Exhibit 10.5
REGENERON PHARMACEUTICALS, INC.
CHANGE IN CONTROL SEVERANCE PLAN
As amended and restated, effective November 14,
2008
INTRODUCTION
The purposes of this Regeneron Pharmaceuticals,
Inc. Change in Control Severance Plan (this “ Plan
”) are (i) to help the Company (as defined below) retain key
employees of the Company, (ii) to help maintain the focus of such
employees on the business of the Company and to mitigate the
distractions caused by the possibility that the Company may be the
target of an acquisition; and (iii) to provide certain benefits to
such employees in the event their employment is terminated (or
constructively terminated) after, or in contemplation of, a change
in control. The possibility of such terminations and the
uncertainty it creates may result in the loss or distraction of key
employees of the Company to the detriment of the Company and its
shareholders.
The Company’s Board of Directors (the
“ Board ”) considers the retention of key
employees and the avoidance of such loss and distraction to be
essential to protecting and enhancing the best interests of the
Company and it shareholders. The Board also believes that when a
change in control is perceived as imminent, or is occurring, the
Board should be able to receive and rely on disinterested service
from employees regarding the best interests of the Company and its
shareholders without concern that employees might be distracted or
concerned by the personal uncertainties and risks created by a
change in control.
Accordingly, in order to accomplish the above
purposes, the Board has caused the Company to adopt this Plan, as
amended and restated effective November 14, 2008 (the “
Effective Date ”).
1. Definitions . For the purpose of this Plan the foregoing
terms shall have the following meanings:
(a) “ Anticipatory Termination ”
means a termination of an Eligible Executive’s employment by
the Company without Cause or by an Eligible Executive for Good
Reason that occurs after a tender offer is announced for the
Company or after material discussions have occurred with a possible
acquirer with regard to a Transaction (as defined in the definition
of “Change in Control” below), provided, that such
offer or discussions have not terminated.
(b) “ Average Bonus ” shall mean
the average amount in each of the Company’s last three (3)
completed fiscal years prior to the termination of employment (or
if higher the last three (3) completed fiscal years prior to the
Change in Control) awarded to an Eligible Executive as an annual
bonus for such years (or if not employed on the last day of three
prior completed fiscal years, the average over those fiscal years
when employed on the last day of a fiscal year or, if no such
dates, the average of the Average Bonus of all Eligible Executives
in the Eligible Executive’s Group; provided, that any bonus
awarded to an Eligible Executive for a fiscal year during which he
or she was employed for only a portion of the year shall be
annualized to reflect a full year’s bonus for such
year).
(c) “ Bonus ” shall mean the
product of (i) the Eligible Executive’s annual base salary
rate for the year in which the Date of Termination occurs (which is
calculated immediately prior to any reduction in base salary (if
any) if such termination is by the Eligible Executive for Good
Reason) multiplied by (ii) the average of the percentages that
bonuses represented of base salary for the fiscal years utilized to
determine Average Bonus.
(d) “ Cause ” shall mean, as to
each Eligible Executive, (i) the Eligible Executive’s willful
misconduct involving the Company or its assets, business or
employees or in the performance of his or her duties which is
materially injurious to the Company (in a manner which would affect
the Company economically or as to its reputation); (ii) the
Eligible Executive’s indictment for, or conviction of, or
pleading guilty or nolo contendre to, a felony (provided that for
this purpose, a felony shall cover any action or inaction that is a
felony or crime under federal, state or local law in the United
States (collectively, “ U.S. law ”) and any
action or inaction which takes place outside of the United States,
if it would be a felony under U.S. law); (iii) the Eligible
Executive’s continued and substantial failure to attempt in
good faith to perform his or her duties with the Company (other
than failure resulting from the Eligible Executive’s
incapacity due to physical or mental illness or injury), which
failure has continued for a period of at least ten (10) days after
written notice thereof from the Company; (iv) the Eligible
Executive’s breach of any material provisions of any written
agreement with the Company, which breach, if curable, is not cured
within ten (10) days after written notice thereof from the Company;
or (v) the Eligible Executive’s failure to attempt in good
faith to promptly follow a written direction of the Board or a more
senior officer, provided that the failure shall not be considered
“Cause” if the Eligible Executive, in good faith,
believes that such direction, or implementation thereof, is illegal
or inconsistent with the Company’s Code of Conduct and he or
she promptly so notifies the Chairman of the Board in writing. No
act or failure to act by an Eligible Executive shall be deemed to
be “willful” if the Eligible Executive believed in good
faith that such action or non-action was in, or not opposed to, the
best interests of the Company.
(e) A “ Change in
Control ” shall mean the occurrence of any of the
following events: (i) any “ Person ” (as defined
in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the “ Exchange Act ”), as modified and
used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (1) the Company, (2) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company,
(3) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (4) a corporation owned, directly
or indirectly, by the shareholders of the Company in substantially
the same proportions as their ownership of stock of the Company) is
or becomes the “ Beneficial Owner ” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing thirty-five percent (35%) or
more of the Company’s then outstanding securities, excluding
any Person who is an officer or director of the Company or who
becomes such a Beneficial Owner in connection with a transaction
described in clause (A) of subsection (iii) below; (ii) the
following individuals cease for any reason to constitute a majority
of the number of directors then serving: individuals who, on the
Effective Date, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the
Board or nomination for election by the Company’s
shareholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors on the Effective Date or whose appointment, election
or nomination for election was previously so approved or
recommended; (iii) there is consummated a merger or consolidation
of the Company with any other corporation other than (A) a merger
or consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least sixty percent
(60%) of the combined voting power of the voting securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of the
Company representing thirty-five percent (35%) or more of the
combined voting power of the Company’s then outstanding
securities; or (iv) the shareholders of the Company approve a plan
of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company
of all or substantially all of the Company’s assets, other
than a sale or disposition by the Company of all or substantially
all of the Company’s assets to an entity at least
seventy-five percent (75%) of the combined voting power of the
voting securities of which are owned by Persons in substantially
the same proportions as their ownership of the Company immediately
prior to such sale; subsections (iii) and (iv) above each a
“Transaction”. For the avoidance of doubt, the term
“securities” shall refer solely to the Company’s
Common Stock, par value $.001 per share and Class A Stock, par
value $.001 per share.
(f) “ Code ” shall mean the
Internal Revenue Code of 1986, as amended.
(g) “ Committee ” shall mean the
Compensation Committee of the Board.
(h) “ Company ” shall mean
Regeneron Pharmaceuticals, Inc. and any successor thereto;
provided , that for the purposes of this Plan, other than
any obligation to make payments or provide benefits hereunder and
as to the definition of Change in Control, “Company”
shall also include all of the Company’s subsidiaries (as
defined in Code Section 424(f)).
(i) “ Disability ” shall mean, as
to each Eligible Executive, the Eligible Executive’s failure
to have performed his or her material duties and responsibilities
as a result of physical or mental illness or injury for more than
one hundred eighty (180) days during a three hundred sixty-five
(365) day period.
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(j) “ Eligible Executives ” shall
mean Group 1 Executives and Group 2 Executives.
(k) “ Equity Grant ” shall mean
any stock option, restricted stock award, or other equity grant
under the Company’s long-term incentive plans.
(l) “ Good Reason ” shall mean,
as to each Eligible Executive, a termination (including, if
applicable, by retirement in accordance with Company policy) by the
Eligible Executive and effected by a written notice given within
ninety (90) days after the occurrence of the Good Reason event. For
purposes of this Agreement, “Good Reason” shall mean,
as to each Eligible Executive, the occurrence of any of the
following events without the Eligible Executive’s express
written consent which event is not cured within thirty (30) days
after written notice thereof from the Eligible Executive to the
Company: (i) any material diminution in the Eligible
Executive’s position, duties, responsibilities, title or
authority, or the assignment to the Eligible Executive of duties
and responsibilities materially inconsistent with his or her
position, except in connection with the Eligible Executive’s
termination for Cause or as a result of death, or temporarily as a
result of the Eligible Executive’s incapacity or other
absence for an extended period; (ii) any material breach by the
Company of any material provision of any written agreement with the
Eligible Executive or failure to timely pay any compensation
obligation to the Eligible Executive; (iii) a reduction in the
Eligible Executive’s annual base salary or target bonus
opportunity (if any); (iv) a relocation of the Eligible
Executive’s principal business location to an area outside of
a fifty (50) mile radius of the Eligible Executive’s current
principal business location or (v) a failure by the Company to
comply with this Plan.
(m) “ Group 1 Executive ” shall
mean an officer or other executive who has been designated by the
Committee as a Group 1 Executive in accordance with Section 2
below.
(n) “ Group 2 Executive ” shall
mean an officer or other executive who has been designated by the
Committee as a Group 2 Executive in accordance with Section 2
below.
(o) “ Severance Multiplier ”
shall mean one for Group 1 Executives and two for Group 2
Executives.
(p) A termination “ without Cause
” shall mean a termination of an Eligible Executive’s
employment by the Company other than for a termination for Cause or
due to Disability.
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2. Eligible Executives . Eligible Executives shall consist of those
officers and other executives of the Company as the Committee in
its sole discretion designates in writing to participate in the
Plan. At the time the Committee designates an employee as an
Eligible Executive, the Committee shall also designate whether such
Eligible Executive is a Group 1 Executive or a Group 2 Executive.
The Committee may, in its sole discretion, terminate an
employee’s participation in the Plan as an Eligible Executive
by providing not less than one (1) year’s prior written
notice to the employee (a “ Plan Participation Termination
Notice ”) at any time following the two (2) year
anniversary of the Effective Date; provided , that no Plan
Participation Termination Notice shall be effective after a Change
in Control (whether sent before or after). The Committee may
designate additional Eligible Executives or change the designation
of any Group 1 Executive to a Group 2 Executive at any time in its
sole discretion.
3. Termination of Employment in Connection with a
Change in Control .
Subject to the provisions of Section 24 hereof:
(a) If (i) a Change in Control
occurs and an Eligible Executive’s employment with the
Company is terminated by the Company without Cause or by the
Eligible Executive for Good Reason at any time within two (2) years
after the Change in Control or (ii) there was an Anticipatory
Termination and the Change in Control has taken place within one
hundred eighty (180) days thereafter, such Eligible Executive shall
be entitled to the amounts provided in Section 4 upon such
termination or, if an Anticipatory Termination, upon the Change in
Control (less any severance benefits previously paid or provided by
the Company).
(b) In the event of an Anticipatory
Termination, if any Equity Grants in the name of the applicable
Eligible Executive would vest as a result of the Anticipatory
Termination had it occurred after the Change in Control (or the
Equity Grant otherwise would have vested pursuant to its terms on
or prior to the Change in Control if not for the Anticipatory
Termination), any such Equity Grant that otherwise would be
forfeited shall not be forfeited pending a determination of whether
or not a Change in Control occurs within one hundred eighty (180)
days thereafter (the “Determination Period”), but
during the Determination Period no unvested Equity Grant shall vest
or be exercisable and no dividends shall be payable unless and
until the Change in Control takes place during the Determination
Period. If a Change in Control occurs during the Determination
Period, then the Equity Grants that would have vested during the
Determination Period absent the Anticipatory Termination and any
Equity Grants that would vest on the Change in Control or, upon a
without Cause or Good Reason termination within two (2) years
thereafter, shall become vested upon the Change in Control and the
exercise period of all Equity Grants that are subject to exercise
conditions shall be extended, to the extent applicable, to the
later of (i) the permitted exercise dates after the Anticipatory
Termination provided in the plan or grant assuming the Change in
Control had happened immediately prior to the Anticipatory
Termination and (ii) the date which is thirty (30) days following
the first date after such Change in Control in which shares of the
Company could be traded by the Eligible Executive on the applicable
market under the Company’s or its subsidiary’s trading
window policies but, (x) not beyond the last day of extension
permitted under Code Section 409A without such Equity Grant being
deemed subject to the additional tax under Code Section 409A, and
(y) in no event beyond the initial expiration date of the grant. In
the event an Equity Grant would expire after an Anticipatory
Termination and prior to it becoming exercisable (including as a
result of a Change in Control) as a result of either (x) or (y) of
the forgoing sentence, it may be exercised during the thirty (30)
day period prior to its expiration (or, if in connection with a
Change in Control, such other period (whether shorter or longer)
that applies to other similar Equity Grants) but the transaction
shall be held in escrow pending a determination of whether a Change
in Control has taken place during the one hundred eighty (180) day
period after termination of the Eligible Executive’s
employment.
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4. Compensation on Change in Control
Termination . (a) If,
pursuant to Section 3, an Eligible Executive is entitled to amounts
and benefits under this Section 4, such Eligible Executive shall
receive the following payments and benefits from the
Company:
(i) (A) any base salary, bonus, paid time off or
other compensation accrued or earned under law or in accordance
with the Company’s policies and practices applicable to the
Eligible Executive but not yet paid; (B) subject to submission of
appropriate documentation, any incurred but unreimbursed business
expenses for the period prior to the Eligible Executive’s
termination payable in accordance with the Company’s policies
and practices; and (C) any other amounts or vested benefits due
under the then applicable employee benefit (including without
limitation any Supplemental Executive Retirement Plan), equity or
incentive plans of the Company then in effect, applicable to the
Eligible Executive (including, without limitation, the
Company’s 401(k) Savings Plan) as shall be determined and
paid in accordance with such plans;
(ii) subject to Section 4(b) and Section 8 hereof,
within ten (10) days after the satisfaction of the requirements of
Section 8 hereof (or, if such termination occurred prior to a
Change in Control, within ten (10) days after the latter of the
aforesaid date or the Change in Control), a lump sum payment equal
to the product of (A) the Severance Multiplier times (B) the sum of
(x) the Eligible Executive’s annual base salary rate (which
is calculated immediately prior to any reduction in base salary (if
any) if such termination is by the Eligible Executive for Good
Reason) and (y) the Eligible Executive’s Average
Bonus;
(iii) subject to Section 4(b) and
Section 8 hereof, within ten (10) days after the satisfaction of
the requirements of Section 8 hereof (or, if such termination
occurred prior to a Change in Control, within ten (10) days after
the latter of the aforesaid date or the Change in Control), a pro
rata Bonus payment for the year in which the Eligible Executive is
terminated based on the portion of the year the Eligible Executive
was employed;
(iv) to the extent not paid pursuant
to Section 4(a)(i)(A) above, any earned but unpaid bonus for a
previously completed fiscal year of the Company; provided that such
bonus shall be paid to the Eligible Executive in the year following
the completed fiscal year of the Company when other executives of
the Company receive their bonuses (but not later than 2 ½
months following the completion of such fiscal year);
(v) subject to Section 4(b) and
Section 8 hereof, continued coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”), or
otherwise, under the Company health plans in which the Eligible
Executive and his/her dependents participated immediately prior to
the Eligible Executive’s Date of Termination, or materially
equivalent plans thereto (the “Health Plans”), for the
Eligible Executive and the Eligible Executive’s dependents
until the earlier of (A) (x) one (1) year following the Date of
Termination applicable to the Eligible Executive if the Eligible
Executive is a Group 1 Executive, or (y) eighteen (18) months
following the Date of Termination applicable to the Eligible
Executive if the Eligible Executive is a Group 2 Executive, and (B)
the Eligible Executive’s becoming eligible to participate in
the health plan of another employer; provided , that the
Eligible Executive timely elects such coverage and pays the same
premium amount for such coverage as the Eligible Executive would
pay if an active employee immediately prior to the Change in
Control (the ” Existing Premium Amount ”); and
further provided that such coverage shall cease to the extent that
the providing of such coverage would violate applicable law.
Furthermore, to the extent that the applicable coverage period in
this Section 4(a)(v) can not be provided under the Company’s
policies or, if the providing of such coverage would result in
taxation of the benefits under Code Section 105(h) (or a successor
provision), the Company shall make payments to the Eligible
Executive of the premiums it had been paying for such coverage for
the Eligible Executive (but on a fully taxed grossed-up basis). In
addition, if a Group 2 Executive has not become eligible to
participate in the health plan of another employer by the date
immediately following the expiration of the eighteen (18) month
period referred to in the preceding sentence, the Company shall
make a monthly payment to the Eligible Executive of the monthly
premium it had been paying for such coverage for the Eligible
Executive (but on a fully taxed grossed-up basis) for up to a
maximum of six (6) months following the expiration of such eighteen
(18) month period (or, if earlier, until the Eligible Executive
becomes eligible to participate in the health plan of another
employer).
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(vi) subject to Section 4(b) and Section 8 hereof,
continued coverage (at Company expense to the same extent as
payments were made by the Company while the Eligible Executive was
an active employee) in all welfare benefit plans (other then those
covered by (v) above) and financial/tax advisory and preparatory
services that the Eligible Executive participated in prior to
his/her Date of Termination for (x) one (1) year following the Date
of Termination applicable to the Eligible Executive if the Eligible
Executive is a Group 1 Executive, or (y) two (2) years following
the Date of Termination applicable to the Eligible Executive if the
Eligible Executive is a Group 2 Executive. All such coverage shall
be provided in a manner such that it either (i) does not provide
for a “deferral of compensation” within the meaning of
Code Section 409A or (ii) complies with the requirements of Code
Section 409A. Payment to an Eligible Executive of a lump sum amount
equal to the premium payable for such coverage shall only be
permitted if such payment may be made without violating the
requirements of Code Section 409A.
(b) Severance payments and benefits pursuant to
Section 4(a)(ii), (iii) or (iv) hereof are intended to qualify as a
short-term deferral for purposes of Treasury Regulation Section
1.409A-1(b)(4). Nevertheless, if the Company determines in good
faith that any payment provided under such sections or otherwise
under Section 4(a) would cause a violation of Code Section 409A if
paid within the first six (6) months after termination of an
Eligible Executive’s employment, such amount(s) shall not be
paid to such Eligible Executive during such six (6) month period
but shall instead be paid or provided to such Eligible Executive
immediately after the end of such six (6) month period, in a lump
sum (without interest). Thereafter, payments to such Eligible
Executive shall be made in accordance with the Company’s
normal payroll practices. In the event that continuation of any
benefit would in the good faith judgment of the Company cause a
violation of Code Section 409A if provided at Company cost during
the first six (6) months after the Date of Termination of an
Eligible Executive, if the Eligible Executive wants such benefit
continuation, he/she shall pay to the Company the full cost
therefor during such six (6) month period and the Company shall
reimburse him/her for such cost in a lump sum payment immediately
after the end of such six (6) month period.
5. Excise Tax . In the event that an Eligible Executive shall
become entitled to payments and/or benefits provided by this Plan
or any other amounts in the “nature of compensation”
(whether pursuant to the terms of this Plan or any other plan,
arrangement or agreement with the Company, including, without
limitation, an award agreement under an equity compensation plan,
any Person whose actions result in a change of ownership or
effective control covered by Section 280G(b)(2) of the Code or any
person affiliated with the Company or such person) as a result of a
Change in Control (collectively the “ Company Payments
”), and if such Company Payments will be subject to the tax
(the “ Excise Tax ”) imposed by Section 4999 of
the Code (and any similar tax that may hereafter be imposed by any
taxing authority) the amounts of any Company Payments shall be
automatically reduced to an amount one dollar less than an amount
that would subject the Eligible Executive to the Excise Tax;
provided, however, that the reduction shall occur only if the
reduced Company Payments received by the Eligible Executive (after
taking into account further reductions for applicable federal,
state and local income, social security and other taxes) would be
greater than the unreduced Company Payments to be received by the
Eligible Executive minus (i) the Excise Tax payable with respect to
such Company Payments and (ii) all applicable federal, state and
local income, social security and other taxes on such Company
Payments. The Eligible Executive may elect which payments and
benefits shall be reduced to accomplish the foregoing, but, if the
Eligible Executive does not make such an election, the first
benefit to be reduced is acceleration of vesting of any stock
option where the exercise price exceeds the fair market value of
the underlying shares at the time the acceleration would otherwise
occur, and the second benefit to be reduced shall be any cash
payments under this Plan.
(a) For purposes of determining whether any of the
Company Payments will be subject to the Excise Tax and the amount
of such Excise Tax, (x) the Company Payments shall be treated as
“parachute payments” within the meaning of Section
280G(b)(2) of the Code, and all “parachute payments” in
excess of the “base amount” (as defined under Code
Section 280G(b)(3) of the Code) shall be treated as subject to the
Excise Tax, unless and except to the extent that, in the opinion of
the Company’s independent certified public accountants
appointed prior to any change in ownership (as defined under Code
Section 280G(b)(2)) or tax counsel selected by such accountants
(the “ Accountants ”) such Company Payments (in
whole or in part) either do not constitute “parachute
payments,” including giving effect to the recalculation of
stock options in accordance with Treasury Regulation Section
1.280G-1 Q/A33, represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the
Code in excess of the “base amount” or are otherwise
not subject to the Excise Tax, and (y) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by
the Accountants in accordance with the principles of Section 280G
of the Code. To the extent permitted under Revenue Procedure
2003-68, the value determination shall be recalculated to the
extent it would be beneficial to the Eligible Executive, at the
request of the Eligible Executive.
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(b) For purposes of making the calculation
hereunder, the Eligible Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in effect in the calendar year in which the Company
Payments are to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the
Eligible Executive’s residence in effect for the calendar
year in which the Company Payments are to be made, net of the
maximum reduction in U.S. federal income taxes which could be
obtained from deduction of such state and local taxes if paid in
such year.
(c) In the event of any controversy with the
Internal Revenue Service (or other taxing authority) with regard to
the Excise Tax, the Eligible Executive shall permit the Company to
control issues related to the Excise Tax (at its expense), provided
that such issues do not potentially materially adversely affect the
Eligible Executive, but the Eligible Executive shall control any
other issues. In the event the issues are interrelated, the
Eligible Executive and the Company shall in good faith cooperate so
as not to jeopardize resolution of either issue, but if the parties
cannot agree the Eligible Executive shall make the final
determination with regard to the issues. In
