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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the “Agreement”) made this 18th day of March 2022 (the “Effective Date”) is by and between Aerie Pharmaceuticals, Inc., a Delaware corporation with principal executive offices at 4301 Emperor Blvd. Suite 400 Durham, NC 27703 (the “Company”), and Peter Lang residing at XXXXXXXXXXXXXXX (“Executive”).
W I T N E S S E T H:
WHEREAS, the Company desires to employ Executive as its Chief Financial Officer
WHEREAS, Executive desires to accept such employment and to serve the Company in such capacity, upon the terms and subject to the conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:
1.Employment. The Company agrees to employ Executive, and Executive agrees to be employed by the Company, upon the terms and subject to the conditions of this Agreement.
2.Term. Subject to Sections 8 and 9 hereof, the Company agrees to employ Executive, and Executive agrees to be employed by the Company, in each case pursuant to this Agreement, for a period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the “Initial Term”). This Agreement will renew automatically for successive one (1) year periods (each, a “Renewal Period”) unless either party gives notice of non-renewal at least 90 days prior to the end of the Initial Term or the then-current Renewal Period, as applicable (the Initial Term and any Renewal Period are collectively referred to as the “Term”). Each additional Renewal Period shall be added to the end of the next scheduled expiration date of the Initial Term or Renewal Period, as applicable, as of the first day after the last day on which notice may be given pursuant to the preceding sentence.
3.Duties; Place of Performance; Etc.
(a)Executive shall serve as Chief Financial Officer of the Company and shall report to the Chief Executive Officer of the Company (the “CEO”). Subject to the direction of the CEO and the Board of Directors (the “Board”), as applicable, Executive shall have such powers and perform such duties as are reasonably determined by the CEO and the Board and could change based on business needs. The position will be generally consistent with the role of a chief financial officer, as further defined in the job description.
(b)Executive shall devote substantially all of his business time, attention and energies to the business and affairs of the Company and shall use his best efforts to advance the interests of the Company and shall not during the Term be actively engaged in any other business
activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, which will interfere with the performance by Executive of his duties hereunder or Executive’s availability to perform such duties or that will adversely affect, or negatively reflect upon, the Company. Following execution of this Agreement, should Executive be, or desire to become, engaged as a consultant, owner, director officer or advisor of any other venture, Executive must obtain the prior written consent of the Board, which consent may be withheld in the Board’s sole discretion.
(c)The duties to be performed by Executive hereunder shall be primarily performed at the offices of the Company or such other place as the CEO may authorize; provided, however, that Executive understands that his duties will require periodic travel, which may be substantial at times.
4.Compensation. As full compensation for the performance by Executive of his duties under this Agreement, the Company shall pay Executive as follows:
(a)Base Salary. The Company shall pay Executive an annual base salary (the “Base Salary”) equal to $450,000, payable in accordance with the Company’s normal payroll practices. Executive’s Base Salary may be increased at the discretion of the Board but may not be decreased by the Board, or the Compensation Committee of the Board (the “Compensation Committee”) except as a proportional reduction, as to the salaries of all other executives of the Company at the level of Senior Vice President and above as part of an overall reduction in salaries decided by the Board, Compensation Committee or CEO, as applicable, in good faith as being in the best interests of the Company and its stockholders, and will only be so reduced during such time as all such other executive salaries remain so reduced.
(b)Performance Bonus.
(i)During the Term, Executive shall also be eligible to receive an annual cash performance bonus (the “Performance Bonus”) based on a target equal of 50% of Executive’s Base Salary. The actual amount of such Performance Bonus shall be determined by the Board or the Compensation Committee, and shall be based on the achievement of specific performance objectives to be established by the CEO and approved by the Board or Compensation Committee, on an annual basis (the “Performance Goals”).
(ii)During the Term of this Agreement, Executive and the CEO shall meet no later than the end of each year to mutually determine Executive’s performance objectives for the subsequent calendar year, which objectives shall be approved by the Board, or the Compensation Committee. If Executive and the CEO are unable to agree upon such objectives for the relevant year despite mutual good faith efforts to do so, then the objectives will be determined in the good faith discretion by the CEO no later than January 15th and will be communicated promptly to Executive in writing after being so determined and will be deemed to have been accepted by Executive.
(iii)Any Performance Bonus payable to Executive pursuant to this Section 4(b) shall be paid to Executive on or before March 15th of the subsequent calendar year, subject to continued employment through the date of payment.
(c)Withholding. The Company shall withhold all applicable federal, state, and local taxes and social security and such other amounts as may be required by law from all amounts payable to Executive under this Section 4.
(d)Equity Grants. During the Term hereof, Executive will be eligible to receive equity incentive awards, which may be in the form of stock options, restricted stock grants or other equity incentive awards, as follows:
(i)Stock Options. As soon as practicable after the Effective Date, the Company will grant to Executive an option (the “Initial Option”) pursuant to the Company’s Inducement Award Plan (the “Inducement Plan”) to purchase shares of common stock of the Company (the “Initial Option Shares”). Subject to the approval of the Compensation Committee, the exercise price per share of Executive's Initial Option will be calculated in a manner consistent with the how the exercise price was calculated for stock options granted to other executive officers (other than the Chief Executive Officer) as part of the Company’s annual equity program in March 2022, with such calculation for the Initial Option being based on the date that the Initial Option is granted. The Initial Option shall vest over time, subject to Executive's continued employment, as more fully described in Section 1(d)(iv) below. The final terms of the Initial Option shall be set forth in an individual option award agreement to be provided to Executive at the time of grant and in the Inducement Plan, provided that the Initial Option and all subsequent options shall provide a cashless exercise option (at Executive’s option) wherein Executive will have no obligation to pay nor outlay any cash in order to exercise any such option or satisfy any resulting tax liability, subject to all applicable securities laws.
(ii)Restricted Stock. As soon as practicable after the Effective Date, the Company will grant to Executive shares of restricted common stock of the Company (the “Restricted Stock”) pursuant to the Inducement Plan. The Restricted Stock shall vest, subject to certain time or performance vesting conditions, as more fully described in Section 1(d)(iv). The final terms of the Restricted Stock shall be set forth in an individual restricted stock award agreement to be provided to Executive at the time of grant and in the Inducement Plan.
(iii)Additional Equity Grants. During the Term hereof, Executive will be eligible to receive equity incentive awards, which may be in the form of stock options, restricted stock grants, performance shares or other equity incentive awards under or outside of the Company’s Amended and Restated Omnibus Incentive Plan and under any successor equity incentive plans of the Company, as the Board in its sole discretion determines to be appropriate.
The recommendation to authorize the equity awards in connection with the commencement of your employment, as described in Sections 2(d)(i) and (ii) above, with an approximate target value of $1,400,000, is subject to Board approval and will be granted as soon as practicable following your start date; provided that if your start date is prior to the date on which 2022 annual long-term equity awards are granted by the Company to other individuals who report
directly to the CEO, then the grant date for your awards will be the same as the grant date used for the such other individuals’ awards. The grant date is anticipated to occur in March 2022. Subject to approval by the Board, the target value will be delivered as follows: 50% in stock options, 25% in restricted stock, and 25% in performance-vested stock. The award will be subject to the provisions of the Company’s Inducement Award Plan and specific stock agreements with you. The Initial Option Shares will be subject to vesting provisions in which ¼ of the total options will vest upon the first anniversary of grant with the balance vesting at a rate of 1/36 of the total options each month thereafter. The restricted stock will vest in four equal installments upon the first four anniversaries of grant. The performance-vested stock will vest based on the achievement of performance-based conditions over a performance period, to be determined by the Board prior to the Effective Date of this Agreement. All vesting is also contingent on continued service through each vesting date. Details of this plan will be provided to you upon grant. Beginning with the 2023 annual grant cycle, future equity awards, as described in Section 2(d)(iii) above, will be in the discretion of the Compensation Committee taking into consideration, among other factors, the Executive’s role and contributions to the Company and analysis of relevant market conditions and benchmarking.
(e)Expenses. The Company shall reimburse Executive for all normal, usual, and necessary expenses incurred by Executive in furtherance of the business and affairs of the Company, including reasonable travel and entertainment, upon timely receipt by the Company of appropriate vouchers or other proof of Executive’s expenditures and otherwise in accordance with any travel and expense reimbursement policy as may from time to time be adopted by the Company.
(f)Insurance.
(i)Executive will be designated as a named insured on any directors’ and officers’ liability insurance the Company may have.
(ii)The Company will provide Executive, at the Company’s expense, with a life insurance benefit plan with terms and coverage appropriate for Executive’s position with the Company, which policy amount shall be equal to no less than one year’s Base Salary in effect at the time the policy was acquired.
(g)Executive Benefits. Executive will receive the Company’s standard employee benefits package (including health and disability insurance with ninety-five percent (95%) of the cost paid by the Company, participation in the Company’s 401(k) plan subject to the terms and conditions thereof) as such package and policies are in effect from time to time, and as such benefits package may be adjusted by the Board in good faith during the Term hereof, as applicable to all employees, which benefits package can be increased, but cannot be decreased unless such decrease is effected in connection with, and is proportional to, an overall reduction in the relevant benefits to all executive officers, and will only be so reduced during such time as all such other relevant executive officer benefits remain so reduced.
(h)Vacation. Executive shall, during the Term, be entitled to four (4) weeks of vacation per annum, in addition to nationally recognized holidays and sick days provided as part of the Company’s benefit programs.
5.Confidential Information and Inventions.
(a)Executive recognizes and acknowledges that in the course of his duties he is likely to continue to receive confidential or proprietary information owned by the Company, its Affiliates or third parties with whom the Company or any such Affiliates has an obligation of confidentiality. Accordingly, during and after the Term, Executive agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose other than in connection with the fulfillment of his duties under this Agreement, any Confidential and Proprietary Information (as defined below) owned by, or received by or on behalf of, the Company or any of its Affiliates. “Confidential and Proprietary Information” shall include, but shall not be limited to, confidential or proprietary scientific or technical information, data, formulas and related concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of the Company or of any Affiliate or client of the Company. Additionally, information that, by its nature and content, would be readily recognized by a reasonable person to be proprietary to the Company shall also be deemed Confidential and Proprietary Information. Executive expressly acknowledges the trade secret status of the Confidential and Proprietary Information and that the Confidential and Proprietary Information constitutes a protectable business interest of the Company. Executive agrees not to:
(i)use any such Confidential and Proprietary Information for personal use or for others; and
(ii)permanently remove any Company material or reproductions (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof from the Company’s offices at any time during his employment by the Company, except as required in the execution of Executive’s duties to the Company; provided, however, that Executive shall not be prevented from using or disclosing any Confidential and Proprietary Information:
(A)that Executive can demonstrate was known to him prior to the commencement of his services with the Company.
(B)that is now, or becomes in the future, available to persons who are not required, by contract or otherwise, to treat such information as confidential unless such persons acquired the Confidential and Proprietary Information through acts or omissions of Executive; or
(C)that Executive is compelled to disclose pursuant to the order of a court or other governmental or legal body having jurisdiction over such matter,
provided that (1) Executive shall give Company sufficient advance written notice of such required disclosure to permit it to seek a protective order or other similar order with respect to such Confidential and Proprietary Information, and (2) thereafter Executive shall disclose only the minimum Confidential and Proprietary Information required to be disclosed in order to comply, whether or not a protective order or other similar order is obtained by the Company. The Confidential and Proprietary Information that is disclosed pursuant to this paragraph shall remain Confidential and Proprietary Information for all other purposes.
Notwithstanding the foregoing, nothing herein shall preclude Executive’s right to communicate, cooperate or file a complaint with any U.S. federal, state or local governmental or law enforcement branch, agency or entity (collectively, a “Governmental Entity”) with respect to possible violations of any U.S. federal, state or local law or regulation, or otherwise make disclosures to any Governmental Entity, in each case, that are protected under the whistleblower or similar provisions of any such law or regulation; provided that in each case such communications and disclosures are consistent with applicable law. In addition, Executive acknowledges that Executive has received notice of the immunity from liability to which Executive is entitled for the disclosure of confidential information or a trade secret to the government or in a court filing as provided by Federal law, as set forth in Exhibit A to this Agreement.
(b)Executive agrees to immediately return to the Company all Company material and reproductions thereof (including but not limited, to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) in his possession upon request and in any event immediately upon termination of employment.
(c)Except with prior written authorization by the Company, Executive agrees not to disclose or publish any of the Confidential and Proprietary Information, or any confidential, scientific, technical, or business information of any other party to whom the Company or any of its Affiliates owes a legal duty of confidence, at any time during or after his employment with the Company.
(d)Executive agrees that all inventions, discoveries, improvements and patentable or copyrightable works, relating to the Company’s business (“Inventions”) initiated, conceived or made by him, either alone or in conjunction with others, during the Term shall be the sole property of the Company to the maximum extent permitted by applicable law and, to the extent permitted by law, shall be “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C.A., Section 101). The Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual property or other rights in connection therewith. Executive hereby assigns to the Company all right, title and interest he may have or acquire in all such Inventions; provided, however, that the Board may in its sole discretion agree to waive the Company’s rights pursuant to this Section 5(d) with respect to any Invention that is not directly or indirectly related to the Company’s business. Executive further agrees to assist the Company in every proper way (but at the Company’s expense) to obtain and from time to time
enforce patents, copyrights or other rights on such Inventions in any and all countries, and to that end Executive will execute all documents necessary:
(i)to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and
(ii)to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection.
(e)Executive acknowledges that while performing the services under this Agreement Executive or other employees, agents or advisors of the Company or its Affiliates in the course of their services on behalf of the Company, may locate, identify and/or evaluate molecules, compounds, products and product candidates having commercial potential in the specific segments of the pharmaceutical or biotechnology research and development industries in which the Company is then operating (the “Corporate Opportunities”). Executive understands, acknowledges, and agrees that Executive shall not pursue any such Corporate Opportunity for himself or for others unless on behalf of the Company or unless such Corporate Opportunity is first offered to the Company and the Board rejects such Corporate Opportunity. Notwithstanding the foregoing, nothing in this Agreement shall be construed as a limitation of Executive’s fiduciary duties as an officer and executive of the Company.
(f)The provisions of this Section 5 shall survive any termination of this Agreement.
6.Non-Solicitation; Non-Disparagement.
(a)During the Term and for a period of 12 months thereafter, Executive shall not, directly or indirectly, without the prior written consent of the Company engage in any Prohibited Solicitation. For purposes of this Agreement, a “Prohibited Solicitation” shall mean Executive’s (i) directly or indirectly hiring, contacting, inducing or soliciting (or assisting any Person to hire, contact, induce or solicit) for employment any person who is, or within six (6) months prior to the date of such hiring, contacting, inducing or soliciting was, an employee of the Company or any of its Affiliates, or (ii) directly or indirectly inducing or soliciting (or assisting any Person to induce or solicit) any customer, client or vendor of, or other person having a business relationship with, the Company or any of its Affiliates to terminate its relationship or otherwise cease doing business in whole or in part with the Company or any of its Affiliates, or directly or indirectly interfering with (or assist any Person to interfere with) any relationship between the Company or any of its Affiliates and any of their respective customers, clients, or vendors.
(b)During the Term and at all times thereafter, (i) Executive agrees he shall not, directly or indirectly, make or encourage any other individual to make any public or private comments, orally or in written form (including, without limitation by e-mail or other electronic transmission), whether or not true, that would “disparage” the Company, or any of its officers, directors, managers, or significant stockholders and (ii) the Company agrees not to issue any public statement that would “disparage” Executive, and shall advise its officers and directors not
to make any such statement on the Company’s behalf. “Disparaging” statements are those which impugn the character, capabilities, reputation or integrity of the aforesaid individuals or entity or which accuse the aforesaid individuals or entity of acting in violation of any law or governmental regulation or of condoning any such action, or otherwise acting in an unprofessional, dishonest, disreputable, improper, incompetent, or negligent manner, but shall not include truthful statements required by due legal process. Notwithstanding the foregoing, nothing in this Agreement shall preclude the parties hereto or their successors from making truthful statements in the proper performance of their jobs or that are required by applicable law, regulation or legal process, and the parties shall not violate this provision in making truthful statements in response to disparaging statements made by the other party.
(c)In the event that Executive materially breaches any provisions of Section 5 or this Section 6, then, in addition to any other rights that the Company may have, the Company shall be entitled to seek injunctive relief to enforce the restrictions contained in such Sections, which injunctive relief shall be in addition to any other rights or remedies available to the Company under the law or in equity.
(d)The right and remedy enumerated in Section 6(c) shall be independent of and shall be in addition to and not in lieu of any other rights and remedies available to the Company at law or in equity. If any of the covenants contained in this Section 6, or any part of any of them, is hereafter construed or adjudicated to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants or rights or remedies which shall be given full effect without regard to the invalid portions. If any of the covenants contained in this Section 6 are held to be invalid or unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and in its reduced form such provision shall then be enforceable. No such holding of invalidity or unenforceability in one jurisdiction shall bar or in any way affect the Company’s right to the relief provided in this Section 6 or otherwise in the courts of any other state or jurisdiction within the geographical scope of such covenants as to breaches of such covenants in such other respective states or jurisdictions, such covenants being, for this purpose, severable into diverse and independent covenants.
(e)In the event that an actual proceeding is brought in equity to enforce the provisions of Section 5 or this Section 6, Executive shall not urge as a defense that there is an adequate remedy at law, nor shall the Company be prevented from seeking any other remedies which may be available. Executive agrees that he shall not raise in any proceeding brought to enforce the provisions of Section 5 or this Section 6 that the covenants contained in such Sections limit his ability to earn a living.
(f)The provisions of this Section 6 shall survive any termination of this Agreement.
7.Representations and Warranties by Executive. Executive hereby represents and warrants to the Company as follows:
(a)Neither the execution or delivery of this Agreement nor the performance by Executive of his duties and other obligations hereunder violate or will violate any statute or law
or conflict with or constitute a default or breach of any covenant or obligation, including without limitation any non-competition restrictions, under any prior employment agreement, contract, or other instrument to which Executive is a party or by which he is bound (whether immediately, upon the giving of notice or lapse of time or both).
(b)Executive has the full right, power, and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder. This Agreement constitutes the legal, valid, and binding obligation of Executive enforceable against him in accordance with its terms. No approvals or consents of any persons or entities are required for Executive to execute and deliver this Agreement or perform his duties and other obligations hereunder.
(c)Executive represents and warrants to the Company that he has not brought and shall not bring with him to the Company, or use in the performance of his responsibilities for the Company, any materials or documents of a former employer which are not generally available to the public or which did not belong to Executive prior to his employment with the Company, unless Executive has obtained written authorization from the former employer or other owner for their possession and use and provided the Company with a copy thereof.
8.Termination. Executive’s employment with the Company shall be at-will, and either party may terminate the employment at any time for any reason or no reason at all (subject to applicable notice requirements); provided, however, that under certain circumstances, Executive may be entitled to receive payments and other benefits from the Company following termination as described in Section 9.
Notwithstanding the foregoing, should Executive voluntarily terminate his employment, Executive, shall provide the Company with no less than 30 days' prior written notice, which may be waived or shortened by the Company; provided that Company pays Executive all Base Salary, bonus, and other remuneration (including but not limited to continued vesting of all equity awards during such period) in the ordinary course of business through the originally noticed termination date.
9.Severance.
(a)In the event that Executive’s employment is terminated by the Company without Cause, or by Executive for Good Reason (each as hereinafter defined), or as a result of any non-renewal of this Agreement or the Term, then, subject to Section 9(d) and Section 10:
(i)the Company shall pay Executive's accrued but unpaid Base Salary through the date of termination at the rate in effect at the time of termination (without regard to any reduction in Base Salary that served as the basis for a resignation for Good Reason), accrued but unused vacation, all then unpaid bonuses from the prior calendar year through the date of termination, and reimburse Executive for any unreimbursed business expenses incurred prior to the date of termination;
(ii)the Company shall continue to pay Executive’s Base Salary at the rate in effect at the time of termination (without regard to any reduction in Base Salary that served as the basis for a resignation for Good Reason or any reduction in Base Salary within ninety (90) days prior to and including the date of any a termination by the Company without Cause) for a period of 6 months following the date of termination in accordance with the Company’s ordinary payroll practice;
(iii)to the extent permitted by applicable healthcare laws and provided that Executive makes a timely election to continue coverage, the Company shall pay directly to the insurance provider the premium for COBRA continuation coverage for Executive and Executive’s dependents, less the amount payable by an active employee for such coverage, for a period of 6 months or until he obtains new employment, whichever comes first (the benefits described in this Section 9(a)(iii) shall be referred to as the “Continued Benefits”). Notwithstanding the foregoing, in the event that applicable healthcare laws do not permit continuation of coverage, then the Company shall reimburse Executive for the costs of obtaining coverage in an amount not to exceed the coverage amounts paid or payable by Executive immediately prior to the date of termination; and
(iv)the vesting applicable to all equity awards granted during Executive's employment with the Company shall cease ninety (90) days after the date of termination, and Executive shall have a period of ninety (90) days following the expiration of such post- termination vesting period to exercise any and all vested equity awards that require exercise, after which time all equity awards shall expire; provided, however, that no such equity award that is an option shall be exercisable after the expiration of its maximum term pursuant to the terms thereof. Notwithstanding the generality of the foregoing, with respect to the Initial Option, if the Executive’s employment is terminated by the Company in connection with the a nonrenewal of the Initial Term, the vesting applicable to the Initial Option will continue for one (1) year following the date of termination, and the Executive shall have a period of ninety (90) days following expiration of such post-termination vesting period to exercise the vested portion of the Initial Option, after which time any unexercised portion of the Initial Option shall expire.
(b)In the event that Executive’s employment is terminated by the Company for Cause, or by Executive other than for Good Reason, then:
(i)the Company shall pay Executive’s accrued but unpaid Base Salary through the date of termination, at the rate in effect at the time of termination, accrued but unused vacation, and reimburse Executive for any unreimbursed business expenses incurred prior to the date of termination;
(ii)Executive shall not be entitled to receive any payments or Continued Benefits described in this Section 9; and
(iii)the vesting applicable to all Equity Awards shall cease immediately and Executive shall have a period of 90 days to exercise any and all vested Equity Awards, after which time all Equity Awards shall expire; provided, however, that no such Equity Award that is
an option shall be exercisable after the expiration of its maximum term pursuant to the terms thereof.
(c) If a Change in Control occurs and (1) if the Executive’s employment with the Company is terminated within the ninety (90) days immediately prior to the date on which the Change in Control occurs, where such termination of employment (x) was at the request or suggestion of a counterparty involved in the contemplated Change in Control transaction, or (y) otherwise arose in connection with or in anticipation of the Change in Control; (2) the successor corporation (or a parent or subsidiary of the successor corporation) does not offer Executive employment on terms comparable to or better than Executive's then existing terms of employment with the Company and in connection with the occurrence of the Change in Control, Executive terminates employment; or (3) Executive's employment is terminated by such successor corporation without Cause or by Executive for Good Reason, or in the case of a nonrenewal of this Agreement or the Term, within one-year after the occurrence of the Change in Control, then:
(i)the Company shall pay Executive’s accrued but unpaid Base Salary through the date of termination, at the rate in effect at the time of termination (without regard to any reduction in Base Salary that served as basis for a resignation for Good Reason), accrued but unused vacation, and reimburse Executive for any unreimbursed business expenses incurred prior to the date of termination;
(ii)the Company shall continue to pay Executive’s Base Salary at the rate in effect at the time of termination (without regard to any reduction in Base Salary that served as the basis for a resignation for Good Reason or any reduction in Base Salary within ninety (90) days prior to and including a termination by the Company without Cause) for a period of 12 months following the date of termination in accordance with the Company’s ordinary payroll practice;
(iii)the Company shall pay Executive a Performance Bonus in an amount equal to the greater of (1) the target bonus for the applicable calendar year; and (2) the average of the Performance Bonus received by Executive for the two years immediately preceding termination;
(iv)the Company shall provide the Continued Benefits to Executive for a period of 12 months following the date of termination or until he obtains new employment, whichever comes first; and
(v)All unvested Equity Awards shall immediately vest in full and remain exercisable, if applicable, for a period of 90 calendar days following the date of such termination; provided, however, that no such Equity Award that is an option shall be exercisable after the expiration of its maximum term pursuant to the terms thereof. In order to give effect to the foregoing provision, notwithstanding anything to the contrary set forth in any agreement governing an Equity Award regarding immediate forfeiture of unvested shares upon termination of service or the duration of post-termination of service exercise periods, following any termination of Executive’s employment, none of Executive’s equity incentive awards shall
terminate with respect to any vested or unvested portion subject to such Equity Award before 90 days following such termination.
(b)This Section 9 sets forth the only obligations of the Company with respect to the termination of Executive’s employment with the Company, and Executive acknowledges that, upon the termination of his employment, he shall not be entitled to any payments or benefits which are not explicitly provided in this Section 9. Further, notwithstanding anything to the contrary contained herein, the Company shall have no obligation to pay, and Executive shall have no right to receive, any compensation, benefits or other consideration provided for in this Section 9 (other than any accrued but unpaid Base Salary through the date of termination and any reimbursement of unreimbursed expenses incurred prior to the date of termination) (the “Payments”) unless Executive executes an agreement in a form satisfactory to the Company (the “Release Agreement”) releasing the Company from any and all liability in connection with Executive’s employment or the termination thereof that becomes effective no later than 60 days following Executive’s termination (the “Release Deadline”). Except as required by Section 10, the Payments will commence on the first payroll period following the Release Agreement becoming effective; provided, that (i) if the Payments (or any portion thereof) constitute “deferred compensation” within the meaning of Section 409A (as defined in Section 10) and (ii) the period commencing on the date of termination and ending on the Release Deadline spans two calendar years, then the Payments (or such portion thereof that constitute “deferred compensation”) will commence on the later of the Release Agreement becoming effective and the first payroll date of the Company in the second calendar year. Any portion of the Payments that is delayed due to the application of the preceding sentence shall be made on the date that the Payments commence.
(c)Effective as of the date of any termination of Executive’s employment, unless otherwise agreed to by Executive and the Board, upon termination of Executive’s employment hereunder for any reason, Executive shall be deemed to have resigned from all offices held at the Company or any subsidiary or other Affiliate of the Company at the date of such termination, including without limitation the position of Chief Financial Officer or position of director of any subsidiary or Affiliate of the Company, as applicable.
(d)The Company shall withhold all applicable federal, state, and local taxes and social security and such other amounts as may be required by law from all amounts payable to Executive under this Section 9.
(e)The provisions of this Section 9 shall survive any termination of this Agreement.
(f)For purposes of this Agreement, “Cause” shall include any of the following:
(i)Executive’s willful failure to perform the material duties or obligations hereunder, or willful misconduct by Executive in respect of such duties or obligations, including, without limitation, willful failure, disregard or refusal by Executive to abide by specific, objective and lawful directions received by him in writing constituting an action of the CEO or the Board, which willful failure, disregard or refusal is not cured by Executive within 30 days following written notice from the Company.
(ii)any willful, intentional or grossly negligent act by Executive having the reasonably foreseeable effect of actually and substantially injuring, whether financial or otherwise, the business or reputation of the Company which, if capable of being cured, is not cured by Executive within 30 days following written notice from the Company;
(iii)Executive’s indictment of, or plea of nolo contender to, any felony;
(iv)Executive being convicted of a misdemeanor involving fraud, theft, breach of trust or similar acts, that causes, or could reasonably be expected to cause, substantial harm to business or reputation of the Company;
(v)the determination by the Company, after a reasonable and good-faith investigation by the Company following a written allegation by another employee of the Company, that Executive engaged in some form of harassment prohibited by law (including, without limitation, age, sex or race discrimination); provided, however, that Cause shall not exist under this clause (v) unless the Company gives written notice to Executive where such notice describes with particularity the alleged act(s) at issue and the Board provides Executive with a summary of its findings;
(vi)any conduct on the part of Executive that constitutes a breach of his fiduciary duties to the Company;
(vii)any misappropriation or embezzlement of the property of the Company or its affiliates (whether or not a misdemeanor or felony) by Executive; or
(viii)a material breach by Executive of this Agreement.
(g)For purposes of this Agreement, “Good Reason” shall mean:
(i)any material diminution by the Company of Executive’s title, duties, reporting or Base Salary, other than as a proportional reduction, consistent with the reductions in the scope and or salaries of all other executive officers of the Company at the level of Vice President and above as part of an overall reduction in salaries of executive officers of the Company, which proportional reduction shall remain in effect only for such time as all such other executive salaries remain so reduced; for avoidance of doubt, should the company decide to sell, partner, or out license technologies or assets in development or marketed in defined geographies or discontinue specific operations that is deemed to be in the interest of shareholders, this will not constitute a reduction of scope in the Executive’s duties, or
(ii)a material breach by the Company of this Agreement and/or any other agreement between Company and/or any of its Affiliates, and Executive.
Notwithstanding the foregoing, should Executive wish to terminate this Agreement for Good Reason, he must provide the Company with written notice of such Good Reason within 30 days of the occurrence of such event and reasonably cooperate with the Company in remedying the condition causing Good Reason for a period of not more than 60 days (the “Cure Period”). If,
following the Cure Period, the condition causing Good Reason remains uncured, a termination of employment by Executive for Good Reason shall be effective on the day following the expiration of such cure period. “Good Reason” does not include Company decisions to out license ex-US markets for pipeline products or decisions to sell a division (e.g., manufacturing plant) for sound business reasons.
(h)For purposes of this Agreement, “Change in Control” shall have the meaning set forth in the Plan.
10.Section 409A. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement that constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”) and that are payable in connection with Executive’s termination of employment shall not commence unless and until Executive has also incurred a “separation from service” within the meaning of Section 409A, unless the Company reasonably determines that such amounts may be provided to Executive without causing Executive to incur the additional 20% tax under Section 409A. If Executive is, upon a separation from service, a “specified employee” within the meaning of Section 409A, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the payment of any deferred compensation shall not commence until the earlier to occur of: (i) the date that is six months and one day after Executive’s separation from service, or (ii) the date of Executive’s death. Any payments that are delayed due to the application of the preceding sentence shall be made on the date that payments commence. For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.
11.Section 280G. Notwithstanding anything to the contrary contained in this Agreement, to the extent that any of the payments and benefits provided for under this Agreement or any other agreement or arrangement between Executive and the Company (collectively, the “Payments”) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this Section 11, would be subject to the excise tax imposed by Section 4999 of the Code, then the Payments shall be payable either (i) in full or (ii) as to such lesser amount which would result in no portion of such Payments being subject to excise tax under Section 4999 of the Code; whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in Executive’s receipt on an after-tax basis, of the greatest amount of economic benefits under this Agreement, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Unless Executive and the Company otherwise agree in writing, any determination required under this Section 11 shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose reasonable determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 11, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Sections 280G and 4999 of the Code. Executive and the Company shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this Section 11. If a reduction in Payments is necessary so that no portion of the Payments is subject to the excise tax under Section 4999 of the Code, reduction shall occur in the manner that results in the greatest economic benefit to Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata. If this Section 11 is applied to reduce an amount payable to Executive, and the Internal Revenue Service successfully asserts that, despite the reduction, Executive has nonetheless received payments which are in excess of the maximum amount that could have been paid to him without being subjected to any excise tax, then, unless it would be unlawful for the Company make such a loan or similar extension of credit to Executive, Executive may repay such excess amount to the Company though such amount constitutes a loan to Executive made at the date of payment of such excess amount, bearing interest at 120% of the applicable federal rate (as determined under section 1274(d) of the Code in respect of such loan).
12.Miscellaneous.
(a)This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, without giving effect to its principles of conflicts of laws.
(b)Executive will be subject to such indemnification as is provided under the Company’s Bylaws.
(c)Any dispute arising out of, or relating to, this Agreement or the breach thereof (other than Sections 5 or 6 hereof), or regarding the interpretation thereof, shall be exclusively decided by binding arbitration conducted in North Carolina in accordance with the rules of the American Arbitration Association (the “AAA”) then in effect before a single arbitrator appointed in accordance with such rules. Judgment upon any award rendered therein may be entered and enforcement obtained thereon in any court having jurisdiction. The arbitrator shall have authority to grant any form of appropriate relief, whether legal or equitable in nature, including specific performance. Each of the parties agrees that service of process in such arbitration proceedings shall be satisfactorily made upon it if sent by registered mail addressed to it at the address referred to in clause (h) below. The costs of such arbitration shall be borne proportionate to the finding of fault as determined by the Arbitrator. Judgment on the arbitration award may be entered by any court of competent jurisdiction.
(d)This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors, and assigns.
(e)This Agreement and Executive’s rights and obligations hereunder, may not be assigned by Executive. The Company may assign its rights, together with its obligations, hereunder in connection with any sale, transfer, or other disposition of all or substantially all of its business or assets provided the assignee entity which succeeds to the Company expressly assumes the Company’s obligations hereunder and complies with the terms of this Agreement.
(f)This Agreement cannot be amended orally, or by any course of conduct or dealing, but only by a written agreement signed by the parties hereto.
(g)The failure of either party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and such terms, conditions and provisions shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party.
(h)All notices, requests, consents and other communications, required or permitted to be given hereunder, shall be in writing and shall be delivered personally or by an overnight courier service or sent by registered or certified mail, postage prepaid, return receipt requested, to the parties at the addresses set forth on the first page of this Agreement, and shall be deemed given when so delivered personally or by overnight courier, or, if mailed, five (5) days after the date of deposit in the United States mail. Either party may designate another address, for receipt of notices hereunder by giving notice to the other party in accordance with this clause (h).
(i)This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements, and understandings, written or oral, relating to the subject matter hereof. No representation, promise or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.
(j)As used in this Agreement, “Affiliate” of a specified Person shall mean and include any Person controlling, controlled by or under common control with the specified Person.
(k)The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
(l)This Agreement may be executed in wet ink or electronically, and in any number of counterparts, each of which (whether transmitted physically, by facsimile, or electronically) shall constitute an original, but all of which together shall constitute one and the same instrument.
(m)Notwithstanding anything in this Agreement to the contrary, any payments made to Executive herein shall be subject to any recoupment or claw back policy adopted by the Company from time to time and to any requirement of applicable law, regulation or listing standard that requires the Company to recoup or claw back any compensation so paid.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
AERIE PHARMACEUTICALS, INC.
By: /s/ Raj Kannan
Name: Raj Kannan, CEO
Date: April 4, 2022
EXECUTIVE
By: /s/ Peter Lang
Name: Peter Lang
Date: March 15, 2022
Note: All employment and employee’s obligations
under this Agreement are contingent on a completed
background check, application, drug screen and
proof of COVID-19 vaccination.
[Signature Page - Lang EA]
EXHIBIT A
18 U.S.C. 1833(b) provides:
(1)IMMUNITY. —An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—
(A)is made—
(i)in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and
(ii)solely for the purpose of reporting or investigating a suspected violation of law; or
(B)is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
(2)USE OF TRADE SECRET INFORMATION IN ANTI-RETALIATION LAWSUIT. -An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual—
(A)files any document containing the trade secret under seal; and
(C)does not disclose the trade secret, except pursuant to court order.
Exhibit A
NOLAN FINANCIAL
FORM NONQUALIFIED DEFERRED COMPENSATION PLAN
ADOPTION AGREEMENT
NONQUALIFIED DEFERRED COMPENSATION PLAN
The undersigned Company acting on behalf of itself and each Participating Employer, having been duly advised by its own counsel as to the legal and tax consequences of adopting this Nonqualified Deferred Compensation Plan (the “Plan”) and having determined that adoption of this unfunded, nonqualified deferred compensation plan will enable the Company to attract and retain key personnel, HEREBY ADOPTS the this Adoption Agreement and the attached base Plan document (referred to together herein as the “Plan”), subject to the following terms, conditions and elections, all of which are integral parts of the Plan adopted hereby:
Company Name: _Aerie Pharmaceuticals, Inc._
Company Address: _4301 Emperor Blvd., Suite 400 Durham, NC 27703
Plan Name: _Nonqualified Deferred Compensation Plan_
Effective Date of the Plan: _02/01/2022_
Participating Employers: ________________________________
Record Keeper Name: The Nolan Financial Group
Record Keeper Address: 6720-B Rockledge Drive, Suite 140, Bethesda, MD 2081
Capitalized terms used in this Adoption Agreement that are defined in the Plan document attached hereto and not separately defined herein shall have the respective defined meanings set forth in the attached Plan document.
The Company acting on behalf of itself and each Participating Employer hereby elects, for purposes of this Plan, as follows (insert check mark or “X” for each desired election and fill in appropriate blanks):
I. Pay Types from which Annual Deferral Amounts may be deferred by Participants are as follows:
| | | | | | | | |
Pay Type | Maximum Percentage/Dollar | Description Notes (if necessary) |
☒ Base Salary | 80% | |
☐ Bonus – Short Term (non-performance based) | | |
☐ Bonus – Long Term (non-performance based) | | |
☒ Bonus – Short Term (performance based) | 80% | Annual |
☐ Bonus – Long Term (performance based) | | |
☐ Commissions | | |
☐ Director Fees | | |
☐ Restricted Equity Units | | |
☐ Other | | |
II. Annual Company Matching Amounts: The Company will credit Annual Company Matching Amounts:
☐ Yes ☒ No
a. Matching Contribution Formula: (select (i) or (ii) below)
(i) ☐ Percent of Participant deferrals formula, subject to a specified limit, as follows:
(a) ☐ Matching Contribution Rate: _____% of (specify Pay Type names):
_______________________________________________
_______________________________________________
_______________________________________________
(b) ☐ Matching Contribution Limit: ______ % of each applicable Pay Type
(ii) ☐ Other matching formula: ________________________________________
III. Discretionary Contributions. The Company initially elects to credit Annual Company Discretionary Amounts for selected Participants. The amounts to be calculated in one of the following manners (select one):
a. ☐ No Discretionary Contributions
b. ☒ Permissible but amount discretionary
c. ☐ Annual contribution amount or formula:
_____________________________________________
d. ☐ Other:
_____________________________________________________________
IV. Vesting.
a. The following Vesting Schedule shall apply to all Annual Company Matching Amounts, as follows (select one):
☐ Immediate vesting (100%) as amounts are credited
☒ Cliff vesting: 100% at the end of ____ years (commencing as specified below)
☐ Incremental annual vesting, as follows (complete chart below):
| | | | | |
Years Completed | % of Contribution Vested |
Year 0 | 0% |
Year 1 | 0% |
Year 2 | 0% |
Year 3 | 0% |
Year 4 | 100% |
Year 5 | % |
Year 6 | % |
Year 7 | % |
Year 8 | % |
Year 9 | % |
Year 10 | % |
EXAMPLE (TBD based on specs below):
b. The Vesting Commencement Date shall be determined as follows (select one):
☐ Years of participation – based on plan participation date
☐ Years of service – based on date of hire
☐ Age – based on date of birth
☒ Class year - (all employer contributions for the same deferral year vest at the same time regardless of crediting date)
c. The Vesting Increase Timing shall be determined as follows (select one):
☐ On the last day of the vesting year
☒ On the first day of the vesting year (the anniversary of the Commencement Date)
☐ On specific date each year: ________________
d. The Vesting Acceleration Events that will automatically vest 100% shall be determined as follows (select all that apply):
☒ Retirement eligibility
☒ Disability
☒ Death
☒ Change in Control
☒ Involuntary termination without Cause or for Good Reason
☐ Other _________________________
e. Rehires: The below indicated date shall be used for the purposes of determining the Vesting Commencement Date of a former Participant who is rehired following a Termination of Employment, and who is selected for participation in accordance with the terms of the Plan:
☒ Original Date of Hire
☐ Most Recent Date of Hire
☐ Other __________________
f. Company Discretionary Amounts Vesting Schedule:
☐ Shall follow the same schedule as Annual Company Matching Amounts (above)
☒ Shall follow same scheduled as Annual Company Matching Amounts unless the Employer specifies a custom vesting schedule for the particular discretionary contribution at the time of contribution
V. Retirement Eligibility Date (select all that apply):
☒ Age __62___
☒ Age __55_ plus __10__ years of cumulative service
☐ Age _____ plus ____ years of plan participation
☐ Age _____ plus ____ years of cumulative service and _____ years of plan participation
☐ Other:
VI. Distributions.
a.☒ In-Service Distributions- Specified Calendar Year
(i)May include employer contributions (only if no vesting limitations) ☒ Yes ☐ No
(ii)Type of election is (select one):
☒ Class year - each year’s balance may have a different distribution election
☐ User-created accounts (max number of accounts: _______) each year’s balance is directed to one or more date-specific accounts.
(iii)Available Forms of Distribution (select all that apply):
☒ Lump Sum
☒ Annual installments for any whole number of years up to __5___
☐Other: ___________________________
(iv)The Minimum Deferral Period for vested balances, is _2_ years* measured from the beginning of the Plan Year For example: when enrolling for the _2022_ plan year, the earliest allowable In-Service Distribution year is _2024_ (yyyy)
(*recommend no earlier than time at which balances are 100% vested. Unvested portions at the time of the scheduled payments would be paid out upon Separation from Service.)
(v) In-Service Distributions will be trumped by:
☒ All other distribution events (default)
☐ Retirement
☐ Termination
☐ Disability
☐ Death
☐ Change in Control
b.☒ Retirement Distribution – commencing on termination of service after retirement eligibility date
(i)Type of election applies to (select one):
☐ All years
☒ Class year
(ii)Forms of Distribution (select all that apply):
☒ Lump Sum
☒ Annual installments for any whole number of years up to _10_
☐ Other: ___________________________
c.☒ Termination Distribution (or Separation Distribution if not using Retirement vs. Termination)
(i)Type of election applies to (select one):
☐ All years
☒ Class year
(ii)Forms of Distribution (select all that apply):
☒ Lump Sum (recommended)
☐ Annual installments for any whole number of years up to __
☐ Other: __________________________
d.☒ Disability Distribution
(i)Type of election applies to (select one):
☐ In accordance with the participant Retirement election, or
☒ All years (recommended)
☐ Class year (not recommended if user-created accounts is selected for In-service distributions)
(ii) Forms of Distribution (if separate from Retirement election, select all that apply):
☒ Lump Sum
☐ Annual installments for any whole number of years up to _____
☐ Other: ___________________________
e.☒ Death Benefit Distribution (pre-commencement vs. post-commencement)
(i)Form of Distribution pre-commencement of separation distribution
☐ In accordance with Participant’s separation elections, or
(if separate form or election for death, select all that apply):
☒ Lump Sum (recommended)
☐ Annual installments for any whole number of years up to _____
☐ Other: ___________________________
(ii)Form of Distribution post-commencement of separation distribution
☒ Continue in accordance with Participant’s elections (recommended), or
(if separate form or election, select all that apply):
☐ Lump Sum
☐ Annual installments for any whole number of years up to _____
☐ Other: ___________________________
f.☐ Additional Supplemental Death Benefit (may require consent for life insurance)
☒ None
☐ An amount to be determined by the Committee
☐ Specified amount: _______________________________
g.☒ Change in Control Distribution
(i)Distribution Election is (select one):
☐ None
☐ Mandatory
☒ Optional (declinable) (recommended)
(ii)Type of election applies to All deferred amounts
(iii)Forms of Distribution (select all that apply):
☒ Lump Sum (recommended form if offered)
☐ Annual installments for any whole number of years up to _____
☐ Other: ___________________________
(iv)Shall apply if,
☒ The participants incurs a Separation from Service within 12 months following a Change in Control (recommended)
☐ In the event of a Change in Control, regardless of the participant’s employment or contract status with the Company
h.☒ Default Distribution (if none selected then the Default Distribution election for all events will be Lump Sum at Separation from Service)
(i)Forms of Distribution (select one):
☒ Lump Sum (recommended)
☐ Annual installments for any whole number of years up to _____
☐ Other: ___________________________
(ii)Time of Distribution:
☒ Separation from Service (recommended)
☐ Other: ___________________________
i.Small Accounts Payment
(NOTE: this is in addition to the default deminimis provision in the base Plan that allows the Company to pay the Participant’s vested Account Balance at any time if it does not exceed the then applicable limit of Section 402(g)(1)(B) of the Code and results in the termination of the Participant’s entire interest in the Plan.)
☒ None (recommended)
☐ Notwithstanding any payment election made by the Participant, if at the time any distribution becomes due and the vested balance of all installments associated with that distribution does not exceed $_______________________ then the balance will be paid in a single lump sum, subject to compliance with Code Section 409A.
j.The Plan’s Identification Date for purposes of determining Specified Employee status is December 31 unless a different date is specified: _____________________ (for public companies only)
k.Installment Date: Lump sum payments shall be made or installment payments shall begin following an event triggering payment, within the Section 409A Discretionary Payment Period and subject to any delay required under Section 409A:
☐ As soon as practicable following the event triggering payment
☐ January of the Plan Year commencing after the event triggering payment
☒ Other: _ For a participant’s Termination or Retirement, a Participant’s initial installment date shall be the first business day of the month that is at least 6 full months following their Termination/Retirement.
Subsequent annual installments shall be paid on:
☒ The anniversary of the first Installment Date
☐ January of each subsequent Plan Year
Scheduled Distribution payments shall be made in January of the scheduled payment year unless an alternative month is specified here ______________________________________
VII. Cause: If the definition for “Cause” is different than that specified in the Plan, specify the alternative definition that shall apply for purpose of this Plan: (if blank, base Plan definition will apply):
_________________________________________________________________
_________________________________________________________________
VIII. Good Reason: If the definition for “Good Reason” is different than that specified in the Plan, specify the alternative definition that shall apply for purpose of this Plan: (if blank, base Plan definition will apply):
_________________________________________________________________
_________________________________________________________________
IX. Governing Law: The Plan will generally be governed by federal law but the governing state law, to the extent not preempted by federal law, and in any case subject to the choice of law rules of any court before which any suit or proceeding affecting this Plan may be heard, shall be the laws of the following state (specify state):
_________________________________________________________
(if none specified, the state under which laws the Company was formed).
X. Amendments to base Plan Language: (if require changes to specific Plan provisions)
_________________________________________________________
_________________________________________________________
_________________________________________________________
IN WITNESS WHEREOF, the Company, on behalf of itself and each Participating Employer, has caused its duly authorized representative to execute this Adoption Agreement, under seal, as of the Effective Date set forth above, intending that the Company shall be bound hereby, and that each Participant, Committee Member and Record Keeper may rely hereon.
| | | | | | | | | | | |
| | COMPANY: | Aerie Pharmaceuticals, Inc. |
| | | |
| | | |
| | | |
| | By: | /s/ John LaRocca |
| | | |
| | Name: | John LaRocca |
| | | |
| | Title: | General Counsel |
| | | |
NONQUALIFIED DEFERRED COMPENSATION PLAN
The Company on behalf of itself and its Participating Affiliates, by execution of the attached Adoption Agreement adopts this Nonqualified Deferred Compensation Plan as of the Effective Date stated therein, for the purposes of attracting high quality executives and promoting in its key executives increased efficiency and an interest in the successful operation of the Company. The Plan, comprised of the Adoption Agreement and this base Plan document, is intended to, and shall be interpreted to, comply in all respects with Code Section 409A and those provisions of the ERISA applicable to an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of management or highly compensated employees. Unless otherwise indicated in a particular context, capitalized or otherwise defined terms used herein shall have the meaning given to such terms in the Adoption Agreement or in the following Article 1.
ARTICLE 1.
DEFINITIONS
1.1“Account” means, with respect to any Participant, a bookkeeping entry used as a measurement and determination of the amounts to be paid to a Participant, or designated Beneficiary, pursuant to this Plan and subject to such limits, rules and procedures as the Committee from time to time may adopt under this Plan. The Committee and the Record Keeper may establish and use sub-accounts and other record keeping entries with respect to any Participant’s Account, including without limitation any Deferral Account, Equity Unit Account, Company Matching Account and Company Discretionary Account applicable to such Participant.
1.2“Account Balance” means, with respect to any Participant at any particular time, the sum at such time of such Participant’s (i) Deferral Account balance, (ii) Company Matching Account balance; (iii) Company Discretionary Account balance; and (iv) Equity Unit Account balance. The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan.
1.3“Adoption Agreement” means the agreement pursuant to which the Company has adopted this Plan, which Adoption Agreement is incorporated herein by reference, including without limitation any terms defined therein. Adoption Agreements may be completed and/or signed using such online systems and other electronic means as the Committee or Record Keeper from time to time may designate for such purpose.
1.4“Affiliate” means a corporation, partnership, limited liability company or other entity that is required to be considered, together with the Company, as a single employer under Section 414(b) of the Code (employees of controlled group of Companies) or Section 414(c) of the Code (employees of partnerships or limited liability companies under common control). For purposes of determining a controlled group of Companies under Section 414(b), the language “at least 50 percent” shall be used instead of “at least 80 percent” each place it appears in Section 1563(a)(1), (2), and (3) of the Code. For purposes of determining trades or businesses that are under common control for purposes of Section 414(c) of the Code, “at least 50 percent” shall be used instead of “at least 80 percent” each place it appears in Treas. Reg. §1.414(c)-2. An entity shall not be considered an “Affiliate” for any period of time prior to satisfying the controlled group or common control tests described above.
1.5“Annual Company Discretionary Amount” means the contribution amount, if any, for any one Plan Year that is determined for a Participant in accordance with Section 3.5.
1.6“Annual Company Matching Amount” means the contribution amount, if any, for any one Plan Year that is determined for a Participant in accordance with Section 3.4.
1.7“Annual Deferral Amount” means that portion of a Participant’s Pay Type(s) that a Participant elects to have deferred, and is deferred, in accordance with Article 3, for any one Plan Year. In the event of a Participant’s Retirement, Disability, death or a Termination of Employment prior to the end of a Plan Year, such year’s Annual Deferral Amount shall be the actual amount deferred in such Plan Year prior to such event.
1.8“Base Salary” means base salary earned with respect to services performed and payable in cash, exclusive of any of the following: Bonuses, Commissions, overtime, incentive payments and other performance-based forms of compensation, director and other special fees, expense allowances and reimbursements, severance, Restricted Equity Units, and any other forms of compensation, earnings or payments that are not regular in frequency and form (before reductions for, contributions to or deferrals under this Plan or any other profit sharing, 401(k), pension, deferred compensation or benefit plan sponsored by the Company or any Affiliate).
1.9“Beneficiary” means one or more persons, trusts, estates, or other entities, designated in accordance with Article 8 that are entitled to receive benefits under this Plan upon the death of a Participant.
1.10“Beneficiary Designation Form” means the form established from time to time by the Committee that a Participant completes, signs and returns to the Company to designate one or more Beneficiaries. Beneficiary Designation Forms may be completed and/or signed using such online systems and other electronic means as the Committee or Record Keeper from time to time may designate for such purpose
1.11“Board of Directors” shall mean the Board of Directors, Managers, Trustees or other group having the legal authority to act as the governing body of the Company.
1.12“Bonus” means any compensation relating to services performed that is granted or awarded apart from Base Salary and Commissions and that is identified by the applicable Company or Affiliate as a “bonus” (before reductions for, contributions to or deferrals under this Plan or any other profit sharing, 401(k), pension, deferred compensation or benefit plan sponsored by the Company or any Affiliate).
1.13“Calendar Year” means the annual period measured from January 1 to December 31.
1.14“Cause”, unless otherwise defined in the Adoption Agreement, means: (a) with respect to each Participant who has an employment agreement containing a definition of “cause” or “for cause”, said definition as set forth in his or her employment agreement; and (b) with respect to all other Participants, willfully engaging in misconduct which is demonstrably and materially injurious to the Company or any Affiliate, unless the act or omission giving rise to such misconduct is done, or omitted to be done, by a Participant in good faith and with a reasonable reason to believe that such action or omission was in the best interest of the Company and its Affiliates.
1.15“Change in Control” means, with respect to the applicable Participating Employer, a change in the ownership or effective control of the Participating Employer, or in the ownership of a substantial portion of the assets of the Participating Employer. Unless otherwise specified in the Adoption Agreement, shall be defined as follows with respect to a corporate Participating Employer:
(a)For purposes of this Section, a change in the ownership of the Participating Employer occurs on the date on which any one person, or more than one person acting as a group, acquires ownership of
stock of the Participating Employer that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Participating Employer.
(b)A change in the effective control of the Participating Employer occurs on the date on which either: (i) a person, or more than one person acting as a group, acquires ownership of stock of the Participating Employer possessing 30% or more of the total voting power of the stock of the Participating Employer, taking into account all such stock acquired during the 12-month period ending on the date of the most recent acquisition, or (ii) a majority of the members of the Participating Employer’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 such Board of Directors prior to the date of the appointment or election, but only if no other corporation is a majority shareholder of the Participating Employer.
(c)A change in the ownership of a substantial portion of assets occurs on the date on which any one person, or more than one person acting as a group, other than a person or group of persons that is related to the Participating Employer, acquires assets from the Participating Employer that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Participating Employer immediately prior to such acquisition or acquisitions, taking into account all such assets acquired during the 12-month period ending on the date of the most recent acquisition.
An event constitutes a Change in Control with respect to a Participant only if the Participant’s relationship to the affected Participating Employer satisfies the requirements of Treasury Regulation § 1.409A-3(i)(5)(ii).
In the case of a Participating Employer that is a partnership or limited liability company, to the extent permitted under Code Section 409A, a Change in Control may also occur in the event of changes in ownership of such entity and/or change in the ownership of a substantial portion of the assets of such entity, and the provisions set forth above respecting such changes relative to a corporation shall be applied by analogy.
To qualify as a Change in Control event, the occurrence of the event must be objectively determinable and any requirement that any other person or group, such as a plan administrator or compensation committee, certify the occurrence of a Change in Control must be strictly ministerial and not involve any discretionary authority. If the Adoption Agreement provides for a payment on a Change in Control, such payment shall only be made if the event specified in the Adoption Agreement also qualifies as a change in control event within the meaning of Code Section 409A (Treas. Reg. section 1.409A-3(i)(5)).
It is the Company’s responsibility to determine whether a Change in Control has occurred and to advise the Committee and the Record Keeper accordingly.
1.16“Change in Control Distribution” shall have the meaning set forth in Section 6.4
1.17“Claimant” shall have the same meaning set forth in Section 10.1.
1.18“Code” means the Internal Revenue Code of 1986, as the same may be amended from time to time.
1.19“Commissions”
(a)Sales Commission Compensation. A Participant earning sales commission compensation (as defined in Treas. Reg. section 1.409A-2(a)(12)) is treated as providing the services to which such compensation relates only in the Company’s taxable Year in which the customer remits payment to the
Company or, if applied consistently to all similarly situated Participants, the Company’s taxable Year in which the sale occurs.
(b)Investment Commission Compensation. A Participant earning investment commission compensation (as defined in Treas. Reg. section 1.409A02(a)(12)) is treated as providing the services to which such compensation relates over the 12 months preceding the date as of which the overall value of the assets or asset accounts is determined for purposes of the calculation of the investment commission compensation.
It is the Company’s responsibility to determine whether a Pay Type qualifies as Commissions in accordance with the foregoing requirements with respect to any Participant and to advise the Record Keeper accordingly.
1.20“Committee” means the person(s) designated as Committee members or such other persons as the Company’s Board of Directors from time to time may designate to serve as members of the Committee hereunder. In the absence of any Committee, or should the Committee be unable or unwilling to serve, the Company shall perform the duties of the Committee under this Plan.
1.21“Company” means the entity identified as the “Company” in the Adoption Agreement pursuant to which this Plan has been adopted and may include the applicable Participating Employer as the context requires.
1.22“Company Discretionary Account” means, with respect to any Participant (but subject in the case of each Participant to Section 3.7), an Account consisting of the sum of (i) all of the Participant’s Annual Company Discretionary Amounts, plus (ii) Notional Investment Adjustments in value credited or debited thereon in accordance with Article 4 of this Plan, less (iii) all distributions from such account.
1.23“Company Matching Account” means, with respect to any Participant (but subject in the case of each Participant to Section 3.7), an Account consisting of the sum of (i) all of the Participant’s Annual Company Matching Amounts, plus (ii) Notional Investment Adjustments in value credited or debited thereon in accordance with Article 4 of this Plan, less (iii) all distributions from such account.
1.24“Day” means a calendar day or any part thereof.
1.25“Deferral Account” means an Account consisting of the sum of (i) all of a Participant’s Annual Deferral Amounts, plus (ii) Notional Investment Adjustments in value credited or debited thereon in accordance with Article 4 of this Plan, less (iii) all distributions from such account.
1.26“Deferral Election Form” means notice filed by a Participant with the Record Keeper specifying the amount of the Participant’s Pay Type(s) to be deferred, and the time and form of distribution payments as defined in the Adoption Agreement. Deferral Election Forms may be completed and/or signed using such online systems and other electronic means as the Committee or Record Keeper from time to time may designate for such purpose.
1.27“Disability” or “Disabled” shall mean the Participant is: (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Participant’s employer. The Adoption Agreement may also provide that a Participant will
be deemed to be Disabled if determined to be totally disabled by the Social Security Administration or Railroad Retirement Board. The determination of Disability shall be made by the Committee. The Committee may require that the Participant submit to an examination by the Company or its agent to determine the existence of a Disability.
1.28“Disability Benefit” means the benefit set forth in Section 6.3.
1.29“Eligible Employee” means any employee of the Company or other Participating Employer who is selected to participate herein in accordance with the provisions of Article 2 hereof, and is one of a select group of management or highly compensated employees. Eligible Employee may also include selected Independent Contractors as determined in the complete and sole discretion of the Committee.
1.30“Employee” means any individual who is employed by or providing services to the Employer. Employee means “service provider” as used in Treas. Reg. section 1.409A-1(f).
1.31“Employer” or “Participating Employer” means the Company or Affiliate who is the legal employer of the Employee or service recipient in the case of an independent contractor.
1.32 “Equity Unit Account” shall mean the Account established for Restricted Equity Unit deferrals to be credited with any deferred Restricted Equity Units and shall be credited at the time specified by the Committee.
1.33“ERISA” means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.
1.34“First Plan Year” means the period beginning on the Effective Date set forth in the Adoption Agreement and ending on December 31 immediately following the Effective Date.
1.35“Good Reason”, unless otherwise defined in the Adoption Agreement, means: (a) with respect to each Participant who has an employment agreement containing a definition of “good reason” or “for good reason”, said definition as set forth in his or her employment agreement; and (b) with respect to all other Participants, the Company’s material breach of any agreement between the Company and the Participant.
1.36“Hardship Distribution” means any distribution or waiver of deferral granted by the Committee pursuant to Article 7.
1.37“Identification Date” for the purpose of identifying Specified Employees means each December 31 or such other date as defined in the Adoption Agreement.
1.38“Installment Date” shall mean the date by which a lump sum payment under the Plan shall be made or the date by which installment payments under the Plan shall commence and shall, in all events, include only a qualifying distribution date, event or schedule under Section 409A. The Installment Date for payments commencing upon Separation from Service shall, unless otherwise specified in the Adoption Agreement, begin in the January of the Plan Year following such Separation from Service and each anniversary of such date in each succeeding Plan Year during the period in which such installments are required to be made. In the case of death, the Committee shall be provided with documentation reasonably necessary to establish the fact of the Participant’s death and payment shall be made as soon as practicable following death within the discretionary payment period permitted under Section 409A. Unless otherwise specified in the Adoption Agreement, the Installment Date of a Scheduled Distribution shall be January of the Plan Year specified by the Participant for such distribution. Notwithstanding the foregoing, the Installment
Date shall not be before the earliest date on which benefits may be distributed under Section 409A without the imposition of additional Section 409A taxes, as determined by the Committee and the Committee shall have discretion regarding the timing of payments to pay within the Section 409A Discretionary Payment Period. In the event that the Participant is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof) of the Company, to the extent required by Section 409A, the Installment Date shall be no earlier than the earlier of (i) the first day of the seventh (7th) calendar month commencing after the Participant’s Separation from Service, or (ii) the Participant’s death. Any payments delayed by reason of the preceding sentence shall be caught up and paid in a single lump sum on the first day such payments are permissible consistent with the application of Section 409A.
1.39“Independent Contractor” means a non-employee director or an independent contractor for whom deferred amounts will be subject to 409A as provided in Treas. Reg. section 1.409A-1(f)(2).
1.40“In-Service Distribution” means a distribution made pursuant to Section 6.5.
1.41“Matching Contribution Limit” means, with respect to each Pay Type, the Maximum Contribution Limit set forth for such Pay Type in the Adoption Agreement, to be used and calculated as a limit on Annual Company Matching Amounts pursuant to Section 3.4.
1.42“Matching Contribution Rate” means, with respect to each Pay Type, the respective percentage rate, if any, set forth in the Adoption Agreement for such Pay Type, which rate shall be used to calculate Annual Company Matching Amounts pursuant to Section 3.4, subject to the Matching Contribution Limit, if any, applicable to such Pay Type.
1.43“Notional Investment” means any security, fund, account, sub-account, index, formula or other instrument, asset, measure or method from time to time designated by the Committee as a means to calculate the amount of any Notional Investment Adjustment.
1.44“Notional Investment Adjustment” means earnings, gains, losses and any other adjustments made with respect to any Annual Deferral Amount, Annual Company Matching Amount or Annual Company Discretionary Amount, which adjustments are made based on the performance of a Notional Investment pursuant to Article 4.
1.45“Notional Investment Election Form” means notice filed with the Record Keeper by or on behalf of a Participant (or his or her Beneficiaries, as provided below) specifying the allocation of the Participant’s Annual Deferral Amount and how the Participant’s Annual Deferral Amount, Annual Company Matching Amount and Annual Company Discretionary Amount, if any, are to be allocated under the Plan among the Notional Investments provided under the Plan. Notional Investment Election Forms may be completed and/or signed using such online systems and other electronic means as the Committee or Record Keeper from time to time may designate for such purpose. Upon the death of a Participant, for so long as such Participant’s Beneficiaries retain an interest in such Participant’s Account hereunder, such Beneficiaries may file Notional Investment Election Forms with respect to such Account in accordance with such policies and procedures as the Committee from time to time may specify for such purpose.
1.46“Participant” means any Eligible Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Participation Agreement, a Deferral Election Form, a Notional Investment Election Form, (iv) whose signed Participation Agreement, Deferral Election Form, and Notional Investment Election Form are accepted by the Committee, and (v) who commences participation in the Plan. A spouse or former spouse (or beneficiary) of a Participant shall not be treated as a Participant in the Plan, even if he or she has an interest in the Participant’s benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce.
1.47“Participation Agreement” means the form established from time to time by the Committee, that a Participant completes, signs and returns to the Company to become a Participant in this Plan. Participation Agreements may be completed and/or signed using such online systems and other electronic means as the Committee or Record Keeper from time to time may designate for such purpose.
1.48“Pay Type” means the forms of compensation selected in the Adoption Agreement as eligible for deferral and for inclusion in the calculation of Annual Deferral Amounts under the Plan. References to one or more “Pay Types” with respect to any particular Calendar Year means said forms of compensation relating to services performed during such Calendar Year, whether or not paid in such Calendar Year or included on a Federal Income Tax Form W-2 for such Calendar Year (except and to the extent otherwise required under any applicable Section 409A Requirements). The Committee from time to time may adopt and amend such rules and procedures as it deems appropriate to more particularly define or classify any particular Pay Type for further clarification in the administration of this Plan.
1.49“Permissible Change Election” means an election to change the time or form of payment of any benefit under the Plan that:
(a)does not take effect until at least 12 months after the date on which such election to delay or change is made;
(b)is made at least 12 months prior to the date previously scheduled for the payment affected thereby;
(c)postpones the payment affected thereby for a period of not less than 5 years from the date when such payment otherwise would have been made; provided, however, that this restriction shall not apply in the case of a payment on account of a Disability, death or an Unforeseeable Emergency; and
(d)does not accelerate the scheduled time for payment of any distribution, except as permitted under Section 409A Requirements.
For purposes of the foregoing, unless otherwise provided in the Adoption Agreement or otherwise required under applicable Section 409A Requirements, any distribution that a Participant elects to receive in a series of installments shall be treated as being a single payment on the date of the first installment of such series.
1.50“Plan” means this Plan, as adopted by the Adoption Agreement.
1.51“Plan Year” means each Calendar Year except that the first Plan Year shall commence on the Effective Date of the Plan specified in the Adoption Agreement and end on December 31 of the same Calendar Year.
1.52“Pre-Commencement Death Benefit” means the death benefit payable under Section 6.6.1.
1.53“Post-Commencement Death Benefit” means the death benefit payable under Section 6.6.2.
1.54“Record Keeper” means the party designated as the Record Keeper, as such designation may be amended from time to time in the discretion of the Committee. In the absence of any such designation, or should the Record Keeper be unable or unwilling to serve, the Company shall perform the duties of the Record Keeper under this Plan.
1.55 “Restricted Equity Units” shall mean restricted equity unit awards of a right to receive common stock or other equity units of the Company at a specified date in the future made by an Employer to an Eligible Employee under an equity compensation arrangement sponsored by the Company, or such other similar equity participation awards, as are specified as eligible for deferral under the Plan from time to time by the Committee, in its discretion and in compliance with all applicable laws.
1.56“Retirement” means the Termination of Employment of a Participant by retiring on or after such Participant’s Retirement Eligibility Date.
1.57“Retirement Benefit” means the benefit set forth in Section 6.1.
1.58“Retirement Eligibility Date” means the date when the Participant attains the definition designated in the Adoption Agreement.
1.59“Section 409A” means Section 409A of the Code, as the same may be amended from time to time, and any successor statute thereto. References to Section 409A or any requirement under Section 409A, as the same may be interpreted, construed or applied to this Plan at any particular time, shall be deemed to mean and include, to the extent then applicable and then in force and effect (but not to the extent overruled, limited or superseded), published guidance, regulations, notices, rulings and similar announcements issued by the Internal Revenue Service or by the Secretary of the Treasury under or interpreting Section 409A, decisions by any court of competent jurisdiction involving a Participant or a beneficiary and any closing agreement made under Section 7121 of the Code that is approved by the Internal Revenue Service and involves a Participant, all as determined by the Committee in good faith, which determination may (but shall not be required to) be made in reliance on the advice of such tax counsel or other tax professional(s) with whom the Committee from time to time may elect to consult with respect to any such matter.
1.60“Section 409A Discretionary Payment Period” means with respect to any designated payment date, the period during which payments will be treated as having been made upon such designated payment date under Treasury Regulation § 1.409A-3(d), providing for payments to be treated as timely if made no earlier than thirty (30) days prior to such designated payment date and no later than the end of the Calendar Year in which such designated payment date occurs, or if later, by the 15th day of the third calendar month following such designated payment date.
1.61“Section 409A Requirement” means any requirement under Section 409A, the failure of which would result in the imposition or accrual of interest or additional taxes under Section 409A on or with respect to any income intended to be deferred under the Plan.
1.62“Specified Employee” means, at any time when stock of the Company (or other Participating Employer as applicable) is publicly traded on an established securities market or otherwise (as determined in accordance with Section 409A Requirements), those service providers who are “specified employees” within the meaning of Section 409A. The determination shall be made consistent with all Section 409A Requirements as follows: (a) a key employee of the Company (within the meaning of Code Section 409A(a)(2)(B)) any stock of which is publicly traded on an established securities market or otherwise will be considered a key employee if the service provider meets the requirements of Code Section 416(i)(1)(A)(i),(ii) or (iii) (applied in accordance with the regulations thereunder and disregarding Code Section 416(i)(5)) at any time during the 12-month period ending on an Identification Date specified in the Adoption Agreement; (b) if
a person is a key employee as of an Identification Date, the person is treated as a Specified Employee for the 12-month period beginning on the first day of the fourth month following the Identification Date; (c) if no alternative Identification Date is designated in the Adoption Agreement, the Identification Date shall be December 31. Whether any stock of the Company is publicly traded on an established securities market or otherwise must be determined as of the date of the Participant’s Separation from Service. The application of rules regarding “Specified Employees” to spinoffs and mergers and nonresident alien employees shall be determined pursuant to applicable guidance. It is the Company’s responsibility to elect which rules under Section 409A shall apply when determining who is a Specified Employee, to annually determine who are the Specified Employees, and to timely provide a list of Specified Employees to the Record Keeper.
1.63“Termination Benefit” means the benefit set forth in Section 6.2.
1.64“Termination”, “Termination of Employment” or “Separation from Service” shall be interpreted consistently with all Section 409A Requirements according to the following specifications:
(a)Employee. Any absence from service that ends the employment of an individual with the employer shall be deemed to be a Termination of Employment. However, the employment relationship is treated as continuing intact while the individual is on military leave, sick leave, or other bona fide leave of absence (such as temporary employment by the government) if the period of such leave does not exceed six months, or if longer, so long as the individual’s right to reemployment with the Company is provided whether by statute or by contract. If the period of leave exceeds six months and the individual’s right to reemployment is not provided either by statue or by contract, the employment relationship is deemed to terminate on the first date immediately following such six month period. The determination of whether an Employee has a Termination of Employment shall be determined pursuant to Treas. Reg. section 1.409A-1(h). Unless the Adoption Agreement specifies an alternative percentage (between 20% and 50%), Termination of Employment shall occur once an Employee’s services decrease to 20% or less of the average level of bona fide services compared to services performed over the preceding 36 month period.
(b)Independent Contractor. An independent contractor is considered to have a Termination or Separation from Service upon (i) retirement as a director, or (ii) the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed if the expiration constitutes a good-faith and complete termination of the contractual relationship.
It is the Company’s responsibility to determine whether there is a Termination of Employment/Separation from Service in accordance with Section 409A with respect to any Participant and to advise the Record Keeper accordingly.
1.65“Unforeseeable Emergency” means, with respect to any particular Participant, (i) a severe financial hardship of such Participant resulting from an illness or accident suffered by such Participant, by such Participant’s spouse or by a dependent (within the meaning of Section 152 of the Code without regard to Section 152(b)(1), (b)(2) and (d)(1)(B) of the Code) of such Participant; (ii) a Participant’s loss of property due to casualty; or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. It is the Company’s responsibility to determine whether there is an Unforeseeable Emergency in accordance with Section 409A with respect to any Participant and to advise the Record Keeper accordingly.
It is intended that the Plan shall conform with all applicable Section 409A Requirements. Accordingly, in interpreting, construing or applying any of the foregoing definitions or any of the terms, conditions or provisions of the Plan, the same shall be construed in such manner as shall meet and comply with Section 409A Requirements then applicable thereto, and in the event of any inconsistency with any Section 409A Requirements, the same shall be reformed so as to meet such Section 409A Requirements to the
fullest extent then permitted without penalty (and without imposition or accrual of interest or additional taxes) under Section 409A.
ARTICLE 2.
ELIGIBILITY AND PARTICIPATION
2.1Eligibility. Participation in the Plan shall be limited to any Eligible Employee, as determined by the Committee in its sole discretion. Any action so taken with respect to any particular Participant or group of Participants shall not imply a right on the part of any other Participant or group of Participants to enroll for or receive additional benefits or amounts of benefits. The Committee may terminate the right of any existing Participant to file additional Deferral Election Forms under this Plan, and shall terminate any such right for a Participant who ceases to be one of a select group of management or highly compensated employees, or otherwise ceases to meet any of the requirements applicable to participation in this Plan.
2.2Enrollment. As a condition to participate, each Eligible Employee shall complete, execute and return to the Record Keeper a Participation Agreement, a Deferral Election and a Notional Investment Election after he or she is selected to participate in the Plan. The Committee may establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary, convenient or appropriate to carry out any of the purposes or intent of the Plan or to better assure the Plan’s compliance with Section 409A Requirements. Eligible Employees also shall submit to the Record Keeper a Beneficiary Designation Form. The enrollment period shall generally occur prior to the beginning of the applicable Plan Year, but the Committee may establish a special enrollment period ending no later than thirty (30) days after an Eligible Employee first becomes eligible to participate in the Plan to allow deferrals by such Eligible Employee of eligible amounts earned during the balance of such Plan Year (as long as such Eligible Employee is not already a participant in another plan or arrangement which is aggregated with this Plan for purposes of Code Section 409A). Eligibility for mid-year enrollment of rehired or newly Eligible Employees who have previously participated in the Plan shall be permitted only in compliance with all requirements of Code Section 409A, and as determined in the complete and sole discretion of the Committee.
2.3Eligibility. An Eligible Employee shall commence participation in the Plan at the time specified by the Committee following the completion of the applicable enrollment period, assuming all enrollment requirements have been completed, including timely submission of all required enrollment documents to the Record Keeper; provided, however, that if an Eligible Employee is a former employee that has been rehired following a Termination of Employment or is a participant in another nonqualified deferred compensation plan aggregated with this Plan for purposes of Code Section 409A, such employee may not commence participation in the Plan until the first day of the following Plan Year. If an Eligible Employee fails to meet all such requirements within the period required in accordance with Section 2.2, that Eligible Employee shall not be eligible to participate in the Plan until the first day of the Plan Year following the delivery to and acceptance by the Committee (or its designee) of the required documents.
ARTICLE 3.
CONTRIBUTIONS AND CREDITS
3.1Deferral Amount. For each Plan Year, a Participant may elect to defer amounts of those Pay Types designated in the Adoption Agreement, using a Deferral Election Form. Any deferral election shall be subject to such limits, rules and procedures from time to time established by the Committee prior to the applicable Plan Year. The Committee, among other matters, may establish one or more minimum and/or maximum limits on how much of any particular Pay Type that a Participant may elect to defer for such Participant’s Annual Deferral Amount in any Plan Year. In no event will the Annual Deferral Amount or the Matching Contribution Amount (if any) for any Pay Type, or for all Pay Types combined, for any particular Participant exceed the maximum amounts permitted under any applicable law.
3.2Election To Defer.
3.2.1First Plan Year. When a Participant first enrolls to participate in the Plan, the Participant shall make an irrevocable deferral election by completing a Deferral Election Form for the remainder of the Plan Year in which the Participant first enrolls, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Record Keeper in accordance with Section 2.2 above and accepted by the Committee or its designee. Any election under this paragraph shall apply only on a prospective basis, and only with respect to compensation for services to be performed after the date when the election is made and final. To the extent that Bonus is included within the Pay Types available for deferrals under this Plan, such elections may include a pro-rata portion of the then-current Plan Year’s Bonus, based on the number of days remaining in the applicable Bonus performance period after such election irrevocably takes effect, divided by the total number of days in said performance period. Despite the foregoing, if a Participant already is a participant under any other nonqualified account balance plan aggregated with this Plan under Code Section 409A or is otherwise not eligible to commence participation until the following Plan Year, then such Participant’s first Deferral Election Form under this Plan shall contain elections only with respect to Plan Years after the date when such Deferral Election Form is filed, in the same manner as contemplated for subsequent Plan Years in Section 3.2.2 below.
3.2.2Subsequent Plan Years. For each succeeding Plan Year, an irrevocable deferral election shall be made by completing a new Deferral Election Form for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, which elections shall be made by timely filing with the Committee or its designee, in accordance with its and the Committee’s rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made.
3.2.3Performance-Based Compensation. Despite the foregoing, in the case of any Performance-Based Compensation based on services performed over a period of at least 12 consecutive months, such election may be made no later than 6 months before the end of such performance period. Amounts to be treated as “Performance-Based Compensation” under this Plan must meet the following criteria at the time the election is made:
(i)The performance period is at least 12 months in length;
(ii)Such compensation has not become readily ascertainable. Compensation is readily ascertainable when the amount is first both calculable and substantially certain to be paid. The performance-based compensation is bifurcated between the portion that is readily ascertainable and the amount that is not readily ascertainable. Accordingly, in general any minimum amount that is both calculable and substantially certain to be paid will be treated as readily ascertainable;
(iii)The compensation must be contingent on the satisfaction of pre-established organizational or individual performance criteria (established no later than 90 days after the beginning of the Service Period);
The term Performance-Based Compensation includes payments based upon subjective performance criteria, provided that the subjective performance criteria are bona fide and relate to the performance of the Eligible Employee, a group of employees that includes the Eligible Employee, or a business unit for which the Eligible Employee provides services (which may include the entire organization), and the determination that any subjective performance criteria have been met is not made by the Eligible Employee or a family member of the Eligible Employee (as defined in Section 267(c)(4) of the Code applied as if the family of an individual includes the spouse or any member of the family), or a person under the effective control of the Eligible
Employee or such a family member, and no amount of the compensation of the person making such determination is effectively controlled in whole or in part by the Eligible Employee or such a family member.
It is the Company’s responsibility to determine whether a Pay Type qualifies as Performance-Based Compensation in accordance with the foregoing requirements with respect to any Participant and to advise the Record Keeper accordingly.
3.2.4Changes. Deferral Election Forms filed prior to their applicable filing deadline hereunder may be changed, until such filing deadline occurs, by filing an updated or amended Deferral Election Form in accordance with the foregoing requirements.
3.3Withholding Of Annual Deferral Amounts. for each plan year, the base salary portion of the annual deferral amount shall be withheld from each regularly scheduled Base Salary payroll in approximately equal amounts, as adjusted from time to time for increases and decreases in Base Salary, unless otherwise determined in the complete and sole discretion of the Committee. Deferrals of all other Pay Types that are included in the Annual Deferral Amount shall be withheld at the time each such Pay Type is or otherwise would be paid to the Participant, as determined in the complete and sole discretion of the Committee, whether or not this occurs during the Plan Year itself, subject to compliance with all applicable Section 409A Requirements. Compensation payable after the last day of the Plan Year solely for services performed during the payroll period containing the last day of the plan Year (the final payroll period) is treated as compensation for services performed in the subsequent Plan Year in which the payment is made. This subsection does not apply to any Compensation paid during such period for services performed during any period other than such final payroll period, such as a payment of an annual bonus.
3.4Annual Company Matching Amount. If the Company shall elect in the Adoption Agreement to make Annual Company Matching Amounts, then in each Plan Year, for so long as a Participant remains actively employed by the Company or other Participating Employer and continues to be a Participant in this Plan, the Company shall credit to such Participant’s Account an Annual Company Matching Amount, such amount to be calculated in the manner and on the Match Crediting Dates set forth in the Adoption Agreement, up to (and not exceeding) in each Plan Year the Company Contribution Limit, if any, applicable thereto. Annual Company Matching Amounts shall be credited in each instance as of the applicable Match Crediting Date designated in the Adoption Agreement, such amounts to be determined by the Company as soon as practicable, but not later than 60 days after each applicable Match Crediting Date.
3.5Annual Company Discretionary Amounts. The Company, in its discretion, may credit additional amounts to the Company Discretionary Account of any Participant or group of Participants. No such contribution to a Participant or group of Participants shall imply any right on the part of other Participants to receive a similar contribution, nor are such contributions required to be uniform with respect to the Participants for whom they are made.
3.6FICA/FUTA and Other Taxes. For each Plan Year in which a Participant elects an Annual Deferral Amount, the Participant’s Employer shall ratably withhold, from that portion of the Participant’s wages, salary, bonus or other compensation that is not being deferred, the Participant’s share of taxes under the Federal Insurance Contributions Act and the Federal Unemployment Tax Act (“FICA/FUTA Taxes”) and any other taxes on deferred amounts which may be required or appropriate. If necessary, the Committee shall reduce the Annual Deferral Amount in order to comply with this paragraph. In addition, as balances with Company Matching Accounts and Company Discretionary Accounts, if any, become vested pursuant to Article 5, to the extent that such amounts are subject to FICA/FUTA Taxes or any other taxes, the Participant’s Employer shall withhold from the Participant’s wages, salary, bonus or other compensation for the year in which such vesting occurs the Participant’s share of FICA/FUTA taxes and such other taxes on the amounts that have vested in such year, all to the extent necessary and appropriate to satisfy such tax
obligations. If necessary, the Committee shall reduce the Annual Deferral Amount for the year in which FICA/FUTA or other taxes are due or the Participant’s Account, if other payments or deferrals are insufficient, in order to comply with this paragraph.
3.7For Cause Terminations. Despite anything to the contrary in this Plan, if the Committee in good faith determines that a Participant has caused or incurred a Termination of Employment for Cause, then such Participant’s Company Discretionary Account and such Participant’s Company Matching Account (including both vested and unvested balances thereof) automatically shall be forfeited in their entirety, subject to compliance with all applicable laws.
ARTICLE 4.
ALLOCATION OF FUNDS
4.1Crediting/Debiting of Account Balances. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts, other than Restricted Equity Units, shall be credited or debited to a Participant’s Account in accordance with the following:
4.2Notional Investment Calculations. The Committee shall designate in its sole discretion one or more Notional Investments to be used to calculate Notional Investment Adjustments to be credited or debited to Participants’ Accounts, as if each Participant were making an actual investment in Notional Investments with his or her Account Balance. Notional Investments shall be used to calculate bookkeeping entries in each Participant’s respective Account and shall be utilized solely as a means to calculate and adjust Account Balances pursuant to this Plan. The Committee from time to time may delete, modify, substitute or otherwise change any Notional Investment under the Plan for any reason with respect to any future Account Balance calculations, and the Committee may impose such limits, rules and procedures governing the frequency, timing, methods and other matters pertaining to the calculation of Notional Investment Adjustments, and the use, effectiveness and application thereof, as the Committee from time to time may deem to be necessary, convenient or appropriate for purposes of administering the Plan.
4.3Election of Notional Investments. If the Committee shall approve more than one Notional Investment to be used with respect to any Plan Year, then each Participant shall elect, on a Notional Investment Election Form duly filed with the Record Keeper for such Plan Year, one or more Notional Investment(s) to be used to calculate the Notional Investment Adjustments to be credited or debited, as the case may be, to his or her Account under this Article 4. Each Participant shall specify, on each Notional Investment Election Form, the portions of his or her Account to be allocated to one or more Notional Investments, as if the Participant was making an actual investment in that Notional Investment with that portion of his or her Account Balance. Notional Investment Election Forms may be completed and/or signed using such online systems and other electronic means as the Committee or Record Keeper from time to time may designate for such purpose. The Committee may impose such limits, rules and procedures governing the frequency of permitted changes, timing of effectiveness, minimum and maximum amounts (if any) and other matters pertaining to Notional Investment Election Forms, and the use, effectiveness and application thereof, as the Committee from time to time may deem to be necessary, convenient or appropriate for purposes of administering the Plan, including the designation of a default option in the event a Participant fails to make a valid election.
4.4Crediting or Debiting Method. The Participant’s Account, other than Equity Unit Accounts, will be credited or debited, as the case may be, with the increase or decrease in the performance of each Notional Investment selected by the Participant, as though the portion of the Participant’s Account Balance then was actually invested in the Notional Investments selected by the Participant, in the percentages (if more than one Notional Investment is available under this Plan) then applicable to each portion of the Participant’s Account. The value of each Notional Investment shall be calculated under the Plan as of the close of business on the business day when the published or calculated value of such Notional Investment becomes effective generally, but not more frequently than once per business day. The Committee from time to time may specify such times, frequencies, methods, rules and procedures for calculating the value of any particular Notional Investment (for example, specifying that interest on money market funds shall be calculated and credited on a monthly basis).
4.5No Actual Investment. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, each Notional Investment is to be used for measurement purposes only. A Participant’s election of any Notional Investment(s), the allocation of any portion of his or her Account thereto and the use of any Notional Investment(s) to calculate any Notional Investment Adjustment in value to be credited or debited to his or her Account shall not be considered or construed in any manner as an actual investment of his or her Account in any such Notional Investment. In the event that the Company, in its own discretion, decides to invest funds in any or all of the Notional Investments, no Participant shall have any rights or interests in or to any such investment. Without limiting the foregoing, a Participant’s Account Balance shall at all times be a bookkeeping entry only, and shall not represent any actual investment made on his or her behalf by the Company. The Participant at all times shall remain an unsecured creditor of the Company.
4.6Crediting of Equity Unit Accounts. Equity Unit Accounts may be established under the Plan in the complete and sole discretion of the Committee and shall be subject to such additional terms and conditions as may be specified by the Committee from time to time. No amounts credited to an Equity Units Account may be diversified into another form of investment after such amounts have been credited to the Account. Amounts credited to an Equity Unit Account that remain notionally invested in the form of Company securities may be distributed in the form of common securities of the Company or, in cash equal to the fair market value of the common securities of the Company as of the date of distribution, in the complete and sole discretion of the Committee, or subject to the terms and limitations of the applicable Restricted Equity Unit plan and award agreement. Notwithstanding any other provisions of the Plan, no securities shall be issued to a Participant in connection with a distribution under the Plan unless, and until, such Participant has executed such documentation as may be required by the Committee and agreed to comply with all applicable securities laws. The Committee shall administer any Equity Unit Account consistent with the terms of the applicable Restricted Equity Unit plan and agreement. The Committee shall have the discretion to make adjustments in the number of securities, or convert or allow a Participant to elect to convert securities, if any, payable with respect to Restricted Equity Units credited to an Equity Unit Account to an alternative form of investment under the Plan after any applicable vesting and/or holding period, as appropriate to accomplish the intent of the Plan and applicable Restricted Equity Unit plan and award agreement, all as may be directed by the Committee, in its complete and sole discretion. Prior to any distribution of securities, Participants shall have no rights as equity holders with respect to amounts or units credited to an Equity Unit Account, except that the deferral documentation may provide that the Participant shall be entitled to receive additional credits to an Equity Unit Account in the amount of any cash or stock dividends payable on securities of the Company equal in number to the vested Restricted Equity Units credited to such Equity Unit Account. Any dividends payable on vested Restricted Equity Units credited to an Equity Unit Account (i) may be denominated in equity units and result in a credit of additional notional equity units to the applicable Equity Unit Account, or (ii) may be credited to a cash subaccount and thereafter credited with notional earnings as directed by the Committee. Pursuant to Code Section 409A, any dividend
equivalents shall be considered current earnings on the Equity Unit Account and shall be credited to the appropriate Account as of the date dividends are paid to equity holders of the Company and distributed at the same time and in the same form elected for the applicable Equity Unit Account.
ARTICLE 5.
VESTING
5.1Vesting of Benefits. The Participant’s Account Balance attributable to his or her Deferral Accounts, and Notional Investment Adjustments thereto, shall always be 100% vested. Subject to Section 3.7, credits to each Participant’s Company Matching Accounts, and Notional Investment Adjustments thereto, and credits to each Participant’s Company Discretionary Accounts, and Notional Investment Adjustments thereto, shall be vested in accordance with the provisions set forth in the Adoption Agreement. Amounts credited to the Participant’s Equity Unit Accounts shall vest in accordance with the schedule included in the award agreement or determined and provided to the Participant at the time of contribution by the Committee. Except as otherwise approved by the Committee and/or required under Section 409A Requirements, the date indicated in the Adoption Agreement shall be used for the purposes of determining the Vesting Commencement Date of a former Participant who is rehired following a Termination of Employment.
ARTICLE 6.
DISTRIBUTION OF BENEFITS
6.1Retirement Benefit. If a Participant shall remain (other than for intervening authorized leaves of absence) an active employee of the Company or any Affiliate until such Participant’s Retirement Date, then upon such Participant’s Retirement, the Company shall pay to such Participant a Retirement Benefit in an amount equal to such Participant’s vested Account Balance, to be calculated and paid as more particularly provided in Section 6.7 below, subject to the terms and conditions of this Plan.
6.2Termination Benefit. In the event of the Participant’s Termination of Employment, either voluntarily or involuntarily, for any reason other than Disability, Retirement or death, the Company shall pay to the Participant a Termination Benefit in an amount equal to such Participant’s vested Account Balance, to be calculated and paid as more particularly provided in Section 6.7 below, subject to the terms and conditions of this Plan.
6.3Disability Benefit. If a Participant shall remain (other than for intervening authorized leaves of absence) an active employee of the Company or any Affiliate until such Participant’s Disability, then upon such Participant’s Disability, the Company shall pay to such Participant a Disability Benefit in an amount equal to such Participant’s vested Account Balance, to be paid as more particularly provided in Section 6.7 below, subject to the terms and conditions of this Plan and the Adoption Agreement. In the event of a Participant’s Disability, to the extent permitted under applicable Section 409A Requirements, all deferrals following the date of Disability will cease. The Committee may require, as a condition to any right or action under this paragraph, that the Participant be examined by a duly licensed physician selected by the Company to determine or confirm the existence of such Participant’s Disability.
6.4Change in Control Distribution. If the Adoption Agreement allows for Change in Control Distributions under this Plan, then, in the event of a Change in Control, the Company shall pay to the Participant a Change in Control Distribution as specified in the Adoption Agreement in an amount equal to such Participant’s vested Account Balance, to be calculated and paid as more particularly provided in Section 6.7 below, subject to the terms and conditions of this Plan as specified in the Adoption Agreement.
6.5In-Service Distributions. If the Adoption Agreement allows for In-Service Distributions under this Plan, then a Participant may allocate in the Deferral Election Form a portion of his or her Account
Balance to be paid as a scheduled In-Service Distribution, such payment to be made in a lump sum or annual installments as set forth in the Adoption Agreement. The amount to be calculated and paid as more particularly provided in Section 6.7 below, subject to the terms and conditions of this Plan. Despite the foregoing, if another distribution event occurs that would result in the payment of any benefit prior to an In-Service Distribution as specified in the Adoption Agreement, then such other form of benefit shall be paid in lieu of such In-Service Distribution. A Participant may elect to delay the scheduled time for payment of an In-Service Distribution under this paragraph, but only if such election constitutes a Permissible Change Election. If any amount of the Account Balance that has been designated for an In-Service Distribution shall be unvested at the time an In-Service Distribution is scheduled to occur, such unvested amount instead shall remain in such Participant’s Account, to be included, when and if it vests, with other amounts payable by reason of the Participant’s Separation from Service.
6.6Death Benefit.
6.6.1Pre-Commencement Death Benefit. If a Participant dies prior to the commencement of his or her Separation from Service payment, then the Company shall pay the Participant’s vested Account Balance as a Pre-Commencement Death Benefit to such Participant’s Beneficiary, such payments to be made in accordance with Section 6.7, subject to the terms and conditions of this Plan as specified in the Adoption Agreement.
6.6.2Post Commencement Death Benefit. If a Participant dies after the commencement of his or her Separation from Service payment, the Company shall pay the Participant’s vested Account Balance as a Post-Commencement Death Benefit to such Participant’s Beneficiary, such payments to be made in accordance with Section 6.7, subject to the terms and conditions of this Plan as specified in the Adoption Agreement.
6.6.3Supplemental Death Benefit. If specified in the Adoption Agreement, in the event that a Participant dies while actively employed by the Company or an Affiliate, in addition to the Participant’s vested Account Balance, the Company may pay an extra amount (a “Supplemental Death Benefit”) to such Participant’s Beneficiary, provided, however, that (a) the Company subsequently may elect to amend, revoke or eliminate any such Supplemental Death Benefit at any time in its discretion prior to the Participant’s death, by giving notice of such subsequent election to such Participant, (b) the Company shall have no obligation to specify any Supplemental Death Benefit with respect to any Participant, regardless of whether the Company has elected to specify any Supplemental Death Benefit with respect to any other Participant or group of participants, and (c) no Supplemental Death Benefit shall be paid with respect to a Participant if such Participant’s death occurs as a result of suicide during the twenty-four (24) calendar months beginning with the calendar month following commencement of a Participant’s enrollment in this Plan or if such Participant has made a material misrepresentation in any form or document provided by the Participant to or for the benefit of the Company or in connection with the administration of this Plan. The Committee may impose such conditions on its approval of any Supplemental Death Benefit as the Committee from time to time may elect, including without limitation requirements that the Participant consent to the Company’s purchase and ownership of insurance on his or her life (and to the naming of the Company and/or its designees as a beneficiary on any such policy), that the Participant complete an application for life insurance and submit to medical examinations relating to the underwriting of any such insurance policy, and that any such policy be underwritten and issued on terms satisfactory to the Committee. In the event that the service of the Participant is terminated by the applicable Employer for any reason other than his or her death, any right to a Supplemental Death Benefit shall thereupon terminate, and neither the Company nor the Participating Employer shall have any further obligation under this Section.
6.7Payments. A Participant’s vested Account Balance shall be distributed in one or more annual installments as set forth in the Participant’s Deferral Election Form, in accordance with definitions and
subject to limitations set forth in the Adoption Agreement. The amount shall be calculated by taking the amount of the Participant’s vested Account Balance divided by the total number of installments (in the case of a lump sum distribution, divided by one). This amount to be valued as of the end of the day (the “Valuation Date”) that is the date of the event giving rise to the distribution or such other date as reasonably determined by the Committee; provided, however, that in the case of a Specified Employee’s Separation from Service, to the extent required by Section 409A, the Valuation Date of the first payment shall be extended to take into account any required delay in payment. Payments shall commence on the Installment Date. If there shall be more than one installment to be paid, then each subsequent installment shall be calculated by taking the Participant’s Account Balance as of the close of business on the subsequent installment payment date, and dividing such amount by the number of installments then remaining. The final installment payment shall be equal to the remaining Account Balance of the Participant. In no event shall the amount of any lump sum or installment payment to a Participant exceed the remaining vested Account Balance of such Participant. For purposes of the foregoing, unless otherwise provided in the Adoption Agreement or otherwise required under applicable Section 409A Requirements, any distribution that a Participant elects to receive in a series of installments shall be treated as being a single payment on the date of the first installment of such series. The timing of payment hereunder shall in all events comply with all Section 409A Requirements. All designated payment events shall be interpreted so as to be limited to permissible payment events under Code Section 409A. Any discretion exercised by the Committee with respect to the timing of payments hereunder shall come with the Section 409A Discretionary Payment Period.
6.8Tax Withholding And Reporting. The Company shall have the right to deduct any required withholding taxes from any payment made under this Plan.
6.9No Acceleration; Changes; Certain Delays. The time or schedule for payment of any distribution under the Plan may not be accelerated, except as set forth in this Plan and as permitted under applicable Section 409A Requirements. No election may be made to change the time or form of payment of any distribution under this Plan, or any installment thereof, except for a Permissible Change Election. Despite the foregoing, to the extent consistent with applicable Section 409A Requirements, the Committee may elect to delay payment of any benefit hereunder if such benefit would be fully or partially non-deductible under Section 162(m) of the Code, would violate securities laws, or if there is a bona fide payment dispute (but only if the applicable Participant or Beneficiary is diligently attempting to collect the applicable benefit and does not control the Company or the Committee, or control the Company’s or the Committee’s decisions with respect thereto); and to the extent permitted under Section 409A Requirements, the time or schedule of payment of a benefit hereunder may be accelerated:
6.9.1to the extent that such benefit (or this Plan as it pertains thereto in the case of any particular Participant) fails to meet Section 409A Requirements, but only in an amount equal to the amount required to be included in income as a result of the failure to comply with Section 409A Requirements;
6.9.2for payment to an individual other than a Participant, to the extent necessary to fulfill a domestic relations order as provided in Section 11.6;
6.9.3to pay Federal Insurance Contributions Act tax imposed under Section 3101, 3121(a) and 3121(v)(2) of the Code, where applicable, on compensation deferred under this Plan (hereinafter, the “FICA Amount”), or to pay the income tax at source on wages imposed under Section 3401 of the Code or the corresponding withholding provisions of applicable state, local or foreign tax laws as a result of the payment of the FICA Amount, and to pay additional income tax at source on wages attributable to the pyramiding Section 3401 wages and taxes, but not in excess of the FICA Amount and the income tax withholding related to such FICA Amount; or
6.9.4as more particularly provided in Section 6.10, Article 7 or Section 11.8.
6.10Deminimis Amounts. Notwithstanding any other provisions of this Plan to the contrary, the company may distribute a Participant’s vested Account Balance in a lump sum at any time if the balance does not exceed the then current limit (as indexed) under Section 402(g)(1)(B) of the Code and results in the termination of the Participant’s entire interest in this Plan and all other similar plans in compliance with all Section 409A Requirements.
ARTICLE 7.
UNFORESEEABLE EMERGENCIES
7.1Application for Hardship Distribution or Deferral Election Termination. In the event that any Participant incurs an Unforeseeable Emergency, if consistent with applicable Section 409A Requirements, such Participant may apply to the Committee for a Hardship Distribution in the form of (i) cancellation of existing Annual Deferral Amount elections for Pay Types not yet earned by such Participant, and (ii) to the extent cancellation of all such elections is insufficient to satisfy the needs resulting from such Unforeseeable Emergency, an accelerated payment (“Hardship Distribution”) of some or all of such Participant’s vested Account Balance. The Committee shall consider the circumstances of each such case, and the best interests of the Participant and his or her family, and shall have the right, in its sole discretion, to allow such application, in full or in part, or to refuse to make a Hardship Distribution. In the event that any Participant receives a distribution from a plan due to an unforeseeable emergency or a hardship pursuant to Treasury Regulation § 1.401(k)-1(d)(3) (or successor regulation thereto, to the extent recognized for these purposes under Section 409A Requirements), such Participant’s existing Annual Deferral Amount elections for Pay Types not yet earned by such Participant shall be cancelled for the remainder of the Plan Year.
7.2Amount of Distribution. In no event shall the amount of any Hardship Distribution payment exceed the lesser of: (a) the Participant’s vested Account Balance, or (b) the amount determined by the Committee to be necessary to alleviate the hardship, including any taxes payable by the Participant as a result of receiving such Hardship Distribution, and which is not reasonably available from other resources of the Participant, including reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets (unless liquidation of such assets would cause severe financial hardship) or by cessation of deferrals under this Plan or other nonqualified plans in which such Participant participates, all in a manner consistent with any applicable Section 409A Requirements.
7.3Rules Adopted By Committee. The Committee shall have the authority to adopt additional rules and procedures relating to Hardship Distributions. The request to take a Hardship Distribution shall be made by filing a form provided by and filed with the Committee and shall be accompanied by appropriate documentation evidencing the existence and extent of the hardship consistent with Section 409A Requirements.
ARTICLE 8.
BENEFICIARY DESIGNATION
8.1Beneficiary. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefit under this Plan after the Participant’s death. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of the Company in which the Participant participates.
8.2Beneficiary Designation; Change. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form and returning it to the Record Keeper. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with
the terms of the Beneficiary Designation Form and the Committee’s rules and procedures, as in effect from time to time. The Committee and the Record Keeper shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death.
8.3No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s benefits, then the Participant’s designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant’s estate.
8.4Doubt as to Beneficiary. If the Record Keeper has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Company to withhold such payments until this matter is resolved to the Committee’s satisfaction.
8.5Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Committee may, in its discretion, make such distribution (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence, or (ii) to the conservator or committee or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Committee, the Record Keeper, the Company and the Plan from further liability on account thereof.
8.6Discharge of Obligation. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge the Company and the Committee from all further obligations under the Plan with respect to the Participant, and that Participant’s Participation Agreement shall terminate upon such full payment of benefits.
ARTICLE 9.
MANAGEMENT AND ADMINISTRATION OF THIS PLAN
9.1The Committee. The Committee shall be responsible for the management, operation and administration of the Plan, and for processing claims under Article 10 of this Plan. The Committee shall administer the Plan in accordance with its terms and shall have the discretion, power and authority to determine all questions arising in connection with the administration, interpretation and application of the Plan. Any such determination shall be conclusive and binding upon all persons. The Committee shall have all powers necessary or appropriate to accomplish its duties under the Plan. The Committee from time to time may employ others to render advice with regard to its responsibilities under this Plan and to perform services under this Plan, including the services contemplated to be performed by the Record Keeper. The Committee may also allocate its responsibilities to others and may exercise any other powers necessary for the discharge of its duties.
9.2The Record Keeper. Except to the extent provided to the contrary in a separate written agreement, the Record Keeper shall solely be responsible for keeping records of Account Balances, and for receiving and processing data pertaining to elections and transactions affecting Account Balances pursuant to the Plan.
9.3Information From Company. The Company and each Affiliate shall supply full and timely information to the Committee and the Record Keeper on all matters as may be required properly to administer the Plan. The Committee and the Record Keeper may rely upon the correctness of all such information as is so supplied and shall have no duty or responsibility to verify such information. The Committee and the Record Keeper shall also be entitled to rely conclusively upon all tables, valuations, certifications, opinions
and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by or on behalf of the Company or the Committee with respect to the Plan.
9.4Indemnification. The Company, to the fullest extent permitted by applicable law, shall indemnify and hold harmless the members of the Committee, the Record Keeper and their respective employees, officers, directors, partners, agents, affiliates and representatives, from and against any and all claims, losses, liabilities, costs, damages and expenses (including without limitation reasonable attorneys’ fees) arising from any action or failure to act with respect to this Plan on account of such party’s services hereunder, except in the case of gross negligence or willful misconduct.
9.5Section 409A Compliance. The Company intends that this Plan will be established, construed, administered and applied in compliance with all Section 409A Requirements, but in light of uncertainty with respect to such requirements and limits, the Company reserves the right to unilaterally interpret or amend the Plan and/or any Participation Agreement or Deferral Election Form without the consent of the Participants and to take any actions that may be appropriate to comply with the Section 409A Requirements.
ARTICLE 10.
CLAIMS PROCEDURES
10.1Presentation of Claim. A Participant or a Participant’s Beneficiary after a Participant’s death (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination under this Article with respect to the amounts distributable to such Claimant. The claim must state with particularity the determination desired by the Claimant. If the claim relates to disability benefits, the Committee shall ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision.
10.2Notification of Decision. The Committee shall consider a Claimant’s claim within a reasonable time, but no later than ninety (90) days after receiving the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of the initial period. Notwithstanding the forgoing, if the claim relates to a Disability determination the decision shall be rendered within forty-five (45) days which may be extended up to an additional thirty (30) days if due to matters beyond the control of the Plan, the Committee needs additional time to process a claim, which may be further extended up to an additional thirty (30) days if due to matters beyond the control of the Plan, the Committee needs additional time to process a claim. The extension notice shall indicate the special circumstances requiring an extension of time, the date by which the Committee expects to render the benefit determination, the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant shall be afforded at least forty-five (45) days within which to provide the specified information. The Committee shall notify the Claimant in writing either that the Claimant’s request has been allowed in full or denied in part or in full. In the case of an adverse benefit determination with respect to Disability benefits, on the basis of the Committee’s independent determination of the Participant’s disability status, the Committee will provide a notification in a culturally and linguistically appropriate manner (as described in Department of Labor Regulation Section 2560.503-1(o)). If the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, such notice must set forth in a manner calculated to be understood by the Claimant, and it must contain:
(i)the specific reason(s) for the denial of the claim, or any part of it;
(ii)specific reference(s) to pertinent provisions of this Plan upon which such denial was based;
(iii)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;
(iv)notice that the Claimant has a right to request a review of the claim denial and an explanation of the claim review procedure and the time limits applicable to such procedures set forth in Section 10.3 below;
(v)a statement of the Claimant’s right to bring a civil action under ERISA §502(a) (or arbitration if applicable under the terms of the Plan and permitted by ERISA) following an adverse benefit determination on review, and a description of any time limit that applies under the Plan for bringing such an action; and
(vi)in addition, with respect to a claim that related to Disability benefits:
(a)a discussion of the decision, including an explanation or basis for disagreeing with or not following:
(1)the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant;
(2)the views of medical or vocational experts whose advice was obtained on behalf of the Plan in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and
(3)a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration.
(b)if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the Claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request;
(c)either the specific internal rules, guidelines, protocols, standards or other similar criteria of the Plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the Plan do not exist; and
(d)a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by Department of Labor Regulation Section 2560.503-1(m)(8).
10.3Review of a Denied Claim. On or before sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, (180 days in the case of a Disability claim) a Claimant (or the Claimant’s duly authorized representative) may file with the Company a written request for a review of the denial of the claim. The Claimant (or the Claimant’s duly authorized representative):
10.3.1may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits;
10.3.2may submit written comments or other documents; and/or
10.3.3may request a hearing, which the Company, in its sole discretion, may grant.
10.3.4If the initial claim is for disability benefits, and the claim requires an independent determination by the Committee of a Participant’s Disability status, and the Committee denies the claim, in whole or in part, the Claimant shall have the opportunity for a full and fair review by the Committee of the denial, as follows:
(i)Prior to such review of the denied claim, the Claimant shall be given, free of charge, any new or additional evidence considered, relied upon, or generated by the Plan, insurer, or other person making the benefit determination in connection with the claim, or any new or additional rationale, as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided, to give the Claimant a reasonable opportunity to respond prior to that date.
(ii)The Committee shall respond in writing to such Claimant within forty-five (45) days after receiving the request for review. If the Committee determines that special circumstances require additional time for processing the claim, the Committee can extend the response period by an additional forty-five (45) days by notifying the Claimant in writing, prior to the end of the initial 45-day period that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Committee expects to render its decision.
(iii)The Claimant shall be given the opportunity to submit issues and written comments to the Committee, as well as to review and receive, without charge, all relevant (as defined in applicable ERISA regulations) documents, records and other information relating to the claim. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination.
(iv)In considering the review, the Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. Additional considerations shall be required in the case of a claim for disability benefits. For example, the claim will be reviewed by an individual or committee who did not make the initial determination that is subject of the appeal, nor by a subordinate of the individual who made the determination, and the review shall be made without deference to the initial adverse benefit determination. If the initial adverse benefit determination was based in whole or in part on a medical judgment, the Committee will consult with a health care professional with appropriate training and experience in the field of medicine involving the medical judgment. The health care professional who is consulted on appeal will not be the same individual who was consulted during the initial determination or the subordinate of such individual. If the Committee obtained the advice of medical or vocational experts in making the initial adverse benefits determination.
10.4Decision on Review. The review committee appointed by the Company shall render a decision on review promptly, and no later than sixty (60) days after the Company receives the Claimant’s written request for a review of the denial of the claim (45 days in the case of a Disability claim). If the Company determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of the initial period (45 days in the case of a Disability claim). The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Company expects to render the benefit determination. In rendering its decision, the Company shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. In the case of an adverse benefit determination with respect to disability benefits, on the basis of the Committee’s independent determination of the Participant’s disability status, the Committee will provide a notification in a culturally and linguistically appropriate manner (as described in Department of Labor Regulation Section 2560.503-1(o)). The decision must be written in a manner calculated to be understood by the Claimant, and it must contain:
10.4.1specific reasons for the decision;
10.4.2specific reference(s) to the pertinent provisions of this Plan upon which the decision was based;
10.4.3a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.
10.4.4a statement describing any voluntary appeal procedures offered by the Plan and the Claimant’s right to obtain the information about such procedures;
10.4.5a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) (or arbitration where applicable under the terms of the Plan and permitted under ERISA) which shall describe any applicable contractual limitations period that applies to the Claimant’s right to bring such an action, including the calendar date on which the contractual limitations period expires for the claim; and
10.4.6a discussion of the decision, including an explanation of the basis for disagreeing with or not following:
(i)the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant;
(ii)the views of medical or vocational experts whose advice was obtained on behalf of the Plan in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and
(iii)a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration.
10.4.7If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the Claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request; and
10.4.8Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the Plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the Plan do not exist.
10.5Failure of Plan to Follow Procedures. In the case of a claim for Disability benefits, if the Plan fails to strictly adhere to all the requirements of this claims procedure with respect to a disability claim, the Claimant is deemed to have exhausted the administrative remedies available under the Plan, and shall be entitled to pursue any available remedies under ERISA Section 502(a) on the basis that the Plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim, except where the violation was: (a) de minimis; (b) non-prejudicial; (c) attributable to good cause or matters beyond the Plan’s control; (d) in the context of an ongoing good-faith exchange of information; and (e) not reflective of a pattern or practice of noncompliance. The Claimant may request a written explanation of the violation from the Plan, and the Plan must provide such explanation within ten (10) days, including a specific description of its basis, if any, for asserting that the violation should not cause the administrative remedies to be deemed exhausted. If a court rejects the Claimant’s request for immediate review on the basis that the Plan met the standards for the exception, the claim shall be considered as re-filed on appeal upon the Plan’s receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the Plan shall provide the claimant with notice of the resubmission.
ARTICLE 11.
MISCELLANEOUS
11.1Trust. Except as set forth below, nothing contained in this Plan, nor any action taken pursuant to its provisions by any person, shall create, or be construed to create, a trust of any kind, or a fiduciary relationship between the Company and any other person. Despite the foregoing, if the Company elects to establish a grantor trust for the purpose of holding any assets intended to fund the payment of any benefits under this Plan, the Company shall have no obligation to make any contributions or deposits into such trust and all assets of such trust shall remain subject to the claims of the Company’s creditors generally in the event of any insolvency or bankruptcy of the Company, and except as permitted under applicable Section 409A Requirements, no such assets shall be located outside of the United States of America. No trust or restriction shall be imposed on any assets intended to fund the payment of any benefits under this Plan as a result of any change in Company’s financial health. The creation of any trust shall not relieve the Company of its obligations under this Plan.
11.2No Right To Company Assets; Unsecured Claim. Payments to any Participant or Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Company. No person shall have any interest in any such asset by virtue of any provision of this Plan. The Company’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. To the extent that any person acquires a right to receive payments from the Company under the provisions hereof, such right shall be no greater than the right of any unsecured general creditor of the Company; no such person shall have or acquire any legal or equitable right, interest or claim in or to any property or assets of the Company. In the event that, in its discretion, the Company purchases an insurance policy or policies insuring the life of a Participant or any other property, to allow the Company to recover or meet the cost of providing benefits, in whole or in part, hereunder, no Participant or Beneficiary shall have any rights whatsoever therein or in the proceeds therefrom. The Company shall be the sole owner and beneficiary of any such insurance policy or property and shall possess and may exercise all incidents of ownership therein.
11.3Captions. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
11.4Furnishing Information. Each Participant and his or her Beneficiary(ies) shall cooperate with the Committee and the Record Keeper by furnishing any and all information requested by the Committee or the Record Keeper 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 Committee may deem necessary.
11.5No Contract Of Employment. Nothing contained herein shall be construed to be a contract of employment for any term of years, nor as conferring upon any Participant the right to continue to be employed by the Company or any Affiliate in his or her present capacity or in any capacity. It is expressly understood that this Plan relates to the payment of deferred compensation for each Participant’s services, and is not intended to be an employment contract.
11.6Benefits Not Transferable. No Participant or Beneficiary under this Plan shall have any power or right to transfer, assign, anticipate, hypothecate or otherwise encumber any part or all of the amounts payable hereunder. No such amounts shall be subject to seizure by any creditor of any such Participant or Beneficiary, by a proceeding at law or in equity, nor shall such amounts be transferable by operation of law in the event of bankruptcy, insolvency or death of the Participant or Beneficiary. Any such attempted assignment shall be void.
The interest in the benefits hereunder of a spouse of a Participant who predeceases the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession.
Notwithstanding the foregoing, to the extent necessary to comply with the terms of a “domestic relations order” (as defined in Section 414(p)(1)(B) of the Code) the Committee may cause all or a portion of a Participant’s Account Balance to be segregated into a sub-Account for the benefit of the Participant’s spouse, child or other dependent identified in such order as the alternative payee and give such alternative payee (or their legal representative if such alternative payee is incompetent or a minor), as applicable (i) the same Notional Investment alternatives as are available to the Participant under the Plan with respect to such sub-Account until distributed, and (ii) the same distribution form and timing options as are available to the Participant under the Plan or an immediate lump sum payment, all as directed by the domestic relations order and subject to compliance with Code Section 409A Requirements.
11.7Successors. The provisions of this Plan shall bind and inure to the benefit of the Participant’s employer and its successors and assigns and the Participant and the Participant’s designated Beneficiaries.
11.8Amendment and Termination. To the extent permitted under Section 409A Requirements, this Plan may be amended or terminated by the Company at any time, without notice to or consent of any person, pursuant to resolutions adopted by the Company. Any such amendment or termination shall take effect as of the date specified therein and, to the extent permitted by law and Section 409A Requirements, may have retroactive effect. However, no such amendment or termination shall reduce the vested balance then credited to the Participant’s Account Balance under Section 4. The Company and each participating Employer reserve the right to terminate its participation in this Plan. Except as otherwise provided below, the termination of the Plan shall not affect the distribution provisions in effect for the Accounts maintained under the Plan, and all amounts deferred prior to the date of any such Plan termination shall continue to become due and payable in accordance with the distribution provisions in effect immediately prior to such Plan termination. Payment of the Account Balances may be accelerated upon Plan termination and liquidation of the Plan only in compliance with all Section 409A Requirements as then in effect. Section 409A regulations currently permit acceleration of distributions under the following circumstances:
11.8.1Dissolution/Bankruptcy. The Plan may be terminated and liquidated within 12 months of a corporate dissolution taxed under Code section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. 503(b)(1)(A), provided that the amounts deferred under the Plan are included in the Participants’ gross incomes in the latest of:
(i)The calendar year in which the plan termination and liquidation occurs
(ii)The calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or
(iii)The first calendar year in which the payment is administratively practicable.
11.8.2Change in Control. The Plan may be terminated and liquidated pursuant to irrevocable action taken by the Company within the 30 days preceding or the 12 months following a change in control event (as defined in Treas. Reg. section 1.409A-3(i)(5)). For purposes of this subsection, an arrangement will be treated as terminated only if all substantially similar agreements, methods, programs, and other arrangements sponsored by the Company immediately after the time of the change in control event with respect to which deferrals of compensation are treated as having been deferred under a single plan under Treas. Reg. section1.409A-1(c)(2) are terminated and liquidated with respect to each participant that experienced the change in control event, so that under the terms of the termination and liquidation all such participants are required to receive all amounts of compensation deferred under the terminated agreements, methods, programs, and other arrangements within 12 months of the date the Company irrevocably takes all necessary action to terminate and liquidate the agreements, methods, programs, and other arrangements.
11.8.3Termination of All Plans. The Plan may be terminated and liquidated at any time provided that:
(i)The termination and liquidation does not occur proximate to a downturn in the financial health of the Company or applicable Participating Employer;
(ii)All agreements, methods, programs, and other arrangements sponsored by the Company that would be aggregated with any terminated and liquidated agreements, methods, programs, and other arrangement under Treas. Reg. section 1.409A-1(c) if the same Participant had deferrals of compensation under all of the agreements, methods, programs, and other arrangements that are terminated and liquidated;
(iii)No payments are made other than payments that would be payable under the terms of the plans if the termination and liquidation had not occurred are made within 12 months of the termination date;
(iv)All payments are made within 24 months of the date the Company takes all necessary action to irrevocably terminate and liquidate the plan; and
(v)The Company does not adopt a new arrangement that would be aggregated with the plan under Section 1.409A-1(c) of the Treasury Regulations provision for the deferral of compensation at any time within 3 years following the date of termination of the Plan.
11.9Notice. Either the Committee or the Record Keeper may specify that any election, form, designation, agreement or communication by a Participant under the Plan shall be made or submitted online at a site on the World Wide Web designated for such purpose, or by other reasonable electronic means. Subject to the foregoing, any notice, consent or demand required or permitted to be given under the provisions of this
Plan shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent or demand is mailed, it shall be sent by United States certified mail, postage prepaid, addressed, if to the Company or the Committee, to the Company Address set forth in the Adoption Agreement, and if to the Record Keeper, to the Record Keeper Address set forth in the Adoption Agreement, and if to any Participant, to such Participant’s address most recently submitted by him or her to the Record Keeper (and in the absence of such submission, as most recently appearing on the records of the Company). The date of such mailing shall be deemed the date of notice, consent or demand. Any person may change the address to which notice is to be sent by giving notice of the change of address in the manner aforesaid.
11.10Governing Law. The Plan and the right and obligations of all persons hereunder shall be governed by and construed in accordance with the laws of the state set forth in the Adoption Agreement, other than its laws regarding choice of law, to the extent that such state law is not preempted by federal law.