SENIOR EXECUTIVE SEVERANCE
BENEFIT PLAN
Amended and Restated Effective
November 7, 2008
This Ardea
Biosciences, Inc. Senior Executive Severance Benefit Plan was
established effective July 1, 2001 and most recently amended
and restated November 7, 2008 (the “ Plan
”). The purpose of the Plan is to provide for the payment of
severance benefits to certain eligible employees of Ardea
Biosciences, Inc. (the “ Company ”) whose
employment with the Company is terminated pursuant to a Covered
Termination (as defined below). This Plan shall supersede any other
severance benefit plan, policy or practice previously maintained by
the Company with respect to Eligible Employees covered under this
Plan, except to the extent Eligible Employees are parties to
written agreements with the Company that expressly contemplate
otherwise. This Plan document also is the Summary Plan Description
for the Plan.
For purposes of
the Plan, the following terms are defined as follows:
(a) “Base Salary” means the Eligible
Employee’s annual base pay (excluding incentive pay, premium
pay, commissions, overtime, bonuses and other forms of variable
compensation), at the rate in effect during the last regularly
scheduled payroll period immediately preceding the date of the
Eligible Employee’s Covered Termination, and prior to any
reduction in base pay that would permit such Eligible Employee to
voluntarily terminate employment in a Constructive Termination
pursuant to Section 2(d)(i).
(b) “Board” means the Board of Directors of
the Company.
(c) “Company” means Ardea Biosciences,
Inc.
(d) “Constructive Termination” means, with
respect to an Eligible Employee, that such Eligible Employee
voluntarily terminates his or her employment with the Company
(A) after (1) any of the following are undertaken without
Cause and without such Eligible Employee’s express written
consent; (2) the Eligible Employee notifies the Company in
writing, within ninety (90) days after the occurrence of one
of the following events, which notice specifies the condition
giving rise to a Constructive Termination and that the Eligible
Employee intends to terminate his employment no earlier than thirty
(30) days after the Company’s receipt of such notice;
and (3) the Company does not cure such condition within thirty
(30) days following its receipt of such notice (the “
Cure Period ”) or states unequivocally in
writing that it does not intend to attempt to cure such condition,
and (B) such voluntary termination occurs within ninety
(90) days following the end of the Cure Period:
1.
(i) a material reduction by the Company in the Eligible
Employee’s Base Salary; provided, however, that
(A) a reduction of Base Salary of five percent (5%) or less
shall in no event be considered a material reduction for purposes
of this Plan, and (B) a reduction by the Company of the
Eligible Employee’s Base Salary by up to ten percent (10%)
shall not constitute a material reduction for purposes of this Plan
if it is made in connection with an across-the-board reduction by
the Company of all Eligible Employees’ annual base salaries
by a percentage at least equal to the percentage by which the
Eligible Employee’s Base Salary is reduced;
(ii) a relocation of the Eligible Employee’s business
office to a location more than fifty (50) miles from the
location at which the Eligible Employee performs his or her duties,
except for required travel by the Eligible Employee on the
Company’s business to an extent substantially consistent with
the Eligible Employee’s business travel obligations;
provided, however , that no relocation of the Eligible
Employee’s business office shall constitute a Constructive
Termination for purposes of this Plan if the Eligible Employee
provides services to the Company from a remote location (e.g.,
through telecommuting) at the time of the relocation; or
(iii) a material breach by the Company of any provision of
this Plan or any other Agreement between the Eligible Employee and
the Company concerning the terms and conditions of his or her
employment.
(e) “Continuation Period” means a period of
twelve (12) months following the Eligible Employee’s
Covered Termination.
(f) “Covered Termination” means an
Involuntary Termination Without Cause or a Constructive
Termination, notice of either of which is given on or after the
Effective Date.
(g) “Effective Date” means July 1,
2001, the effective date of the Plan.
(h) “Eligible Employee” means any
full-time, regular hire employee of the Company, other than the
Company’s Chief Executive Officer, who is a Senior Vice
President or who holds a higher such office with the Company and
any person designated by the Board or its Compensation Committee
from time to time, and whose employment with the Company terminates
due to a Covered Termination.
(i) “ERISA” means the Employee Retirement
Income Security Act of 1974, as amended.
(j) “Involuntary Termination Without Cause”
means the Eligible Employee’s dismissal or discharge for
reasons other than Cause. For this purpose, “Cause”
means that, in the reasonable determination of the Company, the
Eligible Employee has
(i) been convicted of or pleaded guilty or no contest to any
felony or any crime involving dishonesty that is likely to inflict
or has inflicted demonstrable and material injury on the business
of the Company;
(ii) willfully participated in any fraud against the
Company;
2.
(iii) willfully and materially breached a Company
policy;
(iv) intentionally damaged any property of the Company
thereby causing demonstrable and material injury to the business of
the Company;
(v) willfully and materially breached the Eligible
Employee’s Proprietary Information and Inventions Agreement
with the Company; or
(vi) engaged in conduct that, in the reasonable
determination of the Company’s Board of Directors,
demonstrates gross unfitness to serve.
Notwithstanding
the foregoing, Cause shall not exist based on conduct described in
clause (iii) or (vi) above unless the conduct described
in such clause has not been cured within fifteen (15) days
following the Eligible Employee’s receipt of written notice
from the Company specifying the particulars of the conduct
constituting Cause.
(k)
“ Target Performance Bonus ” means either:
(i) the target performance bonus then in effect for the
Eligible Employee for the year in which the Covered Termination
occurs, (ii) if, on or prior to the date of the Covered
Termination, the Company shall not have approved a target
performance bonus applicable to such Eligible Employee for the year
in which such Covered Termination occurs, but a target performance
bonus applicable to such Eligible Employee exists for the year
immediately preceding the year in which such Covered Termination
occurs, the target performance bonus amount in effect for the
Eligible Employee for such immediately preceding year, or
(iii) if there is no target performance bonus in effect for
the Eligible Employee for either the year in which such Covered
Termination occurs or the immediately preceding year, the largest
maximum target performance bonus payable to any other Company
officer with an employment title equivalent to or below the
employment title of such Eligible Employee for the year that
includes such Covered Termination.
Section 3. Eligibility For
Benefits.
(a) General Rules. Subject to the requirements set
forth in this Section, the Company shall provide the severance
benefits described in Section 4 of the Plan to Eligible
Employees.
(i) In order to be eligible to receive benefits under the
Plan, an Eligible Employee whose employment is terminated pursuant
to a Covered Termination that is an Involuntary Termination Without
Cause must continue to provide services to the Company, at the
Company’s request, through such date as determined by the
Company; provided, however, that such date shall not be more
than ninety (90) days from the date the Eligible Employee is
notified by the Company, in writing, of his or her Involuntary
Termination Without Cause.
(ii) In order to be eligible to receive benefits under the
Plan, an Eligible Employee also must execute a general waiver and
release (the “ Release ”) in
substantially the form attached hereto as Exhibit A,
Exhibit B or Exhibit C, as appropriate, within the
applicable time period set forth therein, but in no event later
than forty-five (45) days following termination of the
Eligible Employee’s employment, and permitting such Release
and Waiver to become fully effective in accordance with its terms,
(the date Executive’s Release
3.
becomes fully
effective, the “Release Effective Date”
), and such Release must become effective in accordance with its
terms. The Company, in its sole discretion, may modify the form of
the required Release to comply with applicable state law and shall
determine the form of the required Release.
(b) Exceptions to Benefit Entitlement. An employee who
otherwise is an Eligible Employee shall not receive benefits under
the Plan in any of the following circumstances, as determined by
the Company in its sole discretion:
(i) The employee has executed an individually negotiated
employment contract or agreement with the Company relating to
severance benefits that is in effect on his or her termination
date, in which case such employee’s severance benefit, if
any, shall be governed by the terms of such individually negotiated
employment contract or agreement and shall be governed by this Plan
only to the extent that the reduction pursuant to Section 5(a)
below does not entirely eliminate benefits under this
Plan.
(ii) The Company involuntarily terminates the
employee’s employment with the Company, and such termination
does not constitute an Involuntary Termination Without
Cause.
(iii) The employee voluntarily terminates employment with
the Company, and such termination does not constitute a
Constructive Termination. Voluntary terminations include, but are
not limited to, resignation, retirement or failure to return from a
leave of absence on the scheduled date.
(iv) The employee voluntarily terminates employment with the
Company in order to accept employment with another entity that is
wholly or partly owned (directly or indirectly) by the Company or
an affiliate of the Company.
(v) The employee is offered employment, with the same title
and reporting responsibilities and no diminution in duties and
responsibilities, with the Company, an affiliate of the Company, or
a successor to the Company.
(vi) The employee is rehired by the Company or an affiliate
of the Company prior to the date benefits under the Plan are
scheduled to commence.
Section 4. Amount of Benefit.
(a) Severance. Each Eligible Employee shall receive the
following benefits:
(i) Base Salary for the Continuation Period;
(ii) Target Performance Bonus for the period in which the
Eligible Employee’s termination occurs, prorated to the date
of termination; and
(iii) Accelerated vesting of shares subject to all stock
awards, for the number of shares which would have vested
accordingly had the Eligible Employee continued employment with the
Company for the Continuation Period.
4.
Salary
continuation shall be paid in regular installments on the normal
payroll dates of the Company commencing on the Release Effective
Date (except as provided in Section 5(g) below) and shall be
subject to all required tax withholding. Target Performance Bonus
payments shall be paid within ten (10) days after the Release
Effective Date.
(b) Severance in connection with a Change in Control .
An Eligible Employee whose employment with the Company terminates
due to a Covered Termination within three (3) months before or
within twelve (12) months following a Change in Control, (as
defined in the Appendix, Section C, of the Company’s
2004 Stock Equity Incentive Plan), shall receive the following
benefits, and not the benefits described in Section 4(a)
above:
(i) A payment equal to twelve (12) months of Base
Salary; and
(ii) A payment equal to the greater of (1) the Target
Performance Bonus for the year in which the Eligible
Employee’s termination occurs or (2) the Target
Performance Bonus earned for the year preceding the year in which
the Eligible Employee’s termination occurs.
Payments of Base
Salary and Target Performance Bonus amounts shall be paid within
ten (10) days after the Release Effective Date (except as provided
in Section 5(g) below) and shall be subject to all required tax
withholding.
(c) Continued Insurance Benefits . Provided that the
Eligible Employee elects continued coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“
COBRA ”), upon a severance described in
Sections 4(a) and 4(b) above, the Company shall pay the portion of
premiums (the “ COBRA Premiums ”) of each
Eligible Employee’s group medical, dental and vision
coverage, including coverage for the Eligible Employee’s
eligible dependents, that the Company paid prior to the Covered
Termination for the Continuation Period described in Section 4(a)
or, if shorter, for the duration of the COBRA continuation period.
Such premium payments shall continue for the duration of the
Continuation Period; provided, however, that no such premium
payments shall be made following the effective date of the Eligible
Employee’s coverage by a medical, dental or vision insurance
plan of a subsequent employer, or cancellation of coverage due to
non-payment by the Eligible Employee of his or her portion of the
applicable premiums. Each Eligible Employee shall be required to
notify the Company immediately if the Eligible Employee becomes
covered by a medical, dental or vision insurance plan of a
subsequent employer.
No provision of
this Plan will affect the continuation coverage rules under COBRA,
except that the Company’s payment of any COBRA Premiums
during the Continuation Period will be credited as payment by the
Eligible Employee for purposes of the Eligible Employee’s
payments required under COBRA. Therefore, the period during which
an Eligible Employee may elect to continue the Company’s
group medical coverage at his or her own expense under COBRA, the
length of time during which COBRA coverage will be made available
to the Eligible Employee, and all other rights and obligations of
the Eligible Employee under COBRA (except the obligation to pay
such portion of the insurance premiums that the Company pays during
the Continuation Period) will be applied in the same manner that
such rules would apply in the absence of this Plan. At the
conclusion of the Continuation Period, the
5.
Eligible
Employee shall be responsible for the entire payment of premiums
required under COBRA for the duration of the COBRA continuation
period. For purposes of this Section 4(b), such portion of the
applicable premiums that will be paid by the Company during the
Continuation Period shall not include any amounts payable by the
Eligible Employee under a Section 125 health care
reimbursement plan, which amounts, if any, are the sole
responsibility of the Eligible Employee.
Section 5. Limitations on
Benefits.
(a) Certain Reductions and Offsets. Notwithstanding any
other provision of the Plan to the contrary, any benefits payable
to an Eligible Employee under this Plan shall be reduced by any
severance benefits payable by the Company to such individual under
any other policy, plan, program or arrangement, including, without
limitation, a contract between the Eligible Employee and any
entity, covering such individual, unless such contract expressly
contemplates that the Eligible Employee is also eligible to
participate in the Plan. Furthermore, to the extent that any
federal, state or local laws, including, without limitation,
so-called “plant closing” laws, require the Company to
give advance notice or make a payment of any kind to an Eligible
Employee because of that Eligible Employee’s involuntary
termination due to a layoff, reduction in force, plant or facility
closing, sale of business, change of control, or any other similar
event or reason, the benefits payable under this Plan shall either
be reduced or eliminated but not below one (1) week of Base
Salary. The benefits provided under this Plan are intended to
satisfy any and all statutory obligations that may arise out of an
Eligible Employee’s involuntary termination of employment for
the foregoing reasons, and the Plan Administrator shall so construe
and implement the terms of the Plan.
(b) Mitigation. Except as otherwise specifically
provided herein, Eligible Employees shall not be required to
mitigate damages or the amount of any payment provided under this
Plan by seeking other employment or otherwise, nor shall the amount
of any payment provided for under this Plan be reduced by any
retirement benefits received by such Eligible Employee after the
Covered Termination.
(c) Termination of Benefits. Benefits under this Plan
shall terminate immediately if the Eligible Employee, at any time,
violates any proprietary information or confidentiality obligation
to the Company.
(d) Non-Duplication of Benefits. No Eligible Employee
is eligible to receive benefits under this Plan more than one
time.
(e) Indebtedness of Eligible Employees. To the extent
permitted by law, if a terminating employee is indebted to the
Company or an affiliate of the Company at his or her termination
date, the Company reserves the right to offset any severance
payments under the Plan by the amount of such indebtedness.
Additionally, if a Covered Employee is subject to withholding for
taxes related to any non-Plan benefits, the Company may offset any
salary severance payment or other payments under the Plan by the
amount of such withholding taxes.
6.
(f) Parachute Payments. If any payment or benefit the
Eligible Employee would receive in connection with a change in
ownership or effective control of the Company from the Company or
otherwise (“ Payment ”) would
(i) constitute 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 sentence, be subject to the excise tax imposed by
Section 4999 of the Code (the “ Excise Tax
”), then such Payment shall be equal to the Reduced Amount.
The “ Reduced Amount ” shall be either
(x) the largest portion of the Payment that would result in no
portion of the Payment being subject to the Excise Tax or
(y) the largest portion, up to and including the total, of the
Payment, whichever amount, after taking into account all applicable
federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal rate),
results in the Eligible Employee’s receipt, on an after-tax
basis, of the greater amount of the Payment notwithstanding that
all or some portion of the Payment may be subject to the Excise
Tax. If a reduction in payments or benefits constituting
“parachute payments” is necessary so that the Payment
equals the Reduced Amount, reduction shall occur in the following
order: reduction of cash payments; cancellation of accelerated
vesting of stock awards; reduction of employee benefits. In the
event that acceleration of vesting of stock award compensation is
to be reduced, such acceleration of vesting shall be cancelled in
the reverse order of the date of grant of the Eligible
Employee’s stock awards.
The accounting
firm engaged by the Company for general audit purposes as of the
day prior to the effective date of the change in ownership or
effective control of the Company shall perform the foregoing
calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or
group effecting the change in ownership or effective control of the
Company, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The
Company shall bear all expenses with respect to the determinations
by such accounting firm required to be made hereunder.
The accounting
firm engaged to make the determina
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