Document:

ex10-6.htm

 

Great-West Life & Annuity Insurance Company

2005 Nonqualified Deferred Compensation Plan

Effective as of March 24, 2009

1759593.3

  

  

  

TABLE OF CONTENTS

 

	
PREAMBLE

	
1

	  	  
	
ARTICLE I DEFINITIONS

	
2

	
1.1

	
Account

	
2

	
1.2

	
Adoption Agreement

	
2

	
1.3

	
Affiliate

	
2

	
1.4

	
Aggregated Plan

	
2

	
1.5

	
Beneficiary

	
2

	
1.6

	
Benefit Benchmark

	
2

	
1.7

	
Board

	
2

	
1.8

	
Change in Control Event

	
2

	
1.9

	
Code

	
7

	
1.10

	
Commissions

	
7

	
1.11

	
Compensation

	
7

	
1.12

	
Compensation Deferral Agreement

	
7

	
1.13

	
Compensation Deferrals

	
7

	
1.14

	
Conflict of Interest Divestiture

	
7

	
1.15

	
Corporate Dissolution

	
7

	
1.16

	
De Minimis Distribution

	
7

	
1.17

	
Distributable Event

	
7

	
1.18

	
Domestic Partner

	
8

	
1.19

	
Domestic Relations Order

	
8

	
1.20

	
Effective Date

	
8

	
1.21

	
Eligible Individual

	
8

	
1.22

	
ERISA

	
8

	
1.23

	
Income Inclusion Under Code § 409A

	
8

	
1.24

	
Interim Distribution Date

	
8

	
1.25

	
Investment Commissions

	
8

	
1.26

	
Investment Credits and Debits

	
9

	
1.27

	
Nonqualified Deferred Compensation Plan

	
9

	
1.28

	
Participant

	
9

	
1.29

	
Performance-Based Compensation

	
9

	
1.30

	
Plan

	
10

	
1.31

	
Plan Administrator

	
10

	
1.32

	
Plan Sponsor

	
10

	
1.33

	
Plan Termination Following a Change in Control Event

	
10

	
1.34

	
Plan Termination Following a Corporate Dissolution

	
10

	
1.35

	
Plan Termination in Connection with Termination of Certain Similar Arrangements

	
11

	
1.36

	
Regular Salary

	
11

	
1.37

	
Sales Commissions

	
11

	
1.38

	Variable Pay (Sales) 	11
	
1.39

	
Separation from Service

	
11

	
1.40

	
Specified Employee

	
13

	
1.41

	
Spouse

	
13

	
1.42

	
Taxable Year

	
14

  

i

  

	  

1.43

	Trust	14
	
1.44

	
Trustee

	
14

	
1.45

	
Unforeseeable Emergency

	
14

	
1.46

	
Valuation Date

	
14

	
1.47

	
Without Good Cause

	
14

	
ARTICLE II ELIGIBILITY AND PARTICIPATION

	
15

	
2.1

	
Eligibility

	
15

	
2.2

	
Participation

	
15

	
2.3

	
Compensation Deferral Agreement

	
15

	
2.4

	
Subsequent Changes in Form of Payment

	
17

	
2.5

	
Matching Credits and Discretionary Credits

	
17

	
2.6

	
Establishing a Reserve for Plan Liabilities

	
17

	
ARTICLE III PARTICIPANT ACCOUNTS AND REPORTS

	
18

	
3.1

	
Establishment of Accounts

	
18

	
3.2

	
Account Maintenance

	
18

	
3.3

	
Investment Credits and Debits

	
18

	
3.4

	
Participant Statements

	
19

	
ARTICLE IV WITHHOLDING OF TAXES

	
20

	
4.1

	
Withholding from Compensation

	
20

	
4.2

	
Withholding from Benefit Distributions

	
20

	
ARTICLE V VESTING

	
20

	
5.1

	
Vesting

	
20

	
ARTICLE VI PAYMENTS

	
20

	
6.1

	
Benefits

	
20

	
6.2

	
Separation from Service Payment

	
21

	
6.3

	
Conflict of Interest Divestiture

	
22

	
6.4

	
Death Benefit

	
22

	
6.5

	
Domestic Relations Order Payment

	
22

	
6.6

	
Unforeseeable Emergency Distribution

	
23

	
6.7

	
Election to Receive Interim Distributions

	
23

	
6.8

	
Payment upon Income Inclusion Under § 409A

	
23

	
6.9

	
Permissible Delay in Payments

	
23

	
6.10

	
Beneficiary Designation

	
24

	
6.11

	
Claims Procedure

	
25

	
ARTICLE VII CANCELLATION OF DEFERRALS

	
30

	
7.1

	
Unforeseeable Emergency

	
30

	
7.2

	
Disability

	
31

	
ARTICLE VIII PLAN ADMINISTRATION

	
31

	
8.1

	
Appointment

	
31

	
8.2

	
Duties of Plan Administrator

	
31

	
8.3

	
Plan Sponsor

	
31

	        8.4	Administrative Fees and Expenses	32
	
8.5

	
Plan Administration and Interpretation

	
32

	
8.6

	
Powers, Duties, Procedures

	
32

	
8.7

	
Information

	
32

  

ii

  

	  

8.8

	 Indemnification of Plan Administrator	33
	 ARTICLE IX TRUST FUND	33
	
9.1

	
Trust

	
33

	
9.2

	
Unfunded Plan

	
33

	
9.3

	
Assignment and Alienation

	
33

	
ARTICLE X AMENDMENT AND PLAN TERMINATION

	
33

	
10.1

	
Amendment

	
33

	
10.2

	
Plan Termination

	
34

	
10.3

	
Plan Termination Following a Change in Control Event

	
34

	
10.4

	
Plan Termination Following a Corporate Dissolution

	
35

	
10.5

	
Plan Termination in Connection with Termination of Certain Similar Arrangements

	
35

	
10.6

	
Effect of Payment

	
36

	
ARTICLE XI MISCELLANEOUS

	
36

	
11.1

	
Total Agreement

	
36

	
11.2

	
Employment Rights

	
37

	
11.3

	
Non-Assignability

	
37

	
11.4

	
Binding Agreement

	
37

	
11.5

	
Receipt and Release

	
37

	
11.6

	
Furnishing Information

	
37

	
11.7

	
Compliance with Code § 409A

	
37

	
11.8

	
Insurance

	
38

	
11.9

	
Governing Law

	
38

	
11.10

	
Headings and Subheadings

	
38

  

iii

  

PREAMBLE

 

The Great-West Life & Annuity Insurance Company Nonqualified Deferred Compensation Plan (the “Grandfathered Plan”) was established effective as of June 1, 1999 for the benefit of a select group of management or highly compensated Eligible Individuals.  Effective as of December 31, 2004, the Grandfathered Plan was frozen, and no further amounts were deferred under that plan as of such date.  The terms of the Grandfathered Plan as of October 3, 2004 continue to govern the amount deferred under that plan as of December 31, 2004.

 

Effective as of January 1, 2005, the Great-West Life & Annuity Insurance Company 2005 Nonqualified Deferred Compensation Plan (the “Plan”) was established to provide benefits similar to those provided under the Grandfathered Plan in compliance with Code § 409A.  The Plan document, together with the Adoption Agreement, were amended and restated effective as of January 1, 2008.  Such amendment and restatement apply to all amounts deferred under the Plan on or after January 1, 2005.

 

Effective as of March 24, 2009, the Plan was again amended and restated to reflect certain changes to the Plan.

 

Participants in the Plan shall have no right, either directly or indirectly, to anticipate, sell, assign or otherwise transfer any benefit accrued under the Plan.  In addition, no Participant shall have any interest in any assets set aside as a source of funds to satisfy benefit obligations under the Plan.  Participants shall have the status of general unsecured creditors of the Plan Sponsor, and the Plan shall constitute an unsecured promise by the Plan Sponsor to make benefit payments in the future.

 

The Plan is intended to be “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of ERISA §§ 201(2) and 301(a)(3), is intended to comply with the requirements of Code § 409A and the regulations and binding guidance issued thereunder to avoid adverse tax consequences and shall be interpreted and administered to the extent possible in a manner consistent with that intent.

 

1759593.3

  

  

  

 

ARTICLE I

 

 

DEFINITIONS

 

	
 1.1  

	
Account  The bookkeeping account established for each Participant to record his or her benefit under the Plan.  Where the context so requires, references to the Participant’s Account, or to the Participant’s vested Account, shall mean the applicable portion of the Account attributable to a specific Taxable Year or deferral period.

 

	
 1.2  

	
Adoption Agreement  The written instrument by which the Plan Sponsor establishes or amends a Nonqualified Deferred Compensation Plan for Eligible Individuals.

 

	
 1.3  

	
Affiliate  Any corporation or business entity that would be considered a single employer with the Plan Sponsor pursuant to Code §§ 414(b) or 414(c).

 

	
 1.4  

	
Aggregated Plan  A nonqualified deferred compensation plan that is required to be aggregated and treated with the Plan as a single plan under Code § 409A.

 

	
 1.5  

	
Beneficiary  An individual, individuals, trust or other entity designated by the Participant to receive his or her benefit in the event of the Participant’s death.  If more than one Beneficiary survives the Participant, the Participant’s benefit shall be divided equally among all such Beneficiaries, unless otherwise provided in the Beneficiary Designation form.  Nothing herein shall prevent the Participant from designating primary and contingent Beneficiaries.

 

	
 1.6  

	
Benefit Benchmarks  Hypothetical investment funds or benchmarks made available to Participants by the Plan Administrator for purposes of valuing benefits under the Plan.

 

	
 1.7  

	
Board  The Board of Directors of the Plan Sponsor identified in Section I of the Adoption Agreement, or similar governing body if such Plan Sponsor has no Board of Directors.

 

	
 1.8  

	
Change in Control Event  A Change in Ownership, Change in Effective Control or Change in Ownership of a Substantial Portion of Assets, as elected by the Plan Sponsor in the Adoption Agreement, of a corporation identified in Section 1.8(e).

 

	
(a)  

	
Change in Effective Control of the Corporation

 

	
(i)  

	
Notwithstanding that a corporation has not undergone a Change in Ownership, a Change in Effective Control occurs on the date that either:

 

  

2

  

 

	
(1)  

	
any one person or Persons Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or Persons Acting as a Group) ownership of stock of the corporation possessing 30  percent or more of the total voting power of the stock of such corporation; or

 

	
(2)  

	
a majority of members of the corporation’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board of directors prior to the date of the appointment or election, provided that for purposes of this Section 1.8(a)(i)(2) the term corporation refers solely to the relevant corporation identified in Section 1.8(e) for which no other corporation is a majority shareholder for purposes of that section.

 

In the absence of an event described in Section 1.8(a)(i)(a) or Section 1.8(a)(i)(b) a Change in Effective Control will not have occurred.

 

	
(ii)  

	
A Change in Effective Control may occur in any transaction in which either of the two corporations involved in the transaction has a Change in Ownership or a Change in Ownership of a Substantial Portion of Assets.

 

	
(iii)  

	
If any one person or Persons Acting as a Group, is considered to effectively control a corporation (within the meaning of this Section 1.8(a)), the acquisition of additional control of the corporation by the same person or Persons Acting as a Group is not considered to cause a Change in Effective Control (or to cause a Change in Ownership within the meaning of Section 1.8(b)).

 

	
(b)  

	
Change in the Ownership of the Corporation.  A Change in Ownership occurs on the date that any one person or Persons Acting as a Group, acquires ownership of stock of the corporation that, together with stock held by such person or Persons Acting as a Group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of such corporation.  However, if any one person or Persons Acting as a Group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of a corporation, the acquisition of additional stock by the same person or Persons Acting as a Group is not considered to cause a Change in

 

  

3

  

Ownership (or to cause a Change in Effective Control).  An increase in the percentage of stock owned by any one person or Persons Acting as a Group, as a result of a transaction in which the corporation acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of a Change in Ownership.  A Change in Ownership applies only when there is a transfer of stock of a corporation (or issuance of stock of a corporation) and stock in such corporation remains outstanding after the transaction.

 

	
(c)  

	
Change in the Ownership of a Substantial Portion of a Corporation’s Assets

 

	
(i)  

	
A Change in Ownership of a Substantial Portion of Assets occurs on the date that any one person or Persons Acting as a Group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or Persons Acting as a Group) assets from the corporation that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the corporation immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

	
(ii)  

	
There is no Change in Ownership of a Substantial Portion of Assets when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer, as provided in this Section 1.8(c)(ii).  A transfer of assets by a corporation is not treated as a change in the ownership of such assets if the assets are transferred to:

 

	
(1)  

	
a shareholder of the corporation (immediately before the asset transfer) in exchange for or with respect to its stock;

 

	
(2)  

	
an entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the corporation;

 

	
(3)  

	
a person or Persons Acting as a Group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of the corporation; or

 

  

4

  

 

	
(4)  

	
an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in Section 1.8(c)(ii)(c.).

 

For purposes of this Section 1.8(c)(ii) and except as otherwise provided, a person’s status is determined immediately after the transfer of the assets.

 

	
(d)  

	
Persons Acting as a Group

 

	
(i)  

	
With regards to Change in the Ownership, persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering.  However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or similar business transaction with the corporation.  If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

	
(ii)  

	
With regards to Change in Effective Control, persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering.  However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or similar business transaction with the corporation.  If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

	
(iii)  

	
With regards to Change in Ownership of a Substantial Portion of Assets, persons will not be considered to be acting as a group solely because they purchase assets of the same corporation at the same time.  However, persons

 

  

5

  

will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets or similar business transaction with the corporation.  If a person, including an entity shareholder owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

	
(e)  

	
To constitute a Change in Control Event as to a Participant, the Change in Control Event must relate to:

 

	
(i)  

	
the corporation with respect to which the Participant is an Eligible Individual at the time of the Change in Control Event;

 

	
(ii)  

	
the corporation that is liable for the payment of the Account (or all corporations liable for the payment if more than one corporation is liable) but only if either the Participant’s benefits under the Plan are attributable to the performance of services by the Participant for such corporation (or corporations) or there is a bona fide business purpose for such corporation or corporations to be liable for such payment and, in either case, no significant purpose in making such corporation or corporations liable for such payment is the avoidance of Federal income tax; or

 

	
(iii)  

	
a corporation that is a majority shareholder of a corporation identified in Sections 1.8(e)(i) or 1.8(e)(ii), or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in Section 1.8(e)(i) or Section 1.8(e)(ii).  With regard to a relevant corporation, a majority shareholder is a shareholder owning more than 50% of the total fair market value and total voting power of such corporation.

 

	
(f)  

	
Stock Ownership.  For the purposes of this Section 1.8, ownership of stock will be determined by the application of Code § 318(a).  Stock underlying a vested option is considered owned by the individual who holds the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option).  For purposes of the preceding sentence, however, if a vested option is exercisable for stock that is

 

  

6

  

not substantially vested (as defined by Treasury Regulation §§ 1.83-3(b) and (j)), the stock underlying the option is not treated as owned by the individual who holds the option.  In addition, mutual and cooperative corporations are treated as having stock for purposes of this Section 1.8(f).

 

	
 1.9  

	
Code The Internal Revenue Code of 1986, as amended from time to time.  Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection.

 

	
 1.10  

	
Commissions Shall mean both Investment Commissions and Sales Commissions.

 

	
 1.11  

	
Compensation  Shall mean a Participant’s Regular Salary, Variable Pay (Sales), bonuses, Commissions, Performance-Based Compensation, and director fees, as elected by the Plan Sponsor in the Adoption Agreement.

 

	
 1.12  

	
Compensation Deferral Agreement  The written agreement between an Eligible Individual and the Plan Sponsor to defer receipt by the Eligible Individual of Compensation, which shall be in such form as the Plan Administrator shall determine.  Such agreement shall state the deferral amount or percentage of Compensation to be withheld from the Eligible Individual’s Compensation and shall state the date on which the agreement is effective, as provided at Section 2.3.

 

	
 1.13  

	
Compensation Deferrals  That portion of a Participant’s Compensation which is deferred under the terms of this Plan.

 

	
 1.14  

	
Conflict of Interest Divestiture Shall have the meaning set forth in Section 6.3.

 

	
 1.15  

	
Corporate Dissolution  A corporate dissolution taxed pursuant to Code § 331 or with the approval of a bankruptcy court pursuant to section 503(b)(1)(A) of title 11, United States Code.

 

	
 1.16  

	
De Minimis Distribution  Shall have the meaning elected by the Plan Sponsor in the Adoption Agreement.

 

	
 1.17  

	
Distributable Event  The events entitling a Participant or Beneficiary to a payment of benefits under the Plan, which shall be: Separation from Service; death; the occurrence of an Interim Distribution Date; the occurrence of an Unforeseeable Emergency; Plan Termination Following a Change of Control Event, if applicable; Plan Termination Following a Corporate Dissolution; Plan Termination in Connection with Termination of Certain Similar Arrangements; Conflict of Interest Divestiture; Domestic Relations Order; and Income Inclusion Under Code § 409A.

 

  

7

  

 

	
 1.18  

	
Domestic Partner  Shall have the meaning elected by the Plan Sponsor in the Adoption Agreement.  The Plan Administrator in its sole discretion shall determine whether an individual meets the requirements of a Domestic Partner and shall have the right to request documentary proof of the existence of a Domestic Partner relationship, which proof may include, but is not limited to, a joint checking account, a joint mortgage or lease, driver’s licenses showing the same address, the registration of a domestic partnership or civil union in states that recognize such relationships or such other proof as the Plan Administrator may determine.

 

	
 1.19  

	
Domestic Relations Order  Any 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 a Participant and is made pursuant to a State domestic relations law (including a community property law).

 

	
 1.20  

	
Effective Date  The date as of which the Plan becomes effective or is amended, as selected in the Adoption Agreement.

 

	
 1.21  

	
Eligible Individual  Any common-law employee, independent contractor or non-employee director who provides services to the Plan Sponsor and is designated by the Plan Sponsor as eligible to participate in the Plan in accordance with Section 2.1.  Only those individuals who are part of a select group of management or highly compensated individuals, as determined by the Plan Sponsor in its sole discretion, may be designated as Eligible Individuals under the Plan.

 

	
 1.22  

	
ERISA  The Employee Retirement Income Security Act of 1974, as amended.  Reference to any section or subsection of ERISA includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection.

 

	
 1.23  

	
Income Inclusion Under Code § 409A  Shall have the meaning set forth in Section 6.9.

 

	
 1.24  

	
Interim Distribution Date  Shall have the meaning elected by the Plan Sponsor in the Adoption Agreement.

 

	
 1.25  

	
Investment Commissions  The Compensation or the portion of Compensation earned by a Participant that meets the following requirements: (a) a substantial portion of the services provided by the Participant for such Compensation consists of sales of financial products or other direct customer services to an unrelated customer with respect to customer assets or customer asset accounts; (b) the customer retains the right to terminate the customer relationship and may move or liquidate the assets or asset accounts without undue delay (which may be subject to a reasonable notice period); (c) such Compensation consists of a portion of the value of the overall assets or asset account balance, an amount substantially all of which

 

  

8

  

is calculated by reference to the increase in the value of the overall assets or account balance during a specified period, or both; and (d) the value of the overall assets or account balance and Investment Commission is determined at least annually.  For this purpose, a customer is treated as an unrelated customer only if the customer is not related (within the meaning of Code § 409A) to either the Plan Sponsor, any Affiliate or the Participant.  Notwithstanding the foregoing, Compensation involving a related customer will be treated as an Investment Commission provided that (x) the Compensation otherwise meets the requirements set forth in this section, (y) substantial sales from which Investment Commissions arise are made, or substantial services from which Investment Commissions arise are provided, to unrelated customers by the Plan Sponsor or an Affiliate and (z) the sales and service arrangement and the commission arrangement with respect to the related customers are bona fide, arise from the Plan Sponsor’s or Affiliate’s ordinary course of business and are substantially the same, both in terms and in practice, as the terms and practices applicable to unrelated customers (within the meaning of Code § 409A) to which (individually or in the aggregate) substantial sales are made or substantial services provided by the Plan Sponsor or an Affiliate.

 

	
 1.26  

	
Investment Credits and Debits  Bookkeeping adjustments to Participants’ Accounts to reflect the hypothetical interest, earnings, appreciation, losses and depreciation that would be accrued or realized if assets equal to the value of such Accounts were invested in accordance with such Participants’ Benefit Benchmarks.

 

	
 1.27  

	
Nonqualified Deferred Compensation Plan  A pension plan, within the meaning of ERISA § 201(2), the purpose of which is to permit a select group of management or highly compensated Eligible Individuals to defer receipt of a portion of their Compensation to a future date.

 

	
 1.28  

	
Participant  An Eligible Individual who is currently deferring a portion of his or her Compensation under this Plan, or an Eligible Individual or former Eligible Individual who is still entitled to the payment of benefits under the Plan.

 

	
 1.29  

	
Performance-Based Compensation  Compensation, the amount of which, or entitlement to which, is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months.  Organizational or individual performance criteria are considered pre-established if established in writing by no later than 90 days after the commencement of the period of service to which the criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established.  Performance-Based Compensation does not include any amount, or portion of any amount, that will be paid either regardless of performance or based upon a level of performance that is substantially certain to be met at the time the criteria is established.  If payments are based upon the satisfaction of subjective criteria, the

 

  

9

  

subjective performance criteria must be bona fide and relate to the performance of the Participant, a group that includes the Participant or a business unit for which the Participant provides services, and the determination that any subjective performance criteria have been met must not be made by the Participant, a family member of the Participant or a person under the effective control of the Participant or a family member of the Participant or where any amount of the compensation of the person making such determination is effectively controlled in whole or in part by the Participant or family member of the Participant.  Compensation determined by reference to the value of the Plan Sponsor or an Affiliate, or the stock of the Plan Sponsor or an Affiliate, shall be Performance Based Compensation only as provided under Code § 409A and the regulations and binding guidance issued thereunder.

 

	
 1.30  

	
Plan  The Nonqualified Deferred Compensation Plan established by the Plan Sponsor under the terms of this Basic Plan Document and the accompanying Adoption Agreement.

 

	
 1.31  

	
Plan Administrator  The individual(s) or committee appointed by the Board or Executive Committee of the Board to administer the Plan as provided herein.  If no such appointment is made, the highest-ranking officer in the Human Resources department of the Plan Sponsor identified in Section I of the Adoption Agreement shall serve as the Plan Administrator.  Any individual serving as the Plan Administrator may be removed at any time in the sole discretion of the Board or the Executive Committee of the Board.  In no event shall a Plan Administrator who is a Participant be permitted to make decisions regarding solely his or her own benefits under this Plan; rather, such decisions shall be made by the other members of any committee appointed to act as the Plan Administrator or, if no such committee has been appointed, the most senior officer of the Plan Sponsor identified in Section I of the Adoption Agreement whose benefits are not at issue in the decision.

 

	
 1.32  

	
Plan Sponsor  The corporation or business entity identified in Section I of the Adoption Agreement, including any successor to such corporation or business that assumes the obligations of such corporation or business.  The term Plan Sponsor shall also include, where appropriate, any entity affiliated with the Plan Sponsor which adopts the Plan with the consent of the Plan Sponsor and is listed on Exhibit A attached to the Adoption Agreement.  Only the Plan Sponsor identified in Section I of the Adoption Agreement shall have the power to amend this Plan, appoint the Plan Administrator, or exercise any of the powers described in Section 8.3 hereof.

 

	
 1.33  

	
Plan Termination Following a Change in Control Event  Shall have the meaning set forth in Section 10.3.

 

	
 1.34  

	
Plan Termination Following a Corporate Dissolution  Shall have the meaning set forth in Section 10.4.

 

  

10

  

 

	
 1.35  

	
Plan Termination in Connection with Termination of Certain Similar Arrangements  Shall have the meaning set forth in Section 10.5.

 

	
 1.36  

	
Regular Salary  The Participant’s gross income paid by the Plan Sponsor during the Taxable Year as reportable on Internal Revenue Service Forms W-2 and 1099, including amounts excludible from gross income that are contributed by the Participant on a pre-tax basis to a salary reduction retirement or welfare plan (including amounts contributed to this Plan), but excluding Commissions, bonuses, Variable Pay (Sales), Performance-Based Compensation, director fees, or any other irregular payments.

 

	
 1.37  

	
Sales Commissions  Compensation earned by a Participant that meets the following requirements: (a) a substantial portion of the services provided by the Participant for the Compensation consists of the direct sale of a product or service to an unrelated customer; (b) the Compensation paid by the Plan Sponsor consists of either a portion of the purchase price for the product or service or an amount substantially all of which is calculated by reference to the volume of sales; and (c) payment of the Compensation is either contingent upon the Plan Sponsor or Affiliate receiving payment from an unrelated customer for the product or services or, if applied consistently to all similarly situated Participants, is contingent upon the closing of the sales transaction and such other requirements as may be specified by the Plan Sponsor or Affiliate before the closing of the sales transaction.  For this purpose, a customer will be treated as an unrelated customer only if the customer is not related (within the meaning of Code § 409A) to either the Plan Sponsor, any Affiliate or the Participant.  Notwithstanding the foregoing, Compensation involving a related customer will be treated will be treated as a Sales Commission provided that (x) the Compensation otherwise meets the requirements set forth in this section, (y) substantial sales from which Sales Commissions arise are made, or substantial services from which Sales Commissions arise are provided, to unrelated customers by the Plan Sponsor or an Affiliate and (z) the sales and service arrangement and the commission arrangement with respect to the related customers are bona fide, arise from the Plan Sponsor’s or Affiliate’s ordinary course of business and are substantially the same, both in terms and in practice, as the terms and practices applicable to unrelated customers (within the meaning of Code § 409A) to which (individually or in the aggregate) substantial sales are made or substantial services provided by the Plan Sponsor or an Affiliate.

 

	
 1.38  

	
Variable Pay (Sales)  Compensation that is designated as Variable Pay under the regular payroll procedures of the Plan Sponsor.

 

	
 1.39  

	
Separation from Service  A Participant shall have a Separation from Service under the circumstances described below.

 

	
(a)  

	
Employees  A Participant who is a common law employee has a Separation from Service if the Participant voluntarily or involuntarily

 

  

11

  

terminates employment with the Plan Sponsor and all Affiliates, for any reason other than death.  A termination of employment occurs if the facts and circumstances indicate that the Plan Sponsor and the Participant reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services the Participant will perform after such date (whether as an employee or an independent contractor) will decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services if the Participant has been providing services for less than 36 months).  Notwithstanding the foregoing, the employment relationship is treated as continuing while the Participant is on military leave, sick leave or other bona fide leave of absence if the period of leave does not exceed 6 months, or if longer, so long as the Participant retains the right to reemployment with the Plan Sponsor or an Affiliate under an applicable statute or contract.  When a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or to last for a period of at least 6 months and such impairment causes the Participant to be unable to perform the duties of his or her position or any substantially similar position, a 29-month period of absence shall be substituted for the 6-month period above.

 

	
(b)  

	
Independent Contractors  A Participant who is an independent contractor shall have a Separation from Service upon the expiration of all contracts under which services are performed for the Plan Sponsor and all Affiliates if the expiration constitute a good faith and complete termination of the contractual relationship.  An expiration does not constitute a good faith and complete termination of the contractual relationship if the Plan Sponsor or an Affiliate anticipates a renewal of a contractual relationship or the independent contractor becoming an employee.  For this purpose, a Plan Sponsor is considered to anticipate the renewal of the contractual relationship if the Plan Sponsor or an Affiliate intends to contract again for the services provided under the expired contract and the independent contractor has not been eliminated as a possible provider of services under any such new contract.  A Plan Sponsor is considered to intend to contract again for the services provided under an expired contract if doing so is conditioned only upon incurring a need for the services, the availability of funds or both.

 

	
(c)  

	
Directors  Except as otherwise provided hereunder, a Participant who is a member of the Board shall be considered to be an

 

  

12

  

Independent Contractor for purposes of determining whether the Participant has had a Separation from Service.

 

	
(d)  

	
Dual Status  If a Participant provides services to the Plan Sponsor and any Affiliates as an employee and as an independent contractor, the Participant must have a Separation from Service with the Plan Sponsor and all Affiliates both as an employee and an independent contractor to have a Separation from Service.  Notwithstanding the foregoing, if a Participant provides services to the Plan Sponsor and any Affiliates as an employee and as a director, (1) the services provided as a director are not taken into account in determining whether the Participant has a Separation from Service as an employee under the Plan if the Participant participates in the Plan as an employee, provided the Participant does not participate in any other nonqualified deferred compensation plan as a director that is aggregated with the Plan under Code § 409A, and (2) the services provided as an employee are not taken into account in determining whether the Participant has a Separation from Service as a director under the Plan if the Participant participates in the Plan as a director, provided the Participant does not participate in any other nonqualified deferred compensation plan as an employee that is aggregated with the Plan under Code § 409A.

 

	
 1.40  

	
Specified Employee  A key employee (as defined in Code § 416(i) without regard to paragraph (5) thereof) of a Plan Sponsor or its Affiliates, any stock of which is publicly traded on an established securities market or otherwise.  A Participant is a key employee if the Participant meets the requirements of Code § 416(i)(1)(A)(i), (ii) or (iii) (applied in accordance with the regulations thereunder and disregarding Code § 416(i)(5)) at any time during the 12-month period ending each December 31.  If a Participant is a key employee at any time during the 12-month period ending on such December 31, the Participant is treated as a Specified Employee for the 12-month period beginning on the following April 1.  Whether any stock of a Plan Sponsor or its Affiliates is publicly traded on an established securities market or otherwise must be determined as of the date of the Participant’s Separation from Service.  Compensation that is excludable from an employee’s gross income on account of the location of the services or the location of the employer that is not effectively connected with the conduct of a trade or business within the United States shall not be treated as compensation for purposes of determining the identity of a key employee under this Section.

 

	
 1.41  

	
Spouse  The individual to whom a Participant is married, or was married in the case of a deceased Participant who was married at the time of his or her death.

 

  

13

  

 

	
 1.42  

	
Taxable Year  The 12-consecutive-month period beginning each January 1 and ending each December 31.

 

	
 1.43  

	
Trust  The agreement, if any, between the Plan Sponsor and the Trustee under which assets may be delivered by the Plan Sponsor to the Trustee to offset liabilities assumed by the Plan Sponsor under the Plan.  Any assets held under the terms of the Trust shall be the exclusive property of the Plan Sponsor and shall be subject to the creditor claims of the Plan Sponsor with respect to whom such Trust has been established.  Participants shall have no right, secured or unsecured, to any assets held under the terms of the Trust.

 

	
 1.44  

	
Trustee  The institution named by the Plan Sponsor in the Trust agreement, if any, and any corporation which succeeds the Trustee by merger or by acquisition of assets or operation of law.

 

	
 1.45  

	
Unforeseeable Emergency  A severe financial hardship to the Participant resulting from an illness or accident of the Participant or the Participant’s Spouse, Beneficiary or dependent (as defined in Code § 152 without regard to §§ 152(b)(1), (b)(2) and (d)(1)(B)), loss of the Participant’s property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

 

	
 1.46  

	
Valuation Date  The date on which Participant Accounts under the Plan are valued.  The Valuation Date shall be each business day of the Taxable Year on which the New York Stock Exchange and, if a Trust has been established in connection with the Plan, the Trustee are open for business.

 

	
 1.47  

	
Without Good Cause  A Participant’s involuntary Separation from Service shall be without good cause if it occurs for reasons other than the Participant’s commission of a crime involving dishonesty or moral turpitude (e.g., fraud, theft, embezzlement, deception, etc.); misconduct, including but not limited to insubordinate behavior, by the Participant in the performance of his or her job duties and responsibilities; any conduct by the Participant of a nature which reflects negatively upon the Plan Sponsor or any Affiliate or which would prevent the Participant from being able to adequately perform his or her job duties and responsibilities (e.g., malicious, willful and wanton, or negligent conduct, etc.); the Participant’s failure to adequately perform his/her duties and responsibilities as such duties and responsibilities are, from time to time in the Plan Sponsor’s absolute discretion, determined; and the Participant’s breach of any of the Plan Sponsor’s established operating policies and procedures.

 

  

14

  

 

 

ARTICLE II

 

 

ELIGIBILITY AND PARTICIPATION

 

	
 2.1  

	
Eligibility  The Plan Sponsor will designate in the Adoption Agreement those persons who shall be considered Eligible Individuals under the Plan.

 

	
 2.2  

	
Participation The Plan Administrator shall provide written notification to each Eligible Individual of his or her eligibility to participate in the Plan.

 

	
 2.3  

	
Compensation Deferral Agreement  In order to defer Compensation under the Plan for a given Taxable Year, an Eligible Individual must enter into a Compensation Deferral Agreement with the Plan Sponsor authorizing the deferral of all or part of the Participant’s Compensation for such Taxable Year.  With respect to Variable Pay (Sales), a Compensation Deferral Agreement will be effective for the 12-month period from April 1 to March 31.  The Compensation Deferral Agreement shall also specify the method of payment for benefits under the Plan and any Interim Distribution Date that shall apply with respect to amounts credited to the Participant’s Account for such period.

 

Upon receipt of a properly completed and executed Compensation Deferral Agreement, the Plan Administrator shall notify the Plan Sponsor to withhold that portion of the Participant’s Compensation specified in the Agreement.  In no event will the Participant be permitted to defer more or less than the amount(s) specified by the Plan Sponsor in the Adoption Agreement.

 

The Compensation Deferral Agreement shall remain in effect for the duration of the period to which it relates.

 

Except as provided below, a Compensation Deferral Agreement must be completed and returned to the Plan Sponsor prior to the first day of the Taxable Year in which services are performed for the Compensation deferred and shall be irrevocable except as otherwise provided hereunder.

 

	
(a)  

	
Initial Eligibility  If the Plan is established on a date other than the first day of a Taxable Year, or if an individual becomes an Eligible Individual on a date other than the first day of a Taxable Year and such individual has not at any time been eligible to participate in the Plan or any Aggregated Plan, the Compensation Deferral Agreement may be completed and returned to the Plan Sponsor within 30 days after the Effective Date or within 30 days of the Eligible Individual’s initial eligibility date.  In no event shall a Participant be permitted to defer Compensation with respect to services performed before the date on which the Compensation Deferral Agreement is signed by the Participant and accepted by the Plan Administrator.

 

  

15

  

 

	
(b)  

	
Former Participants With No Account Balance  If an Eligible Individual who is a  former Participant has been paid all amounts deferred under the Plan and any Aggregated Plan and, on and before the date of the last payment, is not eligible to continue (or elect to continue) to participate in the Plan or any Aggregated Plan for periods after the last payment (other than through an election of a different time and form of payment with respect to the amounts paid), the Eligible Individual may be treated as initially eligible to participate in the Plan pursuant to subsection (a) above as of the first date following such last payment that the Eligible Individual again becomes eligible to participate in the Plan.

 

	
(c)  

	
Participants Ineligible for Two Years  If an Eligible Individual who is a Participant or former Participant ceases being eligible to participate in the Plan and any Aggregated Plan, regardless of whether all amounts deferred under such plans have been paid, and subsequently becomes eligible to participate in the Plan again, the Eligible Individual may be treated as being initially eligible to participate in the Plan pursuant to subsection (a) above if the Eligible Individual has not been eligible to participate in the Plan or an Aggregated Plan (other than through the accrual of earnings) at any time during the twenty-four (24) month period ending on the date the Eligible Individual again becomes eligible to participate in the Plan.

 

	
(d)  

	
Performance-Based Compensation  A Compensation Deferral Agreement with respect to Performance-Based Compensation may be completed and returned to the Plan Sponsor no later than the date that is six months before the end of the performance period to which the Performance-Based Compensation relates, provided the Participant performs services continuously from the later of the beginning of the performance period or the date upon which the performance criteria are established through the date upon which the Participant makes an initial deferral election, and further provided that in no event may an election to defer Performance-Based Compensation be made with respect to Compensation that has become readily ascertainable.

 

	
(e)  

	
Sales Commissions  Compensation Deferral Agreements made with respect to Sales Commissions must be completed and returned to the Plan Sponsor prior to the first day of the Taxable Year in which the customer remits payment to the Plan Sponsor or Affiliate for which the Sales Commission is paid or, if applied consistently to all similarly situated Participants, the Taxable Year in which the sale occurs.

 

  

16

  

 

	
(f)  

	
Investment Commissions  Compensation Deferral Agreements made with respect to Investment Commissions must be completed and returned to the Plan Sponsor prior to the first day of the Taxable Year in which falls the date that is twelve (12) months before the date as of which the overall value of the assets or asset accounts is determined for purposes of calculating the Investment Commission.

 

	
 2.4  

	
Subsequent Changes in Form of Payment  A Participant may elect to change the form of payment of amounts distributable upon a Separation from Service or death, provided, however, that any such election shall be effective only if:

 

	
(a)  

	
the election does not accelerate the time or schedule of any payment within the meaning of Code § 409A;

 

	
(b)  

	
the election does not take effect until at least twelve 12 months after the date on which the election is made; and

 

	
(c)  

	
except in the case of a payment to be made following death, the first payment with respect to which such election is made is deferred for a period of 5 years from the date such payment would otherwise have been made.

 

The Plan Administrator shall have sole and absolute discretion to decide whether such a request shall be approved but may approve no more than one such request for any Participant with respect to Compensation Deferrals and Matching and Discretionary Credits for any Taxable Year (or applicable deferral period).

 

	
 2.5  

	
Matching Credits and Discretionary Credits  The Plan Sponsor may adjust the Account of a Participant with matching or discretionary credits.  The amount of the Discretionary Credits and/or Matching Credits and the formula(s) for allocating such credits will be selected by the Plan Sponsor in the Adoption Agreement.

 

	
 2.6  

	
Establishing a Reserve for Plan Liabilities  The Plan Sponsor may, but is not required to, establish one or more Trusts to which the Plan Sponsor may transfer such assets as the Plan Sponsor determines in its sole discretion to assist in meeting its obligations under the Plan.  Any such assets shall be the property of the Plan Sponsor and remain subject to the claims of the Plan Sponsor’s creditors, to the extent provided under any Trust established with respect to such Plan Sponsor.  The Trustee shall have no duty to determine whether the amounts forwarded by the Plan Sponsor are the correct amount or that they have been transmitted in a timely manner.

 

  

17

  

 

 

ARTICLE III

 

 

PARTICIPANT ACCOUNTS AND REPORTS

 

	
 3.1  

	
Establishment of Accounts  The Plan Administrator shall establish and maintain individual recordkeeping accounts and subaccounts, as applicable, on behalf of each Participant for purposes of determining each Participant’s benefits under the Plan.  A Participant’s Account does not represent the Participant’s ownership of, or any ownership interest in, any assets which may be set aside to satisfy the Plan Sponsor’s obligations under the Plan.

 

	
 3.2  

	
Account Maintenance  As of each Valuation Date, the Plan Administrator shall credit each Participant’s Account with the following:

 

	
(a)  

	
An amount equal to any Compensation Deferrals made by the Participant since the last Valuation Date;

 

	
(b)  

	
An amount equal to any Matching Credits or Discretionary Credits, and any forfeitures, if applicable, since the last Valuation Date; and

 

	
(c)  

	
An amount equal to deemed Investment Credits under Section 3.3 below since the last Valuation Date.

 

As of each Valuation Date, the Plan Administrator shall debit each Participant’s Account with the following:

 

	
(d)  

	
An amount equal to any distributions to be made from the Plan to the Participant or Beneficiary, as described below, not previously debited from the Participant’s Account; and

 

	
(e)  

	
An amount equal to deemed Investment Debits under Section 3.3 below since the last Valuation Date; and

 

	
(f)  

	
An amount equal to any forfeitures incurred by the Participant since the last Valuation Date.

 

The amount of any payment to be made to a Participant or Beneficiary under the Plan will be debited from the Participant’s Account as of the last Valuation Date of the month preceding the month in which the payment will be made.

 

	
 3.3  

	
Investment Credits and Debits   The Accounts of Participants shall be adjusted for Investment Credits and Debits in accordance with this Section 3.3.

 

Participants shall have the right to specify one or more Benefit Benchmarks in which their Compensation Deferrals, Matching Credits and Discretionary Credits shall be deemed to be invested.  The Benefit Benchmarks shall be utilized solely for purposes of adjusting their Accounts in accordance with

 

  

18

  

procedures adopted by the Plan Administrator.  The Plan Administrator shall provide the Participant with a list of the available Benefit Benchmarks.  From time to time, in the sole discretion of the Plan Administrator, the Benefit Benchmarks available within the Plan may be revised.  All Benefit Benchmark selections must be denominated in whole percentages unless the Plan Administrator determines that lower increments are acceptable.  A Participant may make changes in the manner in which future Compensation Deferrals, Matching Credits and/or Discretionary Credits are deemed to be invested among the various Benefit Benchmarks within the Plan in accordance with procedures established by the Plan Administrator.  A Participant may re-direct the manner in which earlier Compensation Deferrals, Matching Credits and/or Discretionary Credits, as well as any appreciation (or depreciation) to-date, are deemed to be invested among the Benefit Benchmarks available in the Plan in accordance with procedures established by the Plan Administrator.

 

As of each Valuation Date, the Plan Administrator shall adjust the Account of each Participant for interest, earnings or appreciation (less losses and depreciation) with respect to the then balance of the Participant’s Account equal to the actual results of the Participant’s deemed Benefit Benchmark elections.

 

All notional acquisitions and dispositions of Benefit Benchmarks which occur within a Participant’s Account, pursuant to the terms of the Plan, shall be deemed to occur at such times as the Plan Administrator shall determine to be administratively feasible in its sole discretion and the Participant’s Account shall be adjusted accordingly.  Accordingly, if a distribution or reallocation must occur pursuant to the terms of the Plan and all or some portion of the Account must be valued in connection with such distribution or reallocation (to reflect Investment Credits and Debits), the Plan Administrator may in its sole discretion, unless otherwise provided for in the Plan, select a date or dates which shall be used for valuation purposes.

 

Notwithstanding the Participant’s deemed Benefit Benchmark elections under the Plan, the Plan Sponsor shall be under no obligation to actually invest any amounts in such manner, or in any manner, and such Benefit Benchmark elections shall be used solely to determine the amounts by which the Participant’s Account shall be adjusted under this Article III.

 

	
 3.4  

	
Participant Statements   The Plan Administrator shall provide each Participant with a statement showing the credits and debits from his or her Account during the period from the last statement date.  Such statement shall be provided to Participants as soon as administratively feasible following the end of each Taxable Year and on such other dates as agreed to by the Plan Sponsor and the party maintaining Participant records.

 

  

19

  

 

ARTICLE IV

 

 

WITHHOLDING OF TAXES

 

	
 4.1  

	
Withholding from Compensation  For any Taxable Year in which Compensation Deferrals, Matching Credits and/or Discretionary Credits are made to or vested within the Plan (as applicable), the Plan Sponsor shall withhold the Participant’s share of income, FICA and other employment taxes from the portion of the Participant’s Compensation not deferred.  If deemed appropriate by the Plan Sponsor, all or any portion of a benefit under the Plan may be distributed in certain instances where necessary to facilitate compliance with applicable withholding requirements to the extent such distribution would not result in adverse tax consequences under Code § 409A.  The amount of any such distribution shall not exceed the amount necessary to comply with applicable withholding requirements.

 

	
 4.2  

	
Withholding from Benefit Distributions  The Plan Sponsor (or the Trustee of the Trust, as applicable) shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Plan Sponsor, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Plan Sponsor.

 

 

ARTICLE V

 

 

VESTING

 

	
 5.1  

	
Vesting  A Participant shall be immediately vested in (i.e., shall have a non-forfeitable right to) all Compensation Deferrals credited to his or her Account, including any Investment Credits or Debits associated therewith.  The Plan Sponsor shall specify in the Adoption Agreement the vesting provisions applicable to any Discretionary Credits or Matching Credits allocated to the Accounts of Participants.  Upon a Distributable Event, except as otherwise provided under the Plan, any amount of the benefit payment credited to the Account of the Participant that is not vested shall be forfeited.  Forfeitures incurred by a Participant shall reduce the amounts credited to a Participant’s Account, but shall not be reallocated to the Accounts of other Participants unless otherwise specified in the Adoption Agreement.  A distribution for a Domestic Relations Order Payment under Section 6.6 shall be made from the Account of the Participant only to the extent it is vested.

 

 

ARTICLE VI

 

 

PAYMENTS

 

	
 6.1  

	
Benefits  Except as otherwise provided under the Plan, a Participant’s or Beneficiary’s benefit payable under the Plan shall be based on the value of the Participant’s vested Account as of the last Valuation Date of the month

 

  

20

  

preceding the month in which the benefit is paid or commences.  If applicable, installment payments paid in the year of a Participant’s Distributable Event shall be based on the value of the Participant’s vested Account, measured on the last Valuation Date of the month preceding the month in which the installment payments commence, and shall be equal to  1/n (where ‘n’ is equal to the total number of annual benefit payments not yet distributed).  Subsequent installment payments shall be computed in a consistent manner, except that the amount of installment payments in any year following the year in which installment payments commence will be based on the value of the Participant’s Account as of the last Valuation Date of the preceding year.  For purposes of Code § 409A, installment payments shall be treated as a single payment.  Notwithstanding a Participant’s election regarding the form of any payment, the Plan Sponsor shall make a De Minimis Distribution, as elected by the Plan Sponsor in the Adoption Agreement, and pay the Participant’s or Beneficiary’s benefit in a single lump-sum payment.  In no event, will a Participant’s right to a benefit under this Plan give such Participant a secured right or claim on any assets set aside by the Plan Sponsor to meet its obligations under the Plan.  All payments from the Plan shall be subject to applicable tax withholding and shall commence (or be fully paid, in the event a lump sum form of distribution was selected) no later than ninety (90) days after the occurrence of the Distributable Event, except as otherwise provided herein.

 

	
 6.2  

	
Separation from Service Payment  In the event of a Participant’s Separation from Service, the Participant’s vested Account shall be paid in the form of a cash lump sum or, if elected by the Participant, in monthly cash payments (over a period of three(3), five (5), ten (10), or fifteen (15) years.)  Election of the form of the Separation from Service Payment must be provided to the Plan Administrator at the time the Participant first enters into a Compensation Deferral Agreement.  A Participant shall be permitted to elect different forms of payment for a Separation from Service that occurs before the Participant attains age 55 and a Separation from Service that occurs after the Participant attains age 55.

 

Notwithstanding a Participant’s election regarding the form of the Separation from Service Payment, the Plan Sponsor shall make a De Minimis Distribution, as elected by the Plan Sponsor in the Adoption Agreement, and pay the Participant’s or Beneficiary’s benefit in a single lump-sum payment.

 

Notwithstanding the foregoing, a distribution resulting from a Separation from Service by a Participant who is a Specified Employee on the date of Separation from Service shall be made within the ninety (90) days following the date that is 6 months after the Separation from Service or, if earlier, within the ninety (90) days following the death of the Specified Employee.  The first payment made following the 6-month period described in the preceding sentence shall include all payments that otherwise would have

 

  

21

  

been made after Separation from Service but for the delay required by this paragraph.

 

	
 6.3  

	
Conflict of Interest Divestiture  The Plan Administrator shall pay to a Participant all or a portion of the Participant’s vested Account to the extent

 

	
(a)  

	
necessary for any ­Participant who is Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal government; or

 

	
(b)  

	
reasonably necessary to avoid the violation of an applicable Federal, state or local ethics or conflicts of interest law (including when such payment is reasonably necessary to permit the Participant to participate in activities in the normal course of his or her position in which the Participant would not otherwise be able to participate under an applicable rule).

 

The Plan Administrator shall have complete discretion to determine whether the Participant’s circumstances meet the requirements for a Conflict of Interest Divestiture and the amount of any distribution.  A distribution under this Section shall be made at such time and in such form otherwise available under the Plan as shall be necessary to comply with an applicable ethics agreement or to avoid the violation of an applicable ethics or conflict of interest law.

 

	
 6.4  

	
Death Benefit  In the event of the Participant’s death, the Participant’s vested Account shall be paid to the Participant’s Beneficiary (or, if applicable, in accordance with Section 6.10).  The amounts deferred by a Participant for any Taxable Year shall be paid pursuant to this Section in the form of a cash lump sum or, if elected by the Participant, in monthly cash installments over the period elected by the Participant in the Compensation Deferral Agreement for such Taxable Year, or as changed pursuant to Section 2.4.

 

	
 6.5  

	
Domestic Relations Order Payment  If it is necessary to comply with a Domestic Relations Order, whether before or after the Participant has otherwise incurred a Distributable Event or commenced receiving payments from the Plan, the Plan Administrator shall pay to the Spouse, former Spouse, child, or other dependent of the Participant, as specified in the Domestic Relations Order, the amount from the Participant’s vested Account required to comply with the Domestic Relations Order.  The Plan Administrator shall have complete discretion to determine whether the circumstances of the Participant meet the requirements for a Domestic Relations Order Payment under this Section.  If the request for a payment due to a Domestic Relations Order is approved, the distribution shall be made at such time and in such form of payment otherwise available under the Plan as shall be necessary to comply with the Domestic Relations Order.

 

  

22

  

 

	
 6.6  

	
Unforeseeable Emergency Distribution  If a Participant has an Unforeseeable Emergency, as defined herein, the Plan Administrator may pay to the Participant that portion of his or her vested Account which the Plan Administrator determines is reasonably necessary to satisfy the emergency.  The amounts distributed to the Participant as a result of an Unforeseeable Emergency may not exceed the amounts reasonably necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cancellation of Compensation Deferrals pursuant to Section 7.1.  A Participant requesting an Unforeseeable Emergency Distribution shall apply for the payment in writing on a form approved by the Plan Administrator and shall provide such additional information as the Plan Administrator may require.  The Plan Administrator shall have complete discretion to determine whether the financial hardship of the Participant constitutes an Unforeseeable Emergency under the Plan.  If, subject to the sole discretion of the Plan Administrator, the request for a withdrawal is approved, the distribution shall be made within ninety (90) days after the date of approval by the Plan Administrator.

 

	
 6.7  

	
Election to Receive Interim Distributions  A Participant may make an election, at the time he or she files a Compensation Deferral Agreement for a given deferral period, to have those Compensation Deferrals to which the agreement relates paid to him or her at an Interim Distribution Date designated by the Participant.  Such Compensation Deferrals, adjusted to reflect Investment Credits and Debits, shall be payable in a single cash lump sum payment within ninety (90) days after an applicable Interim Distribution Date.  The Participant’s selection of an Interim Distribution Date is irrevocable, except as provided in Section 2.4, and must comply with the definition of Interim Distribution Date under Section 1.24.  Notwithstanding a Participant’s advance election to designate Interim Distribution Dates, the amounts which would otherwise be subject to such Interim Distribution Dates shall be distributable upon a Distributable Event pursuant to the Plan, if such Distributable Event occurs prior to an applicable Interim Distribution Date.  Matching Credits and Discretionary Credits shall not be payable at an Interim Distribution Date.

 

	
 6.8  

	
Payment upon Income Inclusion Under § 409A  If the Plan Administrator determines at any time that the Plan fails to meet the requirements of Code § 409A with respect to a Participant, the Plan Administrator shall pay to the Participant the amount credited to the Participant’s vested Account that is required to be included in income as a result of such failure.

 

	
 6.9  

	
Permissible Delay in Payments  A payment may be delayed beyond the distribution date otherwise provided for under the Plan in one or more of the

 

  

23

  

circumstances below, if the Plan Sponsor so elects in the Adoption Agreement.

 

	
(a)  

	
Payments Subject to Code § 162(m)  A payment, including any portion thereof, will be delayed when the Plan Sponsor reasonably anticipates that its deduction with respect to such payment otherwise would be eliminated by application of Code § 162(m), provided that the payment is made either during the Participant’s first Taxable Year in which the Plan Sponsor reasonably anticipates (or should reasonably anticipate) that if the payment is made during such year the deduction of such payment will not be barred by Code § 162(m) or during the period beginning with the date of the Participant’s Separation from Service and ending on the later of the last day of the Plan Sponsor’s taxable year in which the Participant has a Separation from Service or the 15th day of the third month following the Participant’s Separation from Service, and provided further that when any scheduled payment to a Participant in the Plan Sponsor’s taxable year is delayed in accordance with this Section, all scheduled payments to such Participant that could be delayed in accordance with this Section are also delayed.  When a payment is delayed to a date on or after the Participant’s Separation from Service, the payment shall be treated as a payment upon a Separation from Service and, in the case of a Specified Employee, the date that is 6 months after a Participant’s Separation from Service is substituted for any reference to a Participant’s Separation from Service in the foregoing provisions of this Section.

 

	
(b)  

	
Violation of Federal Securities Laws or Other Applicable Law  A payment will be delayed when the Plan Sponsor reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law, provided that the payment will be made at the earliest date at which the Plan Sponsor reasonably anticipates that the making of the payment will not cause such violation.  The making of a payment that would cause inclusion in gross income or the application of any penalty provision or other provision of the Code is not treated as a violation of applicable law.

 

	
 6.10  

	
Beneficiary Designation  A Participant shall have the right to designate a Beneficiary and to amend or revoke such designation at any time in writing.  Such designation, amendment or revocation shall be effective upon receipt by the Plan Administrator.  If the Beneficiary is a minor or incompetent, benefits may be paid to a legal guardian, trustee, or other proper representative of the Beneficiary, and such payment shall completely discharge the Plan Sponsor and the Plan of all further obligations hereunder.

 

  

24

  

 

If no Beneficiary designation is made, or if the Beneficiary designation is held invalid, or if no Beneficiary survives the Participant and benefits are determined to be payable following the Participant’s death, the Plan Administrator shall direct that payment of benefits be made to the person or persons in the first of the below categories in which there is a survivor.  The categories of successor beneficiaries, in order, are as follows:

 

	
(a)  

	
Participant’s Spouse;

 

	
(b)  

	
Participant’s Domestic Partner, if elected by the Plan Sponsor in the Adoption Agreement;

 

	
(c)  

	
Participant’s descendants, per stirpes (eligible descendants shall be determined by the intestacy laws of the state in which the decedent was domiciled);

 

	
(d)  

	
Participant’s parents;

 

	
(e)  

	
Participant’s brothers and sisters (including step brothers and step sisters); and

 

	
(f)  

	
Participant’s estate.

 

	
 6.11  

	
Claims Procedure  Any person who claims entitlement to a benefit that has not been timely paid under the terms of the Plan shall submit a claim to the Plan Administrator in writing.  The Plan Administrator has complete discretion and authority to interpret and construe any provision of the Plan, and its decisions regarding claims for benefits hereunder are final and binding.

 

	
(a)  

	
Presentation of Claim.  Any Participant, Beneficiary or person claiming benefits under the Plan (such Participant, Beneficiary or other person being referred to below as a “Claimant”) may deliver to the Plan Administrator a written claim for a determination with respect to benefits distributable to such Claimant from the Plan.  The claim must state with particularity the determination desired by the Claimant.

 

Any claim by a Participant that a payment made under the Plan is less than the amount to which the Participant is entitled must be made in writing pursuant to the foregoing provisions of this Section within 180 days after the date of such payment.  Notwithstanding any other provision of the Plan, including the provisions of Section 5.1, a Participant shall forfeit all rights to any amounts claimed if the Participant fails to make claim as provided in the preceding sentence.

 

  

25

  

 

	
(b)  

	
Notification of Decision  The Plan Administrator shall consider a Claimant’s claim within a reasonable time, and shall notify the Claimant in writing:

 

	
(i)  

	
that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or

 

	
(ii)  

	
that the Plan Administrator has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:

 

	
(1)  

	
the specific reason(s) for the denial of the claim, or any part of it;

 

	
(2)  

	
specific reference(s) to pertinent provisions of the Plan upon which such denial was based;

 

	
(3)  

	
a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary;

 

	
(4)  

	
a description of the claim review procedure set forth in Section 6.12(c) below, including information regarding any applicable time limits and a statement regarding the Claimant’s right to bring an action under ERISA § 502(a) following an adverse determination on review; and

 

	
(5)  

	
if the decision involved the Disability of the Participant, information regarding whether an internal rule or procedure was relied upon in making its decision and that the Claimant can request a copy of such rule or procedure, free of charge, upon request.

 

The Plan Administrator will notify the Claimant of an adverse decision within ninety (90) days after the date the claim was received, unless the Plan Administrator determines there are special circumstances that require an extension of time in which to make a decision.  If an extension of time is needed, the Plan Administrator shall notify the Claimant of the extension before the expiration of the original 90-day period.  The notice will include a description of the special circumstances requiring an extension of time and an estimate of the date it expects a decision to be made.  The extension shall not exceed an additional 90-day period.

 

  

26

  

 

If the adverse decision relates to a claim involving the Disability of the Participant, the Plan Administrator will notify the Claimant of an adverse decision within forty-five (45) days after the date the claim was received, unless the Plan Administrator determines that matters beyond its control require an extension of time in which to make a decision.  If an extension of time is needed, the Plan Administrator shall notify the Claimant of the extension before the expiration of the original 45-day period.  The notice will include a description of the circumstances necessitating the extension and an estimate of the date it expects a decision to be made.  The extension shall not exceed an additional 30-day period unless, within the 30-day period the Plan Administrator again determines that more time is needed due to matters beyond its control, in which case notice of the need for not more than an additional thirty (30) days is provided to the Claimant before the first 30-day period expires.  The notice will include a description of the circumstances requiring the extension and an estimate of the date it expects a decision to be made.  Any extension notice will include information regarding the standards on which a determination of Disability will be made, the outstanding issues which prevent a decision from being made, and any additional information which is needed in order to reach a decision.  The Claimant will have forty-five (45) days to supply any additional information.

 

If the Plan Administrator notifies the Claimant of the need for an extension of time to make a decision regarding his or her claim in accordance with this Section 6.12(b), and the extension is needed due to the Claimant’s failure to provide information necessary to decide the claim, the period of time in which the Plan Administrator must make a decision does not include the time between the date the notice of the extension was sent to the Claimant and the date the Claimant responds to the request for additional information.

 

	
(c)  

	
Review of a Denied Claim  Within sixty (60) days after receiving a notice from the Plan Administrator that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Plan Administrator a written request for a review of the denial of the claim.  During the 60-day review period, the Claimant (or the Claimant’s duly authorized representative):

 

	
(i)  

	
may review relevant documents;

 

	
(ii)  

	
may submit written comments or other documents relating to the claim;

 

  

27

  

 

	
(iii)  

	
may request access to and copies of all relevant documents, free of charge;

 

	
(iv)  

	
may request a hearing, which the Plan Administrator, in its sole discretion, may grant.

 

The Plan Administrator will consider all documents and other information submitted by the Claimant in reviewing its previous decision, including documents not available to or considered by it during its initial determination.

 

If the appeal relates to a determination of the Plan Administrator involving the Disability of the Participant, the Claimant will have one-hundred-eighty (180) days following receipt of a denial to file a written request for review.  In such event, no deference shall be given to the initial benefit determination, and the review shall be conducted by an appropriate fiduciary who is someone other than the individual who made the initial determination or a subordinate of such individual.  If the initial determination was based in whole or in part on a medical judgment, the reviewer shall consult with an appropriately trained and experienced health care professional, and shall disclose the identity of any experts who provided advice with regard to the initial decision.  The health care professional whose advice is sought during the appeal process will not be an individual who was consulted during the initial determination, nor a subordinate of such an individual.

 

	
(d)  

	
Decision on Review  The Plan Administrator shall render its decision on   review promptly, and not later than sixty (60) days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Plan Administrator’s decision must be rendered within one-hundred-twenty (120) days after such date.  If an extension of time is needed, the Plan Administrator shall notify the Claimant of the extension before the expiration of the original 60-day period.  The notice will include a description of the circumstances requiring the extension and an estimate of the date it expects a decision to be made.  Such decision must be written in a manner calculated to be understood by the Claimant, and if the decision on review is adverse it must contain:

 

	
(i)  

	
specific reasons for the decision;

 

	
(ii)  

	
specific reference(s) to the pertinent Plan provisions upon which the decision was based;

 

  

28

  

 

	
(iii)  

	
a statement that the Claimant may receive, upon request and free of charge, access to and copies of relevant documents and information;

 

	
(iv)  

	
a statement describing any voluntary appeal procedures under the Plan and the Claimant’s right to bring an action under ERISA § 502(a);

 

	
(v)  

	
if the decision involved the Disability of the Participant, information regarding whether an internal rule or procedure was relied upon in making its decision and that the Claimant can request a copy of such rule or procedure, free of charge, upon request;

 

	
(vi)  

	
if the decision involved the Disability of the Participant, a statement  that the Claimant and the Plan may have other voluntary alternative dispute resolution options, such as mediation, and that the Claimant may find out what options are available by contacting the local U.S. Department of Labor Office and the state insurance regulatory agency; and

 

	
(vii)  

	
such other matters as the Plan Administrator deems relevant.

 

If the appeal involves the Disability of the Participant, the decision of the Plan Administrator will be made within forty-five (45) days after the filing of the written request for review, unless special circumstances require additional time, in which case the Plan Administrator’s decision will be made within ninety (90) days after the date the request was filed.  If an extension of time is needed, the Plan Administrator shall notify the Claimant of the extension before the expiration of the original 45-day period.  The notice will include a description of the circumstances requiring the extension and an estimate of the date it expects a decision to be made.

 

If the Plan Administrator notifies the Claimant of the need for an extension of time to make a decision regarding his or her appeal in accordance with this Section 6.12(d), and the extension is needed due to the Claimant’s failure to provide information necessary to decide the appeal, the period of time in which the Plan Administrator must make a decision does not include the time between the date the notice of the extension was sent to the Claimant and the date the Claimant responds to the request for additional information.

 

	
(e)  

	
Disputed Payments under Code § 409A  If the Plan Sponsor or any Affiliate fails to make a payment, in whole or in part, that is payable as of a date specified under the terms of the Plan, the

 

  

29

  

payment will be treated as made upon the date specified under the Plan for purposes of Code § 409A if the Claimant accepts the portion (if any) of the payment that the Plan Sponsor or Affiliate is willing to make (unless such acceptance will result in a relinquishment of the claim to all or part of the remaining amounts), makes prompt and reasonable good faith efforts to collect the remaining portion of the payment, and any further payment (including payment of a lesser amount that satisfies the obligation to make the payment) is made no later than the end of the first calendar year in which the Claimant and the Plan Sponsor or Affiliate enter into a legally binding settlement of such dispute, the Plan Sponsor or Affiliate concedes the amount is payable or the Plan Sponsor or Affiliate is required to made such payment pursuant to a final, binding and nonappealable judgment or other binding decision.  For purposes of this Section, efforts to collect a payment will be presumed not to be prompt, reasonable, good faith efforts unless the Claimant provides notice to the Plan Administrator within 90 days of the latest date upon which a payment could have been timely made in accordance with the terms of the Plan and unless, if not paid, the claimant takes further enforcement measures within 180 days after such latest date.

 

 

ARTICLE VII

 

 

CANCELLATION OF DEFERRALS

 

	
 7.1  

	
Unforeseeable Emergency  If a Participant has an Unforeseeable Emergency, as defined herein, the Plan Administrator may cancel all future Compensation Deferrals pertaining to Compensation not yet earned and required to be made pursuant to the Participant’s current Compensation Deferral Agreement if reasonably necessary to satisfy the Participant’s financial hardship subject to the standards and requirements for an Unforeseeable Emergency Distribution set forth in Section 6.7.  If a Participant receives a hardship distribution from a qualified plan of the Plan Sponsor pursuant to Code § 401(k)(2)(B)(IV), the Plan Administrator shall cancel all future Compensation Deferrals pertaining to Compensation not yet earned and required to be made pursuant to the Participant’s current Compensation Deferral Agreement, and the Participant will be prohibited from making Compensation Deferrals under the Plan for at least six (6) months after receipt of the hardship distribution or such longer period as may be prescribed by the qualified plan.  The Participant’s eligibility for Employer Matching Credits and/or Employer Discretionary Credits shall be similarly canceled, and the Participant shall be eligible to defer Compensation again at a later time only as provided under Article II.

 

	
 7.2  

	
Disability  The Plan Administrator may cancel all future Compensation Deferrals pertaining to Compensation not yet earned and required to be made

 

  

30

  

pursuant to a Participant’s current Compensation Deferral Agreement if the Participant becomes disabled.  For purposes of this Section, a Participant becomes disabled if the Participant has a medically determinable physical or mental impairment that causes him to be unable to perform the duties of his position or any substantially similar position and such impairment can be expected to result in death or can be expected to last for a continuous period of not less than six months.  Such cancellation must be made, if at all, by the end of the Taxable Year in which (or, if later, by the fifteenth day of the third month after) the Participant becomes disabled.  The Participant shall be eligible to defer Compensation again at a later time only as provided under Article II.

 

 

ARTICLE VIII

 

 

PLAN ADMINISTRATION

 

	
 8.1  

	
Appointment The Plan Administrator shall serve at the pleasure of the Board, which shall have the right to remove the Plan Administrator at any time.  The Plan Administrator shall have the right to resign upon thirty (30) days’ written notice to the Board.

 

	
 8.2  

	
Duties of Plan Administrator  The Plan Administrator shall be responsible to perform all administrative functions of the Plan.  These duties include but are not limited to:

 

	
(a)  

	
Communicating with Participants in connection with their rights and benefits under the Plan;

 

	
(b)  

	
Reviewing Benefit Benchmark elections received from Participants;

 

	
(c)  

	
Arranging for the payment of taxes (including income tax withholding), expenses and benefit payments to Participants under the Plan;

 

	
(d)  

	
Filing any returns and reports due with respect to the Plan;

 

	
(e)  

	
Interpreting and construing Plan provisions and settling claims for Plan benefits;

 

	
(f)  

	
Serving as the Plan’s designated representative for the service of notices, reports or claims (other than service of legal process);

 

	
(g)  

	
Employing any agents such as accountants, auditors, attorneys, actuaries or other professionals as it deems necessary in the performance of its duties.

 

	
 8.3  

	
Plan Sponsor  The Plan Sponsor has sole responsibility for the establishment and maintenance of the Plan.  The Plan Sponsor through its Board or the

 

  

31

  

Executive Committee of the Board shall have the power and authority to appoint and remove the Plan Administrator and Trustee.  The Plan Sponsor may delegate any of its powers to the Plan Administrator, Board member or a committee of the Board.

 

	
 8.4  

	
Administrative Fees and Expenses  All reasonable costs, charges and expenses incurred by the Plan Administrator or the Trustee in connection with the administration of the Plan or the Trust shall be paid by the Plan Sponsor.  If not so paid, such costs, charges and expenses shall be charged to the Trust, if any, established in connection with the Plan.  The Trustee shall be specifically authorized to charge its fees and expenses directly to the Trust.  If the Trust has insufficient liquid assets to cover the applicable fees, the Trustee shall have the right to liquidate assets held in the Trust to pay any fees or expenses due.  Notwithstanding the foregoing, no Compensation other than reimbursement for expenses shall be paid to a Plan Administrator who is an employee of the Plan Sponsor.

 

	
 8.5  

	
Plan Administration and Interpretation  The Plan Administrator shall have complete discretionary control and authority to determine the rights and benefits and all claims, demands and actions arising out of the provisions of the Plan or any Participant, Beneficiary, deceased Participant, or other person having or claiming to have any interest under the Plan.  The Plan Administrator shall have complete discretion to interpret the Plan and to decide all matters under the Plan.  Such interpretation and decision shall be final, conclusive, and binding on all Participants and any person claiming under or through any Participant.  Any individual serving as Plan Administrator who is a Participant will not vote or act on any matter relating solely to himself or herself.  When making a determination or calculation, the Plan Administrator shall be entitled to rely on information furnished by a Participant, a Beneficiary, the Plan Sponsor, or other party.  The Plan Administrator shall have the responsibility for complying with any reporting and disclosure requirements of ERISA.

 

	
 8.6  

	
Powers, Duties, Procedures  The Plan Administrator shall have such powers and duties, may adopt such rules, may act in accordance with such procedures, may appoint such officers or agents, may delegate such powers and duties, may receive such reimbursement and compensation, and shall follow such claims and appeal procedures with respect to the Plan as it may establish, each consistently with the terms of the Plan.

 

	
 8.7  

	
Information  To enable the Plan Administrator to perform its functions, the Plan Sponsor shall supply full and timely information to the Plan Administrator on all matters relating to the Compensation of Participants, their employment, retirement, death, Separation from Service, and such other pertinent facts as the Plan Administrator may require.

 

  

32

  

 

	
8.8

	
Indemnification of Plan Administrator The Plan Sponsor agrees to indemnify and to defend to the fullest extent permitted by law any officers(s), employee(s) or Board members who serve a Plan Administrator (including any such individual who formerly served as Plan Administrator) against all liabilities, damages, costs and expenses (including reasonable attorneys’ fees and amounts paid in settlement of any claims approved by the Plan Sponsor) occasioned by any act or omission to at in connection with the Plan, if such act or omission is in good faith.

 

 

ARTICLE IX

 

 

TRUST FUND

 

	
 9.1  

	
Trust  The Plan Sponsor may establish a Trust for the purpose of accumulating assets which may, but need not be used, by the Plan Sponsor to satisfy some or all of its financial obligations to provide benefits to Participants under this Plan.  Any trust created under this Section 9.1 shall be domiciled in the United States of America, and no assets of the Plan shall be held or transferred outside the United States.  All assets held in the Trust shall remain the exclusive property of the Plan Sponsor and shall be available to pay creditor claims of the Plan Sponsor in the event of insolvency, to the extent provided under any Trust established with respect to such Plan Sponsor.  The assets held in Trust shall be administered in accordance with the terms of the separate Trust Agreement between the Trustee and the Plan Sponsor.

 

	
 9.2  

	
Unfunded Plan   In no event will the assets accumulated by the Plan Sponsor in the Trust be construed as creating a funded Plan under the applicable provisions of ERISA or the Code, or under the provisions of any other applicable statute or regulation.  Any funds set aside by the Plan Sponsor in Trust shall be administered in accordance with the terms of the Trust.

 

	
 9.3  

	
Assignment and Alienation  No Participant or Beneficiary of a deceased Participant shall have the right to anticipate, assign, transfer, sell, mortgage, pledge or hypothecate any benefit under this Plan.  The Plan Administrator shall not recognize any attempt by a third party to attach, garnish or levy upon any benefit under the Plan except as may be required by law.

 

 

ARTICLE X

 

 

AMENDMENT AND PLAN TERMINATION

 

	
 10.1  

	
Amendment  The Plan Sponsor identified in Section I of the Adoption Agreement, through it Board or the Executive Committee of the Board, shall have the right to amend this Plan without the consent of any Participant or Beneficiary hereunder, provided that no such amendment shall have the effect of reducing any of the vested benefits to which a Participant or Beneficiary has accrued a right as of the effective date of the amendment.

 

  

33

  

Notwithstanding the foregoing, the Plan Sponsor identified in Section I of the Adoption Agreement, through its Board or the Executive Committee of the Board, shall have the right to amend this Plan in any manner whatsoever without the consent of any Participant or Beneficiary to comply with or avoid the application of the requirements of Code § 409A and any binding guidance thereunder to avoid adverse tax consequences or to preserve the favorable tax treatment of benefits paid or payable under the Plan even if such amendment has the affect of reducing a vested benefit or existing right of a Participant or Beneficiary hereunder.

 

	
 10.2  

	
Plan Termination  The Plan Sponsor identified in Section I of the Adoption Agreement, through its Board or the Executive Committee of its Board, may terminate or discontinue the Plan in whole or in part at any time.  No further Discretionary Credits or Matching Credits shall be made following Plan Termination, and no further Compensation Deferrals shall be permitted after the Taxable Year in which the Plan Termination occurs, except that the Plan Sponsor shall be responsible to pay any benefit attributable to vested amounts credited to the Participant’s Account as of the effective date of termination (following any adjustments to such Accounts in accordance with Article III hereof).  If the Plan is terminated in accordance with this Section 10.2, the Plan Administrator shall make distribution of the Participant’s vested benefit upon the occurrence of a Distributable Event with respect to a Participant.  A Participant’s vested benefit shall be adjusted to reflect Investment Credits and Debits for all Valuation Dates between Plan Termination and the occurrence of a Participant’s Distributable Event.

 

	
 10.3  

	
Plan Termination Following a Change in Control Event  If, as elected by the Plan Sponsor in the Adoption Agreement:

 

	
(a)  

	
a Change in Control Event constitutes a Plan Termination; or

 

	
(b)  

	
within the 30 days preceding or the 12 months following a Change in Control Event, the Plan Sponsor takes irrevocable action to terminate the Plan,

 

the Plan will be terminated and liquidated with respect to the Participants of each corporation that experienced the Change in Control Event.  The Plan will be terminated under this Section 10.3 only if all other arrangements sponsored by the Plan Sponsor experiencing the Change in Control Event that would be aggregated with the Plan as a single plan under Code § 409A are also terminated, so all participants under such aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within 12 months after the date the Plan Sponsor takes all necessary action to terminate the Plan and the other arrangements.  For purposes of this Section 10.3, when the Change of Control Event results from an asset purchase transaction, the applicable Plan Sponsor with the discretion to

 

  

34

  

terminate the Plan and the other arrangements is the Plan Sponsor that is primarily liable immediately after the transaction for the payment of deferred compensation.  Upon a Plan Termination Following a Change in Control Event, no further Compensation Deferrals or Employer Discretionary Credits or Employer Matching Credits shall be made, and  the Plan Administrator shall be responsible to pay any benefit attributable to vested amounts credited to the Participant’s Account as soon as practicable following date on which the Plan Sponsor irrevocably takes all necessary action to terminate the Plan (following any final adjustments to such Accounts in accordance with Article III hereof), but not later than 12 months following such date.

 

	
 10.4  

	
Plan Termination Following a Corporate Dissolution  The Plan Sponsor, through its Board or the Executive Committee of the Board, in its discretion may terminate and liquidate the Plan and make the payments provided below within 12 months after a Corporate Dissolution provided that the value of the Participants’ vested benefits is included in the Participants’ gross incomes in the latest of the following years (or, if earlier, the year in which the amount is actually or constructively received):

 

	
(a)  

	
 the calendar year in which the Plan Termination occurs;

 

	
(b)  

	
the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or

 

	
(c)  

	
the first calendar year in which the payment is administratively practicable.

 

Upon a Plan Termination Following a Corporate Dissolution, no further Compensation Deferrals or Employer Discretionary Credits or Employer Matching Credits shall be made, and the Plan Administrator shall be responsible to pay any benefit attributable to vested amounts credited to the Participant’s Account as of the effective date of termination  (following any final adjustments to such Accounts in accordance with Article III hereof).

 

	
 10.5  

	
Plan Termination in Connection with Termination of Certain Similar Arrangements  The Plan Sponsor, through its Board or the Executive Committee of the Board, in its discretion may terminate the Plan and make the distribution provided below provided that

 

	
(a)  

	
the termination does not occur proximate to a downturn in the financial health of the Plan Sponsor and its Affiliates;

 

	
(b)  

	
the Plan Sponsor terminates all other arrangements that would be aggregated with the Plan as a single plan under Code § 409A if the same Participant had deferrals of compensation under all of the other arrangements;

 

  

35

  

 

	
(c)  

	
no payments in liquidation of the Plan are made within 12 months after the date the Plan Sponsor takes all necessary action to irrevocably terminate the Plan, other than payments that would be payable under the terms of the Plan if action to terminate the Plan had not occurred;

 

	
(d)  

	
all payments are made within 24 months after the date the Plan Sponsor takes all necessary action to irrevocably terminate the Plan; and

 

	
(e)  

	
neither the Plan Sponsor nor any Affiliate adopts a new plan that would be aggregated with any terminated plan or arrangement under the definition of what constitutes a plan for purposes of Code § 409A if the same Participant participated in both arrangements, at any time within 3 years following the date the Plan Sponsor takes all necessary action to irrevocably terminate the Plan.

 

Upon a Plan Termination in Connection with the Termination of Certain Similar Arrangements, no further Employer Discretionary Credits or Employer Matching Credits shall be made, and no further Compensation Deferrals shall be made after the Taxable Year in which the Plan Termination in Connection with the Termination of Certain Similar Arrangements occurs.  The Plan Administrator shall be responsible to pay any benefit attributable to vested amounts credited to the Participant’s Account as soon as practicable after distributions are permissible under Code § 409A (following any final adjustments to such Accounts in accordance with Article III hereof).

 

	
 10.6  

	
Effect of Payment  The full payment of the balance of a Participant’s vested Account under the provisions of the Plan shall completely discharge all obligations to a Participant and his designated Beneficiaries under this Plan and each of the Participant’s Compensation Deferral Agreements shall terminate.

 

 

ARTICLE XI

 

 

MISCELLANEOUS

 

	
 11.1  

	
Total Agreement  This Plan document and the executed Adoption Agreement, Compensation Deferral Agreement, Beneficiary designation and other administration forms shall constitute the total agreement or contract between the Plan Sponsor and the Participant regarding the Plan.  No oral statement regarding the Plan may be relied upon by a Participant or Beneficiary.  The Plan Sponsor or Plan Administrator shall have the right to establish such procedures as are necessary for the administration or operation of the Plan or Trust, and such procedures shall also be considered a part of the Plan unless clearly contrary to the express provisions thereof.

 

  

36

  

 

	
 11.2  

	
Employment Rights  Neither the establishment of this Plan nor any modification thereof, nor the creation of any Trust or Account, nor the payment of any benefits, shall be construed as giving a Participant or other person a right to employment with the Plan Sponsor or any Affiliate or any other legal or equitable right against the Plan Sponsor of any Affiliate except as provided in the Plan.  In no event shall the terms of employment of any Eligible Individual be modified or in any way be affected by the Plan.

 

	
 11.3  

	
Non-Assignability  None of the benefits, payments, proceeds or claims of any Participant or Beneficiary shall be subject to attachment or garnishment or other legal process by any creditor of such Participant or Beneficiary, nor shall any Participant or Beneficiary have the right to alienate, commute, pledge, encumber or assign any of the benefits or payments or proceeds which he or she may expect to receive, contingently or otherwise under the Plan.

 

	
 11.4  

	
Binding Agreement  Any action with respect to the Plan taken by the Plan Administrator or the Plan Sponsor or the Trustee or any action authorized by or taken at the direction of the Plan Administrator, the Plan Sponsor or other authorized party shall be conclusive upon all Participants and Beneficiaries entitled to benefits under the Plan.

 

	
 11.5  

	
Receipt and Release  Any payment to any Participant or Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Plan Sponsor, the Plan Administrator and the Trustee under the Plan, and the Plan Administrator may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect.  If any Participant or Beneficiary is determined by the Plan Administrator to be incompetent by reason of physical or mental disability (including not being the age of majority) to give a valid receipt and release, the Plan Administrator may cause payment or payments becoming due to such person to be made to a legal guardian, trustee, or other proper representative of the Participant or Beneficiary without responsibility on the part of the Plan Administrator, the Plan Sponsor or the Trustee to follow the application of such funds.

 

	
 11.6  

	
Furnishing Information  A Participant or Beneficiary will cooperate with the Plan Administrator or any representative thereof by furnishing any and all information requested by the Plan Administrator and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Plan Administrator may deem necessary.

 

	
 11.7  

	
Compliance with Code § 409A  Notwithstanding any provision of the Plan to the contrary, all provisions of the Plan will be interpreted and applied to comply with the requirements of Code § 409A and any regulations and applicable binding guidance so as to avoid adverse tax consequences.  No provision of

 

  

37

  

the Plan, however, is intended or shall be interpreted to create any right with respect to the tax treatment of the amounts paid or payable hereunder, and neither the Plan Sponsor nor any Affiliate shall under any circumstances have any liability to a Participant or Beneficiary for any taxes, penalties or interest due on amounts paid or payable under the Plan, including taxes, penalties or interest imposed under Code § 409A.

 

	
 11.8  

	
Insurance  The Plan Sponsors, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as they may choose.  The Plan Sponsors or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance.  The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Plan Sponsor shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to which the Plan Sponsor have applied for insurance.

 

	
 11.9  

	
Governing Law  Construction, validity and administration of this Plan shall be governed by applicable Federal law and applicable state law in which the principal office of the Plan Sponsor is located, without regard to the conflict of law provisions of such state law.  If any provision shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.

 

	
 11.10  

	
Headings and Subheadings  Headings and subheadings in this Plan are inserted for convenience only and are not to be considered in the interpretation of the provisions hereof.

 

  

38

  

 

NONQUALIFIED DEFERRED COMPENSATION PLAN

ADOPTION AGREEMENT

The Plan Sponsor named below hereby establishes a Nonqualified Deferred Compensation Plan for Eligible Individuals as provided in this Adoption Agreement and the Basic Plan Document.

	
ARTICLE XII  

	
Plan Sponsor Information

 

	 	
 12.1  

	
Name and Address of Plan Sponsor:

 

	
Great-West Life & Annuity Insurance Company

	
8515 E. Orchard Road

	
Greenwood Village, Colorado 80111

	
 12.2  

	
Plan Name:                                2005 Nonqualified Deferred Compensation Plan                                                                                   

                                                                          

	
 12.3  

	
Telephone Number:                  (303) 737-3000                                                                          

 

	
 12.4  

	
Tax ID Number:                          84-0467907                                                                          

 

	
 12.5  

	
Tax Year End:                             December 31                                                                          

 

	
ARTICLE XIII

	
Definitions

 

	
 13.1  

	
Compensation  Shall mean (select one or more):

 

	
(a)  

	
[ X ]           Regular Salary

 

	
(b)  

	
[ X ]           Bonuses (Annual - not to include any amount earned under any other incentive plan, program or award)

 

	
(c)  

	
[ X ]           Variable Pay (Sales)

 

	
(d)  

	
[    ]           Commissions

 

	
(e)  

	
[ X ]           Performance-Based Compensation

 

	
(f)  

	
[    ]           Director Fees

 

  

39

  

 

	
 13.2  

	
Domestic Partner  Shall mean (select one):

 

	
(a)  

	
[    ]           An individual over age 18 in a committed relationship with the Participant which relationship includes the following characteristics: the parties have shared the same regular and permanent residence for at least six (6) months; neither party is legally married to any other person; the parties have no blood relationship that would preclude marriage; both parties have attained the age of legal majority in their state of residence; and the parties are financially interdependent.

 

	
(b)  

	
[ X ]           An individual who satisfies the following criteria:

 

Has been registered with the Plan Sponsor in accordance with the procedure for such registration established by the Plan Sponsor.

 

	
(c)  

	
[    ]           The Plan does not recognize Domestic Partners.

 

	
 13.3  

	
Interim Distribution Date  Shall mean (select one):

 

	
(a)  

	
[    ]           The first day of the Taxable Year in which falls the date that is three (3), five (5) or ten (10) years, as selected by the Participant at the time he or she files a Compensation Deferral Agreement, after the date on which the Compensation deferred under the Compensation Deferral Agreement would otherwise be payable, upon which a distribution shall be made in accordance with Section 6.8 of the Plan document.

 

	
(b)  

	
[ X ]           The first day of the Taxable Year selected by the Participant at the time he or she files a Compensation Deferral Agreement.

 

	
 13.4  

	
De Minimis Distributions (select one):

 

	
(a)  

	
[    ]           The Plan Sponsor shall not make De Minimis Distributions.

 

	
(b)  

	
[ X ]         The Plan Sponsor shall make De Minimis Distributions, and, notwithstanding the Participant’s election regarding the Separation from Service Payment, the Plan Sponsor shall pay the Participant’s benefit in a single lump sum payment, provided that:

 

 

	 (i)  	 the payment accompanies the termination and liquidation of the entirety of the Participant’s interest in the Plan and all Aggregated Plans, and

 

	 (ii)  	 the payment is not greater than (select one):

 

 

 

  

40

  

	
(1)  

	
[    ]           $ ______________ (select an amount no greater than the current applicable dollar limit under Code section 402(g)(1)(B)) ($15,500 for 2007) (the “Applicable Dollar Limit”)), or

 

	
(2)  

	
[ X ]           The Applicable Dollar Limit, as adjusted, for the Taxable Year in which the payment occurs.

 

	
 13.5  

	
Effective Date This is a (select one):

 

	
(a)  

	
[    ]           New Plan.  The effective date of this new Plan is _____________________

 

	
(b)  

	
[ X ]          Restatement of an existing Plan.  The Plan was originally effective as of June 1, 1999.  The effective date of this restated Plan document and Adoption Agreement is January 1, 2008.  This restated Plan document and Adoption Agreement apply to all amounts (select 1 or 2 and, if applicable, 3)

 

	 (i)  	 [ X ]    deferred in taxable years beginning after December 31, 2004.  An amount is considered deferred as of any date for purposes of this Section if the Participant has a legally binding right to be paid the amount and the right to the amount is earned and vested.

 

	 (ii)  	 [    ]    ________________________________________

 

	 (iii)  	 [    ]    Notwithstanding the foregoing, this restated Plan document and Adoption Agreement will not apply to the following amounts (describe, if applicable): __________________________________

 

 

	
ARTICLE XIV

	
Eligibility

 

The Plan is intended to be “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of §§201(2) and 301(a)(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”).  The Plan Sponsor should consult with counsel regarding eligibility under the “select group” standard.

 

An individual shall be an Eligible Individual as follows (select one or more):

 

	
 14.1  

	
[ X ]           If he or she is designated as an Eligible Individual by the President and C.E.O.

 

	
 14.2  

	
[     ]           If he or she is designated, in writing, as an Eligible Individual by the Plan Administrator.  The Plan Administrator will not vote or act on 

 

  

41

  

any matter regarding eligibility that relates solely to himself or herself.

 

	
 14.3  

	
[ X ]           If he or she occupies one of the following positions:

 

Great-West Life & Annuity Company Vice Presidents and above; Management Grade sales employees; High level sales independent contributors

 

	
 14.4  

	
[    ]           If his or her Compensation for a Taxable Year is expected to be greater than $ ____________

 

	
 14.5  

	
[    ]           If he or she is an Eligible Individual, as defined in III (a), (b) (c) or (d) above, of an Additional Adopting Plan Sponsor as listed on Exhibit A attached to this Adoption Agreement and is otherwise defined as an Eligible Individual under the Plan.

 

	
ARTICLE XV  

	
Compensation Deferrals (select one or more):

 

	
 15.1  

	
[ X ]           A Participant’s Compensation Deferrals with respect to a Taxable Year shall be limited to a minimum of (select one or more):

 

	
(a)  

	
[ X ]           5                      % of a Participant’s Regular Salary

 

	
(b)  

	
[ X ]           5                      % of a Participant’s Bonus

 

	
(c)  

	
[ X ]           5                      % of a Participant’s Variable Pay (Sales)

 

	
(d)  

	
[    ]           % of a Participant’s Commissions

 

	
(e)  

	
[ X ]           5                      % of a Participant’s Performance-Based Compensation

 

	
(f)  

	
[    ]               % of a Participant’s Director Fees

 

  

42

  

 

	
 15.2  

	
[ X ]           A Participant's Compensation Deferrals with respect to a Taxable Year shall be limited to a maximum of (select one or more):

 

	
(a)  

	
[ X ]           90                      % of a Participant’s Regular Salary

 

	
(b)  

	
[ X ]           90                     % of a Participant’s Bonus

 

	
(c)  

	
[ X ]           90                      % of a Participant’s Variable Pay (Sales)

 

	
(d)  

	
[     ]       % of a Participant’s Commissions

 

	
(e)  

	
[ X ]           90                      % of a Participant’s Performance-Based Compensation

 

	
(f)  

	
[     ]       % of a Participant’s Director Fees

 

	
 15.3  

	
[ X ]           A Participant's Compensation Deferrals with respect to a Taxable Year shall be limited to a minimum of (select one or more):

 

	
(a)  

	
[ X ]           $           2,500                    of a Participant’s Regular Salary

 

	
(b)  

	
[    ]           $         of a Participant’s Bonus

 

	
(c)  

	
[    ]           $                                   of a Participant’s Variable Pay (Sales)

 

	
(d)  

	
[    ]           $         of a Participant’s Commissions

 

	
(e)  

	
[    ]           $         of a Participant’s Performance-Based Compensation

 

	
(f)  

	
[    ]           $         of a Participant’s Director Fees

 

	
 15.4  

	
[    ]           A Participant's Compensation Deferrals with respect to a Taxable Year shall be limited to a maximum of (select one or more):

 

	
(a)  

	
[    ]           $          of a Participant’s Regular Salary

 

	
(b)  

	
[    ]           $          of a Participant’s Bonus

 

	
(c)  

	
[    ]           $          of a Participant’s Variable Pay (Sales)

 

	
(d)  

	
[    ]           $          of a Participant’s Commissions

 

	
(e)  

	
[    ]           $          of a Participant’s Performance-Based Compensation

 

	
(f)  

	
[    ]           $          of a Participant’s Director Fees

 

  

43

  

	
ARTICLE XVI

	
Matching Credits

 

	
 16.1  

	
Matching Credits shall be determined in accordance with one or more of the following methods (select one or more):

 

	
(a)  

	
[    ]           The Plan Sponsor shall credit to the Account of each Participant __________% of such Participant's Compensation Deferrals.  Matching Credits shall be made based on Compensation Deferrals made each (select one):

 

	 (i)  	 [    ]    Pay Period
	 (ii)  	 [    ]    Taxable Year
	 (iii)  	 [    ]    Other (specify):     

 

 

	
(b)  

	
[    ]           The Plan Sponsor shall credit to the Account of each Participant _____% of such Participant's Compensation Deferrals that do not exceed _____% the Participant’s Compensation, plus _____% of the Participant’s Compensation Deferrals that exceed _____% of such Participant's Compensation but do not exceed _____% of the Participant's Compensation.  Matching Credits shall be made based on Compensation Deferrals made each (select one):

 

	 (i)  	 [    ]    Pay Period
	 (ii)  	 [    ]    Taxable Year
	 (iii)  	 [    ]    Other (specify):     

 

 

	
(c)  

	
[    ]           An amount determined and made at a time in the discretion of the Plan Sponsor.

 

	
 16.2  

	
Limitations on Matching Credits.

 

	
(a)  

	
[    ]           The Matching Credit shall not exceed $_______________ for any Participant.

 

	
(b)  

	
[    ]           The Plan Sponsor shall not provide a Matching Credit for any Compensation Deferral in excess of __________% of the Participant's Compensation.

 

  

44

  

 

	
 16.3  

	
Eligibility for Matching Credit (select one or more):

 

	
(a)  

	
[    ]           All Participants who have completed at least __________ Hours of Employment during the Taxable Year.  The term “Hours of Employment” is defined as:

 

____________________________________________________________________________________________________

 

	
(b)  

	
[    ]           All Participants employed on the last day of a Taxable Year.

 

	
(c)  

	
[    ]           All Participants who satisfy the following conditions:

 

____________________________________________________________________________________________________

 

	
(d)  

	
[    ]           No eligibility conditions.  All Participants who make Compensation Deferrals are eligible for Matching Credits.

 

	
ARTICLE XVII

	
Discretionary Credits

 

	
 17.1  

	
Amount of Discretionary Credit (select one or more):

 

	
(a)  

	
[    ]           An amount determined at the discretion of the Plan Sponsor, which need not be uniform as to Participants.

 

	
(b)  

	
[    ]           An amount determined by the following formula:

 

____________________________________________________________________________________________________

 

	
 17.2  

	
Eligibility for Discretionary Credit (select one or more):

 

	
(a)  

	
[    ]           All Participants who have completed at least _____Hours of Employment during the Taxable Year.  (The term “Hours of Employment” must be defined above.)

 

	
(b)  

	
[    ]           All Participants employed on the last day of a Taxable Year.

 

	
(c)  

	
[    ]           All Participants who satisfy the following conditions:

 

____________________________________________________________________________________________________

 

	
(d)  

	
[    ]           No eligibility conditions.  All Participants who are Eligible Individuals of the Plan Sponsor during the Taxable Year are eligible for Discretionary Credits.

 

  

45

  

	
ARTICLE XVIII

	
Vesting and Forfeitures (select one or more):

 

	
 18.1  

	
[ X ]           A Participant’s entire Account shall be 100% vested at all times.

 

	
 18.2  

	
[    ]           A Participant’s vesting schedule can be accelerated at the discretion of the Plan Administrator if such a change in vesting schedule is in writing.  The Plan Administrator will not vote or act on any matter regarding Vesting and Forfeitures that relates solely to himself or herself.

 

	
 18.3  

	
[    ]           The Participant shall at all times be one-hundred percent (100%) vested in his or her Compensation Deferrals, as well as in any hypothetical appreciation (or depreciation) specifically attributable to such Compensation Deferrals due to Investment Credits and Debits.  The Participant shall vest in Matching Credits and/or Discretionary Credits, as well as in any hypothetical appreciation (or depreciation) specifically attributable to such amounts due to Investment Credits and Debits, pursuant to the vesting schedule shown below.

 

	
Years of Service

	  	
Vesting Percentage

	  	  	  	  
	  	  	  	
%

	  	  	  	
%

	  	  	  	
%

	  	  	  	
%

	  	  	  	
%

For purposes of the above schedule, a Participant shall earn a “Year of Service” as follows:

________________________________________________________________________________________________________________

 

	
 18.4  

	
[    ]           A Participant’s entire Account shall become 100% vested upon (select one or more):

 

	
(a)  

	
[    ]           The Participant’s death while employed.

 

	
(b)  

	
[    ]           The Participant’s Disability while employed.

 

	
(c)  

	
[    ]           The Participant’s attainment of age ________ while employed.

 

	
(d)  

	
[    ]           A Plan Termination Following a Change in Control Event, if applicable.

 

	
(e)  

	
[    ]           A Conflict of Interest Divestiture.

 

  

46

  

	
(f)  

	
[    ]           The Participant’s involuntary Separation from Service Without Good Cause by the Plan Sponsor.

 

	
 18.5  

	
[    ]           A Participant who is otherwise vested in accordance with this Section VII shall nevertheless forfeit his or her vested Account (other than Compensation Deferrals and any hypothetical appreciation or depreciation specifically attributable to such Compensation Deferrals) under the following circumstances (please specify):

 

________________________________________________________________________________________________________________________________________________________________________

 

	
 18.6  

	
[    ]           Any forfeitures under the Plan shall be credited to the Account of each Participant other than the Participant whose Account generated the forfeiture in the same proportion that each such Participant’s Account as of the end of the Taxable Year in which the forfeiture occurred bears to the Accounts of all such Participants as of the same date.

 

	
ARTICLE XIX

	
Delay in Payment (select one or more):

 

An amount otherwise required to be paid under the Plan shall be delayed if the payment

 

	
 19.1  

	
[ X ]           Is subject to Code §162(m).

 

	
 19.2  

	
[ X ]           Violates federal securities laws or certain other applicable law.

 

	
ARTICLE XX

	
Change in Control Event

 

	
 20.1  

	
A Change in Control Event shall be defined as (election applies only to Plan Sponsors that are corporations; select one or more):

 

	
(a)  

	
[ X ]           A Change in Ownership of the Corporation.

 

	
(b)  

	
[ X ]           A Change in the Effective Control of the Corporation.

 

	
(c)  

	
[ X ]           A Change in Ownership of a Substantial Portion of a Corporation’s Assets.

 

  

47

  

	
 20.2  

	
The occurrence of a Change in Control Event shall (select one):

 

	
(a)  

	
[    ]           not, under any circumstances, including the discretion of the Plan Sponsor, constitute a Plan Termination Following a Change in Control Event.

 

	
(b)  

	
[    ]           constitute a Plan Termination Following a Change in Control Event.

 

	
(c)  

	
[ X ]           may constitute a Plan Termination Following a Change in Control Event, at the discretion of the Plan Sponsor, within 12 months after a Change in Control Event.

 

  

48

  

	
ARTICLE XXI

	
Signatures

 

This Nonqualified Deferred Compensation Plan, including this Adoption Agreement, has been designed to permit Participants to defer Federal and state income tax on amounts credited to their Accounts until a later Taxable Year.  The Plan Sponsor adopting this Plan should consult with tax counsel regarding the consequences of adopting this Plan to both the Plan Sponsor and Participants and the effect an amendment or restatement of an existing plan using this Plan Document may have, if any, under Code §409A.  Registration of interests under this Nonqualified Deferred Compensation Plan may be required under securities law.  Independent legal counsel should be consulted with respect to securities law issues.  By executing this Adoption Agreement, the Plan Sponsor acknowledges that no representations or warranties as to the legal consequences (including the tax and securities law consequences) to the Plan Sponsor and Participants of the operation of this Plan have been made by the entity that has provided this Plan document and Adoption Agreement.

 

The Plan and this accompanying Adoption Agreement were adopted by the Plan Sponsor the 24th day of March, 2009.

 

	
Executed for the Plan Sponsor by:

	  	
Graham R. McDonald

	
Title of Individual:

	  	
Senior Vice President, Corporate Resources

	
Signature:

	  	
/s/ Graham R. McDonald

	  	  	  
	
Executed for the Plan Sponsor by:

	  	
Glen R. Derback

	
Title of Individual:

	  	
Senior Vice President and Controller

	
Signature:

	  	
/s/ Glen R. Derback

 

  

49

  

EXHIBIT A

 

ADDITIONAL ADOPTING PLAN SPONSORS

In accordance with paragraph 1.32 of the Basic Plan Document, the Plan Sponsor has consented to allow the following entities to participate in the Plan:

 

	
1.  

	
All wholly owned subsidiaries of the Plan Sponsor

	
2.  

	
Mountain Asset Management LLC

 

  

50exhibit101.htm

Execution Copy

SECOND AMENDED AND RESTATED LICENSE AND SUPPLY AGREEMENT

This Second Amended and Restated License and Supply Agreement (the "Agreement") made and entered into as of this 14th day of May, 2010, effective as of May 19, 2010 (the “Second A&R Agreement Date”), by and between Columbia Laboratories (Bermuda) Limited, a Bermuda corporation having its principal place of business at Canon’s Court, 22 Victoria Street, PO Box HM 1179, Hamilton HM 12, Bermuda ("Licensor"), and Ares Trading S.A., a Swiss company with its principal place of business at c/o Zone Industrielle , 1267 Coinsins, Switzerland ("Licensee").

 

WITNESSETH:

 

WHEREAS, Licensor and Licensee entered into a License and Supply Agreement dated as of May 20, 1999, as such agreement was amended and restated as of June 4, 2002, and further amended by Amendment No. 1 thereto, dated December 21, 2006;

 

WHEREAS, this Agreement is the second amended and restated version of the License and Supply Agreement;

 

WHEREAS, Licensor is the owner or exclusive licensee of, and has the right to transfer or grant licenses with respect to, certain Technology, Patents and the Trademarks (as hereinafter defined);

 

WHEREAS, Licensor wishes to grant to Licensee an exclusive license (subject only to Licensor's retained use and manufacturing rights) to the Technology and Patents for use and sale of the Product (as hereinafter defined) in the Territory (as hereinafter defined), and Licensee wishes to receive such a license, on the terms and subject to the conditions set forth herein; and

 

WHEREAS, Licensor wishes to assign the Trademarks to Licensee, and Licensee wishes to accept such assignment, on the terms and subject to the conditions set forth herein, and Licensor wishes to retain for its own use the Licensor Trademark.

 

NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows.

 

1. Definitions.  As used in this Agreement, the following terms (except as otherwise expressly provided or unless the context otherwise requires) shall have the respective meanings set forth below (it being understood that the terms defined in this Agreement shall include the singular number in the plural, and the plural number in the singular):

 

(a) "Affiliate" shall mean any corporation or other business entity that either directly or indirectly controls a party to this Agreement, is controlled by such party, or is under common control of such party.  As used herein, the term "control" means possession of the power to direct or cause the direction of the management and policies of a corporation or other entity whether through the ownership of voting securities, by contract or otherwise.

 

(b) "Base Price" shall mean Direct Cost plus 20%.  On a country-by-country basis, Licensor shall notify Licensee of the Base Price if the Base Price becomes relevant in calculating the Purchase Price.

 

(c) "Confidential Information" shall mean all information and/or technical data which is disclosed by one party hereto to the other party hereto pursuant to this Agreement which the disclosing party treats as confidential and identifies as such, other than (i) information known to the receiving party or its Affiliates prior to the disclosure of such information to such party, provided said prior knowledge is supportable by documentary evidence, (ii) information which at the time of the disclosure is, or thereafter becomes, generally known to the public, provided that such public knowledge does not result from any act or disclosure by the receiving party or one of its Affiliates in violation of the terms of this Agreement, (iii) information which can be shown to be independently discovered, after the date hereof, by a party, or one of its Affiliates, without the aid, application or use of the disclosed information, or (iv) information obtained by the receiving party from a third party which is determined to be in lawful possession of such information, provided such third party is not in violation of any contractual or legal obligation to the disclosing party or one of its Affiliates with respect to such information.  Confidential information of Licensor shall be deemed to include Dispensing Data disclosed by Licensor or its Affiliates to Licensee or its Affiliates, regardless of whether such Dispensing Data is identified as confidential.  Confidential Information of Licensee shall be deemed to include Dispensing Data disclosed by Licensee or its Affiliates to Licensor or its Affiliates regardless of whether such Dispensing Data is identified as confidential.

 

(d) "Direct Cost" shall mean the following direct costs of manufacturing the Product:  raw material/ingredient costs, packaging costs, direct labor and direct overhead.

 

(e) "Failure to Supply" shall mean Licensor fails to supply the Product in the countries of Europe taken as a whole substantially in accordance with the firm orders contained within Licensee's forecast for a continuous period of one-hundred and twenty (120) days.

 

(f) "FDA" shall mean the U.S. Food and Drug Administration.

 

(g) "Field" shall mean the vaginal delivery of progesterone or progestational agents alone or in combination or co-administered with other active substances directed toward use in hormone replacement therapy as well as in the indications of secondary amenorrhea, in vitro fertilization, and prevention of endometrial hyperplasia and other indications where progesterone or progestational agents are commonly used except in a locally acting - non-systemic - contraceptive where progesterone or a progestational agent may be useful.

 

(h) "Finished Package Form" shall mean applicators wrapped in aluminum foil with required leaflet printed in two colors and inserted into an appropriate box with customary trade dress printed in up to four colors.  The boxes will be placed into appropriate outer cartons which will be printed in one color with required labeling and UPC codes.

 

(i) "Forecast" shall mean the official Licensee forecast as required by paragraphs 4 (i) and 4 (j).

 

(j) "GMP" shall mean current good manufacturing practice regulations promulgated by the FDA and other regulatory agencies.

 

(k) "Intellectual Property Rights" shall mean trade secrets, trademarks, tradenames, logos, trade dress, graphics, designs, patents, copyrights or other proprietary rights.

 

(l) “Licensee Domain Names” shall mean domain names and or social media addresses related to the Product that are not a Licensor Domain Name.  The Licensee Domain Names as of the Second A&R Agreement Date are listed on Schedule F.

 

(m) “Licensee Trademarks” shall mean the trademarks set forth on Schedule G.

 

(n) “Licensor Domain Name” shall mean domain names and or social media addresses related to the Product as set forth in Schedule E.

 

(o) “Licensor Trademark” shall mean the trademark CRINONE in the United States subject to U.S. Patent & Trademark Registration No. 2,086,161.

 

(p) "Low Viscosity Product" shall mean any batch of Product that, as of the initial release testing by Licensor of such Product or its contract manufacturer, has a viscosity that meets the viscosity specification in the applicable regulatory filing, but falls below 53,500 cps.

 

(q) "Marketing License Agreement" shall mean the Marketing License Agreement dated as of June 4, 2002, by and between Licensor and Licensee, which was terminated pursuant to the terms of the agreement entered into between the Parties on December 21, 2006.

 

(r) "NDA" shall mean a New Drug Application as defined by the FDA.

 

(s) "Net Sales" shall mean the aggregate equivalent of gross revenue received by Licensee, its Affiliates or sublicensees (for the sake of clarity, the definition of Net Sales hereunder shall not include any sales of Product by the Licensor) from or on account of the sale of the Product to non affiliated third parties on which payments are due under this Agreement, less (i) reasonable credits or allowances, if any, actually granted on account of cash or trade discounts, recalls, rebates, rejection or return of the Product previously sold, (ii) excises, sales taxes, value added taxes, consumption taxes, duties or other taxes imposed upon and paid with respect to such sales (excluding income or franchise taxes of any kind) and (iii) separately itemized insurance and transportation costs incurred in shipping the Product to such third parties.  No deduction shall be made for any item of cost incurred by Licensee or its Affiliates in preparing, manufacturing, shipping or selling the Product except as permitted pursuant to clauses (i), (ii) or (iii) of the foregoing sentence.  Net Sales shall not include any transfer between Licensee and any of its Affiliates or sublicensees for resale.  No transfer of the Product for test or development purposes or as free samples shall be considered a sale hereunder for accounting and payment purposes.

 

(t) "Non-Fertility Specialist Market" shall have the meaning set forth in the Marketing License Agreement.

 

(u)  "Patents" shall mean the patents and/or patent applications filed in the Territory owned by the Licensor or its Affiliates or with respect to which Licensor or its Affiliates may now or hereafter have the right to grant licenses in the Territory, the claims of which may be infringed, absent a license, by the manufacture, use or sale of the Product within the Territory, including, without limitation, the patents and applications set forth in Schedule A hereto and any and all patents issued pursuant thereto, as well as any patents to be applied for or issued to Licensor or its Affiliates in the future during the term of this Agreement, which future patents and patent applications shall be added to Schedule A by written notice of Licensor to Licensee within thirty (30) days of such application and/or issuance.

 

(v) "Product" shall mean progesterone/COL-1620 vaginal gel.

 

(w) "Product A" shall mean progesterone/COL-1620 vaginal gel containing progesterone in a concentration of four percent (4%).

 

(x) "Product B" shall mean progesterone/COL-1620 vaginal gel containing progesterone in a concentration of eight percent (8%).

 

(y) "Purchase Price" shall have the meaning set forth in Section 5 of this Agreement.

 

(z) "Promote" and "Promotional" shall mean, with respect to the Product, any activities undertaken by or on behalf of a party to encourage sales or use of the Product, including, without limitation, sales detail calls, product sampling, journal advertising, direct mail programs, direct-to-consumer advertising, convention exhibits and all other forms of marketing, advertising or promotion.

 

(aa) "Technology" shall mean all pharmacological, toxicological, preclinical, clinical, technical or other information, data and analysis and know-how relating to the registration, manufacture, packaging, use, marketing and sale of the Product (including, without limitation, all works copyrighted by Licensor) and all proprietary rights relating thereto owned by Licensor or its Affiliates or to which Licensor or its Affiliates has rights so as to be able to license, whether prior to or after the Second A&R Agreement Date, and relating or pertaining to the Product.

 

(bb) "Territory" shall mean all countries and territories of the world except for the United States.

 

(cc) "Trademarks" shall mean the trademark " CRINONE " or the trademark "PERLENCE" for use on cosmetic and pharmaceutical products used primarily for progesterone supplementation as set forth in Schedule B, but shall exclude the Licensor Trademark.

 

(dd) "Unit" shall mean a single applicator.

 

(ee) "United States" shall mean the several United States, the District of Columbia and Puerto Rico.

 

(ff) “US Agreement” shall mean the agreement relating to rights in the United States entered into between the Parties on December 21, 2006.

 

(gg) "Valid Claim" shall mean a claim which is contained in an unexpired, issued Patent which has not been held invalid or unenforceable by a decision of a court or patent office of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid by the owner through reissue or disclaimer.

 

(hh) “Ongoing Clinical Trials” shall mean clinical trials sponsored by Licensor and listed in attached Schedule C

 

(ii) ‘”New Clinical Trials” shall mean any new clinical trials relating to the Product which are initiated by Licensor or Licensee after the Second A&R Agreement Date.

 

2. Grant of License.

 

(a) Licensor grants to Licensee, and Licensee accepts from Licensor, on the terms and conditions stated herein, an exclusive (even as to Licensor and Licensor's Affiliates) right and license, with the right to sublicense, under the Patents and Technology to market, use and sell the Product in the Territory; provided, however, that Licensee will only sublicense Product containing progesterone in a concentration of eight percent (8%) after prior consultation with Licensor.  Licensor grants to Licensee, and Licensee accepts from Licensor, on terms and conditions stated herein, a nonexclusive right and license with the right to sublicense its Affiliates under the Patents and Technology to make and/or have made the Product anywhere in the world, but only for use or sale in the Territory.

 

(b) [INTENTIONALLY OMITTED].

 

(c) Licensor's retained rights in the Territory in connection with the Product shall include only those rights under the Patents and Technology to make, have made and use the Product as necessary for Licensor to fulfill its commitments now or in the future with respect to this Agreement and with respect to its licensees who market the Product outside the Territory, to otherwise operate its business (it being understood that Licensor, its Affiliates and other licensees shall not sell, use or market the Product within the Territory), and to make, have made, use, market and sell the Product, itself or through its Affiliates or licensees, outside the Territory.

 

(d) Licensor shall not, and shall cause its Affiliates and licensees not to use the Trademarks and Licensee Domain Names outside the Territory. For the avoidance of doubt, Licensor is free to use the Licensor Trademark and Licensor Domain Names outside the Territory, and to use the Licensor Trademark in the Territory solely to manufacture, have manufactured, package, label, and export the Products for sale outside the Territory in accordance with the terms and conditions of this Agreement.

 

(e) Licensee may, at any time, request from Licensor, and Licensor agrees to grant directly to any party in any country of the Territory exclusive license rights consistent with those granted to Licensee herein.  Accordingly, upon receipt of Licensee's request, Licensor shall enter into and sign a separate direct license agreement or agreements with the companies designated by Licensee in the request.  All direct agreements shall be prepared by Licensee.  In the absence or upon the expiration of laws and regulations to the contrary, the terms and conditions thereof shall not be less favorable by Licensor than those contained in this Agreement and shall be similar to the terms and conditions contained in this Agreement.  Such agreements must be approved by Licensor, which approval shall not be unreasonably withheld.  In those countries in which the validity of such a direct license agreement requires prior governmental approval or registration, such direct license agreement shall not be binding or have any force or effect until the required governmental approval or registration has been granted.  Incidental out-of-pocket costs incurred by Licensor in the renegotiation of this Agreement, the execution of direct license agreements and matters pertaining thereto shall be for the account of Licensee, when prior approved by Licensee.

 

(f) In the event that any local government would request or local regulations would require that the regulatory approval for the Product be held in the name of Licensee or should it reasonably appear that ownership of the registration for the Product by Licensee would facilitate regulatory approval, then Licensor, upon the request of Licensee, shall transfer to Licensee ownership of the regulatory approval for the Product for such country or countries.

 

3. Trademarks.

 

(a)                 As of the Second A&R Agreement Date, Licensor presently assigns to Licensee, at Licensor’s cost, all rights to, and interest  in, the Trademarks listed on Schedule B and related goodwill pursuant to the process described  on Schedule D.  Licensor shall reimburse Licensee for Licensee’s reasonable out-of-pocket expenses in securing the assignment of the Trademarks. All trademark licenses granted by Licensor to Licensee prior to the Second A&R Agreement Date shall terminate as of the Second A&R Agreement Date.

 

 (b) The Licensor undertakes to not use in the Territory, for any products it produces or produced by other third parties upon its instructions or under its control, certain brands or designs that include letters, word(s), logo or symbol with any colours, which are identical or confusingly similar to the Trademarks now being assigned to the Licensee.

 

(c) Licensor represents and warrants to the Licensee that the rights of the Trademarks which are hereby assigned have not been encumbered with, including but not limited to, claims of infringement of third-party intellectual property rights or bound by any agreements of any nature whatsoever that limit the right of the Licensor to dispose of the Trademarks.

 

(d)               Commencing on the Second A&R Agreement Date and continuing until all supply obligations of Licensor under the Agreement have terminated, Licensee grants to Licensor, and Licensor accepts from Licensee, on the terms and conditions stated herein, an non-exclusive right and license, with the right to sublicense, to use the Trademarks to manufacture, have manufactured, package, label, import and export the Products in accordance with the terms and conditions of this Agreement.

 

(e)               The parties acknowledge that the Licensee has sole and exclusive ownership of the Licensee Trademarks and the Licensee Domain Names and, as of the Second A&R Agreement Date, the Trademarks.

 

4. Supply.

 

(a) During the term of the Agreement, Licensor shall supply, unless otherwise agreed, Licensee, its Affiliates and sublicensees with the Product on an exclusive basis in the Territory.  All such Product shall be delivered in Finished Package Form.  Also, during the term of the Agreement, Licensor shall not develop, license, manufacture nor sell to another party in the Territory any product in the Field.  Licensor is not restricted from developing, licensing, manufacturing or selling other hormones or drugs.  Licensor represents that as of the Second A&R Agreement Date, it has not entered into any arrangement which would contravene the intentions of this paragraph. For the avoidance of doubt, nothing in this paragraph shall be interpreted to restrict Licensor’s right to manufacture Product in the Territory for sale outside the Territory.

 

(b) Although Licensor is responsible for production and quality control, Licensee has the right of inspection to ensure Licensor meets all appropriate standards set by the FDA or other appropriate regulatory authorities.

 

(c) Licensor shall be obliged to maintain the registration of the manufacturing facilities with the appropriate regulatory authorities and to allow inspection of such facilities by regulatory authorities insofar as necessary or advisable in order to facilitate the supply to Licensee, its Affiliates or sublicensees of the Product, and promptly to notify Licensee of any inspection of its own or its contract supplier's manufacturing facilities by the regulatory authorities and promptly to provide Licensee with copies of any correspondence received from the regulatory authorities setting forth the results of any such inspection insofar as the Product is concerned.  Furthermore, as may be required for regulatory purposes, Licensor grants Licensee the right to refer to, and shall cause its contract supplier to grant to Licensee access to, contract supplier's master file relating to the Product and undertakes to notify Licensee and provide Licensee with specific details of any changes to said master file or other filings by the contract supplier with the regulatory authorities relative to the Product.  Licensor shall consult with Licensee before it or its contract supplier makes any material change in any manufacturing process for the Product.  Licensor shall be kept duly informed without any delay by copy letter of any correspondence between Licensee and the contract supplier, in the event that any such communication should occur.

 

(d) Licensor shall notify Licensee or designees of Licensee acceptable to Licensor  of any and all manufacturing, filling, quality control, testing and release activities involving the Product, at least ten (10) days prior to any such activities.  Following such notice and upon five (5) days prior notice given by Licensee to Licensor in writing, Licensor shall permit, and shall cause its contract manufacturers to permit, representatives of Licensee or designees of Licensee acceptable to Licensor and/or its contract manufacturers (i)  to observe any manufacturing, filling, quality control, testing and release activities involving the Product and facilities used by or in connection with such activities, and (ii) to perform an audit of each contract manufacturer with respect to the compliance of such contract manufacturer with GMP, provided that such representatives or designees of Licensee shall conduct such observations and audits in a manner which shall cause the least possible interruption to Licensor's and the contract manufacturers' operations under the particular circumstances.  Notwithstanding the foregoing, GMP audits conducted pursuant to subsection (ii) shall be performed no more often than annually, except that additional GMP audits may be conducted by Licensee upon a specific, reasonable basis related to GMP compliance and provided that the scope of any such additional audit shall be limited to addressing the specific basis for the audit.  Such observations and audits shall take place in a timely manner and shall be permitted to take place during any or all phases of manufacturing, filling, quality control and testing involving the Product.  As part of such observations and audits, Licensor and its contract manufacturers shall grant Licensee access to information in their possession relevant to whether the Product is produced under GMP.   Licensor shall promptly respond to any observations made by Licensee and shall take any corrective actions necessary so that it can continue to supply the Product in accordance with this Agreement.

 

(e) Personnel of Licensee or Licensee's designee shall be entitled to witness the manufacturing of test batches, scale-up batches and full-size production batches which in each case will be used as NDA support batches filed by Licensee or in regulatory authority presentations.  These batches would be prepared by the intended commercial process for the Product or prepared to demonstrate the quality of the entire process (validation) or any single aspect of a critical manufacturing parameter.  Licensee may witness and/or review the analytical laboratory testing of any of the above cited batches or of the methodology which will be used to support a regulatory authority presentation.  Licensee may prospectively review, to the extent necessary for compliance with applicable GMP and for scheduling purposes, the protocols and actual study data and results (process, cleaning, sterilization, validation) as related to such batches.

 

(f) Licensee shall keep all information disclosed to or obtained by Licensee under paragraphs 4 (c), (d) and (e) strictly confidential and not disclose the same to any other person, except to the extent reasonably necessary or appropriate under applicable regulations for Licensee to register the Product with the regulatory authorities or otherwise comply with applicable law.

 

(g) The information disclosed shall be used only to check the compliance of the contract supplier with GMP or any other applicable regulation or any other purpose agreed by Licensor and the contract supplier.  In no case, shall Licensee use such information to manufacture the Product, except in the case where such rights have been acquired from Licensor or transferred to Licensee.

 

(h) Product in Finished Packaged Form shall be delivered by Licensor so as to comply with the packaging and labeling requirements set forth by the FDA or other appropriate regulatory agencies.

 

(i) Licensee will supply Licensor with a sales Forecast between the time of submission of a registration file in any country of the Territory and the approval of such file by the appropriate regulatory authority in such country, so that Licensor can plan production.  If Licensee or one of its Affiliates or sublicensees does not market the Product in a country within six (6) months after approval for both marketing and price, where applicable (e.g. France, Spain and Italy), Licensee will pay to Licensor twenty percent (20%) of the first year Forecast for the Product in such country for each year of delay in marketing the Product in such country.  It is additionally provided that such payment will be reduced in the event Licensee or one of its Affiliates or sublicensees introduces the Product in such country within the twelve (12) month period from the date of regulatory approval therein (including price approval) to the extent of thirty percent (30%) of Net Sales for such country during said twelve (12) month period.

 

(j) Licensee will give Licensor, before the fifteenth (15th) day of every month, a non-binding Forecast of Licensee's, its Affiliates' and sublicensees' requirements of Product for each country in which the Product is marketed for the following eighteen  (18) month period. Before the 15th day of every month, Licensee will place a firm order for Licensee’s, its Affiliates’ and sublicensees’ requirements for the one (1) month period beginning three and a half  months later, and  the Product described in the order will be delivered to Licensee, its Affiliates and sublicensees one hundred and twenty (120) days from the date of the order  The firm orders placed by Licensee for the one month’s supply of Product shall represent in aggregate a quantity of at least one (1) batch of Product. Licensor is obliged to supply the amount of Product requested in the firm order except to the extent that such amount is more than fifteen percent (15%) higher than the amount that had been forecasted for that period in the last Forecast received by Licensor.  With respect to any amount ordered in excess of the fifteen percent (15%) limit, Licensor is obligated to use commercially reasonable efforts to supply the requested amount to Licensee, its Affiliates and sublicensees.

 

(k) Licensor shall use reasonable commercial efforts to notify Licensee within thirty (30) days after the Second A&R Agreement Date  and thereafter thirty (30) days prior to the end of each calendar year, of factory vacation schedules for the coming year, and if Licensee receives notice of such vacation schedules, they will be incorporated into Licensee's Forecasts.

 

(l) Licensor bears the expense and responsibility for transportation and insurance for the Product to the Licensee's choice of airport or seaport (FOB port) nearest to the manufacturing site where the Product is manufactured; thereafter, transportation, insurance and duties for the Product are the responsibility of Licensee.  Each shipment of the Product shall be accompanied by a Certificate of Analysis for each lot within each shipment signed by authorized quality control/quality assurance personnel of Licensor or its contract manufacturer.

 

(m)           Licensor shall comply with the following:

Licensor shall manufacture the Product for Licensee using three (3) or fewer shearing cycles and shall certify to Licensee on the Certificate of Analysis that the Product was manufactured using three (3) or fewer shearing cycles.  Licensor shall implement and comply with the provisions of the Continuous Improvement Plan provided to Licensee and dated October 31, 2002, and shall cause each of its contract manufacturers to (i) implement and comply with such Continuous Improvement Plan, (ii) implement and comply with any plans for addressing observations or recommendations regarding the Product or the production of the Product set forth in any letter provided by such subcontractor to Licensor, and (iii) otherwise manufacture, fill, and perform quality assurance on the Product in full compliance with GMP.

Licensor shall manufacture the bulk Product in 1000 kg batches.

All Product manufactured and supplied hereunder shall meet the quality control specifications and the specifications in the applicable regulatory filing through the expiration date stated on that Product package.  The Product shall be manufactured in accordance with a validated manufacturing process and the results shall be in accordance with the validated range for each parameter.  Such Product when delivered to Licensee, its Affiliates and sublicensees shall also not be adulterated or misbranded within the meaning of the U.S. Food, Drug and Cosmetic Act, as amended.  In accordance with GMPs and other applicable laws and regulations, Licensor or its contract manufacturer will test each shipment of the Product to be supplied to Licensee, its Affiliates and sublicensees pursuant to this Agreement before delivery of such shipment to Licensee, its Affiliates and sublicensees to ensure that the Product meets these standards.

Licensor’s stability testing program for the Product shall, at all times, include the requirement that at least one batch of product be placed on stability testing each year in accordance with the GMPs.

Licensor shall supply to Licensee all of Licensee's requirements of the Product in accordance with Section 4(j) before supplying its own requirements or that of any licensee of Licensor.

(n)           Licensor shall, within forty-five (45) days following each of the first four (4) three-month periods immediately following the date of the initial release testing of each batch of Low Viscosity Product, measure and report to Licensee in writing the viscosity of each such batch of Low Viscosity Product until such time as each such Low Viscosity Product batch is shown by any such measurement to have a viscosity that equals or exceeds 53,500 cps.  Licensee, its Affiliates or sublicensees may not return under this paragraph any delivered Low Viscosity Product that is shown by any such measurements to have a viscosity that equals or exceeds 53,500 cps, provided such Low Viscosity Product meets all other specifications and requirements under this Agreement.  Licensee, its Affiliates and sublicensees shall have the right to (i) reject any delivered Product that does not meet quality control specifications and the specifications in the applicable regulatory filings, (ii) return to Licensor, at Licensor's expense and in accordance with Licensor's shipping instructions, any delivered Low Viscosity Product that in each of the four measurements has a viscosity below 53,500 cps, and (iii) return to Licensor, at Licensor's expense and in accordance with Licensor's shipping instructions, any delivered Low Viscosity Product if Licensee is already in possession of one batch of Low Viscosity Product that Licensee has yet to accept or return under this Section 4(n).  Licensee must notify Licensor in writing of any such rejection or return within thirty (30) days (except as to latent defects) after Licensee's right to reject or return has accrued, and Licensor shall replace all batches rejected or returned by Licensee with Product that has a viscosity that equals or exceeds 53,500 cps and that meets all other specifications and requirements under this Agreement within one-hundred and twenty (120) days following rejection or return of the batch by Licensee.  The expense of return, manufacture of replacement Product and shipment of replacement Product are Licensor's.

(o)           Deleted

(p)           In the event Licensor is unable, due to reasons beyond its control, to provide Licensee, its Affiliates and sublicensees the amount of Product set forth in any firm order, Licensor shall be obligated to provide such amount of Product to Licensee, its Affiliates and sublicensees through third parties with which Licensor contracts, and Licensor shall be responsible for any additional costs, including without limitation additional costs of manufacturing the Product, caused thereby, provided that the provisions of this sentence shall not apply to the extent that the amount of Product set forth in such firm order exceeds the Forecast by more than fifteen percent (15%).

 

(q)           In countries (e.g. in some countries in South America or in India) where the Purchase Price of thirty percent (30%) of Net Sales for Finished Package Form of the Product is below the Base Price, Licensor will provide Licensee finished Product in tubes with reusable applicators or other appropriate presentation, at a negotiated second base price.  In countries where import duties make it impractical to import Product in Finished Package Form (e.g. Argentina), Licensor will grant Licensee the right to manufacture the Product locally if requested by Licensee for such country and will be paid a royalty on Net Sales for such country, provided such royalty can be legally expatriated from any such country, equal to the difference between thirty percent (30%) of Net Sales in such country and Licensee's cost of manufacturing the Product for such country.

 

This royalty shall be payable for such country until the expiration of any Valid Claims in such country or until a third-party vaginally-administered progesterone product approved in such country subsequent to May 21, 1995 captures fifteen percent (15%) or more of the sales of the Product in such country.  Subsequent to either event taking place in any such country, the royalty payable to Licensor on Net Sales in such country shall be reduced to seven percent (7%) in consideration of rights to the Trademarks and Technology until May 21, 2015 and thereafter the royalty payable on Net Sales in such country shall be two percent (2%) in consideration of rights to the Technology until May 21, 2020.  Thereafter Licensee shall have an irrevocable fully paid up license to the Product under the Technology (subject to the condition set forth in Section 13 hereto).

 

(r)           If after the Initial Term as defined in Section 13, the parties cannot agree upon mutually acceptable terms for supply, Licensee has the option of converting this Agreement into a license agreement and Licensee will be free to manufacture, or have manufactured, the Product, provided that Licensee pays to Licensor on a quarterly basis a royalty for the license of the Technology of fifteen percent (15%) of Net Sales.

 

The royalty pursuant to this paragraph (r) shall remain at fifteen (15%) of Net Sales for any country until the expiration of any Valid Claims in such country or until a third-party vaginally-administered progesterone product approved in such country subsequent to May 21, 1995 captures fifteen percent (15%) or more of the sales of the Product in such country.  Subsequent to either event taking place in any country of the Territory, the royalty payable to Licensor on Net Sales in such country shall be reduced to seven percent (7%) in consideration of rights to the Trademarks and Technology until May 21, 2015, and thereafter the royalty payable on Net Sales in such country shall be two percent (2%) in consideration of right to the Technology until May 21, 2020.

 

(s)            Each Party shall be responsible for receiving and responding to complaints and requests for information from patients and others regarding the Product sold by it and each Party shall provide reasonable assistance to the other Party in responding to such complaints and requests for information and shall be responsible for investigating and resolving any complaints.  Within thirty (30) days following the end of each calendar month during the term of the Agreement, each Party shall provide the other Party with a written report detailing complaints regarding the Product received during such month, provided that each Party shall notify the other Party of serious adverse events within two (2) days following notice to either Party of such serious adverse event.  During the term of this Agreement, each Party shall make available to the other Party information about the Product as may be necessary to carry out the provisions and purposes of this Agreement and the U.S. Agreement, including without limitation general medical information relating to the Product’s storage, use and safety.  Each Party shall provide prompt written notice to the other Party, including relevant references, of any information which the Party giving notice believes in its reasonable judgment is material for medical information services.  Material information shall include, but not be limited to, published or unpublished reports or other clinical or laboratory data received by either Party about Product safety, contraindications, treatment programs in the indications specified by the approved Product insert, stability, storage and shipping, pharmacology, and other information that either Party believes in its reasonable judgment is relevant to safe and effective Product use.  The Party giving notice shall provide reasonable follow-up information and prompt written replies to verbal or written questions from the other Party pertinent to medical information services about the Product.  On a periodic basis as agreed by both Parties, but no less than annually, each Party shall provide the other Party a written summary of information about the Product, which in the reasonable judgment of the Party providing the information, is material for the medial services information of the other Party.

(t)           In the event any regulatory authority having jurisdiction shall so request or order, or if either party has reason to believe that any corrective action should be taken with respect to the Product supplied hereunder, including without limitation any Product recall, customer notice, restriction, change, or market action, then such party shall immediately inform the other in writing.  If the party owning the relevant registration file for such Product, after consultation with the other party, deems it necessary to effect a Product corrective action then such party shall effect such corrective action in accordance with procedures agreed upon by the parties.

 

If the Product defect causing the corrective action shall be found to result solely from the manufacture and supply of the Product hereunder, then Licensor shall either supply a quantity of the Product without charge sufficient to enable Licensee and/or its Affiliates or sublicensees to replace all Product subject to the corrective action, or render a credit to Licensee, its Affiliates or sublicensees for such Product, at Licensee's option.  Such replacement Product shall be delivered at Licensor's expense within thirty (30) days of the date on which the corrective action was effected, as Licensee may direct.  In such event Licensor also agrees to reimburse Licensee, its Affiliates or sublicensees for other costs and expenses incurred with respect to such corrective action.  If the Product defect causing the corrective action shall be found to result solely from one of the Party’s, its Affiliates’ or sublicensees’ marketing, use or sale of the Product, then the costs and expenses of such corrective action shall be paid by such Party.  If the Product defect causing the corrective action shall be found to result from a joint act or omission of the parties, then the parties shall negotiate in good faith an appropriate allocation of the costs and expenses of the corrective action.  The Licensor shall be responsible for the costs of any corrective action (i) outside of the Territory and (b) within the Territory, if found to result solely from the manufacture and supply of the Product hereunder.

 

(u)           At any time upon the request of either party, the parties agree to cooperate and negotiate in good faith to prepare and execute a technical agreement consistent with the provisions of this Agreement and other provisions necessary for compliance with applicable laws, rules and regulations of European countries.

 

5. Price and Payment Terms.

 

(a) The Purchase Price to be paid by the Licensee for the Product in Finished Package Form shall be the Base Price or thirty percent (30%) of Net Sales, whichever is greater, unless otherwise agreed as contemplated in paragraph 4(q).

 

If the Base Price were to exceed thirty percent (30%) of Net Sales, the parties shall meet to discuss how to resolve the high cost of goods.  The parties hereby acknowledge that the Base Price for the Product is contemplated for six (6) Units – twelve (12) days therapy in Finished Package Form.  If Licensee orders the Product in the Finished Package Form containing fewer than six (6) Units the Base Price shall be reduced.  This reduction will reflect a pro rata reduction in the cost of the Product based on the number of Units specified as well as any reduction in the cost of packaging.  If Licensee wishes to order the Product in Finished Package Form that contains more than six (6) Units the Base Price will be adjusted accordingly.

 

(b) The following quantity discounts will be applied to annual purchases of the Product by Licensee, its Affiliates, or sublicensees:

 

(i)           Over ten (10) million Units - 3.33% - which would reduce the Purchase Price to twenty-nine percent (29%) of Net Sales or the Base Price, whichever is greater.

 

(ii)           Over twenty (20) million Units - 6.66% - which would reduce the Purchase Price to twenty-eight percent (28%) of Net Sales or the Base Price, whichever is greater.

 

(iii)           Over thirty (30) million Units - 10% - which would reduce the Purchase Price to twenty-seven percent (27%) of Net Sales or the Base Price, whichever is greater.

 

(c) At Licensee's request, Licensor will supply promotional samples of the Product in Finished Package Form at a Purchase Price equal to Licensor's Direct Cost.

 

(d) Licensee's invoice price for the Product purchased from Licensor shall be paid in U.S. dollars thirty (30) days after the later of (A) receipt by Licensee of an invoice for such Product, or (B) the shipment by Licensor of the corresponding Product.

 

(i)           Licensor's invoice price to Licensee and Licensee's payment to Licensor shall both be in U.S. dollars and shall be established for each Product pack for each country of the Territory at the commencement of each calendar year.  For each country, the basis for the invoice price shall be the in-market local currency price from Licensee its Affiliates or sublicensees to third parties converted into U.S. dollars at the exchange rate published in the Wall Street Journal prevailing at the close of business on the first working day of the applicable calendar year.

 

(ii)           Any necessary adjustments to such payments to reflect the actual Purchase Price for the Product shall be made forty-five (45) days after the end of each calendar quarter in the report described in paragraph 16(a), by converting local currency Net Sales into U.S. dollars based on the local currency – U.S. dollar exchange rate published in the Wall Street Journal on the last working day of the applicable calendar quarter and calculating the Purchase Price on this basis.

 

(iii)           Underpayments or overpayments shall be calculated based on the Net Sales value of Units of the Product sold by Licensee, its Affiliates or sublicensees during the calendar quarter.  Purchases by Licensee in excess of actual Unit sales by Licensee, its Affiliates or sublicensees during a given calendar quarter shall be carried over to the next calendar quarter for reconciliation.  Volume discounts, as defined by paragraph 5(b), shall be taken into account in the last reconciliation of each calendar year.

 

 

(e) If a vaginally administered progesterone-containing product is approved in any country of the Territory subsequent to May 21, 1995 which product captures fifteen percent (15%) or more of the sales of the Product in such country the parties shall renegotiate price based on the economic impact upon the Licensee for any such country or countries.

 

6.           Marketing.

 

(a)           Licensee will be responsible for marketing and sales of the Product in the Territory.  Licensee will use its diligent efforts to make the Product a commercial success by making a commitment throughout the term of the Agreement, financial and otherwise, to the Product that is no less than its commitment to those of its own brands and products in similar circumstances that it actively and aggressively promotes, in accordance with the life cycle of such products, provided, however, that Licensee shall have no such obligations with respect to the Product containing progesterone in a concentration of four percent (4%).  Licensee will ensure that any sublicense it makes under the Patents and Technology to market, use and sell the Product in the Territory will contain appropriate obligations of commercial diligence.

 

(b)           Licensee will provide quarterly sales and other marketing information useful to the Licensor in monitoring sales progress.

 

(c)           Licensor hereby authorizes Licensee to communicate directly with regulatory authorities with respect to regulatory files for the Product owned by Licensor to the extent necessary to fulfill Licensee's responsibilities for marketing and sales of the Product in the Territory.  Licensor agrees, at Licensee's request, to execute any documents or take any other actions as may be necessary or desirable to obtain authorization for Licensee so to communicate directly with such regulatory authorities.

 

(d)           Licensee may refer to, and otherwise use, all published and unpublished studies regarding the Product in its Promotional and marketing efforts under this Agreement.

 

(e)           Licensor acknowledges and agrees that (i) Licensee has no obligation under this Agreement or otherwise to market, promote or sell Product A; and (ii) by continuing after the Second A&R Agreement Date  to market, promote and sell Product B to the Non-Fertility Specialist Market outside of the United States in a manner substantially similar to the manner Licensee has marketed, promoted and sold Product B to the Non-Fertility Specialist Market outside of the United States prior to April, 2001, Licensee shall satisfy any and all obligations it may have now or in the future under this Agreement or otherwise to market, promote or sell Product B to the Non-Fertility Specialist Market outside of the United States.

 

 

7.           Clinical Trials and Registration.

 

(a)           Licensor will be responsible for the Ongoing Clinical Trials (including costs of the Ongoing Clinical Trials).Licensor’s Ongoing Clinical Trials are attached in Schedule C.

Licensor shall promptly provide the data of the Ongoing Clinical Trials free-of-charge to Licensee and Licensee may rely upon the data from those Ongoing Clinical Trials solely for use with the Product within the Territory.

The parties shall consult from time to time regarding the use, details and timing of the Ongoing Clinical Trials to support registration filings for the Product in the Territory and in particular for Europe and key countries (e.g. Japan, China, Russia,.Brasil, India, etc).

Licensor will be responsible for registration filings for the Product outside the Territory, and shall be responsible for all relating costs and expenses.

Licensee will be responsible for registration filings for the Product within the Territory, and shall be responsible for all relating costs and expenses.

(b)           Licensee shall have the right to monitor and audit the Ongoing Clinical Trials and/or other tests required by the protocols described in Schedule C for the Product.

(c)           Each party will immediately notify the other of any adverse or unexpected reaction or results or any actual or potential government action relevant to clinical trials of the Product and the parties will discuss with each other measures to be undertaken to resolve any such problem.

 

(d) Licensor will be responsible for New Clinical Trials (including costs thereof), in new indications, if any, and relating new registration filings for the Product outside the Territory. Licensee will be responsible for New Clinical Trials (including costs thereof), in new indications, if any, and relating new registration filings for the Product within the Territory.

 

The parties shall consult from time to time regarding the use, scope, details and timing of the New Clinical Trials for the Product and each party shall promptly provide the other party free-of-charge with the data of the New Clinical Trials it is responsible for. Each party may rely upon the data from the other party’s New Clinical Trials solely for use with the Product within (i) the Territory, for Licensee or (ii) outside the Territory for Licensor.

 

8.           Maintenance of Patents.

 

(a)           Licensor shall keep Licensee currently advised of all steps taken or to be taken in the prosecution for all applications for Patents.  Licensor shall have full and complete control over any reissue or reexamination or other proceedings relating to the Patents and/or Technology and of any disclaimers thereof.  Licensor shall bear all costs for the maintenance and enforcement of the Patents, as well as all costs for the filing, maintenance and enforcement of all additional Patents which may be filed by the Licensor during the term hereof.  If Licensor fails to carry out such obligations set forth in this Section 8(a), Licensee may carry out such obligations on Licensor's behalf at Licensor's cost and may set off such cost against amounts due to Licensor hereunder provided that such action is commercially reasonable.

 

(b)           Licensee shall be responsible for, and bear all costs for the maintenance and enforcement of the Trademarks.  If Licensee fails to carry out such obligations set forth in this Section 8(b), Licensor may carry out such obligations on Licensee's behalf at Licensor's cost and may charge such cost to Licensee, provided that such action is commercially reasonable.

 

(c)           Trademark Use and Quality Control

 

(i)           To the extent Licensor uses any of the Trademarks pursuant to the license granted to it by Licensee under Section 3 hereof, Licensor agrees to list the Trademarks in accordance with good customary trademark practice, and to avoid taking any action that would in any manner impair or detract from the value of the Trademarks, or the goodwill and reputation of Licensee.

 

(ii)           To the extent Licensor uses any of the Trademarks pursuant to the license granted to it by Licensee under Section 3 hereof, Licensor agrees to use the Trademarks only in the form and manner and with appropriate legends as approved from time to time by Licensee, and not to use any other trademark or service mark in combination with the Trademarks without the prior written approval of Licensee, provided that such approval shall be granted unless Licensee reasonably objects on the basis that the proposed use would impair the value of the Trademarks.

 

9.           Infringement of Patents, Technology and/or Trademarks

 

(a)           Licensee and Licensor shall each promptly notify the other following the discovery of any alleged infringement or unauthorized use of the Patents, Technology and/or Trademarks which may come to their attention.

 

 (b)           In the event either Party learns of a third party’s patent/ technology and/or trademarks/ logo in the Territory that may infringe one of the Trademarks or Logos, or that one of the Trademarks or Logos may infringe a third party’s trademark or logo in the Territory, such Party shall promptly inform the other. The Parties shall jointly decide whether any and, if so, what action shall be taken. Costs and expenses sharing rules related to such action, and any compensation or damages awarded in such action, shall be agreed on a case by case basis between the parties before engaging into any actions.

 

10.           Infringement of Third-Party Intellectual Property Rights.

 

(a)           Each party hereto shall notify the other promptly of the receipt of notice of any action, suit or claim alleging infringement by the Patents, the Technology, the Trademarks or the Product of any Intellectual Property Rights of a third party.

 

(b)           In no event shall Licensee settle any such allegation of infringement without the prior written consent of Licensor, which consent shall not be unreasonably withheld or delayed.  In the event that the Licensor agrees in writing or Licensee in good faith determines that it is necessary for Licensee to make royalty or other payments to a third party in order for Licensee to make, have made, use or sell or to continue making, having made, using or selling the Product, Licensee shall be entitled to offset such amounts so paid to any third party against any amounts which may become due to Licensor under this Agreement.

 

11.           Confidentiality.

 

Each party hereto shall hold all Confidential Information in confidence, use it only in connection with the performance of its obligations pursuant to this Agreement and use its diligent efforts (consistent with those which it uses to safeguard its own confidential information) to safeguard Confidential Information and to prevent the unauthorized use or disclosure of any Confidential Information.  Each party hereto shall ensure that its Affiliates or employees who have access to any Confidential Information shall be made aware of and subject to these obligations.  The receiving party may disclose Confidential Information to regulatory authorities for the purpose of seeking marketing approval of the Product pursuant to this agreement and may also disclose Confidential Information to individuals who have a need to know to effectuate the development and commercialization of the Product pursuant to this Agreement, provided each such individual is bound by a confidentiality obligation comparable to the obligation set forth in this Section 11.  The obligations of the parties hereto under this Section 11 shall survive for five (5) years after the expiration or termination of this Agreement.

 

12.           Representations, Warranties and Covenants and Indemnification.

 

(a)           Licensor hereby represents, warrants and covenants the following:

 

(i)           Licensor is a corporation duly organized, existing and in good standing under the laws of Bermuda, with full right, power and authority to enter into and perform this Agreement and to grant all of the rights, powers and authorities herein granted.

 

(ii)           The execution, delivery and performance of this Agreement do not conflict with, violate or breach any agreement to which Licensor is a party, or Licensor's articles of incorporation or bylaws.

 

(iii)           This Agreement has been duly executed and delivered by Licensor and is a legal, valid and binding obligation enforceable against Licensor in accordance with its terms.

 

(iv)           Licensor shall comply with all applicable laws, consent decrees and regulations of any federal, state or other governmental authority in performing this Agreement.

 

(v)           To the best of Licensor's knowledge and belief as of the Second A&R Agreement Date, there are no issued or pending patents, trademarks or patent or trademark applications relating to the Product that would prevent Licensee from using or selling the Product in the Territory.

 

(vi)           To the best of Licensor's knowledge and belief as of the Second A&R Agreement Date, there are no outstanding, pending or threatened product liability or breach of warranty or other similar claims, actions, suits, demands, investigations, arbitrations, administrative or other proceedings, or orders, injunctions, judgments or decrees of any court or government agency in connection with the Product in the Territory.

 

(vii)           To the best of Licensor's knowledge and belief as of the Second A&R Agreement Date, there are no outstanding, pending or threatened violations, notices of noncompliance, warning letters, orders, injunctions, judgments or decrees of any court or government agency, investigations, claims, actions, suits, demands, administrative or other proceedings that have resulted or might result in the revocation, suspension or modification of any regulatory approval for the Product in the Territory.

 

(b)           Licensee hereby represents, warrants and covenants the following:

 

(i)           Licensee is a corporation duly organized, existing and in good standing under the laws of Switzerland, with full right, power and authority to enter into and perform this Agreement.

 

(ii)           The execution, delivery and performance of this Agreement do not conflict with, violate or breach any agreement to which Licensee is a party, or Licensee's articles of organization or bylaws.

 

(iii)           This Agreement has been duly executed and delivered by Licensee and is a legal, valid and binding obligation enforceable against Licensee in accordance with its terms.

 

(iv)           Licensee shall comply with all applicable laws, consent decrees and regulations of any federal, state or other governmental authority in performing this Agreement.

 

(c)           Indemnification

 

(i)           Licensor agrees to indemnify and hold harmless Licensee, its Affiliates and sublicensees and their respective employees, agents, officers and directors from and against any claims, losses, liabilities, damages, costs and expenses (including reasonable attorneys' fees) incurred by Licensee, its Affiliates or sublicensees arising out of or in connection with any (A) breach by Licensor of any representation, warranty, covenant or obligation hereunder, (B) claim or demand of any kind for injury to a person or property arising from Licensor's or its contract manufacturer's manufacturing, packaging, or labeling of the Product; provided, that this indemnification shall not apply to the extent such claim or demand has resulted from manufacturing, packaging, or labeling conducted by or at the direction of Licensee, its Affiliates or sublicensees or from any negligent act or omission with respect to such Product by Licensee, its Affiliates, or sublicensees or their employees or agents, (C) act or omission on the part of Licensor or any of its employees, agents or contract manufacturers in the performance of this Agreement, and (D) payments, commissions or fees of any kind due to consultants or brokers retained by Licensor relating to the Product.

 

(ii)           Licensee agrees to indemnify and hold harmless Licensor and its Affiliates and their respective employees, agents, officers and directors from and against any claims, losses, liabilities, damages, costs and expenses (including reasonable attorneys' fees) incurred by Licensor or its Affiliates arising out of or in connection with any (A) breach by Licensee of any representation, warranty, covenant or obligation hereunder, (B) claim or demand of any kind for injury to person or property arising from Licensee's, its Affiliates' or sublicensees' marketing, distribution and sale of the Product; provided, that this indemnification shall not apply to the extent such claim or demand has resulted from any negligent act or omission with respect to such Product by Licensor, its Affiliates, their employees, agent or contract manufacturers, (C) act or omission on the part of Licensee or any of its employees or agents in the performance of this Agreement, (D) third party claims alleging infringement of such third parties' Intellectual Property Rights as a result of the advertisement, promotion or marketing materials created by or at the direction of Licensee, its Affiliates or sublicensees and used in connection with the sale of the Product hereunder, and (E) payments, commissions or fees of any kind due to consultants or brokers retained by Licensee relating to the Product.

 

(iii)           A party seeking indemnification under this paragraph 12 (c) (the "Indemnified Party") must give prompt written notice thereof to the other party (the "Indemnifying Party").  The Indemnifying Party shall have the right to defend any such claim or demand subject to the right of the Indemnified Party to participate with counsel of its choice in such defense, but the fees and expenses of such additional counsel shall be at the expense of the Indemnified Party.  The Indemnified Party shall cooperate fully in all respects with the Indemnifying Party in any such compromise, settlement or defense, including, without limitation, by making available all pertinent information and personnel under its control to the Indemnifying Party.  The Indemnifying Party will not compromise or settle any claim or demand (other than, after consultation with Indemnified Party, a claim or demand to be settled by the payment of money damages and/or the granting of releases) without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld.

 

(iv)           Each party shall maintain and keep in force for the term of this Agreement comprehensive general liability insurance including Products/Completed Operations, Contractual and Broad Form Property Damage covering its indemnification obligations hereunder with a minimum limit of Fifteen Million United States Dollars (U.S. $15,000,000) per annum combined single limit for Bodily Injury and Property Damage to be increased as appropriate consistent with prudent business practices prevailing in the pharmaceutical business.  Such insurance shall be placed with a first class insurance carrier with at least a BBB rating by Standard & Poors.  Promptly after the execution and delivery of this Agreement, each party shall furnish a certificate of insurance to the other party evidencing the foregoing endorsements, coverage and limits, and providing that such insurance shall not expire or be canceled or modified without at least thirty (30) days prior notice to the other party.

 

13.           Term of License.

 

Except as otherwise provided for herein, and subject to the provisions of paragraph 4 (r), the Agreement shall commence on the Second A&R Agreement Date and remain in effect until May 19, 2015 (the "Initial Term"), renewable upon mutual agreement of the parties for five (5) year periods at commercial terms to be agreed upon.  It is understood that if after the Initial Term or any subsequent five-year period the parties cannot agree upon mutually acceptable terms, Licensee will have the option of converting this Agreement into a license agreement and Licensee will be free to manufacture, or have manufactured, the Product.  Under such circumstances, Licensor shall continue to supply the Product in Finished Package Form under the then current terms and conditions of this Agreement for as long as is necessary and will assist Licensee as necessary, including without limitation by transferring to Licensee all Technology necessary or useful to give Licensee the capability of manufacturing the Product in such a way as to communicate such Technology to Licensee promptly, effectively and economically, so that Licensee can undertake manufacture of the Product and continue the sale of the Product without interruption.

 

14.           Termination.

 

(a)           This Agreement may be terminated upon the mutual written agreement of the parties.

 

(b)           Either party may terminate this Agreement forthwith by written notice to the other, if the other party commits a material breach of any part of this Agreement and such breach has not been remedied by the breaching party within sixty (60) days after written notice of such breach has been given by the other party.  If the breach cannot be remedied within sixty (60) days, the breaching party may submit a plan within this sixty (60) day period, reasonably acceptable to the other party, outlining the steps that it intends taking to cure the breach and then must cure the breach in accordance with the terms of such plan or be subject to an action by the other party for termination of this Agreement pursuant to this paragraph 14 (b) for breach of such plan.

 

(c)           This Agreement may also be terminated by written notice of one party, if the other party shall be involved in financial difficulties as evidenced:

 

(i)           by its commencement of a voluntary case under any applicable bankruptcy code or statute, or by its authorizing, by appropriate proceedings, the commencement of such voluntary case; or

 

(ii)           by its failing to receive dismissal of any involuntary case under any applicable bankruptcy code or statute within sixty (60) days after initiation of such action or petition; or

 

(iii)           by its seeking relief as a debtor under any applicable law of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or by consenting to or acquiescing in such relief; or

 

(iv)           by the entry of an order by a court of competent jurisdiction finding it to be bankrupt or insolvent, or ordering or approving its liquidation, reorganization or any modification or alteration of the rights of its creditors or assuming custody of, or appointing a receiver or other custodian for, all or a substantial part of its property or assets; or

 

(v)           by its making an assignment for the benefit of, or entering into a composition with its creditors, or appointing or consenting to the appointment of a receiver or other custodian for all or a substantial part of its property.

 

(d)           Licensee may terminate this Agreement at any time during the Initial Term with one (1) year's written notice if the Product is not a commercial success, as determined by Licensee in its sole discretion, and on ninety (90) days' notice at any time during the Agreement for reasons of safety or efficacy of the Product.

 

(e)           Licensee shall have the option of converting this Agreement into a license agreement at any time following a Failure to Supply.  Upon notice of such conversion, Licensor shall assist Licensee as necessary, including, without limitation, by transferring to Licensee all Technology necessary or useful to give Licensee the capability of manufacturing the Product in such a way as to communicate such Technology to Licensee promptly, effectively and economically so that Licensee can undertake manufacture of the Product and continue the sale of the Product without interruption.  Licensee shall then be free to manufacture, or have manufactured, the Product provided that Licensee pays on a quarterly basis the royalties as provided in Section 4(r).

 

(f)           The failure by a party to exercise its rights to terminate this Agreement pursuant to this Section (14) in the event of any occurrence giving rise thereto shall not constitute a waiver of such rights in the event of any subsequent occurrence.

 

(g)           Termination of this Agreement shall not release either party from its obligations accrued prior to the effective date of termination nor deprive either party from any rights that this Agreement provides shall survive termination.  The provisions of paragraphs 4 (q), (r), (s) and (t), Sections 11, 13, 14(g), 16 through 31, and paragraph 12 (c) shall remain in full force and effect and shall survive the termination of this Agreement to the extent necessary to effect the express purposes of such paragraphs and Sections.

 

15.           Publicity.

 

The parties hereto shall coordinate the preparation and issuance of any public announcement of this Agreement.  Any such announcement shall comply with relevant Securities and Exchange Commission requirements and shall take into account any reasonable concern regarding the trade.  The wording of such announcement shall be agreed upon by the parties before release.

 

16.           Audits.

 

(a)           Licensee shall keep accurate records of all Product sales and other relevant data concerning the Product for a period of two (2) years following the year in which such records were created and Licensee shall provide Licensor quarterly reports thereof forty-five (45) days after the end of the applicable calendar quarter.  Such reports shall state the number of Units of Product manufactured by Licensee, its Affiliates or sublicensees and the number of Units of Product sold by Licensee, its Affiliates or sublicensees during the applicable quarter as well as the number of free samples of Product distributed and any Product returns made during such calendar quarter together with an accounting of any other applicable components of the amounts paid or to be paid hereunder with respect to such calendar quarter.  Simultaneous with the delivery of such report, Licensee shall make, or cause to be made, any additional payment due with respect to the Purchase Price for Product sold during such calendar quarter.  Once a year, upon reasonable notice, at times mutually agreed upon and during business hours, Licensor at Licensor's cost may have the accounts of Licensee, its Affiliates or sublicensees for the preceding two (2) calendar years relating to the Product reviewed by independent certified public accountants appointed by Licensor and reasonably approved by Licensee, solely in order to verify amounts due under this Agreement.  Licensor and Licensee shall mutually determine a general strategy for such audit in advance of its conduct.  Said accountant shall not disclose to Licensor any information except that which should properly be contained in a quarterly report required under this Agreement.  Licensee shall promptly pay any underpayment evidenced by such audit, and Licensor shall promptly refund any overpayment evidenced by such audit.  In the event such an audit evidences an underpayment of more than five percent (5%) with respect to the amounts actually paid, Licensee shall promptly pay such underpayment to Licensor with interest at the prime rate as set by Citibank, from the time when such underpayment accrued, and shall reimburse Licensor for the reasonable costs and expenses (including fees) of such audit.

 

(b)           Licensor shall keep accurate records of its Direct Costs of manufacturing the Product for a period of two (2) years following the year in which such records were created.  Once a year, upon reasonable notice, at times mutually agreed upon and during business hours, Licensee at Licensee's cost may have the accounts of Licensor for the preceding two (2) calendar years relating to the Direct Costs of manufacturing the Product reviewed by independent certified public accountants appointed by Licensee and reasonably approved by Licensor, solely in order to verify amounts due under this Agreement.  Licensor and Licensee shall mutually determine a general strategy for such audit in advance of its conduct.  Said accountant shall not disclose to Licensee any information except that relating to the Direct Costs of manufacturing the Product.  Licensor shall promptly refund any overpayment evidenced by such audit, and Licensee shall promptly pay any underpayment evidenced by such audit.  In the event such audit evidences an overpayment of more than five percent (5%) with respect to the amounts actually paid, Licensor shall promptly refund such overpayment to Licensee with interest at the prime rate as set by Citibank, from the time when such overpayments accrued, and shall reimburse Licensee for the reasonable costs and expenses (including fees) of such audit.

 

17.           Notices.

 

All notices required hereunder shall be in writing and shall be deemed to be properly given if sent by air courier to the party to be notified at the address set forth on page 1 hereof, or at such other latest address as either party may hereafter designate in writing to the other; provided that a copy of each notice to be sent to Licensor hereunder shall also be sent by the same means to General Counsel, Columbia Laboratories, Inc.,  354 Eisenhower Parkway, Second Floor, Plaza Two, Livingston, New Jersey 07039, U.S.A.; and further provided that a copy of each notice sent to Licensee hereunder shall also be sent by the same means to Legal Department, Merck Serono S.A.-Geneva, 9 chemin des Mines, 1202 Geneva, Switzerland.  The date of service of any notice so sent by air courier shall be the date of receipt.

 

18.           Ownership Change; Assignment; Successors.

 

This Agreement shall be binding on and inure to the benefit of the successors and assigns of the parties, including any Affiliate, subsidiary, division or any entity controlled by either party.  Except as provided herein, Licensee may not sublicense or assign this Agreement, in whole or in part, without the consent in writing of Licensor, and any purported assignment with such consent (which may be withheld without reason) shall be void; provided, that Licensee may upon notice to Licensor assign all or any portion of this Agreement to any of its Affiliates, but may not then sell such Affiliate without Licensor's prior written consent unless this Agreement is first assigned back from such Affiliate to Licensee.  Licensor may not assign its rights under this Agreement, in whole or in part, without consent in writing of Licensee; and any purported assignment without such consent (which may be withheld without reason) shall be void; provided, that Licensor may upon notice to Licensee assign all or any portion of this Agreement to any of its Affiliates, but may not then sell such Affiliate without Licensee's prior written consent unless this Agreement is first assigned back from such Affiliate to Licensor.

 

If any person, individually or in concert with others, shall acquire directly or indirectly, through one or more intermediaries, the beneficial ownership of fifty percent or more of the equity or assets of Licensor or Licensee during the term of this Agreement, the party not being acquired may require from the new owners of the acquired party a written affirmation of its intent and capability to comply with all the terms of this Agreement.  Under no circumstances shall such action by Licensor interfere with or compromise the continued supply of the Product to Licensee, provided, however, that should such interference or compromise occur, Licensee in such event shall have the option of terminating this Agreement.

 

Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto, or their respective permitted successors and assigns, any benefits, rights or remedies.

 

19.           Tax.

 

All taxes levied on account of any payments accruing under this Agreement which constitute income to Licensor, shall be the obligation of Licensor, and if provision is made in law or regulation for withholding, such tax shall be deducted from any payment then due, paid to the proper taxing authority, and receipt for payment of the tax secured and promptly sent to Licensor.

 

20.           Independent Contractors.

 

The relationship of the parties under this Agreement is that of independent contractors.  Neither party shall be deemed to be the agent of the other and neither is authorized to take any action binding upon the other.

 

21.           Entire Agreement; Modification.

 

This Agreement, including the Schedules hereto, contains the entire understanding between the parties hereto relating to the subject matter hereof, there being no terms and conditions other than those set forth herein, and it supersedes all prior agreements, written or oral, between the parties hereto with respect to the matters covered hereunder.  This Agreement may not be modified, altered or otherwise changed other than by an instrument in writing, duly executed by each of the parties hereto. For avoidance of doubt, the terms of the Amended and Restated  License and Supply Agreement dated as June 4, 2002 (as amended) shall remain in effect (as stated therein) until the Second A&R Agreement Date.

 

22.           Severability.

 

If any provision of this Agreement should be or becomes fully or partly invalid or unenforceable for any reason whatsoever or should be adjudged to violate any applicable law, this Agreement is to be considered divisible as to such provision and such provision is deemed to be deleted from this Agreement, and the remainder of this Agreement shall be valid and binding as if such provision were not included herein; provided, however, that this Agreement is not rendered fundamentally different in its content or effect.

 

23.           Effect of Headings.

 

The headings for the sections and paragraphs of this Agreement are to facilitate reference only, do not form a part of this Agreement, and shall not in any way affect the interpretation hereof.

 

24.           Choice of Law.

 

This Agreement and performance hereof shall be construed and governed by the laws of the State of New York and of the United States.  Any dispute, controversy, claim or difference arising between the parties out of, relating to, or in connection with this Agreement shall be submitted to the jurisdiction of the courts sitting in the State of New York.

 

25.           No Waiver.

 

No delay or omission or failure to exercise any right or remedy provided for herein shall be deemed to be a waiver thereof or acquiescence in the event giving rise to such right or remedy.

 

26.           Counterparts.

 

This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which, when so executed shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.

 

27.           Further Assurances.

 

Licensor and Licensee each agree to produce or execute such other documents or agreements as may be necessary or desirable for the execution and implementation of this Agreement and the consummation of the transactions contemplated hereby.

 

28.           Schedules.

 

The terms and provisions of the Schedules attached to this Agreement are hereby incorporated herein as if fully set forth herein.

 

29.           Bankruptcy.

 

All Trademark, Patent and Technology rights and licenses granted to the Product under or pursuant to this Agreement by Licensor to Licensee are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, as amended from time to time (the "Bankruptcy Code"), licenses of rights to "intellectual property" as defined under Section 101 (35A) of the Bankruptcy Code, and any comparable law in the Territory.  The parties hereto agree that so long as Licensee, as a licensee of such rights under this Agreement, makes all payments to Licensor required under this Agreement.  Licensee shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code.  The parties further agree that, in the event that any proceeding shall be instituted by or against Licensor seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking an entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or it shall take an action to authorize any of the foregoing actions, Licensee, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code.  The parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against Licensor under the Bankruptcy Code, Licensee shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiment of such intellectual property, and the same, if not already in its possession, shall be promptly delivered to Licensee (i) upon any such commencement of a bankruptcy proceeding upon written request therefor by Licensee, unless Licensor elects to continue to perform all of its obligations under this Agreement, or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on behalf of Licensor, upon written request therefor by Licensee. In addition the parties agree that in such event the intellectual property delivered to Licensee shall include all Technology necessary or useful to give Licensee the capability of manufacturing the Product and such Technology shall be delivered to Licensee in such a way as to communicate it to Licensee promptly, effectively and economically.

 

30.           Force Majeure.

 

No failure or omission by a party hereto in the performance of any obligation of this Agreement shall be deemed a breach of this Agreement nor shall it create any liability if the same shall arise from any cause or causes beyond the control of the party, including, but not limited to, the following, which, for the purposes of this Agreement, shall be regarded as beyond the control of the party in question:  acts of God, acts or omissions of any government, any rules, regulations, or orders issued by any governmental authority or any officer, department, agency, or instrumentality thereof, fire, storm, flood, earthquake, accident, war, rebellion, insurrection, riot, invasion, strikes, lockouts; provided however, that the party so affected shall promptly advise the other party of the existence of such causes of nonperformance, shall use its best efforts to avoid or remove such causes of nonperformance and shall continue performance hereunder with the utmost dispatch whenever such causes are removed.

 

31.           Performance by Affiliates.

 

The parties agree that certain of their rights and obligations under this Agreement may be carried out by one or more of their Affiliates; provided, however, that each party shall remain responsible for the acts and omission of its Affiliates.  The parties further understand and agree that no such Affiliate is a party to this Agreement, and, except as contemplated by this Agreement, is not the agent of such party for purposes hereof, is not authorized to bind such party and cannot enter into amendments to this Agreement, which can only be made in accordance with the terms of Section 21 hereof.

 

IN WITNESS WHEREOF, the parties hereto have set their hands as of the day and year first above written,

 

Columbia Laboratories (Bermuda) Ltd.

By:           /S/ Robert S. Mills                      14/5/2010                     

(Title)                      President

Ares Trading S.A.

By:           /S/ L. Foelisch                             11/5/2010                      

(Title)                      VP Supply Chain

By:           /S/ Cedric Hyde        12/5/2010                                           

(Title)                      CFO

[SCHEDULES INTENTIONALLY OMITTED]

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