EXHIBIT 10.10
Executive Severance and Retention
Incentive Plan
Amended and Restated May 5,
2009
1. Introduction. The purpose
of this Executive Severance and Retention Incentive Plan (the
“Plan”) is to provide assurances of specified severance
benefits to eligible executives of Netflix, Inc. (the
“Company”) upon certain terminations of employment and
to provide specified retention incentives to eligible executives of
the Company upon a Change in Control. The Company believes that the
severance plan set forth in this Plan will aid the Company in
attracting and retaining highly qualified individuals. In addition,
the Company believes that the retention incentive set forth in this
Plan will help (a) assure that the Company will have continued
dedication and objectivity from its executives notwithstanding the
possibility, threat or occurrence of a Change in Control and
(b) provide the Company’s executives with an incentive
to continue their employment and to motivate executives to maximize
the value of the Company upon a Change in Control for the benefit
of its stockholders. This Plan is an “employee welfare
benefit plan,” as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended. This
document constitutes both the written instrument under which the
Plan is maintained and the required summary plan description for
the Plan.
2. Important Terms. To help
you understand how this Plan works, it is important to know the
following terms:
2.1
“Administrator” means the Company, acting
through its Chief Talent Officer or any person to whom the
Administrator has delegated any authority or responsibility
pursuant to Section 9, but only to the extent of such
delegation.
2.2 “Base Pay”
means a Covered Executive’s regular straight-time salary as
in effect during the last regularly scheduled payroll period
immediately preceding the date on which the Severance Benefit or
Retention Incentive becomes payable. Base Pay does not include
payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions or other
compensation.
2.3 “Board” means
the Board of Directors of the Company.
2.4 “Retention
Incentive” means the compensation the Covered Executive
will be provided pursuant to Section 4.
2.5 “Cause” means
(i) an act of fraud or personal dishonesty undertaken by a
Covered Executive in connection with the Covered Executive’s
responsibilities as an employee that is intended to result in
substantial gain or personal enrichment of the Covered Executive,
(ii) a Covered Executive’s conviction of, or plea of
nolo contendere to, a felony, or (iii) a Covered
Executive’s gross misconduct in connection with the
performance of the Covered Executive’s responsibilities as an
employee or willful failure to perform a reasonable material
component of the Covered Executive’s responsibilities as an
employee.
2.6 “Change in
Control” means the first to occur of any of the
following:
(a) Any “person” (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the
total voting power represented by the Company’s then
outstanding voting securities; or
(b) consummation of the sale or
disposition by the Company of all or substantially all of the
Company’s assets; or
(c) The consummation of a merger or
consolidation of the Company, with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or
its parent) at least fifty percent (50%) of the total voting
power represented by the voting securities of the Company, or such
surviving entity or its parent outstanding immediately after such
merger or consolidation; or
(d) A change in the composition of
the Board, as a result of which fewer than a majority of the
Directors are Incumbent Directors. “Incumbent
Directors” means Directors who either (A) are Directors
as of the Effective Date, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a
majority of those Directors whose election or nomination was not in
connection with any transaction described in subsections (i),
(ii) or (iii) or in connection with an actual or
threatened proxy contest relating to the election of
Directors.
2.7 “Company”
means Netflix, Inc., a Delaware corporation, and any successor by
merger, acquisition, consolidation or otherwise that assumes the
obligations of the Company under the Plan, or becomes bound by the
terms of the Plan by operation of law or otherwise.
2.8 “Covered
Executive” means a common law employee of the Company who
is employed at the Vice President level or higher.
2.9 “Director”
means a member of the Company’s Board of
Directors.
2.10 “Effective
Date” means July 1, 2005.
2.11 “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
2.13 “Involuntary
Termination” means a termination of employment of a
Covered Executive under the circumstances described in
Section 3.1.
2.14 “Option”
means a right granted pursuant to the Company’s stock option
plan(s) to purchase common stock of the Company pursuant to the
terms and conditions of such plan(s).
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2.15 “Plan” means
the Executive Severance and Retention Incentive Plan, as set forth
in this document, and as hereafter amended from time to
time.
2.16 “Severance
Benefit” means the compensation and other benefits the
Covered Executive will be provided pursuant to
Section 3.
2.17 “Severance
Date” means the date on which an Eligible Executive
experiences an Involuntary Termination.
2.18 “Stock Option
Allowance Value” means an amount of cash equivalent to
the stock option allowance then being used in calculating the
number of options granted monthly to the Covered Executive for the
calendar year of termination or Change in Control, as
applicable.
3. Severance.
3.1 Eligibility . If at any
time prior to a Change in Control, the Company (or any parent or
subsidiary of the Company) terminates such Covered
Executive’s employment for other than Cause, death or
permanent disability, then, subject to the Covered
Executive’s compliance with Section 3.3, the Covered
Executive shall receive the Severance Benefit provided pursuant to
this Section 3. For purposes of clarification, the severance
amount set forth in 3.2 shall not be due or payable to any Covered
Executive who shall have received or is eligible to receive the
Retention Incentive.
3.2 Severance Benefit . Each
Covered Executive who becomes eligible for a Severance Benefit
under Section 3.1 shall be paid a lump sum cash payment equal
to nine (9) months of Base Pay and nine (9) months of
Stock Option Allowance Value. The Severance Benefit shall be paid
to the Covered Executive as soon as administratively practicable
following the Severance Date, but in no event more than two and one
half months following the Severance Date but subject to
Section 7 and to the Covered Executive’s compliance with
Section 3.3.
3.3 Release and Non-Disparagement
Agreement. As a condition to receiving a Severance Benefit
under this Plan, each Covered Executive will be required to sign a
waiver and release of all claims arising out of his or her
Involuntary Termination and employment with the Company and its
subsidiaries and affiliates and an agreement not to disparage the
Company, its directors, or its executive officers, in a form
reasonably satisfactory to the General Counsel of the Company (the
“Release”). The Release must be executed and effective
within the period required by the Release but in no event later
than sixty (60) days following the Covered Executive’s
Severance Date, inclusive of any revocation period set forth in the
Release (such deadline, the “Release Deadline”). The
Severance Benefit will not be paid or provided until the Release
becomes effective. If the Release does not become effective by the
Release Deadline, the Covered Executive will forfeit all rights to
the Severance Benefit.
4. Retention
Incentive.
4.1 Eligibility. An
individual shall be eligible for the Retention Incentive under the
Plan, in the amount set forth in Section 4.2, only if
he or she (i) is a Covered Executive on the date of a Change
in Control, and (ii) is not eligible for a Severance Benefit
under Section 3.
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4.2 Retention Incentive. Each
Covered Executive eligible for a Retention Incentive in accordance
with Section 4.1 shall be entitled to receive a lump sum cash
payment equal to twelve (12) months of Base Pay and twelve
(12) months Stock Option Allowance Value. The Retention
Incentive shall be paid to the Covered Executive as soon as
administratively practicable following the date of the Change in
Control, but in no event more than two and one-half months
thereafter.
4.3 Parachute Payments. In
the event that a Severance Benefit or Retention Incentive provided
for in this Plan or otherwise payable or provided to the Covered
Executive (i) constitutes a “parachute payment”
within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the “Code”) and (ii) but
for this Section 4.3, would be subject to the excise tax
imposed by Section 4999 of the Code (the “Excise
Tax”), then the Employee’s Severance Benefit or
Retention Incentive hereunder shall be either
(a) delivered in full, or
(b) delivered as to such lesser
extent which would result in no portion of such benefits being
subject to the Excise Tax,
whichever of the foregoing amounts,
taking into account the applicable federal, state and local income
taxes and the Excise Tax, results in the receipt by the Covered
Executive on an after-tax basis, of the greatest amount of
benefits, notwithstanding that all or some portion of such benefits
may be taxable under Section 4999 of the Code. Unless the
Company and the Covered Executive otherwise agree in writing, any
determination required under this Section 4.3 shall be made in
writing in good faith by an accounting firm chosen by the
Administrator and reasonably acceptable to the Covered Executive
(the “Accountants”). If a reduction in benefits is
required only under the Plan, the reduction will apply to the
Employee’s Severance Benefit or Retention Incentive, as
applicable. If a reduction in benefits is required under the Plan
and one or more other arrangements or plans entered into with or
maintained for the benefit of the Covered Executive that provides
for vesting acceleration of equity awards, cash severance or
retention benefits, and/or continued employee benefits coverage,
the reduction will occur in the following order: the vesting
acceleration of stock options or stock appreciation rights, then
cash severance or retention benefits, then vesting acceleration of
equity awards other than stock options or stock appreciation
rights, and then Company-paid employee benefits coverage. In the
event that acceleration of vesting of stock options, stock
appreciation rights or other equity awards is to be reduced, such
acceleration of vesting shall be cancelled in the reverse order of
the date of grant for the Covered Executive’s stock options,
stock appreciation rights or other equity awards, as applicable. If
two or more stock options, stock appreciation rights or other
equity awards are granted on the same day, the stock options, stock
appreciation rights or other equity awards, as applicable, will be
reduced on a pro-rata basis. For purposes of making the
calculations required by this Section 4.3, the Accountants may
make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and
4999 of the Code. The Company and the Covered Executive shall
furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination
under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any
calculations contemplated by this Section 4.3.
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5. Reserved
6. Non-Duplication of
Benefits. Notwithstanding any other provision in the Plan to
the contrary and except as provided in this Section 6, the
Severance Benefits and Retention Incentive provided hereunder shall
be in lieu of any other severance and/or retention plan benefits
and the Severance Benefits and Retention Incentive provided
hereunder shall be reduced by any severance paid or provided to a
Covered Executive under any other plan or arrangement.
Notwithstanding the preceding sentence, this Section 6 shall
not apply to a Covered Executive to the extent such Covered
Executive’s separate, written employment, retention or other
agreement with the Company explicitly exempts the Covered Executive
from the preceding sentence.
7. Section 409A.
7.1 Notwithstanding anything herein
to the contrary, it is the intent that the Retention Incentives and
Severance Benefits payable under the Plan satisfy the requirements
of the “short-term deferral” rule set forth in
Section 1.409A-1(b)(4) of the Treasury Regulations and be
exempt from Section 409A of the Code and the final regulations
and any guidance promulgated thereunder (“Section
409A”). If the Severance
