Exhibit 10.1
ICOS CORPORATION
AMENDED AND
RESTATED
CHANGE IN CONTROL SEVERANCE
AGREEMENT
THIS AMENDED AND RESTATED CHANGE IN
CONTROL SEVERANCE AGREEMENT, (the “Agreement”) is
entered into pursuant to the ICOS Corporation Change in Control
Severance Plan (the “Plan”) effective as of
October 16, 2006, (the “Effective Date”), by and
between Paul N. Clark (the “Employee”) and ICOS
Corporation, a Washington corporation, (the “Company”).
This Agreement and the Plan provide the complete terms and
conditions of the Employee’s participation in the Plan and
this Agreement supersedes all prior agreements with respect to the
Employee’s participation in the Plan. The Plan and this
Agreement constitute the Summary Plan Description required under
the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”).
1. Definitions . The
following definitions shall apply for all purposes under this
Agreement:
(a) Announcement .
“Announcement” means the earlier of (i) the
initial public announcement by the Company that it has entered into
a definitive agreement which, upon consummation of the transactions
contemplated thereby, will result in a Change in Control or
(ii) the initial public announcement by the Company that a
transaction or event constituting a Change in Control has
occurred.
(b) Code . “Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
(c) Change in Control .
“Change in Control” means the occurrence of any one or
more of the following events that occur on or after the Effective
Date:
(i) The consummation of a merger or
consolidation of the Company with or into another entity or any
other corporate reorganization, unless more than 50% of the
combined voting power of the continuing or surviving entity’s
securities outstanding immediately after such merger, consolidation
or other reorganization are immediately thereafter beneficially
owned, directly or indirectly and in substantially the same
proportion, by the persons who beneficially owned the
Company’s outstanding voting securities immediately prior to
such merger, consolidation or other reorganization;
(ii) The sale, transfer or other
disposition of all or substantially all of the Company’s
assets;
(iii) A change in the composition of
the Company’s Board of Directors (“Board”), as a
result of which fewer than one-half of the incumbent directors are
directors who either (A) had been directors of the Company on
the date 24 months prior to the date of the event that may
constitute a Change in Control (the “original
directors”) or (B) were elected, or nominated for
election, to the Board with the affirmative votes of at least a
majority of the aggregate of the original directors who were still
in office at the time of the election or nomination and the
directors whose election or nomination was previously so
approved;
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(iv) Any transaction as a result of
which any person becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934
(the “Exchange Act”), directly or indirectly, of
securities of the Company representing at least 20% of the total
voting power represented by the Company’s then outstanding
voting securities. For purposes of this Paragraph (iv), the term
“person” shall have the same meaning as when used in
Sections 13(d) and 14(d) of the Exchange Act but shall
exclude:
(A) A trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
a subsidiary of the Company;
(B) A corporation owned directly or
indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of the common stock of the
Company; and
(C) The Company; or
(v) Shareholder approval of a
complete liquidation or dissolution of the Company.
A transaction shall not constitute a
Change in Control if its sole purpose is to change the state of the
Company’s incorporation or to create a holding company that
will be owned in substantially the same proportions by the persons
who held the Company’s securities immediately before such
transactions. For purposes of Section 1(c)(i) above, the
calculation of voting power shall be made as if the date of the
acquisition were a record date for a vote of the Company’s
shareholders, and for purposes of Section 1(c)(iv) above, the
calculation of voting power shall be made as if the date of the
consummation of the transaction were a record date for a vote of
the Company’s shareholders.
(d) Employment Agreement .
“Employment Agreement” means the employment agreement,
dated June 11, 1999, by and between the Company and the
Employee, as may be amended from time to time by the
parties.
(e) Good Reason . “Good
Reason” shall mean the occurrence on or after the effective
date of a Change in Control of any of the following (without the
Employee’s express written consent which specifically
references this Agreement):
(i) a material and substantial
diminution in the nature or status of the Employee’s
position, authority, title, reporting relationships, duties or
responsibilities, in each case as in effect immediately prior to
the Announcement or any other action by the Company or a successor
entity which results in such a material and substantial diminution,
excluding for this purpose an isolated and inadvertent action not
taken in bad faith and which is remedied by the Company or
successor entity within 15 days after receipt of notice thereof
given by the Employee;
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(ii) one or more reductions in the
Employee’s “total compensation,” which is defined
as follows:
(A) any reduction in the
Employee’s base salary, except for across-the-board base
salary reductions similarly affecting all management personnel of
the Company and all management personnel of the
“person” (within the meaning of Sections 13(d) and
14(d) of the Exchange Act) in control of the Company; or
(B) any reduction in the
Employee’s target annual bonus percentage of base
salary;
(iii) the failure to grant to the
Employee stock options, stock units, performance shares, or other
equity-based compensation during each twelve (12) month period
following the Change in Control having a substantially similar
value in the aggregate (measured as of the date of grant) as those
rights granted to the Employee on an annualized average basis, and
having all other material terms (including vesting requirements) at
least as favorable to the Employee, as those rights granted to him
or her during the three-year period immediately prior to the Change
in Control;
(iv) the delivery of notification to
the Employee that his or her principal place of work will be
relocated by a distance of 35 miles or more;
(v) the Company’s failure to
continue to provide the Employee with benefits substantially
similar in the aggregate to those enjoyed by the Employee under any
of the Company’s life insurance, medical, health and
accident, disability, pension, retirement, or other welfare benefit
plans in which the Employee and his or her eligible family members
were participating at the time of the Change in Control, the taking
of any action by the Company which would directly or indirectly
materially reduce any of such benefits, or the failure by the
Company to provide the Employee with the number of paid vacation
days to which the Employee is entitled on the basis of his or her
years of service with the Company in accordance with the
Company’s normal vacation policy in effect at the time of the
Change in Control; or
(vi) the material breach by the
Company or by its successor entity of any material obligation owed
to the Employee under the Plan, this Agreement or the Employment
Agreement.
Before “Good Reason” has
been deemed to have occurred, the Employee must give the Company
written notice detailing why the Employee believes a Good Reason
event has occurred. The Company shall then have 15 days after its
receipt of written notice to cure the items cited in the written
notice so that “Good Reason” will have not formally
occurred with respect to the event(s) in question.
(f) Just Cause . “Just
Cause” means any one or more of the following:
(i) The Employee’s willful and
continued failure to substantially perform the Employee’s
duties with the Company, as reasonably determined by the Board in
good faith (other than any such failure resulting from the
Employee’s incapacity due to any physical or mental illness
of the Employee or any such actual or anticipated failure after the
Employee’s issuance of a notice of termination for Good
Reason), after a written demand for substantial performance is
delivered to the Employee by the Board, which demand
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specifically identifies the manner
in which the Board believes that the Employee has not substantially
performed the Employee’s duties;
(ii) The Employee’s willful
and continued failure to substantially follow and comply with the
specific and lawful directives of the Board, as reasonably
determined by the Board in good faith (other than any such failure
resulting from the Employee’s incapacity due to any physical
or mental illness of the Employee or any such actual or anticipated
failure after the Employee’s issuance of a notice of
termination for Good Reason), after a written demand for
substantial performance is delivered to the Employee by the Board,
which demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed the
Employee’s duties;
(iii) The conviction of the Employee
by a court of competent jurisdiction (or the entering of a plea of
nolo contendere or guilty by the Employee) for a felony
crime;
(iv) The Employee’s
misconduct, fraud or dishonesty that causes material harm or damage
to the Company; or
(v) Any unauthorized use or
disclosure of confidential information or trade secrets by the
Employee that causes material harm or damage to the
Company.
For purposes of this
Section 1(f), no act, or failure to act, on the
Employee’s part shall be deemed “willful” unless
done, or omitted to be done, by the Employee not in good faith.
Notwithstanding the foregoing, the Employee shall not be deemed
terminated for Just Cause pursuant to Sections 1(f)(i) or
(ii) hereof unless and until there shall have been delivered
to the Employee a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire
membership of the Board at a meeting of the Board (after reasonable
notice to the Employee, an opportunity for the Employee, together
with his or her counsel, to be heard before the Board and a
reasonable opportunity to cure), finding that in the Board’s
good faith determination the Employee had engaged in conduct set
forth in this Section 1(f) and specifying the particulars
thereof in reasonable detail.
(g) Separation from Service .
“Separation from Service” means the Employee’s
“separation from service” within the meaning of
Section 409A(a)(2)(A)(i) of the Code and the Treasury
Regulations thereunder.
(h) Severance Payment .
“Severance Payment” shall mean the cash severance
payment described in Section 2(b)(i).
(i) Specified Interest Rate .
“Specified Interest Rate” shall mean a rate equal to 75
basis points over the yield on the Treasury Constant Maturity
Series with maturity equal to six months as of the date of the
Employee’s Separation from Service, as reported in Federal
Reserve Statistical Release H.15.
(j) Total Disability .
“Total Disability” shall be deemed to have occurred if
the Employee is classified as disabled under a long-term disability
policy of the Company or, if no such policy applies, the Employee
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
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death or which has lasted or can be expected to
last for a continuous period of not less than 12 months.
2. Qualifying Termination;
Severance Benefits .
(a) Qualifying Termination .
The Employee shall be entitled to receive the Severance Payment and
other benefits described in Section 2(b) below if within the
18-month period commencing with the date of the occurrence of a
Change in Control, either:
(i) The Employee resigns his or her
employment for Good Reason within six months after the Employee of
the occurrence of an event specified in Section 1(e);
or
(ii) The Company terminates the
Employee’s employment for any reason other than Just Cause,
death or Total Disability.
The occurrence of either
Section 2(a)(i) or 2(a)(ii) is a “Qualifying
Termination”.
(b) Severance Benefits
.
(i) Cash Payment . In the
event of a Qualifying Termination, the Employee shall be entitled
to receive an amount equal to the sum of:
(A) three times the Employee’s
annual base salary, as in effect on the date of the termination of
the Employee’s employment (or, if greater, the
Employee’s annual base salary as in effect on the date of the
Announcement) and calculated without regard to any reduction in the
Employee’s annual base salary that constitutes Good
Reason;
(B) an amount determined by
multiplying three times the greatest of (1) the
Employee’s performance cash bonus at target for the year of
termination, (2) the Employee’s performance cash bonus
at target for the calendar year which includes the Announcement or
(3) the most recent annual cash bonus payment received by the
Employee;
(C) an amount determined by
multiplying the greatest of (1) the Employee’s
performance cash bonus at target for the year of termination,
(2) the Employee’s performance cash bonus at target for
the calendar year which includes the Announcement or (3) the
most recent annual cash bonus payment received by the Employee, by
a fraction the numerator of which is the number of days elapsed
since the completion of the most recently completed performance
period for which a bonus was paid (or for which the Compensation
Committee determined that no bonus was payable) and the denominator
of which is 365; and
(D) $30,000, which the Company
intends to be used for the purpose of obtaining financial
counseling, tax planning and outplacement services.
Subject to Section 2(d) below,
the Severance Payment shall be made to the Employee in a single
lump sum cash payment on or as soon as practicable following the
day of the Employee’s Separation from Service, but in any
event no later than 15 business days
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following the Employee’s
Separation from Service; provided, however, that if
