þ | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 22-2711928 | |
(State or other jurisdiction of incorporation | (I.R.S. Employer Identification | |
or organization) | Number) | |
86 Morris Avenue, Summit, NJ | 07901 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer þ | Accelerated filer o | Non-Accelerated filer o | Smaller Reporting Company o | |||
Page No. | ||||||||
PART I FINANCIAL INFORMATION
|
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|
||||||||
Item 1 Unaudited Consolidated Financial Statements
|
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|
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3 | ||||||||
|
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4 | ||||||||
|
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5 | ||||||||
|
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7 | ||||||||
|
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22 | ||||||||
|
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32 | ||||||||
|
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33 | ||||||||
|
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|
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33 | ||||||||
|
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34 | ||||||||
|
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34 | ||||||||
|
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34 | ||||||||
|
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34 | ||||||||
|
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34 | ||||||||
|
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35 | ||||||||
|
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36 | ||||||||
|
||||||||
Exhibit 10.1 | ||||||||
Exhibit 10.2 | ||||||||
Exhibit 10.3 | ||||||||
Exhibit 10.4 | ||||||||
Exhibit 10.5 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
2
Three-Month Periods Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
|
||||||||
Revenue:
|
||||||||
|
||||||||
Net product sales
|
$ | 431,374 | $ | 269,796 | ||||
Collaborative agreements and other revenue
|
4,768 | 4,804 | ||||||
Royalty revenue
|
26,455 | 18,815 | ||||||
|
||||||||
Total revenue
|
462,597 | 293,415 | ||||||
|
||||||||
|
||||||||
Expenses:
|
||||||||
|
||||||||
Cost of goods sold (excluding amortization expense)
|
44,724 | 22,055 | ||||||
Research and development
|
156,877 | 79,575 | ||||||
Selling, general and administrative
|
140,451 | 105,206 | ||||||
Amortization of acquired intangible assets
|
9,842 | 2,215 | ||||||
Acquired in-process research and development
|
1,740,000 | | ||||||
|
||||||||
Total expenses
|
2,091,894 | 209,051 | ||||||
|
||||||||
|
||||||||
Operating (loss) income
|
(1,629,297 | ) | 84,364 | |||||
|
||||||||
Other income and expense:
|
||||||||
Interest and investment income, net
|
29,623 | 24,774 | ||||||
Equity in losses of affiliated companies
|
5,079 | 1,283 | ||||||
Interest expense
|
2,210 | 2,688 | ||||||
Other income, net
|
922 | 931 | ||||||
|
||||||||
|
||||||||
(Loss) income before income taxes
|
(1,606,041 | ) | 106,098 | |||||
|
||||||||
Income tax provision
|
35,047 | 48,689 | ||||||
|
||||||||
|
||||||||
Net (loss) income
|
$ | (1,641,088 | ) | $ | 57,409 | |||
|
||||||||
|
||||||||
Net (loss) income per common share:
|
||||||||
Basic
|
$ | (3.98 | ) | $ | 0.15 | |||
Diluted
|
$ | (3.98 | ) | $ | 0.14 | |||
|
||||||||
Weighted average shares:
|
||||||||
Basic
|
412,263 | 377,599 | ||||||
|
||||||||
Diluted
|
412,263 | 429,306 | ||||||
|
3
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
|
||||||||
Assets
|
||||||||
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 938,125 | $ | 1,218,273 | ||||
Marketable securities available for sale
|
1,088,367 | 1,520,645 | ||||||
Accounts receivable, net of allowances of $5,447 and $4,213
at March 31, 2008 and December 31, 2007, respectively
|
258,385 | 167,252 | ||||||
Inventory
|
96,313 | 49,076 | ||||||
Deferred income taxes
|
54,863 | 20,506 | ||||||
Other current assets
|
121,211 | 108,669 | ||||||
|
||||||||
Total current assets
|
2,557,264 | 3,084,421 | ||||||
|
||||||||
|
||||||||
Property, plant and equipment, net
|
227,225 | 197,428 | ||||||
Investment in affiliated companies
|
10,682 | 14,422 | ||||||
Intangible assets, net
|
530,480 | 92,658 | ||||||
Goodwill
|
530,294 | 39,033 | ||||||
Other assets
|
55,519 | 183,322 | ||||||
|
||||||||
|
||||||||
Total assets
|
$ | 3,911,464 | $ | 3,611,284 | ||||
|
||||||||
|
||||||||
Liabilities and Stockholders Equity
|
||||||||
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 64,072 | $ | 37,876 | ||||
Accrued expenses
|
290,670 | 159,220 | ||||||
Income taxes payable
|
4,004 | 4,989 | ||||||
Convertible notes
|
196,512 | 196,555 | ||||||
Current portion of deferred revenue
|
1,307 | 7,666 | ||||||
Other current liabilities
|
34,265 | 26,625 | ||||||
|
||||||||
Total current liabilities
|
590,830 | 432,931 | ||||||
|
||||||||
|
||||||||
Deferred revenue, net of current portion
|
3,061 | 60,303 | ||||||
Non-current income taxes payable
|
226,721 | 211,307 | ||||||
Other non-current liabilities
|
61,378 | 62,799 | ||||||
|
||||||||
|
||||||||
Total liabilities
|
881,990 | 767,340 | ||||||
|
||||||||
|
||||||||
Commitments and Contingencies
|
||||||||
|
||||||||
Stockholders Equity:
|
||||||||
|
||||||||
Preferred stock, $.01 par value per share, 5,000,000 shares
authorized; none outstanding at March 31, 2008 and December 31, 2007, respectively
|
| | ||||||
Common stock, $.01 par value per share, 575,000,000 shares authorized; issued
439,745,644 and 407,150,694 shares at March 31, 2008 and December 31, 2007,
respectively
|
4,397 | 4,072 | ||||||
Common stock in treasury, at cost; 4,053,715 and 4,026,116 shares
at March 31, 2008 and December 31, 2007, respectively
|
(151,073 | ) | (149,519 | ) | ||||
Additional paid-in capital
|
4,640,100 | 2,780,849 | ||||||
(Accumulated deficit) retained earnings
|
(1,516,428 | ) | 124,660 | |||||
Accumulated other comprehensive income
|
52,478 | 83,882 | ||||||
|
||||||||
|
||||||||
Total stockholders equity
|
3,029,474 | 2,843,944 | ||||||
|
||||||||
|
||||||||
Total liabilities and stockholders equity
|
$ | 3,911,464 | $ | 3,611,284 | ||||
|
4
Three-Month Periods Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
|
||||||||
Cash flows from operating activities:
|
||||||||
Net (loss) income
|
$ | (1,641,088 | ) | $ | 57,409 | |||
|
||||||||
Adjustments to reconcile net income to net cash
provided by operating activities:
|
||||||||
|
||||||||
Depreciation and amortization of long-term assets
|
7,497 | 4,698 | ||||||
Amortization of acquired intangible assets
|
9,942 | 2,215 | ||||||
Provision for accounts receivable allowances
|
2,046 | 3,445 | ||||||
Deferred income taxes
|
(392 | ) | (9,571 | ) | ||||
Acquired In-process research and development
|
1,740,000 | | ||||||
Share-based compensation expense
|
21,276 | 9,573 | ||||||
Equity in losses of affiliated companies
|
5,079 | 1,283 | ||||||
Shares issued for employee benefit plans
|
2,135 | 1,287 | ||||||
Other, net
|
47 | (711 | ) | |||||
|
||||||||
Change in current assets and liabilities, excluding the effect of
acquisition:
|
||||||||
Accounts receivable
|
(38,147 | ) | (5,058 | ) | ||||
Inventory
|
(7,235 | ) | (4,790 | ) | ||||
Other operating assets
|
(4,362 | ) | 8,616 | |||||
Accounts payable and accrued expenses
|
(48,657 | ) | (15,134 | ) | ||||
Income tax payable
|
14,548 | 37,330 | ||||||
Deferred revenue
|
871 | (795 | ) | |||||
|
||||||||
Net cash provided by operating activities
|
63,560 | 89,797 | ||||||
|
||||||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Proceeds from sales of marketable securities
|
563,272 | 706,204 | ||||||
Purchases of marketable securities available for sale
|
(194,629 | ) | (1,256,255 | ) | ||||
Payments for acquisition of business, net of cash acquired
|
(746,009 | ) | | |||||
Capital expenditures
|
(18,149 | ) | (10,754 | ) | ||||
Investment in affiliated companies
|
(1,339 | ) | | |||||
Purchases of investment securities
|
(4,762 | ) | (1,406 | ) | ||||
Other
|
8,275 | |||||||
|
||||||||
Net cash used in investing activities
|
(393,341 | ) | (562,211 | ) | ||||
|
||||||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Net proceeds from exercise of common stock options and warrants
|
23,249 | 31,302 | ||||||
Excess tax benefit from share-based compensation arrangements
|
12,303 | 19,525 | ||||||
|
||||||||
Net cash provided by financing activities
|
35,552 | 50,827 | ||||||
|
||||||||
|
||||||||
Effect of currency rate changes on cash and cash equivalents
|
14,081 | 795 | ||||||
|
||||||||
|
||||||||
Net increase (decrease) in cash and cash equivalents
|
$ | (280,148 | ) | $ | (420,792 | ) | ||
|
||||||||
Cash and cash equivalents at beginning of period
|
$ | 1,218,273 | $ | 1,439,415 | ||||
|
||||||||
|
||||||||
Cash and cash equivalents at end of period
|
$ | 938,125 | $ | 1,018,623 | ||||
|
5
Three-Month Periods Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
|
||||||||
Supplemental schedule of non-cash investing and financing activity:
|
||||||||
Change in net unrealized loss (gain) on marketable
securities available for sale
|
$ | 91,226 | $ | 2,259 | ||||
|
||||||||
|
||||||||
|
||||||||
Matured shares tendered in connection with stock option
exercises
|
$ | (1,554 | ) | $ | (963 | ) | ||
|
||||||||
|
||||||||
Conversion of convertible notes
|
$ | 43 | $ | 6 | ||||
|
||||||||
|
||||||||
Supplemental disclosure of cash flow information:
|
||||||||
Interest paid
|
$ | 1,067 | $ | 1,750 | ||||
|
||||||||
|
||||||||
Income taxes paid
|
$ | 528 | $ | | ||||
|
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
MARCH 31, 2008
Table of Contents
MARCH 31, 2008
Table of Contents
MARCH 31, 2008
(Amounts in thousands)
Purchase Price Summary:
$
1,749,222
920,805
25,448
44,924
20,212
$
2,760,611
Table of Contents
MARCH 31, 2008
(Amounts in thousands)
March 7, 2008
$
340,415
8,404
510,986
1,740,000
304
2,600,109
(69,000
)
(128,352
)
(141,748
)
2,261,009
499,602
$
2,760,611
The allocation of the purchase price is subject to finalization of Celgenes management analysis of
the fair value of the assets acquired and liabilities assumed of Pharmion as of the acquisition
date. The final allocation of the purchase price may result in additional adjustments to the
recorded amounts of assets and liabilities and may also result in adjustments to depreciation,
amortization and acquired in-process research and development. The final allocation is expected to
be completed as soon as practicable but no later than 12 months after the acquisition date.
Table of Contents
MARCH 31, 2008
March 31,
(Amounts in thousands, except per share amounts)
2008
2007
$
483,728
$
329,883
(1,650,543
)
(1,708,655
)
$
(4.09
)
$
(3.75
)
(Amounts in thousands)
$
16,800
45,000
3,800
3,400
$
69,000
Table of Contents
MARCH 31, 2008
Three-Month Periods Ended
March 31,
(Amounts in thousands except per share)
2008
2007
$
(1,641,088
)
$
57,409
1,393
$
(1,641,088
)
$
58,802
412,263
377,599
18,693
33,014
412,263
429,306
$
(3.98
)
$
0.15
$
(3.98
)
$
0.14
Table of Contents
MARCH 31, 2008
Three-Month Periods Ended
March 31,
(Amounts in thousands)
2008
2007
$
(1,641,088
)
$
57,409
6,967
1,306
(62,806
)
(1,289
)
64
(57,128
)
1,370
25,724
1,557
(31,404
)
2,927
$
(1,672,492
)
$
60,336
Quoted Price in
Significant
Significant
Balance at
Active Markets for
Other Observable
Unobservable
(Amounts in thousands)
March 31, 2008
Identical Assets
Inputs
Inputs
$
1,088,367
$
3,800
$
1,062,828
$
21,739
(700
)
(700
)
$
1,087,667
$
3,800
$
1,062,128
$
21,739
Fair Value
Measurements
Using Significant
(Amounts in thousands)
Unobservable Inputs
$
37,038
(15,299
)
$
21,739
Table of Contents
MARCH 31, 2008
Gross
Gross
Estimated
(Amounts in thousands)
Amortized
Unrealized
Unrealized
Fair
March 31, 2008
Cost
Gain
Loss
Value
$
201,284
$
3,850
$
(152
)
$
204,982
152,814
4,249
(5
)
157,058
675,206
14,641
689,847
10,928
13
10,941
21,739
21,739
4,480
(680
)
3,800
$
1,066,451
$
22,753
$
(837
)
$
1,088,367
Gross
Gross
Estimated
(Amounts in thousands)
Amortized
Unrealized
Unrealized
Fair
December 31, 2007
Cost
Gain
Loss
Value
$
216,255
$
2,253
$
(108
)
$
218,400
150,175
1,410
(28
)
151,557
969,312
10,690
(131
)
979,871
13,448
19
(1,611
)
11,856
37,038
37,038
20,212
101,711
121,923
$
1,406,440
$
116,083
$
(1,878
)
$
1,520,645
Amortized
Fair
(Amounts in thousands)
Cost
Value
$
506,324
$
511,674
475,875
490,131
69,912
71,779
9,860
10,983
$
1,061,971
$
1,084,567
Table of Contents
MARCH 31, 2008
March 31,
December 31,
(Amounts in thousands)
2008
2007
$
11,955
$
8,899
22,839
21,214
61,519
18,963
$
96,313
$
49,076
(Amounts in thousands)
March 31,
December 31,
Investment in Affiliated Companies
2008
2007
$
3,530
$
2,191
7,152
12,231
$
10,682
$
14,422
Three-Month Periods Ended
(Amounts in thousands)
March 31,
Equity in Losses of Affiliated Companies
2008
2007
$
5,079
$
1,208
75
$
5,079
$
1,283
(1)
The Company records its interest and share of losses based on its ownership
percentage.
(2)
Consists of goodwill at March 31, 2008 and December 31, 2007, respectively.
Table of Contents
MARCH 31, 2008
Table of Contents
MARCH 31, 2008
Gross
Intangible
Weighted
(Amounts in thousands)
Carrying
Accumulated
Assets,
Average
March 31, 2008
Value
Amortization
Net
Life (Years)
$
534,593
$
(8,205
)
$
526,388
6.5
4,250
(691
)
3,559
13.8
312
(44
)
268
12.6
362
(97
)
265
5.0
$
539,517
$
(9,037
)
$
530,480
6.5
Gross
Intangible
Weighted
(Amounts in thousands)
Carrying
Accumulated
Assets,
Average
December 31, 2007
Value
Amortization
Net
Life (Years)
$
109,982
$
(21,470
)
$
88,512
12.9
4,250
(614
)
3,636
13.8
297
(36
)
261
12.6
318
(69
)
249
5.0
$
114,847
$
(22,189
)
$
92,658
12.9
Table of Contents
MARCH 31, 2008
(Amounts in thousands)
$
39,033
499,602
(8,275
)
(66
)
$
530,294
Three-Month Periods Ended
March 31,
(Amounts in thousands)
2008
2007
$
528
$
387
9,616
2,602
11,132
6,584
$
21,276
$
9,573
Table of Contents
MARCH 31, 2008
Weighted
Weighted
Average
Average
Aggregate
Exercise
Remaining
Intrinsic
Price
Contractual
Value
Options
Per Option
Term (Years)
(In Thousands)
32,739,159
$
28.05
6.1
$
702,341
1,762,466
1,206,031
(1,659,326
)
(140,149
)
(10,925
)
33,897,256
$
29.55
6.0
$
1,095,509
33,388,641
$
29.18
6.0
$
1,091,667
22,278,086
$
20.17
4.7
$
916,319
Table of Contents
MARCH 31, 2008
Table of Contents
MARCH 31, 2008
Table of Contents
22
23
24
25
26
27
28
29
As of March 31, 2008, we have certain financial assets and liabilities recorded at fair value. In accordance with
Statement of Financial Accounting Standards No. 157,
Fair Value Measurement
, or SFAS 157, we have classified our
financial assets and liabilities as Level 1, 2 or 3 within the fair value hierarchy. Fair values determined based on
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Our Level 1
assets consist of the companys marketable equity security. Fair values determined based on Level 2 inputs utilize
observable quoted prices for similar assets and liabilities in active markets and observable quoted prices from
identical or similar assets in markets that are not very active. Our Level 2 assets consists of U.S. Treasury
securities, U.S. government-sponsored agency securities, mortgage-backed obligations and corporate debt securities.
Fair values determined based on Level 3 inputs utilize unobservable inputs and includes valuations or assets or
liabilities for which there is little, if any, market activity. Our Level 3 assets consist of the private cash fund.
A majority of our financial assets and liabilities have been classified as Level 2. These assets and liabilities were
initially valued at the transaction price and subsequently valued based on inputs utilizing observable quoted prices
for similar assets and liabilities in active markets and observable quoted prices from identical or similar assets in
markets that are not very active.
The only asset with fair values based on Level 3 inputs was the private cash fund, which represent approximately 2.0%
of total fair value for available-for-sale securities at March 31, 2008.
During the quarter ended March 31, 2008 we did not change the valuation methods for our marketable securities.
30
31
Table of Contents
Table of Contents
Three-Month Periods Ended March 31, 2008 and 2007
Three-Month Period Ended
March 31,
Increase
Percent
(Amounts in thousands)
2008
2007
(Decrease)
Change
$
286,846
$
146,233
$
140,613
96.2
%
113,927
106,034
7,893
7.4
%
13,820
13,820
N/A
15,114
15,964
(850
)
-5.3
%
1,667
1,565
102
6.5
%
$
431,374
$
269,796
$
161,578
59.9
%
4,768
4,804
(36
)
-0.7
%
26,455
18,815
7,640
40.6
%
$
462,597
$
293,415
$
169,182
57.7
%
Table of Contents
Table of Contents
Returns
Distributor
(Amounts in thousands)
and
Government
Chargebacks
2008
Allowances
Discounts
Rebates
and Services
Total
$
16,734
$
2,895
$
9,202
$
8,839
$
37,670
926
283
1,266
2,037
4,512
10,511
8,911
13,775
17,239
50,436
(7,415
)
(2,785
)
(6,889
)
(4,016
)
(21,105
)
(495
)
(5,596
)
(151
)
(15,772
)
(22,014
)
$
20,261
$
3,708
$
17,203
$
8,327
$
49,499
Returns
Distributor
(Amounts in thousands)
and
Government
Chargebacks
2007
Allowances
Discounts
Rebates
and Services
Total
$
9,480
$
2,296
$
7,468
$
10,633
$
29,877
7,961
5,679
5,976
15,204
34,820
(7,127
)
(2,104
)
(5,708
)
(8,525
)
(23,464
)
(907
)
(3,621
)
(8,888
)
(13,416
)
$
9,407
$
2,250
$
7,736
$
8,424
$
27,817
Table of Contents
March 31,
Increase
Percent
(Amounts in thousands)
2008
2007
(Decrease)
Change
$
44,724
$
22,055
$
22,669
102.8
%
10.4
%
8.2
%
156,877
79,575
77,302
97.1
%
33.9
%
27.1
%
140,451
105,206
35,244
33.5
%
30.4
%
35.9
%
1,740,000
1,740,000
N/A
9,842
2,215
7,627
344.3
%
Three-Month Period Ended
March 31,
(Amounts in thousands)
2008
2007
Increase
$
49,141
$
32,719
$
16,422
92,804
33,341
59,463
10,868
10,010
858
4,064
3,505
559
$
156,877
$
79,575
$
77,302
Table of Contents
Table of Contents
Three-Month Period Ended
March 31,
Increase
(Amounts in thousands)
2008
2007
(Decrease)
$
63,560
$
89,797
$
(26,237
)
$
(393,341
)
$
(562,211
)
$
168,870
$
35,552
$
50,827
$
(15,275
)
March 31,
December 31,
(Amounts in thousands)
2008
2007
(Decrease)
$
2,026,492
$
2,738,918
$
(712,426
)
$
2,109,390
$
2,835,205
$
(722,603
)
(1)
Includes cash, cash equivalents and marketable securities available for sale, accounts
receivable, net of allowances, inventory and other current assets, less accounts payable, accrued
expenses, income taxes payable and other current liabilities.
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Table of Contents
Payment Due By Period
Less than
More than
(Amounts in thousands)
1 Year
1 to 3 Years
3 to 5 Years
5 Years
Total
$
196,512
$
$
$
$
196,512
19,094
33,871
18,538
7,929
79,432
21,219
21,219
4,127
8,253
8,153
16,104
36,637
37,969
11,914
49,883
$
278,921
$
54,038
$
26,691
$
24,033
$
383,683
In addition to the critical
accounting policies referenced above, the following are also applicable:
projecting regulatory approvals,
estimating future cash flows from product sales resulting from completed products and
in-process projects and
developing appropriate discount rates and probability rates by project.
Table of Contents
32
33
34
35
36
Duration
Less than
More Than
(Amounts in thousands)
1 Year
1 to 3 Years
3 to 5 Years
5 Years
Total
$
506,319
$
476,308
$
68,074
$
10,000
$
1,060,701
$
511,674
$
490,131
$
71,779
$
10,983
$
1,084,567
4.3
%
4.1
%
3.4
%
4.1
%
4.1
%
Table of Contents
Table of Contents
demands on management related to the increase in our size after the acquisition;
the diversion of managements attention from the
management of daily operations to the integration of operations;
higher integration costs than anticipated;
failure to achieve expected synergies and costs savings;
difficulties in the assimilation and retention of employees;
difficulties in the assimilation of different cultures and practices,
as well as in the assimilation of broad and geographically dispersed personnel
and operations; and
difficulties in the integration of departments, systems,
including accounting systems, technologies, books and records, and
procedures, as well as in maintaining uniform standards, controls,
including internal control over financial reporting required by the
Sarbanes-Oxley Act of 2002 and related procedures and policies.
our ability to achieve a marketing authorization for VIDAZA
®
in Europe and in
other countries;
our ability to include favorable VIDAZA
®
survival data from a recent Phase III
study in the approved prescribing information in the United States;
continued acceptance by regulators, physicians, patients and other key decision-makers as a
safe, superior therapeutic as compared to currently existing or future treatments for myelodysplastic syndrome, or MDS;
our ability to successfully compete with other approved MDS therapies; and
our ability to expand the indications for which we can market VIDAZA
®
.
Table of Contents
Letter Agreement between the Company and Aart Brouwer, dated November 1, 2005.
Letter Agreement between the Company and Graham Burton, dated June 2, 2003; Amendment to the
Letter Agreement dated April 28, 2008.
Amendment to Letter Agreement between the Company and David W. Gryska, dated April 28, 2008.
Amendment to the 2005 Deferred Compensation Plan.
Supplemental Indenture to the Indenture dated June 3, 2003 between the Company and the Bank
of New York, as Trustee, dated May 9, 2008.
Certification by the Companys Chief Executive Officer.
Certification by the Companys Chief Financial Officer.
Certification by the Companys Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
Certification by the Companys Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
Table of Contents
CELGENE CORPORATION
DATE May 12, 2008
By:
/s/ David W. Gryska
David W. Gryska
Sr. Vice President and Chief Financial Officer
DATE May 12, 2008
By:
/s/ Andre Van Hoek
Andre Van Hoek
Controller and
Chief Accounting Officer
Table of Contents
Exhibit
No.
Description
10.1
10.2
10.3
10.4
10.5
31.1
31.2
32.1
32.2
I accept the offer as outlined above | ||
|
||
Anticipated start date |
1. | Position and Responsibilities |
1.1 | The Employer hereby employs the Employee and the Employee accepts employment as President International. |
1.2 | The Employees responsibilities are specified by the Employer. The Employees responsibilities may, from time to time, be modified by the Employer to perform other assignments or assume further responsibilities. The Employees other rights and obligations shall not be affected by such modification. |
1.3 | Unless the Employer provides otherwise, the Employee reports to Robert J. Hugin, President and Chief Operating Officer. (designee) |
2. | Remuneration |
2.1 | Salary |
The Employee shall receive an annual gross base salary of CHF 585,000 paid in 12 equal installments to be paid on the final payday of each month. |
2.2 | Bonus Payments |
In addition to the fixed base salary in accordance with paragraph 2.1 above, the Employee shall be entitled to participate in the Management Incentive Plan (MIP) with an annual target bonus of 50% of the Employees base salary based (to be calculated in local currency) based on the achievement of agreed upon performance objectives, in accordance with the provisions of the Employers Management Incentive Program and Celgenes Long Term Incentive Program (LTIP) with a target bonus of 50% of the Employees base salary, based on the Company achieving pre-defined performance objectives, in accordance with the provisions or our Long Term Incentive Program (LTIP). |
2.3 | Stock Options | |
As a new employee, pursuant to approval by the Compensation Committee of the Board of Directors of Celgene Corporation, the Employee will receive a one-time grant of a stock option to purchase 150000 shares of Celgene common stock. Grants are made at fair market value on the date of the grant, and this grant will vest 100% upon grant issuance. Additionally, the Employee will be eligible for Celgene Corporations annual equity grant based upon performance. | ||
2.4 | Deductions | |
The salary and bonus payments are gross payments. The Employees share in the prevailing premiums for social security insurances mandatory under Swiss law such as AHV, IV, ALV, EO etc., as well as for the pension plan maintained by the Employer (cf. paragraph. 4 hereafter) shall be deducted from the payments made to the Employee. In addition, the Employee agrees he has provided to the Employer certification that he will not be required to pay taxes at source. The Employee will himself have to report and pay taxes. | ||
2.5 | Further Payments | |
Unless otherwise expressly agreed upon in writing, the payment of any other gratuities, profit shares, premiums or other extra payments shall be on a voluntary basis, subject to the provision that even repeated payments without the reservation of voluntarily shall not create any legal claim for the Employee, either in respect to their cause or their amount, either for the past or for the future. | ||
3. | Expenses | |
3.1 | The Employer shall reimburse the Employee upon submission of appropriate vouchers for reasonable and customary business travel expenses in accordance with the applicable Employers guidelines as in force from time to time. | |
4. | Pension Fund | |
4.1 | The Employee will be subject to the mandatory requirements of the Federal Law on Occupational Old Age, Survivors and Disability Benefit Plan (BVG). Employer and Employee shall pay their shares in the pension plan according to the applicable pension regulations and the terms of the pension plan administered by Winterthur Columna or provider in place. |
5. | Sickness / Insurance, EMPLOYEES PREVENTION FROM WORK | |
5.1 | If the Employee is by no fault of his own and due to reasons inherent in his person, such as for example sickness, accident or military service, prevented from performing work, the Employer will, after the first three months of employment, continue to pay the Employees salary according to the following: |
|
1-90 days: | 100% of insured base salary | ||
|
||||
|
91-720 days: | 80% of insured base salary |
Nothing in this paragraph 5.3 shall in any way limit the parties freedom to give notice of termination; once the employment terminated, the Employer shall no longer have the obligation to make any salary payments but the Employee shall receive the benefits according to the Pension Scheme, if any. | ||
6. | Working Hours / Vacations | |
6.1 | The Employee agrees to exercise his best efforts to successfully and carefully accomplish the duties assigned to him | |
6.2 | The Employee shall be entitled to 23 working days of paid vacations per calendar year, in addition to public and bank holidays. | |
7. | Duties of Loyalty and Confidentiality | |
7.1 | The Employee shall devote his efforts exclusively to the Employer in furtherance of the Employers interests. Any engagement in additional occupations for remuneration or any participation in any kind of enterprise requires the written consent of the Employer. This shall not apply to the usual acquisition of stock or other shares for investment purposes. Membership in the board of directors or supervisory board of other companies shall also require the written approval of the Employer. The employee acknowledges the company policy regarding Board of Director appointments of no more than two appointments so as to fully ensure balance against outside Board commitments and Celgene objectives. | |
7.2 | The Employee shall during the period of employment with the Employer and at any time thereafter, keep secret any confidential information concerning the business, contractual arrangements, deals, transactions or particular affairs of the Employer or its affiliates and will not use any such information for his own benefit or the benefit of others. This obligation shall also exist with respect to any protected data and confidential information of third parties that the Employee gets to know while performing the obligations under this Agreement. | |
7.3 | Upon termination of this Agreement for any reason, the Employee shall return to the Employer all files and any company documents concerning the business of the Employer and its affiliates in his possession or open to his access, including all designs, customer and price lists, printed material, documents, sketches, notes, drafts as well as copies thereof, regardless whether or not the same are originally furnished by the Employer or its affiliates. | |
8. | Inventions | |
8.1 . | All intellectual property rights including but not limited to patent rights, design rights, copyrights and related rights, database rights, trademark rights and chip rights as well as any rights in know how ensuing from the work performed by the Employee during the term of his employment (hereinafter the Intellectual Property Rights), shall exclusively vest in the Employer. The Employee may not, without the Employers written consent, disclose, multiply, use, manufacture, bring on the market or sell, lease, deliver or otherwise trade, offer, or register the results of his work. Any inventions while performing the employment contract but not in performance of a contractual obligation will be compensated appropriately (Art.332 paragraph. 4 CO) |
8.2. | Insofar as rights that are mentioned in section 8.1 above and are related to the Intellectual Property Rights are not vested in the Employer by operation of law or based on section 8.1 above, the Employee covenants that he will transfer and, insofar as possible, hereby transfers to the Employer such rights provided, however, that the Employer may renounce such transfer or transfer back to the Employee any such Intellectual Property Rights at any time. If a transfer should not be possible under the applicable law, then the Employee shall grant to the Employer a perpetual, transferable, royalty-free license to use such Intellectual Property Rights. | |
8.3 | The Employer is entitled to transfer the Intellectual Property Rights in full or in part to any third party. The Employer and such third parties are not obliged to mention the Employee as the author if they publish any inventions, computer programs or other works. They are free to make any modifications, translations and/or other adaptations and/or can refrain from making any publications. | |
9. | Data Protection | |
With the execution of this Agreement, the Employee consents that the Employer may store, transfer, adapt and delete all personal data in connection with this employment relationship. The Employee acknowledges that personal data may be transferred to companies outside Switzerland affiliated with the Employer, in particular to Celgene Corporation in the U.S. However all such data transfer shall be guided to be in full compliance with Swiss Data Protection Law. | ||
10. | RESTRAINT OF COMPETITION | |
The Employee shall not, during the term of his employment and for a 12 months period after the end of the employment, perform any activity competing with the Employer in specific subject areas in which the Employee was active or to which he had access during his work for Celgene. | ||
In particular, the Employee agrees: |
| not to have, directly or indirectly, any financial or other interest in a business or company which develops, produces, markets or distributes products substantially similar to the products of the Employer or its affiliated companies or to render services similar to those rendered by the Employer or its affiliated companies (a Competitor); |
| not to accept any part of full time employment in such a Competitor or to act as consultant, agent or representative of or in any other capacity for such a Competitor; | ||
| not to directly or indirectly establish such a Competitor. |
11. | SANCTIONS | |
The Employee understands that a violation of the obligations under article 10 of this Agreement might cause serious damage to the Employer. In the event the Employee violates an obligation under article 10 of this Agreement, the Employer shall be entitled to seek judicial enforcement of such obligation. Furthermore, the Employee agrees to pay to the Employer an amount of CHF 585000 as liquidated damages upon each violation of a duty or obligation under article 10. The payment of the liquidated damages does not relieve the Employee from the obligations under article 10 of this Agreement. The Employers right to claim damages exceeding the amount of liquidated damages is expressly reserved. | ||
12. | Duration and Termination | |
12.1 | This Employment Agreement shall be effective as of November 2, 2005 and last for a fixed period of three years terminating, without any notice being required, on November 1, 2008. | |
12.2 | The first three months of the employment relationship shall be the probation period. During the probation period, this Agreement may be terminated by either party at any time by respecting notice period of seven days. | |
12.3 | After the end of the probation period this Agreement may be terminated by either party by respecting a notice period of three months in the fourth, fifth and sixth month of service and thereafter by respecting a notice period of six months always with effect to the end of a calendar month. | |
13. | Miscellaneous | |
13.1 | This Employment Agreement replaces all prior understandings and/or contracts between the parties. | |
13.2 | Amendments and additions to this Agreement including this clause must be in writing to be effective. This form requirement does not apply to the notice of termination, which does not require a particular form. |
13.3 | Should one or several provisions of this Agreement prove invalid, in part or in whole, such invalid provision(s) shall not affect the validity of the other provisions in this Agreement. The invalid provision(s) shall be replaced by such valid provision(s) that best meet(s) the parties intention when agreeing on the invalid provision(s). | |
14. | Applicable Law | |
14.1 | This Employment Agreement shall be governed by Swiss law. |
|
|
|||||
|
||||||
by: The Employer
|
||||||
|
||||||
|
|
I accept the offer as outlined above
|
||
|
||
Anticipated start date
|
1 | This letter is not, and should not be interpreted as, an express or implied contract of employment. At all times employment with Celgene is at will. |
| the conviction of a crime involving moral turpitude or a felony; | ||
| acts or omissions taken in bad faith and to the detriment of the Company; or | ||
| a breach of any material term of the letter agreement. |
Dr. Graham Burton
|
Celgene Corporation | |||
|
||||
|
||||
|
By: Sol J. Barer, Ph.D. | |||
|
Chairman of the Board and Chief Executive Officer |
| the conviction of a crime involving moral turpitude or a felony; | ||
| acts or omissions taken in bad faith and to the detriment of the Company; or | ||
| a breach of any material term of the letter agreement. |
David Gryska
|
Celgene Corporation | |||
|
||||
|
||||
|
By: Sol J. Barer, Ph.D. | |||
|
Chairman of the Board and Chief Executive Officer |
2.1 | Account. Account means a bookkeeping account maintained by the Committee to record the payment obligation of a Participating Employer to a Participant as determined under the terms of the Plan. The Committee may maintain an Account to record the total obligation to a Participant and component Accounts to reflect amounts payable at different times and in different forms. Reference to an Account means any such Account established by the Committee, as the context requires. Accounts are intended to constitute unfunded obligations within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. | |
2.2 | Account Balance. Account Balance means, with respect to any Account, the total payment obligation owed to a Participant from such Account as of the most recent Valuation Date. | |
2.3 | Adopting Employer. Adopting Employer means an Affiliate who, with the consent of the Company, has adopted the Plan for the benefit of its eligible employees. | |
2.4 | Affiliate. Affiliate means a corporation, trade or business that, together with the Company, is treated as a single employer under Code Section 414(b) or (c). |
2.5 | Beneficiary. Beneficiary means a natural person, estate, or trust designated by a Participant to receive payments to which a Beneficiary is entitled in accordance with provisions of the Plan. The Participants spouse, if living, otherwise the Participants estate, shall be the Beneficiary if: (i) the Participant has failed to properly designate a Beneficiary, or (ii) all designated Beneficiaries have predeceased the Participant. | |
A former spouse shall have no interest under the Plan, as Beneficiary or otherwise, unless the Participant designates such person as a Beneficiary after dissolution of the marriage, except to the extent provided under the terms of a domestic relations order as described in Code Section 414(p)(1)(B). | ||
2.6 | Business Day. A Business Day is each day on which the New York Stock Exchange is open for business. | |
2.7 | Change in Control. Change in Control, with respect to a Participating Employer that is organized as a corporation, occurs on the date on which any of the following events occur (i) a change in the ownership of the Participating Employer; (ii) a change in the effective control of the Participating Employer; (iii) a change in the ownership of a substantial portion of the assets of the Participating Employer. | |
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. 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 Employers 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 . 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 performs services for the Participating Employer that has experienced the Change in Control, or the Participants relationship to the affected Participating Employer otherwise satisfies the requirements of Treasury Regulation Section 1.409A-3(i)(5)(ii). | ||
The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Code Section 409A. |
Page 2 of 22
2.8 | Claimant. Claimant means a Participant or Beneficiary filing a claim under Article XII of this Plan. | |
2.9 | Code. Code means the Internal Revenue Code of 1986, as amended from time to time. | |
2.10 | Code Section 409A. Code Section 409A means section 409A of the Code, and regulations and other guidance issued by the Treasury Department and Internal Revenue Service thereunder. | |
2.11 | Committee. Committee means the committee appointed by the Board of Directors of the Company (or the appropriate committee of such board) to administer the Plan. If no designation is made, the Chief Executive Officer of the Company or his delegate shall have and exercise the powers of the Committee. | |
2.12 | Company. Company means Celgene Corporation. | |
2.13 | Company Contribution. Company Contribution means a credit by a Participating Employer to a Participants Account(s) in accordance with the provisions of Article V of the Plan. Company Contributions are credited at the sole discretion of the Participating Employer and the fact that a Company Contribution is credited in one year shall not obligate the Participating Employer to continue to make such Company Contribution in subsequent years. Unless the context clearly indicates otherwise, a reference to Company Contribution shall include Earnings attributable to such contribution. | |
2.14 | Compensation. Compensation means a Participants base salary, bonus, commission, and such other cash or equity-based compensation (if any) approved by the Committee as Compensation that may be deferred under this Plan. Compensation shall not include any compensation that has been previously deferred under this Plan or any other arrangement subject to Code Section 409A. | |
2.15 | Compensation Deferral Agreement. Compensation Deferral Agreement means an agreement between a Participant and a Participating Employer that specifies (i) the amount of each component of Compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV, and (ii) the Payment Schedule applicable to one or more Accounts. The Committee may permit different deferral amounts for each component of Compensation and may establish a minimum or maximum deferral amount for each such component. Unless otherwise specified by the Committee in the Compensation Deferral Agreement, Participants may defer up to 90% of their base salary and up to 100% of other types of Compensation for a Plan Year. A Compensation Deferral Agreement may also specify the investment allocation described in Section 8.4. | |
2.16 | Death Benefit. Death Benefit means the benefit payable under the Plan to a Participants Beneficiary(ies) upon the Participants death as provided in Section 6.1 of the Plan. | |
2.17 | Deferral. Deferral means a credit to a Participants Account(s) that records that portion of the Participants Compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV. Unless the context of the Plan clearly indicates otherwise, a reference to Deferrals includes Earnings attributable to such Deferrals. |
Page 3 of 22
Deferrals shall be calculated with respect to the gross cash Compensation payable to the Participant prior to any deductions or withholdings, but shall be reduced by the Committee as necessary so that it does not exceed 100% of the cash Compensation of the Participant remaining after deduction of all required income and employment taxes, 401(k) and other employee benefit deductions, and other deductions required by law. Changes to payroll withholdings that affect the amount of Compensation being deferred to the Plan shall be allowed only to the extent permissible under Code Section 409A. | ||
2.18 | Disabled. Disabled means that a Participant 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 twelve months, (i) unable to engage in any substantial gainful activity, or (ii) receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participants employer. The Committee shall determine whether a Participant is Disabled in accordance with Code Section 409A provided, however, that a Participant shall be deemed to be Disabled if determined to be totally disabled by the Social Security Administration or the Railroad Retirement Board. | |
2.19 | Earnings. Earnings means an adjustment to the value of an Account in accordance with Article VIII. | |
2.20 | Effective Date. Effective Date means January 1, 2008. | |
2.21 | Eligible Employee. Eligible Employee means a member of a select group of management or highly compensated employees of a Participating Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, as determined by the Committee from time to time in its sole discretion. | |
2.22 | Employee. Employee means a common-law employee of an Employer. | |
2.23 | Employer. Employer means, with respect to Employees it employs, the Company and each Affiliate. | |
2.24 | ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. | |
2.25 | Participant. Participant means an Eligible Employee who has received notification of his or her eligibility to defer Compensation under the Plan under Section 3.1 and any other person with an Account Balance greater than zero, regardless of whether such individual continues to be an Eligible Employee. A Participants continued participation in the Plan shall be governed by Section 3.2 of the Plan. | |
2.26 | Participating Employer. Participating Employer means the Company and each Adopting Employer. |
Page 4 of 22
2.27 | Payment Schedule. Payment Schedule means the date as of which payment of an Account under the Plan will commence and the form in which payment of such Account will be made. | |
2.28 | Performance-Based Compensation. Performance-Based Compensation means Compensation where the amount of, or entitlement to, the Compensation is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least twelve consecutive months. Organizational or individual performance criteria are considered pre-established if established in writing by not later than ninety (90) days after the commencement of the period of service to which the criteria relate, provided that the outcome is substantially uncertain at the time the criteria are established. The determination of whether Compensation qualifies as Performance-Based Compensation will be made in accordance with Treas. Reg. Section 1.409A-1(e) and subsequent guidance. | |
2.29 | Plan. Generally, the term Plan means the Celgene Corporation 2005 Deferred Compensation Plan as documented herein and as may be amended from time to time hereafter. However, to the extent permitted or required under Code Section 409A, the term Plan may in the appropriate context also mean a portion of the Plan that is treated as a single plan under Treas. Reg. Section 1.409A-1(c), or the Plan or portion of the Plan and any other nonqualified deferred compensation plan or portion thereof that is treated as a single plan under such section. | |
2.30 | Plan Year. Plan Year means January 1 through December 31. | |
2.31 | Retirement Age. Retirement Age means a Participants attainment of age 55. | |
2.32 | Retirement/Termination Benefit. Retirement Benefit means the benefit payable to a Participant under the Plan following the Retirement of the Participant. | |
2.33 | Retirement/Termination Account. Retirement/Termination Account means an Account established by the Committee to record the amounts payable to a Participant upon Separation from Service. Unless the Participant has established a Specified Date Account, all Deferrals and Company Contributions shall be allocated to a Retirement/Termination Account on behalf of the Participant. | |
2.34 | Separation from Service. An Employee incurs a Separation from Service upon termination of employment with the Employer. Whether a Separation from Service has occurred shall be determined by the Committee in accordance with Code Section 409A. | |
Except in the case of an Employee on a bona fide leave of absence as provided below, an Employee is deemed to have incurred a Separation from Service if the Employer and the Employee reasonably anticipated that the level of services to be performed by the Employee after a date certain would be reduced to 20% or less of the average services rendered by the Employee during the immediately preceding 36-month period (or the total period of employment, if less than 36 months), disregarding periods during which the Employee was on a bona fide leave of absence. |
Page 5 of 22
An Employee who is absent from work due to military leave, sick leave, or other bona fide leave of absence shall incur a Separation from Service on the first date immediately following the later of (i) the six-month anniversary of the commencement of the leave or (ii) the expiration of the Employees right, if any, to reemployment under statute or contract. | ||
For purposes of determining whether a Separation from Service has occurred, the Employer means the Employer as defined in Section 2.23 of the Plan, except that for purposes of determining whether another organization is an Affiliate of the Company, common ownership of at least 50% shall be determinative. | ||
The Committee specifically reserves the right to determine whether a sale or other disposition of substantial assets to an unrelated party constitutes a Separation from Service with respect to a Participant providing services to the seller immediately prior to the transaction and providing services to the buyer after the transaction. Such determination shall be made in accordance with the requirements of Code Section 409A. | ||
2.35 | Specified Date Account. A Specified Date Account means an Account established by the Committee to record the amounts payable at a future date as specified in the Participants Compensation Deferral Agreement. Unless otherwise determined by the Committee, a Participant may maintain no more than three Specified Date Accounts. A Specified Date Account may be identified in enrollment materials as an In-Service Account or such other name as established by the Committee without affecting the meaning thereof. | |
2.36 | Specified Date Benefit. Specified Date Benefit means the benefit payable to a Participant under the Plan in accordance with Section 6.1(b). | |
2.37 | Substantial Risk of Forfeiture. Substantial Risk of Forfeiture shall have the meaning specified in Treas. Reg. Section 1.409A-1(d). | |
2.38 | Unforeseeable Emergency. An Unforeseeable Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participants spouse, the Participants dependent (as defined in Code section 152, without regard to section 152(b)(1), (b)(2), and (d)(1)(B)), or a Beneficiary; loss of the Participants property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The types of events which may qualify as an Unforeseeable Emergency may be limited by the Committee. | |
2.39 | Valuation Date. Valuation Date shall mean each Business Day. | |
2.40 | Year of Service . A Year of Service shall mean each 12-month period of continuous service with the Employer. |
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3.1 | Eligibility and Participation. An Eligible Employee becomes a Participant upon the earlier to occur of (i) a credit of Company Contributions under Article V or (ii) receipt of notification of eligibility to participate. | |
3.2 | Duration. A Participant shall be eligible to defer Compensation and receive allocations of Company Contributions, subject to the terms of the Plan, for as long as such Participant remains an Eligible Employee. A Participant who is no longer an Eligible Employee but has not Separated from Service may not defer Compensation under the Plan but may otherwise exercise all of the rights of a Participant under the Plan with respect to his or her Account(s). On and after a Separation from Service, a Participant shall remain a Participant as long as his or her Account Balance is greater than zero and during such time may continue to make allocation elections as provided in Section 8.4. An individual shall cease being a Participant in the Plan when all benefits under the Plan to which he or she is entitled have been paid |
4.1 | Deferral Elections, Generally. |
(a) | A Participant may elect to defer Compensation by submitting a Compensation Deferral Agreement during the enrollment periods established by the Committee and in the manner specified by the Committee, but in any event, in accordance with Section 4.2. A Compensation Deferral Agreement that is not timely filed with respect to a service period or component of Compensation shall be considered void and shall have no effect with respect to such service period or Compensation. The Committee may modify any Compensation Deferral Agreement prior to the date the election becomes irrevocable under the rules of Section 4.2. | ||
(b) | The Participant shall specify on his or her Compensation Deferral Agreement the amount of Deferrals and whether to allocate Deferrals to a Retirement/Termination Account or to a Specified Date Account. If no designation is made, Deferrals shall be allocated to the Retirement/Termination Account. A Participant may also specify in his or her Compensation Deferral Agreement the Payment Schedule applicable to his or her Plan Accounts. If the Payment Schedule is not specified in a Compensation Deferral Agreement, the Payment Schedule shall be the Payment Schedule specified in Section 6.2. |
4.2 | Timing Requirements for Compensation Deferral Agreements. |
(a) | First Year of Eligibility. In the case of the first year in which an Eligible Employee becomes eligible to participate in the Plan, he has up to 30 days following his initial eligibility to submit a Compensation Deferral Agreement with respect to Compensation to be earned during such year. The Compensation Deferral Agreement described in this paragraph becomes irrevocable upon the end of such 30-day period. The determination of whether an Eligible Employee may file a Compensation Deferral Agreement under this paragraph shall be determined in accordance with the rules of Code Section 409A, including the provisions of Treas. Reg. Section 1.409A-2(a)(7). |
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A Compensation Deferral Agreement filed under this paragraph applies to Compensation earned on and after the date the Compensation Deferral Agreement becomes irrevocable. | |||
(b) | Prior Year Election. Except as otherwise provided in this Section 4.2, Participants may defer Compensation by filing a Compensation Deferral Agreement no later than December 31 of the year prior to the year in which the Compensation to be deferred is earned. A Compensation Deferral Agreement described in this paragraph shall become irrevocable with respect to such Compensation as of January 1 of the year in which such Compensation is earned. | ||
(c) | Performance-Based Compensation. Participants may file a Compensation Deferral Agreement with respect to Performance-Based Compensation no later than the date that is six months before the end of the performance period, provided that: |
(i) | the Participant performs services continuously from the later of the beginning of the performance period or the date the criteria are established through the date the Compensation Deferral Agreement is submitted; and | ||
(ii) | the Compensation is not readily ascertainable as of the date the Compensation Deferral Agreement is filed. |
A Compensation Deferral Agreement becomes irrevocable with respect to Performance-Based Compensation as of the day immediately following the latest date for filing such election. Any election to defer Performance-Based Compensation that is made in accordance with this paragraph and that becomes payable as a result of the Participants death or disability (as defined in Treas. Reg. Section 1.409A-1(e)) or upon a Change in Control (as defined in Treas. Reg. Section 1.409A-3(i)(5)) prior to the satisfaction of the performance criteria, will be void. | |||
(d) | Short-Term Deferrals. Compensation that meets the definition of a short-term deferral described in Treas. Reg. Section 1.409A-1(b)(4) may be deferred in accordance with the rules of Article VII, applied as if the date the Substantial Risk of Forfeiture lapses is the date payments were originally scheduled to commence, provided, however, that the provisions of Section 7.3 shall not apply to payments attributable to a Change in Control (as defined in Treas. Reg. Section 1.409A-3(i)(5)). |
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(e) | Certain Forfeitable Rights. With respect to a legally binding right to a payment in a subsequent year that is subject to a forfeiture condition requiring the Participants continued services for a period of at least twelve months from the date the Participant obtains the legally binding right, an election to defer such Compensation may be made on or before the 30th day after the Participant obtains the legally binding right to the Compensation, provided that the election is made at least twelve months in advance of the earliest date at which the forfeiture condition could lapse. The Compensation Deferral Agreement described in this paragraph becomes irrevocable after such 30th day. If the forfeiture condition applicable to the payment lapses before the end of the required service period as a result of the Participants death or disability (as defined in Treas. Reg. Section 1.409A-3(i)(4)) or upon a Change in Control (as defined in Treas. Reg. Section 1.409A-3(i)(5)), the Compensation Deferral Agreement will be void unless it would be considered timely under another rule described in this Section. | ||
(f) | Company Awards. Participating Employers may unilaterally provide for deferrals of Company awards prior to the date of such awards. Deferrals of Company awards (such as sign-on, retention, or severance pay) may be negotiated with a Participant prior to the date the Participant has a legally binding right to such Compensation. | ||
(g) | Evergreen Deferral Elections. The Committee, in its discretion, may provide in the Compensation Deferral Agreement that such Compensation Deferral Agreement will continue in effect for each subsequent year or performance period. Such evergreen Compensation Deferral Agreements will become effective with respect to an item of Compensation on the date such election becomes irrevocable under this Section 4.2. An evergreen Compensation Deferral Agreement may be terminated or modified prospectively with respect to Compensation for which such election remains revocable under this Section 4.2. A Participant whose Compensation Deferral Agreement is cancelled in accordance with Section 4.6 will be required to file a new Compensation Deferral Agreement under this Article IV in order to recommence Deferrals under the Plan. | ||
(h) | Transition Relief; Deferral Elections Filed by March 15, 2005. Notwithstanding the foregoing and any other provisions in the Plan concerning timing of initial deferral elections to the contrary, Participants may, pursuant to transition relief provided in Q&A 21 of Notice 2005-1, make or modify Deferral Elections with respect to Deferrals subject to Code Section 409A that relate all or in part to services performed on or before December 31, 2005, so long as: (i) a Deferral Election with respect to such compensation is properly filed with the Committee prior to March 15, 2005; and (ii) the amounts to which the Deferral Election relate have not been paid or become payable prior to the election. |
4.3 | Allocation of Deferrals. A Compensation Deferral Agreement may allocate Deferrals to one or more Specified Date Accounts and/or to the Retirement/Termination Account. The Committee may, in its discretion, establish a minimum deferral period for Specified Date Accounts (for example, the third Plan Year following the year Compensation subject to the Compensation Deferral Agreement is earned). | |
4.4 | Deductions from Pay. The Committee has the authority to determine the payroll practices under which any component of Compensation subject to a Compensation Deferral Agreement will be deducted from a Participants Compensation. | |
4.5 | Vesting. Participant Deferrals shall be 100% vested at all times. |
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4.6 | Cancellation of Deferrals. The Committee may cancel a Participants Deferrals (i) for the balance of the Plan Year in which an Unforeseeable Emergency occurs, (ii) if the Participant receives a hardship distribution under the Employers qualified 401(k) plan, through the end of the Plan Year in which the six-month anniversary of the hardship distribution falls, and (iii) during periods in which the Participant is unable to perform the duties of his or her position or any substantially similar position due to a mental or physical impairment that can be expected to result in death or last for a continuous period of at least six months, provided cancellation occurs by the later of the end of the taxable year of the Participant or the 15 th day of the third month following the date the Participant incurs the disability (as defined in this paragraph (iii)). |
5.1 | Discretionary Company Contributions. The Participating Employer may, from time to time in its sole and absolute discretion, credit Company Contributions to any Participant in any amount determined by the Participating Employer. Such contributions will be credited to a Participants Retirement/Termination Account. | |
5.2 | Vesting. Company Contributions described in Section 5.1, above, and the Earnings thereon, shall vest in accordance with the vesting schedule(s) established by the Committee at the time that the Company Contribution is made. All Company Contributions shall become 100% vested upon the occurrence of the earliest of: (i) the death of the Participant while actively employed; (ii) the Disability of the Participant, (iii) the Participants attainment of Retirement Age, or (iv) a Change in Control. The Participating Employer may, at any time, in its sole discretion, increase a Participants vested interest in a Company Contribution. The portion of a Participants Accounts that remains unvested upon his or her Separation from Service after the application of the terms of this Section 5.2 shall be forfeited. |
6.1 | Benefits, Generally. A Participant shall be entitled to the following benefits under the Plan: |
(a) | Retirement/Termination Benefit. Upon the Participants Separation from Service, he or she shall be entitled to a Retirement/Termination Benefit. The Retirement/Termination Benefit shall be equal to the vested portion of the Retirement/Termination Account and (i) if the Retirement/Termination Account is payable in a lump sum, the unpaid balances of any Specified Date Accounts, or (ii) if the Retirement/Termination Account is payable in installments, the vested portion of any Specified Date Accounts with respect to which payments have not yet commenced. Payment of the Retirement/Termination Benefit shall be made or begin on the first day of the 7 th month following the date of Separation from Service, based on the value of such Account(s) as of the end of the month preceding the month of payment. In no event shall a payment upon Separation from Service be made to a Participant who is as of the date such Participant incurs a Separation from Service a specified employee (as defined in Code Section 409A), sooner than the first day of the seventh month following the month in which such Separation from Service occurs. |
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(b) | Specified Date Benefit. If the Participant has established one or more Specified Date Accounts, he or she shall be entitled to a Specified Date Benefit with respect to each such Specified Date Account. The Specified Date Benefit shall be equal to the vested portion of the Specified Date Account, based on the value of that Account as of the end of the month designated by the Participant at the time the Account was established. Payment of the Specified Date Benefit will be made or begin the first day of the month following the designated month. | ||
(c) | Death Benefit. In the event of the Participants death, his or her designated Beneficiary(ies) shall be entitled to a Death Benefit. The Death Benefit shall be equal to the vested portion of the Retirement/Termination Account and (i) if the Retirement/Termination Account is payable in a lump sum, the unpaid balances of any Specified Date Accounts, or (ii) if the Retirement/Termination Account is payable in installments, the vested portion of any Specified Date Accounts with respect to which payments have not yet commenced. The Death Benefit shall be based on the value of the Accounts as of the end of the month in which death occurred, with payment made in the first day of the following month. | ||
(d) | Unforeseeable Emergency Payments. A Participant who experiences an Unforeseeable Emergency may submit a written request to the Committee to receive payment of all or any portion of his or her vested Accounts. Whether a Participant or Beneficiary is faced with an Unforeseeable Emergency permitting an emergency payment shall be determined by the Committee based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency may not be made to the extent that such emergency is or may be reimbursed through insurance or otherwise, by liquidation of the Participants assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of Deferrals under this Plan. If an emergency payment is approved by the Committee, the amount of the payment shall not exceed the amount reasonably necessary to satisfy the need, taking into account the additional compensation that is available to the Participant as the result of cancellation of deferrals to the Plan, including amounts necessary to pay any taxes or penalties that the Participant reasonably anticipates will result from the payment. The amount of the emergency payment shall be subtracted first from the vested portion of the Participants Retirement/Termination Account until depleted and then from the vested Specified Date Accounts, beginning with the Specified Date Account with the latest payment commencement date. Emergency payments shall be paid in a single lump sum within the 90-day period following the date the payment is approved by the Committee. |
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6.2 | Form of Payment. |
(a) | Retirement/Termination Benefit. A Participant who is entitled to receive a Retirement/Termination Benefit shall receive payment of such benefit in a single lump sum, unless the Participant elects on his or her initial Compensation Deferral Agreement to have such benefit paid in substantially equal annual installments over a period of two to fifteen years, as elected by the Participant. | ||
(b) | Specified Date Benefit. The Specified Date Benefit shall be paid in a single lump sum, unless the Participant elects on the Compensation Deferral Agreement with which the account was established to have the Specified Date Account paid in substantially equal annual installments over a period of two to five years, as elected by the Participant. | ||
Notwithstanding any election of a form of payment by the Participant, upon a Separation from Service the unpaid balance of a Specified Date Account with respect to which payments have not commenced shall be paid in accordance with the form of payment applicable to the Retirement/Termination Account. If such benefit is payable in a single lump sum, the unpaid balance of all Specified Date Accounts (including those in pay status) will be paid in a lump sum. | |||
(c) | Death Benefit. A designated Beneficiary who is entitled to receive a Death Benefit shall receive payment of such benefit in a single lump sum, if death occurs prior to the date payments from the Retirement/Termination Account have begun. If death occurs after the date payments from the Retirement/Termination Account have begun, payments shall continue in the form elected. | ||
(d) | Change in Control. A Participant will receive a lump sum payment equal to the unpaid balance of all of his or her Accounts within 90 days following a Change in Control. | ||
(e) | Small Account Balances. The Committee shall pay the value of the Participants Accounts upon a Separation from Service in a single lump sum if the balance of such Accounts is not greater than the applicable dollar amount under Code Section 402(g)(1)(B), provided the payment represents the complete liquidation of the Participants interest in the Plan. | ||
(f) | Rules Applicable to Installment Payments. If a Payment Schedule specifies installment payments, annual payments will be made beginning as of the payment commencement date for such installments and shall continue on each anniversary thereof until the number of installment payments specified in the Payment Schedule has been paid. The amount of each installment payment shall be determined by dividing (a) by (b), where (a) equals the Account Balance as of the Valuation Date and (b) equals the remaining number of installment payments. | ||
For purposes of Article VII, installment payments will be treated as a single form of payment. If a lump sum equal to less than 100% of the Retirement/Termination Account is paid, the payment commencement date for the installment form of payment will be the first anniversary of the payment of the lump sum. |
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6.3 | Acceleration of or Delay in Payments. The Committee, in its sole and absolute discretion, may elect to accelerate the time or form of payment of a benefit owed to the Participant hereunder, provided such acceleration is permitted under Treas. Reg. Section 1.409A-3(j)(4). The Committee may also, in its sole and absolute discretion, delay the time for payment of a benefit owed to the Participant hereunder, to the extent permitted under Treas. Reg. Section 1.409A-2(b)(7). If the Plan receives a domestic relations order (within the meaning of Code Section 414(p)(1)(B)) directing that all or a portion of a Participants Accounts be paid to an alternate payee, any amounts to be paid to the alternate payee(s) shall be paid in a single lump sum. |
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7.1 | Participants Right to Modify. A Participant may modify any or all of the alternative Payment Schedules with respect to an Account, consistent with the permissible Payment Schedules available under the Plan, provided such modification complies with the requirements of this Article VII. In addition, prior to January 1, 2009, the Committee may permit a Participant to modify any or all of the alternative Payment Schedules with respect to an Account, consistent with the permissible Payment Schedules available under the Plan, provided such modification complies with the requirements of IRS Notice 2007-86. | |
7.2 | Time of Election. The date on which a modification election is submitted to the Committee must be at least twelve months prior to the date on which payment is scheduled to commence under the Payment Schedule in effect prior to the modification. | |
7.3 | Date of Payment under Modified Payment Schedule. Except with respect to modifications that relate to the payment of a Death Benefit or a Disability Benefit, the date payments are to commence under the modified Payment Schedule must be no earlier than five years after the date payment would have commenced under the original Payment Schedule. Under no circumstances may a modification election result in an acceleration of payments in violation of Code Section 409A. | |
7.4 | Effective Date. A modification election submitted in accordance with this Article VII is irrevocable upon receipt by the Committee and becomes effective 12 months after such date. | |
7.5 | Effect on Accounts. An election to modify a Payment Schedule is specific to the Account or payment event to which it applies, and shall not be construed to affect the Payment Schedules of any other Accounts. |
8.1 | Valuation. Deferrals shall be credited to appropriate Accounts on the date such Compensation would have been paid to the Participant absent the Compensation Deferral Agreement. Company Contributions shall be credited to the Retirement/Termination Account at the times determined by the Committee. Valuation of Accounts shall be performed under procedures approved by the Committee. | |
8.2 | Earnings Credit. Except as otherwise provided in Section 8.6, each Account will be credited with Earnings on each Business Day, based upon the Participants investment allocation among a menu of investment options selected in advance by the Committee, in accordance with the provisions of this Article VIII (investment allocation). | |
8.3 | Investment Options . Investment options will be determined by the Committee. The Committee, in its sole discretion, shall be permitted to add or remove investment options from the Plan menu from time to time, provided that any such additions or removals of investment options shall not be effective with respect to any period prior to the effective date of such change. |
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8.4 | Investment Allocations. A Participants investment allocation constitutes a deemed, not actual, investment among the investment options comprising the investment menu. At no time shall a Participant have any real or beneficial ownership in any investment option included in the investment menu, nor shall the Participating Employer or any trustee acting on its behalf have any obligation to purchase actual securities as a result of a Participants investment allocation. A Participants investment allocation shall be used solely for purposes of adjusting the value of a Participants Account Balances. | |
A Participant shall specify an investment allocation for each of his Accounts in accordance with procedures established by the Committee. Allocation among the investment options must be designated in increments of 1%. The Participants investment allocation will become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Committee, the next Business Day. | ||
A Participant may change an investment allocation on any Business Day, both with respect to future credits to the Plan and with respect to existing Account Balances, in accordance with procedures adopted by the Committee. Changes shall become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Committee, the next Business Day, and shall be applied prospectively. | ||
8.5 | Unallocated Deferrals and Accounts. If the Participant fails to make an investment allocation with respect to an Account, such Account shall be invested in an investment option, the primary objective of which is the preservation of capital, as determined by the Committee. | |
8.6 | Fixed-Rate Earnings . Notwithstanding anything to the contrary in this Article VIII or the Plan, the Committee may provide that all or some of a Participants Accounts shall be credited with Earnings at an assumed rate of interest as determined by the Committee and communicated to affected Participants. The Committee may, in its sole discretion, limit or restrict the ability of a Participant to reallocate the investment of such Accounts to other investment options available under the Plan. |
9.1 | Plan Administration . This Plan shall be administered by the Committee which shall have discretionary authority to make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and to utilize its discretion to decide or resolve any and all questions, including but not limited to eligibility for benefits and interpretations of this Plan and its terms, as may arise in connection with the Plan. Claims for benefits shall be filed with the Committee and resolved in accordance with the claims procedures in Article XII. |
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9.2 | Administration Upon Change in Control. Upon a Change in Control, the Committee, as constituted immediately prior to such Change in Control, shall continue to act as the Committee. The individual who was the Chief Executive Officer of the Company (or if such person is unable or unwilling to act, the next highest ranking officer) prior to the Change in Control shall have the authority (but shall not be obligated) to appoint an independent third party to act as the Committee. | |
Upon such Change in Control, the Company may not remove the Committee, unless 2/3rds of the members of the Board of Directors of the Company and a majority of Participants and Beneficiaries with Account Balances consent to the removal and replacement Committee. Notwithstanding the foregoing, neither the Committee nor the officer described above shall have authority to direct investment of trust assets under any rabbi trust described in Section 11.2. | ||
The Participating Employer shall, with respect to the Committee identified under this Section, (i) pay all reasonable expenses and fees of the Committee, (ii) indemnify the Committee (including individuals serving as Committee) against any costs, expenses and liabilities including, without limitation, attorneys fees and expenses arising in connection with the performance of the Committee hereunder, except with respect to matters resulting from the Committees gross negligence or willful misconduct and (iii) supply full and timely information to the Committee on all matters related to the Plan, any rabbi trust, Participants, Beneficiaries and Accounts as the Committee may reasonably require. | ||
9.3 | Withholding. The Participating Employer shall have the right to withhold from any payment due under the Plan (or with respect to any amounts credited to the Plan) any taxes required by law to be withheld in respect of such payment (or credit). Withholdings with respect to amounts credited to the Plan shall be deducted from Compensation that has not been deferred to the Plan. | |
9.4 | Indemnification. The Participating Employers shall indemnify and hold harmless each employee, officer, director, agent or organization, to whom or to which are delegated duties, responsibilities, and authority under the Plan or otherwise with respect to administration of the Plan, including, without limitation, the Committee and its agents, against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him or it (including but not limited to reasonable attorney fees) which arise as a result of his or its actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by the Participating Employer. Notwithstanding the foregoing, the Participating Employer shall not indemnify any person or organization if his or its actions or failure to act are due to gross negligence or willful misconduct or for any such amount incurred through any settlement or compromise of any action unless the Participating Employer consents in writing to such settlement or compromise. | |
9.5 | Delegation of Authority. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with legal counsel who shall be legal counsel to the Company. | |
9.6 | Binding Decisions or Actions. The decision or action of the Committee in respect of any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations thereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. |
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10.1 | Amendment and Termination. The Company may at any time and from time to time amend the Plan or may terminate the Plan as provided in this Article X. Each Participating Employer may also terminate its participation in the Plan. | |
10.2 | Amendments. The Company, by action taken by its Board of Directors, may amend the Plan at any time and for any reason, provided that any such amendment shall not reduce the vested Account Balances of any Participant accrued as of the date of any such amendment or restatement (as if the Participant had incurred a voluntary Separation from Service on such date) or reduce any rights of a Participant under the Plan or other Plan features with respect to Deferrals made prior to the date of any such amendment or restatement without the consent of the Participant. The Board of Directors of the Company may delegate to the Committee the authority to amend the Plan without the consent of the Board of Directors for the purpose of (i) conforming the Plan to the requirements of law, (ii) facilitating the administration of the Plan, (iii) clarifying provisions based on the Committees interpretation of the document and (iv) making such other amendments as the Board of Directors may authorize. | |
10.3 | Termination. The Company, by action taken by its Board of Directors, may terminate the Plan and pay Participants and Beneficiaries their Account Balances in a single lump sum at any time, to the extent and in accordance with Treas. Reg. Section 1.409A-3(j)(4)(ix). If a Participating Employer terminates its participation in the Plan, the benefits of affected Employees shall be paid at the time provided in Article VI. | |
10.4 | Accounts Taxable Under Code Section 409A. The Plan is intended to constitute a plan of deferred compensation that meets the requirements for deferral of income taxation under Code Section 409A. The Committee, pursuant to its authority to interpret the Plan, may sever from the Plan or any Compensation Deferral Agreement any provision or exercise of a right that otherwise would result in a violation of Code Section 409A. |
11.1 | General Assets. Obligations established under the terms of the Plan may be satisfied from the general funds of the Participating Employers, or a trust described in this Article XI. No Participant, spouse or Beneficiary shall have any right, title or interest whatever in assets of the Participating Employers. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Participating Employers and any Employee, spouse, or Beneficiary. To the extent that any person acquires a right to receive payments hereunder, such rights are no greater than the right of an unsecured general creditor of the Participating Employer. |
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11.2 | Rabbi Trust. A Participating Employer may, in its sole discretion, establish a grantor trust, commonly known as a rabbi trust, as a vehicle for accumulating assets to pay benefits under the Plan. Payments under the Plan may be paid from the general assets of the Participating Employer or from the assets of any such rabbi trust. Payment from any such source shall reduce the obligation owed to the Participant or Beneficiary under the Plan. |
12.1 | Filing a Claim. Any controversy or claim arising out of or relating to the Plan shall be filed in writing with the Committee which shall make all determinations concerning such claim. Any claim filed with the Committee and any decision by the Committee denying such claim shall be in writing and shall be delivered to the Participant or Beneficiary filing the claim (the Claimant). |
(a) | In General. Notice of a denial of benefits will be provided within ninety (90) days of the Committees receipt of the Claimants claim for benefits. If the Committee determines that it needs additional time to review the claim, the Committee will provide the Claimant with a notice of the extension before the end of the initial ninety (90) day period. The extension will not be more than ninety (90) days from the end of the initial ninety (90) day period and the notice of extension will explain the special circumstances that require the extension and the date by which the Committee expects to make a decision. | ||
(b) | Contents of Notice. If a claim for benefits is completely or partially denied, notice of such denial shall be in writing and shall set forth the reasons for denial in plain language. The notice shall (i) cite the pertinent provisions of the Plan document and (ii) explain, where appropriate, how the Claimant can perfect the claim, including a description of any additional material or information necessary to complete the claim and why such material or information is necessary. The claim denial also shall include an explanation of the claims review procedures and the time limits applicable to such procedures, including a statement of the Claimants right to bring a civil action under Section 502(a) of ERISA following an adverse decision on review. In the case of a complete or partial denial of a Disability benefit claim, the notice shall provide a statement that the Committee will provide to the Claimant, upon request and free of charge, a copy of any internal rule, guideline, protocol, or other similar criterion that was relied upon in making the decision. |
12.2 | Appeal of Denied Claims. A Claimant whose claim has been completely or partially denied shall be entitled to appeal the claim denial by filing a written appeal with a committee designated to hear such appeals (the Appeals Committee). A Claimant who timely requests a review of the denied claim (or his or her authorized representative) may review, upon request and free of charge, copies of all documents, records and other information relevant to the denial and may submit written comments, documents, records and other information relevant to the claim to the Appeals Committee. All written comments, documents, records, and other information shall be considered relevant if the information (i) was relied upon in making a benefits determination,(ii) was submitted, considered or generated in the course of making a benefits decision regardless of whether it was relied upon to make the decision, or (iii) demonstrates compliance with administrative processes and safeguards established for making benefit decisions. The Appeals Committee may, in its sole discretion and if it deems appropriate or necessary, decide to hold a hearing with respect to the claim appeal. |
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(a) | In General. Appeal of a denied benefits claim must be filed in writing with the Appeals Committee no later than sixty (60) days after receipt of the written notification of such claim denial. The Appeals Committee shall make its decision regarding the merits of the denied claim within sixty (60) days following receipt of the appeal (or within one hundred and twenty (120) days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). If an extension of time for reviewing the appeal is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. The notice will indicate the special circumstances requiring the extension of time and the date by which the Appeals Committee expects to render the determination on review. The review will take into account 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. | ||
(b) | Contents of Notice. If a benefits claim is completely or partially denied on review, notice of such denial shall be in writing and shall set forth the reasons for denial in plain language. | ||
The decision on review shall set forth (i) the specific reason or reasons for the denial, (ii) specific references to the pertinent Plan provisions on which the denial is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, or other information relevant (as defined above) to the Claimants claim, and (iv) a statement describing any voluntary appeal procedures offered by the plan and a statement of the Claimants right to bring an action under Section 502(a) of ERISA. |
12.3 | Claims Appeals Upon Change in Control. Upon a Change in Control, the Appeals Committee, as constituted immediately prior to such Change in Control, shall continue to act as the Appeals Committee. Upon such Change in Control, the Company may not remove any member of the Appeals Committee, but may replace resigning members if 2/3rds of the members of the Board of Directors of the Company and a majority of Participants and Beneficiaries with Account Balances consent to the replacement. | |
The Appeals Committee shall have the exclusive authority at the appeals stage to interpret the terms of the Plan and resolve appeals under the Claims Procedure. |
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Each Participating Employer shall, with respect to the Committee identified under this Section, (i) pay its proportionate share of all reasonable expenses and fees of the Appeals Committee, (ii) indemnify the Appeals Committee (including individual committee members) against any costs, expenses and liabilities including, without limitation, attorneys fees and expenses arising in connection with the performance of the Appeals Committee hereunder, except with respect to matters resulting from the Appeals Committees gross negligence or willful misconduct and (iii) supply full and timely information to the Appeals Committee on all matters related to the Plan, any rabbi trust, Participants, Beneficiaries and Accounts as the Appeals Committee may reasonably require. | ||
12.4 | Legal Action. A Claimant may not bring any legal action, including commencement of any arbitration, relating to a claim for benefits under the Plan unless and until the Claimant has followed the claims procedures under the Plan and exhausted his or her administrative remedies under such claims procedures. | |
If a Participant or Beneficiary prevails in a legal proceeding brought under the Plan to enforce the rights of such Participant or any other similarly situated Participant or Beneficiary, in whole or in part, the Participating Employer shall reimburse such Participant or Beneficiary for all legal costs, expenses, attorneys fees and such other liabilities incurred as a result of such proceedings. If the legal proceeding is brought in connection with a Change in Control, or a change in control as defined in a rabbi trust described in Section 11.2, the Participant or Beneficiary may file a claim directly with the trustee for reimbursement of such costs, expenses and fees. For purposes of the preceding sentence, the amount of the claim shall be treated as if it were an addition to the Participants or Beneficiarys Account Balance. | ||
12.5 | Discretion of Appeals Committee. All interpretations, determinations and decisions of the Appeals Committee with respect to any claim shall be made in its sole discretion, and shall be final and conclusive. |
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13.1 | Anti-assignment Rule. No interest of any Participant, spouse or Beneficiary under this Plan and no benefit payable hereunder shall be assigned as security for a loan, and any such purported assignment shall be null, void and of no effect, nor shall any such interest or any such benefit be subject in any manner, either voluntarily or involuntarily, to anticipation, sale, transfer, assignment or encumbrance by or through any Participant, spouse or Beneficiary. Notwithstanding anything to the contrary herein, however, the Committee has the discretion to make payments to an alternate payee in accordance with the terms of a domestic relations order (as defined in Code Section 414(p)(1)(B)). | |
13.2 | No Legal or Equitable Rights or Interest. No Participant or other person shall have any legal or equitable rights or interest in this Plan that are not expressly granted in this Plan. Participation in this Plan does not give any person any right to be retained in the service of the Participating Employer. The right and power of a Participating Employer to dismiss or discharge an Employee is expressly reserved. The Participating Employers make no representations or warranties as to the tax consequences to a Participant or a Participants beneficiaries resulting from a deferral of income pursuant to the Plan. | |
13.3 | No Employment Contract. Nothing contained herein shall be construed to constitute a contract of employment between an Employee and a Participating Employer. | |
13.4 | Notice. Any notice or filing required or permitted to be delivered to the Committee under this Plan shall be delivered in writing, in person, or through such electronic means as is established by the Committee. Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Written transmission shall be sent by certified mail to: |
Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing or hand-delivered, or sent by mail to the last known address of the Participant. | ||
13.5 | Headings. The headings of Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control. | |
13.6 | Invalid or Unenforceable Provisions. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Committee may elect in its sole discretion to construe such invalid or unenforceable provisions in a manner that conforms to applicable law or as if such provisions, to the extent invalid or unenforceable, had not been included. |
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13.7 | Lost Participants or Beneficiaries. Any Participant or Beneficiary who is entitled to a benefit from the Plan has the duty to keep the Committee advised of his or her current mailing address. If benefit payments are returned to the Plan or are not presented for payment after a reasonable amount of time, the Committee shall presume that the payee is missing. The Committee, after making such efforts as in its discretion it deems reasonable and appropriate to locate the payee, shall stop payment on any uncashed checks and may discontinue making future payments until contact with the payee is restored. | |
13.8 | Facility of Payment to a Minor. 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 Company, and the Plan from further liability on account thereof. | |
13.9 | Governing Law. To the extent not preempted by ERISA, the laws of the State of New Jersey shall govern the construction and administration of the Plan. |
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2
CELGENE CORPORATION
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By: | ||||
Name: | ||||
Title: | ||||
THE BANK OF NEW YORK
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as Trustee |
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By: | ||||
Name: | ||||
Title: | ||||
3
/s/ Sol J. Barer | ||||
Sol J. Barer | ||||
Chief Executive Officer |
/s/ David W. Gryska | ||||
David W. Gryska | ||||
Sr. Vice President and Chief Financial Officer | ||||
Date: May 12, 2008 | /s/ Sol J. Barer | |||
Sol J. Barer | ||||
Chief Executive Officer |
Date: May 12, 2008 | /s/ David W. Gryska | |||
David W. Gryska | ||||
Sr. Vice President and Chief Financial Officer | ||||