For purposes of Section 162(m),Bylaws, the material terms include (i)option among those choices receiving the employees eligible to receive compensation, (ii) a description of the business criteria on which the performance goals are based and (iii) the maximum amount of compensation that can be paid to an employee under the performance goals. Each of these aspects is discussed below.

Stockholders are requested in this Proposal No. 4 to approve the performance goals under the 2005 Plan for compliance with Section 162(m). The affirmative vote of the holders of a majority of the votes cast in person or by proxy at the Annual Meeting will be requireddeemed to re-approvebe the performance goals underfrequency preferred by our stockholders. The Board and the 2005 Plan. Abstentions will haveCompensation Committee value the same effect as negative votes. Broker non-votes are not counted for any purpose in determining whether this matter has been approved.

Summaryopinions of the 2005 Plan

The following summary of the 2005 Plan is qualified in its entirety by the specific language of the 2005 Plan, a copy of which is filed with this Proxy Statement as Exhibit A.

General

The purpose of the 2005 Plan is to advance our interests by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. These incentives may be provided through the grant of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units, and other stock-based and cash-based awards.

Authorized Shares

Subject to adjustment as described under "Adjustments" below, an aggregate of 5,200,000 shares of our common stock have been authorized for issuance under the 2005 Plan. Shares issued under the 2005 Plan may be authorized but unissued shares of our common stock.

Certain Award Limits

In addition to the limit described above on the total number of shares of our common stock authorized for issuance under the 2005 Plan, the 2005 Plan limits the number of shares that may be issued under certain types of awards to any single individual, subject to adjustment as described under "Adjustments" below. No more than 9% of the maximum aggregate number of shares authorized under the 2005 Plan may be granted to any individual in any fiscal year, except in the case of awards granted during the first year of a participant's employment. To enable compensation in connection with certain types of awards to qualify as "performance-based" within the meaning of Section 162(m), the 2005 Plan establishes a limit on the maximum aggregate number of shares or dollar value for which any such award may be granted to an employee in any fiscal year. The limits for awards intended to qualify as performance-based within the meaning of Section 162(m) are as follows:

Further, no more than 5,200,000 shares may be issued upon the exercise of incentive stock options granted under the 2005 Plan. No more than 50% of the maximum aggregate number of shares authorized under the 2005 Plan may be issued to participants pursuant to "full value" awards (i.e., awards that do not require participants to purchase their shares, such as the grant of restricted stock). Finally, the 2005 Plan establishes minimum vesting conditions applicable to full value awards. No more than 10% of the maximum aggregate number of shares authorized under the 2005 Plan may be issued to participants pursuant to full value awards that provide for vesting more rapidly than in annual pro rata installments over a period of three years if vesting is based on continued service alone or that have performance periods of less than 12 months if vesting is based on the attainment of performance goals, except in the case of the participant's death, disability, retirement, involuntary termination or a change in control of the Company.

Share Counting

If any award granted under the 2005 Plan expires or otherwise terminates for any reason without having been exercised or settled in full, or if shares subject to forfeiture or repurchase are forfeited or repurchased by us for not more than the participant's purchase price, any such shares reacquired or subject to a terminated award will not again become available for issuance under the 2005 Plan. Furthermore, the 2005 Plan provides that shares withheld or reacquired by us in satisfaction of a tax withholding obligation will not again become available under the 2005 Plan. The number of shares available under the 2005 Plan will be reduced upon the exercise of a stock appreciation right by the gross number of shares for which the award is exercised. If shares are tendered in payment of the exercise price of an option, or the option is exercised by means of a net-exercise procedure, the number of shares available under the 2005 Plan will be reduced by the gross number of shares for which the option is exercised.

Adjustments

Appropriate adjustments will be made to the number of shares authorized under the 2005 Plan, to the numerical limits on certain types of awards described above, and to outstanding awards in the event of any change in our common stock through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares or similar change in our capital structure, or if we make a distribution to our stockholders in a form other than common stock (excluding normal cash dividends) that has a material effect on the fair market value of our common stock. In such circumstances, our Compensation Committee also has the discretion under the 2005 Plan to adjust the terms of outstanding awards as it deems appropriate. Without affecting the number of shares available for grant under the 2005 Plan, our Compensation Committee may authorize the issuance or assumption of benefits under the 2005 Plan in connection with any merger, consolidation or similar transaction on such termsthis matter and, conditions as it deems appropriate.

Administration

The 2005 Plan is administered by our Compensation Committee and our Board. For purposes of this summary, the "Committee" will refer to the Compensation Committee or our Board. Subject toextent there is any significant vote in favor of one frequency over the provisions of the 2005 Plan, the Committee will determine in its discretion the persons to whom and the times at which awards are granted, the types and sizes of such awards, and all of their terms and conditions. The Committee may, subject to certain limitations on the exercise of its discretion required by the 2005 Plan, amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The 2005 Plan provides, subject to certain limitations, for indemnification by us of any director, officer or employee against all reasonable expenses, including attorneys' fees, incurred in connection with any legal action arising from such person's action or failure to act in administering the 2005 Plan. All awards granted under the 2005 Plan will be evidenced by a written or electronic agreement between us and the participant specifying the terms and conditions of the award, consistent with the requirements of the 2005 Plan. The Committee will interpret the 2005 Plan and awards granted under the 2005 Plan, and all determinations of the Committee will be final, binding and conclusive on all persons having an interest in the 2005 Plan or any award.

Prohibition of Option and SAR Repricing

The 2005 Plan expressly provides that, without the approval ofother options, even if less than a majority of the votes cast, the Board will consider our stockholders’ concerns and evaluate any appropriate next steps. However, because this vote is advisory and not binding on the Board or the Company in person or by proxy at a meetingany way, the Board may decide that it is in the best interests of our stockholders the Committee may not provide for either the cancellation of outstanding options or stock appreciation rights in exchange for the grant of new options or stock appreciation rights at a lower exercise price or the amendment of outstanding options or stock appreciation rights to reduce the exercise price.

Eligibility

We may grant awards to our outside directors, employees and consultants or the employees and consultants of any present or future parent or subsidiary corporation of the Company to hold an advisory vote on executive compensation more or other affiliated entity. We may grant incentive stock options only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company. Since the inception of the 2005 Plan, we have not granted any incentive stock options under the plan. As of April 4, 2014, approximately 9 employees, including all of our executive officers, 4 directors and 4 consultants were eligible for awards under the 2005 Plan.

Stock Options

The Committee may grant nonstatutory stock options, incentive stock options within the meaning of Section 422 of the Code, or any combination of these. The exercise price of each option may not be less frequently than the fair market value of a share ofoption preferred by our common stock on the date of grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of our stock or any parent or subsidiary corporation of the Company (a ten percent stockholder) must have an exercise price equal to at least 110% of the fair market value of a share of common stock on the date of grant. On April 4, 2014, the closing price of our common stock on the NASDAQ Stock Market was $8.06 per share.

The 2005 Plan provides that the option exercise price may generally be paid in cash or its equivalent; by means of a broker-assisted cashless exercise; by tender to us of shares of common stock owned by the participant having a fair market value not less than the exercise price; by means of a net-exercise procedure; by such other lawful consideration as approved by the Committee; or by any combination of these.

Options will become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The maximum term of any option granted under the 2005 Plan is seven years, provided that an incentive stock option granted to a ten percent stockholder must have a term not exceeding five years. Unless otherwise permitted by the Committee, an option generally will remain exercisable for three months following the participant's termination of service, provided that if service terminates as a result of the participant's death or disability, the option generally will remain exercisable for 12 months, but in any event the option must be exercised no later than its expiration date.

Incentive stock options are not transferable by the participant other than by will or by the laws of descent and distribution, and are exercisable during the participant's lifetime only by the participant. However, a nonstatutory stock option may be assigned or transferred to certain family members to the extent permitted by the Committee in its discretion.

Stock Appreciation Rights

The Committee may grant stock appreciation rights either in tandem with a related option (a tandem SAR) or independently of any option (a freestanding SAR). A tandem SAR requires the option holder to elect between the exercise of the underlying option for shares of common stock or the surrender of the option and the exercise of the related stock appreciation right. A tandem SAR is exercisable only at the time and only to the extent that the related stock option is exercisable, while a freestanding SAR is exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The exercise price of a tandem SAR will be the same as the exercise price of the related option, and the exercise price of a freestanding SAR may not be less than the fair market value of a share of our common stock on the date of grant.

Upon the exercise of any stock appreciation right, the participant is entitled to receive an amount equal to the excess of the fair market value of the underlying shares of common stock as to which the right is exercised over the aggregate exercise price for such shares. Payment of this amount upon the exercise of a tandem SAR may be made only in shares of common stock whose fair market value on the exercise date equals the payment amount. At the Committee's discretion, payment of this amount upon the exercise of a freestanding SAR may be made in cash or shares of common stock and may be paid in a lump sum or on a deferred basis in accordance with the terms of the participant's award agreement. The maximum term of any stock appreciation right granted under the 2005 Plan is seven years.

Stock appreciation rights are generally nontransferable by the participant other than by will or by the laws of descent and distribution, and are generally exercisable during the participant's lifetime only by the participant. If permitted by the Committee, a tandem SAR related to a nonstatutory stock option and a freestanding SAR may be assigned or transferred to certain family members to the extent permitted by the Committee in its discretion. Other terms of stock appreciation rights are generally similar to the terms of comparable stock options.

Restricted Stock Awards

The Committee may grant restricted stock awards under the 2005 Plan either in the form of a restricted stock purchase right, giving a participant an immediate right to purchase common stock, or in the form of a restricted stock bonus, for which the participant furnishes consideration in the form of services to us. The Committee determines the purchase price payable under restricted stock purchase awards, which may be less than the then current fair market value of our common stock. Outside directors are eligible to receive only restricted stock bonus awards. Subject to the minimum vesting requirements described above under "Certain Award Limits," restricted stock awards may be subject to vesting conditions based on such service or performance criteria as the Committee specifies, including the attainment of one or more performance goals similar to those described below in connection with performance awards. Shares acquired pursuant to a restricted stock award may not be transferred by the participant until vested. Unless otherwise provided by the Committee, a participant will forfeit any shares of restricted stock as to which the restrictions have not lapsed prior to the participant's termination of service. Unless otherwise determined by the Committee, participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that (i) dividends or other distributions paid in shares will be subject to the same restrictions as the original award and (ii) with respect to outside directors only, dividends and other distributions paid in cash will be subject to the same vesting conditions as the original award (or, if earlier, will be paid on March 15^th following the year in which the dividend or other distribution was paid to stockholders generally).

Restricted Stock Units

The Committee may grant restricted stock units under the 2005 Plan, which represent rights to receive shares of our common stock at a future date determined in accordance with the participant's award agreement. No monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award, the consideration for which is furnished in the form of the participant's services to us. The Committee may grant restricted stock unit awards subject to the attainment of one or more performance goals similar to those described below in connection with performance awards, or may make the awards subject to vesting conditions similar to those applicable to restricted stock awards and subject to the minimum vesting requirements described above under "Certain Award Limits." Unless otherwise provided by the Committee, a participant will forfeit any restricted stock units which have not vested prior to the participant's termination of service. Participants have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of common stock are issued in settlement of such awards. However, the Committee may grant restricted stock units that entitle their holders to dividend equivalent rights, which are rights to receive additional restricted stock units for a number of shares whose value is equal to any cash dividends we pay. Such dividend equivalents, if any, will be paid by crediting the participant with additional restricted stock units and will be settled in the same manner and at the same time as the restricted stock units originally subject to the award.

Performance Awards

The Committee may grant performance awards subject to such conditions and the attainment of such performance goals over such periods as the Committee determines in writing and sets forth in a written agreement between us and the participant, subject to the minimum vesting requirements described above under "Certain Award Limits." These awards may be designated as performance shares or performance units. Performance shares and performance units are unfunded bookkeeping entries generally having initial values, respectively, equal to the fair market value determined on the grant date of a share of common stock and a monetary value established by the Committee at the time of grant. Performance awards will specify a predetermined amount of performance shares or performance units that may be earned by the participant to the extent that one or more predetermined performance goals are attained within a predetermined performance period. To the extent earned, performance awards may be settled in cash, shares of common stock (including shares of restricted stock) or any combination thereof.

If our stockholders reapprove the performance goals for the 2005 Plan as set forth below, the Company will continue to follow the following procedures with respect to compensation intended to qualify for the performance-based compensation exception under Code Section 162(m).

Prior to the beginning of the applicable performance period or such later date as permitted under Section 162(m) of the Code, the Committee will establish one or more performance goals applicable to the award. Performance goals will be based on the attainment of specified target levels with respect to one or more measures of our business or financial performance and/or that of any affiliate of the Company, as may be selected by the Committee. The Committee, in its discretion, may base performance goals on one or more of the following measures:

The target levels with respect to these performance measures may be expressed on an absolute basis or relative to a standard specified by the Committee. The degree of attainment of performance measures will be calculated in accordance with generally accepted accounting principles, but prior to the accrual or payment of any performance award for the same performance period, and, according to criteria established by the Committee, excluding the effect (whether positive or negative) of changes in accounting standards or any extraordinary, unusual or nonrecurring item occurring after the establishment of the performance goals applicable to a performance award.

Following completion of the applicable performance period, the Committee will certify in writing the extent to which the applicable performance goals have been attained and the resulting value to be paid to the participant. The Committee retains the discretion to eliminate or reduce, but not increase, the amount that would otherwise be payable on the basis of the performance goals attained to a participant who is a "covered employee" within the meaning of Section 162(m) of the Code. However, no such reduction may increase the amount paid to any other participant. The Committee may make positive or negative adjustments to performance award payments to participants other than covered employees to reflect the participant's individual job performance or other factors determined by the Committee. In its discretion, the Committee may provide a participant awarded performance shares (but not performance units) with dividend equivalent rights with respect to cash dividends paid on our common stock. The Committee may provide for performance award payments in lump sums or installments pursuant to a schedule elected by the participant.

Unless otherwise provided by the Committee, if a participant's service terminates due to the participant's death or disability prior to completion of the applicable performance period, the final award value will be determined at the end of the performance period on the basis of the performance goals attained during the entire performance period but will be prorated for the number of months of the participant's service during the performance period. If a participant's service terminates prior to completion of the applicable performance period for any other reason, the 2005 Plan provides that, unless otherwise determined by the Committee, the performance award will be forfeited. No performance award may be sold or transferred other than by will or the laws of descent and distribution prior to the end of the applicable performance period.

Cash-Based Awards and Other Stock-Based Awards

The Committee may grant cash-based awards or other stock-based awards in such amounts and subject to such terms and conditions as the Committee determines. Cash-based awards will specify a monetary payment or range of payments, while other stock-based awards will specify a number of shares or units based on shares or other equity-related awards. Subject to the minimum vesting requirements described above under "Certain Award Limits," such awards may be subject to vesting conditions based on continued performance of services or to the attainment of one or more performance goals similar to those described above in connection with performance awards. Settlement of cash-based awards or other stock-based awards may be in cash or shares of common stock, as determined by the Committee. A participant will have no voting rights with respect to any such award unless and until shares are issued pursuant to the award. The Committee may grant dividend equivalent rights with respect to other stock-based awards. The effect on such awards of the participant's termination of service will be determined by the Committee and set forth in the participant's award agreement.

Change in Control

If a change in control occurs, the surviving, continuing, successor or purchasing entity or its parent may, without the consent of any participant, either assume or continue outstanding awards or substitute substantially equivalent awards for its stock. Any awards which are not assumed or continued in connection with a change in control or exercised or settled prior to the change in control will terminate effective as of the time of the change in control. The Committee may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such extent as it determines. The 2005 Plan also authorizes the Committee, in its discretion and without the consent of any participant, to cancel each or any outstanding stock-based award upon a change in control in exchange for a payment to the participant with respect to each vested share (and each unvested share if so determined by the Committee) subject to the canceled award of an amount equal to the excess of the consideration to be paid per share of common stock in the change in control transaction over the exercise or purchase price per share, if any, under the award.

Awards Subject to Section 409A of the Code

Certain awards granted under the 2005 Plan may be deemed to constitute "deferred compensation" within the meaning of Section 409A of the Code, providing rules regarding the taxation of nonqualified deferred compensation plans, and such regulations or other administrative guidance that have been or may in the future be issued pursuant to Section 409A. Any such awards will be required to comply with the requirements of Section 409A. Notwithstanding any provision of the 2005 Plan to the contrary, the Committee is authorized, in its sole discretion and without the consent of any participant, to amend the 2005 Plan or any award agreement as it deems necessary or advisable to comply with Section 409A.

Termination or Amendment

The 2005 Plan will continue in effect until its termination by the Committee, provided that all awards shall be granted within ten years from the effective date of its adoption upon initial approval by our stockholders, which occurred on June 8, 2005. The Committee may terminate or amend the 2005 Plan at any time, provided that no amendment may be made without stockholder approval that would increase the maximum aggregate number of shares of stock authorized for issuance under the 2005 Plan, would change the class of persons eligible to receive incentive stock options or would require stockholder approval under any applicable law, regulation or rule. No termination or amendment may affect any outstanding award unless expressly provided by the Committee, and, in any event, may not adversely affect an outstanding award without the consent of the participant unless necessary to comply with any applicable law, including, but not limited to, Section 409A of the Code.

Summary of U.S. Federal Income Tax Consequences

The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the 2005 Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances.

Incentive Stock Options

A participant recognizes no taxable income for regular income tax purposes upon the receipt or exercise of an incentive stock option. Participants who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option will normally recognize a capital gain or loss equal to the difference, if any, between the sale price and the purchase price of the shares. In such event, we will not be entitled to any corresponding deduction for federal income tax purposes. In the event of the participant's disposition of shares before both of these holding periods have been satisfied (a "disqualifying disposition"), the participant will recognize ordinary income equal to the spread between the option exercise price and the fair market value of the shares on the date of exercise, but in most cases not to exceed the gain realized on the sale, if lower. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the participant upon the disqualifying disposition of the shares generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.

In general, the difference between the option exercise price and the fair market value of the shares on the date when an incentive stock option is exercised is treated as an adjustment in computing income that may be subject to the alternative minimum tax, which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the

alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to participants subject to the alternative minimum tax.

Nonstatutory Stock Options

Options not designated or qualifying as incentive stock options are nonstatutory stock options and have no special tax status. A participant generally recognizes no taxable income upon receipt of such an option. Upon exercising a nonstatutory stock option, the participant normally recognizes ordinary income equal to the difference between the exercise price paid and the fair market value of the shares on the date when the option is exercised. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the exercise date, will be taxed as capital gain or loss. We generally should be entitled to a tax deduction equal to the amount of ordinary income recognized by the participant as a result of the exercise of a nonstatutory stock option, except to the extent such deduction is limited by applicable provisions of the Code.

Stock Appreciation Rights

A participant recognizes no taxable income upon the receipt of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant generally will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the stock appreciation right, except to the extent such deduction is limited by applicable provisions of the Code.

Restricted Stock Awards

A participant acquiring restricted stock generally will recognize ordinary income equal to the excess of the fair market value of the shares on the "determination date" over the price paid, if any, for such shares. The "determination date" is the date on which the participant acquires the shares, unless the shares are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earlier of (1) the date on which the shares become transferable or (2) the date on which the shares are no longer subject to a substantial risk of forfeiture. If the determination date is after the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date on which the shares are acquired. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the determination date, will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

Performance Awards, Restricted Stock Unit Awards, Cash-Based Awards and Other Stock-Based Awards

A participant generally will recognize no income upon the receipt of a performance share, performance unit, restricted stock unit, cash-based or other stock-based award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of settlement in an amount equal to the cash received and the fair market value of any unrestricted shares of stock received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. If the participant receives shares of restricted stock, the participant generally will be taxed in the same manner as described above under "Restricted Stock Awards." Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value on the determination date (as defined above under Restricted Stock Awards), will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

New Plan Benefits

The benefits that will be awarded or paid under the 2005 Plan are not currently determinable. Awards granted under the 2005 Plan are within the discretion of the Committee, and the Committee has not determined future awards or who might receive them.

Existing Plan Benefits

The aggregate numbers of shares of common stock subject to outstanding options to certain persons under the 2005 Plan as of April 4, 2014, are as follows:

As of April 4, 2014, no options have been granted under the 2005 Plan to any other nominee for election as a director, or any associate of any such director, nominee or executive officer, and no other person has been granted 5% or more of the total amount of outstanding options granted under the 2005 Plan.

THE BOARD RECOMMENDS A VOTE "FOR"IN FAVOR OF “EVERY YEAR” ON PROPOSAL 4.

Equity Compensation Plan Information

As of December 31, 2013, we maintained one active stock-based compensation plan under which we could grant stock-based awards to officers and other employees, directors and consultants. Under our 2005 Plan, we are authorized to issue a variety of incentive awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance share and performance unit awards, deferred compensation awards and other stock-based or cash-based awards.

Prior to 2009, we had five stock-based incentive plans and one employee stock purchase plan under which we could grant stock based awards to officers and other employees, directors and consultants. These plans consisted of the 1993 Employee Stock Purchase Plan, 1991 Stock Option Plan, 1999 Stock Option Plan, 2002 Outside Directors Stock Option Plan and 2005 Plan, all of which were approved by our stockholders, and the 1999 Nonstatutory Stock Option Plan, which was not approved by our stockholders.

In February 2009, our Compensation Committee terminated the 2002 Outside Directors Stock Option Plan, subject to any outstanding options. In June 2009, our Compensation Committee terminated the 1993 Employee Stock Purchase Plan. In September 2009, our Compensation Committee terminated the 1991 Stock Option Plan. Also in September 2009, our Compensation Committee terminated the 1999 Stock Option Plan and the 1999 Nonstatutory Stock Option Plan, subject to any outstanding options. In June 2009, our stockholders approved amendments to the Company's 2005 Plan to expand persons eligible to participate in the plan to include our outside directors.

The following table sets forth information regarding all of our existing equity compensation plans under which we were authorized to issue shares of our common stock or which we have options outstanding as of December 31, 2013:

We provide our outside directors with grants of restricted stock as a portion of their total compensation to ensure that our outside directors own common stock in the Company and their interests are aligned with our stockholders. As approved by our stockholders at the Company's 2009 Annual Meeting,In 2016, each of our outside directors receivesreceived an annual grant of restricted stock under our Amended and Restated 2005 Equity Incentive Plan with a grant date value equal to $50,000,$250,000, based on the closing price of our common stock on the date of grant. In March 2017, in consultation with the Compensation Committee’s compensation consultant and in acknowledgment of the Company’s stock performance during 2016, the Board revised its compensation policy for outside directors to decrease the amount of the annual grant of restricted stock to a grant date value equal to $150,000, based on the closing price of our common stock on the date of grant. Such grants are made to each current outside director annually atafter the dateconclusion of our annual general meeting of stockholders and to each new outside director upon his or her initial election to the Board. The revision discussed above will apply to grants made after the Annual Meeting. Each grant of restricted stock vests on the first anniversary of the grant date so long as the director continues to serve on ourthe Board during the vesting period. During the vesting period, our outside directors have the right to vote their restricted stock and to receive any dividends or distributions paid on their restricted stock, except that dividends or distributions are accumulated and paid on the earlier of the vesting of the underlying stock in accordance with the vesting conditions of the original award or March 15^th of the year following the payment of such dividend or distribution to all stockholders.

2013

2016 Compensation of Directors

In 2013,2016, our outside directors who served on the Board during 2013 on our Board2016 earned the compensation set forth in the table below:

Director		Fees Earned				Stock Awards(1)				Total
David W. Gryska(2)		$	—			$	—			$	—
Jody S. Lindell		$	147,500			$	50,000			$	197,500
Paul W. Sandman		$	155,000			$	50,000			$	205,000
Harold E. Selick, Ph.D.		$	170,000			$	50,000			$	220,000

Director		Fees Earned				Stock Awards(1)				Total
David W. Gryska		$	120,000			$	250,000			$	370,000
Jody S. Lindell		$	132,500			$	250,000			$	382,500
Paul W. Sandman		$	135,000			$	250,000			$	385,000
Harold E. Selick, Ph.D		$	142,500			$	250,000			$	392,500
Samuel R. Saks, M.D.		$	115,000			$	250,000			$	365,000
Paul R. Edick		$	127,500			$	250,000			$	377,500

	(1) (1	)		Amounts in this column represent the grant date fair value of the restricted stock granted to our outside directors, as determined in accordance with FASB ASC Topic 718. As of December 31, 2013,2016, Drs. Selick and Saks, Messrs. Edick, Gryska and Sandman and Ms. Lindell each of our outside directors had 5,97471,023 unvested restricted stock awards.

(2)

Mr. Gryska joined the Board in March 2014.

Shares subject to options held by our outside directors as of December 31, 2013, are set forth in the table below:

Shares Subject to Options Held as of December 31, 2013

Director

Vested

Unvested

Total

Paul W. Sandman

42,500

—

42,500

Stock Ownership Guidelines

Our

The Board has determined that ownership of our common stock by our officers and directors promotes a focus on long-term growth and aligns the interests of our officers and directors with those of our stockholders. As a result, ourthe Board adopted stock ownership guidelines stating that our outside directors, our chief executive officer and our other five most-highly-compensated officers (based on annual base salary), should maintain certain minimum ownership levels of our common stock.

Our

In 2016, our stock ownership guidelines encouragerequired that each outside director should own shares of common stock with a value of at least one timetimes the annual cash retainer we pay to the outside director not later than sevenfive years after the date the person initially becomes an outside director. With the exceptionAs of Mr. Gryska who joined the Board in March 2014,December 31, 2016, all of our outside directors are in compliance with this requirement. We believe that Mr. Gryska will be in compliance with this requirement not later than seven years after the date he became an outside director.

The Board is permitted, in its discretion, to waive the application of our stock ownership guidelines to any covered individual if it determines that, as a result of the individual'sindividual’s personal circumstances, application of the ownership guidelines would result in a hardship.

EXECUTIVE OFFICERS

Certain information with respect to our current executive officers is set forth below. Under ourthe Bylaws, each executive officer is appointed annually by ourthe Board, of Directors, and each holds office until such officer resigns, is removed, is otherwise disqualified to serve or such officer'sofficer’s successor is elected and qualified. There are no family relationships among any of our directors or executive officers.

Name		Age		Position
John P. McLaughlin		62 65		President and Chief Executive Officer
Christopher Stone		49 52		Vice President, General Counsel and Secretary
Peter Garcia		52 55		Vice President and Chief Financial Officer
Danny Hart		38 41		Deputy General Counsel and Assistant Secretary Vice President, Business Development
David Montez Steffen Pietzke		40 45		ControllerVice President, Finance and Chief Accounting Officer

John P. McLaughlin, please see discussion under "Proposal“Proposal 1: Election of Directors –- Members of the Board of Directors"Directors” for information about Mr. McLaughlin.

Christopher Stonejoined the Company in February 2009 as our Vice President, General Counsel and Secretary. He brings more than 2025 years of legal experience to the role. Before joining PDL, Mr. Stone served as Vice President of Legal Affairs and Corporate Secretary at LS9, an advanced biofuels development company, where his work included a focus on intellectual property protection and licensing. Prior to that time, he was Vice President of Intellectual Assets USA at Danisco A/S, a global producer of food ingredients, enzymes and bio-based solutions. From 1994 to 2005, Mr. Stone was with Genencor International, a biotechnology company that was acquired by Danisco in 2005, most recently as Vice President of Intellectual Property and General Patent Counsel. At Genencor, he handled all intellectual property matters, including developing and implementing an overall strategy for its domestic and international patent estate of approximately 3,700 patents and patent applications, and managed multiple litigation and interference proceedings and numerous European patent oppositions. Mr. Stone received a J.D. from the National Law Center at George Washington University and a B.S. in Biochemistry from the University of Massachusetts. He is an active member of the District of Columbia Bar, Nevada Bar (company counsel) and California Bar, and was admitted to practice before the United States Patent & Trademark Office in 1992.

Peter Garcia joined the Company in May 2013 as our Vice President and Chief Financial Officer. He also served as our Acting Chief Accounting Officer from May 2013 until July 2013. Before joining PDL, Mr. Garcia served as CFOchief financial officer of BioTime, Inc., which he joined in 2011. Between the years of 1996 and 2011, Mr. Garcia was CFOchief financial officer of six biotech and high-tech companies, including Marina Biotech, Nanosys, Nuvelo, Novacept, IntraBiotics Pharmaceuticals and Dendreon Corporation. While at these companies he raised over $550 million, led multiple merger and acquisition transactions, and managed multiple functions including finance, accounting, treasury, investor relations, corporate communications, IT and facilities. From 1990 to 1996, he was a finance executive with Amgen. Mr. Garcia holds a B.A. in economics and sociology with honors from Stanford University and an MBA with an emphasis in finance and accounting from UCLA.

Danny Hart, our Deputy General Counsel and Assistant Secretary,Vice President, Business Development, joined the Company in January 2010 as the Company'sCompany’s Corporate Counsel. Since joining the Company, Mr. Hart was promoted to Associate Corporate Counsel and Assistant Secretary in April 2011, and then to his current position of Deputy General Counsel and Assistant Secretary in January 2012.2012 and then to his current position of Vice President, Business Development in September 2014. From 2006 until he joined the Company, Mr. Hart worked as an associate with Hogan & Hartson LLP (now Hogan Lovells US LLP), a leading international law firm, where his practice focused on securities, corporate governance and mergers and acquisitions. Before joining Hogan & Hartson, Mr. Hart began his legal career at Skadden, Arps, Slate, Meagher & Flom LLP, a leading international law firm, where he focused on corporate restructurings. Mr. Hart received a J.D. from Vanderbilt University Law School and a B.A. from the University of Washington in Seattle. He is licensed to practice as company counsel in NevadaSeattle and holds an active license to practice law in the State of Delawarea J.D. from Vanderbilt University Law School.

Steffen Pietzke, our Vice President, Finance and an inactive license in the State of Colorado.

David MontezChief Accounting Officer, joined the Company in July 2013June 2015 as ourthe Company’s Controller and Chief Accounting Officer. He brings more than a decade of accounting experienceSince joining the Company, Mr. Pietzke was promoted to the role. Before joiningVice President, Finance and Chief Accounting Officer in March 2017. Prior to PDL, Mr. Montez served as the Director of Finance and Corporate Controller at GlassPoint Solar, Inc., the leader in solar enhanced oil recovery, where he managed multiple functions including global finance, accounting, IT and human resources. From 2005 to 2011, Mr. MontezPietzke was an Audita Senior Manager with Moss Adams.Ernst & Young LLP (EY) since 2013. He provided audit and related financial services to both public and private companies in the U.S., Europe and China. Prior to joining EY, Mr. Montez has also servedPietzke was with PricewaterhouseCoopers LLP for more than 12 years, most recently as Revenue Controllera senior manager. He is highly regarded at these public accounting firms for Harmonic Inc.his technical expertise where he focused on specific complex areas such as revenue recognition, financial instruments, derivatives, stock-based compensation and began his accounting career at PricewaterhouseCoopers, LLP.public offerings. Mr. Montez receivedPietzke is a B.A.licensed Certified Public Accountant, a member of the American Institute of Certified Public Accountants and holds a Bachelor of Business Science degree in Accounting with honors from the University of Utah and is a certified public accountant.Sciences in Offenburg, Germany.

COMPENSATION DISCUSSION & ANALYSIS

Overview

This Compensation Discussion & Analysis describes our compensation program as it relates to our named executive officers set forth below in the “Executive Officer Compensation—Summary Compensation Table. In this”

We present our Compensation Discussion & Analysis we first present an executive summary of our compensation program for our named executive officers. Next, we discussin the philosophy and objectives of our executive compensation program in greater detail and we review the process the Compensation Committee follows in deciding how to compensate our named executive officers. We then present a brief overview of the specific elements of our compensation program and we present a detailed discussion and analysis of the Compensation Committee's specific decisions about the compensation of our named executive officers for fiscal year 2013.

following sections:

1.	Executive Summary. In this section, we describe certain aspects of our business, highlight our 2016 corporate performance and certain changes to the compensation of our chief executive officer, and summarize certain governance aspects of our executive compensation program.	p.	23
2.	Executive Compensation Program Philosophy, Objectives and Process. In this section, we describe our executive compensation philosophy and objectives and the process the Compensation Committee follows in deciding how to compensate our named executive officers and the material elements of our executive compensation program.	p.	30
3.	Compensation Program Elements. In this section, we present a brief overview of the specific elements of our compensation program and a detailed discussion and analysis of the Compensation Committee’s specific decisions about the compensation of our named executive officers for fiscal year 2016.	p.	32
4.	Other Executive Compensation Matters. In this section, we summarize our other compensation policies, review the accounting and tax treatment of compensation and the relationship between our compensation program and risk.	p.	40

This Compensation Discussion & Analysis contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. The actual compensation programs that we adopt in the future may differ materially from currently planned programs as summarized in this discussion.

Executive Summary

Business Overview

For the past several years, we have had a unique business model in the healthcare industry because we conducted no clinical research, development or commercialization activities, but rather earned substantially all our revenues from royalties related to our patents covering the humanization of antibodies, which we refer to our Queen et al. patents. Anticipating a significant decline in revenue once these royalties ended in the first quarter of 2016, we began acquiring income generating assets in the second half of 2012 to build a longer-term replacement revenue stream. These income generating assets were typically in the form of notes receivable, royalty rights and hybrid notes/royalty receivables from health care companies with commercial-stage therapies or medical devices having strong economic fundamentals. In early 2016 we began to see attractive opportunities to make equity investments in commercial stage companies that either owned or were acquiring pharmaceutical and/or medical products. In July 2016, we took advantage of such an opportunity by making equity investments in Noden Pharma DAC and Noden Pharma USA, Inc. (together, “Noden Pharma”) that became our subsidiaries. Noden Pharma acquired the pharmaceutical products, Tekturna

^® and Tekturna HCT^® in the United States and Rasilez^® and Rasilez HCT^® in the rest of the world (the “Noden Products”).

Since 2012 we have consistently been able to selectively identify and acquire income generating assets to provide a more diversified base of assets that we believe will support meaningful financial returns to our stockholders going forward. To date, including the Noden Pharma transaction, we have consummated 17 of such transactions and committed over $1.4 billion in the acquisition of new income generating assets and products.

In order to efficiently conduct our operations, we rely on a small staff of eleven people, with our principal place of business being in the State of Nevada. In addition, in connection with the formation of Noden Pharma and the acquisition of the Noden Products, we added eight employees at Noden Pharma. We believe that the transition underlying our business strategy requires competitively compensating our very small management team consistent with the long-term focus necessary to support our business model in this period of transition. We compete with many other companies in seeking to attract and retain a skilled management team and have to overcome the disadvantages of being located in a remote location with limited access to top executive talent and expertise.

Fiscal 20132016 Performance

As anticipated, in the second quarter of 2016, our revenues materially decreased after we stopped receiving payments from certain Queen et al. patent licenses and legal settlements, which accounted for 82% of our 2015 revenues. In 2013,2016, we reported total revenuerevenues of $442.9approximately $244.0 million, an 18.3% increase over 2012 revenue and an approximate 22.3% increase over the Company's revenue in 2011.59% decrease from 2015 total revenues.

Income Generating Asset Acquisitions

We actively manage a portfolio of income generating assets while evaluating new transactions. We are a unique public company consisting of fewer than ten employees and maintain the highest revenue-per-employee in our industry with limited expenses related to operating as a public company. We are entirely focused on increasing the return to our stockholders over the life of our currentacquiring income generating assets and if possible, acquiring assets and completing transactions that extend our ability to pay dividends beyondbuilding returns for the expiration oflonger term after most payments from the Queen et al. patents. The following paragraphs highlight three areaspatent licenses and legal settlements ceased in the second quarter of our business where2016. During 2016, we took action in 2013 to increase the rate of return to our stockholders and extend our ability to pay dividends.

Income Generating Asset Acquisitions

This year, the Company continued to pursue its strategic initiative to extend the distribution of dividend payments to its stockholders for a longer period of time by completingcompleted two new income generating asset transactions. In 2013, the Company completed six notableacquisition transactions, including our first pharmaceutical product acquisitions, utilizing over $360approximately $119.5 million of the Company's available cash and cash equivalents and bringing the Company's two-year transaction total to nearly $500committing an additional $170.0 million.

The Company has transitioned to actively managing its portfolio of

Using cash flows generated from our income generating assets while evaluating new transactions. Atand products, the conclusionreturn on such assets was 14.9% in 2016, 10.5% in 2015, 24.2% in 2014 and 8.6% in 2013, for a four year average of 14.6%. The charts below show (i) the year-over-year growth in asset value of our income generating assets and products and (ii) the year-over-year cash flow and revenue attributable to our income generating asset and product acquisitions, in each case since 2013, the portfoliofirst full year of assets under management (excludingour program to acquire income generating assets.

Total Stockholder Return

The chart below shows our total stockholder return over the Queen et al. patents) isfive, three and one year periods ending December 31, 2016 in excess of $400 million. The Company's assets under management grew by over 361% from the end of 2012comparison to the endaverage of 2013.

Whileour peer group specified under “Comparator Companies” on page 31:

There are inter-related factors that may explain this disconnect between performance and share price. First is the Company's intent issignificant decline in revenues we experienced after the first quarter of 2016 due to focus on and build returns in later years afterthe expiration of the Queen et al. patents in 2013and the Company generated approximately $30.1 million in income and revenue that was attributableconclusion of most license payments related to the patents. While we anticipated this decline in revenue and informed our investors of our plan to mitigate it through the acquisition of income generating assets, the significant decline in revenues quarter over quarter negatively impacted our stock price. Second, we eliminated our dividend program in August of 2016 to increase cash on hand for subsequent acquisitions and recognized a year-over-year growth of over 378% fromincome generating assets, which resulted in several dividend sensitive institutional investors selling our stock. We formed our strategy of acquiring income generating assets in anticipation of the Company's non-Queen et al.significant reduction of revenues after the first quarter of 2016, but finding high quality income and revenue.

Protection of Queen et al. Patent Revenues

Throughout 2013, the Company continued its proactive litigation strategy in an effortgenerating assets to protect its most valuable asset,fully replace the Queen et al. patents. As validated by the Company's settlement with Genentech, Inc. (Genentech)derived revenues is a several-year process. However, through our strategy of acquiring income generating assets and F. Hoffman- La Roche Ltd. (Roche) in early 2014, the Company's litigation efforts throughout 2013 were meaningful and advanced our stockholder's interests by increasing the rate of return to our stockholders and extending our ability to pay dividends.

Under the terms of the settlement agreement, PDL successfully increased the worldwide royalty rate to a fixed royalty rate of 2.125% from the effective date of the settlement agreement. Before the settlement agreement, the blended royalty rate on worldwide sales in 2013 was approximately 1.9%. Further, PDL received an up front payment from Genentech that corresponds to the value that would have been received had the fixed royalty rate been in place as of August 15, 2013. Critically, the settlement agreement ensures that PDL willexpansion into acquiring products, we believe we can continue to receive royalty paymentsprovide our shareholders with returns that extend well beyond the revenues from itsthe Queen et al. patents by precluding Genentechpatents.

2016 and Roche2017 Compensation Changes for our Chief Executive Officer to Align with Stock Performance

In recognition of the performance of our stock price, our chief executive officer, Mr. McLaughlin, forfeited approximately $1.0 million in compensation that he was eligible to earn under the 2016/2020 Long-Term Incentive Plan that was established in early 2016. In addition, with respect to 2017 compensation, Mr. McLaughlin proposed, and the Compensation Committee agreed, to reduce his base salary from ever again challenging$800,065 (his base salary in 2016) to $700,057 for 2017. The Compensation Committee also reduced the validitytotal amount of anycash and stock awardable under the five-year 2017/2021 Long-Term Incentive Plan from $4,300,000 to $3,000,000, when compared to the prior year’s long-term incentive plan. These events are more fully described under the headings “Fiscal 2016 Executive Compensation — Pay for Performance Alignment of PDL's patent rights,

CEO Compensation in 2016” and “Summary of Fiscal 2017 Executive Compensation Decisions” below.

Dividends

 

In the first and second quarters of 2016, we paid a dividend of $0.05 per share, totaling $0.10 per share for the year and providing a dividend yield of approximately 7.1% at December 31, 2016. In August, our Board eliminated the quarterly dividend program because it and we believe that the Company can increase shareholder value to a greater extent by acquiring additional products and other income generating assets.

Stockholder Engagement

including its supplementary protection certificates

In May 2016, we reached out to our top 25 stockholders, who in Europe, from ever again contesting whether PDL's patents cover Avastin®, Herceptin®, Lucentis®, Xolair®, Perjeta®, Kadcyla® and Gadzyva® and from ever again contesting Genentech and Roche's obligation to pay royalties based on patent invalidity, scope or enforceability or due to the invalidity or unenforceabilityaggregate owned approximately 60% of our license agreements. The settlement agreement further clarifiesoutstanding common stock at such time, to determine if such stockholders had any issues or questions regarding the obligations ofvoting proposals in the parties2016 proxy statement. In response to this outreach, no stockholders identified any issues with respect to the conduct of any audits initiated by PDLvoting proposals.

Accordingly, an overwhelming majority of the booksvotes cast (above 95%) at our annual meeting held in June 2016 were in favor of each of the proposals, including the “say-on-pay” proposal. Since “say-on-pay” was adopted, we have received stockholder approval votes of above 93% each year. In addition, periodically throughout 2016, our chief financial officer and recordschief executive officer met directly with stockholders and potential investors at healthcare and other investor conferences to discuss the business strategy of Genentech, which will ensure athe Company.

Fiscal 2016 Executive Compensation

Emphasis on “At Risk”, Performance Based Compensation

The Compensation Committee is focused on linking both cash and equity compensation to Company performance and putting such compensation "at risk." In furtherance of this goal, over the past five years, the Compensation Committee has increasingly put more timelycompensation “at risk”. In 2015 and efficient process2016, all cash and equity compensation earned by executive officers is “at risk” under the annual bonus and long-term incentive plans devised by the Compensation Committee; the only component of compensation not “at risk” is base salary. Since 2013, we have not granted equity-based compensation to our executive officers that is subject solely to time-based vesting. As we have transitioned our business model, the "at-risk" cash payments and equity grants to our chief executive officer increased to 80.7% in 2016 from 46.9% in 2012, as well as a full and fair audit procedure. Finally,illustrated in the agreement clarifies that the sales amountschart below:

As we continue to transition our business from which the royalty is calculated does not include certain taxes and discounts.

The net result of PDL's litigation efforts in 2013 is a settlement agreement that creates certainty of royalty payment by Genentech, ensures that royalties receivedreliance on revenues deriving from the Queen et al. patents will in all likelihood exceed those that would have been received underto acquiring products and income generating assets, the previously governing license agreements, clarifiesCompensation Committee believes it is important to tie the lengthstructure and payment of the royalty paymentsincentive plans for our executive officers to our business model and greatly minimizes the chancefinancial performance during this transition period.

Pay-for-Performance Alignment of future disputes between the parties.

CEO Compensation in 2016

Dividends and Total Stockholder Return

In 2013, the Company continued to pay its notably high yield quarterly dividend of $0.15 per share, totaling $0.60 per share for the year.

In addition to creating additional sources of revenue and income to the Company, we achieved a total stockholder return (TSR) of 23.8% in 2013, which compares with 13.6% over three years and 10.6% over five years. Relative to the list of companies our Compensation Committee,January 2016, in consultation with its independent compensation consultant, prepared as comparable companies with which it could evaluate the compensation of our named executive officers, PDL's one-year, three-year and five-year TSRs were better than 71.4%, 42.9% and 50.0%, respectively, of the comparator companies (that are still in existence) selected byBoard Advisory, the Compensation Committee for 2013 compensation decisions. When our TSR isincreased the stock and cash amounts that Mr. McLaughlin was eligible to earn under the 2016/20 LTIP to $3,000,000 in cash and $1,300,000 in restricted stock over the five year vesting period of the plan. This reflected an approximately 31% increase in target amounts he was eligible to earn when compared to the "peer companies" selected by Institutional Shareholder Services (ISS) (that are still2015/19 LTIP target amounts, which were $2,297,190 in existence), we outperformed 80.0%cash and $984,510 in 2013, 35.0% over three years and 40.0% over five years.

Fiscal 2013 Executive Compensation

Ourrestricted stock. The intent of the Compensation Committee was to put Mr. McLaughlin’s total compensation in the 50^th percentile of that of the Compensation Committee's selected comparator companies and the industry companies covered by the 2015 Radford Compensation Survey consistent with its compensation philosophy, as more fully described below.

In March 2017, in recognition of the performance of our stock price during 2016, Mr. McLaughlin forfeited the approximately $1.0 million in increases described above, and his target award under the 2016/20 LTIP was reduced to reflect the target levels under his 2015/19 LTIP. The amount of cash he was eligible to earn was decreased from $3,000,000 to $2,297,190 and the amount of restricted stock he was eligible to earn was reduced from $1,300,000 to $984,510 (based on grant date fair value).

Due to the nature of restricted stock grants, our stock price directly affects the amount of compensation actually realized by our chief executive officer. We have included below a summary of the compensation reported versus the compensation actually realized by our chief executive officer for 2016. We believe this supplemental information is focusedimportant because a significant portion of our chief executive officer’s equity compensation reported in the Summary Compensation Table for 2016 is an incentive for future performance over a five year period, which only provides an actual economic benefit if the applicable performance goals are achieved in future periods, and is directly affected by the market value of the restricted stock when it vests, as opposed to when it is granted. Therefore, we believe providing both “reported” and “realized” pay provides a more complete view of the

value of our chief executive officer’s compensation in 2016. The table below sets forth the differences between the 2016 compensation reported in the Summary Compensation Table, the amount realizable based on tying cashour stock price as of 2016 year-end and the actual compensation to Company performance and putting cash compensation "at risk." "At-risk" cash paymentsour chief executive officer received in 2016:

Value of Reported Pay(1) vs. Value of Realizable Pay(2) vs. Value of Realized Pay(3)
Reported Pay		$	4,185,155
Realizable Pay		$	3,496,341
Realized Pay		$	3,016,472
Delta in Pay - Realizable vs. Reported		(16.5		)%
Delta in Pay - Realized vs. Reported		(27.9		)%

(1	)		Value of “Reported Pay” represents compensation awarded and granted to our chief executive officer during 2016. The value of Reported Pay is calculated as the sum of salary, value of stock awards under the 2016/20 LTIP based on the price of our stock on the grant date ($3.22), non-equity incentive plan compensation and all other compensation reported in the 2016 Summary Compensation Table.
(2	)		The value of “Realizable Pay” reflects the sum of salary, non-equity incentive compensation and all other compensation, reported for 2016 in the Summary Compensation Table, with the value of stock awards granted under the 2016/20 LTIP (i) reduced to reflect our chief executive officer’s forfeiture of $315,490 in grant date value of restricted stock awards and (ii) based on the closing stock price of a share of our common stock on December 30, 2016 ($2.12). This amount does not include the value of any stock awards actually earned and vested under the 2014/18 LTIP or 2015/19 LTIP during 2016.
(3	)		The value of “Realized Pay” reflects the sum of salary, the value of the annual bonus paid with respect to 2016, the value of stock awards and non-equity incentive cash compensation actually earned and vested during 2016 under the terms of our 2014/18 LTIP and 2015/19 LTIP and all other compensation received by our chief executive officer during 2016. The value of the stock awards earned and vested is calculated based on the closing stock price of our common stock on December 30, 2016 ($2.12). Our chief executive officer does not hold any stock options.

The table below sets forth the reported value of restricted stock granted to our CEO increasedchief executive officer under the 2014/18 LTIP and the 2015/19 LTIP based on the grant date values for the restricted stock under such plans ($8.22 and $7.62 per share, respectively) for the portion that vested during 2016 compared to 56.5%the value realized based on the stock price as of 2016 year-end ($2.12):

		Reported Value of Restricted Stock				Realized Value of Restricted Stock
2014/18 LTIP		$	163,429			$	42,319
2015/19 LTIP		$	492,255			$	125,998

As indicated in 2013 from 17.0% in 2010 (2011 is absent as athe tables above, the performance of our stock over the life of our long-term incentive plan did not vestplans has a significant impact on the amount of compensation that is actually realized by our executive officers.  The Compensation Committee believes that the alignment between executive compensation and thereforethe performance of the Company is not included), as illustrated inan important objective and that the chart below:

use of restricted stock and five-year incentive plans support a stronger “pay-for-performance” alignment.

Base Salary

For fiscal year 2013, our2016, the Compensation Committee reviewed the base salary of each of our named executive officers and the performance of the Company as well as an analysis and summary of competitive market practicepractices prepared by Setren,Board Advisory, LLC, or Board Advisory, the Compensation Committee's independent compensation consultant at the time.consultant. Based on this review, the Compensation Committee decidedgenerally determined to raise certain ofset the named executive officers' salaries so that theirofficers’ base salaries aresalary near or at the 50^th50% percentile of comparable executive salaries of the comparator companies selected by the Compensation Committee's comparator companies and to give cost-of-living adjustments to the remaining named executive officers.

Committee.

Annual and Long-Term Bonus Plans

The Compensation Committee believes that both the short-term and long-term incentive structures of our executive compensation plans should be viewed in conjunction with each other to determine the most effective way to align executive management’s incentives in both the short- and long-term with those of our stockholders. The Compensation Committee gives careful consideration to balancing these short and long-term objectives in designing the performance-based incentive plans for our

executive officers. All compensation is performance-based under both the annual and long-term bonus plans and there are no guaranteed payments under these plans.

2016 Annual Bonus Plan

With respect to the annual cash bonus for fiscal year 2016, the Compensation Committee established the 20132016 Annual Bonus Plan for fiscal year 2013.Plan. This annual cash bonus iswas intended to incentivize and reward our named executive officers for accomplishing corporate (75% weighting) and individual (25% weighting) goals, except for our chief executive officer whose bonus iswas determined solely on the performance of the Company against its corporate goals. For those named executive officers subject to both corporate and individual goals, Messrs. Garcia’s, Stone’s and Hart’s were weighted 75% for corporate goals and 25% for individual goals and Mr. Pietzke’s were weighted 60% for corporate goals and 40% for individual goals.

The annual cash bonus is compensation that is entirely at risk in the case of underperformance, and whileunderperformance. The Compensation Committee sets the target bonus amounts are set by the Compensation Committeeamount in consultation with Setren, the Compensation Committeeits independent compensation consultant and ultimately determines the ultimate amount of theachievement levels and total annual cash bonus, which can range between zero and a maximum bonus level, not to exceed 150%200% of the annual target bonus, based on accomplishment of performance goals.

In furtherance of a short-term performance incentive structure, the Compensation Committee developed the corporate goals under the 2016 Annual Bonus Plan with a view towards the current transitional phase of our business due to the expected decline in revenues during 2016. In order to provide for long-term growth and individualsustainable returns for our stockholders in this transitional period, the Compensation Committee believed that the primary short-term focus of the Company should be on acquiring and accumulating additional high quality income generating assets to replace a portion of the revenues historically derived from our Queen et al. patents. In addition, the Compensation Committee also viewed the optimization of our capital structure as integral to ensuring cash flows sufficient to support such income generating asset acquisitions. As such, the Compensation Committee established the following corporate goals for the 2016 Annual Bonus Plan:

acquire $200 million in income generating assets with rates of return that have a meaningful impact on our ability to provide returns to stockholders in the future (weighted as 35% of the corporate goals);

effectively manage existing income generating assets to assure anticipated returns (weighted as 30% of the corporate goals); and

effectively optimize our capital structure and continue to appropriately address tax compliance and examinations on our income tax matters (weighted as 35% of the corporate goals).

To determine the appropriate amount of income generating asset acquisitions to set as a corporate goal, the Compensation Committee, with the assistance of our management team, reviewed our short and long-term projected cash flows that would be available to support the achievement of the overarching goal of providing sustainable long-term growth and returns to stockholders. While the primary purpose of the 2016 Annual Bonus Plan was to incentivize management to achieve the shorter term goals of the Company, the Compensation Committee also tried to balance the longer term goals of the Company and its stockholders by including both acquiring new income generating assets and the effective management of its existing income generating assets as components of the corporate goals.

The purpose of these components was to ensure the Company has sufficient assets to generate return for our stockholders and to manage such assets so that they provide the returns that will support our long term growth and provide returns to stockholders in the future.

In December 2013,2016, the Compensation Committee evaluated the Company's performance against the 20132016 corporate performance goals (as well as the performance of each of theour named executive officers, other than theour chief executive officer, against their individual goals). The Compensation Committee determined that while corporate performance exceeded 150%75% of the 20132016 corporate goals established forunder the Company's 20132016 Annual Bonus Plan the paymentswere achieved, as more fully discussed below under the plan would be limited by the established plan cap of 150%.

heading “2016 Performance Evaluations and Bonus Amounts.”

The amount of base salary and cash bonus earned by each named executive officer for fiscal year 20132016 is set forth in the Summary“Executive Officer Compensation-Summary Compensation TableTable” on page 48.

43.

2016/20 Long-Term Incentive Plan

In furtherance of a long-term performance incentive structure, in January 2013,2016, the Compensation Committee established the 2013/20142016/20 Long-Term Incentive Plan, or the 2013/142016/20 LTIP, for our named executive officers. In establishing the 2016/20 LTIP, the

Compensation Committee relied on analysis performed by Board Advisory with respect to similar plans established by comparable revenue generating companies.

The 2013/142016/20 LTIP is comprised of two components: (i) the right to receive a cash payment and (ii) the grant of a number of unvested restricted shares of our common stock withbased on a specific grant value.known underlying stock price. The purpose of the 2013/142016/20 LTIP is to enhance stockholder return over the long term, through promotion of long-term corporate goals and retention of the Company's management team.team over a performance period of five years. The 2013/142016/20 LTIP vestsis constructed so that 50% of such cash payments and restricted shares are eligible to vest in December 2014. Our2017 at the end of a two calendar year performance period, and the remaining 50% of cash payments and restricted shares are eligible to vest in equal amounts over the following three-year period in December of 2018, 2019 and 2020. The Compensation Committee recognizes that the attainment of long-term goals typically takesfor the Company’s business model requires more than one year to accomplish, and therefore our annual cash bonus plan inadequately incentivizesalone fails to provide sufficient incentives to achieve those long-term goals.

Our Compensation Committee is focused on linking a significant percentage of compensation to performance and putting a majority of its named executive officers' compensation at risk. Accordingly, the long-term incentive plan adopted by our Compensation Committee in January 20132016/20 LTIP states that all of the compensation that could be earned under the plan is at risk and tied to the achievement of performance criteria.

In December 2013, the 2012/13 LTIP vested and paidcriteria over a longer-term period of five years, similar to the 2014/18 Long-Term Incentive Plan, or 2014/18 LTIP, and 2015/19 Long-Term Incentive Plan, or 2015/19 LTIP.

The Compensation Committee structured the performance goals and vesting structure of the 2016/20 LTIP with the objective of aligning the medium-term and longer-term interests of our executive officers with those of our stockholders. The Compensation Committee believes that the acquisition and accumulation of high quality income generating assets is fundamental to ensuring that we are able to have sufficient cash flows to support sustainable long term growth and the ability to provide our stockholders with returns in the future. The Compensation Committee believes that this is such a critical objective while the Company transitions away from the Queen et al. derived revenue that it should be an element in both the annual bonus and long-term incentive plans, but much more heavily weighted in the long-term incentive plans as the key to growth for future years. To reflect this objective, the Compensation Committee determined that the goal for the initial two-year vesting period under the 2016/20 LTIP should be the acquisition of $400 million in income generating assets during such two-year period. Similar to the 2016 Annual Bonus Plan, the determination of the amount of income generating asset acquisitions set as the performance goal was based on our cash flow projections. To incentivize the executive officers to only acquire high quality income generating assets that provide the levels of returns necessary for the cash flows of the business to achieve its longer term objectives, the Compensation Committee designed the performance goals corresponding to the subsequent vesting periods in years three, four in five of the 2016/20 LTIP so that they would measure the quality of the income generating assets acquired in the initial two-year vesting period. The performance goals for these subsequent vesting periods are that the income generating assets acquired in the initial two-year period must generate at least 75% of the projected cash flows, or returns, in the aggregate, that the Company modeled when the acquisitions were consummated. With such structure, the Compensation Committee effectively tied 50% of the potential awards to the accumulation of income generating assets and 50% of the potential awards to the quality of such assets. Generally, we do not present the projected cash flows for income generating assets until the end of the applicable performance period because it would be competitively harmful to do so, which is common practice for multi-year performance awards.

The amount of awards earned by each named executive officers eligible for paymentofficer under the plan. The amount earned under the 2012/132014/18 LTIP and 2015/19 LTIP for fiscal year 2016 is discussed under the section "Long-Term Incentive"“Long-Term Incentive” beginning on page 42.

36.

Summary of Fiscal 2017 Executive Compensation Decisions

In recognition of the Company’s transition into the specialty pharmaceutical industry and the performance of its stock price during 2016, for the fiscal year 2017, Mr. McLaughlin proposed a reduction to his base salary to the Compensation Committee for its consideration. In response to his proposal, Mr. McLaughlin’s base salary was reduced by 12% from $800,065 (his base salary for 2016) to $700,057. The Compensation Committee also reduced the total amount of cash and stock eligible to be earned under the five-year 2017/2021 Long-Term Incentive Plan by approximately 30% from the levels of the 2016/20 LTIP that were originally awarded to Mr. McLaughlin (from $4,300,000 to $3,000,000) prior to his forfeiture with respect to the 2016/10 LTIP described above. In addition, the Compensation Committee decided (i) to keep compensation of the Company’s other named executive officers at the same level as their 2016 compensation, other than Mr. Pietzke who received a raise in connection with a promotion and (ii) shift the cash and stock mix from 70% cash and 30% stock that was used in prior years’ incentive plans to a mix of 60% cash and 40% stock under the 2017/21 LTIP so that the stock component was weighed more heavily in comparison to prior years’ plans. For more details concerning the fiscal 2017 executive compensation determined by the Compensation Committee please see the Company’s Current Report on Form 8-K filed with the SEC on March 10, 2017.

Selected Compensation Governance Highlights

Our executive compensation program includes the followingconsists of an array of compensation governance features and controls, among others:

Our Compensation Committee is comprised solely of independent directors.

Our namedcontrols. Below we summarize certain executive officers receive no supplemental executive retirement benefits or perquisites.

We do not gross-up tax payments forcompensation-related practices that were in effect during 2016 and that we believe serve our named executive officers.

Our chief executive officer's annual cash bonus is 100% attributable to the achievement of corporate goals set by the Compensation Committee and ratified by the Board and is fully at risk of non-payment in the event of unsatisfactory performance, thereby putting 50% of our chief executive officer's annual cash compensation (comprised of base salary and an annual cash bonus opportunity) at risk and tied to the Company's annual performance.

Ourstockholders’ long-term incentive plans have been designed to retain our valuable management, align the interest of management with our stockholders and incentivize long-term performance.

We maintain stock ownership guidelines for our directors and executive officers.

interests.

We use grants of restricted stock in connection with the Company's long-term incentive plans rather than stock options because, in the opinion of our Compensation Committee, use of actual shares, which receive dividends, rather than options, which do not receive dividends, causes our named executive officers and our employees to be more careful with risk and directly aligns their interests with the interests of our stockholders, who are overwhelmingly interested in our payment of dividends.

We strictly prohibit our executive officers from "short sales," hedging and monetization transactions (such as zero-cost collars and forward sale contracts), holding PDL securities in margin accounts and pledging PDL securities as collateral for loans.

What We Do
ü		The Compensation Committee is comprised solely of independent directors.
ü		We structure a substantial portion of officer pay opportunities in the form of “at-risk” performance-based compensation.
ü		Our chief executive officer's annual cash bonus is 100% attributable to the achievement of corporate goals set by the Compensation Committee and ratified by the Board and is fully at risk of non-payment in the event of unsatisfactory performance, thereby putting a minimum of 50% of our chief executive officer's total annual cash compensation (comprised of base salary and an annual cash bonus opportunity) at risk and tied to the Company's annual performance
ü		Our long-term incentive plans have been designed to reward and retain our valuable management, align the interest of management with our stockholders and incentivize long-term performance. Our cash and equity incentive awards are fully “at risk”, earned based on achievement of performance goals that are aligned with our business plan.
ü		We use grants of restricted stock in connection with the Company's long-term incentive plans rather than stock options because, in the opinion of the Compensation Committee, actual shares more closely aligns the interests of our named executive officers and our employees with the interests of our stockholders, and causes them to be more careful with risk.
ü		We conduct an annual say-on-pay vote.
ü		We seek input from, listen to and respond to stockholders.
ü		We have adopted a clawback policy to prevent executive officers involved in certain wrongful conduct from unjustly benefiting from such conduct, and to remove the financial incentives to engage in such conduct.
ü		We utilize robust stock ownership guidelines for executive officers and directors.
ü		We strictly prohibit our executive officers from "short sales," hedging and other monetization transactions (such as zero-cost collars and forward sale contracts), holding the Company’s securities in margin accounts and pledging the Company’s securities as collateral for loans.
ü		The Compensation Committee retains an independent compensation consultant.
What We Do Not Do
û		We do not provide supplemental executive retirement benefits.
û		We do not provide gross-up tax payments for our named executive officers.
û		We do not provide guaranteed bonuses.
û		We do not provide grants of restricted shares or options that vest simply based on the passage of time.

We have adopted a clawback policy to prevent executives involved in certain wrongful conduct from unjustly benefiting from that conduct, and to remove the financial incentives to engage in that conduct.

Compensation decisions and other details are discussed in greater detail in the remainder of this Compensation Discussion & Analysis.

Executive Compensation Program Philosophy, Objectives and Process

Philosophy and Objectives

The Company has a unique business model in the biopharmaceutical industry because we conduct no clinical research, development or commercialization activities, but rather earn substantially all our revenues from royalties and other income generating assets. In order to efficiently conduct our operations, we rely on a small staff of fewer than ten persons, with our principal place of business being in the State of Nevada. To achieve our corporate goals, we need a highly talented and seasoned team of business professionals. We compete with many other companies in seeking to attract and retain a skilled management team and suffer from the disadvantages of being located in a remote location with limited access to top executive talent and having a potentially short corporate existence due to the loss of significant royalty revenues after expiry of the Company's patents in 2014.

The Compensation Committee has structured our executive compensation program to take into account our unique business model, locationleveraged headcount and potentially short corporate existence. Accordingly, the Compensation Committee utilizes four types of compensation to attract and retain a talented management team: base salary, annual cash bonus, long-term incentive compensation and employee benefits.

location.

The goals of our executive compensation established by the Compensation Committee are fourfold:

Structure our compensation plans to effectively motivate our executive leadershipmanagement to achieve the stated goals of the Company and to perform in a manner that maximizes stockholder value.

Offer executive compensation programs that are competitive in the marketplace to enable us to recruit high-quality candidates for senior leadership positions and to retain these executivesexecutive officers through appropriate base compensation, equity and cash awards and incentives.

Strike a balance of short-term and long-term incentives tied to our named executive officers' individual performance and their contribution to our annual and long-term company-wide goals and objectives.

Align the interests of our named executive officers and stockholders through the use of equity incentives, performance metrics and stock ownership requirements of PDL stock. 

requirements.

Our business mission is to enhance stockholder value by: (i)by acquiring and managing our intellectual property to maximizea portfolio of companies, products, royalty agreements and debt facilities in the value of our patent portfoliobiotech, pharmaceutical and related assets and (ii) acquiring new income generating assets.medical device industries. Because these goals are accomplished over a varied period of time,both the short- and long-term, the Compensation Committee has established a compensation program that utilizes a mix of

annual and long-term incentives to assure that management and employees are focused on attainment of the Company's corporate goals, whether these goals are short- or long-term. Ourgoals. The Compensation Committee has not employed any specific policies for allocating compensation between annual and long-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation; although it has determined thatreviews the mix with its current compensation structure adequately accomplishes the Company's objectives.

independent consultant on an annual basis.

 

The Compensation Committee structures our executive compensation program in a manner that it thinksbelieves does not promote inappropriate risk taking by our executives, but ratherexecutive officers, and encourages them to take a balanced approach, focused on achieving our corporate goals and enhancing stockholder return. For example, the Company does not currently award stock options; the Compensation Committee instead utilizes restricted stock awards that capture dividend payments and promote a sense of ownership among management and the Company's employees. Further, our named executive officers are subject to stock ownership guidelines, requiring them to own a defined multiple of their base salary. A more complete discussion regarding the risk assessment process can be found at "Risk Assessment of Compensation Policies" above.

Executive Compensation

Process

When making executive compensation program decisions, ourthe Compensation Committee reviews: (i) the Company's competitive market compensation data;data, (ii) the Company'sour performance against the Company'sour corporate goals and objectives;objectives, (iii) the Company'sour performance relative to itsour comparator companies;companies, (iv) individual officer qualifications and performance based on specified performance metrics;metrics, and (v) the unique circumstances of the Company. To accomplish these reviews, the Compensation Committee engaged Setren, a life sciencesBoard Advisory, an independent compensation consultant, to provide advice on competitive market practice and recommendations for structuring our named executive officers' compensation for fiscal year 2013, and the Company2016. In addition, we engaged ISSa third party corporate governance consultant to provide market performance and performance metric data for fiscal year 20122015 for the Compensation Committee's fiscal year 20132016 compensation decisions.

Comparator Companies

Due to the Company's unique business model and circumstances, ourthe Compensation Committee has found it difficult to establish an appropriate group of peer companies against which to benchmarkfor the purposes of evaluating our named executive officers' compensation. Instead,compensation practices. While our historical business is firmly rooted in the healthcare industry, our shift in focus towards also acquiring and managing a broader array of income generating assets has characteristics customarily associated with the asset management and financial services industries. However, the Compensation Committee directed itsdetermined there was a lack of public companies in the asset management and financial service industries with similar revenues and size to the Company. The Compensation Committee, in consultation with Board Advisory, has determined that companies in the healthcare industry remain the most appropriate peers for executive compensation consultant to prepare a listcomparison purposes because (i) all of comparator companiesour income generating assets are derived from the healthcare industry with revenues between $100 million and $600 million (the comparator companies). The Compensation Committee has determined that such search parameters are appropriate based on(ii) it is the sector from which we primarily draw our management. The Compensation Committee also reviewed a peer group proposed by a third party corporate governance consultant. To that end, in September 2015, the Company primarily draws its managementCompensation Committee directed Board Advisory to analyze companies in the healthcare industry with the same GICS code and revenues between $200 million and approximately $1 billion to recommend a peer group for purposes of analyzing the range of revenue being comparable to the Company's revenue. The resulting list of companies is refined to select those companies that most closely resemble the Company. Company’s compensation practices.

The list of comparator companies is reviewed and updated annually as the previous year's companies may no longer fit the Company's specified parameters.most appropriate parameters for the Company. Certain of the comparator companies approved in December of 2015 for 2016 compensation decisions (Cepheid, Medivation, Inc. and Sagent Pharmaceuticals, Inc.) have since been acquired and/or no longer exist as independent companies. The list of comparator companies was selected based in part on the Company’s size in terms of market capitalization and revenues based on information available to the Compensation Committee in December 2015. The following list of comparator companies for 20132016 compensation decisions demonstrates the Compensation Committee's focus on selecting companies relatively similar in industry sector and size (after taking into account that the Company is unique in its business model and circumstances):

Acorda Therapeutics			ISTA Pharmaceuticals	Salix Pharmaceuticals
Auxilium Pharmaceuticals	Jazz Pharmaceuticals	Santarus
Acorda Therapeutics, Inc. Akorn, Inc. Alkermes plc BioMarin Pharmaceutical Inc. Depomed, Inc.	Momenta Emergent BioSolutions Inc. Genomic Health, Inc. Horizon Pharma plc Impax Laboratories, Inc. Incyte Corporation	Jazz Pharmaceuticals	Spectrum Pharmaceuticals
Dendreon	plc Myriad Genetics,	Inc. Seattle Genetics, Inc. The Medicines Company
Emergent BioSolutions	Onyx Vertex Pharmaceuticals	ViroPharma
Genomic Health	Regeneron Pharmaceuticals	Inc.

Competitive Market Data

OurThe Compensation Committee reviewed the resulting competitive market compensation data prepared by SetrenBoard Advisory from the list of comparator companies. OurThe Compensation Committee has determined that, in order to attract the executive talent necessary to lead the Company, target total direct compensation (comprised of base salary, annual bonus opportunity and long-term incentive opportunity) should be near or at the 50^th percentile of the comparator companies.

 

Performance Data

Our Compensation Committee reviewed the Company's and individual performance relative to established corporate and individual goals when making compensation decisions for fiscal year 2013.  Additionally, the Compensation Committee reviewed and considered pay-for-performance reports prepared by ISS to confirm that the Company's pay practices are reasonable relative to the Company's performance and are in line with industry and market practices and standards. The ISS peer companies for 2013 were:

Acorda Therapeutics	Hi-Tech Pharmacal	Salix Pharmaceuticals
Alkermes	Impax Laboratories	Santarus
Auxilium Pharmaceuticals	Incyte	Seattle Genetics
Cepheid	Jazz Pharmaceuticals	Spectrum Pharmaceuticals
Cubist Pharmaceuticals	Medivation	The Medicines Company
Dendreon	Myriad Genetics	United Therapeutics
Emergent BioSolutions	Questcor Pharmaceuticals	ViroPharma
Genomic Health

Qualifications and Unique Company Existence

In addition to analyzing market compensation and performance data, the Compensation Committee considers aneach individual's qualifications, experience and contribution to the Company when making compensation decisions, as well as the Company'sour unique business model, the difficulty in locating experienced and qualified executive officer candidates in the remote area surrounding the Company'sour headquarters the Company's potentially short-term corporate existence (resulting in our named executive officers' potentially short-term employment with the Company) and the fact that we require our named executive officers to be located proximate to the Company'sour headquarters in Nevada.

No Delegation of Compensation Decisions

The Compensation Committee has not delegated any of its exclusive power to determine matters of executive compensation and benefits. Our chief executive officer assistsand an independent compensation consultant assist the Compensation Committee by presenting proposals and recommendations to the Compensation Committee, information on the Company and individual performance of theour named executive officers and management's perspective and recommendations on compensation matters (our chief executive officer recuses himself from that portion of the Compensation Committee meetings involving deliberation and decision making ofdecision-making pertaining to his own compensation). The Compensation Committee reports to the Board on the major items covered at each Compensation Committee meeting.

Compensation Program Elements

The annual compensation payable to our named executive officers is composedcomprised of four primary elements which are designed together to motivate our named executive officers to meetachieve our strategic goals. These four elements are: (i) base salary, (ii) annual cash bonus, (iii) long-term incentive compensation and (iv) employee benefits.

In addition, we provide other limited perquisites, benefits and severance, but such perquisites and benefits, other than a housing allowance provided to a limited number of employees, are generally available to all of our employees on the same terms as to our named executive officers.

Each element, — and why we pay it, — is discussed below.

Base Salary

Base salary is the fundamental, fixed element of our named executive officers' compensation and the foundation for each named executive officer's total compensation.

In order to attract the executive talent necessary to lead the Company, ourthe Compensation Committee thinksbelieves that base salary should be atnear or nearat the 50^th percentile of similar-sized companies within the biotechnologyhealthcare industry and should be based on an individual's qualifications, experience and contribution to the Company. When setting base salaries for our named executive officers, the Compensation Committee considers the Company's unique business model, the executive officers' prior performance, individual contributions, responsibilities, experience and position, the difficulty in locating experienced and qualified executive officer candidates in the remote area surrounding the Company's headquarters, the Company's

 

potentially short-term corporate existence (resulting in our named executive officers' potentially short-term employment with the Company) and the fact that we require our named executive officers to be located proximate to the Company's headquarters in Nevada.

Base salaries are reviewed annually and may be adjusted by ourthe Compensation Committee taking into account the individual performance of the named executive officer as well as that of the Company as a whole.

For fiscal year 2013,2016, the Compensation Committee reviewed the base salary and performance of each of our named executive officers, the performance of the Company and Setren'sBoard Advisory’s analysis and summary of the market practice of the comparator companies. At the request of the Compensation Committee, Board Advisory analyzed (i) the compensation levels of the comparator companies referenced above and (ii) the 2015 Radford Global Life Sciences Survey for companies with annual revenues in a range between $220 million and $1.4 billion (the “2015 Radford Compensation Survey”). The Compensation Committee determined that the base salaries of twocertain of theour named executive officers for 2015 (Messrs. Garcia, Hart and Pietzke) were lower thannear or at the 50^th percentile at both itsof the Company’s comparator companies and according to the 20122015 Radford Biotechnology Survey, while the other base salaries were at or near the average of the 50^th percentile.Compensation Survey. Based on this review, and a qualitative review of the overall performance of each named executive officer and the unique role of each named executive officer within the Company, the Compensation Committee determined to raiseincrease the base salaries of itsthese named executive officers. The base salaries for Messrs. McLaughlin and Stone were increasedofficers solely by an equivalent cost-of-living adjustment (3.0%) for 2016. For Messrs. McLaughlin and the base salary for Ms. Krumel was increased to at or near the average of the 50^thpercentile. The base salary of Mr. Hart was increased in January 2013 and then again in May 2013 so that it was aligned to reflect his increased contribution to the Company in the Company's income generating asset acquisition strategy.

Upon the hiring of Messrs. Garcia and Montez,Stone, the Compensation Committee withdetermined that their 2015 compensation was slightly below the assistance of Barney,50^th percentile according to the analysis performed an analysis equivalentby Board Advisory. Based on this review, the Compensation Committee determined to that used for its existing named executive officersincrease Mr. McLaughlin’s salary by 5.5% (in addition to the cost-of-living adjustment) and targeted their baseMr. Stone’s salary by 4.5% (in addition to be at or near the 50^th percentile of similar-sized companies within the biotechnology industry. cost-of-living adjustment).

The fiscal year 20132016 base salaries for our named executive officers are set forth in the table below:

Name		Title		2013 Base Salary				% Increase from 2012 Base Salary
John P. McLaughlin		President and Chief Executive Officer		$	695,250				3.0	%
Christopher Stone		Vice President, General Counsel and Secretary		$	401,700				3.0	%
Peter Garcia(1)		Vice President and Chief Financial Officer		$	390,000				—
Danny Hart(2)		Deputy General Counsel and Assistant Secretary		$	306,000				29.1	%
David Montez(1)		Controller and Chief Accounting Officer		$	240,000				—
Caroline Krumel		Former Vice President of Finance and Principal Accounting Officer		$	255,960				8.0	%

(1)

Raises for Messrs. Garcia and Montez absent from this table because their appointments to officers of the Company occurred in 2013.

(2)

Mr. Hart's base salary was increased to $255,960 in January 2013 and to $306,000 in May 2013.

Name		Title		2016 Base Salary		% Increase from 2015 Base Salary
John P. McLaughlin		President and Chief Executive Officer		$800,065		8.5%
Christopher Stone		Vice President, General Counsel and Secretary		$460,350		7.5%
Peter Garcia		Vice President and Chief Financial Officer		$430,301		3.0%
Danny Hart		Vice President, Business Development		$381,924		3.0%
Steffen Pietzke		Controller and Chief Accounting Officer		$267,800		3.0%

Annual Cash Bonus

The second component of our named executive officers' total compensation is the annual cash bonus. The annual cash bonus is intended to encourage high levels of individual and Company performance by rewarding our named executive officers for their individual contributions and our overall performance during the year.

As discussed above, in order to attract the executive talent necessary to lead the Company, ourthe Compensation Committee thinkshas determined that total compensation should be near or at the 50^th percentile of other similar-sized companies within the biotechnologyhealthcare industry and should be based on an individual's qualifications and experience. Furthermore, ourthe Compensation Committee thinksbelieves that a significant portion of a named executive officer's compensation should be based on Company and individual performance. As a result, we provide our named executive officers with an annual cash bonus opportunity that can be earned based on achievement of certain predetermined corporate and, in the case of theour named executive officers other than our chief executive officer, individual performance goals.

As with base salary, when determining annual bonus opportunities, the Compensation Committee considers the Company's unique business model, the executive officers' prior performance, individual contributions, responsibilities, experience and position, the difficulty in locating experienced and qualified executive officer candidates in the remote area surrounding the Company's headquarters, the Company's potentially short-term corporate existence (resulting in our named executive officers' potentially short-term employment with the Company) and the fact that we require our named executive officers to be located proximate to the Company's headquarters in Nevada.

 

Fiscal Year 20132016 Annual Bonus Evaluation

For fiscal year 2013,2016, the Compensation Committee established the 20132016 Annual Bonus Plan. The 20132016 Annual Bonus Plan is composed entirely of cash andcompensation that is compensation entirely at risk, depending on performance. In the event of underperformance, the Compensation Committee may elect to award no bonus. In the event of performance that exceeds the Compensation Committee's performance expectations, the bonus amount is capped at a maximum of 150%200% of the target amount, unless the Compensation Committee determines in its discretion to award amounts outside of and in addition to the 2013 Annual Bonus Plan.

amount.

As part of the 20132016 Annual Bonus Plan, the BoardCompensation Committee reviewed and approved the Company's corporate goals for 2013,2016 and the Compensation Committee reviewed and approved individual goals for our named executive officers, as well as the weighting of corporate and individual goals in determining their bonuses for fiscal year 2013.

2016.

In determining the appropriate ratio of corporate goals and individual goals for measuring overall performance, the Compensation Committee has determined that theour chief executive officer's performance should be measured solely on the basis of the Company's overall performance with respect to corporate goals. With respect to the other named executive officers, the Compensation Committee has determined that the ratio should be heavily skewed toward the attainment of the corporate goals, but also recognized that, in a company with a small staff such as PDL,the Company, some weight should be accorded to the attainment of individual goals because the individual goals contribute toward attainment of the corporate goals.

In connection with itsthe annual cash bonus, the Compensation Committee reviewed the target bonus (as a percentage of base salary) of each named executive officer and Setren'sBoard Advisory’s analysis and summary of the market practice of the comparator companies. TheIn January of 2016, the Compensation Committee determined that the target bonus percentages of Messrs. McLaughlin, Stone, Garcia, Hart and Stone and Ms. KrumelPietzke were near or at the 50^th percentile at bothof its comparator companies andas well as those covered by the 20122015 Radford Biotechnology Survey, and that the target bonus percentage of Mr. Hart was below the 50^th percentile based on his increased contribution to the Company. Based on this review, and a review of the performance of Mr. Hart,accordingly, the Compensation Committee determinedmade no changes to raise his target bonus percentage to a percentage at or near the 50^th percentile of the comparator companies and the Radford Biotechnology Survey.

Upon the hiring of Messrs. Garcia and Montez, the Compensation Committee, with the assistance of Barney, performed an analysis equivalent to that used for its existing named executive officers and targeted their target and maximum bonus percentage to be at or near the 50^th percentile of similar-sized companies within the biotechnology industry. percentages.

The target and maximum bonus (as a percentage of base salary) and the ratio of corporate to individual goals for each named executive officer are set forth in the table below:

Name		Title		2012 Target Bonus				2013 Target Bonus				2013 Maximum Bonus				Ratio of 2013 Corporate Goals/ 2013 Individual Goals
John P. McLaughlin		President and Chief Executive Officer			100	%			100	%			150	%		100%/0
Christopher Stone		Vice President, General Counsel and Secretary			50	%			50	%			75	%		75%/25
Peter Garcia(1)		Vice President and Chief Financial Officer			—				50	%			75	%		75%/25
Danny Hart		Deputy General Counsel and Assistant Secretary			30	%			40	%			60	%		75%/25
David Montez(1)		Controller and Chief Accounting Officer			—				30	%			45	%		75%/25
Caroline Krumel(2)		Former Vice President of Finance and Principal Accounting Officer			—				—				—				—

(1)

The 2013 target bonus percentages for Messrs. Garcia and Montez were not evaluated along with the other named executive officers because at the time of the target bonus evaluation, Messrs. Garcia and Montez were not officers of the Company (although Messrs. Garcia's and Montez's target bonus percentages were evaluated in connection with their respective employment offers). Because Messrs. Garcia and Montez joined the Company mid-year, they were each eligible to receive a prorated portion of their target bonus in 2013.

Name		Title		2015 Target Bonus		2016 Target Bonus		2016 Maximum Bonus		Ratio of 2016 Corporate Goals/ 2016 Individual Goals
John P. McLaughlin		President and Chief Executive Officer		100%		100%		200%		100%/0%
Christopher Stone		Vice President, General Counsel and Secretary		50%		75%		150%		75%/25%
Peter Garcia		Vice President and Chief Financial Officer		50%		75%		150%		75%/25%
Danny Hart		Vice President, Business Development		50%		75%		150%		75%/25%
Steffen Pietzke		Controller and Chief Accounting Officer		45%		45%		90%		60%/40%

 

(2)

Ms. Krumel was not considered for the 2013 Annual Bonus Plan because she resigned from the Company before the plan was adopted.

Corporate Goals

Our corporate goals for 20132016 and the relative weight ascribed to them are set forth in the table below:

2013
2016 Corporate Goal		Weight
Business Development
Optimize ValueAcquisition of Patent Estate Income Generating Assets of at least $200 million			35	% 35%
Implement Corporate Strategy & Business Development Management of Income Generating Assets			50	% 30%
Human Resources Financing and Management of Tax Matters			15	% 35%
Total			100	% 100%

At the time the Compensation Committee set the goals for 2016, the Compensation Committee believed that each of the 2016 annual bonus plan goals was achievable, but only with significant effort. The Compensation Committee monitored the achievement of the 20132016 corporate goals throughout the year.

Individual Goals

Christopher Stone

Goals for 20132016 for Christopher Stone, our Vice President, General Counsel and Secretary, included: (i)effectively manage intellectual property and legal diligence for asset acquisitions, (ii) participate in loan documentation, and participate heavily in royalty acquisition negotiation and documentation, (iii) assist in effective management of audits, (iv) effectively manage investment company regulation matters, (v) provide legal support for potential acquisitions, (vi) effectively manage patent litigation with Roche/Genentech; (ii) perform diligence for income generating asset acquisition opportunities; (iii)Merck, (vii) effectively manage newly approved licensed product issues related to the Queen et al. patents and other acquired patents, as applicable; (iv) strengthen PDL's position with respect to its foreign patents; and (v)Wellstat Diagnostics loan, (viii) manage and address anydevelop the legal department with regard to efficiency and risk management processes and ensuring appropriate staffing and skills given the changing nature of the company, and (ix) effectively manage new disputes and litigation or disputes, as applicable.matters. A specific value was not attached to each goal.

Peter Garcia

Goals for 20132016 for Peter Garcia, our Vice President and Chief Financial Officer, included: (i) assesseffectively manage finance department, (ii) monitor financial markets and build finance group with qualified individuals; (ii) enhance financial reporting process;evaluate debt financing opportunities, (iii) develop knowledge of PDL licensed products;manage tax returns and audits to successful resolution, (iv) develop relationships with PDL's analysts and investment bankers; (v) assume significant responsibility for investor relations; (vi) review and recommend changes to PDL's capital structure; (vii) assist in financial evaluation and analysis of income generating assets;assets, including the addition of internal reporting tools, (v) work with the Board and senior management to develop an acquisition plan that includes compatible acquisition targets or revenue models, (vi) effectively manage and coordinate financial and Sarbanes-Oxley compliance and quarterly reviews with auditors, (vii) continue to meet SEC filing requirements, with reliable and timely filings and no restatements, (viii) maintain and manage D&O insurance renewal.the Company’s investments and ensure compliance with debt and other potential financing requirements, (ix) maintain an active consultative relationship with auditors, tax preparers and other third-party service providers to ensure timely responses and proper risk mitigation, (x) implement enterprise risk mana

gement program and update audit committee, (xi) work with outside tax advisors to investigate corporate structures to reduce the Company’s federal tax burden and (xii) create a sustainable investor relations program including adding at least one research analyst and planning and completing at least one non-deal roadshow during 2016. A specific value was not attached to each goal.

Danny Hart

Goals for 20132016 for Danny Hart, our Deputy General Counsel and Assistant Secretary,Vice President, Business Development, included: (i) manageidentification of potential income generating asset acquisition process, including draftingassets in the pharmaceutical, biopharmaceutical, medtech and negotiation medical device industry, (ii) identificationof terms; (ii) support Compensation Committeepotential income generating assets within universities, (iii) prepare written materials related to the investigation, evaluation, research and opinions of potential income generating assets, (iv) review and prepare financial models of revenue forecasts for income generating assets, (v) attendance at two medical panels on differing areas of clinical practice of potential relevance to the Company’s transaction activities, (vi) structure and negotiate terms of investments in meeting regulatorypotential income generating assets, (vii) manage and governance standards; (iii) directtrack existing income generating assets for which he is designated as the lead, (viii) manage business development subordinates and manage 2013 proxy and annual meeting; (iv) advise Board of Directors and recommend improvements(ix) work with business development team to optimize corporate governance; (v) provide legal support for “34 Act reporting; (vi) manage legal component ofclose one non-US royalty or debt related issues and transactions; (vii) assess and develop asset acquisition activities; and (viii) continue relevant education. transaction.A specific value was not attached to each goal.

David Montez

Steffen Pietzke

Goals for 20132016 for David Montez,Steffen Pietzke, our Controller and Chief Accounting Officer, included: (i) prepareensure timely and accurate SEC financial filings;filings and maintain active NASDAQ listing, (ii) evaluate, research and document proper accounting treatment for new income generating assets and financing transactions (including early conversions) and insure their proper integration into the Company’s accounting records, (iii) effectively manage discussion with Securities and Exchange Commission on the appropriate accounting treatment for income generating assets; (iv) maintain an active consultative relationship with auditors, tax preparers and other 3rd party service providers to ensure timely responses and proper risk mitigation, (v) effectively manage and coordinate financial and Sarbanes-Oxley audits; (iii) researchaudits and determine financial reporting and disclosure impact, prepare technical memos to support the Company's accounting treatment for periodic transactions and newly issued accounting pronouncements and ensure timely adoption of the same; (iv)quarterly reviews with external auditors, (vi) manage preparation of financial statements; (v) direct and coordinate budget management functions; (vi) direct and coordinate debt service payments; (vii) manage federalFederal and state tax returns and audits; work to resolve audits to successful outcome, (vii) assist in analysis of income generating assets, (viii) ensure compliance with local, state assist in monitoring performance of income generating assets; develop a quarterly internal reporting system to measure performance, (ix)oversee payroll processing and federal tax laws and regulations; (ix) ensure compliance with 401(k) reporting requirements.and compliance and (x) maintain active CPA designation, including attending seminars and conferences related to financial instrument accounting. A specific value was not attached to each goal.

2013

2016 Performance Evaluations and Bonus Amounts

The 20132016 Annual Bonus Plan requires that our chief executive officer conduct the performance reviews of our other named executive officers, thatwhich are then reviewed by ourthe Compensation Committee. Following these assessments, ourthe Compensation Committee determines the attainment percent of the goals for our other named executive officers. OurThe Compensation Committee is responsible for evaluating our chief executive officer's performance.

 

In December 2013,2016, the Compensation Committee evaluated the Company's performance against the 20132016 corporate performance goals. The Compensation Committee determined that while corporate performance exceeded 150%75% of the 20132016 corporate goals established for the Company's 20132016 Annual Bonus Plan had been achieved. The Compensation Committee based its decision on the payments underfollowing factors:

“Business Development - Acquisition of Income Generating Assets”. The Company entered into agreements for $259.0 million in new transaction commitments during 2016, including the plan would be limitedacquisition of its first specialty pharmaceutical products through its equity investments in Noden Pharma. The corporate goal was $200.0 million for 2016. In light of the amount committed significantly exceeding the goal, the Committee concluded that the Company had performed at a level of 45% versus the target level of 35%.

“Business Development - Management of Income Generating Assets”. The Company effectively managed most of its existing income generating assets. However, the Company was forced to foreclose on its Direct Flow Medical loan investment after they failed to secure additional financing during 2016. In light of such factors, the Committee concluded that the Company had performed at a level of 15% versus the target level of 30%.

“Financing and Financial Matters”. The Company issued $150.0 million in convertible senior notes in 2016, using a portion of the proceeds to repurchase approximately $120.0 million of its existing convertible senior notes due in 2018. The corporate goal was to effectively optimize the Company’s capital structure as well as to continue to appropriately address tax compliance and examinations on Company income tax matters. Despite the successful issuance of new convertible notes, the Compensation Committee noted that the Company was not able to repurchase as much of the existing convertible senior notes due in 2018 as it had wished. The Compensation Committee concluded that the Company had performed at a level of 25% versus the target level of 35%.

Negative Discretion. Despite a scoring of 85% on the corporate goals referenced above, the Compensation Committee exercised its discretion to reduce the scoring by 10% (resulting in the established plan cap75% score) in acknowledgement of 150%. the Company’s poor stock performance over the year.

The Compensation Committee then reviewed the individual 20132016 performance of each of the Company's named executive officers and, specifically, their level of achievement of the individual goals established for them at the beginning of 2013,2015, their management and leadership, their professional contributions and their technical and organizational contributions. Based on its review, the Compensation Committee determined that:

Mr. McLaughlin, whose 2013 Annual Bonus Plan isbecause his bonus was based solely upon the achievement of corporate goals under the 2016 Annual Bonus Plan with no individual goals component, would receive 150%75% of the target amount;

Mr. Stone achieved all of his individual goals in 20132016 and that, combined with his continued superior performance and contribution in 2013,2016, resulted in Mr. Stone achieving his individual goals for the 20132015 Annual Bonus Plan at 150%125%;

Mr. Garcia achieved all of his individual goals in 20132016 and that, combined with his continued superior performance and contribution in 2013,2016, resulted in Mr. Garcia achieving his individual goals for the 20132016 Annual Bonus Plan at 150%, subject to proration;

125%;

Mr. Hart achieved all of his individual goals in 20132016 and that, combined with his continued superior performance and contribution to the Company in 2013,2016, resulted in Mr. Hart achieving his individual goals for the 2016 Annual Bonus Plan at 150%125%; and receiving an additional one-time discretionary bonus equal to $100,000 to reflect his increased contribution to the Company in the Company's income generating asset acquisition strategy and value to the Company; and

Mr. MontezPietzke achieved all of his individual goals in 20132016 and that, combined with his continued strong performance and contribution to the Company in 2013,2016, resulted in Mr. MontezPietzke achieving his individual goals for the 20132016 Annual Bonus Plan at 105%, subject to proration.

120%.

Following this review, the Compensation Committee approved bonus payments to each of theour named executive officers based on the above determinations:

Name	Title		2013 Annual Bonus Plan Bonus
John P. McLaughlin	President and Chief Executive Officer		$	1,042,875
Christopher Stone	Vice President, General Counsel and Secretary		$	301,275
Peter Garcia(1)	Vice President and Chief Financial Officer		$	239,850
Danny Hart	Deputy General Counsel and Assistant Secretary		$	183,600
David Montez(1)	Controller and Chief Accounting Officer		$	57,942
Caroline Krumel(2)	Former Vice President of Finance and Principal Accounting Officer		$	—

(1)

Bonuses for Messrs. Garcia and Montez were prorated because their appointments to officers of the Company occurred after April 2013, the date after which proration occurs under the 2013 Annual Bonus Plan.

(2)

Ms. Krumel was not eligible to receive a bonus under the 2013 Annual Bonus Plan because she resigned from the Company before the plan was adopted.

Name		Title		2016 Annual Bonus Plan Bonus
John P. McLaughlin		President and Chief Executive Officer		$	600,049
Christopher Stone		Vice President, General Counsel and Secretary		$	302,105
Peter Garcia		Vice President and Chief Financial Officer		$	282,385
Danny Hart		Vice President, Business Development		$	250,638
Steffen Pietzke		Controller and Chief Accounting Officer		$	112,074

Long-Term Incentive

The third component of the Company'sour compensation strategy is long-term incentive plans. In 2016, the Compensation Committee determined that it would be in the best interest of the Company and our stockholders to formulate a plan that would provide for a five-year performance period to appropriately align the performance period with our long-term growth, similar to the long-term incentive plan. As currently arranged,plans of the named executive officers receiveprevious two years. Under the 2016/20 LTIP, 50% of the long-term incentives thatwill be eligible to vest at the endafter a two-year performance period in December of the year following the year in which it was adopted (December 2017), with the long-term incentive plan is adopted, making it subjectremaining 50% eligible to a two-yearvest in equal percentages of 16.67% in December of the third, fourth and fifth years of the five-year performance period.

The performance goals under the 2016/20 LTIP during the first two years of the five-year performance period are generally based on the acquisition or deployment of income-generating assets, and the performance goals for the remaining three years of the five-year performance period are generally based on the quality and return on those acquired assets.

Staggered Plans Promote Retention

The purpose of our long-term incentive planplans is to enhance stockholder return over the long-term, through promotion of long-term corporate goals and retention of the Company's management team. The Compensation Committee recognizes that continuity of a management team is critical to corporate success in most instances and, therefore, it is in the Company's best interestsinterest to retain certain key members of the Company. Ourmanagement. The Compensation Committee has determined that the use of staggered plans increases the effectiveness over time of the retention component of the long-term incentive plans. Rather than implement a single plan that vests at the end of three or morea certain number of years, the Compensation Committee staggers two, two-year

multiple long-term incentive plans that vest in portions

long-term incentive

according to the respective plans. The result is that when a portion of one long-term incentive plan vests, theour named executive officers remain at the midpointdifferent points in vesting under the second,other, staggered plan.

Inplans.

For example, effective January 2012,1, 2015, the Compensation Committee adopted a long-term incentive plan thatthe 2015/19 LTIP, 50% of which vested in December 2013,2016 and paid to eligible named executive officers soon thereafter (the 2012/13 LTIP). Inthe remaining portion of which will vest ratably in December of 2017, 2018 and 2019. Effective January 2013,1, 2016, the Compensation Committee adopted a second long-term incentive plan thatthe 2016/20 LTIP, 50% of which will vest in December 2014, the 2013/14 LTIP, and that overlaps2017, with the recently vested long-term incentive plan. remaining portions vesting ratably in December of 2018, 2019 and 2020.

Performance Goals Aligned with Attaining Long-term Value for Stockholders

Beginning with the long-term incentive plan adopted in 2013 (the 2013/14 LTIP,LTIP), all payments under the Company's long-term incentive plans are performance basedperformance-based and at risk of non-payment in the event of underperformance.

No awards are subject solely to time-based vesting. Performance goals are selected by the Compensation Committee as objective goals most likely to increase stockholder return during the life of the plan. Under the last three long-term incentive plans (including the 2016/20 LTIP), the performance goals are divided between an initial performance goal for the two-year period prior to the first vesting date and subsequent performance goals for the subsequent vesting periods under the plans.

As discussed above, the initial performance goal for the 2016/20 LTIP for the portion that may vest in December 2017 relates to the acquisition of a minimum amount of income generating assets. The subsequent performance goals for the portions that may vest thereafter test the performance of those income generating assets as measured by the amount of cash flows generated in such vesting periods compared to their forecasted performance. By structuring the plan as such, the Compensation Committee’s intent is to set performance goals under the 2016/20 LTIP of (i) acquiring income generating assets in the initial two-year vesting period that provide sufficient cash flows to the Company and (ii) testing the quality of those income generating assets in the subsequent vesting periods, in each case to incentive management to make decisions that continue to return value to its stockholders over the term of the plan. By doing so, the Compensation Committee’s desire is to align the performance goals with the goal of the Company to maximize value for its stockholders over the five-year performance period of the plan.

Plan Components

Under the long-term incentive plans, each named executive officer is eligible for awards consisting of:of (i) restricted stock and (ii) a cash payment. The Compensation Committee fashioneddesigned the long-term incentive planplans to consist of a mix of 70% cash and 30% restricted stock. In determining the appropriate mix of cash and non-cash awards for the 2014/18 LTIP, 2015/19 LTIP and 2016/20 LTIP, the Compensation Committee determined that it was important to include a significant cash component because: (i) the cash component could easily be subjectedit minimizes dilution to adjustments that would incentivize the accomplishment of certain, valuable long-term goalsour stockholders and (ii) in the event that the Company's management successfully accomplishedof a transaction that resulted in a change in control and the loss of employment for some or all of theour named executive officers, the cash component would provide more certain financial support in the likely event that the officers are terminated following such a transaction. The equity component seeks to align management's interest with the interests of our stockholders by ensuring that: (i) only transactions on terms attractive to equity holders are implemented and (ii) management is incentivized to continue our long-term growth objective for the Company's robust dividend payments.purpose of providing valuable returns to our stockholders. The equity component is not subject to adjustment.

In order to attractshares of restricted stock are granted at the executive talent necessary to leadbeginning of the Company, our Compensation Committee thinks that the long-term incentive should be at or near the 50^th percentile of similar-sized companies within the biotechnology industry and should befive-year performance period based on an individual's qualifications, experience and contribution to the Company. When setting the long-term incentive for our named executive officers, the Compensation Committee considers the Company's unique business model, the executive officers' prior performance, individual contributions, responsibilities, experience and position, the difficulty in locating experienced and qualified executive officer candidates in the remote area surrounding the Company's headquarters, the Company's potentially short-term corporate existence (resulting in our named executive officers' potentially short-term employment with the Company) and the fact that we require our named executive officers to be located proximate to the Company's headquarters in Nevada. After considering the above and setting the value of the long-term incentive for each named executive officer, the Compensation Committee discounts the amount of the long-term incentive as recognition that the plans have historically vested after only two years.

Equity

participant’s target award.

Subject to the acceleration provisions set forth in the severance agreements of theour named executive officers and the long-term incentive plans described below, theeach cash award and restricted stock award vests at the end of the two-yeartimes specified in each plan, provided that the named executive officer remains employed by the Company through such date. Under the 2013/142014/18, 2015/19 LTIP and 2016/20 LTIPs, in addition to remaining employed by the Company through the end of the two-year plan,applicable vesting dates, the Company must meet minimum two-year performance goals described above over the applicable performance periods for the restricted stock awardand cash awards to vest. The performance goals for the 2013/14 LTIP relate to the acquisition of income generating assets and the salevest and/or be paid. Payment of the Company.

cash payment under the long-term incentive plans will be made on or as soon as practicable after the applicable vesting dates.

Dividend payments and other distributions made on the restricted stock during the vesting periodperiods of the restricted stock will accrue through the vesting periodperiods and will be paid, plus interest, to the named executive officer upon vesting of the restricted stock award. If the minimum performance goals for the 2013/14 LTIPlong-term incentive plan’s restricted stock awardawards are not met, the accrued dividend payments and other distributions will be forfeited. InThe Company believes it is important to incentivize the executives to work towards a change in control of the Company in the event the Board of Directors decides to pursue a sale. Accordingly, in the event of a change in control, the long-term incentive plan directsplans direct that vesting of the restricted stock award, including any accrued but unpaid dividends or other distributions, plus interest, and the target cash payment, including any adjustments (as discussed below) earned on the target cash payment, will accelerate and paybe paid in connection with the change in control.

Cash

Payment of the cash payment under the long-term incentive plan will be made on or as soon as practicable after the plan vests, provided that the named executive officer remains employed by the Company through the vesting date. While the 2012/13 LTIP only required the passage of time to vest and pay at the target award amounts, the Compensation Committee fashioned the 2013/14 LTIP so that payments under the plan will not occur unless the Company meets minimum

 

performance goals. The performance goals for

2014/18 LTIP Payments in 2016

With the 2013/14 LTIP relate to the acquisition of income generating assets and the sale of the Company and were selected as the goals most likely to increase stockholder return during the life of the plan.

With each long-term incentive plan, the Compensation Committee adopts performance goals that allow for incremental payment increases expressed as a percentage of the target cash payment when target goals are exceeded (the adjustment).  In the case of the 2013/142014/18 LTIP, all payments under the Company's long-term incentive planssuch plan are performance based and at risk of non-payment in the event of underperformance.  The amountperformance goal with respect to the vesting of 16.67% of the adjustment and2014/18 LTIP award on December 12, 2016, the achievementthird year of eachthe five-year performance goal are determined by the Compensation Committee, in its sole discretion, providedperiod, was that the aggregate maximum cash payment that any named executive officer may receive undergenerated by the 2012/13 LTIP may not exceedincome generating assets acquired over the initial two times his target cash payment. The adjustment for eachcalendar-year performance goal under the 2012/13 LTIP is set forth in the table below:

Performance Goal	Adjustment
Protection of EuropeanUnion Queen et al. Patent Rights	40%
Sale or Merger of Company (premium to current share price 20%-50%)	20-50%
Royalty rights acquisition and financing, if applicable (total NPV of $75M, $100M or $150M = 30%, 40% or 50% adjustment, respectively)	30-50%

The Compensation Committee determined the above adjustment percentages by assessing the value delivered to the Company's stockholders as well as the difficulty of attaining eachperiod of the specified performance goals. For example, the Compensation Committee has determined that protecting our European patent rights would take considerable time and effort from the Company and would at the same time deliver a significant value to our stockholders. The goals related to a saleplan be least 75% of the Company or acquiring royalty rights are goals that are equally complicated to achieve, but slightly less complicated to achieve than the goal related to protection of our European patent rights. However, both of those goals have the potential to deliver more value to our stockholders; therefore, their adjustment percentage range is ultimately higher than the adjustment percentageamount projected for protection of our European patent rights.

such assets.

In December 2013,2016, the Compensation Committee reviewed the Company's performance against the LTIP performance goals and determined that, while the Company's attainment of the specified performance goals exceeded two times the target performance establishedthis goal for the Company's 2012/13 LTIP, the Compensation Committee would limit the adjustment under the 2012/13 LTIP to the established cap of two times.2016 performance period. The Compensation Committee arrived at 200% by determiningdetermined that the performance goal had been met in recognition that the Company had achieved: (i)received $84.0 million in cash in 2016 from the Protectionincome generating assets acquired during 2014 and 2015. The amount of European patents adjustmentcash originally projected to be received in excess2016 from such assets was $52 million. The performance goals for the remaining performance periods of the targeted 40% and (ii)2014/18 LTIP will similarly measure the royalty rights acquisition adjustment well in excessquality of 50%, the Company having achieved $368 million of transactions, but limited the adjustment by established cap.income generating assets. The Board subsequently ratified the Compensation Committee's adjustmentawards and, upon vesting, theour named executive officers received the awards set forth in the table below:

Name		Title		Target Cash				Incremental Cash Adjustment				Value of Restricted Stock Award				Number of Shares Underlying Restricted Stock Award
John P. McLaughlin		President and Chief Executive Officer		$	469,000			$	469,000			$	201,000				31,955
Christopher Stone		Vice President, General Counsel and Secretary		$	258,000			$	258,000			$	110,600				17,583
Peter Garcia(1)		Vice President and Chief Financial Officer		$	—			$	—			$	—			$	—
Danny Hart(2)		Deputy General Counsel and Assistant Secretary		$	122,710			$	122,710			$	52,590				7,476
David Montez(1)		Controller and Chief Accounting Officer		$	—			$	—			$	—			$	—
Caroline Krumel(3)		Former Vice President of Finance and Principal Accounting Officer		$	—			$	—			$	—			$	—

below for the 2016 vesting period of the 2014/18 LTIP:

Name		Title		Target Cash				Cash Awarded				Target Value of Restricted Stock Award(1)				Target Number of Shares Underlying Restricted Stock Award(2)		Number of Shares Vested under Restricted Stock Award
John P. McLaughlin		President and Chief Executive Officer		$	381,334			$	381,334			$	163,429			19,962		19,962
Christopher Stone		Vice President, General Counsel and Secretary		$	97,724			$	97,724			$	41,882			5,116		5,116
Peter Garcia		Vice President and Chief Financial Officer		$	96,948			$	96,948			$	41,549			5,075		5,075
Danny Hart		Vice President, Business Development		$	78,435			$	78,435			$	33,615			4,375		4,375
Steffen Pietzke(3)		Controller and Chief Accounting Officer		$	—			$	—			$	—			—		—

	(1)	Target Value of Restricted Stock Award is the value of the restricted stock on the date granted assuming 100% of the award is achieved. The realized value of such restricted stock may be more or less based on (i) the value of the restricted stock when it actually vests over the life of the 2014/18 LTIP and (ii) the number of shares that actually vest.
	(2)	For Messrs. McLaughlin, Stone and Garcia, and Montez werefor the initial grant of $33,751 in restricted stock to Mr. Hart, a price of $8.22 per share was used to determine the number of shares granted in 2014, which reflected the closing price of the Company’s shares on April 10, 2014, as per the terms of the 2014/18 LTIP applicable to officers employed as of the beginning of the year. For the subsequent grant of $2,504 in restricted stock to Mr. Hart based on his promotion in 2014, a price of $9.31 per share was used, reflecting the closing price of the Company’s shares on May 28, 2014, as per the terms of his promotion.
	(3)	Mr. Pietzke was not eligible to receive payment under the 2012/132014/18 LTIP because theyhe joined the Company after eligibility under the plan expired.

2015/19 LTIP Payments

Similar to the 2014/18 LTIP, all payments under the 2015/19 LTIP are performance based and at risk of non-payment in the event of underperformance. Any adjustment in amounts with respect to achievement of the performance goals is determined by the Compensation Committee, in its sole discretion. The performance goal with respect to the vesting of 50% of the 2015/19 LTIP award on December 12, 2016 was the deployment of $500 million in the acquisition of income generating assets over the initial two calendar-year performance period of 2015 and 2016.

In December 2016, the Compensation Committee reviewed the Company's performance against the 2015/19 LTIP performance goal for the initial performance period of 2015 and 2016 and determined that the 2015/19 LTIP award for such period should be awarded at 92%. The Compensation Committee, in its sole discretion, determines any award under the 2015/19 LTIP by measuring performance against the stated goal, as well as assessing the difficulty of attaining the specified performance goal. The Compensation Committee arrived at 92% in recognition that the Company had achieved the acquisition of income generating assets and new loans for existing investments with an aggregate value of approximately $462 million, which represents 92% of

the goal of $500 million during the initial two-year performance period. The performance goals for the remaining performance periods of the 2015/19 LTIP will measure the quality of the income generating assets, which pursuant to the plan, must produce cash flows of at least 80% of the projections the Company used at the time such acquisitions were consummated. The Board subsequently ratified the Compensation Committee's awards and, upon vesting, our named executive officers received the awards set forth in the table below for the initial two-year performance period of the 2015/19 LTIP: 

Name		Title		Target Cash				Cash Awarded				Target Value of Restricted Stock Award(1)				Target Number of Shares Underlying Restricted Stock Award(2)		Number of Shares Vested under Restricted Stock Award
John P. McLaughlin		President and Chief Executive Officer		$	1,148,595			$	1,056,707			$	492,255			64,601		59,433
Christopher Stone		Vice President, General Counsel and Secretary		$	382,655			$	352,043			$	163,995			24,200		22,266
Peter Garcia		Vice President and Chief Financial Officer		$	379,615			$	349,245			$	162,692			24,008		22,090
Danny Hart		Vice President, Business Development		$	355,250			$	326,830			$	152,250			23,060		21,217
Steffen Pietzke		Controller and Chief Accounting Officer		$	116,960			$	107,578			$	50,127			8,294		7,631

	(2) (1)	To reflect Mr. Hart's increased contribution toTarget Value of Restricted Stock Award is the Company invalue of the Company's income generating asset acquisition strategy, the Company granted two catch-up restricted stock awards of:on the date granted assuming 100% of the award is achieved. The realized value of such restricted stock may be more or less based on (i) $75,000 under the 2013/14value of the restricted stock when it actually vests over the life of the 2015/19 LTIP and (ii) $22,390 under the 2012/13 LTIP. Also includes the related increased amountnumber of Mr. Hart's target cash under the 2012/13 LTIP. shares that actually vest.

(3) (2)

Ms. KrumelFor Messrs. McLaughlin, Stone, Garcia, and Hart, a price of $7.62 per share was not eligibleused to receive payment underdetermine the 2012/13 LTIP because she resigned frominitial number of shares granted, which reflected the closing price of the Company’s shares on January 28, 2015 per the terms of the 2015/19 LTIP. For Mr. Pietzke, a price of $6.18 per share was used to determine the initial number of shares granted, which reflected the closing price of the Company’s shares on July 6, 2015 per the terms of his employment offer. For the subsequent grant of $75,690 in restricted stock to Mr. Stone, $75,089 in restricted stock to Mr. Garcia, $87,000 in restricted stock to Mr. Hart and $9,113 in restricted stock to Mr. Pietzke, a price of $4.95 per share was used, reflecting the closing price of the Company’s shares on September 29, 2015, as per the terms of each such officer’s retention bonus. The retention bonuses were awarded by the Compensation Committee in September 2015 in light of concerns about retaining management beyond 2015 given the transitional phase of the Company beforeand dramatic decrease in revenue expected after the plan vested. first quarter of 2016.

Employee Benefits

The final component of the Company's compensation strategy is the inclusion of certain employee benefits. We provide our employees, including our named executive officers, with customary benefits, including medical, dental, vision and life insurance coverage, short-term and long-term disability coverage and the ability to participate in our 401(k) plan, which provides for a Company matching contribution up to certain limits. The costs of our insurance coverage benefits are largely borne by us; however, employees pay portions of the premiums for some of these benefits. We think that these benefits are of the type customarily offered to employees by our peer group and in our industry.

This element of compensation is intended to provide assurance of financial support in the event of illness or injury and encourage retirement savings through a 401(k) plan.

All Other Compensation

We generally do not offer perquisites to our named executive officers. However, due

Due to the Company's unique business model, the difficulty in locating experienced and qualified executive officer candidates in the remote area surrounding the Company's headquarters the Company's potentially short-term corporate existence (resulting in our named executive officers' potentially short-term employment with the Company) and the fact that we require our named executive officers to be located proximate to the Company's headquarters in Nevada, the Compensation Committee decided to provide housing assistance to Mr. Garcia ($4,000 per month), Mr. Hart ($2,500 per month) and Mr. MontezPietzke ($1,5002,500 per month).

for 2016. We generally do not offer any other perquisites to our named executive officers.

Severance Benefits

In May 2011, ourthe Board of Directors authorized the Company to enter into severance agreements with each of its named executive officers that provide for certain compensation, benefits and accelerated vesting rights if the named executive officer's employment is terminated without "cause" or should he or she resignsresign for "good reason," as those terms are defined in the applicable severance agreement.

Specifically, theeach severance agreements provideagreement provides that, upon termination of the named executive officer's employment without cause or his or her resignation for good reason, the named executive officer will be entitled to receive, subject to the execution of a general release of all claims against the Company, the following severance payment and benefits: (i) a percentage of the named executive officer's annual base salary, (ii) a percentage of the named executive officer's target annual bonus for the year in which the separation occurs, (iii) payment of the named executive officer's COBRAConsolidated Omnibus Budget Reconciliation Act (COBRA) premiums, if any, for a certain number of months, (iv) acceleration of vesting of a pro-rated amount of the restricted stock awards granted pursuant to any outstanding long-term incentive plan, (v) payment of any accrued but unpaid dividends or other distributions, plus interest, paid on the restricted stock awards whichthat are accelerated pursuant to clause (iv) and (vi) payment of a pro-rated amount of the named executive officer's target cash payment that the named executive officer is eligible to earn under any outstanding long-term incentive plan. Any severance payments under thea severance agreementsagreement will be paid in a lump sum within 5five days after the effective date of the named executive officer's release of claims.

The Company adopted the severance agreements because it recognizes that they are necessaryin recognition of the need to attract and retain a talented management team.team to a unique location. The Board of Directors determined the amount of severance benefits for each of itsour named executive officers upon recommendation of the Compensation Committee, which, in consultation with its former compensation consultant, Setren, Smallberg & Associates, Inc., determined the recommended amounts based on the 50^th percentile of its comparator companies' practices.

A calculation of these severance benefits can be found at "Potential“Executive Officer Compensation-Potential Payments upon Termination or Change in Control" below.

Other Executive Compensation Matters

Stock Ownership Guidelines

Our

The Board has determined that ownership of our common stock by our officers promotes a focus on long-term growth and aligns the interests of our officers with those of our stockholders. As a result, ourthe Board adopted stock ownership guidelines stating that our chief executive officer and our other five most-highly-compensated officers (based on annual base salary), should maintain certain minimum ownership levels of our common stock.

Our

In 2016, our stock ownership guidelines encouragerequire the following levels of ownership among our named executive officers:

Our chief executive officer, chief financial officer and general counsel should own shares of common stock with a value of at least one time such executive officer's annual base salary not later than sevenfive years after the date the person is initially appointed to such position; and

Our other executive officers should own shares of common stock with a value of at least one-half thesuch executive officer's annual base salary not later than sevenfive years after the date the person is initially appointed to such position.

OurThe Board carefully evaluated market practices among its comparator companies and compensation standards set by independent third parties when setting the ownership levels by our named executive officers. OurThe Board determined that the amounts are near or at the 50^th percentile of its comparator companies and further determined that the levels are appropriate after considering that the Company uses only restricted stock awards as its equity compensation component, thereby resulting in far fewer shares granted to itsour named executive officers than is typical at most companies where stock options are granted. We believe that

As of December 31, 2016, all of our named executive officers will bewere in compliance with this requirement not later than seven years afterrequirement. 

In April 2017, the date each person was appointedBoard revised the stock ownership guidelines as they apply to such positionour chief executive officer. The Board increased the ownership threshold applicable to our chief executive officer from a number of shares of common stock with a value equal to at least his or her annual base salary to a number of shares of common stock with a value equal to at least three times his or her annual base salary. No other changes to the Company.

guidelines were made.

The Board is permitted, in its discretion, to waive the application of our stock ownership guidelines to any covered individual if it determines that, as a result of the individual's personal circumstances, application of theour stock ownership guidelines would result in a hardship.

Hedging and Pledging Prohibition against Certain Equity Transactions

Our Trading Compliance Policy strictly prohibits our executive officers from "short sales," hedging and monetization transactions (such as zero-cost collars and forward sale contracts), which allow a party to lock in much of the value of their stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock, holding PDLthe Company’s securities in margin accounts and pledging PDLthe Company’s securities as collateral for loans. "Short sales," which are sales of shares of common stock by a person who does not own the shares at the time of the sale, evidence an expectation that the value of the shares will decline. We prohibit our officers from entering into "short sales" because such transactions signal to the market that thesuch officer has no confidence in us or our short-term prospects and may reduce thesuch officer's incentive to improve our performance.

In addition, Section 16(c) of the Exchange Act expressly prohibits executive officers and directors from engaging in "short sales."

Consideration of the Stockholders' Advisory Vote on Compensation

Our current policy is to hold an annual advisory vote on executive compensation. Our Board and our Compensation Committee value the opinions of our stockholders, and we believe that it is important for our stockholders to have an opportunity to vote on this proposal annually, which is consistent with the frequency preferred by our stockholders. This year, we are submitting to our stockholders the opportunity to vote for the second time on the preferred frequency with which we hold advisory votes on executive compensation.

At the Company's annual meeting of stockholders held in May 2013,June 2016, an overwhelming majority of the votes cast on the say-on-pay proposal were votedcast in favor of the proposal. In reviewing our executive compensation program, the Compensation Committee considered, among other things, the 20132016 vote results and other feedback we received from stockholders. After careful consideration, the Compensation Committee did not alter the structure of the executive compensation program as a result of the 20132016 vote results. In addition, taking into consideration the voting results from the 2011 annual meeting concerning the frequency of the stockholders advisory votes on executive compensation, our current policy is to hold an annual advisory vote on executive compensation until the next advisory vote on the frequency of such votes.

Compensation Recovery

Clawback Policy

In January 2013, ourthe Board adopted a policy for recoupment of incentive compensation, (theor the clawback policy).policy. The Board adopted the clawback policy to prevent executivesexecutive officers involved in certain wrongful conduct from unjustly benefiting from that conduct, and to remove the financial incentives to engage in such conduct. The clawback policy generally requires an executive officer who is involved in wrongful conduct that results in a restatement of the Company's financial statements to

repay to the Company up to the full amount of any incentive compensation based on the financial statements that were subsequently restated. Incentive compensation includes bonuses or awards under the Company's annual cash bonus plans, long-term incentive plans and equity incentive plans.

Our

The Board intends to review itsthe clawback policy for compliance with the Securities and Exchange Commission's final rules related to compensation recovery, when such rules are adopted.

Tax and Accounting Considerations

In determining executive compensation, the Compensation Committee also considers, among other factors, the possible tax consequences to the Company and to its executives.our executive officers. However, to maintain maximum flexibility in designing compensation programs, the Compensation Committee will not limit compensation to those levels or types of compensation that are intended to be deductible. For example, ourthe Compensation Committee considers the provisions of Section 162(m) of the Code and related Treasury Department regulations that restrict deductibility for federal income tax purposes of executive compensation paid to our chief executive officer and each of our three other most-highly-compensated executive officers holding office at the end of any year, other than our chief executive officer and other than our chief financial officer, to the extent such compensation exceeds $1,000,000 for any of such officers in any year and does not qualify for an exception under the statute or regulations. The members of ourthe Compensation Committee qualify as outside directors for purposes of exempting executive compensation from the limits on deductibility under Section 162(m). of the Code. The Compensation Committee has determined that our interests are best served in certain circumstances by providing compensation that does not qualify as performance-based compensation under Section 162(m) of the Code and, accordingly, has grantedmay grant such compensation whichthat may be subject to the $1,000,000 annual limit on deductibility, including base salary, annual cash bonuses and time-vested restricted stock.

In addition to Section 162(m), of the Code, Sections 280G and 4999 of the Code provide that executive officers, persons who hold significant equity interests and certain other highly-compensated service providers may be subject to an excise tax if they receive payments or benefits in connection with a change in control of the Company that exceeds certain prescribed limits, and that the Company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. Further, Section 409A of the Code imposes certain additional taxes on service providers who enter into certain deferred compensation arrangements that do not comply with the requirements of Section 409A.409A of the Code. We have not agreed to pay any named executive officer, a "gross-up" or other reimbursement payment for any tax liability that he or she might owe as a result of the application of SectionsSection 280G, 4999 or 409A of the Code.

The Compensation Committee also considers the accounting consequences to the Company of different compensation decisions and the impact of certain arrangements on stockholder dilution. However, neither of these factors by themselves will compel a particular compensation decision.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion & Analysis contained in this proxy statement. Based on this review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion & Analysis be included in this proxy statement and incorporated into our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

2016.

Respectfully Submitted By:

The Compensation Committee

Harold Selick, Ph.D. (chairperson)

Jody S. Lindell

Paul W. Sandman

Samuel R. Saks, M.D.

EXECUTIVE OFFICER COMPENSATION

Summary Compensation Table

The compensation earned by our chief executive officer, our chief financial officer, our three other highest compensated executive officers serving as of the end of 2016 (the named executive officers) and our executive officers who departed the Company in 2013, for the last three fiscal years is set forth in the table below:

Name and Title		Year				Salary				Bonus				Stock Awards(1)				Non-Equity Incentive Plan Compensation				All Other Compensation				Total
John P. McLaughlin		2013				$	695,250			$	469,000	(2)		$	201,000			$	1,511,875	(3)		$	10,000	(4)		$	2,887,125
President and Chief		2012				$	675,000			$	469,000			$	201,000			$	1,188,050			$	10,000			$	2,543,050
Executive Officer		2011				$	585,000			$	—			$	201,000			$	368,550			$	9,800			$	1,164,350
Christopher Stone		2013				$	401,700			$	258,000	(2)		$	110,600			$	559,275	(5)		$	10,000	(6)		$	1,339,575
Vice President, General		2012				$	390,000			$	258,000			$	110,600			$	464,475			$	10,000			$	1,233,075
Counsel and Secretary		2011				$	360,635			$	—			$	110,600			$	173,438			$	9,800			$	654,473
Peter Garcia		2013				$	248,182	(7)		$	—	(8)		$	105,000			$	239,850	(9)		$	40,581	(10)		$	633,613
Vice President and
Chief Financial Officer
Danny Hart		2013				$	286,888	(11)		$	222,710	(12)		$	97,390	(13)		$	306,310	(14)		$	40,000	(15)		$	953,298
Deputy General Counsel		2012				$	237,000			$	58,600			$	30,200			$	135,658			$	40,000			$	501,458
and Assistant Secretary		2011				$	186,300			$	—			$	25,100			$	39,123			$	38,652			$	289,175
David Montez		2013				$	105,000	(16)		$	—	(8)		$	30,200			$	57,942	(9)		$	14,720	(17)		$	207,862
Controller and Chief
Accounting Officer
Caroline Krumel		2013				$	41,544	(18)		$	—			$	—			$	—			$	5,302	(19)		$	46,846
Former Vice President of		2012				$	237,000			$	80,400			$	30,200			$	147,756			$	52,000			$	547,356
Finance and Principal		2011				$	220,417			$	2,000			$	30,200			$	62,100			$	47,800			$	362,517
Accounting Officer

Name and Title		Year		Salary					Bonus				Stock Awards(1)					Non-Equity Incentive Plan Compensation					All Other Compensation					Total
John P. McLaughlin		2016		$	800,065				$	—			$	1,300,000				$	2,038,090		(2)		$	10,000		(3)		$	4,148,155
President and Chief		2015		$	737,591				$	—			$	984,510				$	2,134,034				$	10,000				$	3,866,135
Executive Officer		2014		$	716,108				$	—			$	984,510				$	2,359,424				$	10,000				$	4,070,042
Christopher Stone		2016		$	460,350				$	—			$	327,990				$	751,872		(4)		$	10,000		(5)		$	1,550,212
Vice President, General		2015		$	428,233				$	—			$	327,990				$	709,987				$	10,000				$	1,476,210
Counsel and Secretary		2014		$	415,760				$	—			$	252,300				$	1,059,315				$	10,000				$	1,737,375
Peter Garcia		2016		$	430,301				$	—			$	325,384				$	728,578		(6)		$	58,000		(7)		$	1,542,263
Vice President and Chief		2015		$	417,768				$	—			$	325,384				$	694,933				$	58,000				$	1,496,085
Financial Officer		2014		$	405,600				$	—			$	250,295				$	1,000,668				$	58,000				$	1,714,563
Danny Hart		2016		$	381,924				$	—			$	304,500				$	655,903		(8)		$	40,000		(9)		$	1,382,327
Vice President,		2015		$	370,800				$	—			$	304,500				$	611,938				$	40,000				$	1,327,238
Business Development		2014		$	343,075				$	—			$	217,500				$	776,550				$	40,000				$	1,377,125
Steffen Pietzke		2016		$	267,800				$	—			$	100,254				$	219,652		(10)		$	40,000		(11)		$	627,706
Controller and Chief		2015		$	134,924				$	—			$	100,256				$	87,750				$	37,754				$	360,684
Accounting Officer

(1)

Amounts in this column represent the grant date fair value of restricted stock awards granted in 2013, 20122016, 2015 and 2011,2014, calculated in accordance with FASB ASC Topic 718. The amounts shown disregard estimated forfeitures. Assumptions used in the calculation of these amounts for awards granted in 2013, 20122016, 2015 and 20112014 are included in Note 1415 to the Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on March 3, 2014.1, 2017. The 2013, 20122016, 2015 and 20112014 restricted stock grants were made in connection with the Company'sCompany’s adoption of the 2013/142016/20 LTIP, thata portion of which will vest in December 2014,2017, the 2012/132015/19 LTIP, 50% of which vested and paid in December 2016, the 2014/18 LTIP, 16.67% of which vested and paid in December 2016 and 50% of which vested and paid in December 2015, and the 2013/14 LTIP that vested and paid in December 2013, and the 2011/12 LTIP that vested and paid in December 2012,2014, respectively.

ely.

(2)	Consists of the target cash component of the 2012/13 LTIP that vested and paid in December 2013.

(3)

Consists of: (i) payments under the 20132016 Annual Bonus Plan - $1,042,875 and$600,049, (ii) the performance adjustmentperformance-based cash payment under the 2012/132014/18 LTIP - $469,000. $381,334 and (iii) the performance-based cash payment under the 2015/19 LTIP - $1,056,707.

	(4)
(3)	Consists of matching contributions we made to Mr. McLaughlin'sMcLaughlin’s 401(k) plan.

	(5)
(4)	Consists of: (i) payments under the 20132016 Annual Bonus Plan - $301,275 and$302,105, (ii) the performance adjustmentperformance-based cash payment under the 2012/132014/18 LTIP - $258,000. $97,724 and (iii) the performance-based cash payment under the 2015/19 LTIP - $352,043.

	(6)
(5)	Consists of matching contributions we made to Mr. Stone'sStone’s 401(k) plan.

(7)

(6)

Mr. Garcia's annual base salary for 2013 was $390,000. The amount of salary reflected in this column is lower than his annual base salary because Mr. Garcia joinedConsists of: (i) payments under the Company in April 2013. 2016 Annual Bonus Plan - $282,385, (ii) the performance-based cash payment under the 2014/18 LTIP - $96,948 and (iii) the performance-based cash payment under the 2015/19 LTIP - $349,245.

	(8)
(7)	Messrs. Garcia and Montez were not eligible to receive payment under the 2012/13 LTIP because they joined the Company after eligibility under the plan expired.

(9)

Bonuses for Messrs. Garcia and Montez were prorated because their appointments to officers of the Company occurred after April 2013, the date after which proration occurs under the 2013 Annual Bonus Plan. Messrs. Garcia and Montez were not eligible to receive payment under the 2012/13 LTIP because they joined the Company after eligibility under the plan expired.

(10)

Consists of: (i) matching contributions we made to Mr. Garcia'sGarcia’s 401(k) plan - $10,000 and (ii) the housing allowance paid to Mr. Garcia - $30,581. $48,000.

	(11)
(8)	Mr. Hart's base salary was increased to $255,960 in January 2013 and to $306,000 in May 2013.

(12)

Consists of: (i) the target cash component of the 2012/13 LTIP that vested and paid in December 2013 - $122,710 and (ii) a discretionary one-time bonus - $100,000.

(13)

Consists of the grant date fair value of the catch-up grants of restricted stock awarded to Mr. Hart in 2013 representing: (i) $75,000 under the 2013/14 LTIP and (ii) $22,390 under the 2012/13 LTIP.

(14)

Consists of: (i) payments under the 20132016 Annual Bonus Plan - $183,600 and$250,638, (ii) the performance adjustmentperformance-based cash payment under the 2012/132014/18 LTIP - $122,710. $78,435 and (iii) the performance-based cash payment under the 2015/19 LTIP - $326,830.

	(15)
(9)	Consists of: (i) matching contributions we made to Mr. Hart'sHart’s 401(k) plan - $10,000 and (ii) the housing allowance paid to Mr. Hart - $30,000.

(16)

(10)

Consists of: (i) payments under the 2016 Annual Bonus Plan - $112,074 and (ii) the performance-based cash payment under the 2015/19 LTIP - $107,578. Mr. Montez's annual base salary for 2013Pietzke was $240,000. The amount of salary reflected in this column is lower than his annual base salarynot eligible to receive payment under the 2014/18 LTIP because Mr. Montezhe joined the Company in July 2013. after eligibility under the plan expired.

	(17)
(11)	Consists of: (i) matching contributions we made to Mr. Montez'sPietzke’s 401(k) plan - $6,833$10,000 and (ii) the housing allowance paid to Mr. MontezPietzke - $7,887. $30,000.

(18)

Ms. Krumel's annual base salary for 2013 was $255,960. The amount of salary reflected in this column is lower than her annual base salary because Ms. Krumel departed the Company in January 2013. It also reflects accrued vacation paid to Ms. Krumel upon her departure from the Company.

(19)

Consists of: (i) matching contributions we made to Ms. Krumel's 401(k) plan - $1,802 and (ii) the housing allowance paid to Ms. Krumel - $3,500.

Grants of Plan-Based Awards During 2013

2016

The following table lists each grant of plan-based awards made by PDL during 20132016 to our named executive officers:

						Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)												Estimated Future Payouts Under Equity Incentive Plan Awards(2)								All Other Stock Awards: Number of Shares of				Grant Date Fair Value of Stock
Name		Grant Date				Threshold(3)				Target				Maximum				Threshold(4)				Target				Stock				Awards
John P. McLaughlin		1/23/2013																	—				29,911							$	201,000
			N/A				—			$	695,250			$	1,390,500
		N/A					—			$	469,000			$	1,407,000
Christopher Stone		1/23/2013																	—				16,458							$	110,600
		N/A					—			$	200,850			$	401,700
		N/A					—			$	258,000			$	774,000
Peter Garcia		5/23/2013																	—				12,575							$	105,000
		N/A					—			$	195,000			$	390,000
		N/A					—			$	245,000			$	735,000
Danny Hart		1/23/2013																	—				4,494							$	30,200
		5/21/2013		(5)															—				5,352				2,675			$	67,190
		N/A					—			$	122,400			$	244,800
		N/A					—			$	175,000			$	525,000
David Montez		8/5/2013																	—				3,670							$	30,200
		N/A					—			$	72,000			$	144,000
		N/A					—			$	70,400			$	211,200
Caroline Krumel(6)		N/A					—			$	—			$	—				—				—				—				—

				Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)											Estimated Future Payouts Under Equity Incentive Plan Awards(2)						All Other Stock Awards: Number of Shares of Stock		Grant Date Fair Value of Stock Awards
Name		Grant Date		Threshold(3)			Target				Maximum				Threshold(4)			Target
John P. McLaughlin		1/26/2016													—			403,727					$	1,300,000
		N/A		—			$	800,065			$	1,600,130
		N/A		—			$	3,000,000			$	—
Christopher Stone		1/26/2016													—			101,860					$	327,990
		N/A		—			$	345,263			$	690,525
		N/A		—			$	765,310			$	—
Peter Garcia		1/26/2016													—			101,051					$	325,384
		N/A		—			$	322,726			$	645,452
		N/A		—			$	759,229			$	—
Danny Hart		1/26/2016													—			94,565					$	304,500
		N/A		—			$	286,443			$	572,886
		N/A		—			$	710,500			$	—
Steffen Pietzke		1/26/2016													—			31,135					$	100,254
		N/A		—			$	120,510			$	241,020
		N/A		—			$	233,920			$	—

(1)

The amounts in the below columns relate to the Company's 2013Company’s 2016 Annual Bonus Plan (second row for each named executive officer) and 2013/142016/20 LTIP (third row for each named executive officer). Actual amounts paid in December 20132016 under the 20132016 Annual Bonus Plan were based on ourthe Compensation Committee'sCommittee’s review of corporate performance and individual achievements in December 20132016 and are included in the "Non-Equity“Non-Equity Incentive Plan Compensation"Compensation” column of the Summary Compensation Table above.

(2)	These numbers of shares of stock relate to the shares of restricted stock granted to our named executive officers in 20132016 under the 2013/142016/20 LTIP that vestsbegin vesting in December 2014. 2017.

(3)	The amounts in the "Threshold"“Threshold” column reflect the minimum amount that could be awarded under the 20132016 Annual Bonus Plan and the 2013/142016/20 LTIP.

(4)	The amounts in the "Threshold"“Threshold” column reflect the minimum amount of shares that could be awarded under the 2013/142016/20 LTIP.

(5)

Consists of the grant date fair value of the catch-up grants of restricted stock awarded to Mr. Hart in 2013 representing: (i) $44,800 under the 2013/14 LTIP and (ii) $22,390 under the 2012/13 LTIP.

(6)

Ms. Krumel departed the Company in January 2013 and therefore was and is ineligible to receive payment under any plan.

Outstanding Equity Awards at December 31, 2013

2016

The following table sets forth information concerning stock options and stock awards held by the named executive officers as of December 31, 2013:

		Option Awards																Stock Awards(1)
Name		Number of Securities Underlying Unexercised Options Exercisable				Number of Securities Underlying Unexercised Options Unexercisable				Option Exercise Price				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested				Market Value of Shares or Units of Stock That Have Not Vested
John P. McLaughlin			15,085				—			$	5.414			10/8/2015					—				—
			—				—				—				—				29,911			$	252,449
Christopher Stone			—				—				—				—				16,458			$	138,906
Peter Garcia			—				—				—				—				12,575			$	106,133
Danny Hart			—				—				—				—				9,846			$	83,100
David Montez			—				—				—				—				3,670			$	30,975
Caroline Krumel(3)			—				—				—				—				—			$	—

2016:

		Option Awards												Stock Awards(1)
Name		Number of Securities Underlying Unexercised Options Exercisable			Number of Securities Underlying Unexercised Options Unexercisable			Option Exercise Price			Option Expiration Date			Number of Shares or Units of Stock That Have Not Vested			Market Value of Shares or Units of Stock That Have Not Vested(2)
John P. McLaughlin		—			—			—			—			508,250			$	1,077,490
Christopher Stone		—			—			—			—			136,290			$	288,935
Peter Garcia		—			—			—			—			135,208			$	286,641
Danny Hart		—			—			—			—			126,371			$	267,907
Steffen Pietzke		—			—			—			—			39,430			$	83,592

(1)	Reflect restricted stock granted to our named executive officers in 20132014, 2015 and 2016 under the 2013/142014/18 LTIP, that vests in December 2014. the 2015/19 LTIP and the 2016/20 LTIP, respectively.

(2)	TheMarket value is the “closing” price of the shares subject to this option were granted with respect to Mr. McLaughlin's service as an outside director prior to being appointed President and Chief Executive Officer of our Company. on December 30, 2016 ($2.12).

(3)

Ms. Krumel departed the Company in January 2013.

Option Exercises and Stock Vested in 2013

2016

No options were exercised by the named executive officers during 2013.2016. The following table sets forth the restricted shares granted to Mr. McLaughlin, Mr. Stone and Mr. Hartthe named executive officers under the 2012/132014/18 LTIP, fully16.67% of which vested in 2013:

		Stock Awards
Name		Number of Shares Acquired on Vesting				Value Realized on Vesting
John P. McLaughlin			31,955			$	257,557
Christopher Stone			17,583			$	141,719
Peter Garcia			—			$	—
Danny Hart			7,476			$	60,257
David Montez			—			$	—
Caroline Krumel			—			$	—

December 2016 and the 2015/19 LTIP, 50% of which vested in December 2016:

		Stock Awards
Name		Number of Shares Acquired on Vesting			Value Realized on Vesting(1)
John P. McLaughlin		79,395			$	163,554
Christopher Stone		27,382			$	56,407
Peter Garcia		27,165			$	55,960
Danny Hart		25,592			$	52,720
Steffen Pietzke		7,631			$	15,720

(1)    Value based on the “closing” price of the shares on the vesting date, December 12, 2016 ($2.06).

Potential Payments upon Termination or Change in Control

Termination

Our named executive officers are employed "at“at will."” However, they are eligible to receive certain severance payments and benefits upon their termination of employment under certain defined circumstances. The amount and type of such severance payments and benefits depends upon the specific circumstances under which a named executive officer'sofficer’s employment terminates. There are two general categories of termination:

	•	Voluntary Termination/For Cause Termination: includes voluntary termination of employment by the named executive officer (other than in connection with a resignation for good reason) and termination of the named executive officer's employment by us for cause.

•

Involuntary Termination without Cause: includes termination of the named executive officer's employment by us for reasons not constituting cause, such as due to a company-wide or departmental reorganization, or resignation by the named executive officer for good reason.

Voluntary Termination/For Cause Termination: includes voluntary termination of employment by the named executive officer (other than in connection with a resignation for good reason) and termination of the named executive officer’s employment by us for cause.

Involuntary Termination without Cause: includes termination of the named executive officer’s employment by us for reasons not constituting cause, such as due to a company-wide or departmental reorganization, or resignation by the named executive officer for good reason.

Payments and benefits receivable upon an involuntary termination without cause or a voluntary termination for good reason are governed by the Severance Agreement between the applicable named executive officer and PDL. A copy of the form of our severance agreement is available as an exhibit to our Current Report on Form 8-K filed with the SEC on May 26, 2011 (the Severance Agreement).

For purposes of determining an individual'sindividual’s eligibility for the various severance payments and benefits available under the Severance Agreement, the following definitions are relevant:

A resignation for "good reason"“good reason” will be deemed to occur should a named executive officer resign from his or her employment with us for any of the following reasons without such named executive officer'sofficer’s informed written consent (following a notice and cure period):

	•	a material diminution in the authority, duties or responsibilities of the named executive officer, causing the position to be of materially lesser rank or responsibility within PDL;

	•	a requirement that the named executive officer report to a corporate officer or other employee less senior than the named executive officer's previous report;

	•	a material reduction in annual base salary of the named executive officer, unless reductions comparable in amount and duration are concurrently made for all other PDL officers; or

a material diminution in the authority, duties or responsibilities of the named executive officer, causing the position to be of materially lesser rank or responsibility within PDL;

a requirement that the named executive officer report to a corporate officer or other employee less senior than the named executive officer’s previous report;

a material reduction in annual base salary of the named executive officer, unless reductions comparable in amount and duration are concurrently made for all other PDL officers; or

any action or inaction by PDL that constitutes, with respect to the named executive officer, a material breach of the applicable offer letter.

A named executive officer'sofficer’s employment will be deemed to have been terminated for "cause"“cause” if such termination occurs by reason of the named executive officer's:

	•	intentional theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit or falsification of any PDL documents or records;

	•	material failure to abide by the PDL's code of conduct or other written policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct);

	•	material and intentional unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of PDL (including, without limitation, improper use or disclosure of PDL confidential or proprietary information);

	•	willful act that has a material detrimental effect on PDL's reputation or business;

officer’s:

intentional theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit or falsification of any PDL documents or records;

material failure to abide by the PDL’s code of conduct or other written policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct);

material and intentional unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of PDL (including, without limitation, improper use or disclosure of PDL confidential or proprietary information);

willful act that has a material detrimental effect on PDL’s reputation or business;

repeated failure or inability to perform any reasonable assigned duties after written notice from the chief executive officer of, and a reasonable opportunity to cure, such failure or inability;

material breach of any employment, service, non-disclosure, non-competition, non-solicitation or other similar agreement between the named executive officer and PDL, which breach is not cured pursuant to the terms of such agreement or within twenty (20) days of receiving written notice of such breach; or

	•	material breach of any employment, service, non-disclosure, non-competition, non-solicitation or other similar agreement between the named executive officer and PDL, which breach is not cured pursuant to the terms of such agreement or within twenty (20) days of receiving written notice of such breach; or

conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the named executive officer'sofficer’s ability to perform his or her duties with PDL.

Specifically, the Severance Agreement provides that, upon termination of the named executive officer'sofficer’s employment without cause or his or her resignation for good reason, the executive officer will be entitled to receive, subject to the execution of a general release of all claims against the Company, the following severance payment and benefits:

	•	a percentage of the executive officer's annual base salary;

	•	a percentage of the executive officer's target annual bonus for the year in which the separation occurs;

	•	payment of the executive officer's COBRA premiums, if any, for a certain number of months;

	•	acceleration of vesting of a pro-rated amount of the restricted stock awards granted pursuant to any outstanding long-term incentive plan;

	•	payment of any accrued but unpaid dividends or other distributions, plus interest, paid on the restricted stock awards which are accelerated pursuant to the above clause; and

a percentage of the executive officer’s annual base salary;

a percentage of the executive officer’s target annual bonus for the year in which the separation occurs;

payment of the executive officer’s COBRA premiums, if any, for a certain number of months;

acceleration of vesting of a pro-rated amount of the restricted stock awards granted pursuant to any outstanding long-term incentive plan;

payment of any accrued but unpaid dividends or other distributions, plus interest, paid on the restricted stock awards which are accelerated pursuant to the above clause; and

payment of a pro-rated amount of the named executive officer'sofficer’s target cash payment that the executive officer is eligible to earn under any long-term incentive plan.

The following table sets forth the amount of severance each named executive officer is eligible to receive pursuant to the first, second and third bullet points above:

Name		Title		% of Annual Base Salary		% of Target Annual Bonus		Number of Months of COBRA Premiums
John P. McLaughlin		President and Chief Executive Officer		100%		100%		12
Christopher L. Stone		Vice President, General Counsel and Secretary		100%		75%		12
Peter Garcia		Vice President and Chief Financial Officer		100%		75%		12
Danny Hart		Deputy General Counsel and Assistant Secretary		100%		75%		12
David Montez		Controller and Chief Accounting Officer		100%		75%		12
Caroline Krumel		Former Vice President and Principal Accounting Officer		100%		75%		12

Name		Title		% of Annual Base Salary		% of Target Annual Bonus		Number of Months of COBRA Premiums
John P. McLaughlin		President and Chief Executive Officer		100%		100%		12
Christopher L. Stone		Vice President, General Counsel and Secretary		100%		75%		12
Peter Garcia		Vice President and Chief Financial Officer		100%		75%		12
Danny Hart		Vice President, Business Development		100%		75%		12
Steffen Pietzke		Controller and Chief Accounting Officer		100%		75%		12

Any severance payments under the Severance Agreement will be paid in a lump sum within 5 days after the effective date of the named executive officer'sofficer’s release of claims. In the event of a change in control, the Severance Agreement may not be terminated until 24 months following the date of the change in control. Otherwise, a change in control has no bearing on the benefits received by a named executive officer upon termination.

Change in Control

A change in control, however, will trigger acceleration and vesting ofawards granted under the Company'sCompany’s long-term incentive plans.  Under the 2013/142014/18 LTIP, "changethe 2015/19 LTIP and the 2016/20 LTIP, “change in control"control” is deemed to have occurred as of the first day after any one or more of the following conditions is satisfied:

any "person"“person” (as such term is used toin Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company, becomes the "beneficial owner"“beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of (i) the outstanding shares of common stock of the

Company or (ii) the combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of directors; or

the Company (i) is party to a merger, consolidation or exchange of securities which results in the holders of voting securities of the Company outstanding immediately prior thereto failing to continue to hold at least 50% of the combined voting power of the voting securities of the Company, the surviving entity or a parent of the surviving entity outstanding immediately after such merger, consolidation or exchange, or (ii) sells or disposes of all or substantially all of the Company’s assets (or any transaction or combination of transactions having similar effect is consummated), or (iii) the individuals constituting the Board immediately prior to such merger, consolidation, exchange, sale or disposition shall cease to constitute at least 50% of the Board, unless the election of each director who was not a director prior to such merger, consolidation, exchange, sale or disposition was approved by a vote of at least two-thirds of the directors then in office who were directors prior to such merger, consolidation, exchange, sale or disposition.

		Company or (ii) the combined voting power of the Company's then-outstanding securities entitled to vote generally in the election of directors; or
	•	the Company (i) is party to a merger, consolidation or exchange of securities which results in the holders of voting securities of the Company outstanding immediately prior thereto failing to continue to hold at least 50% of the combined voting power of the voting securities of the Company, the surviving entity or a parent of the surviving entity outstanding immediately after such merger, consolidation or exchange, or (ii) sells or disposes of all or substantially all of the Company's assets (or any transaction or combination of transactions having similar effect is consummated), or (iii) the individuals constituting the Board of Directors immediately prior to such merger, consolidation, exchange, sale or disposition shall cease to constitute at least 50% of the Board of Directors, unless the election of each director who was not a director prior to such merger, consolidation, exchange, sale or disposition was approved by a vote of at least two-thirds of the directors then in office who were directors prior to such merger, consolidation, exchange, sale or disposition.

Notwithstanding the foregoing, a transaction will not be considered a change in control unless the transaction qualifies as a "change“change in control"control” as defined in Treasury Regulation Section 1.409A-3(i)(5)(i).

Table of Termination and Change in Control Payments

The following table sets forth the amount of severance each of our current named executive officers would be eligible to receive upon a hypothetical termination or change in control on December 31, 2013,2016, and does not include accrued wages or vacation pay that would be payable to a named executive officer upon a termination:

Benefits and Payments upon Separation(1)		Termination for Cause or Voluntary Termination without Good Reason				Involuntary Termination without Cause or Voluntary Termination for Good Reason					Change in Control without Termination
John P. McLaughlin
Salary		$	—			$	695,250				$	—
Bonus		$	—			$	695,250				$	—
2013/14 LTIP		$	—			$	847,676		(2)		$	1,677,401	(3)
COBRA Benefits		$	—			$	22,825				$	—
Total		$	—			$	2,261,001				$	1,677,401
Christopher Stone
Salary		$	—			$	401,700				$	—
Bonus		$	—			$	150,638				$	—
2013/14 LTIP		$	—			$	466,331		(4)		$	922,784	(5)
COBRA Benefits		$	—			$	31,378				$	—
Total		$	—			$	1,050,047				$	922,784
Peter Garcia
Salary		$	—			$	390,000				$	—
Bonus		$	—			$	146,250				$	—
2013/14 LTIP		$	—			$	428,113		(6)		$	848,679	(7)
COBRA Benefits		$	—			$	31,408				$	—
Total		$	—			$	995,771				$	848,679
Danny Hart
Salary		$	—			$	306,000				$	—
Bonus		$	—			$	91,800				$	—
2013/14 LTIP		$	—			$	309,959		(8)		$	614,009	(9)
COBRA Benefits		$	—			$	31,232				$	—
Total		$	—			$	738,991				$	614,009
David Montez
Salary		$	—			$	240,000				$	—
Bonus		$	—			$	54,000				$	—
2013/14 LTIP		$	—			$	123,290		(10)		$	244,377	(11)
COBRA Benefits		$	—			$	31,350				$	—
Total		$	—			$	448,640				$	244,377

Benefits and Payments upon Separation		Termination for Cause or Voluntary Termination without Good Reason				Involuntary Termination without Cause or Voluntary Termination for Good Reason						Change in Control without Termination
John P. McLaughlin
Salary		$	—			$	800,065					$	—
Bonus		$	—			$	800,065					$	—
2014/18 LTIP		$	—			$	574,009			(1)		$	850,358			(2)
2015/19 LTIP		$	—			$	671,355			(3)		$	1,285,548			(4)
2016/20 LTIP		$	—			$	1,467,394			(5)		$	3,855,901			(6)
COBRA Benefits		$	—			$	30,853					$	—
Total		$	—			$	4,343,741					$	5,991,807
Christopher Stone
Salary		$	—			$	460,350					$	—
Bonus		$	—			$	258,947					$	—
2014/18 LTIP		$	—			$	147,101			(7)		$	217,920			(8)
2015/19 LTIP		$	—			$	226,628			(9)		$	433,960			(10)
2016/20 LTIP		$	—			$	373,424			(11)		$	981,253			(12)
COBRA Benefits		$	—			$	27,474					$	—
Total		$	—			$	1,493,924					$	1,633,133
Peter Garcia
Salary		$	—			$	430,301					$	—
Bonus		$	—			$	242,044					$	—
2014/18 LTIP		$	—			$	145,933			(13)		$	216,190			(14)
2015/19 LTIP		$	—			$	224,827			(15)		$	430,511			(16)
2016/20 LTIP		$	—			$	370,457			(17)		$	973,457			(18)
COBRA Benefits		$	—			$	40,895					$	—
Total		$	—			$	1,454,457					$	1,620,158
Danny Hart
Salary		$	—			$	381,924					$	—
Bonus		$	—			$	214,832					$	—
2014/18 LTIP		$	—			$	126,710			(19)		$	187,712			(20)
2015/19 LTIP		$	—			$	211,053			(21)		$	404,136			(22)
2016/20 LTIP		$	—			$	346,680			(23)		$	910,978			(24)
COBRA Benefits		$	—			$	40,803					$	—
Total		$	—			$	1,322,002					$	1,502,826
Steffen Pietzke
Salary		$	—			$	267,800					$	—
Bonus		$	—			$	90,383					$	—
2014/18 LTIP		$	—			$	—					$	—
2015/19 LTIP		$	—			$	70,265			(25)		$	134,544			(26)
2016/20 LTIP		$	—			$	114,140			(27)		$	299,926			(28)
COBRA Benefits		$	—			$	40,877					$	—
Total		$	—			$	583,465					$	434,470

(1)	Ms. Krumel is excluded from the table because she voluntarily left the Company in January 2013. She was not awarded any severance benefits because her departure was voluntarily and not for Good Reason.

(2)

Assumes that the cashRatable portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $847,676 (cash award increased by 200% based on accomplished income generating asset transactions, as limited by the plan's captarget cash payment - $703,500;$516,878 and accelerated vesting of equity - $126,225; payment of accrued dividends - $17,947; interest paid on accrued dividends - $4; with the cash award and vesting of equity having been prorated by 50%). $57,131.

(3)

(2)

Assumes that theTotal target cash portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $1,677,401 (cash award increased by 200% based on accomplished income generating asset transactions, as limited by the plan's cappayment - $1,407,000;$765,722 and accelerated vesting of equity - $252,449; payment of accrued dividends - $17,947; interest paid on accrued dividends - $5). $84,636.

(4)

(3)

Assumes that the cashRatable portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $466,331 (cash award increased by 200% based on accomplished income generating asset transactionstarget cash payment - $599,834 and sale of the company, as limited by the plan's cap - $387,000; accelerated vesting of equity - $69,453; payment of accrued dividends - $9,875; interest paid on accrued dividends - $3 with the cash award and vesting of equity having been prorated by 50%). $71,521.

(5)

(4)

Assumes that theTotal target cash portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $922,784 (cash award increased by 200% based on accomplished income generating asset transactions, as limited by the plan's cappayment - $774,000;$1,148,595 and accelerated vesting of equity - $138,906; payment of accrued dividends - $9,875; interest paid on accrued dividends - $3). $136,953.

(6)

(5)

Assumes that the cashRatable portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $428,113 (cash award increased by 200% based on accomplished income generating asset transactions, as limited by the plan's captarget cash payment - $367,500;$1,141,674 and accelerated vesting of equity - $53,067; payment of accrued dividends - $7,545; interest paid on accrued dividends - $1 with the cash award and vesting of equity having been prorated by 50%). $325,720.

(7)

(6)

Assumes that theTotal target cash portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $848,679 (cash award increased by 200% based on accomplished income generating asset transactionspayment - $3,000,000 and sale of the company, as limited by the plan's cap - $735,000; accelerated vesting of equity - $106,133; payment of accrued dividends - $7,545; interest paid on accrued dividends - $1). $855,901.

(8)

(7)

Assumes that the cashRatable portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $309,959 (cash award increased by 200% based on accomplished income generating asset transactions, as limited by the plan's captarget cash payment - $262,500;$132,460 and accelerated vesting of equity - $41,550; payment of accrued dividends - $5,908; interest paid on accrued dividends - $1 with the cash award and vesting of equity having been prorated by 50%). $14,641.

(9)

(8)

Assumes that the Total target cash portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $614,009 (cash award increased by 200% based on accomplished income generating asset transactionspayment - $196,231 and sale of the company, as limited by the plan's cap - $525,000; accelerated vesting of equity - $83,100; payment of accrued dividends - $5,908; interest paid on accrued dividends - $1). $21,689.

(10)

(9)

Assumes that the cashRatable portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $123,290 (cash award increased by 200% based on accomplished income generating asset transactions, as limited by the plan's captarget cash payment - $105,600;$199,835 and accelerated vesting of equity - $15,488; payment of accrued dividends - $2,202; interest paid on accrued dividends - $0 with the cash award and vesting of equity having been prorated by 50%). $26,793.

(11)

(10)

Assumes that theTotal target cash portion of the 2013/14 LTIP is increased by 200% to account for the probable accomplishment of certain performance adjustments totaling 200%: $244,377 (cash award increased by 200% based on accomplished income generating asset transactionspayment - $382,655 and sale of the company, as limited by the plan's cap - $211,200; accelerated vesting of equity - $30,975;$51,305.

(11)	Ratable portion of target cash payment - $291,245 and accelerated vesting of accrued dividendsequity - $2,202; interest paid on accrued dividends - $0). $82,179.

(12)	Total target cash payment - $765,310 and accelerated vesting of equity - $215,943.

(13)	Ratable portion of target cash payment - $131,408 and accelerated vesting of equity - $14,525.

(14)	Total target cash payment - $194,672 and accelerated vesting of equity - $21,518.

(15)	Ratable portion of target cash payment - $198,247 and accelerated vesting of equity - $26,580.

(16)	Total target cash payment - $379,614 and accelerated vesting of equity - $50,897.

(17)	Ratable portion of target cash payment - $288,931 and accelerated vesting of equity - $81,526.

(18)	Total target cash payment - $759,229 and accelerated vesting of equity - $214,228.

(19)	Ratable portion of target cash payment - $114,190 and accelerated vesting of equity - $12,520.

(20)	Total target cash payment - $169,165 and accelerated vesting of equity - $18,547.

(21)	Ratable portion of target cash payment - $185,523 and accelerated vesting of equity - $25,530.

(22)	Total target cash payment - $355,250 and accelerated vesting of equity - $48,886.

(23)	Ratable portion of target cash payment - $270,387 and accelerated vesting of equity - $76,293.

(24)	Total target cash payment - $710,500 and accelerated vesting of equity - $200,478.

(25)	Ratable portion of target cash payment - $61,081 and accelerated vesting of equity - $9,184.

(26)	Total target cash payment - $116,960 and accelerated vesting of equity - $17,584.

(27)	Ratable portion of target cash payment - $89,021 and accelerated vesting of equity - $25,119.

(28)	Total target cash payment - $233,920 and accelerated vesting of equity - $66,006.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Unless otherwise specified, the following table sets forth certain information regarding the beneficial ownership of our common stock as of April 4, 2014,17, 2017, with respect to our officers and directors, and as of the date noted below for those persons or groups that beneficially hold more than 5% of our outstanding shares of common stock. The table contains ownership information for:

	•	each person who is known by us, based on the records of our transfer agent and relevant documents filed with the SEC, to own beneficially more than 5% of the outstanding shares of our common stock;

	•	each member of or nominee to our Board;

	•	each of our named executive officers; and

each person who is known by us, based on the records of our transfer agent and relevant documents filed with the SEC, to own beneficially more than 5% of the outstanding shares of our common stock;

each member of or nominee to the Board;

each of our named executive officers; and

all members of ourthe Board and our executive officers as a group.

Except as indicated in the footnotes to this table, we thinkbelieve that the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable. Unless otherwise specified, the address of each named individual in the table below is the address of the Company:

Name of Beneficial Owner or Identity of Group		Shares Beneficially Owned(1)				Percent of Outstanding(2)
BlackRock, Inc.(3)			19,013,307				11.9	%
40 East 52nd Street
New York, NY 10022
The Bank of New York Mellon Corporation(4)			15,562,279				9.7	%
One Wall Street, 31st Floor
New York, NY 10286
The Charger Corporation(5)			12,439,187				7.8	%
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
Renaissance Technologies Corp.(6)			11,665,354				7.3	%
800 Third Avenue
New York, NY 10022
The Vanguard Group, Inc.(7)			8,738,301				5.4	%
100 Vanguard Blvd.
Malvern, PA 19355
David W. Gryska(8)			5,981				*
John P. McLaughlin(9)			183,783				*
Jody S. Lindell(10)			42,644				*
Paul W. Sandman(11)			91,770				*
Harold Selick, Ph.D.(10)			37,298				*
Christopher Stone(12)			76,670				*
Peter Garcia(13)			12,575				*
Danny Hart(14)			23,131				*
David Montez(15)			3,670				*
All officers and directors as a group (9 persons)(16)			477,522				*

*	less than 1%

Name of Beneficial Owner or Identity of Group		Shares Beneficially Owned(1)			Percent of Outstanding(2)
BlackRock, Inc.(3)		14,271,784			8.8	%
40 East 52nd Street
New York, NY 10022
The Vanguard Group, Inc.(4)		13,352,288			8.3	%
100 Vanguard Blvd.
Malvern, PA 19355
Renaissance Technologies Corp.(5)		12,875,700			8.0	%
800 Third Avenue
New York, NY 10022
Paul Edick(6)		99,486			*
David W. Gryska(6)		104,434			*
John P. McLaughlin(7)		1,404,463			*
Jody S. Lindell(6)		141,097			*
Dr. Samuel Saks(6)		99,113			*
Paul W. Sandman(6)		147,723			*
Harold Selick, Ph.D.(6)		141,751			*
Christopher Stone(8)		448,746			*
Peter Garcia(9)		472,842			*
Danny Hart(10)		387,236			*
Steffen Pietzke(11)		165,690			*
All executive officers and directors as a group (11 persons)(12)		3,612,581			2.2	%
* less than 1%

(1)

Beneficial ownership is determined in accordance with SEC rules. Shares whichthat the person or group has the right to acquire within 60 days after April 4, 2014,17, 2017, are deemed to be outstanding in calculating the share ownership of the person or group. Beneficial ownership calculations for 5% stockholders are based on the most recently publicly-filed Schedule 13Ds or 13Gs, which 5% stockholders are required to file with the SEC and which generally set forth their ownership interests, as amended for known changes.

(2)	Percentage is based on 160,378,182161,774,446 shares of common stock outstanding as of April 4, 2014.17, 2017. Shares to which the person or group has the right to acquire within 60 days after April 4, 2014,17, 2017, are deemed to be outstanding in calculating the share ownership of the person or group but are not deemed to be outstanding as to any other person or group.

(3)

All information included in this footnote and table regarding the beneficial ownership of BlackRock, Inc., a Delaware corporation, is based on our review of the Schedule 13G/A filed with the SEC on January 10, 2014.25, 2017. Blackrock, Inc. discloses the identity of the subsidiaries whichthat acquired the securities being reported by Blackrock, Inc. as BlackRock Advisors (UK) Limited;(Netherlands) B.V.; BlackRock Advisors, LLC; BlackRock Asset Management Canada Limited; BlackRock Asset Management DeutschlandIreland Limited; BlackRock Asset Management Schweiz AG; BlackRock Fund Advisors (owns 5% or greater of the outstanding shares of PDL reported on the Schedule 13G/A)Financial Management, Inc.; BlackRock Fund Management Ireland Limited;Advisors; BlackRock Institutional Trust Company, N.A.; BlackRock International Limited; BlackRock Investment Management (Australia) Limited; BlackRock Investment Management (UK) Ltd; BlackRock Investment Management, LLC; and BlackRock Japan Co Ltd. Blackrock Life Limited.

(4)

All information included in this footnote and table regarding the beneficial ownership of The Bank of New York Mellon Corporation (BNY)Vanguard Group, Inc. (VG), a New York corporation; MBC Investments Corporation (MBC), a Delaware corporation; BNY Mellon Investment Management (Jersey) Limited (BMIMJL), possessing undeclared citizenship; BNY Mellon Investment Management (Europe) Limited (BMIMEL), possessing undeclared citizenship; BNY Mellon Investment Management Europe Holdings Limited (BMIMEHL), possessing undeclared citizenship; BNY Mellon International Asset Management Group Limited (BNYM), possessing London citizenship; Newton Management Limited (NML), possessing London citizenship; and Newton Investment Management Limited (NIML), possessing London citizenship;Pennsylvania corporation, is based on our review of the Schedule 13G/A filed with the SEC on January 29, 2014.

		Sole voting power (shares)				Shared voting power (shares)				Sole dispositive power (shares)				Shared dispositive power (shares)
BNY			14,439,642				3,200				15,410,279				14,460
MBC			13,051,964				—				14,308,441				—
BMIMJL			11,367,210				—				12,562,441				—
BMIMEL			11,367,210				—				12,562,441				—
BMIMEHL			11,367,210				—				12,562,441				—
BNYM			11,367,210				—				12,562,441				—
NML			11,367,210				—				12,562,441				—
NIML			11,248,510								12,306,701

(5)

All information included in this footnote and table regardingFebruary 10, 2017. VG discloses the identity of the subsidiaries that acquired the securities being reported by VG as Vanguard Fiduciary Trust Company (VFTC), a wholly-owned subsidiary of VG, being the beneficial ownershipowner of First Trust Portfolios L.P. (FTP)189,285 shares, and Vanguard Investments Australia, Ltd. (VIA), an Illinois limited partnership; First Trust Advisors L.P. (FTA), an Illinois limited partnership; and The Charger Corporation (TCC), an Illinois corporation, is based on our reviewa wholly-owned subsidiary of VG, being the Schedule 13G filed with the SEC on January 8, 2014. The Charger Corporation is the General Partnerbeneficial owner of both First Trust Portfolios L.P. and First Trust Advisors L.P. First Trust Portfolios L.P. acts as sponsor of certain unit investment trusts which hold shares of the Company. 43,025 shares.

		Sole voting power (shares)				Shared voting power (shares)				Sole dispositive power (shares)				Shared dispositive power (shares)
FTP			—				—				—				11,195,815
FTA			—				1,243,372				—				12,439,187
TCC			—				1,243,372				—				12,439,187

		Sole voting power (shares)			Shared voting power (shares)			Sole dispositive power (shares)			Shared dispositive power (shares)
VG		203,310			30,000			13,133,003			219,285

	(6)
(5)	All information included in this footnote and table regarding the beneficial ownership of Renaissance Technologies LLC (RTC), a Delaware limited liability company, and Renaissance Technologies Holdings Corporation (RTHC), a Delaware corporation, is based on our review of the Schedule 13G/A filed with the SEC on February 13, 2014.14, 2017. RTHC maintains a majority ownership of RTC.

		Sole voting power (shares)			Shared voting power (shares)			Sole dispositive power (shares)			Shared dispositive power (shares)
RTC		12,875,700			0			12,875,700			0
RTHC		12,875,700			0			12,875,700			0

		Sole voting power (shares)				Shared voting power (shares)				Sole dispositive power (shares)				Shared dispositive power (shares)
RTC			10,956,842				—				11,665,050				304
RTHC			10,956,842				—				11,665,050				304

(7)

(6)

All information included in this footnote and table regarding the beneficial ownership of The Vanguard Group, Inc. (VG), a Pennsylvania corporation, is based on our review of the Schedule 13G/A filed with the SEC on February 12, 2014. VG discloses the identity of the subsidiaries which acquired the securities being reported by VG as Vanguard Fiduciary Trust Company (VFTC), a wholly-owned subsidiary of VG, being the beneficial owner of 199,648 shares, and Vanguard Investments Australia, Ltd. (VIA), a wholly-owned subsidiary of VG, being the beneficial owner of 7,100 shares.

 

		Sole voting power (shares)				Shared voting power (shares)				Sole dispositive power (shares)				Shared dispositive power (shares)
VG			206,748				—				8,538,653				199,648

(8)

Includes 5,98171,023 restricted shares that will vest on March 6, 2014,June 2, 2017, provided Mr. Gryskathe director continues to serve on ourthe Board on that date.

(9)

(7)

Includes 15,085 shares issuable upon the exercise of options that are currently exercisable. Includes 29,911243,359 restricted shares that will vest in December 20142017, 402,900 restricted shares that will vest in December 2018, 186,860 restricted shares that will vest in December 2019, 165,327 restricted shares that will vest in December 2020 and 98,039 restricted shares that will vest in December 2021, under the Company's 2013/14Company’s 2014/18 LTIP, 2015/19 LTIP, 2016/20 LTIP and 2017/21 LTIP; provided Mr. McLaughlin is employed by the Company at such datedates and certain minimum performance conditions are met.

	(10)
(8)	Includes 5,974 restricted shares that will vest on May 21, 2014, provided the director continues to serve on our Board on that date.

(11)

Includes 42,500 shares issuable upon the exercise of options that are currently exercisable. Includes 5,974 restricted shares that will vest on May 21, 2014, provided the director continues to serve on our Board at that date.

(12)

Includes 16,45864,111 restricted shares that will vest in December 20142017, 137,345 restricted shares that will vest in December 2018, 60,772 restricted shares that will vest in December 2019, 52,706 restricted shares that will vest in December 2020 and 35,728 restricted shares that will vest in December 2021, under the Company's 2013/14Company’s 2014/18 LTIP, 2015/19 LTIP, 2016/20 LTIP and 2017/21 LTIP; provided Mr. Stone is employed by the Company at such datedates and certain minimum performance conditions are met.

(13)

(9)

Includes 12,57563,603 restricted shares that will vest in December 20142017, 136,254 restricted shares that will vest in December 2018, 60,289 restricted shares that will vest in December 2019, 52,287 restricted shares that will vest in December 2020 and 35,444 restricted shares that will vest in December 2021, under the Company's 2013/14Company’s 2014/18 LTIP, 2015/19 LTIP, 2016/20 LTIP and 2017/21 LTIP; provided Mr. Garcia is employed by the Company at such datedates and certain minimum performance conditions are met.

	(14)
(10)	Includes 9,84659,342 restricted shares that will vest in December 20142017, 127,332 restricted shares that will vest in December 2018, 56,617 restricted shares that will vest in December 2019, 48,931 restricted shares that will vest

in December 2020 and 33,169 restricted shares that will vest in December 2021, under the Company’s 2014/18 LTIP, 2015/19 LTIP, 2016/20 LTIP and 2017/21 LTIP; provided Mr. Hart is employed by the Company at such dates and certain minimum performance conditions are met.

(11)

Includes 18,333 restricted shares that will vest in December 2017, 56,974 restricted shares that will vest in December 2018, 24,294 restricted shares that will vest in December 2019, 21,529 restricted shares that will vest in December 2020 and 16,339 restricted shares that will vest in December 2021, under the Company's 2013/14Company’s 2015/19 LTIP, 2016/20 LTIP and 2017/21 LTIP; provided Mr. HartPietzke is employed by the Company at such datedates and certain minimum performance conditions are met.

	(15)
(12)	Includes 3,670 restricted shares that will vest in December 2014 under the Company's 2013/14 LTIP, provided Mr. Montez is employed by the Company at such date and certain minimum performance conditions are met.

(16)

Consists of all shares beneficially owned by all directors and executive officers as a group as of April 4, 2014.17, 2017.  Includes 57,585 shares issuable upon the exercise of options that are currently exercisable, 17,922426,138 shares that will vest on May 21, 2014,June 2, 2017, provided the director(s) continues to serve on our Board on that date, 72,460448,748 restricted shares that will vest in December 2014,2017, provided the named executive officer(s) continuescontinue to be employed by the Company on that date and certain performance conditions are met, 860,805 restricted shares that will vest in December 2018, provided the named executive officer(s) continue to be employed by the Company on that date and certain performance conditions are met, 388,832 restricted shares that will vest in December 2019, provided the named executive officer(s) continue to be employed by the Company on that date and certain performance conditions are met, 340,780 restricted shares that will vest in December 2020, provided the named executive officer(s) continue to be employed by the Company on that date and certain performance conditions are met, and 218,719 restricted shares that will vest in December 2021, provided the named executive officer(s) continue to be employed by the Company on that date and certain performance conditions are met.

RELATED PERSON TRANSACTIONS

Procedures for Approval of Related Person Transactions

Our

The Audit Committee is responsible for reviewing and approving all related person transactions, including transactions with executive officers and directors, for potential conflicts of interests or other improprieties. Under SEC rules, related person transactions are those transactions where we are or may be a party and the amount involved exceeds $120,000, and where any of our directors or executive officers or any other related person had or will have a direct or indirect material interest, excluding, among other things, compensation arrangements with respect to employment and Board membership. OurThe Audit Committee would approve a related person transaction if it determined that the transaction was in the Company'sCompany’s best interests and on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances.

Our

The Audit Committee has adopted a stringent written policy whereby the Audit Committee will review for approval all related partyperson transactions where the amount involved is anticipated to exceed $25,000. Our directors are required to disclose to ourthe Board any potential conflict of interest or personal interest in a transaction that ourthe Board or the Company is considering. Our executive officers are required to disclose any related person transaction to our Compliance Officer who would notify the Audit Committee of the transaction. We poll our directors regularly, but no less frequently than annually, with respect to related partyperson transactions and their service as an officer or director of other entities.

Any director involved in a related partyperson transaction that is being reviewed or approved must recuse himself or herself from participation in any related deliberation or decision. All related partyperson transactions anticipated to exceed $25,000 are reviewed in advance of the transaction being completed.

Related PartyPerson Transactions

There were no transactions in 20132016 and there is not any currently proposed transaction where we were or are to be a party and the amount involved exceeded $120,000, and where any of our directors or executive officers or any other related person had or will have a direct or indirect material interest, other than the compensation paid to our executive officers with respect to their employment relationship with us and compensation paid to our outside directors for their service as members of ourthe Board, which compensation is disclosed in this proxy statement.

OTHER MATTERS

Stockholder Proposals

If a stockholder wishes to have a proposal considered for presentation directly, without its inclusion in our proxy statement, at the 20152018 Annual Meeting of Stockholders, including for a recommendation of candidates for election to ourthe Board, the stockholder must submit the proposal to us in writing between January 28, 2015,February 9, 2018, and February 27, 2015,March 11, 2018, which is not less than ninety (90) calendar days nor more than one hundred twenty (120) calendar days in advance of the date of the one-year anniversary of the Company's 2014 Annual Meeting of Stockholders.Meeting. Proposals should be addressed to:

PDL BioPharma, Inc.

Attention: Corporate Secretary

932 Southwood Boulevard

Incline Village, NV 89451

Stockholders submitting a proposal must provide certain other information as described in our Bylaws. Copies of our Bylaws are available online in the "Investor“Investor Relations –- Corporate Governance"Governance” section of our corporate Internet site at www.pdl.com. In addition, proposals submitted for inclusion in our proxy statement must comply with Rule 14a-8 under the Exchange Act and must be received at our principalprinciple executive offices shown above no later than the close of business on December 18, 2014,29, 2017, which is not less than 120 days before the date of the Company'sCompany’s proxy statement released to stockholders in connection with the previous year'syear’s annual meeting.

We did not receive from any of our stockholders a request to include a proposal in this proxy statement.

Section 16(a) Beneficial Ownership Reporting Compliance

Our directors and executive officers are required by Section 16(a) of the Securities Exchange Act of 1934 to timely file with the SEC certain reports regarding their beneficial ownership of our common stock. These persons are also required to furnish us with copies of these

reports they file with the SEC. To our knowledge, based solely on our review of such Section 16 Reportsreports we have received and written representations from our directors and executive officers, we have concluded that our directors and executive officers complied with all filing requirements applicable to them under Section 16(a) during 2013.

2016.

Transaction of Other Business

At the date of this proxy statement, the only business which ourthat the Board intends to present or knows that others will present at the Annual Meeting is as set forth above. If any other matter or matters are properly brought before the Annual Meeting, or any adjournment thereof, it is the intention of the persons named in the accompanying form of proxy to vote the proxy on such matters in accordance with their best judgment.

By Order of the Board of Directors

/s/

Christopher Stone

Christopher Stone

Vice President, General Counsel and Secretary

April 17, 2014

April 28, 2017

EXHIBIT A

PDL BIOPHARMA, INC.

2005 EQUITY INCENTIVE PLAN

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TABLE OF CONTENTS

				Page
1.	Establishment, Purpose and Term of Plan			A-1
	1.1	Establishment		A-1
	1.2	Purpose		A-1
	1.3	Term of Plan		A-1
2.	Definitions and Construction			A-1
	2.1	Definitions		A-1
	2.2	Construction		A-7
3.	Administration			A-7
	3.1	Administration by the Committee		A-7
	3.2	Authority of Officers		A-7
	3.3	Administration with Respect to Insiders		A-7
	3.4	Committee Complying with Section 162(m)		A-7
	3.5	Powers of the Committee		A-7
	3.6	Option or SAR Repricing		A-8
	3.7	Indemnification		A-8
4.	Shares Subject to Plan			A-9
	4.1	Maximum Number of Shares Issuable		A-9
	4.2	Share Accounting		A-9
	4.3	Adjustments for Changes in Capital Structure		A-9
5.	Eligibility, Participation and Award Limitations			A-10
	5.1	Persons Eligible for Awards		A-10
	5.2	Participation in Plan		A-10
	5.3	Award Limitations		A-10
6.	Stock Options			A-12
	6.1	Exercise Price		A-12
	6.2	Exercisability and Term of Options		A-12
	6.3	Payment of Exercise Price		A-12
	6.4	Effect of Termination of Service		A-13
	6.5	Transferability of Options		A-13
7.	Stock Appreciation Rights			A-14
	7.1	Types of SARs Authorized		A-14
	7.2	Exercise Price		A-14
	7.3	Exercisability and Term of SARs		A-14
	7.4	Exercise of SARs		A-14
	7.5	Deemed Exercise of SARs		A-15
	7.6	Effect of Termination of Service		A-15
	7.7	Nontransferability of SARs		A-15
8.	Restricted Stock Awards			A-15
	8.1	Types of Restricted Stock Awards Authorized		A-15
	8.2	Purchase Price		A-15
	8.3	Purchase Period		A-15
	8.4	Payment of Purchase Price		A-16
	8.5	Vesting and Restrictions on Transfer		A-16
	8.6	Voting Rights; Dividends and Distributions		A-16
	8.7	Effect of Termination of Service		A-16
	8.8	Nontransferability of Restricted Stock Award Rights		A-17

A-i

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9.	Restricted Stock Unit Awards			A-17
	9.1	Grant of Restricted Stock Unit Awards		A-17
	9.2	Purchase Price		A-17
	9.3	Vesting		A-17
	9.4	Voting Rights, Dividend Equivalent Rights and Distributions		A-17
	9.5	Effect of Termination of Service		A-18
	9.6	Settlement of Restricted Stock Unit Awards		A-18
	9.7	Nontransferability of Restricted Stock Unit Awards		A-18
10.	Performance Awards			A-18
	10.1	Types of Performance Awards Authorized		A-18
	10.2	Initial Value of Performance Shares and Performance Units		A-18
	10.3	Establishment of Performance Period, Performance Goals and Performance Award Formula		A-19
	10.4	Measurement of Performance Goals		A-19
	10.5	Settlement of Performance Awards		A-20
	10.6	Voting Rights; Dividend Equivalent Rights and Distributions		A-22
	10.7	Effect of Termination of Service		A-22
	10.8	Nontransferability of Performance Awards		A-22
11.	Cash-Based Awards and Other Stock-Based Awards			A-23
	11.1	Grant of Cash-Based Awards		A-23
	11.2	Grant of Other Stock-Based Awards		A-23
	11.3	Value of Cash-Based and Other Stock-Based Awards		A-23
	11.4	Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards		A-23
	11.5	Voting Rights; Dividend Equivalent Rights and Distributions		A-23
	11.6	Effect of Termination of Service		A-23
	11.7	Nontransferability of Cash-Based Awards and Other Stock-Based Awards		A-23
12.	Standard Forms of Award Agreement			A-24
	12.1	Award Agreements		A-24
	12.2	Authority to Vary Terms		A-24
13.	Change in Control			A-24
	13.1	Effect of Change in Control on Awards		A-24
	13.2	Federal Excise Tax Under Section 4999 of the Code		A-25
14.	Compliance with Securities Law			A-25
15.	Tax Withholding			A-26
	15.1	Tax Withholding in General		A-26
	15.2	Withholding in Shares		A-26
16.	Amendment or Termination of Plan			A-26
17.	Compliance with Section 409A			A-26
	17.1	Awards Subject to Section 409A		A-26
	17.2	Deferral and/or Distribution Elections		A-27
	17.3	Subsequent Elections		A-27
	17.4	Distributions Pursuant to Deferral Elections		A-27
	17.5	Unforeseeable Emergency		A-28
	17.6	Disabled		A-28
	17.7	Death		A-29
	17.8	No Acceleration of Distributions		A-29
18.	Miscellaneous Provisions			A-29
	18.1	Repurchase Rights		A-29
	18.2	Forfeiture Events		A-29
	18.3	Provision of Information		A-29
	18.4	Rights as Employee, Consultant or Director		A-29

A-ii

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	18.5	Rights as a Stockholder		A-29
	18.6	Delivery of Title to Shares		A-30
	18.7	Fractional Shares		A-30
	18.8	Retirement and Welfare Plans		A-30
	18.9	Beneficiary Designation		A-30
	18.10	Severability		A-30
	18.11	No Constraint on Corporate Action		A-30
	18.12	Unfunded Obligation		A-30
	18.13	Choice of Law		A-31

A-iii

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PDL BIOPHARMA , INC .

2005 EQUITY INCENTIVE PLAN

1.     Establishment, Purpose and Term of Plan .

1.1     Establishment . The PDL BioPharma, Inc. 2005 Equity Incentive Plan (the Plan ) is hereby established effective as of June 8, 2005, the date of its approval by the stockholders of the Company (the Effective Date ).

1.2     Purpose . The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock Purchase Rights, Restricted Stock Bonuses, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards.

1.3     Term of Plan . The Plan shall continue in effect until its termination by the Committee; provided , however , that all Awards shall be granted, if at all, within ten (10) years from the Effective Date.

2.     Definitions and Construction .

2.1     Definitions . Whenever used herein, the following terms shall have their respective meanings set forth below:

(a)      "Affiliate" means (i) an entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other than a Subsidiary Corporation, that is controlled by the Company directly, or indirectly through one or more intermediary entities. For this purpose, the term "control" (including the term "controlled by") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the relevant entity, whether through the ownership of voting securities, by contract or otherwise; or shall have such other meaning assigned such term for the purposes of registration on Form S-8 under the Securities Act.

(b)      "Award" means any Option, Stock Appreciation Right, Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award or Other Stock-Based Award granted under the Plan.

(c)      "Award Agreement" means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions of the Award granted to the Participant.

(d)      "Board" means the Board of Directors of the Company.

(e)    "Cash-Based Award"

(f)      "Cause" means, unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant’s Award Agreement or by a written contract of employment or service, any of the following: (i) the Participant’s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Participating Company documents or records; (ii) the Participant’s material failure to abide by a Participating Company’s code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (iii) the Participant’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of a Participating Company (including, without limitation, the Participant’s improper use or disclosure of a Participating Company’sconfidential or proprietary information); (iv) any intentional act by the Participant which has a material detrimental effect on a Participating Company’s reputation or business; (v) the Participant’s repeated failure or inability to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure or inability; (vi) any material breach by the Participant of any employment, service, non-disclosure, non-competition, non-solicitation or other similar agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vii) the Participant’s conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the Participant’s ability to perform his or her duties with a Participating Company.

(g)      "Change in Control" means, unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant’s Award Agreement or by a written contract of employment or service, the occurrence of any of the following:

(i)    any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person) "beneficial ownership" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company possessing thirty-five percent (35%) or more of the total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of Directors; provided , however , that the following acquisitions shall not constitute a Change in Control: (1) an acquisition by any such person who prior to such acquisition is the beneficial owner of thirty-five percent (35%) or more of such voting power, (2) any acquisition directly from the Company, including, without limitation, a public offering of securities, (3) any acquisition by the Company, (4) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (5) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or

(ii)    an Ownership Change Event or series of related Ownership Change Events (collectively, a  "Transaction" ) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting securities of the Company or, in the case of an Ownership Change Event described in Section 2.1(bb)(iii), the entity to which the assets of the Company were transferred (the  "Transferee" ), as the case may be; or

(iii)    a liquidation or dissolution of the Company.

For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall have the right to determine whether multiple sales or exchanges of the voting securities of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive. Notwithstanding the foregoing, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A.

(h)      "Code" means the Internal Revenue Code of 1986, as amended, and any applicable regulations or administrative guidelines promulgated thereunder.

(i)      "Committee" means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in eachinstance as shall be specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.

(j)      "Company" means PDL BioPharma, Inc., a Delaware corporation, or any successor corporation thereto.

(k)      "Consultant" means a person engaged to provide consulting or advisory services (other than as an Employee or a member of the Board) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on a Form S-8 Registration Statement under the Securities Act.

(l)      "Covered Employee" means any Employee who is or may reasonably be expected to become a "covered employee" as defined in Section 162(m), or any successor statute, and who is designated, either as an individual Employee or a member of a class of Employees, by the Committee no later than (i) the date ninety (90) days after the beginning of the Performance Period, or (ii) the date on which twenty-five percent (25%) of the Performance Period has elapsed, as a "Covered Employee" under this Plan for such applicable Performance Period.

(m)      "Director" means a member of the Board.

(n)      "Disability" means the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of the Code.

(o)      "Dividend Equivalent" means a credit, made at the discretion of the Committee or as otherwise provided by the Plan, to the account of a Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by such Participant.

(p)      "Employee" means any person treated as an employee (including an Officer or a member of the Board who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided , however , that neither service as a member of the Board nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the terms of the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee.

(q)      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(r)      "Fair Market Value" means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:

(i)    Except as otherwise determined by the Committee, if, on such date, the Stock is listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the NASDAQ Stock Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in The Wall Street Journalor such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.

(ii)    Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value on the basis of the opening, closing, or average of the high and low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions in the Stock as reported on a national or regional securities exchange or market system and consistently applied, or on any other basis consistent with the requirements of Section 409A. The Committee may also determine the Fair Market Value upon the average selling price of the Stock during a specified period that is within thirty (30) days before or thirty (30) days after such date, provided that, with respect to the grant of an Option or SAR, the commitment to grant such Award based on such valuation method must be irrevocable before the beginning of the specified period and such valuation method must be used consistently for grants of Options and SARs under the same and substantially similar programs. The Committee may vary its method of determination of the Fair Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A.

(iii)    If, on such date, the Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be as determined by the Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse.

(s)      "Full Value Award" means any Award settled in Stock, other than (i) an Option, (ii) a Stock Appreciation Right, (iii) a Restricted Stock Purchase Right or an Other Stock-Based Award under which the Company will receive monetary consideration equal to the Fair Market Value (determined as of the date of grant) of the shares subject to such Award or (iv) an Other Stock-Based award based on appreciation in the Fair Market Value of the Stock.

(t)      "Incentive Stock Option" means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.

(u)      "Insider" means an Officer, Director or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.

(v)      "Net-Exercise" means a procedure by which the Participant will be issued a number of shares of Stock upon the exercise of an Option determined in accordance with the following formula:

N =	X(A-B)/A, where
	"N" = the number of shares of Stock to be issued to the Participant upon exercise of the Option;
	"X" = the total number of shares with respect to which the Participant has elected to exercise the Option;
	"A" = the Fair Market Value of one (1) share of Stock determined on the exercise date; and
	"B" = the exercise price per share (as defined in the Participant's Award Agreement)

(w)      "Nonstatutory Stock Option" means an Option not intended to be (as set forth in the Award Agreement) an incentive stock option within the meaning of Section 422(b) of the Code.

(x)      "Officer" means any person designated by the Board as an officer of the Company.

(y)      "Option" means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to Section 6.

(z)       "Other Stock-Based Award" means an Award denominated in shares of Stock and granted pursuant to Section 11.

(aa)      "Outside Director" means a Director who is neither an Employee nor a Consultant,

(bb)      "Ownership Change Event" means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).

(cc)      "Parent Corporation" means any present or future "parent corporation" of the Company, as defined in Section 424(e) of the Code.

(dd)      "Participant" means any eligible person who has been granted one or more Awards.

(ee)      "Participating Company" means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.

(ff)       "Participating Company Group" means, at any point in time, all entities collectively which are then Participating Companies.

(gg)      "Performance Award" means an Award of Performance Shares or Performance Units.

(hh)      "Performance Award Formula" means, for any Performance Award, a formula or table established by the Committee pursuant to Section 10.3 which provides the basis for computing the value of a Performance Award at one or more threshold levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.

(ii)        "Performance-Based Compensation"

(jj)      "Performance Goal" means a performance goal established by the Committee pursuant to Section 10.3.

(kk)      "Performance Period" means a period established by the Committee pursuant to Section 10.3 at the end of which one or more Performance Goals are to be measured.

(ll)       "Performance Share" means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based on performance.

(mm)     "Performance Unit" means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon performance.

(nn)      "Restricted Stock Award" means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase Right.

(oo)      "Restricted Stock Bonus" means Stock granted to a Participant pursuant to Section 8.

(pp)      "Restricted Stock Purchase Right" means a right to purchase Stock granted to a Participant pursuant to Section 8.

(qq)      "Restricted Stock Unit" or  "Stock Unit" means a right granted to a Participant pursuant to Section 9, respectively, to receive a share of Stock on a date determined in accordance with the provisions of Section 9, as applicable, and the Participant’s Award Agreement.

(rr)       "Restriction Period" means the period established in accordance with Section 8.5 during which shares subject to a Restricted Stock Award are subject to Vesting Conditions.

(ss)      "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.

(tt)       "SAR" or  "Stock Appreciation Right" means a right granted to a Participant pursuant to Section 7 to receive payment of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price.

(uu)      "Section 162(m)" means Section 162(m) of the Code.

(vv)      "Section 409A" means Section 409A of the Code.

(ww)    "Section 409A Deferred Compensation" means compensation provided pursuant to the Plan that constitutes deferred compensation subject to and not exempted from the requirements of Section 409A.

(xx)      "Securities Act" means the Securities Act of 1933, as amended.

(yy)      "Service" means a Participant’s employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. Unless otherwise provided by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders such Service or a change in the Participating Company for which the Participant renders such Service, provided that there is no interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed to have terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the entity for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.

(zz)      "Stock" means the common stock of the Company, as adjusted from time to time in accordance with Section 4.3.

(aaa)    "Subsidiary Corporation" means any present or future "subsidiary corporation" of the Company, as defined in Section 424(f) of the Code.

(bbb)   "Ten Percent Owner" means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.

(ccc)    "Trading Compliance Policy" means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Company’s equity securities by Directors, Officers, Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities.

(ddd)   "Vesting Conditions" mean those conditions established in accordance with the Plan prior to the satisfaction of which shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participant’s purchase price for such shares upon the Participant’s termination of Service.

2.2     Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise.

3.     Administration.

3.1     Administration by the Committee . The Plan shall be administered by the Committee. All questions of interpretation of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Award. In addition, any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan, including, without limitation, pursuant to Section 3.5 below, or Award Agreement or other agreement thereunder shall be final, binding and conclusive upon all persons having an interest therein.

3.2     Authority of Officers . The Chief Executive Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein.

3.3     Administration with Respect to Insider . With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3.

3.4     Committee Complying with Section 162(m ). If the Company is a "publicly held corporation" within the meaning of Section 162(m), the Board may establish a Committee of "outside directors" within the meaning of Section 162(m) to approve the grant of any Award intended to result in the payment of Performance-Based Compensation.

3.5     Powers of the Committee . In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:

(a)    to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock, units or monetary value to be subject to each Award;

(b)    to determine the type of Award granted;

(c)    to determine the Fair Market Value of shares of Stock or other property;

(d)    to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with any Award,including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of the expiration of any Award, (vii) the effect of the Participant’s termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;

(e)    to determine whether an Award will be settled in shares of Stock, cash, or in any combination thereof;

(f)    to approve one or more forms of Award Agreement;

(g)    to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto;

(h)    to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares acquired pursuant thereto, including with respect to the period following a Participant’s termination of Service;

(i)     without the consent of the affected Participant and notwithstanding the provisions of any Award Agreement to the contrary, to unilaterally substitute at any time a Stock Appreciation Right providing for settlement solely in shares of Stock in place of any outstanding Option,provided that such Stock Appreciation Right covers the same number of shares of Stock and provides for the same exercise price (subject in each case to adjustment in accordance with Section 4.3) as the replaced Option and otherwise provides substantially equivalent terms and conditions as the replaced Option, as determined by the Committee;

(j)     to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of, or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose citizens may be granted Awards; and

(k)     to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.

3.6     Option or SAR Repricing . Without the affirmative vote of holders of a majority of the shares of Stock cast in person or by proxy at a meeting of the stockholders of the Company at which a quorum representing a majority of all outstanding shares of Stock is present or represented by proxy, the Board shall not approve either (a) the cancellation of outstanding Options or SARs and the grant in substitution therefor of new Options or SARs having a lower exercise price or (b) the amendment of outstanding Options or SARs to reduce the exercise price thereof. This paragraph shall not be construed to apply to "issuing or assuming a stock option in a transaction to which Section 424(a) applies," within the meaning of Section 424 of the Code.

3.7     Indemnification . In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with thePlan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided , however , that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.

4.     Shares Subject to Plan .

4.1     Maximum Number of Shares Issuable . Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equal to five million two hundred thousand (5,200,000) shares, and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.

4.2     Share Accounting . If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the Participant’s original purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall not again be available for issuance under the Plan. In addition, Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to Section 15.3 shall not again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award, other than an Option or SAR, that is settled in cash. Upon payment in shares of Stock pursuant to the exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the SAR is exercised. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net-Exercise, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised.

4.3     Adjustments for Changes in Capital Structure . Subject to any required action by the stockholders of the Company and the requirements of Section 409A to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, in the Award limits set forth in Section 5.3 and in the exercise or purchase price per share under any outstanding Award in order to prevent dilution or enlargement of Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as "effected without receipt of consideration by the Company." If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the New Shares ), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number, and in no event may the exercise or purchase price under any Award be decreased to an amount less than the par value, if any, of the stock subject to such Award. The Committee, in its sole discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of Performance Goals, Performance Award Formulas andPerformance Periods. The adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.

The Committee may, without affecting the number of Shares reserved or available hereunder, authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Sections 409A and 422 and any related guidance issued by the U.S. Treasury Department, where applicable.

5.     Eligibility, Participation and Award Limitations .

5.1     Persons Eligible for Awards . Awards may be granted only to Employees, Consultants and Outside Directors.

5.2     Participation in Plan . Awards are granted solely at the discretion of the Committee. Eligible persons may be granted more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.

5.3     Award Limitations .

(a)     Incentive Stock Option Limitations .

(i)     Maximum Number of Shares Issuable Pursuant to Incentive Stock Options . Subject to adjustment as provided in Section 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed five million two hundred thousand (5,200,000) shares. The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock Options shall be the number of shares determined in accordance with Section 4.1, subject to adjustment as provided in Section 4.2 and Section 4.3.

(ii)     Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an ISO-Qualifying Corporation ). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective Employee upon the condition that such person become an Employee of an ISO-Qualifying Corporation shall be deemed granted effective on the date such person commences Service as an Employee of an ISO-Qualifying Corporation, with an exercise price determined as of such date in accordance with Section 6.1.

(iii)     Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than one hundred thousand dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a limitation different from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Upon exercise, shares issued pursuant to each such portion shall be separately identified.

(b)     Aggregate Limit on Full Value Awards. In no event shall more than fifty percent (50%) of the maximum aggregate number of shares of Stock that may be issued under the Plan, determined in accordance with Sections 4.1, 4.2 and 4.3, be issued pursuant to Full Value Awards.

(c)     Aggregate Limit on Full Value Awards Without Minimum Vesting. Notwithstanding any provision of the Plan to the contrary, no more than ten percent (10%) of the maximum aggregate number of shares of Stock that may be issued under the Plan, determined in accordance with Sections 4.1, 4.2 and 4.3, shall be issued pursuant to Full Value Awards having Vesting Conditions which (i) if based upon a Service requirement, provide for vesting more rapid than annual pro rata vesting over a period of three (3) years or (ii) if based upon the attainment of one or more Performance Goals, provide for a Performance Period of less than twelve (12) months; provided , however , that such limitations shall not preclude the acceleration of vesting of any such Award upon the death, disability, retirement or involuntary termination of Service of the Participant or upon or following a Change in Control, as determined by the Committee in its discretion.

(d)     Maximum Annual Aggregate Award Limits. Subject to adjustment as provided in Section 4.3, no Participant shall be granted within any fiscal year of the Company, other than the fiscal year in which such Participant’s Service with the Company commences, one or more Awards that may be settled in Stock which in the aggregate are for more than a number of shares equal to nine percent (9%) of the maximum aggregate number of shares of Stock that may be issued under the Plan as set forth in Section 4.1.

(e)     Section 162(m) Award Limits. The following limits shall apply to the grant of any Award intended to qualify for treatment as Performance-Based Compensation:

(i)     Options and SARs. Subject to adjustment as provided in Section 4.3, no Employee shall be granted within any fiscal year of the Company one or more Options or Freestanding SARs which in the aggregate are for more than one million six hundred thousand (1,600,000) shares.

(ii)     Restricted Stock Awards and Restricted Stock Unit Awards. Subject to adjustment as provided in Section 4.3, no Employee shall be granted within any fiscal year of the Company one or more Restricted Stock Awards or Restricted Stock Unit Awards for more than seven hundred and fifty thousand (750,000) shares.

(iii)     Performance Awards. Subject to adjustment as provided in Section 4.3, no Employee shall be granted (1) Performance Shares which could result in such Employee receiving more than one hundred thousand (100,000) shares for each full fiscal year of the Company contained in the Performance Period for such Award, or (2) Performance Units which could result in such Employee receiving more than two million dollars ($2,000,000) for each full fiscal year of the Company contained in the Performance Period for such Award.

(iv)     Cash-Based Awards and Other Stock-Based Awards. Subject to adjustment as provided in Section 4.3, no Employee shall be granted (1) Cash-Based Awards in any fiscal year of the Company which could result in such Employee receiving more than two million dollars ($2,000,000) for each full fiscal year of the Company contained in the Performance Period for such Award, or (2) Other Stock-Based Awards in any fiscal year of the Company which could result in such Employee receiving more than one hundred thousand (100,000) shares for each full fiscal year of the Company contained in the Performance Period for such Award.

6.     Stock Options.

Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall from time to time establish. Award Agreements evidencing Options may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

6.1     Exercise Price. The exercise price for each Option shall be established in the discretion of the Committee; provided , however , that (a) the exercise price per share shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.

6.2     Exercisability and Term of Options. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided , however , that (a) no Option shall be exercisable after the expiration of seven (7) years after the effective date of grant of such Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option. Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, each Option shall terminate seven (7) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.

6.3     Payment of Exercise Price.

(a)     Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash or by check or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise price, (iii) by delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a Cashless Exercise ), (iv) by delivery of a properly executed notice electing a Net-Exercise, (v) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.

(b)     Limitations on Forms of Consideration.

(i)     Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. Unless otherwise provided by the Committee, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for more than six (6) months (or such other period, if any, as the Committee may permit) and not used for another Option exercise by attestation during such period, or were not acquired, directly or indirectly, from the Company.

(ii)     Cashless Exercise. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.

6.4     Effect of Termination of Service.

(a)     Option Exercisability. Subject to earlier termination of the Option as otherwise provided herein and unless otherwise provided by the Committee in the grant of an Option and set forth in the Award Agreement, an Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate:

(i)     Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such Option (the Option Expiration Date ).

(ii)     Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant’s termination of Service.

(iii)     Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability or death, the Option, to the extent unexercised and exercisable by the Participant on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.

(b)     Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 14 below, the Option shall remain exercisable until thirty (30) days after the date such exercise would no longer be prevented by such provisions, but in any event no later than the Option Expiration Date.

6.5     Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, a Nonstatutory Stock Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act.

7.     Stock Appreciation Rights.

Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing SARs may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

7.1     Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a related Option (a ) or may be granted independently of any Option (a ). A Tandem SAR may only be granted concurrently with the grant of the related Option.

7.2     Exercise Price. The exercise price for each SAR shall be established in the discretion of the Committee; provided , however , that (a) the exercise price per share subject to a Tandem SAR shall be the exercise price per share under the related Option and (b) the exercise price per share subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the SAR.

7.3     Exercisability and Term of SARs.

(a)     Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such approval is not given, then the Option shall nevertheless remain exercisable in accordance with its terms. A Tandem SAR shall terminate and cease to be exercisable no later than the date on which the related Option expires or is terminated or canceled. Upon the exercise of a Tandem SAR with respect to some or all of the shares subject to such SAR, the related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option related to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares with respect to which the related Option was exercised.

(b)     Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR; provided , however , that no Freestanding SAR shall be exercisable after the expiration of seven (7) years after the effective date of grant of such SAR.

7.4     Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.7) of an SAR, the Participant (or the Participant’s legal representative or other person who acquired the right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive payment of an amount for each share with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price. Payment of such amount shall be made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum as soon as practicable following the date of exercise of the SAR and (b) in the case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof as determined by the Committee in compliance with Section 409A. Unless otherwise provided in the Award Agreement evidencing a Freestanding SAR, payment shall be made in a lump sum as soon as practicable following the date of exercise of the SAR. The Award Agreement evidencing any Freestanding SAR may provide for deferred payment in a lump sum or in installments in compliance with Section 409A. When payment is to be made in shares of Stock, the number of shares to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of exercise of the SAR. For purposes of this Section 7, an SAR shall be deemed exercised on the date on which the Company receives notice of exercise from the Participant or as otherwise provided in Section 7.7.

7.5     Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or expire, the SAR by its terms remains exercisable immediately prior to such termination or expiration and, if so exercised, would result in a payment to the holder of such SAR, then any portion of such SAR which has not previously been exercised shall automatically be deemed to be exercised as of such date with respect to such portion.

7.6     Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise provided herein and unless otherwise provided by the Committee in the grant of an SAR and set forth in the Award Agreement, an SAR shall be exercisable after a Participant’s termination of Service only to the extent and during the applicable time period determined in accordance with Section 6.4 (treating the SAR as if it were an Option) and thereafter shall terminate.

7.7     Nontransferability of SARs. During the lifetime of the Participant, an SAR shall be exercisable only by the Participant or the Participants guardian or legal representative. An SAR shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock Option or a Freestanding SAR shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to FormS8 under the Securities Act.

8.     Restricted Stock Awards.

Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

8.1      Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right; provided that Outside Directors shall be eligible for Restricted Stock Awards only in the form of Restricted Stock Bonus. Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of a Restricted Stock Award or the lapsing of the Restriction Period is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

8.2     Purchase Price. The purchase price for shares of Stock issuable under each Restricted Stock Purchase Right shall be established by the Committee in its discretion. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares of Stock pursuant to a Restricted Stock Bonus, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award.

8.3     Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a period established by the Committee, which shall in no event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right.

8.4     Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash or by check or cash equivalent, (b) by such other consideration as may be approved by the Committeefrom time to time to the extent permitted by applicable law, or (c) by any combination thereof. The Committee may at any time or from time to time grant Restricted Stock Purchase Rights which do not permit all of the foregoing forms of consideration to be used in payment of the purchase price or which otherwise restrict one or more forms of consideration.

8.5     Vesting and Restrictions on Transfer. Subject to Section 5.4(c), Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any Restriction Period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 8.8. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the Company’s Trading Compliance Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Trading Compliance Policy. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

8.6     Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 8.5 and any Award Agreement, during any Restriction Period applicable to shares subject to a Restricted Stock Award, the Participant shall have all of the rights of a stockholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares. However, in the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participant’s Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made. Notwithstanding the foregoing, and except as may be provided in the applicable Award Agreement, any cash dividends and distributions paid with respect to the shares subject to the Restricted Stock Award of an Outside Director shall be accumulated and paid to the Outside Director on the earlier of (i) the satisfaction of the Vesting Conditions for the shares subject to the Restricted Stock Award and (ii) March 15 th following the year in which the dividend or distribution was paid to stockholders generally.

8.7     Effect of Termination of Service. Unless otherwise provided by the Committee in the Award Agreement evidencing a Restricted Stock Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then (a) the Company shall have the option to repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.

8.8     Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or theParticipant’s beneficiary, except transfer by will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

9.     Restricted Stock Unit Awards.

Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

9.1     Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of a Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

9.2     Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Restricted Stock Unit Award.

9.3     Vesting. Subject to Section 5.4(c), Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to the Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then the satisfaction of the Vesting Conditions automatically shall be determined on the first to occur of (a) the next trading day on which the sale of such shares would not violate the Trading Compliance Policy or (b) the later of (i) the last day of the calendar year in which the original vesting date occurred or (ii) the last day of the Company’s taxable year in which the original vesting date occurred.

9.4     Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to the particular shares subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalents, if any, shall be paid by crediting the Participant with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on such date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Such additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time (or as soon thereafter as practicable) as the Restricted Stock Units originally subject to the Restricted Stock Unit Award. Inthe event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award.

9.5     Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service.

9.6     Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on such other date determined by the Committee, in its discretion, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes. If permitted by the Committee, subject to the provisions of Section 17 with respect to Section 409A, the Participant may elect in accordance with terms specified in the Award Agreement to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.

9.7     Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

10.     Performance Awards.

Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

10.1     Types of Performance Awards Authorized. Performance Awards may be granted in the form of either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award.

10.2     Initial Value of Performance Shares and Performance Units. Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.3, on the effective date of grant of the Performance Share, and each Performance Unit shall have an initial monetary value established by the Committee at the time of grant. The final value payable to the Participant in settlement of aPerformance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.

10.3     Establishment of Performance Period, Performance Goals and Performance Award Formula. In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. Unless otherwise permitted in compliance with the requirements under Section 162(m) with respect to each Performance Award intended to result in the payment of Performance-Based Compensation, the Committee shall establish the Performance Goal(s) and Performance Award Formula applicable to each Performance Award no later than the earlier of (a) the date ninety (90) days after the commencement of the applicable Performance Period or (b) the date on which twenty-five percent (25%) of the Performance Period has elapsed, and, in any event, at a time when the outcome of the Performance Goals remains substantially uncertain. Once established, the Performance Goals and Performance Award Formula applicable to a Covered Employee shall not be changed during the Performance Period. The Company shall notify each Participant granted a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.

10.4     Measurement of Performance Goals. Performance Goals shall be established by the Committee on the basis of targets to be attained ( Performance Targets ) with respect to one or more measures of business or financial performance (each, a Performance Measure ), subject to the following:

  (a)     Performance Measures. Performance Measures shall have the same meanings as used in the Company’s financial statements, or, if such terms are not used in the Company’s financial statements, they shall have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Company’s industry. Performance Measures shall be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes or such division or other business unit as may be selected by the Committee. For purposes of the Plan, the Performance Measures applicable to a Performance Award shall be calculated in accordance with generally accepted accounting principles, if applicable, but prior to the accrual or payment of any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to a Performance Award. Performance Measures may be one or more of the following, as determined by the Committee:

  (i) revenue;

  (ii) sales;

  (iii) expenses;

  (iv) operating income;

  (v) gross margin;

  (vi) operating margin;

  (vii) earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization;

  (viii) pre-tax profit;

  (ix) net operating income;

  (x) net income;

  (xi) economic value added;

  (xii) free cash flow;

  (xiii) operating cash flow;

  (xiv) stock price;

  (xv) earnings per share;

  (xvi) return on stockholder equity;

  (xvii) return on capital;

  (xviii) return on assets;

  (xix) return on investment;

  (xx) employee satisfaction;

  (xxi) employee retention;

  (xxii) balance of cash, cash equivalents and marketable securities;

  (xxiii) market share;

  (xxiv) product regulatory approvals;

  (xxv) projects in development;

  (xxvi) regulatory filings;

  (xxvii) research and development expenses; and

  (xxviii) completion of a joint venture or other corporate transaction.

  (b)     Performance Targets. Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under the applicable Performance Award Formula by the level attained during the applicable Performance Period. A Performance Target may be stated as an absolute value or as a value determined relative to an index, budget or other standard selected by the Committee.

10.5     Settlement of Performance Awards.

  (a) Determination of Final Value. As soon as practicable following the completion of the Performance Period applicable to a Performance Award, the Committee shall certify in writing the extent towhich the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant and to be paid upon its settlement in accordance with the applicable Performance Award Formula.

  (b)     Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award granted to any Participant who is not a Covered Employee to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine. If permitted under a Covered Employee’s Award Agreement, the Committee shall have the discretion, on the basis of such criteria as may be established by the Committee, to reduce some or all of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in accordance with the Performance Award Formula. No such reduction may result in an increase in the amount payable upon settlement of another Participant’s Performance Award that is intended to result in Performance-Based Compensation.

  (c)     Effect of Leaves of Absence. Unless otherwise required by law or a Participant’s Award Agreement, payment of the final value, if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period shall be prorated on the basis of the number of days of the Participant’s Service during the Performance Period during which the Participant was not on a leave of absence.

  (d)     Notice to Participants. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), the Company shall notify each Participant of the determination of the Committee.

  (e)     Payment in Settlement of Performance Awards. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period described in Section 17.1 (except as otherwise provided below or consistent with the requirements of Section 409A), payment shall be made to each eligible Participant (or such Participant’s legal representative or other person who acquired the right to receive such payment by reason of the Participant’s death) of the final value of the Participant’s Performance Award. Payment of such amount shall be made in cash, shares of Stock, or a combination thereof as determined by the Committee. Unless otherwise provided in the Award Agreement evidencing a Performance Award, payment shall be made in a lump sum. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the payment to be made to Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant shall be set forth in the Award Agreement. If any payment is to be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the payment during the deferral period of Dividend Equivalents or interest.

  (f)     Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock, the number of such shares shall be determined by dividing the final value of the Performance Award by the value of a share of Stock determined by the method specified in the Award Agreement. Such methods may include, without limitation, the closing market price on a specified date (such as the settlement date) or an average of market prices over a series of trading days. Shares of Stock issued in payment of any Performance Award may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions shall be evidenced by an appropriate Award Agreement and shall be subject to the provisions of Sections 8.5 through 8.8 above.

10.6     Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the AwardAgreement evidencing any Performance Share Award that the Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to the particular shares subject to the Award, on the earlier of the date on which the Performance Shares are settled or the date on which they are forfeited. Such Dividend Equivalents, if any, shall be credited to the Participant in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock. The number of additional Performance Shares (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalents may be paid currently or may be accumulated and paid to the extent that Performance Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalents may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 10.5. Dividend Equivalents shall not be paid with respect to Performance Units. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participant’s Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.

10.7     Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Performance Award, the effect of a Participant’s termination of Service on the Performance Award shall be as follows:

  (a)     Death or Disability. If the Participants Service terminates because of the death or Disability of the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participants Performance Award shall be determined by the extent to which the applicable Performance Goals have been attained with respect to the entire Performance Period and shall be prorated based on the number of days of the Participants Service during the Performance Period. Payment shall be made following the end of the Performance Period in any manner permitted by Section 10.5.

  (b)     Other Termination of Service. If the Participant’s Service terminates for any reason except death or Disability before the completion of the Performance Period applicable to the Performance Award, such Award shall be forfeited in its entirety.

10.8     Nontransferability of Performance Awards. Prior to settlement in accordance with the provisions of the Plan, no Performance Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Performance Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

11.     Cash-Based Awards and Other Stock-Based Awards .

Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Cash-Based Awards and Other Stock-Based Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

11.1     Grant of Cash-Based Awards. Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee may determine.

11.2     Grant of Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Such Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

11.3     Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a monetary payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the Committee. Subject to Section 5.4(c), the Committee may require the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which the performance criteria are met. The establishment of performance criteria with respect to the grant or vesting of any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall follow procedures substantially equivalent to those applicable to Performance Awards set forth in Section 10.

11.4     Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards. Payment or settlement, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof as the Committee determines. The determination and certification of the final value with respect to any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall comply with the requirements applicable to Performance Awards set forth in Section 10. To the extent applicable, payment or settlement with respect to each Cash-Based Award and Other Stock-Based Award shall be made in compliance with requirements of Section 409A.

11.5     Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), if any, in settlement of such Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award that the Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to the particular shares subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalents, if any, shall be paid in accordance with the provisions set forth in Section 9.4. Dividend Equivalent rights shall not be granted with respect to Cash-Based Awards.

11.6     Effect of Termination of Service. Each Award Agreement evidencing a Cash-Based Award or Other Stock-Based Award shall set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination.

11.7     Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior to the payment or settlement of a Cash-Based Award or Other Stock-Based Award, the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the lawsof descent and distribution. The Committee

may impose such additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then listed and/or traded, or under any state securities laws applicable to such shares of Stock.

12.     Standard Forms of Award Agreement .

12.1     Award Agreements. Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement, which execution may be evidenced by electronic means or transmission. Any Award Agreement may consist of an appropriate form of Notice of Grant and a form of Agreement incorporated therein by reference, or such other form or forms, including electronic media, as the Committee may approve from time to time.

12.2     Authority to Vary Terms. The Committee shall have the authority from time to time to vary the terms of any standard form of Award Agreement either in connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided , however , that the terms and conditions of any such new, revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.

13.     Change in Control .

13.1     Effect of Change in Control on Awards. Subject to the requirements and limitations of Section 409A if applicable, the Committee may provide for any one or more of the following:

  (a)     Accelerated Vesting. The Committee may, in its discretion, provide in any Award Agreement or, in the event of a Change in Control, may take such actions as it deems appropriate to provide for the acceleration of the exercisability, vesting and/or settlement in connection with such Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participant’s Service prior to, upon, or following such Change in Control, to such extent as the Committee shall determine.

  (b)     Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the Acquiror ), may, without the consent of any Participant, either assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable. For purposes of this Section, if so determined by the Committee, in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided ,however , that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

  (c)     Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced by the exercise or purchase price per share, if any, under such Award. In the event such determination is made by the Committee, the amount of such payment (reduced by applicable withholding taxes, if any) shall be paid to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.

13.2     Federal Excise Tax Under Section 4999 of the Code.

  (a)     Excess Parachute Payment. In the event that any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment or benefit as an "excess parachute payment" under Section 280G of the Code, the Participant may elect, in his or her sole discretion and in compliance with the requirements of Section 409A, to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.

  (b)     Determination by Independent Accountants. To aid the Participant in making any election called for under Section 13.2(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an "excess parachute payment" to the Participant as described in Section 13.2(a), the Company shall request a determination in writing by independent public accountants selected by the Company (the Accountants ). As soon as practicable thereafter, the Accountants shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Accountants may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make their required determination. The Company shall bear all fees and expenses the Accountants may reasonably charge in connection with their services contemplated by this Section.

14.     Compliance with Securities Law .

The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award unless (a) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award or (b) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

15.     Tax Withholding .

15.1     Tax Withholding in General. The Company shall have the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to an Award or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Group’s tax withholding obligations have been satisfied by the Participant.

15.2     Withholding in Shares . The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of the Participating Company Group. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates.

16.     Amendment or Termination of Plan .

The Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Company’s stockholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.3), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule, including the rules of any stock exchange or market system upon which the Stock may then be listed. No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as provided by the next sentence, no amendment, suspension or termination of the Plan may adversely affect any then outstanding Award without the consent of the Participant. Notwithstanding any other provision of the Plan to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A.

17.    Compliance with Section 409A .

17.1     Awards Subject to Section 409A. The provisions of this Section 17 shall apply to any Award or portion thereof that is or becomes subject to Section 409A, notwithstanding any provision to the contrary contained in the Plan or the Award Agreement applicable to such Award. Awards subject to Section 409A include, without limitation:

  (a)    Any Nonstatutory Stock Option or SAR that permits the deferral of compensation other than the deferral of recognition of income until the exercise of the Award.

  (b)    Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award if either (i) the Award provides by its terms for settlement of all or any portion of the Award on one or more dates following the Short-Term Deferral Period (as defined below) or (ii) the Committee permits or requires the Participant to elect one or more dates on which the Award will be settled.

Subject to any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or other applicable guidance, the term Short-Term Deferral Period means the period ending on the later of (i) the fifteenth (15 th ) day of the third (3 rd ) month following the end of the Company’s fiscal year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the fifteenth(15 th) day of the third (3 rd ) month following the end of the Participant’s taxable year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term "substantial risk of forfeiture" shall have the meaning set forth in any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or other applicable guidance.

17.2     Deferral and/or Distribution Elections. Except as otherwise permitted or required by Section 409A or any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or other applicable guidance, the following rules shall apply to any deferral and/or distribution elections (each, an "Election") that may be permitted or required by the Committee pursuant to an Award subject to Section 409A:

  (a)    All Elections must be in writing and specify the amount of the distribution in settlement of an Award being deferred, as well as the time and form of distribution as permitted by this Plan.

  (b)    All Elections shall be made by the end of the Participant’s taxable year prior to the year in which services commence for which an Award may be granted to such Participant; provided , however , that if the Award qualifies as "performance-based compensation" for purposes of Section 409A and is based on services performed over a period of at least twelve (12) months, then the Election may be made no later than six (6) months prior to the end of such period.

  (c)    Elections shall continue in effect until a written election to revoke or change such Election is received by the Company, except that a written election to revoke or change such Election must be made prior to the last day for making an Election determined in accordance with paragraph (b) above or as permitted by Section 17.3.

17.3     Subsequent Elections. Except as otherwise permitted or required by Section 409A or any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or other applicable guidance, any Award subject to Section 409A which permits a subsequent Election to delay the distribution or change the form of distribution in settlement of such Award shall comply with the following requirements:

  (a)    No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made;

  (b)    Each subsequent Election related to a distribution in settlement of an Award not described in this Section 17.3(b), 17.4(b), or 17.4(f) must result in a delay of the distribution for a period of not less than five (5) years from the date such distribution would otherwise have been made; and

  (c)    No subsequent Election related to a distribution pursuant to Section 17.4(d) shall be made less than twelve (12) months prior to the date of the first scheduled payment under such distribution.

17.4     Distributions Pursuant to Deferral Elections. Except as otherwise permitted or required by Section 409A or any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or other applicable guidance, no distribution in settlement of an Award subject to Section 409A may commence earlier than:

  (a)    Separation from service (as determined by the Secretary of the United States Treasury);

  (b)    The date the Participant becomes Disabled (as defined below);

  (c)    Death;

  (d)    A specified time (or pursuant to a fixed schedule) that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 17.2 and/or 17.3, as applicable;

  (e)    To the extent provided by the Secretary of the U.S. Treasury, a change in the ownership or effective control or the Company or in the ownership of a substantial portion of the assets of the Company; or

  (f)    The occurrence of an "Unforeseeable Emergency" (as defined by applicable U.S. Treasury Regulations promulgated pursuant to Section 409A).

Notwithstanding anything else herein to the contrary, to the extent that a Participant is a "Specified Employee" (as defined in Section 409A(a)(2)(B)(i) of the Code) of the Company, no distribution pursuant to Section 17.4(a) in settlement of an Award subject to Section 409A may be made before the date (the Delayed Payment Date ) which is six (6) months after such Participant’s date of separation from service, or, if earlier, the date of the Participant’s death. All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.

17.5     Unforeseeable Emergency. The Committee shall have the authority to provide in the Award Agreement evidencing any Award subject to Section 409A for distribution in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an Unforeseeable Emergency. In such event, the amount(s) distributed with respect to such Unforeseeable Emergency cannot exceed the amounts necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Award. All distributions with respect to an Unforeseeable Emergency shall be made in a lump sum as soon as practicable following the Committee’s determination that an Unforeseeable Emergency has occurred.

The occurrence of an Unforeseeable Emergency shall be judged and determined by the Committee. The Committee’s decision with respect to whether an Unforeseeable Emergency has occurred and the manner in which, if at all, the distribution in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.

17.6     Disabled. The Committee shall have the authority to provide in any Award subject to Section 409A for distribution in settlement of such Award in the event that the Participant becomes Disabled. A Participant shall be considered "Disabled" if either:

  (a)    the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or

  (b)    the 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 (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Participant’s employer.

All distributions payable by reason of a Participant becoming Disabled shall be paid in a lump sum or in periodic installments as established by the Participant’s Election, commencing as soon as practicable following the date the Participant becomes Disabled. If the Participant has made no Election with respect to distributions upon becoming Disabled, all such distributions shall be paid in a lump sum as soon as practicable following the date the Participant becomes Disabled.

17.7     Death. If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the Participant’s Election as soon as administratively possiblefollowing receipt by the Committee of satisfactory notice and confirmation of the Participant’s death. If the Participant has made no Election with respect to distributions upon death, all such distributions shall be paid in a lump sum as soon as practicable following the date of the Participant’s death.

17.8     No Acceleration of Distributions. Notwithstanding anything to the contrary herein, this Plan does not permit the acceleration of the time or schedule of any distribution under an Award subject to Section 409A, except as provided by Section 409A and/or the Secretary of the U.S. Treasury.

18.     Miscellaneous Provisions .

18.1     Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

18.2     Forfeiture Events.

  (a)    The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service.

  (b)    If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement.

18.3     Provision of Information. Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common stockholders.

18.4     Rights as Employee, Consultant or Director. No person, even though eligible pursuant to Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participant’s Service at any time. To the extent that an Employee of a Participating Company other than the Company receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.

18.5     Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entryon the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.3 or another provision of the Plan.

18.6     Delivery of Title to Shares. Subject to any governing rules or regulations, the Company shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.

18.7     Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.

18.8     Retirement and Welfare Plans. Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards may be included as "compensation" for purposes of computing the benefits payable to any Participant under any Participating Company’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.

18.9     Beneficiary Designation. Subject to local laws and procedures, each Participant may file with the Company a written designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participant’s death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. If a married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness of such designation may be subject to the consent of the Participant’s spouse. If a Participant dies without an effective designation of a beneficiary who is living at the time of the Participant’s death, the Company will pay any remaining unpaid benefits to the Participant’s legal representative.

18.10     Severability. If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby.

18.11     No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or another Participating Company’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action which such entity deems to be necessary or appropriate.

18.12     Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Participating Company. The Participants shall have no claim againstany Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.

18.13     Choice of Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of California, without regard to its conflict of law rules.

 

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