in any of the Company’s
voluntary, employee pay-all plans or programs on the date of the Executive’s
Qualifying Termination, the Executive may continue to participate in such plan
or program pursuant to the terms and conditions set forth therein, for an
additional: (A) thirty (30) months for Tier I Executives or (B) eighteen (18)
months for Tier II and III Executives following the date of the Qualifying
Termination.

	 	(c)	 	Notwithstanding the foregoing, if the Qualifying Termination giving rise to the
payment of General Severance Benefits under this Section 4.2 is due to a General Good
Reason as defined in Section 2(x), then the Executive’s Base Salary and target bonus
opportunity in effect immediately prior to the occurrence of such General Reason shall
be used for purposes of calculating any amounts to be paid based thereupon under
Section 4.2(b).

     4.3 Expiration of Article 4. Notwithstanding any other provision of this Plan to the
contrary, the provisions of this Article 4 shall not apply to any Executive who receives or
delivers a Notice of Termination after December 31, 2009.

17

 

Article 5. Post-2009 Severance Benefits

     5.1 Post-2009 Change in Control Severance Benefits.

	 	(a)	 	Subject to Section 3.4, the Participating Company shall pay the Executive
Change in Control Severance Benefits, as described in Section 5.1(b), if, after
December 31, 2009, the Executive receives or delivers a Notice of Termination of a
Qualifying Termination of the Executive’s employment pursuant to Section 3.1(a) or
3.1(b).
	 
	 	(b)	 	The Change in Control Severance Benefits to be provided to the Executive
pursuant to Section 5.1(a) shall be the following:

	 	(i)	 	An amount equal to the Executive’s unpaid Base Salary,
unreimbursed business expenses, and all other items earned by and owed to the
Executive through and including the date of the Qualifying Termination shall be
paid in cash to the Executive in a single lump sum on the Payment Date. Such
payment shall constitute full satisfaction for these amounts owed to the
Executive.
	 
	 	(ii)	 	An amount equal to the unpaid, accrued vacation pay owed to the
Executive through and including the date of the Qualifying Termination shall be
made in cash to the Executive in a single lump sum on the Payment Date. Such
payment shall constitute full satisfaction for these amounts owed to the
Executive and in no event shall the Executive accrue additional vacation time
after the date of the Executive’s Qualifying Termination.
	 
	 	(iii)	 	Any amount payable to the Executive under the annual bonus
plan then in effect in respect of the most recently completed fiscal year, to
the extent not theretofore paid, shall be paid in cash to the Executive in a
single lump sum at the applicable time provided in the annual bonus plan then
in effect. Such payment shall constitute full satisfaction for this amount
owed to the Executive.
	 
	 	(iv)	 	An amount equal to: (A) three (3) for Tier I Executives, (B)
two (2) for Tier II Executives or (C) one and one-half (11/2) for Tier III
Executives times the sum of: (1) the Executive’s annual rate of Base Salary in
effect upon the date of the Qualifying Termination or, if greater, by the
Executive’s annual rate of Base Salary in effect immediately prior to the
occurrence of the Change in Control plus (2) the Executive’s then current
target bonus opportunity established under the annual bonus plan in effect for
the bonus plan year in which the date of the Executive’s Qualifying Termination
occurs or, if greater, the Executive’s target bonus opportunity in effect prior
to the occurrence of the Change in Control. The Participating Company shall
pay such amount in cash to the Executive in a single lump sum on the Payment
Date.

18

 

	 	(v)	 	An amount equal to the annual bonus the Executive would have
earned under the annual bonus plan for the plan year in which the Qualifying
Termination occurs, determined based on the actual performance achieved under
such annual bonus plan for such plan year and adjusted on a pro rata basis
based on the number of months the Executive was actually employed during such
plan year (full credit is given for partial months of employment), shall be
paid in cash to the Executive in a single lump sum at the applicable time
provided in the annual bonus plan then in effect. Such payment shall
constitute full satisfaction for this amount owed to the Executive.
	 
	 	(vi)	 	The Company shall provide, at the same cost structure as
applicable to active employees, COBRA continuation coverage for the Executive
(and the Executive’s eligible dependents) under the Company’s medical benefit
plan for a period of up to six (6) months from the date of the Qualifying
Termination (the “Subsidized COBRA Period”). The Subsidized COBRA Period will
be included in the Executive’s COBRA continuation coverage period. If the
Executive chooses to continue COBRA continuation coverage after the Subsidized
COBRA Period, the Executive will be responsible for the entire premium payment
for the remainder of the Executive’s COBRA continuation coverage period (in
most cases an additional twelve (12) months).
	 
	 	(vii)	 	If the Executive actively participates in any of the Company’s
voluntary, employee pay-all plans or programs on the date of the Executive’s
Qualifying Termination, the Executive may continue to participate in such plan
or program after the date of the Qualifying Termination if such continued
participation is permitted by the third-party provider pursuant to the terms
and conditions set forth therein.

	 	(c)	 	Notwithstanding the foregoing, if the Qualifying Termination giving rise to the
payment of Change in Control Severance Benefits under this Section 5.1 is due to a
Change in Control Good Reason as defined in Section 2(j)(iii), then the Executive’s
Base Salary and target bonus opportunity in effect immediately prior to the occurrence
of such Change in Control Good Reason shall be used for purposes of calculating any
amounts to be paid based thereupon under Section 5.1(b).

     5.2 Post-2009 General Severance Benefits.

	 	(a)	 	Subject to Section 3.4, the Participating Company shall pay the Executive
General Severance Benefits, as described in Section 5.2(b), if, after December 31,
2009, the Executive receives or delivers a Notice of Termination of a Qualifying
Termination of the Executive’s employment pursuant to Section 3.1(c).

19

 

	 	(b)	 	The General Severance Benefits to be provided to the Executive pursuant to
Section 5.2(a) shall be the following:

	 	(i)	 	An amount equal to the Executive’s unpaid Base Salary,
unreimbursed business expenses, and all other items earned by and owed to the
Executive through and including the date of the Qualifying Termination shall be
paid in cash to the Executive in a single lump sum on the Payment Date. Such
payment shall constitute full satisfaction for these amounts owed to the
Executive.
	 
	 	(ii)	 	An amount equal to the unpaid, accrued vacation pay owed to the
Executive through and including the date of the Qualifying Termination shall be
paid in cash to the Executive in a single lump sum on the Payment Date. Such
payment shall constitute full satisfaction for these amounts owed to the
Executive and in no event shall the Executive accrue additional vacation time
after the date of the Executive’s Qualifying Termination.
	 
	 	(iii)	 	Any amount payable to the Executive under the annual bonus
plan then in effect in respect of the most recently completed fiscal year, to
the extent not theretofore paid shall be paid in cash to the Executive in a
single lump sum at the applicable time provided in the annual bonus plan then
in effect. Such payment shall constitute full satisfaction for this amount
owed to the Executive.
	 
	 	(iv)	 	An amount equal to: (A) two and one-half (21/2) for Tier I
Executives or (B) one and one-half (11/2) for Tier II and III Executives, times
the sum of: (1) the Executive’s annual rate of Base Salary in effect upon the
date of the Qualifying Termination plus (2) the Executive’s then current target
bonus opportunity established under the annual bonus plan in effect for the
bonus plan year in which the date of the Executive’s Qualifying Termination
occurs. The Participating Company shall pay such amount in cash to the
Executive in a single lump sum on the Payment Date.
	 
	 	(v)	 	An amount equal to the annual bonus the Executive would have
earned under the annual bonus plan for the plan year in which the Qualifying
Termination occurs, determined based on the actual performance achieved under
such annual bonus plan for such plan year and adjusted on a pro rata basis
based on the number of months the Executive was actually employed during such
plan year (full credit is given for partial months of employment), shall be
paid in cash to the Executive in a single lump sum at the applicable time
provided in the annual bonus plan then in effect. Such payment shall
constitute full satisfaction for this amount owed to the Executive.

20

 

	 	(vi)	 	The Company shall provide, at the same cost structure as
applicable to active employees, COBRA continuation coverage for the Executive
(and the Executive’s eligible dependents) under the Company’s medical benefit
plan during the Subsidized COBRA Period. The Subsidized COBRA Period will be
included in the Executive’s COBRA continuation coverage period. If the
Executive chooses to continue COBRA continuation coverage after the Subsidized
COBRA Period, the Executive will be responsible for the entire premium payment
for the remainder of the Executive’s COBRA continuation coverage period (in
most cases an additional twelve (12) months).
	 
	 	(vii)	 	If the Executive actively participates in any of the Company’s
voluntary, employee pay-all plans or programs on the date of the Executive’s
Qualifying Termination, the Executive may continue to participate in such plan
or program after the date of the Qualifying Termination if such continued
participation is permitted by the third-party provider pursuant to the terms
and conditions set forth therein.

	 	(c)	 	Notwithstanding the foregoing, if the Qualifying Termination giving rise to the
payment of General Severance Benefits under this Section 5.2 is due to a General Good
Reason as defined in Section 2(x), then the Executive’s Base Salary and target bonus
opportunity in effect immediately prior to the occurrence of such General Good Reason
shall be used for purposes of calculating any amounts to be paid based thereupon under
Section 5.2(b).

Article 6. Excise Taxes.

     6.1 Applicable Provisions if Excise Tax Applies.

	 	(a)	 	Anything in the Plan to the contrary notwithstanding, if it is determined (as
hereafter provided) that any payment or distribution by or on behalf of a Participating
Company to or for the benefit of a Tier I or Tier II Executive to whom this Section 6.1
applies, as provided in Section 6.2, whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise pursuant to or by reason
of any other agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or exercisability of any of the
foregoing (in the aggregate, the “Payment”), would be subject to the Excise Tax, the
Participating Company shall pay an additional amount (the “Gross-Up Payment”) such
that, after payment by the Tier I or Tier II Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise Tax
imposed upon the Gross-Up Payment, the Tier I or Tier II Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payment;
provided, however, that the Participating Company shall only be
required to pay the Gross-Up Payment if the Tier I or Tier II Executive receives total
“Parachute Payments” within the meaning of Section 280G of the Code (without
consideration of the

21

 

	 	 	 	Gross-Up Payment) that exceed one hundred and ten percent (110%) of the amount that
the Tier I and Tier II Executive would be entitled to receive without being subject
to the Excise Tax. Subject to Section 3.2, such Gross-Up Payment shall be made no
later than December 31 of the year following the year in which the Tier I or Tier II
Executive incurs the Excise Tax. Subject to Section 3.2, any expenses, including
interest and penalties assessed on the Excise Tax described in this Section 6.1
resulting from the Company’s actions, incurred by a Tier I or Tier II Executive
shall be reimbursed promptly after the Tier I or Tier II Executive submits evidence
of the incurrence of such expenses, which reimbursement in no event will be later
than December 31 of the year following the year in which the Tier I or Tier II
Executive incurs the expense, provided that in no event will the amount of expenses
eligible for reimbursement in one year affect the amount of expenses to be
reimbursed, or in-kind benefits to be provided, in any other taxable year.
	 
	 	(b)	 	In the event that a Tier I and Tier II Executive to whom this Section 6.1
applies, as provided in Section 6.2, is not entitled to receive a Gross-Up Payment, the
Tier I and Tier II Executive shall be entitled to receive the Payment to which the Tier
I and Tier II Executive is otherwise entitled to, unless reducing such Payment would
result in an increase in the after-tax benefit to the Tier I and Tier II Executive
(taking into account any Excise Tax, and any applicable federal, state and local income
taxes). If reducing such Payment would result in an increase in the after-tax benefit
to the Tier I and Tier II Executive, then the Payment shall be reduced to the minimum
extent necessary so that no portion of any such Payment is subject to the Excise Tax.
The fact that a Tier I or Tier II Executive’s right to a Payment may be reduced by
reason of the limitations contained in this Section 6.1 shall not of itself limit or
otherwise affect any other rights of the Tier I or Tier II Executive other than under
the Plan. In the event that a Payment intended to be provided under the Plan is
required to be reduced pursuant to this Section 6.1, the payment required by Section
4.1(b)(iv) or 5.1(b)(iv), as applicable, will be so reduced.
	 
	 	(c)	 	All determinations required to be made under this Section 6.1, including
whether an Excise Tax is payable by a Tier I or Tier II Executive and the amount of
such Excise Tax, shall be made by the Accounting Firm. The Participating Company shall
direct the Accounting Firm to submit its determination and detailed supporting
calculations to the relevant Participating Company and the Tier I or Tier II Executive
within fifteen (15) calendar days after the date of the Tier I or Tier II Executive’s
termination, if applicable, and any other such time or times as may be requested by
such Participating Company or the Tier I or Tier II Executive. If the Accounting Firm
determines that no Excise Tax is payable by the Tier I or Tier II Executive, it shall,
at the same time as it makes such determination, furnish the Tier I or Tier II
Executive with an opinion that the Tier I or Tier II Executive has substantial
authority not to report any Excise Tax on the Tier I or Tier II Executive’s federal,
state, local income or other tax return.

22

 

	 	(d)	 	The Participating Company and the Tier I or Tier II Executive shall each
provide the Accounting Firm access to and copies of any books, records and documents in
the possession of the Participating Company or the Tier I or Tier II Executive, as the
case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with
the Accounting Firm in connection with the preparation and issuance of the
determination contemplated by Section 6.1(c). Any reasonable determination by the
Accounting Firm of the type contemplated by Section 6.1(c) (and supported by the
calculations done by the Accounting Firm) shall be binding upon such Participating
Company and the Tier I or Tier II Executive, subject to final determination by the
Internal Revenue Service.
	 
	 	(e)	 	The federal, state and local income or other tax returns filed by the Tier I or
Tier II Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax, if any, payable by
the Tier I or Tier II Executive. The Tier I or Tier II Executive shall make proper
payment of the amount of any Excise Tax, and upon request, provide to the Participating
Company true and correct copies (with any amendments) of the Tier I or Tier II
Executive’s federal income tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with the applicable
taxing authority, and such other documents reasonably requested by the Participating
Company, evidencing such filing and payment.
	 
	 	(f)	 	The Participating Company will pay the fees and expenses of the Accounting Firm
for its services in connection with the determinations and calculations contemplated by
Section 6.1(c) and Section 6.1(e). If such fees and expenses are initially paid by the
Tier I or Tier II Executive, the Participating Company shall reimburse the Tier I or
Tier II Executive the full amount of such fees and expenses within ten (10) business
days after receipt from the Tier I or Tier II Executive of reasonable evidence of
payment; provided, however, that any such reimbursements shall be made
no later than December 31 of the year following the year in which the Tier I or Tier II
Executive incurs the fees and expenses. In no event will the amount of expenses
eligible for reimbursement in one year affect the amount of expenses to be reimbursed,
or in-kind benefits to be provided, in any other taxable year.

     6.2 Eligibility for Gross-Up Payment. The provisions of Section 6.1 shall apply only to those
individuals who are Tier I or Tier II Executives eligible to participate in the Plan as of the
close of business on January 31, 2009.

Article 7. Contractual Rights and Legal Remedies

     7.1 Payment Obligations Absolute. Except as otherwise provided in Section 7.4 below, a
Participating Company’s obligation to make the payments and the arrangements provided for herein
shall be absolute and unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other right which the
Participating Company may have against the Executive or anyone else. All amounts payable by a
Participating Company hereunder shall be paid without notice or demand.

23

 

     The Executive shall not be obligated to seek other employment in mitigation of the amounts
payable or arrangements made under any provision of this Plan, and the obtaining of any such other
employment shall in no event effect any reduction of a Participating Company’s obligations to make
the payments and arrangements required to be made under this Plan, except to the extent provided in
Section 4.1(b)(vi), 4.2(b)(vi), 5.1(b)(vi) or 5.2(b)(vi) herein, as applicable.

     7.2 Contractual Rights to Benefits. This Plan establishes and vests in the Executive a
contractual right to the benefits to which he is entitled hereunder. However, nothing herein
contained shall require or be deemed to require, or prohibit or be deemed to prohibit, a
Participating Company to segregate, earmark, or otherwise set aside any funds or other assets, in
trust or otherwise, to provide for any payments to be made or required hereunder.

     7.3 Legal Fees and Expenses. A Participating Company shall pay all reasonable legal fees,
costs of litigation, prejudgment interest, and other expenses which are incurred in good faith by a
Tier I or Tier II Executive as a result of the Participating Company’s refusal to provide the
Change in Control Severance Benefits to which the Tier I or Tier II Executive becomes entitled
under this Plan, or as a result of the Participating Company’s (or any third party’s) contesting
the validity, enforceability, or interpretation of the Plan with respect to the Change in Control
Severance Benefits, or as a result of any conflict between the parties pertaining to the Change in
Control Severance Benefits under this Plan; provided, however, that if the court
determines that a Tier I or Tier II Executive’s claims were arbitrary and capricious, the
Participating Company shall have no obligation hereunder and an Executive who claims to be entitled
to Change in Control Severance Benefits pursuant to Section 5.1 shall be obligated to return to the
Company any reimbursement made to the Executive by the Company pursuant to this Section 7.3. If
such fees and expenses are initially paid by the Tier I or Tier II Executive, subject to Section
3.2, the Participating Company shall reimburse the Tier I or Tier II Executive the full amount of
such fees and expenses after receipt from the Tier I or Tier II Executive of reasonable evidence of
payment; provided, however, that any such reimbursements shall be made no later
than December 31 of the year following the year in  which the Tier I or Tier II Executive incurs
the fees and expenses. In no event will the amount of expenses eligible for reimbursement in one
year affect the amount of expenses to be reimbursed, or in-kind benefits to be provided, in any
other taxable year.

     7.4 Return of Severance Benefits. With respect to Change in Control Severance Benefits or
General Severance Benefits provided pursuant to Sections 4.1, 4.2, 5.1 or 5.2, if at any time the
Executive breaches any provision of (i) the General Release or (ii) the Non-Competition Agreement
(or, with respect to an Executive who has previously executed a Non-Competition Agreement, the
written affirmation of the Executive’s obligations thereunder), each as executed by the Executive
in accordance with Section 3.4 of this Agreement, then in addition to all other rights and remedies
available to it in law or equity, the Participating Company may cease to provide any further
Severance Benefits under this Agreement, and upon the Participating Company’s written demand, the
Executive shall repay to the Participating Company the Severance Benefits and any other amount
previously received under this Agreement. Any amount to be repaid pursuant to this Section 7.4
shall be (A) determined by the Participating Company in its sole and absolute discretion, (B) held
by the Executive in constructive trust for the benefit of the Participating Company and (C) paid by
the Executive to

24

 

the Participating Company within ten (10) days of the Executive’s receipt of written notice
from the Participating Company. The Participating Company shall have the right to offset such
amount against any amounts otherwise owed to the Executive by the Participating Company.

Article 8. Successors

     8.1 Successors to the Company. The Company shall require any successor (whether direct or
indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock,
liquidation, or otherwise) of all or substantially all of the business or assets of the Company by
agreement, to expressly assume and agree to perform this Plan in the same manner and to the same
extent that the Company would be required to perform if no such succession had taken place.
Regardless of whether such agreement is executed, this Plan shall be binding upon any successor in
accordance with the operation of law and such successor shall be deemed “the Company” for purposes
of this Plan.

     8.2 Assignment by the Executive. This Plan shall inure to the benefit of and be enforceable
by the Executive’s personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive dies while any amount would still be
payable to him hereunder had he continued to live, all such amounts, unless otherwise provided
herein, shall be paid in a single lump sum within ninety (90) days following the date of the
Executive’s death to the Executive’s devisee, legatee, or other designee, or if there is no such
designee, to the Executive’s estate, provided that such devisee, legatee, other designee or estate
shall not have the right to designate the payment date.

Article 9. Miscellaneous

     9.1 Employment Status. This Plan is not, and nothing herein shall be deemed to create, an
employment contract between the Executive and a Participating Company. The Executive acknowledges
that the rights of a Participating Company remain wholly intact to change or reduce at any time and
from time to time his compensation, title, responsibilities, location, and all other aspects of the
employment relationship, or to discharge him (subject to Section 3.1).

     9.2 Entire Plan. This Plan contains the entire understanding of the Participating Company and
the Executive with respect to the subject matter hereof. Notwithstanding anything to the contrary,
if the Executive is entitled to the payments provided for under this Plan in the event of the
Executive’s termination of employment and any other employment, retention, severance, or similar
agreement with a Participating Company or any Subsidiary to which the Executive is a party or any
severance pay plan or program of a Participating Company or any Subsidiary in which the Executive
is a participant (an “Other Severance Arrangement”), the Executive will be entitled to severance
benefits under either this Plan or the Other Severance Arrangement, whichever provides for greater
benefits, but will not be entitled to benefits under both this Plan and the Other Severance
Arrangement.

25

 

     9.3 Adoption Procedure for a Participating Company.

	 	(a)	 	Any Subsidiary of the Company may become a Participating Company under the Plan
provided that by appropriate resolutions of the board of directors or other governing
body of such Subsidiary, such Subsidiary agrees to become a Participating Company under
the Plan and also agrees to be bound by any other terms and conditions which may be
required by the Board or the Committee, provided that such terms and conditions are not
inconsistent with the purposes of the Plan.
	 
	 	(b)	 	A Participating Company may withdraw from participation in the Plan, subject to
approval by the Committee, by providing written notice to the Committee that withdrawal
has been approved by the board of directors or other governing body of the
Participating Company. The Committee may at any time remove a Participating Company
from participation in the Plan by providing written notice to the Participating Company
that it has approved removal. The Committee will act in accordance with this Section
9.3 pursuant to unanimous written consent or by majority vote at a meeting.

     9.4 Notices. All notices, requests, demands, and other communications hereunder shall be
sufficient if in writing and shall be deemed to have been duly given if delivered by hand or if
sent by registered or certified mail to the Executive at the last address the Executive has filed
in writing with the Participating Company or, in the case of the Participating Company, at its
principal offices.

     9.5 Includable Compensation. Change in Control Severance Benefits and General Severance
Benefits provided hereunder shall not be considered “includable compensation” for purposes of
determining the Executive’s benefits under any other plan or program of a Participating Company
unless otherwise provided by such other plan or program.

     9.6 Tax Withholding. A Participating Company shall withhold from any amounts payable under
this Plan all federal, state, city, or other taxes as legally required to be withheld.

     9.7 Internal Revenue Code Section 409A. To the extent applicable, it is intended that this
Plan comply with the provisions of Code Section 409A. This Plan shall be administered in a manner
consistent with this intent. References to Code Section 409A shall include any proposed, temporary
or final regulation, or any other guidance, promulgated with respect to such section by the U.S.
Department of Treasury or the Internal Revenue Service. Each payment and each provision of
Severance Benefits pursuant to Article 4 or 5, as applicable, and each provision of reimbursements
pursuant to Section 6.1 or Section 7.3, shall be considered a separate payment and not one of a
series of payments for purposes of Code Section 409A. In addition, the Executive shall be solely
responsible and liable for the satisfaction of all taxes and penalties that may be imposed on the
Executive in connection with this Plan (including any taxes and penalties under Code Section 409A),
and neither the Company nor any of its affiliates shall have any obligation to indemnify or
otherwise hold the Executive harmless from any or all of such taxes or penalties.

26

 

     9.8 Severability. In the event any provision of this Plan shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision had not been
included. Further, the captions of this Plan are not part of the provisions hereof and shall have
no force and effect.

     Notwithstanding any other provisions of this Plan to the contrary, a Participating Company
shall have no obligation to make any payment to the Executive hereunder to the extent, but only to
the extent, that such payment is prohibited by the terms of any final order of a federal or state
court or regulatory agency of competent jurisdiction; provided, however, that such
an order shall not affect, impair, or invalidate any provision of this Plan not expressly subject
to such order.

     9.9 Modification. Provisions of this Plan may be modified or waived by the Company without
the Executive’s consent, except any change that reduces the benefits of an Executive who is already
receiving benefits shall require the Executive’s consent; provided, however, that
during the period beginning on the date of the Change in Control and ending on the second
anniversary of such Change in Control, no provision of this Plan may be modified or waived unless
such modification or waiver is agreed to in writing and signed by the affected Executives then
covered by the Plan and by a member of the Committee, as applicable, or by the respective parties’
legal representatives or successors; provided further that any modification or waiver occurring
during the twelve (12) months immediately prior to the Change in Control shall be deemed null and
void unless such modification or waiver is agreed to in writing and signed by the affected
Executives then covered by the Plan and by a member of the Committee, as applicable, or by the
respective parties’ legal representatives or successors. Modifications or waivers agreed to in
writing may affect only those Executives who have signed such modification or waiver.

     9.10 Gender and Number. Except where otherwise indicated by the context, any masculine term
used herein shall include the feminine; the plural shall include the singular and the singular
shall include the plural.

     9.11 Applicable Law. To the extent not preempted by the laws of the United States, the laws
of North Carolina shall be the controlling law in all matters relating to this Plan, including the
General Release and the Non-Competition Agreement, without giving effect to principles of conflicts
of laws.

IN WITNESS WHEREOF, the Company has executed this Plan on this 16th day of July, 2009.

	 	 	 	 	 
	 

	 	ATTEST:
	 
	 	 	 	 
	 

	 	REYNOLDS AMERICAN INC.
	 
	 	 	 	 
	 

	 	 	 	/s/ Lisa J. Caldwell
	 

	 	 	 	 
	 

	 	By:
	 	Lisa J. Caldwell
	 

	 	 	 	Executive Vice President — Chief Human Resources Officer

27

 

Appendix A

List of Participating Companies

Reynolds American Inc. (plan sponsor)

R. J. Reynolds Tobacco Company

R. J. Reynolds Global Products, Inc.

R. J. Reynolds Tobacco (CI), Co.

RAI International, Inc.

Santa Fe Natural Tobacco Company, Inc.*

Lane, Limited*

Conwood Company, LLC*

Reynolds Innovations Inc.

RAI Services Company

With
respect to a Participating Company that has an Executive
Department(*), only individuals

employed within that Executive Department will be considered to be
employed by the

Participating
Company for purposes of this Plan.EX-10.1

Exhibit 10.1

     CONFIDENTIAL

2009 Incentive Plan

1

 

CONFIDENTIAL

Somaxon Pharmaceuticals, Inc.

2009 Incentive Plan

The Somaxon Pharmaceuticals, Inc. (Somaxon) 2009 Incentive Plan (the “Plan”) is designed to offer
incentive compensation to eligible Employees by rewarding the achievement of corporate goals and
specifically measured individual goals that are consistent with and support overall corporate
goals. The Plan will create an environment which will focus Employees on the achievement of
objectives. Since cooperation between departments and Employees will be required to achieve
corporate objectives that represent a significant portion of the Plan, the Plan should help foster
improved teamwork and a more cohesive management team.

Purpose of the Plan

The Plan is designed to:

	•	 	Provide an incentive program to achieve overall corporate objectives and to enhance
shareholder value
	 
	•	 	Reward those individuals who significantly impact corporate results
	 
	•	 	Encourage increased teamwork among all disciplines within the Company
	 
	•	 	Incorporate an incentive program in the Somaxon overall compensation program to help
attract and retain Employees
	 
	•	 	Incentivize eligible Employees to remain employed by Somaxon throughout the Plan year and
until the time incentive awards are paid

Plan Governance

The Plan will be governed by the Compensation Committee of the Board of Directors. The President
and CEO of Somaxon will be responsible for administration of the Plan. The Compensation Committee
of the Board will be responsible for approving any compensation or incentive awards to officers of
the Company.

Eligibility

All full time (40 hours/week) exempt Employees Level 6 (Manager) or higher are eligible to
participate in the Plan. To receive an incentive award, a participant: (a) must have been in an
eligible position for at least three (3) consecutive months prior to the end of the Plan year and
remain employed through the end of the Plan year and until incentive awards are paid; and (b) must
not be on probation at the time bonus determinations are made.

1

 

CONFIDENTIAL

Section 1: Bonus Incentive Awards (“Bonus”)

Form of Incentive Award Payments

Incentive award payments may be made in cash, through the issuance of stock or stock options, or by
a combination of cash, stock and/or stock options, at the discretion of the Company’s Compensation
Committee, subject to the approval of the Company’s Board of Directors. In the event that the
Compensation Committee and the Board of Directors elect to pay incentive awards in stock or stock
options, the Compensation Committee, in its sole discretion, will make a determination of the
number of shares of stock or stock options to be issued to each Plan participant based, in part,
upon each participant’s Corporate and Individual Performance, as described below. The issuance of
stock and stock options may also be subject to the approval of the Company’s stockholders, and any
stock options issued will be subject to the terms and conditions of the Company’s 2005 Equity
Incentive Award Plan, as amended from time to time by the Company.

Corporate and Individual Performance

Prior to the beginning of the Plan year, the President and CEO will present to the Board of
Directors a list of the overall corporate objectives for the coming year, which are subject to
approval by the Board. All participants in the Plan will then develop a list of key individual
objectives, which must be approved by the responsible Vice President and by the President and CEO.

The Plan calls for incentive awards based on the achievement of annual corporate and individual
objectives that have been approved as indicated above.

The relative weight between corporate and individual performance factors may vary based on the
individual’s level within the organization. The weighting will be reviewed annually and may be
adjusted, as necessary or appropriate. The weighting for 2009 will be as follows:

	 	 	 	 	 	 	 	 	 
	 	 	Corporate	 	Individual
	President and CEO (Grade 12)

	 	 	100	%	 	 	 	 
	Officers and all Vice Presidents (Grade 11)

	 	 	100	%	 	 	 	 
	Executive Directors (Grades 10)

	 	 	75	%	 	 	25	%
	All Others (Grades 6-9)

	 	 	50	%	 	 	50	%

Bonus Percentage

Incentive Awards will be determined by applying a “bonus percentage” to the base salary of
participants in the Plan. The following bonus percentages will be used for this purpose:

2

 

CONFIDENTIAL

	 	 	 	 	 
	Grade Level	 	Position Title	 	Bonus Percentage
	12
	 	President & CEO	 	45%
	11
	 	Officers, Sr. VP,  VP	 	35%
	10
	 	Executive Director	 	25%
	8
— 9  
	 	Sr. Director, Director	 	20%
	  6 — 7
	 	Sr. Manager, Manager	 	15%

Performance Measurement

The following scale will be used to determine the actual award multiplier for incentive award
calculations based upon measurement of corporate and individual performance versus objectives.
Separate payment multipliers will be established for both the individual and the corporate
components of each award. The same payment multiplier for the corporate component of each
participant’s annual award shall be used for all Plan participants in any given year. The award
multiplier for the corporate component shall be determined by the Board of Directors.

	 	 	 	 	 
	Performance Category	 	Award Multiplier
	1. Performance for the year met or exceeded objectives
or was excellent in view of prevailing conditions
	 	 	75% - 150	%
	 
	 	 	 	 
	2. Performance generally met the year’s objectives or
was very acceptable in view of prevailing conditions
	 	 	50% - 75	%
	 
	 	 	 	 
	3. Performance for the year met some, but not all, objectives
	 	 	25% - 50	%
	 
	 	 	 	 
	4. Performance for the year was not acceptable in view of
prevailing conditions
	 	 	0	%

Calculation of Cash Incentive Award

The example below shows sample cash incentive award calculations under the Somaxon
Incentive Plan. First, a total bonus potential is calculated by multiplying the Employee’s base
salary by the bonus percentage. This dollar figure is then divided between its corporate component
and its individual component based on the performance factor mix for that specific position. This
calculation establishes specific dollar potential awards for the performance period for both the
individual and corporate components of the award.

At the end of the performance period, corporate and individual award multipliers will be
established using the criteria described above. The corporate award multiplier, which is based on
overall corporate performance, is used to calculate corporate performance awards for all Plan
participants. This is accomplished by multiplying the bonus percentage established for each
individual at the beginning

3

 

CONFIDENTIAL

of the performance period by the actual corporate award multiplier. The individual award
multiplier, which is based on an individual’s performance against objectives, is used in the same
way to calculate the actual individual performance award.

	 	 	 	 	 	 	 	 	 	 	 
	Example:	 	Cash Award Calculation
	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 
	 	 	Position:
	 	 	 	 	 	Manager
	 	 	Base Salary:
	 	 	 	 	 	$	100,000	 
	 	 	Bonus percentage:
	 	 	 	 	 	 	15	%
	 	 	Potential bonus dollars:
	 	 	 	 	 	$	15,000	 
	 	 	 
	 	 	 	 	 	 	 	 
	 	 	Potential bonus components (based on performance factor mix):
	 	 	 	 	 	 	 	 
	 	 	Potential corporate performance bonus (50%):
	 	 	 	 	 	$	7,500	 
	 	 	Potential individual performance bonus (50%):
	 	 	 	 	 	$	7,500	 
	 	 	 
	 	 	 	 	 	 	 	 
	 	 	Actual Cash Award Calculation
	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 
	 	 	Assumed payment multipliers based on assessment of corporate and individual
performance:
	 	 	 	 	 	 	 	 
	 	 	Corporate multiplier          75%-performance generally met year’s objectives
	 	 	 	 	 	 	 	 
	 	 	Individual multiplier          125%-performance generally exceeded objectives
	 	 	 	 	 	 	 	 
	 	 	Cash Award:
	 	 	 	 	 	 	 	 
	 	 	Corporate component
	 	$	5,625	 	 	 	($7,500 x 75	%)
	 	 	Individual component
	 	$	9,375	 	 	 	($7,500 x 125	%)

Payment of the Incentive Award

Payment of incentive awards will be made as soon as practicable after the end of the Plan year but
not before the completion and issuance of the Company’s year-end audited Financial Statements.
Incentive award calculations will be based on the participant’s base salary earned during the year
ending December 31, 2009. Participants’ entitlement to an incentive award under this Plan does not
vest until the awards are actually paid.

Participants who have been in an eligible position for less than a year, but who hold an eligible
position for at least three months prior to the end of the Plan year and remain continuously
employed through the end of the Plan year, will receive a pro-rata bonus based on the portion of
the Plan year they hold an eligible position. Participants promoted during the year from one
“Bonus percentage” level to another will have their Incentive Award calculated using their base
salary earned during the year ending December 31, 2009. Providing the promotion occurred prior to
October 1, 2009, the calculation will be pro-rated, based on the number on months at each Bonus
Percentage level. If the promotion occurred after October 1, 2009, the entire calculation will be
based on the Bonus Percentage applicable prior to the promotion. Other than as stated above,
incentive awards will not be prorated for partial year service.

Termination

A Plan participant, whose employment terminates voluntarily prior to the payment of the incentive
awards, will not be eligible to receive an incentive award.

4

 

CONFIDENTIAL

Continued employment until payment of the incentive award is a condition of vesting. If a
participant’s employment is terminated involuntarily during the calendar year, or prior to payment
of awards, it will be at the absolute discretion of the Company whether or not an award payment is
made.

Board of Director’s Absolute Right to Alter or Abolish the Plan

The Somaxon Board of Directors reserves the right in its absolute discretion to abolish the Plan at
any time or to alter the terms and conditions under which incentive compensation will be paid.
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 compensation hereunder until actual delivery
of such compensation.

Employment Duration/Employment Relationship

This Plan does not, and Somaxon’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 Somaxon or by the participant, with or without cause.

5

 

CONFIDENTIAL

Somaxon Pharmaceuticals, Inc.

2009 Incentive Plan

This is to acknowledge that I have received a copy of the 2009 Incentive Plan.

	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	Date:
	 	 
	 	 
	 

	 	(print) 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	(signature)	 	 	 	 	 	 

     Please return signed copy to Matt Onaitis

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}]]