Exhibit 10.28
AMENDED AND RESTATED QUEST DIAGNOSTICS
INCORPORATED
EXECUTIVE OFFICER SEVERANCE PLAN
1.
Purpose . The purpose of the Quest Diagnostics
Incorporated Executive Officer Severance Plan (together with the
attached schedules, appendices and exhibits, the “
Plan ”) is to secure the continued services of
the executive officers of the Company and provide these executives
with certain termination benefits in the event of a Qualifying
Termination (as defined in Section 2) and to ensure their
continued dedication to their duties in the event of any threat or
occurrence of a Change in Control of the Company (as defined in
Section 2).
2.
Definitions . As used in this Plan, the following
terms shall have the respective meanings set forth
below:
(a)
“ Annual Performance Bonus ” means the
annual cash bonus awarded under the Company’s applicable
incentive plans, as in effect from time to time (as of the date of
adoption of this Plan the “Bonus” within the meaning of
Section 5(a) of the Company’s Senior Management
Incentive Plan, effective as of May 13, 2003 and under the
Company’s Management Incentive Plan such plans referred to
herein as the “ Company Incentive Plan
”).
(b)
“ Base Salary ” means the
Participant’s annual rate of base salary as in effect on the
Date of Termination, provided , however , that Base
Salary for the Termination Period shall mean the
Participant’s highest annual rate of base salary during the
twelve-month period immediately prior to the Participant’s
Date of Termination.
(c)
“ Board ” means the Board of Directors of
the Company and, after a Change in Control, the “board of
directors” of the surviving corporation. References herein to
the Board include any committee or person to whom the Board has
designated its authority.
(d)
“ Bonus Amount ” means the
Participant’s target Annual Performance Bonus for the fiscal
year in which the Participant’s Date of Termination occurs,
provided , however , that if the Participant’s
Qualifying Termination is on account of Good Reason pursuant to a
reduction in a Participant’s compensation or compensation
opportunity under Section 2(k)(ii), “Bonus Amount”
shall be the Participant’s target Annual Performance Bonus
for the prior fiscal year if higher.
(e)
“ Cause ” means (i) the willful and
continued failure of the Participant to perform substantially his
duties with the Company (other than any such failure resulting from
the Participant’s incapacity due to physical or mental
illness or any such failure subsequent to the Participant being
delivered a notice of termination without Cause by the Company or
delivering a notice of termination for Good Reason to the Company)
after a written demand for substantial performance is delivered to
the Participant by or on behalf of the Board which specifically
identifies the manner in which the Board believes that the
Participant has not substantially performed his duties,
(ii) the
willful engaging by the
Participant in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Company or its
affiliates, (iii) the engaging by the Participant in conduct
or misconduct that materially harms the reputation or financial
position of the Company, (iv) the Participant
(x) obstructs or impedes, (y) endeavors to influence,
obstruct or impede or (z) fails to materially cooperate with,
an Investigation, (v) the commission of a felony by the
Participant or (vi) the Participant is found liable in any
Securities and Exchange Commission or other civil or criminal
securities law action.
For
purposes of this paragraph (e), no act or failure to act by
the Participant shall be considered “willful” unless
done or omitted to be done by the Participant in bad faith and
without reasonable belief that the Participant’s action or
omission was in the best interests of the Company or its
affiliates. Any act, or failure to act, in accordance with
authority duly given by the Board, based upon the advice of counsel
for the Company (including counsel employed by the Company) shall
be conclusively presumed to be done, or omitted to be done, by the
Participant in good faith and in the best interests of the
Company.
A
Participant who is designated on Schedule A (and, after a
Change in Control, a Participant who is designated on
Schedule B) shall not be considered to have been terminated
for Cause unless and until the Company has delivered to the
Participant a copy of a resolution duly adopted by three-quarters
(3/4) of the entire Board (excluding the Participant from both the
numerator and denominator if the Participant is a Board member) at
a meeting of the Board called and held for such purpose (after
reasonable notice to the Participant and an opportunity for the
Participant, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board an event set
forth in clauses (i), (ii), (iii), (iv), (v), or (vi) has
occurred and specifying the particulars thereof in
detail.
Anything
herein to the contrary notwithstanding, if, following a termination
of the Participant’s employment by the Company for Cause
based upon the conviction of the Participant for a felony, such
conviction is overturned in a final determination on appeal, the
Participant shall be entitled to the payments and the economic
equivalent of the benefits the Participant would have received if
his employment had been terminated by the Company without
Cause.
(f)
“ Change in Control ” means the
occurrence of any one of the following events:
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(i)
any person is or becomes a “beneficial owner” (as
defined in Rule 13d 3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than 40%
of the total voting power of the Company’s
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then outstanding securities
generally eligible to vote for the election of directors (the
“ Company Voting Securities ”),
provided , however , that any of the following
acquisitions shall not be deemed to be a Change in Control:
(1) by the Company or any subsidiary or affiliate, (2) by
any employee benefit plan (or related trust) sponsored or
maintained by the Company or any subsidiary or affiliate,
(3) by any underwriter temporarily holding securities pursuant
to an offering of such securities, or (4) pursuant to a
Non-Qualifying Transaction (as defined in
paragraph (ii));
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(ii)
the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the
Company or any of its subsidiaries or affiliates that requires the
approval of the Company’s stockholders whether for such
transaction or the issuance of securities in the transaction (a
“ Business Combination ”), unless
immediately following such Business Combination:
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(A)
more than 50% of the total voting power of (x) the corporation
resulting from such Business Combination (the “
Surviving Corporation ”), or (y) if
applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 95% of the voting securities
eligible to elect directors of the Surviving Corporation (the
“ Parent Corporation ”), is represented
by Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is
represented by shares into which such Company Voting Securities
were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same
proportion as the voting power of such Company Voting Securities
among the holders thereof immediately prior to the Business
Combination,
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(B)
no person (other than any employee benefit plan (or any related
trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation), is or becomes the beneficial owner, directly
or indirectly, of securities of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation)
representing 40% of the total voting power of the securities then
outstanding generally eligible to vote for the election of
directors of the Parent Corporation (or the Surviving Corporation),
and
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(C)
at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business
Combination were Incumbent Directors at the time of the
Board’s
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approval of the execution of the
initial agreement providing for such Business
Combination;
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(Any Business Combination which
satisfies all of the criteria specified in (A), (B) and (C) above
shall be deemed to be a “ Non-Qualifying
Transaction ”);
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(iii)
individuals who, on the effective date of this Plan, constitute the
Board (the “ Incumbent Directors ”) cease
for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the
effective date of this Plan, whose election or nomination for
election was approved by a vote of at least a majority of the
Incumbent Directors then on the Board (either by a specific vote or
by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent director;
provided , however , that no individual initially
elected or nominated as a director of the Company as a result of an
actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the
Board shall be deemed to be an Incumbent Director; or
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(iv)
the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or the consummation of a
sale of all or substantially all of the Company’s assets to
an entity that is not an affiliate of the Company (other than
pursuant to a Non-Qualifying Transaction).
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Notwithstanding
the foregoing, a Change in Control of the Company shall not be
deemed to occur solely because any person acquires beneficial
ownership of more than 40% of Company Voting Securities as a result
of the acquisition of Company Voting Securities by the Company
which reduces the number of Company Voting Securities outstanding;
provided, that if after such acquisition by the Company such person
becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company
Voting Securities beneficially owned by such person, a Change in
Control of the Company shall then occur.
(g)
“ Company ” means Quest Diagnostics
Incorporated, a Delaware corporation.
(h)
“ Date of Termination ” means
(i) the effective date on which the Participant’s
employment by the Company terminates as specified in a prior
written notice by the Company or the Participant, as the case may
be, to the other, delivered
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pursuant to Section 12 or
(ii) if the Participant’s employment by the Company
terminates by reason of death, the date of death of the
Participant.
(i)
“ Disability ” shall have the same
meaning ascribed to that term in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended.
(j)
“ Equity Incentive Compensation ” means
all equity-based compensation (including stock options, stock
appreciation rights, restricted stock and performance shares)
awarded under the Company’s incentive plan(s), as in effect
from time to time (as of the date of adoption of this Plan the
Amended and Restated Employee Long-Term Incentive Plan).
(k)
“ Good Reason ” means the occurrence of
one or more of the following circumstances, without the
Participant’s express written consent, and which
circumstance(s) are not remedied by the Company within thirty (30)
days of receipt of a written notice from the Participant describing
in reasonable detail the Good Reason event that has occurred (which
notice must be provided within ninety (90) days of the
Participant’s obtaining knowledge of the event):
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(i)
(A) any material change in the duties, responsibilities or
status (including reporting responsibilities) of the Participant
that is inconsistent in any material and adverse respect with the
Participant’s position(s), duties, responsibilities or
authority with the Company immediately prior to such Change in
Control (including any material and adverse diminution of such
duties or responsibilities); provided , however ,
that Good Reason shall not be deemed to occur upon a change in
duties, responsibilities (other than reporting responsibilities) or
status that is solely and directly a result of the Company no
longer being a publicly traded entity and does not involve any
other event set forth in this Section 2(k) or (B) a
material and adverse change in the Participant’s titles or
offices (including, if applicable, membership on the Board) with
the Company as in effect immediately prior to such Change in
Control;
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(ii)
a material reduction by the Company in the Participant’s
aggregate rate of annual base salary, Annual Performance Bonus
opportunity and Equity Incentive Compensation target opportunity
(including any material and adverse change in the formula for such
targets) as in effect immediately prior to such Change in
Control;
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(iii)
the Company’s requiring the Participant to be based at any
office or location more than fifty (50) miles from the office where
the Participant is located at the time of the Change in Control and
as a result causing the
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Participant’s commute from
his residence at the time of the Change in Control to the new
location to increase by more than fifty (50) miles;
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(iv)
the failure of the Company to continue in effect any employee
benefit plan, compensation plan, welfare benefit plan or fringe
benefit plan in which the Participant is participating immediately
prior to such Change in Control or the taking of any action by the
Company, in each case which would materially adversely affect the
Participant, unless the Participant is permitted to participate in
other plans providing the Participant with materially equivalent
benefits in the aggregate (at materially equivalent or lower cost
with respect to welfare benefit plans); or
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(v)
the failure of the Company to obtain the assumption of the
Company’s obligations hereunder from any successor as
contemplated in Section 11(b).
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Notwithstanding the foregoing, an
isolated, insubstantial and inadvertent action taken in good faith
and which is remedied by the Company within thirty (30) days after
receipt of notice thereof given by the Participant shall not
constitute Good Reason. The Participant’s right to terminate
employment for Good Reason shall not be affected by the
Participant’s incapacities due to mental or physical illness
and the Participant’s continued employment shall not
constitute consent to, or a waiver of rights with respect to, any
event or condition constituting Good Reason. The Participant may
terminate his employment for a “Good Reason” event that
is not reasonably remedied by the Company provided that the
Participant shall have delivered a notice of termination within
ninety (90) days after delivery of the notice describing the Good
Reason event giving rise to such termination.
(l)
“ Investigation ” means an investigation
authorized by the Board, a self-regulatory organization empowered
with self-regulatory responsibilities under federal or state laws
or a governmental department or agency.
(m)
“ Participant ” means an executive
officer of the Company selected, from time to time, by the Board
for participation in this Plan and who is designated on
Schedule A or B at the applicable time but only if such
executive has completed at least one year of continuous employment
with the Company and its Subsidiaries at the applicable time
(unless such one year employment requirement has been waived in
writing by the Board).
(n)
“ Potential Change in Control ” means the
execution or entering into of any agreement by the Company the
consummation of which can be expected to be a Change in
Control.
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(o)
“ Qualifying Termination ” means a
termination of the Participant’s employment with the Company
that occurs on or after January 1, 2008 (i) prior to a
Change in Control, by the Company other than for Cause and
(ii) after a Change in Control, by the Company other than for
Cause or by the Participant for Good Reason. Termination of the
Participant’s employment on account of death, Disability or
Retirement shall not be treated as a Qualifying Termination.
Notwithstanding the preceding sentence, the death of the
Participant after notice of termination for Good Reason or without
Cause has been validly provided shall be deemed to be a Qualifying
Termination.
(p)
“ Retirement ” means the
Participant’s voluntary termination of employment on or after
he or she attains age 60 with five (5) years of
service.
(q)
“ Subsidiary ” means any corporation or
other entity in which the Company has a direct or indirect
ownership interest of 50% or more of the total combined voting
power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the
election of directors (or members of any similar governing body) or
in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets or liquidation or
dissolution.
(r)
“ Termination Period ” means the period
of time beginning with a Change in Control and ending two (2) years
following such Change in Control. Notwithstanding anything in this
Plan to the contrary, if (i) the Participant’s
employment is terminated prior to a Change in Control for reasons
that would have constituted a Qualifying Termination if they had
occurred following a Change in Control; (ii) the Participant
reasonably demonstrates that such termination (or Good Reason
event) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a Change
in Control; and (iii) a Change in Control involving such third
party (or a party competing with such third party to effectuate a
Change in Control) does occur within six (6) months from the date
of such termination, then for purposes of this Plan, the date
immediately prior to the date of such termination of employment or
event constituting Good Reason shall be treated as a Change in
Control. For purposes of determining the timing of payments
and benefits to the Participant under Section 5, the date of
the actual Change in Control shall be treated as the
Participant’s Date of Termination under Section 2(h),
and for purposes of determining the amount of payments and
benefits owed to the Participant under Section 5, the date the
Participant’s employment is actually terminated shall be
treated as the Participant’s Date of Termination under
Section 2(h).
3.
Eligibility . (a) The Board shall determine in its
sole discretion which executives of the Company shall be
Participants in this Plan and whether a Participant shall be
designated on Schedule A or B.
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(b)
The Board may, in its sole discretion, remove any executive from
Schedule A and add such executive to Schedule B but may
not remove any executive from participation in this Plan entirely;
provided , that a Participant who is designated on
Schedule A as of immediately prior to a Change in Control may
not be removed from such Schedule without his or her prior written
consent within the two year period following a Change in
Control.
(c)
The Board may delegate its authority to determine which senior
executives of the Company shall be Participants in this Plan, to
designate the Participants on Schedule A or B and to remove a
Participant from Schedule A to the Compensation Committee (or
any successor committee) of the Board.
4.
Payments Upon Termination of Employment Prior to a Change
in Control . If the employment of the Participant is
terminated pursuant to a Qualifying Termination, then, subject to
the Participant’s execution of a Separation Agreement and
Release in the form attached to this Plan as Exhibit A (the
“ Separation Agreement and Release
”) which shall be provided to the Participant no later than
two (2) days after the Date of Termination and must be executed by
the Participant, become effective and not be revoked by the
Participant by the fifty-fifth (55 th ) day following
the Date of Termination, the Company shall provide to the
Participant:
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(a)
A cash payment equal to the Participant’s Base Salary
multiplied by either (i) 2.00 for a Participant designated on
Schedule A or (ii) 1.00 for a Participant designated on
Schedule B;
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(b)
A cash payment equal to the Bonus Amount times (i) 2.00 for a
Participant designated on Schedule A or (ii) 1.00 for a
Participant designated on Schedule B;
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(c)
For eighteen (18) months for a Participant designated on
Schedule A or (ii) twelve (12) months for a Participant
designated on Schedule B, following the Date of Termination,
group medical and life insurance coverage to the Participant (and
his eligible dependents), under the terms prevailing at the time
immediately preceding the Date of Termination; the Company shall
continue to provide such coverage on the same terms as provided by
the Company to similarly situated executives; provided ,
that the Company shall cease to provide such coverage if the
Participant obtains alternate employment and is eligible for
substantially comparable group medical or life insurance coverage
with such employer; provided further , that the
Participant shall notify the Company within 10 days of
securing such alternate employment; provided further
, that in the event of the disability of the Participant, group
medical coverage shall continue for a longer period consistent with
the Consolidated Omnibus Budget Reconciliation
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Act of 1986 (“
COBRA ”) and, provided , further
, to the extent that any plan does not permit continuation of the
Participant’s or his eligible dependents’ participation
throughout such period, the Company shall pay the Participant an
amount, on an after-tax basis, equal to the Company’s cost of
providing such benefits;
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(d)
For one (1) year following the Date of Termination, the Participant
will be entitled to receive executive outplacement assistance from
Lee Hecht Harrison or an equivalent career placement firm at the
Company’s expense and in accordance with the Company’s
policies for similarly situated executives; and
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(e)
A cash payment equal to any matching contributions made by the
Company on behalf of the Participant to the Company’s 401(k)
plan and the Company’s Supplemental Deferred Compensation
Plan during the year preceding the Date of Termination.
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The
cash payments specified in paragraphs (a), (b), (c) and (e) of this
Section 4 shall be paid no later than the sixtieth (60
th ) day (or the next following business day if the
sixtieth day is not a business day) following the Date of
Termination, but may be made earlier provided that the Separation
Agreement has been executed by the Participant and the revocation
period thereunder has lapsed. Each such cash payment shall be
deemed to be a separate payment for purposes of Section 409A
of the Internal Revenue Code of 1986, as amended (the “
Code ”).
5.
Payments Upon Termination of Employment After a Change in
Control . If during the Termination Period the employment
of the Participant is terminated pursuant to a Qualifying
Termination, then, subject to the Participant’s execution of
a Separation Agreement and Release which shall be provided to the
Participant no later than two (2) days after the Date of
Termination and must be executed by the Participant, become
effective and not be revoked by the Participant by the fifty-fifth
(55 th ) day following the Date of Termination, the
Company shall provide to the Participant:
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(a)
A cash payment equal to the result of multiplying the sum of the
Participant’s Base Salary plus the Participant’s
Bonus Amount by (i) either 3.00 for a Participant designated
on Schedule A or (ii) 2.00 for a Participant designated
on Schedule B; and
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(b)
A cash payment equal to the Participant’s target Annual
Performance Bonus for the fiscal year in which the
Participant’s Date of Termination occurs, multiplied by a
fraction the numerator of which shall be the number of days the
Participant was employed by the Company during the
fiscal
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year in which the Date of
Termination occurred and the denominator of which is
365;
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(c)
The benefits and payments specified in paragraphs (c), (d) and (e)
of Section 4.
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(d)
To the extent provided in Appendix A, if the Participant is
subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the “ Excise
Tax ”), a gross-up payment in accordance with the
provisions of Appendix A.
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The
cash payments specified in paragraphs (a), (b) and (c) of this
Section 5 shall be paid no later than the sixtieth (60
th ) day (or the next following business day if the
sixtieth day is not a business day) following the Date of
Termination, but may be made earlier provided that the Separation
Agreement has been executed by the Participant and the revocation
period thereunder has lapsed. Each such cash payment shall be
deemed to be a separate payment for purposes of Section 409A
of the Code.
6.
Key Employees . It is the intent of the Company that
no payments or benefits provided under this Plan shall be
considered “non-qualified deferred compensation” within
the meaning of Section 409A of the Code and the Plan shall be
interpreted accordingly. If and to the extent that any payment or
benefit is determined by the Company (a) to constitute
“non-qualified deferred compensation” subject to
Section 409A of the Code, (b) such payment or benefit is
provided to a Participant who is a “specified employee”
(within the meaning of Section 409A of the Code and as
determined pursuant to procedures established by the Company) and
(c) such payment or benefit must be delayed for six months
from the Participant’s Date of Termination (or an earlier
date) in order to comply with Section 409A(a)(2)(B)(i) of the
Code and not cause the Participant to incur any additional tax
under Section 409A of the Code, then the Company will delay
making any such payment or providing such benefit until the
expiration of such six month period. The Company shall set aside
those payments that would have been made but for payment delay
required by the preceding sentence in a trust that is in compliance
with Rev. Proc. 92-64 which may, but need not be, the trust
established under the Company’s Supplemental Deferred
Compensation Plan; provided, however, that no payment will be made
to the Rabbi Trust if it would be contrary to law or cause the
Participant to incur additional tax under Section 409A.
7.
Participant’s Obligations . The Participant
agrees that:
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(a)
Without the consent of the Company, the Participant will not
terminate employment with the Company without giving 30 days
prior notice to the Company, and during such 30-day period the
Participant will assist the
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Company, as and to the extent
reasonably requested by the Company, to effect an orderly
transition of the Participant’s duties and responsibilities
with the Company.
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(b)
In the event that the Participant has received any benefits from
the Company under Section 4 of this Agreement, then, during
the period of 36 months following the Date of Termination, the
Participant, upon request by the Company:
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