Document:

Exhibit 10.16

 

ABBVIE DEFERRED COMPENSATION PLAN

 

(Effective as of January 1, 2013)

 

 

ABBVIE

DEFERRED COMPENSATION PLAN

 

ARTICLE I
  INTRODUCTION

 

Section 1.1                          Purpose.  The AbbVie Deferred Compensation Plan (the “Plan”) is designed to assist the Employers in attracting and retaining key employees by providing Eligible Employees with the opportunity to defer the receipt of a portion of their compensation and to have that deferred compensation treated as if it were invested pending its distribution by the Plan.

 

Section 1.2                          ERISA.  The Plan is intended to be exempt from Parts 2, 3, and 4 of Title I of ERISA and, therefore, participation in the Plan is limited to a select group of management and highly compensated employees, within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1).

 

Section 1.3                          Employers.

 

(a)                                 After the Effective Date, any Subsidiary of the Company that is not then an Employer may adopt the Plan with the Company’s consent as described in Section 13.12.

 

(b)                                 Each Employer shall be liable to the Company for an amount equal to the Plan benefits earned by its Eligible Employees.  Where an Eligible Employee has been employed by more than one Employer, the Plan Administrator shall allocate the liability to the Company associated with that Eligible Employee’s Plan benefits among his or her Employers.  The Plan Administrator shall establish procedures for determining the time at which and manner in which the Employers shall pay this liability to the Company.

 

Section 1.4                          Effective Date.  The Plan is adopted and is effective as of January 1, 2013 (the “Effective Date”).

 

Section 1.5                          Transfer of Liabilities from Abbott Laboratories Plan.  As part of the Separation and Distribution Agreement by and between Abbott Laboratories and AbbVie Inc. dated as of November 28, 2012, Abbott and AbbVie entered into the Employee Matters Agreement dated as of December 31, 2012 (the “EMA”).  In accordance with the EMA, all liabilities for AbbVie Employees (as defined in the EMA) under the Abbott Laboratories Deferred Compensation Plan were transferred to the Plan and the Plan became liable to pay all such benefits to such participants.  Supplement A to the Plan sets forth the additional rules applicable to the transferred benefits and transferred participants.

 

ARTICLE II
  DEFINITIONS

 

When used in this Plan, unless the context clearly requires a different meaning, the following words and terms shall have the meanings set forth below.  Whenever appropriate, words used in

 

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the singular shall be deemed to include the plural, and vice versa, and the masculine gender shall be deemed to include the feminine gender.

 

Section 2.1                          Account.  “Account(s)” means the account(s) established for record keeping purposes for each Participant pursuant to Article VI.

 

Section 2.2                          Base Compensation.  “Base Compensation” means the Participant’s total compensation earned in a Plan Year for personal service actually rendered to an Employer, including sales bonuses, sales incentives and sales commissions (excluding Eligible Bonuses, all other bonuses, commissions, relocation expenses, reimbursements, expense allowances, fringe benefits (cash or noncash), welfare benefits (whether or not those amounts are includible in gross income) and other non-regular forms of compensation) before deductions for (i) Deferral Elections made pursuant to Section 4.1 or (ii) contributions made on the Participant’s behalf to any Employer Savings Plan or to any cafeteria plan under Section 125 of the Internal Revenue Code of 1986, as amended (the “Code”), maintained by an Employer.

 

Section 2.3                          Beneficiary.  “Beneficiary” means the person, persons or entity designated by the Participant to receive any benefits payable under the Plan pursuant to Article IX.

 

Section 2.4                          Board of Review.  “Board of Review” means the AbbVie Employee Benefit Board of Review appointed and acting under the AbbVie Pension Plan and having the powers and duties described in this Plan.

 

Section 2.5                          Company.  “Company” means AbbVie Inc., its successors, any organization into which or with which AbbVie Inc. may merge or consolidate or to which all or substantially all of its assets may be transferred.

 

Section 2.6                          Deferral Election.  “Deferral Election” means an election under the Plan by a Participant to defer the receipt of a portion of his or her Eligible Compensation made on a Deferral Election Form.

 

Section 2.7                          Deferral Election Form.  “Deferral Election Form” means the form provided to the Participant by the Plan pursuant to Section 4.1 on which the Participant makes his or her Deferral Election.

 

Section 2.8                          Deferral Account.  “Deferral Account(s)” means the account(s) established for record keeping purposes for each Participant’s Deferral Election pursuant to Section 6.1.

 

Section 2.9                          Disability.  The date of “Disability” of a Participant means the date on which the Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, eligible to receive income replacement benefits for a period of six or more months under the terms of the AbbVie Long-Term Disability Plan (“LTD Plan”) or, for a Participant whose Employer does not participate in the LTD Plan, such similar accident and health plan in which his or her Employer participates.

 

Section 2.10                   Distribution Election.  “Distribution Election” is defined in Section 4.3(a).

 

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Section 2.11                   Distribution Election Form.  “Distribution Election Form” means the form provided to the Participant by the Plan pursuant to Section 4.3 on which the Participant specifies the time at which the amounts credited to one of the Participant’s Account(s) are to be distributed and their method of payment.

 

Section 2.12                   Effective Date.  “Effective Date” is defined in Section 1.6.

 

Section 2.13                   Eligibility Date.  “Eligibility Date” is defined in Section 3.1(b).

 

Section 2.14                   Eligible Bonus.  “Eligible Bonus” means an annual cash incentive bonus for a Plan Year that the Plan Administrator, or its delegate, has designated as being eligible for deferral under the Plan.  As of the Effective Date, cash bonuses paid under the AbbVie Cash Profit Sharing Plan or any Employer’s annual incentive bonus plan with a performance period commencing on January 1 and ending on December 31 of the applicable Plan Year are eligible for deferral under the Plan.

 

Section 2.15                   Eligible Compensation.  “Eligible Compensation” means the Participant’s Base Compensation and Eligible Bonus(es).

 

Section 2.16                   Eligible Employee.  “Eligible Employee” means any person employed by an Employer who is both

 

(i)                                     a United States employee or an expatriate who is based and paid in the United States, and

 

(ii)                                  shown as having a grade level of 20 (or equivalent level of compensation if on a different pay grade system) or higher on his or her Employer’s Human Resource System

 

and who is not (a) both an officer of the Company and eligible to participate in the AbbVie Supplemental Savings Plan, except as contemplated by Section 3.1 hereof for the Plan Year in which the person is first named an officer, (b) an individual who provides services to an Employer under a contract, arrangement or understanding with either the individual directly or with an agency or leasing organization that treats the individual as either an independent contractor or an employee of such agency or leasing organization, even if such individual is subsequently determined (by an Employer, the Internal Revenue Service, any other governmental agency, judicial action, or otherwise) to have been a common law employee of an Employer rather than an independent contractor or employee of such agency or leasing organization, or (c) any Employee who is employed by an Employer located in Puerto Rico, other than any person designated as a “U.S. Expatriate” on the records of an Employer.

 

For all Plan purposes, an individual shall be an “Eligible Employee” for any Plan Year only if during that Plan Year an Employer treats that individual as its employee for purposes of employment taxes and wage withholding for Federal income taxes, even if such individual is subsequently determined (by an Employer, the Internal Revenue Service, any other governmental agency, judicial action, or otherwise) to have been a common law employee of an Employer in that Plan Year.

 

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Section 2.17                   Employer.  “Employer” shall mean the Company, the participating Employers on the Effective Date, and any Subsidiary of the Company that subsequently adopts the Plan in the manner provided in Section 13.12.

 

Section 2.18                   Employer Contribution.  “Employer Contribution” means the contribution deemed to have been made by an Employer pursuant to Section 5.1.

 

Section 2.19                   Employer Contribution Account.  “Employer Contribution Account(s)” means the account(s) established for record keeping purposes for each Participant’s Employer Contributions pursuant to Section 6.1.

 

Section 2.20                   Employer Savings Plan.  “Employer Savings Plan” means any defined contribution retirement plan that is maintained by an Employer, qualified under Code Section 401(a), and includes a cash or deferred arrangement under Code Section 401(k).  The term shall specifically include, but not be limited to, the AbbVie Savings Plan.

 

Section 2.21                   ERISA.  “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

Section 2.22                   Hardship Distribution.  “Hardship Distribution” is defined in Section 8.5(a).

 

Section 2.23                   In-Service Distribution.  “In-Service Distribution” is defined in Section 4.3.

 

Section 2.24                   Initial Election.  “Initial Election” is defined in Section 4.3(a).

 

Section 2.25                   Investment Election.  “Investment Election” is defined in Section 4.2(a).

 

Section 2.26                   Investment Election Form.  “Investment Election Form” means the form provided to the Participant by the Plan pursuant to Section 4.2 on which the Participant specifies the Investment Funds in which the Participant’s Account(s) are to be deemed to be invested.

 

Section 2.27                   Investment Fund(s).  “Investment Fund(s)” means one or more of the funds selected by the Plan Administrator pursuant to Section 4.2.

 

Section 2.28                   Investment Fund Subaccounts.  “Investment Fund Subaccounts” is defined in Section 6.1(b).

 

Section 2.29                   Matching DCP Deferral.  “Matching DCP Deferral” for a Participant for a Plan Year is an amount equal to the total dollar amount of the Participant’s deferrals for the Plan Year pursuant to Employee Deferral Elections under Section 4.1(b), but in no event shall a Participant’s Matching DCP Deferral for a Plan Year exceed the amount by which (a) the Participant’s Base Compensation for the Plan Year up to the limit on compensation as defined in Code Section 401(a)(17) exceeds (b) the Participant’s Base Compensation for the Plan Year less the total dollar amount deferred pursuant to Employee Deferral Elections under Section 4.1(b) for the Plan Year.

 

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Section 2.30                   Participant.  “Participant” means any Eligible Employee who elects to participate in this Plan by filing a Deferral Election, Investment Fund Election, and Distribution Election as provided in Article IV or is a Transferred Participant or a Post-Distribution Participant.

 

Section 2.31                   Plan.  “Plan” means the AbbVie Deferred Compensation Plan.

 

Section 2.32                   Plan Administrator.  “Plan Administrator” means the Board of Review.

 

Section 2.33                   Plan Year.  “Plan Year” means a twelve-month period beginning January 1 and ending the following December 31.

 

Section 2.34                   Post-Distribution Participant.  “Post-Distribution Participant” means: (a) a Post-Distribution AbbVie Employee (as defined in the EMA) who (i) was an employee of Abbott or its subsidiary as of immediately prior to the Separation (as defined in the Separation Agreement) and is transferred to or hired by AbbVie or its Subsidiary after the Separation (as defined in the Separation Agreement), and (ii) had the liabilities associated with his or her account balances in the Abbott Deferred Compensation transferred to this Plan in accordance with Supplement A; and (b) any other individual on whose behalf liabilities are transferred from the Abbott Deferred Compensation Plan to the Plan in accordance with Supplement A in connection with an employment transfer during the Transition Period (as defined in the EMA).

 

Section 2.35                   Rate of Return.  “Rate of Return” means, for each Investment Fund, an amount equal to the net gain or net loss (expressed as a percentage) on the assets of that Investment Fund.

 

Section 2.36                   Retirement.  “Retirement” means a Termination of Employment after having satisfied the age and service requirements of Subsection (a) or (b) below, as applicable:

 

(a)                                 With respect to Participants covered by the AbbVie Pension Plan (the “Pension Plan”):

 

(i)                                     for any Transferred Participant or Post-Distribution Participant who has an Old Formula Benefit (as defined in the Pension Plan), the date on which the Participant attains age 50 and completes 10 years of “vesting service” (as such term is described in the Pension Plan); or

 

(ii)                                  for any Transferred Participant or Post-Distribution Participant who does not have an Old Formula Benefit (as defined in the Pension Plan) under the Pension Plan and any participant who does not fall into the preceding categories hired by AbbVie on or after the Effective Date, the date on which the Participant attains age 55 and completes 10 years of “vesting service” (as such term is described in the Pension Plan).

 

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(b)                                 With respect to Transferred Participants or Post-Distribution Participants covered by the Abbott Laboratories Pension Plan for Former BASF and Former Solvay Employees, the date on which the Participant attains age 55 and completes 5 years of vesting service (as such term is described in the Abbott Laboratories Pension Plan for Former BASF and Former Solvay Employees).

 

Section 2.37                   Separation Date.  “Separation Date” has the meaning set forth in the Separation Agreement.

 

Section 2.38                   Subsequent Election.  “Subsequent Election” is defined in Section 4.2(a).

 

Section 2.39                   Subsidiary.  “Subsidiary” means any corporation, limited liability company, partnership, joint venture, or business trust organized in the United States 50 percent or more of the voting stock of which is owned, directly or indirectly, by the Company.

 

Section 2.40                   Termination of Employment.  “Termination of Employment” means the cessation of a Participant’s services as an employee, whether voluntary or involuntary, for any reason other than death; provided, that the Participant shall not be considered to have terminated employment for purposes of the Plan until he or she would be considered to have incurred a “separation from service” from the Employer within the meaning of Code Section 409A.

 

Section 2.41                   Transferred Participant.  “Transferred Participant” means an AbbVie Employee (as defined in the EMA), excluding a Post-Distribution AbbVie Employee (as defined in the EMA), who accepts an offer of employment or continues employment with or is transferred to AbbVie or one of its Subsidiaries under the Separation Agreement on or immediately after the Separation Date.

 

Section 2.42                   Unforeseeable Emergency.  “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse or a dependent of the Participant, loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster), or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant as determined by the Plan Administrator.

 

ARTICLE III
  PARTICIPATION

 

Section 3.1                          Participation.

 

(a)                                 Except as provided in Sections 3.1(b) and (c), an Eligible Employee may become a Participant by making a Deferral Election, Investment Fund Election, and Distribution Election pursuant to Article IV on or before the deadline set by the Plan Administrator pursuant to Section 4.4.

 

(b)                                 A newly hired individual who is an Eligible Employee shall become eligible to participate in the Plan on the first day of the month next following the month after the

 

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individual’s date of hire (the “Eligibility Date”); provided that in no event shall such individual begin to participate in the plan later than 90 days following his or her date of hire.  Notwithstanding the election requirements of Section 3.1(a), a newly Eligible Employee who was not eligible to participate in any other plan that would be aggregated with the Plan under Treasury Regulation §1.409A-1(c) may make a Deferral Election, Investment Fund Election and Distribution Election pursuant to Article IV within the 30-day period immediately following the Eligibility Date.  Any such election shall become effective for Eligible Compensation earned no earlier than the first payroll period commencing after receipt of the election by the Plan Administrator and shall be irrevocable for the remainder of the Plan Year.

 

(c)                                  An individual who becomes an Eligible Employee as a result of a job promotion or transfer may make a Deferral Election, Investment Fund Election and Distribution Election pursuant to Article IV only with respect to Eligible Compensation to be earned in the Plan Year next following the year of such promotion or transfer.  Any such election shall be made in accordance with Article IV and shall become effective for Eligible Compensation earned in the Plan Year following the year in which the election is made.

 

(d)                                 Participation of Transferred Participants and Post-Distribution Participants shall be governed by Supplement A.

 

Section 3.2                          Termination of Participation.  A Participant who ceases to be an Eligible Employee due to a Termination of Employment will remain a Participant but (i) may no longer make Deferral Elections with respect to any Plan Year following the year of such termination and (ii) all deferrals under the Plan shall cease as of the date of the Participant’s Termination of Employment.  A Participant who ceases to be an Eligible Employee due to a job promotion (or demotion) may no longer make Deferral Elections with respect to any Plan Year following the year of such promotion or demotion but the Participant’s Deferral Elections for the Plan Year in which such promotion or demotion occurs shall remain irrevocable.  A Participant shall remain a Participant until (i) his or her death or (ii) his or her Accounts have been distributed.

 

ARTICLE IV
  ELECTION FORMS

 

Section 4.1                          Deferral Elections.

 

(a)                                 Participants shall make their Deferral Elections annually on a form provided by the Plan Administrator (a “Deferral Election Form”). Each Deferral Election shall apply to only a single Plan Year.

 

(b)                                 On his or her Deferral Election Form, the Participant shall specify the amount (expressed as a percentage) of his or her Base Compensation and the amount (also expressed as a percentage) of his or her Eligible Bonuses that the Participant elects to defer for that Plan Year together with such other information as the Plan Administrator may, in its sole and absolute discretion, require.

 

(c)                                  For any Plan Year, a Participant may elect to defer:

 

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(i)                                     between five percent (5%) and seventy-five percent (75%) of his or her Base Compensation (in whole percentage increments), and

 

(ii)                                  between five percent (5%) and one hundred percent (100%) of his or her Eligible Bonus(es) (in whole percentage increments);

 

provided, however, that in no event may a Participant elect to defer his or her Eligible Compensation to the extent that his or her remaining compensation would be insufficient to satisfy all applicable withholding taxes and contributions required under Employer-sponsored benefit plans in which the Participant participates.

 

(d)                                 A Participant may not revoke his or her Deferral Election at any time after the deadline for making such Deferral Election set by the Plan Administrator pursuant to Section 4.4.

 

Section 4.2                          Investment Elections.  The Plan Administrator shall, from time to time, make available investment options (the “Investment Funds”) that serve as benchmark funds for the amounts a Participant defers under the Plan.  A Participant’s Plan deferrals shall not actually be invested in the Investment Funds and the Participant shall not be considered a shareholder of any of the Investment Funds he or she selects by virtue of participation in the Plan.  Instead, the Participant’s Plan deferrals shall be considered invested in, and his or her Plan Account shall reflect such Investment Fund’s Rate of Return. A Participant’s election of investments shall be subject to the following rules:

 

(a)                                 Participants shall make their investment elections on an Investment Election Form provided by the Plan Administrator (an “Investment Election”).

 

(b)                                 The Investment Election Form completed by the Participant shall apply only to the Eligible Compensation being deferred in a single Plan Year and shall specify the Investment Funds in which the deferrals for each such Plan Year are to be deemed to be invested, and the portion (expressed in whole percentage increments) of the deferrals for such Plan Year that are to be deemed to be invested in each such Investment Fund, and shall continue in effect until revoked or changed as permitted by the Plan Administrator.

 

Section 4.3                          Distribution Elections.

 

(a)                                 Participants shall make their distribution elections in accordance with the Distribution Election Form provided by the Plan Administrator (a “Distribution Election”) as permitted or required by such form.  Each Distribution Election (the “Initial Election”) shall apply only to the Eligible Compensation being deferred in a single Plan Year and must be made by the deadline set by the Plan Administrator pursuant to Section 4.4, at which time the Initial Election shall be irrevocable, subject to Section 4.3(c).

 

(b)                                 On the Distribution Election Form:

 

(i)                                     Mandatory Retirement Election.  In all cases, the Participant shall select the method of payment from among the methods of payment described in Section 8.3(a) to apply in the event payment is made upon Retirement pursuant to this Distribution Election in

 

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accordance with Sections 8.3 or 8.4 or upon Disability in accordance with Section 8.7.

 

(ii)                                  Optional In-Service Distribution Election.  The Participant shall also have the option to elect that the Eligible Compensation being deferred for that Plan Year shall be paid to the Participant while he or she is still employed by an Employer (an “In-Service Distribution”).  If the Participant elects to receive an In-Service Distribution of the Eligible Compensation being deferred, then the Participant shall also select the year in which the payments are to be made.  A Participant may not elect to receive an In-Service Distribution in a Plan Year that is less than two (2) years after the end of the Plan Year in which the Eligible Compensation is earned.

 

(c)                                  Notwithstanding anything to the contrary in Section 4.3, a Participant may change the form of distribution or his or her Distribution Election (a “Subsequent Election”) to the extent permitted by the Plan Administrator and Code Section 409A(a)(4)(C), including the requirements that such Subsequent Election:

 

(i)                                     shall not take effect until at least 12 months after the date on which the Subsequent Election is filed with the Plan Administrator;

 

(ii)                                  shall result in the first distribution subject to such Subsequent Election being made at least five years after the date such distribution would otherwise have been paid pursuant to the previous election; and

 

(iii)                               shall be filed with the Plan Administrator at least 12 months before the date the first scheduled distribution is to be paid pursuant to the previous election.

 

Section 4.4                          Deadline for Submitting Election Forms.  The Plan Administrator may set a deadline or deadlines for the receipt of the election forms required under the Plan; provided, however, that, except as provided in Section 3.1(b), such forms must be filed on or before the end of the year immediately preceding the Plan Year for which it is to be effective.

 

ARTICLE V
  EMPLOYER CONTRIBUTIONS

 

Section 5.1                          Employer Contributions.  Each Participant who makes a Deferral Election will be credited with an Employer Contribution equal to 5% of the Participant’s Matching DCP Deferral.  The Plan Administrator may, however, in his or her discretion, otherwise set the amount of the Employer Contribution, subject to and not in excess of applicable limits imposed by the Internal Revenue Service.

 

Section 5.2                          Allocation of Employer Contributions.  A Participant’s Employer Contribution for a Plan Year shall be allocated among the same Investment Funds and in the same proportion as the Participant has elected for his or her deferrals for that Plan Year.

 

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Section 5.3                          Distribution of Employer Contributions.  An Employer Contribution for a Plan Year shall be distributed to the Participant according to the election made by the Participant governing his or her deferrals for that same Plan Year.

 

ARTICLE VI
  MAINTENANCE AND CREDITING OF ACCOUNTS

 

Section 6.1                          Maintenance of Accounts.

 

(a)                                 The Plan shall maintain a separate Account for each Deferral Election (a “Deferral Account”) made by a Participant and each Employer Contribution (an “Employer Contribution Account”) made for a Participant.  A Participant’s Accounts shall reflect the Participant’s Investment Fund Elections and Distribution Elections made pursuant to Article IV, any Employer Contributions made on behalf of the Participant pursuant to Article V, adjustments to the Account made pursuant to this Article VI, and distributions made with respect to the Account pursuant to Article VIII.  The Accounts shall be used solely as a device for the measurement and determination of the amounts to be paid to the Participants pursuant to this Plan and shall not constitute or be treated as a trust fund of any kind.

 

(b)                                 Each Account shall be divided into separate subaccounts (“Investment Fund Subaccounts”), each of which corresponds to the Investment Fund selected by the Participant pursuant to Section 4.2(b).

 

Section 6.2                          Crediting of Accounts.

 

(a)                                 No later than five (5) business days following the end of each pay period, the Plan shall credit each Participant’s Investment Fund Subaccounts to reflect amounts deferred from the Participant’s Eligible Compensation during that pay period and the Investment Fund Election made by the Participant with respect to that Eligible Compensation.

 

(b)                                 At the end of each Plan Year, the Plan shall credit each Participant’s Investment Fund Subaccounts to reflect any Employer Contribution deemed to have been made on behalf of the Participant for that Plan Year and the allocation of that contribution among the Investment Funds pursuant to Section 4.2.

 

(c)                                  The Plan Administrator shall adjust each Investment Fund Subaccount to reflect any transfers under the Plan to or from that Investment Fund Subaccount, as of the end of each business day to reflect any distributions under the Plan made with respect to that Investment Fund Subaccount, and the Rate of Return on the related Investment Fund.

 

Section 6.3                          Statement of Accounts.  Each Participant shall be issued quarterly statements of his or her Account(s) in such form as the Plan Administrator deems desirable, setting forth the balance to the credit of such Participant in his or her Account(s) as of the end of the most recently completed quarter.

 

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ARTICLE VII
  VESTING AND FORFEITURES

 

Section 7.1                          Deferral Accounts.  A Participant’s Deferral Accounts shall be one hundred percent (100%) vested and non-forfeitable at all times.

 

Section 7.2                          Employer Contribution Account.

 

(a)                                 A Participant’s Employer Contribution Account shall become one hundred percent (100%) vested and non-forfeitable when the matching contributions made by the Participant’s Employer on behalf of the Participant under the Employer Savings Plan in which the Participant participates become one hundred percent (100%) vested and non-forfeitable.

 

(b)                                 If a Participant’s employment with the Employers terminates (whether voluntarily or involuntarily) before the matching contributions made by the Participant’s Employer on behalf of the Participant under the Employer Savings Plan in which the Participant participates become one hundred percent (100%) vested and non-forfeitable, then the Participant shall forfeit his or her related Employer Contribution Account.

 

ARTICLE VIII
  DISTRIBUTION OF BENEFITS

 

Section 8.1                          Distribution of Benefits in the Event of a Termination of Employment.  If a Participant elects to receive his or her Plan benefits as an In-Service Distribution, then in the event of that Participant’s Termination of Employment (other than due to Retirement) prior to receiving that In-Service Distribution, the Company shall pay that Participant’s Plan benefits in a lump-sum to the Participant within 90 days following his or her Termination of Employment.  If a Participant elects to receive his or her Plan benefits upon Retirement, then in the event of that Participant’s Termination of Employment prior to the date the Participant attains eligibility for Retirement, the Company shall pay that Participant’s Plan benefits in a lump-sum to the Participant within 90 days following his or her Termination of Employment.

 

Section 8.2                          In-Service Distributions.  Subject to the provisions of Section 8.6, the Company shall pay In-Service Distributions in a lump-sum to the Participant on the first business day in February of the year designated by the Participant on his or her Distribution Election Form.

 

Section 8.3                          Distribution of Benefits in the Event of Retirement.

 

(a)                                 If, pursuant to Section 4.3, a Participant has elected to receive his or her Plan benefits for a Plan Year upon his or her Retirement, then the Company shall pay the Participant his or her Plan benefits commencing on the first business day in February next following the date of the Participant’s Retirement in any of the following forms pursuant to the Participant’s Initial Election or Subsequent Election, as applicable:

 

(i)                                     in substantially equal quarterly or annual installments to the Participant over fifteen (15) years; or

 

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(ii)                                  in substantially equal quarterly or annual installments to the Participant over ten (10) years; or

 

(iii)                               in substantially equal quarterly or annual installments to the Participant over five (5) years; or

 

(iv)                              in a lump-sum; or

 

(v)                                 if no such election is on file with the Plan Administrator, in substantially equal quarterly installments to the Participant over ten (10) years.

 

Quarterly installments shall be paid on the first business day of each calendar quarter and annual installments shall be paid on the first business day of each calendar year.

 

(b)                                 Notwithstanding the provisions of Section 8.3(a), in the event that, as of the date of the Participant’s Retirement, the Participant’s benefits under the Plan do not exceed, in the aggregate, $15,500, the Participant’s benefits shall be paid to the Participant in a lump-sum.

 

Section 8.4                          Distribution of Benefits on the Earlier to Occur of a Participant’s Retirement or a Specified Date.

 

If a Participant has elected to receive his or her Plan benefits on a specified date pursuant to Section 4.3(b)(ii), if the Participant’s Retirement occurs prior to such specified date,

 

(a)                                 For amounts deferred for a Transferred Participant or a Post-Distribution Participant with respect to Plan Years beginning prior to January 1, 2008, the Company shall pay the Transferred Participant or the Post-Distribution Participant his or her Plan benefits in a lump sum on the first business day in February next following the Participant’s Retirement; and

 

(b)                                 For amounts deferred for a Transferred Participant or a Post-Distribution Participant with respect to Plan Years beginning on or after January 1, 2008, and for amounts deferred for a Participant hired by an Employer on or after the Effective Date of the Plan, the Company shall pay the Participant his or her Plan benefits in accordance with Section 8.3(a), subject to Section 8.3(b).

 

Section 8.5                          Distributions Due to Unforeseeable Emergency.

 

(a)                                 A Participant may receive the early payment of all or part of the balance in his or her Account(s) in the event of an Unforeseeable Emergency (a “Hardship Distribution”) subject to the following restrictions:

 

(i)                                     The Participant has requested the Hardship Distribution from the Plan Administrator on a form provided by or in the format requested by the Plan Administrator;

 

(ii)                                  The Plan Administrator has determined that an Unforeseeable Emergency has occurred;

 

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(iii)                               The Plan Administrator determines the amount of the Hardship Distribution, which amount will be limited to the amount reasonably necessary to satisfy the emergency need (including any amounts necessary to pay any Federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the Hardship Distribution); and

 

(iv)                              The Hardship Distribution shall be distributed in a lump-sum within 30 days following determination by the Plan Administrator of the amount of the Hardship Distribution.

 

(b)                                 The circumstances that would constitute a Unforeseeable Emergency will depend on the facts and circumstances of each case, but, in any case, a Hardship Distribution may not be made to the extent that such hardship may be relieved through (i) reimbursement or compensation by insurance or otherwise, (ii) liquidation of the Participant’s assets, to the extent that liquidation of the Participant’s assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under this Plan in compliance with Code Section 409A.

 

Section 8.6                          Distribution of Benefits in the Event of Death.  In the event of a Participant’s death prior to the complete distribution of his or her Accounts, the Company shall distribute his or her total Plan benefits to his or her Beneficiary in a lump sum within 90 days after the date of the Participant’s death.

 

Section 8.7                          Distribution of Benefits in the Event of Disability.  In the event of a Participant’s Disability, the Company shall pay the Participant his or her Plan benefits commencing on the first business day in February next following the date of the Participant’s Disability in the form set forth below:

 

(a)                                 For any Participant who has elected to receive his or her Plan benefits upon Retirement, pursuant to the Participant’s Distribution Election to receive his or her Plan benefits in one of the Retirement forms permitted under Section 8.3(a), subject to Section 8.3(b).

 

(b)                                 For a Participant who has elected to receive his or her Plan benefits as an In-Service Distribution, if the Participant’s Disability occurs prior to the date specified in such Distribution Election:

 

(i)                                     For amounts deferred for a Transferred Participant or a Post-Distribution Participant with respect to Plan Years beginning on or subsequent to January 1, 2008, or for amounts deferred for a Participant hired by an Employer on or after the Effective Date of the Plan, pursuant to the Participant’s Distribution Election to receive his or her Plan benefits in one of the Retirement forms permitted under Section 8.3(a), subject to Section 8.3(b).

 

(ii)                                  For amounts deferred for a Transferred Participant or a Post-Distribution Participants with respect to all Plan Years beginning prior to January 1, 2008, pursuant to the Participant’s Distribution Election to receive his or her Plan benefits in a lump sum under Section 4.3(b)(ii).

 

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Section 8.8                          Postponing or Amending Distributions.  A Participant may postpone a scheduled distribution or amend the form of distribution specified in Section 8.2,  Section 8.3(a) or Section 8.4 only by making a Subsequent Election pursuant to the terms of Section 4.3(c).

 

Section 8.9                          Distribution of Benefits Pursuant to a Domestic Relations Order.  The Company shall pay all or a portion of a Participant’s Plan benefits in a lump sum to any person other than the Participant pursuant to the terms of a domestic relations order.  For this purpose, a domestic relations order means a judgment, decree or order (including approval of a property settlement agreement) which relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of the Participant and which is made pursuant to a state domestic relations law (including a community property law).

 

ARTICLE IX
  BENEFICIARY DESIGNATION

 

Section 9.1                          Beneficiary Designation.  Each Participant shall have the right, at any time, to designate any person, persons or entity as his or her Beneficiary or Beneficiaries. A Beneficiary designation shall be made, and may be amended, by the Participant by filing a designation with the Plan Administrator, on such form and in accordance with such procedures as the Plan Administrator may establish from time to time.

 

Section 9.2                          Failure to Designate a Beneficiary.  If a Participant or Beneficiary fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or his or her Beneficiary, then the Participant’s Beneficiary shall be deemed to be, in the following order:

 

(i)                                     to the spouse of such person, if any; or

 

(ii)                                  to the deceased person’s estate.

 

Section 9.3                          Facility of Payment.  When, in the Plan Administrator’s opinion, a Participant or Beneficiary is under a legal disability or is incapacitated in any way so as to be unable to manage his or her financial affairs, the Plan Administrator may make any benefit payments to the Participant or Beneficiary’s legal representative, or spouse, or the Plan Administrator may apply the payment for the benefit of the Participant or Beneficiary in any way the Plan Administrator considers advisable, in each case, without subjecting the Participant or Beneficiary to accelerated taxation and/or tax penalties under Code Section 409A.

 

ARTICLE X
  ADMINISTRATION OF PLAN

 

Section 10.1                   Plan Administrator.  The Board of Review, or such person as the Board of Review shall designate pursuant to Section 10.3,  shall serve as the Plan Administrator of the Plan. The administration of the Plan shall be under the supervision of the Plan Administrator. It shall be a principal duty of the Plan Administrator to see that the Plan is carried out, in accordance with its terms, for the exclusive benefit of persons entitled to participate in the Plan without discrimination  among them. Benefits under the Plan shall be

 

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paid only if the Plan Administrator decides, in his or her discretion, that the applicant is entitled to them. The Plan Administrator will have full power to administer the Plan in all of its details, subject to applicable requirements of law. For this purpose, the Plan Administrator’s powers will include but will not be limited to, the following authority, in addition to all other powers provided by this Plan:

 

(i)                                     To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the establishment of any claims procedures that may be required by applicable provisions of law;

 

(ii)                                  To exercise discretion in interpreting the Plan, any interpretation to be reviewed under the arbitrary and capricious standard;

 

(iii)                               To exercise discretion in deciding all questions concerning the Plan and the eligibility of any person to participate in the Plan; such decision to be reviewed under the arbitrary and capricious standard;

 

(iv)                              To appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan;

 

(v)                                 To allocate and delegate its responsibilities under the Plan and to designate other persons to carry out any of its responsibilities under the Plan, any such allocations, delegation or designation to be in writing;

 

(vi)                              To determine the amount and type of benefits to which any Participant or Beneficiary shall be entitled hereunder, including the method and date for all valuations under the Plan;

 

(vii)                           To receive from the Employers and from Participants such information as shall be necessary for the proper administration of the Plan or any of its programs;

 

(viii)                        To maintain or cause to be maintained all the necessary records for the administration of the Plan;

 

(ix)                              To receive, review and keep on file (as it deems convenient and proper) reports of benefit payments made by the Plan;

 

(x)                                 To determine and allocate among the Employers the liability to the Company associated with Plan benefits in accordance with Section 1.4 and to determine the time at which and manner in which that liability shall be paid to the Company;

 

(xi)                              To make, or cause to be made, equitable adjustments for any mistakes or errors made in the administration of the Plan; and

 

(xii)                           To do all other acts which the Plan Administrator deems necessary or proper to accomplish and implement its responsibilities under the Plan.

 

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Section 10.2                   Reliance on Tables, etc.  In administering the Plan, the Plan Administrator will be entitled to the extent permitted by law to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by, or in accordance with the instructions of accountants, counsel, or other experts employed or engaged by the Plan Administrator.

 

Section 10.3                   Delegation.  The Board of Review shall have the authority to appoint another corporation or one or more other persons to serve as the Plan Administrator hereunder, in which event such corporation or person(s) shall exercise all of the powers, duties, responsibilities, and obligations of the Plan Administrator hereunder.

 

Section 10.4                   Operations.  The day to day operation of the Plan will be handled by the person(s) designated by the Plan Administrator.

 

Section 10.5                   Uniform Rules.  The Plan Administrator shall administer the Plan on a reasonable and nondiscriminatory basis and shall apply uniform rules to all similarly situated Participants.

 

Section 10.6                   Plan Administrator’s Decisions Final.  Any interpretation of the provisions of the Plan (including, but not limited to, the provisions of any of its programs) and any decision on any matter within the discretion of the Plan Administrator made by the Plan Administrator in good faith shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known and the Plan Administrator shall make such adjustment on account thereof as it considers equitable and practicable. Neither the Plan Administrator nor any Employer shall be liable in any manner for any determination of fact made in good faith.

 

ARTICLE XI
  CLAIMS FOR BENEFITS

 

Section 11.1                   Claims and Review Procedures.  The Plan Administrator shall adopt procedures for the filing and review of claims in accordance with Section 503 of ERISA.

 

ARTICLE XII
  AMENDMENT AND TERMINATION OF PLAN

 

Section 12.1                   Amendment.  The Company may amend this Plan, in whole or in part, at any time provided, however, that no amendment shall be effective to decrease the balance in any Account as accrued at the time of such amendment.  Any amendment which would allow officers of the Company to participate in the Plan shall require the approval of the AbbVie Inc. Board of Directors.  Any amendment which increases the total cost of the Plan to the Employers in excess of $250,000 in each of the three full calendar years next following the date of the amendment shall be approved by the Board of Review.  The Senior Vice President, Human Resources of the Company (or the individual holding equivalent duties and responsibilities) shall approve all other amendments to the Plan and the extension of the Plan to any division or Subsidiary of the Company.

 

Section 12.2                   Termination.  The Board of Review may at any time terminate the Plan with respect to future Deferral Elections.  The Board of Review may also

 

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terminate and liquidate the Plan in its entirety; provided that such termination and liquidation are consistent with the provisions of Code Section 409A.  Upon any such termination, the Company shall pay to the Participant the benefits the Participant is entitled to receive under the Plan, determined as of the termination date, in compliance with Code Section 409A.

 

ARTICLE XIII
  MISCELLANEOUS

 

Section 13.1                   Unfunded Plan.  This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201, 301 and 401 of ERISA and therefore meant to be exempt from Parts 2, 3 and 4 of Title I of ERISA.  All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan.

 

Section 13.2                   Nonassignability.  Except as specifically set forth in the Plan with respect to the designation of Beneficiaries, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

 

Section 13.3                   Validity and Severability.  The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 13.4                   Governing Law.  The validity, interpretation, construction and performance of this Plan shall in all respects be governed by the laws of the State of Illinois, without reference to principles of conflict of law, except to the extent preempted by federal law.

 

Section 13.5                   Employment Status.  This Plan does not constitute a contract of employment or impose on the Participant or the Company any obligation for the Participant to remain an employee of the Company or change the status of the Participant’s employment or the policies of the Company and its affiliates regarding termination of employment.

 

Section 13.6                   Underlying Compensation and Incentive Plans and Programs.  Nothing in this Plan shall prevent the Company from modifying, amending or terminating the compensation or the incentive plans and programs pursuant to which Eligible Bonuses or Eligible Compensation are earned and which are deferred under this Plan.

 

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Section 13.7                   Successors of the Company.  The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.

 

Section 13.8                   Waiver of Breach.  The waiver by the Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

 

Section 13.9                   Notice.  Any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of the Company, directed to the attention of the Plan Administrator. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.

 

Section 13.10                        Waiver of Notice.  Any notice required under the Plan may be waived by the person entitled to such notice.

 

Section 13.11                        Evidence.  Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

 

Section 13.12                        Additional Employers.  Subject to the consent of the Board of Review, any Subsidiary of the Company may adopt the Plan by filing a written instrument to that effect with the Company.

 

Section 13.13                        Section 409A.  To the extent applicable, it is intended that the Plan comply with the provisions of Code Section 409A.  The Plan will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Plan to fail to satisfy Code Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Code Section 409A).  Notwithstanding anything contained herein to the contrary, to the extent required to avoid accelerated taxation and/or tax penalties under Code Section 409A and applicable guidance issued thereunder, amounts that would otherwise be payable pursuant to the Plan  during the six-month period immediately following the Participant’s Termination of Employment or Retirement shall instead be paid on the first business day after the date that is six months following the Participant’s Termination of Employment or Retirement (or upon the Participant’s death, if earlier), plus, to the extent subject to a six-month delay, a return equal to the Rate of Return that would be achieved if such amounts were invested in accordance with the Participant’s Investment Elections under Section 4.2 from the respective dates on which such amounts would otherwise have been paid until the actual date of payment.

 

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SUPPLEMENT A

 

TRANSFER OF LIABILITIES FROM THE

ABBOTT LABORATORIES DEFERRED COMPENSATION PLAN

 

A-1.                         Purpose and Effect.  The purpose of this Supplement A is to provide for the transfer of liabilities from the Abbott Laboratories Deferred Compensation Plan (the “Abbott DCP”) to this Plan with respect to Transferred Participants and Post-Distribution Participants as set forth in the EMA.

 

A-2.                         Eligibility, Service and Compensation.  Transferred Participants and Post-Distribution Participants shall (a) be eligible to participate in this Plan to the extent they were eligible to participate in the Abbott DCP as of the applicable Transfer Date (as defined in the EMA), and (b) receive credit for vesting and eligibility for all service credited for those purposes under the Abbott DCP as of the Transfer Date (as defined in the EMA) as if that service had been rendered to AbbVie (provided that in the event that any such Transferred Participant or Post-Distribution Participant receives a distribution from the Abbott DCP, the value of such distribution shall be offset against future benefits under the this Plan to the extent necessary to prevent a duplication of benefits).  The compensation paid by Abbott and its subsidiaries to a Transferred Participant or a Post-Distribution Participant that was recognized under the Abbott DCP as of the Transfer Date (as defined in the EMA) shall be credited and recognized for all applicable purposes under this Plan as though it were compensation from AbbVie or its Subsidiaries.

 

A-3.                         Matching DCP Deferral.  For purposes of determining a Transferred Participant’s or a Post-Distribution Participant’s Matching DCP Deferrals for the Plan Year in which such participant becomes eligible to participate in the Plan, such participant’s deferrals and Base Compensation under the Plan shall be prorated.

 

A-4.                         Employer Contributions.  For purposes of determining the Employer Contribution under Section 5.1 for the Plan Year in which a Transferred Participant or a Post-Distribution Participant becomes eligible to participate in the Plan, such participant’s Matching DCP Deferrals made under the Abbott DCP shall not be taken into account.

 

A-5.                         Initial Transfer of Liabilities from Abbott DCP.  As soon as practicable after the Separation Date, and subject to such terms and conditions as the Plan Administrator may establish, all liabilities attributable to Transferred Participants shall be transferred from the Abbott DCP to this Plan.  The Plan shall credit each such Transferred Employee’s account with (a) the amount deferred by such individual into the Abbott DCP as of the applicable Transfer Date, plus (b) any employer contributions, whether vested or unvested, deemed to have been made in relation to the amount described in (a), including, in each case, any earnings thereon.

 

A-6.                         Deferral and Distribution Elections.  The Plan shall recognize, implement and honor all deferral and distribution elections made by each Transferred Participant under the Abbott DCP (including, but not limited to, any election to defer any bonus earned during 2012 but paid in 2013).

 

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A-7.                         Subsequent Transfers.  At such time or times as the Plan Administrator and Abbott (or its delegate) shall agree, and subject to such terms and conditions as the Plan Administrator may establish, all liabilities attributable to Post-Distribution Participants shall be transferred from the Abbott DCP to this Plan.  The Plan shall credit each such Post-Distribution Participant’s account with (a) the amount deferred by such individual into the Abbott DCP as of the applicable Transfer Date, plus (b) any employer contributions, whether vested or unvested, deemed to have been made in relation to the amount described in (a), including, in each case, any earnings thereon.

 

A-8.                         Deferral and Distribution Elections — Post-Distribution Participants.  Post-Distribution Participants are required to make new elections under the Plan upon hire or transfer to AbbVie or its subsidiaries in accordance with Section 3.1(b).  Distribution elections made under the Abbott DCP with respect to transferred amounts described in A-7 above shall be recognized, implemented and honored by the Plan and such amounts shall be immediately distributable to such Post-Distribution Participants in accordance with such elections.  Distribution elections with respect to amounts deferred under this Plan on or after the Effective Date shall be in accordance with Section 4.3 and other applicable provisions of this Plan.

 

A-9.                         Use of Terms.  Terms used in this Supplement A have the meanings of those terms as set forth in the Plan, unless they are defined in this Supplement A.  All of the terms and provisions of the Plan shall apply to this Supplement A except that where the terms of the Plan and this Supplement A conflict, the terms of this Supplement A shall govern.

 

2Exhibit 10.17

 

ABBVIE NON-EMPLOYEE DIRECTORS’ FEE PLAN

 

(Effective as of January 1, 2013)

 

 

ABBVIE

NON-EMPLOYEE DIRECTORS’ FEE PLAN

 

SECTION 1.
 PURPOSE

 

This AbbVie Non-Employee Directors’ Fee Plan (the “Plan”) is hereby established by AbbVie Inc. (the “Company”) to attract and retain as members of its Board of Directors persons who are not full-time employees of the Company or any of its subsidiaries but whose business experience and judgment are valuable assets to the Company and its subsidiaries.

 

SECTION 2.
 DIRECTORS COVERED

 

As used in the Plan, the term “Director” means any person serving on the Board of Directors of the Company on January 1, 2013 (the “Effective Date”) or at any time thereafter, who is not a full-time employee of the Company or any of its subsidiaries.

 

SECTION 3.
  FEES PAYABLE TO DIRECTORS

 

3.1                               Each Director shall be entitled to a deferred monthly fee of Ten Thousand Five Hundred Dollars ($10,500.00) for each calendar month or portion thereof (excluding the month in which he is first elected a Director) that he holds such office with the Company.

 

3.2                               A Director who serves as Chairman of the Executive Committee of the Board of Directors shall be entitled to a deferred monthly fee of One Thousand Six Hundred Dollars ($1,600.00) for each calendar month or portion thereof (excluding the month in which he is first elected to such position) that he holds such position.

 

3.3                               Audit Committee Fees

 

(a)                                 A Director who serves as Chairman of the Audit Committee of the Board of Directors shall be entitled to a deferred monthly fee of One Thousand Five Hundred Dollars ($1,500.00) for each calendar month or portion thereof (excluding the month in which he is first elected to such position) that he holds such position.

 

(b)                                 Each Director who serves on the Audit Committee of the Board of Directors (other than the Chairman of the Audit Committee) shall be entitled to a deferred monthly fee of  Five Hundred Dollars ($500.00) for each calendar month or portion thereof (excluding the month in which he is first elected to such position) that he holds such position.

 

3.4                               A Director who serves as Chairman of the Compensation Committee of the Board of Directors shall be entitled to a deferred monthly fee of One Thousand Dollars ($1,000.00) for each calendar month or portion thereof (excluding the month in which he is first elected to such position) that he holds such position.

 

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3.5                               A Director who serves as Chairman of the Nominations Committee of the Board of Directors shall be entitled to a deferred monthly fee of One Thousand Dollars ($1,000.00) for each calendar month or portion thereof (excluding the month in which he is first elected to such position) that he holds such position.

 

3.6                               A Director who serves as Chairman of any other Committee created by this Board of Directors shall be entitled to a deferred monthly fee of One Thousand Dollars ($1,000.00) for each calendar month or portion thereof (excluding the month in which he is first elected to such position) that he holds such position.

 

3.7                               A Director’s Deferred Fee Account shall be credited with interest annually. The rate of interest credited to deferred fees shall be equal to: (a) the average of the “prime rate” of interest set forth on the Bloomberg Screen BTMM or comparable successor quotation service on the first business day of January and the last business day of each month of the fiscal year; plus (b) two hundred twenty-five (225) basis points.  For purposes of this provision, the term “deferred fees” shall include “deferred monthly fees,” and “deferred meeting fees,” and shall also include any such interest credited thereon.

 

3.8                               For purposes of Sections 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6, the automatic deferral of the fees specified therein shall be subject to a Director’s election to receive such fees currently pursuant to Section 4.1 or Section 8.1 of the Plan.

 

SECTION 4.
 PAYMENT OF DIRECTORS’ FEES

 

4.1                               Any Director may, by written notice filed with the Secretary of the Company no later than December 31 in a calendar year, elect to receive current payment of all or any portion of the monthly and meeting fees earned by him in calendar years subsequent to the calendar year in which he files such notice, in which case such fees shall not be deferred but shall be paid quarterly as earned and no interest shall be credited thereon.  Such election shall be irrevocable as of December 31 of the year prior to the year in which the fees will be earned.

 

Notwithstanding the timing requirements described above, an individual who is newly elected as a Director may make the election described above by filing it with the Secretary of the Company within the thirty (30) day period immediately following the date he or she first becomes a Director eligible to participate in the Plan (and all plans that would be aggregated with the Plan pursuant to Treasury Regulation §1.409A-1(c)(2)(i)), provided that the compensation subject to such election relates solely to services performed after the date of such election and provided, further, that such election shall become irrevocable on the thirtieth day following the date he or she first becomes a Director eligible to participate in the Plan.  In no event shall the fees subject to an election under this Section 4.1 be paid later than the last day of the “applicable 21⁄2 month period,” as such term is defined in Treasury Regulation §1.409A-1(b)(4)(i)(A).  Any Director who has previously provided notice pursuant to this Section 4.1 may, by written notice filed with the Secretary of the Company no later than December 31 in a calendar year, elect to defer payment of all or a portion of the monthly and meeting fees earned by him in calendar years subsequent to the year in which he files such notice, in which case such fees shall be paid to him in accordance with Section 4.2 below.

 

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4.2                               A Director’s deferred fees earned pursuant to the Plan shall commence to be paid on the first day of the calendar month next following the earlier of his death or his attainment of age sixty-five (65) if he is not then serving as a Director, or the termination of his service as a Director if he serves as a Director after the attainment of age sixty-five (65).

 

4.3                               A Director’s deferred fees that have commenced to be payable pursuant to Section 4.2 shall be payable in annual installments in the order in which they shall have been deferred (i.e., the deferred fees and earnings thereon for the earliest year of service as a Director will be paid on the date provided for in Section 4.2, the deferred fees for the next earliest year of service as a Director will be paid on the anniversary of the payment of the first installment, etc.).

 

4.4                               A Director’s deferred fees shall continue to be paid until all deferred fees which he is entitled to receive under the Plan shall have been paid to him (or, in case of his death, to his beneficiary).

 

4.5                               If a Director incurs a termination of service as a Director within two (2) years following the occurrence of a Change in Control (as defined below), the aggregate unpaid balance of such Director’s deferred fees plus all unpaid interest credited thereon shall be paid to such Director in a lump sum within thirty (30) days following the date of such termination of service; provided, however, that if such Change in Control does not constitute a “change in control event” (as defined in Treasury Regulation §1.409A-3(i)(5)), then the aggregate unpaid balance of such Director’s deferred fees shall be paid in accordance with Sections 4.2 and 4.3.

 

Notwithstanding any other provision of the Plan, if a Director has made the alternative election set forth in Section 8.1, and if such Director incurs a termination of service as a Director within five (5) years following the occurrence of a Change in Control, the aggregate unpaid balance of such Director’s fees deposited to the Director’s Grantor Trust (as defined below) plus all unpaid interest credited thereon, shall be paid to such Director from the Director’s Grantor Trust in a lump sum within thirty (30) days following the date of such termination of service.

 

4.6                               A “Change in Control” shall be deemed to have occurred on the earliest of the following dates:

 

(a)                                 the date any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing 20% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (c) below; or

 

(b)                                 the date the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board of Directors and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board of Directors or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on

 

3

 

the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; or

 

(c)                                  the date on which there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity, other than (i) a merger or consolidation (A) immediately following which the individuals who comprise the Board of Directors immediately prior thereto constitute at least a majority of the Board of Directors of the Company, the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger or consolidation is then a subsidiary, the ultimate parent thereof and (B) which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 20% or more of the combined voting power of the Company’s then outstanding securities; or

 

(d)                                 the date the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company, in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, in substantially the same proportions as their ownership of the Company immediately prior to such sale.

 

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have  substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.

 

For purposes of this Plan: “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act; “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act; “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time; and “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or

 

4

 

any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

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

 

(a)                                 The Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided that a Potential Change in Control described in this paragraph (a) shall cease to exist upon the expiration or other termination of all such agreements.

 

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

 

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

 

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

 

4.8                               The provisions of Sections 4.5, 4.6, 4.7 and this Section 4.8 may not be amended or deleted, nor superseded by any other provision of this Plan, (i) during the pendency of a Potential Change in Control and (ii) during the period beginning on the date of a Change in Control and ending on the date five (5) years following such Change in Control.

 

SECTION 5.
 CONVERSION TO COMMON STOCK UNITS

 

5.1                               Any Director who is then serving as a director may, by written notice filed with the Secretary of the Company, irrevocably elect to have all or any portion of deferred fees previously earned but not yet paid, transferred from the Director’s Deferred Fee Account to a stock account established under this Section 5 (“Stock Account”). Any election as to a portion of such fees shall be expressed as a percentage and the same percentage shall be applied to all such fees regardless of the calendar year in which earned or to all deferred fees earned in designated calendar years, as specified by the Director. A Director may make no more than one notional

 

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investment election under this Section 5.l in any calendar year. All such elections may apply only to deferred fees for which an election has not previously been made and shall be irrevocable.

 

5.2                               Any Director may, by written notice filed with the Secretary of the Company, elect to have all or any portion of deferred fees earned subsequent to the date such notice is filed credited to a Stock Account established under this Section 5. Fees covered by such election shall be credited to such account at the end of each calendar quarter in, or for which, such fees are earned. Such election may be revoked or modified by such Director, by written notice filed with the Secretary of the Company, as to deferred fees to be earned in calendar years subsequent to the calendar year such notice is filed, but shall be irrevocable as to deferred fees earned prior to such year.

 

5.3                               Deferred fees credited to a Stock Account under Section 5.1 shall be converted to Common Stock Units by dividing the deferred fees so credited by the closing price of common stock of the Company on the date the notice of election under Section 5 is received by the Company (or the next business day, if there are no sales on such date) as reported on the New York Stock Exchange Composite Reporting System. Deferred fees credited to a Stock Account under Section 5.2 shall be converted to Common Stock Units by dividing the deferred fees so credited by the closing price of common stock of the Company as of the last business day of the calendar quarter for which the credit is made, as reported on the New York Stock Exchange Composite Reporting System.

 

5.4                               Each Common Stock Unit shall be credited with (or adjusted for) the same cash and stock dividends, stock splits and other distributions and adjustments as are received by or applicable to one share of common stock of the Company. All cash dividends and other cash distributions credited to Common Stock Units shall be converted to additional Common Stock Units by dividing each such dividend or distribution by the closing price of common stock of the Company on the payment date for such dividend or distribution, as reported by the New York Stock Exchange Composite Reporting System.

 

5.5                               The value of the Common Stock Units credited each Director shall be paid to the Director in cash on the dates specified in Section 4.3 (or, if applicable, Section 4.5). The amount of each payment shall be determined by multiplying the Common Stock Units payable on each date specified in Section 4.3 (or, if applicable, Section 4.5) by the closing price of common stock of the Company on the day prior to the payment date (or the next preceding business day if there are no sales on such date), as reported by the New York Stock Exchange Composite Reporting System.

 

SECTION 6.
 MISCELLANEOUS

 

6.1                               Each Director or former Director entitled to payment of deferred fees hereunder, from time to time may name any person or persons (who may be named contingently or successively) to whom any deferred Director’s fees earned by him and payable to him are to be paid in case of his death before he receives any or all of such deferred Director’s fees.  Each designation will revoke all prior designations by the same Director or former Director, shall be in a form prescribed by the Company, and will be effective only when filed by the Director or former Director in writing with the Secretary of the Company during his lifetime. If a deceased

 

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Director or former Director shall have failed to name a beneficiary in the manner provided above, or if the beneficiary named by a deceased Director or former Director dies before him or before payment of all the Director’s or former Director’s deferred Directors’ fees, the Company, in its discretion, may direct payment of the remaining installments required by Section 4.3 to either:

 

(a)                                 any one or more or all of the next of kin (including the surviving spouse) of the Director or former Director, and in such proportions as the Company determines; or

 

(b)                                 the legal representative or representatives of the estate of the last to die of the Director or former Director and his last surviving beneficiary.

 

The person or persons to whom any deceased Director’s or former Director’s deferred Directors’ fees are payable under this Section will be referred to as his “beneficiary.”

 

6.2                               Establishment of the Plan and coverage thereunder of any person shall not be construed to confer any right on the part of such person to be nominated for reelection to the Board of Directors of the Company, or to be reelected to the Board of Directors.

 

6.3                               Payment of deferred Directors’ fees will be made only to the person entitled thereto in accordance with the terms of the Plan, and deferred Directors’ fees are not in any way subject to the debts or other obligations of persons entitled thereto, and may not be voluntarily or involuntarily sold, transferred or assigned. When a person entitled to a payment under the Plan is under legal disability or, in the Company’s opinion, is in any way incapacitated so as to be unable to manage his financial affairs, the Company may direct that payment be made to such person’s legal representative, or to a relative or friend of such person for his benefit. Any payment made in accordance with the preceding sentence shall be in complete discharge of the Company’s obligation to make such payment under the Plan.

 

6.4                               Any action required or permitted to be taken by the Company under the terms of the Plan shall be by affirmative vote of a majority of the members of the Board of Directors then in office.

 

6.5                               To the extent applicable, it is intended that the Plan comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”).  The Plan will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Plan to fail to satisfy Code Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Code Section 409A).  Notwithstanding anything contained herein to the contrary, for all purposes of this Plan, a Director shall not be deemed to have had a termination of service as a Director until the Director has incurred a separation from service as defined in Treasury Regulation §1.409A-1(h) and, to the extent required to avoid accelerated taxation and/or tax penalties under Code Section 409A and applicable guidance issued thereunder, payment of the amounts payable under the Plan that would otherwise be payable during the six-month period after the date of termination shall instead be paid on the first business day after the expiration of such six-month period, plus interest thereon, at a rate equal to the rate specified in Section 8.8 (to the extent that such interest is not already provided to the Director under Section 8.10), from the respective dates on which such amounts would otherwise have been paid until the actual date of

 

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payment.  In addition, for purposes of the Plan, each amount to be paid and each installment payment shall be construed as a separate identified payment for purposes of Code Section 409A.

 

SECTION 7.
 AMENDMENT AND DISCONTINUANCE

 

While the Company expects to continue the Plan, it must necessarily reserve, and does hereby reserve, the right to amend or discontinue the Plan at any time; provided, however, that any amendment or discontinuance of the Plan shall be prospective in operation only, and shall not affect the payment of any deferred Directors’ fees theretofore earned by any Director, or the conditions under which any such fees are to be paid or forfeited under the Plan. Any discontinuance of the Plan by the Company shall comply with the requirements of Code Section 409A.

 

SECTION 8.
 ALTERNATE PAYMENT OF FEES

 

8.1                               By written notice filed with the Secretary of the Company prior to each calendar year, a Director may elect to receive all or a portion of his fees earned in the following calendar year in accordance with the provisions of Section 8.  An election under this Section 8.1 shall become irrevocable as of December 31 of the calendar year prior to the year in which such monthly and meeting fees will be earned (or, in the case of a new Director, on the 30th day following the Director’s first participation in the Plan and all plans that would be aggregated with the Plan pursuant to Treasury Regulation §1.409A-1(c)(2)(i), provided that the compensation subject to such election relates solely to services performed after the date of such election).

 

8.2                               If payment of a Director’s fees is made pursuant to Section 8.1, such fees shall not be deferred and a portion of the gross amount of such fees shall be paid currently in cash for the Director directly to a “Grantor Trust” established by the Director, provided such trust is in a form which the Company determines to be substantially similar to the trust attached to this plan as Exhibit A; and the balance of the gross amount of such fees shall be paid currently in cash directly to the Director, provided that the portion paid directly to the Director shall be an amount equal to the aggregate federal, state and local individual income taxes attributable to the gross fees paid pursuant to this Section 8.2 (determined in accordance with Section 8.14).  In no event shall such fees be paid to the Grantor Trust or directly to the Director later than the last day of the “applicable 21⁄2 month period,” as such term is defined in Treasury Regulation §1.409A-1(b)(4)(i)(A).

 

8.3                               The Company will establish and maintain four separate accounts in the name of each Director who has made an election under Section 8.1 as follows: a “Pre-Tax Fee Account,” an “After-Tax Fee Account,” a “Pre-Tax Stock Account” and an “After-Tax Stock Account” (collectively, the “Accounts”).

 

(a)                                 The Pre-Tax Fee Account shall reflect the total amount of any fees paid in cash to a Director or deposited to a Director’s Grantor Trust, including the amount equal to the aggregate federal, state and local individual income taxes attributable to the fees

 

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paid pursuant to Section 8.2, and Interest to be credited to a Director pursuant to Section  8.8.  The After-Tax Fee Account shall reflect such gross amounts but shall be maintained on an after-tax basis.

 

(b)                                 The Pre-Tax Stock Account shall reflect the total amount of fees converted to Common Stock Units pursuant to Section 5, including the amount equal to the aggregate federal, state and local individual income taxes attributable to the fees paid pursuant to Section 8.2, and any adjustments made pursuant to Section 8.9. The After-Tax Stock Account shall reflect such gross amounts but shall be maintained on an after-tax basis.

 

(c)                                  The Accounts established pursuant to this Section 8.3 are for the convenience of the administration of the Plan and no trust relationship with respect to such Accounts is intended or should be implied.

 

8.4                               As of the end of each calendar year, the Company shall adjust each Director’s Pre-Tax Fee Account as follows:

 

(a)                                 FIRST, charge, in any year in which the Director is entitled to receive a distribution from his or her Grantor Trust, an amount equal to the distribution from the fee account maintained thereunder that would have been made to the Director if the aggregate amounts paid according to Section 8.2 had instead been deferred under Section 3;

 

(b)                                 NEXT, credit an amount equal to the gross amount of any fees paid for that year, not converted to Common Stock Units, that are paid to the Director (including the amount deposited in the Director’s Grantor Trust and the amount equal to the aggregate federal, state and local individual income taxes attributable to the fees paid pursuant to Section 8.2) according to Section 8.2; and

 

(c)                                  FINALLY, credit an amount equal to the Interest earned for that year according to Section 8.8.

 

8.5                               As of the end of each calendar year, the Company shall adjust each Director’s After-Tax Fee Account as follows:

 

(a)                                 FIRST, charge, in any year in which the Director is in receipt of a benefit distribution from his or her Grantor Trust, an amount equal to the product of (i) the distribution that would have been made to the Director if the aggregate amounts paid according to Section 8.2 had instead been deferred under Section 3, multiplied by (ii) a fraction, the numerator of which is the balance in the Director’s After-Tax Fee Account as of the end of the prior fiscal year and the denominator of which is the balance of the Director’s Pre-Tax Fee Account as of that same date;

 

(b)                                 NEXT, credit an amount equal to the fees not converted to Common Stock Units that are paid that year to the Director directly to the Director’s Grantor Trust according to Section 8.2; and

 

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(c)                                  FINALLY, credit an amount equal to the After-Tax Interest earned for that year according to Section 8.8.

 

8.6                               As of the end of each calendar year, the Company shall adjust each Director’s Pre-Tax Stock Account as follows:

 

(a)                                 FIRST, charge, in any year in which the Director is entitled to receive a distribution from his or her Grantor Trust, an amount equal to the distribution that would have been made to the Director if the aggregate amount of fees paid according to Section 8.2 had instead been deferred under Section 3 and the adjustments had been made under Section 5;

 

(b)                                 NEXT, credit an amount equal to the total amount of any fees for that year that are converted to Common Stock Units and paid to the Director (including the amount deposited in the Director’s Grantor Trust and the amount equal to the aggregate federal, state and local individual income taxes attributable to the fees paid pursuant to Section 8.2) and allocated to the Stock Account maintained thereunder) according to Section 8.2; and

 

(c)                                  NEXT, credit an amount equal to the net earnings of the Director’s Grantor Trust for the year; and

 

(d)                                 FINALLY, credit an amount equal to the Book Value Adjustments to be made for that year according to Section 8.9.

 

8.7                               As of the end of each calendar year, the Company shall adjust each Director’s After-Tax Stock Account as follows:

 

(a)                                 FIRST, charge, in any year in which the Director is entitled to receive a distribution from his or her Grantor Trust, an amount equal to the product of (i) the distribution that would have been made to the Director if the aggregate amounts paid according to Section 8.2 had instead been deferred under Section 3 and the adjustments had been made under Section 5, multiplied by (ii) a fraction, the numerator of which is the balance in the Director’s After-Tax Stock Account as of the end of the prior fiscal year and the denominator of which is the balance of the Director’s Pre-Tax Stock Account as of that same date;

 

(b)                                 NEXT, credit an amount equal to the fees converted to Common Stock Units that are paid that year to the Director directly to the Director’s Grantor Trust and allocated to the Stock Account maintained thereunder according to Section 8.2; and

 

(c)                                  NEXT, credit an amount equal to the net earnings of the Director’s Grantor Trust for the year; and

 

(d)                                 FINALLY, credit an amount equal to the Book Value Adjustments to be made for that year according to Section 8.9.

 

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8.8                               The Director’s Pre-Tax Fee Account and After-Tax Fee Account shall be credited with interest as follows:

 

(a)                                 As of the end of each calendar year, a Director’s Pre-Tax Fee Account shall be credited with interest (“Interest”) at the following rate:

 

(i)                                     the average of the “prime rate” of interest as set forth on the Bloomberg Screen BTMM or comparable successor quotation service on the first business day of January and the last business day of each month of the fiscal year; plus

 

(ii)                                  two hundred twenty-five (225) basis points.

 

(b)                                 As of the end of each calendar year, a Director’s After-Tax Fee Account shall be credited with the amount of Interest set forth above, multiplied by (one minus the aggregate of the applicable federal, state and local individual income tax rates and employment tax rate, determined in accordance with subsection 7.5) (the “After-Tax Interest”).

 

8.9                               As of the end of each calendar year, a Director’s Pre-Tax Stock Account and After-Tax Stock Account shall be adjusted as provided in Section 5.4, to the extent applicable, and shall also be adjusted to reflect the increase or decrease in the fair market value of the Company’s common stock determined in accordance with Section 5.5, except that (i) any reference to the payment date in such Section shall mean December 31 of the applicable calendar year for purposes of this Section, and (ii) adjustments to the After-Tax Stock Account shall be made on an after-tax basis.  Such adjustments shall be referred to as “Book Value Adjustments.”

 

8.10                        In addition to any fees paid to a Director’s Grantor Trust under Section 8.2 during the year, the Company shall also make a payment (an “Interest Payment”) with respect to each Director who has established a Grantor Trust for each year in which the Grantor Trust is in effect.  The Interest Payment shall equal the excess, if any, of the gross amount of the Interest credited to the Director (as defined in Section 8.8(a)), over the net earnings of the Director’s Grantor Trust for the year, and shall be paid within the thirty (30)-day period beginning April 1 of the following calendar year.  A portion of such gross Interest Payment, equal to the excess, if any, of the Net Interest Accrual over the net earnings of the Director’s Grantor Trust, shall be deposited in the Director’s Grantor Trust, with the balance paid to the Director; provided, however, in the event that the net earnings of the Director’s Grantor Trust exceeds the Net Interest Accrual, a distribution from the Grantor Trust shall be required in accordance with Section 8.15.  A Director’s Net Interest Accrual for a year is an amount equal to the After-Tax Interest credited to the Director’s After-Tax Fee Account for that year in accordance with Section 8.8(b).

 

8.11                        In addition to the fees paid under Section 8.2 during the year and the Interest Payment described above, the Company shall also make a payment (a “Principal Payment”) with respect to each Director who has established a Grantor Trust for each year in which the Grantor Trust is in effect, to be credited to the Stock Account maintained thereunder.  The Principal Payment shall equal the excess, if any, of 75 percent of the fair market value (as determined in accordance with Section 6.5) of the balance of the Director’s Pre-Tax Stock Account on December 31 over the balance in the Stock Account maintained under the Director’s Grantor

 

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Trust as of that same date, and shall be paid within the thirty (30)-day period beginning April 1 of the following calendar year.  For the calendar year in which the last installment distribution is made from the Director’s Grantor Trust (meaning, the year that is X years following the year of  the event triggering the payments, where X is the same number of years served by the Director), the payment made under this Section 8.11 shall equal the excess, if any, of 100 percent of the balance of the Director’s After-Tax Stock Account over the balance in the Stock Account maintained under the Director’s Grantor Trust as of that same date.

 

8.12                        Each Director’s Grantor Trust assets shall be invested solely in the instruments specified by investment guidelines established by the Committee.  Such investment guidelines, once established, may be changed by the Committee, provided that any change shall not take effect until the year following the year in which the change is made and provided further that the instruments specified shall be consistent with the provisions of Section 3(b) of the form of Grantor Trust attached hereto as Exhibit A.

 

8.13                        For purposes of Section 8, a Director’s federal income tax rate shall be deemed to be the highest marginal rate of federal individual income tax in effect in the calendar year in which a calculation under this Section is to be made and state and local tax rates shall be deemed to be the highest marginal rates of individual income tax in effect in the state and locality of the Director’s residence on the date such a calculation is made, net of any federal tax benefits without a benefit for any net capital losses. Notwithstanding the preceding sentence, if a Director is not a citizen or resident of the United States, his or her income tax rates shall be deemed to be the highest marginal income tax rates actually imposed on the Director’s benefits under this Plan or earnings under his or her Grantor Trust without a benefit for any net capital losses.

 

8.14                        If a portion of a Director’s fees have been paid to a Grantor Trust pursuant to Section 8.2, then those fees and earnings thereon shall be paid to him from the Grantor Trust in the order in which they were earned (i.e., the fees for the earliest year of service as a Director will be the first fees distributed from the Grantor Trust(s), the fees for the next earliest year of service as a Director will be paid on the anniversary of the payment of the first installment, etc.).  The distribution of a Director’s fees shall continue until all fees which the Director is entitled to receive under the Plan shall have been paid in accordance with the terms of the Grantor Trust(s).

 

8.15                        AbbVie, as the administrator of the Director’s Grantor Trust, may direct the trustee to distribute to the Director from the income of such Grantor Trust, a sum of money sufficient to pay the taxes on trust earnings for such year, to the extent a sufficient sum of money has not been paid to the Director pursuant to Section 8.10 or 8.11, as applicable.  The taxes shall be determined in accordance with Section 8.13.

 

8.16                        AbbVie, as the administrator of the Director’s Grantor Trust, may direct the trustee to pay the appropriate federal, state and local individual income taxes attributable to the fees and other payments paid to the Director pursuant to Sections 8.2, 8.10 and 8.11 to the applicable tax authorities on behalf of the Director.  The taxes shall be determined in accordance with Section 8.13.

 

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EXHIBIT A

 

IRREVOCABLE GRANTOR TRUST AGREEMENT

 

THIS AGREEMENT, made this              day of                             , 20      , by and between                                                  of                                 ,                   (the “grantor”), and The Northern Trust Company located at Chicago, Illinois, as trustee (the “trustee”),

 

WITNESSETH THAT:

 

WHEREAS, the grantor desires to establish and maintain a trust to hold certain benefits received by the grantor under the AbbVie Non-Employee Directors’ Fee Plan, as it may be amended from time to time;

 

NOW, THEREFORE, it is agreed as follows:

 

ARTICLE I
 INTRODUCTION

 

I-1.                             Name.  This agreement and the trust hereby evidenced (the “trust”) may be referred to as the “                                    Grantor Trust.”

 

I-2.                             The Trust Fund.  The “trust fund” as at any date means all property then held by the trustee under this agreement.

 

I-3.                             Status of the Trust.  The trust shall be irrevocable.  The trust is intended to constitute a grantor trust under Sections 671-678 of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly.

 

I-4.                             The Administrator.  AbbVie Inc. (“AbbVie”) shall act as the “administrator” of the trust, and as such shall have certain powers, rights and duties under this agreement as described below.  AbbVie will certify to the trustee from time to time the person or persons authorized to act on behalf of AbbVie as the administrator.  The trustee may rely on the latest certificate received without further inquiry or verification.

 

I-5.                             Acceptance.  The trustee accepts the duties and obligations of the “trustee” hereunder, agrees to accept funds delivered to it by the grantor or the administrator, and agrees to hold such funds (and any proceeds from the investment of such funds) in trust in accordance with this agreement.

 

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ARTICLE II
 DISTRIBUTION OF THE TRUST FUND

 

II-1.                        Separate Accounts.  The administrator shall maintain two separate accounts under the trust, a “deferred account” and a “stock account.” Funds delivered to the trustee shall be allocated between the accounts by the trustee as directed by the administrator.  As of the end of each calendar year, the administrator shall charge each account with all distributions made from such account during that year; and credit each account with its share of income and realized gains and charge each account with its share of expenses and realized losses for the year.  The trustee shall be required to make separate investments of the trust fund for the accounts, and may not administer and invest all funds delivered to it under the trust as one trust fund.

 

II-2.                        Distributions Prior to the Grantor’s Death.  Principal and accumulated income shall not be distributed from the trust prior to the grantor’s termination of service as a Director of AbbVie (the grantor’s “settlement date”); provided that, each year the administrator may direct the trustee to distribute to the grantor a portion of the income of the trust fund for that year, with the balance of such income to be accumulated in the trust.  The administrator shall inform the trustee of the grantor’s settlement date.  Thereafter, the trustee shall distribute the trust fund to the grantor, if then living, in a series of annual installments, commencing on the first day of the month next following the later of the grantor’s settlement date or the date the grantor attains age 65 years.  The administrator shall inform the trustee of the number of installment distributions and the amount of each installment distribution under this paragraph II-2, and the trustee shall be fully protected in relying on such information received from the administrator.

 

II-3.                        Distributions After the Grantor’s Death.  The grantor, from time to time may name any person or persons (who may be named contingently or successively and who may be natural persons or fiduciaries) to whom the principal of the trust fund and all accrued or undistributed income thereof shall be distributed in a lump sum or, if the beneficiary is the grantor’s spouse (or a trust for which the grantor’s spouse is the sole income beneficiary), in installments, as directed by the grantor, upon the grantor’s death.  If the grantor directs an installment method of distribution to the spouse as beneficiary, any amounts remaining at the death of the spouse beneficiary shall be distributed in a lump sum to the executor or administrator of the spouse beneficiary’s estate.  If the grantor directs an installment method of distribution to a trust for which the grantor’s spouse is the sole income beneficiary, any amounts remaining at the death of the spouse shall be distributed in a lump sum to such trust.  Despite the foregoing, if (i) the beneficiary is a trust for which the grantor’s spouse is the sole income beneficiary, (ii) payments are being made pursuant to this paragraph II-3 other than in a lump sum and (iii) income earned by the trust fund for the year exceeds the amount of the annual installment payment, then such trust may elect to withdraw such excess income by written notice to the trustee.  Each designation shall revoke all prior designations, shall be in writing and shall be effective only when filed by the grantor with the administrator during the grantor’s lifetime.  If the grantor fails to direct a method of distribution, the distribution shall be made in a lump sum.  If the grantor fails to designate a beneficiary as provided above, then on the grantor’s death, the trustee shall distribute the balance of the trust fund in a lump sum to the executor or administrator of the grantor’s estate.

 

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II-4.                        Facility of Payment.  When a person entitled to a distribution hereunder is under legal disability, or, in the trustee’s opinion, is in any way incapacitated so as to be unable to manage his or her financial affairs, the trustee may make such distribution to such person’s legal representative, or to a relative or friend of such person for such person’s benefit.  Any distribution made in accordance with the preceding sentence shall be a full and complete discharge of any liability for such distribution hereunder.

 

II-5.                        Perpetuities.  Notwithstanding any other provisions of this agreement, on the day next preceding the end of 21 years after the death of the last to die of the grantor and the grantor’s descendants living on the date of this instrument, the trustee shall immediately distribute any remaining balance in the trust to the beneficiaries then entitled to distributions hereunder.

 

ARTICLE III
 MANAGEMENT OF THE TRUST FUND

 

III-1.                   General Powers.  The trustee shall, with respect to the trust fund, have the following powers, rights and duties in addition to those provided elsewhere in this agreement or by law:

 

(a)                                 Subject to the limitations of subparagraph (b) next below, to sell, contract to sell, purchase, grant or exercise options to purchase, and otherwise deal with all assets of the trust fund, in such way, for such considerations, and on such terms and conditions as the trustee decides.

 

(b)                                 To retain in cash such amounts as the trustee considers advisable; and to invest and reinvest the balance of the trust fund, without distinction between principal and income, in common stock of AbbVie Inc., or in obligations of the United States Government and its agencies or which are backed by the full faith and credit of the United States Government or in any mutual fund, common trust fund or collective investment fund which invests solely in such obligations; and any such investment made or retained by the trustee in good faith shall be proper despite any resulting risk or lack of diversification or marketability.

 

(c)                                  To deposit cash in any depositary (including the banking department of the bank acting as trustee) without liability for interest, and to invest cash in savings accounts or time certificates of deposit bearing a reasonable rate of interest in any such depositary.

 

(d)                                 To invest, subject to the limitations of subparagraph (b) above, in any common or commingled trust fund or funds maintained or administered by the trustee solely for the investment of trust funds.

 

(e)                                  To borrow from anyone, with the administrator’s approval, such sum or sums from time to time as the trustee considers desirable to carry out this trust, and to mortgage or pledge all or part of the trust fund as security.

 

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(f)                                   To retain any funds or property subject to any dispute without liability for interest and to decline to make payment or delivery thereof until final adjudication by a court of competent jurisdiction or until an appropriate release is obtained.

 

(g)                                  To begin, maintain or defend any litigation necessary in connection with the administration of this trust, except that the trustee shall not be obliged or required to do so unless indemnified to the trustee’s satisfaction.

 

(h)                                 To compromise, contest, settle or abandon claims or demands.

 

(i)                                     To give proxies to vote shares of stock and other voting securities, to join in or oppose (alone or jointly with others) voting trusts, mergers, consolidations, foreclosures, reorganizations, liquidations, or other changes in the financial structure of any corporation, and to exercise or sell stock subscription or conversion rights.

 

(j)                                    To hold securities or other property in the name of a nominee, in a depositary, or in any other way, with or without disclosing the trust relationship.

 

(k)                                 To divide or distribute the trust fund in undivided interests or wholly or partly in kind.

 

(l)                                     To pay any tax imposed on or with respect to the trust; to defer making payment of any such tax if it is indemnified to its satisfaction in the premises; and to require before making any payment such release or other document from any lawful taxing authority and such indemnity from the intended payee as the trustee considers necessary for its protection.

 

(m)                             To deal without restriction with the legal representative of the grantor’s estate or the trustee or other legal representative of any trust created by the grantor or a trust or estate in which a beneficiary has an interest, even though the trustee, individually, shall be acting in such other capacity, without liability for any loss that may result.

 

(n)                                 To appoint or remove by written instrument any bank or corporation qualified to act as successor trustee, wherever located, as special trustee as to part or all of the trust fund, including property as to which the trustee does not act, and such special trustee, except as specifically limited or provided by this or the appointing instrument, shall have all of the rights, titles, powers, duties, discretions and immunities of the trustee, without liability for any action taken or omitted to be taken under this or the appointing instrument.

 

(o)                                 To appoint or remove by written instrument any bank, wherever located, as custodian of part or all of the trust fund, and each such custodian shall have such rights, powers, duties and discretions as are delegated to it by the trustee.

 

(p)                                 To employ agents, attorneys, accountants or other persons, and to delegate to them such powers as the trustee considers desirable, and the trustee shall be

 

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protected in acting or refraining from acting on the advice of persons so employed without court action.

 

(q)                                 To perform any and all other acts which in the trustee’s judgment are appropriate for the proper management, investment and distribution of the trust fund.

 

III-2.                   Principal and Income.  Any income earned on the trust fund, which is not distributed as provided in Article II shall be accumulated and from time to time added to the principal of the trust.  The grantor’s interest in the trust shall include all assets or other property held by the trustee hereunder, including principal and accumulated income.

 

III-3.                   Statements.  The trustee shall prepare and deliver monthly to the administrator and annually to the grantor, if then living, otherwise to each beneficiary then entitled to distributions under this agreement, a statement (or series of statements) setting forth (or which taken together set forth) all investments, receipts, disbursements and other transactions effected by the trustee during the reporting period; and showing the trust fund and the value thereof at the end of such period.

 

III-4.                   Compensation and Expenses.  All reasonable costs, charges and expenses incurred in the administration of this trust, including compensation to the trustee, any compensation to agents, attorneys, accountants and other persons employed by the trustee, and expenses incurred in connection with the sale, investment and reinvestment of the trust fund shall be paid from the trust fund.

 

ARTICLE IV
 GENERAL PROVISIONS

 

IV-1.                    Interests Not Transferable.  The interests of the grantor or other persons entitled to distributions hereunder are not subject to their debts or other obligations and may not be voluntarily or involuntarily sold, transferred, alienated, assigned or encumbered.

 

IV-2.                    Disagreement as to Acts.  If there is a disagreement between the trustee and anyone as to any act or transaction reported in any accounting, the trustee shall have the right to a settlement of its account by any proper court.

 

IV-3.                    Trustee’s Obligations.  No power, duty or responsibility is imposed on the trustee except as set forth in this agreement.  The trustee is not obliged to determine whether funds delivered to or distributions from the trust are proper under the trust, or whether any tax is due or payable as a result of any such delivery or distribution.  The trustee shall be protected in making any distribution from the trust as directed pursuant to Article II without inquiring as to whether the distributee is entitled thereto; and the trustee shall not be liable for any distribution made in good faith without written notice or knowledge that the distribution is not proper under the terms of this agreement.

 

IV-4.                    Good Faith Actions.  The trustee’s exercise or non-exercise of its powers and discretions in good faith shall be conclusive on all persons.  No one shall be obliged to see to the application of any money paid or property delivered to the trustee.  The certificate of the trustee that it is acting according to this agreement will fully protect all persons dealing with the trustee.

 

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IV-5.                    Waiver of Notice.  Any notice required under this agreement may be waived by the person entitled to such notice.

 

IV-6.                    Controlling Law.  The laws of the State of Illinois shall govern the interpretation and validity of the provisions of this agreement and all questions relating to the management, administration, investment and distribution of the trust hereby created.

 

IV-7.                    Successors.  This agreement shall be binding on all persons entitled to distributions hereunder and their respective heirs and legal representatives, and on the trustee and its successors.

 

ARTICLE V
 CHANGES IN TRUSTEE

 

V-1.                         Resignation or Removal of Trustee.  The trustee may resign at any time by giving thirty days’ advance written notice to the administrator and the grantor.  The administrator may remove a trustee by written notice to the trustee and the grantor.

 

V-2.                         Appointment of Successor Trustee.  The administrator shall fill any vacancy in the office of trustee as soon as practicable by written notice to the successor trustee; and shall give prompt written notice thereof to the grantor, if then living, otherwise to each beneficiary then entitled to payments or distributions under this agreement.  A successor trustee shall be a bank (as defined in Section 581 of the Internal Revenue Code of 1986, as amended).

 

V-3.                         Duties of Resigning or Removed Trustee and of Successor Trustee.  A trustee that resigns or is removed shall furnish promptly to the administrator and the successor trustee an account of its administration of the trust from the date of its last account.  Each successor trustee shall succeed to the title to the trust fund vested in its predecessor without the signing or filing of any instrument, but each predecessor trustee shall execute all documents and do all acts necessary to vest such title of record in the successor trustee.  Each successor trustee shall have all the powers conferred by this agreement as if originally named trustee.  No successor trustee shall be personally liable for any act or failure to act of a predecessor trustee.  With the approval of the administrator, a successor trustee may accept the account furnished and the property delivered by a predecessor trustee without incurring any liability for so doing, and such acceptance will be complete discharge to the predecessor trustee.

 

ARTICLE VI
 AMENDMENT AND TERMINATION

 

VI-1.                    Amendment.  With the consent of the administrator, this trust may be amended from time to time by the grantor, if then living, otherwise by a majority of the beneficiaries then entitled to payments or distributions hereunder, except as follows:

 

(a)                                 The duties and liabilities of the trustee cannot be changed substantially without its consent.

 

(b)                                 This trust may not be amended so as to make the trust revocable.

 

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VI-2.                    Termination.  This trust shall not terminate, and all rights, titles, powers, duties, discretions and immunities imposed on or reserved to the trustee, the administrator, the grantor and the beneficiaries shall continue in effect, until all assets of the trust have been distributed by the trustee as provided in Article II.

 

*                *                *

 

IN WITNESS WHEREOF, the grantor has executed this Agreement as of the day and year first above written.

 

 

	
 
    	
 
    
	
 
    	
Grantor
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
The Northern Trust Company as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Its
    	
 
    

 

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