Exhibit 10.1
EXECUTIVE CHANGE IN CONTROL
SEVERANCE BENEFITS AGREEMENT
This form of Executive
Change in Control Severance Benefits Agreement may be entered into
between Onyx Pharmaceuticals, Inc. and each of its Executive Vice
Presidents (“EVP”), Senior Vice Presidents
(“SVP”) and Vice Presidents (“VP”). This
agreement provides for different levels of benefits for EVPs, SVPs
VPs. Where the benefit levels differ among executive
classifications, the benefit levels for each executive
classification are indicated in this form of agreement in bracketed
text.
This Executive Change in Control Severance
Benefits Agreement (the “ Agreement
”) is entered into as of the ___ day of
, 20___ (the “ Effective Date ”), between
(“ Executive ”) and Onyx Pharmaceuticals, Inc.
(the “ Company ”). This Agreement is
intended to provide Executive with certain compensation and
benefits in the event that Executive is subject to certain
qualifying terminations of employment in connection with a Change
in Control. Certain capitalized terms used in this Agreement are
defined in Article 5.
The Company and Executive hereby
agree as follows:
ARTICLE 1
Scope of and
Consideration for this Agreement
1.1 Executive is currently
employed by the Company.
1.2 The Company and Executive
wish to set forth the compensation and benefits that Executive
shall be entitled to receive upon a Covered Termination.
1.3 The duties and
obligations of the Company to Executive under this Agreement shall
be in consideration for Executive’s past services to the
Company, Executive’s continued employment with the Company,
and, with respect to the benefits described in Article 2
[ EVP/SVP : and any Gross-Up Payment
described in Section 3.2] , Executive’s execution of
an effective Release in accordance with Section 3.1.
1.4 This Agreement shall
supersede any other policy, plan, program or arrangement,
including, without limitation, any contract between Executive and
any entity, relating to severance benefits payable by the Company
to Executive, including but not limited to the Executive Change in
Control Severance Benefits Agreement between Executive and the
Company dated
, 200___ (the “ Predecessor Agreement ”);
provided, however , that any and all stock awards consisting
of stock options or restricted stock (including stock bonus awards)
that qualify as Prior Stock Awards under the terms of the
Predecessor Agreement, shall also be defined as “ Prior
Stock Awards ” for purposes of this Agreement and
shall remain subject to the following terms:
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(a) Effective as of the date of the “Change in
Control” (as defined in Section 1.4(b)), the vesting and
exercisability of fifty percent (50%) of the options to purchase
the Company’s common stock (or other restricted stock awards
granted by the Company) that are held by Executive on such date
shall be accelerated in full, and such options shall be exercisable
by Executive for twelve (12) months following any subsequent
termination of Executive’s employment but in no case beyond
the relevant expiration dates of such options. Such acceleration
shall occur on a pro rata basis with respect to all outstanding
stock awards, such that the accelerated vesting percentage of
shares that would otherwise vest at future vesting dates shall
become immediately vested. Effective as of the date of a
“Covered Termination” (as defined in
Section 1.4(c)) the vesting and exercisability of all options
to purchase the Company’s common stock (or other restricted
stock awards granted by the Company) that are held by Executive on
such date shall be accelerated in full, and such options shall be
exercisable by Executive for twelve (12) months following such
date but in no case beyond the relevant expiration dates of such
options.
(b) For purposes of the Prior Stock Awards and this
Section 1.4 only, “ Change in Control
” means one or more of the following events: (i) There
is consummated a sale or other disposition of all or substantially
of assets of the Company (other than a sale to an entity where at
least fifty percent (50%) of the combined voting power of the
voting securities of such entity are owned by the stockholders of
the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale);
(ii) Any person, entity or group (other than the Company, a
subsidiary or affiliate of the Company, or a Company employee
benefit plan, including any trustee of such plan acting as trustee)
becomes the beneficial owner, directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the
combined voting power of the Company’s then outstanding
securities other than by virtue of a merger, consolidation or
similar transaction; or (iii) There is consummated a merger,
consolidation or similar transaction involving (directly or
indirectly) the Company and, immediately after the consummation of
such transaction, the stockholders immediately prior to the
consummation of such transaction do not own, directly or
indirectly, outstanding voting securities representing more than
fifty percent (50%) of the combined outstanding voting power of the
surviving entity in such transaction or more than fifty percent
(50%) of the combined outstanding voting power of the parent of the
surviving entity in such transaction.
(c) For purposes of the Prior Stock Awards and this
Section 1.4 only, “ Covered Termination
” means an Involuntary Termination Without Cause (as defined
in Section 1.4(d)) or a Constructive Termination (as defined
in Section 1.4(e)), either of which occurs within thirteen
(13) months following the effective date of a Change in
Control.
(d) For purposes of the Prior Stock Awards and this
Section 1.4 only, “ Involuntary Termination
Without Cause ” means Executive’s dismissal or
discharge for reasons other than Cause. For this purpose,
“Cause” means that, in the reasonable determination of
the Company, Executive (i) has committed an intentional act or
acted with gross negligence that has materially injured the
business of the Company; (ii) has intentionally refused or
failed to follow lawful and reasonable directions of the Board or
the appropriate individual to whom Executive reports;
(iii) has willfully and habitually neglected Executive’s
duties for the Company; or (iv) has been convicted of a felony
involving moral turpitude that is likely to inflict or has
inflicted material injury on the business of the Company.
Notwithstanding the foregoing,
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Cause
shall not exist based on conduct described in clause (ii) or
(iii) unless the conduct described in such clause has not been
cured within fifteen (15) days following Executive’s
receipt of written notice from the Company specifying the
particulars of the conduct constituting Cause.
(e) For purposes of the Prior Stock Awards and this
Section 1.4 only, “ Constructive
Termination ” means that Executive voluntarily
terminates employment after one of the following is undertaken
without Executive’s express written consent: (i) the
assignment to Executive of duties or responsibilities that results
in a material diminution in Executive’s function as in effect
immediately prior to the effective date of the Change in Control;
(ii) a reduction in Executive’s Base Salary, unless the
reduction is made pursuant to an across-the-board reduction of the
base salaries of all executive officers of the Company of no more
than ten percent (10%); (iii) a change in Executive’s
business location of more than fifteen (15) miles from the
business location immediately prior to the effective date of the
Change in Control; (iv) a material breach by the Company of
any provision of this Agreement; or (v) any failure by the
Company to obtain the assumption of this Agreement by any successor
or assign of the Company, such assumption to be effective no later
than the effective date of a Change in Control.
1.5 All stock awards that do
not qualify as a Prior Stock Award shall be governed by Section 2.6
of this Agreement.
ARTICLE 2
Severance
Benefits
2.1 Severance Benefits. Upon
a Covered Termination, Executive shall be entitled to receive the
benefits set forth in Sections 2.2, 2.3, 2.4, 2.5, and 2.6.
For purposes of this Article 2, “Covered
Termination” and all related definitions shall be as provided
in Article 5 of this Agreement.
2.2 Cash Severance Benefits.
The Company shall make a cash severance payment in a lump sum to
Executive in an amount equal to the product of
(i) Executive’s Base Salary, and (ii) the quotient
obtained by dividing [ EVP/SVP : twenty-six
(26)] [ VP : sixteen (16)] by twelve
(12).
2.3 Health Continuation
Coverage .
(a) [EVP/SVP only:] Provided that Executive is
eligible for, and has made the necessary elections pursuant to
COBRA under a health, dental, or vision plan sponsored by the
Company, Executive shall be entitled to payment by the Company of
all of the applicable premiums (inclusive of premiums for
Executive’s dependents for such health, dental, or vision
plan coverage as in effect immediately prior to the date of the
Covered Termination) for such health, dental, or vision plan
coverage for a period of eighteen (18) months following the
date of the Covered Termination, with such coverage counted as
coverage pursuant to COBRA. No such premium payments (or any other
payments for health, dental, or vision coverage by the Company)
shall be made following the effective date of the Executive’s
coverage by a health,
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dental,
or vision insurance plan of a subsequent employer. Executive shall
be required to notify the Company immediately if Executive becomes
covered by a health, dental, or vision insurance plan of a
subsequent employer. Upon the conclusion of such period of
insurance premium payments made by the Company, Executive will be
responsible for the entire payment of such premiums required under
COBRA for the duration of the COBRA period.
(b) [VP only:] Provided that Executive is
eligible for, and has made the necessary elections pursuant to
COBRA under a health, dental, or vision plan sponsored by the
Company, Executive shall be entitled to payment by the Company of
all of the applicable premiums (inclusive of premiums for
Executive’s dependents for such health, dental, or vision
plan coverage as in effect immediately prior to the date of the
Covered Termination) for such health, dental, or vision plan
coverage for a period of twelve (12) months following the date
of the Covered Termination, with such coverage counted as coverage
pursuant to COBRA. No such premium payments (or any other payments
for health, dental, or vision coverage by the Company) shall be
made following the effective date of the Executive’s coverage
by a health, dental, or vision insurance plan of a subsequent
employer. Executive shall be required to notify the Company
immediately if Executive becomes covered by a health, dental, or
vision insurance plan of a subsequent employer. Upon the conclusion
of such period of insurance premium payments made by the Company,
Executive will be responsible for the entire payment of such
premiums required under COBRA for the duration of the COBRA
period.
(c) For purposes of this Section 2.3,
(i) references to COBRA shall be deemed to refer also to
analogous provisions of state law, and (ii) any applicable
insurance premiums that are paid by the Company shall not include
any amounts payable by Executive under a Code Section 125
health care reimbursement plan, which amounts, if any, are the sole
responsibility of Executive.
2.4 Continued Life Insurance
Benefit. The Company shall pay the portion of the premiums of
Executive’s group life insurance coverage that the Company
paid prior to the Covered Termination. Executive shall be entitled
to [ EVP/SVP : eighteen (18)] [
VP : twelve (12)] months of such premium
payments, but in no event shall such premium payments be made
following the effective date of Executive’s coverage by a
life insurance plan or policy of a subsequent employer. Executive
shall be required to notify the Company in writing immediately if
Executive becomes covered by a life insurance plan or policy of a
subsequent employer.
2.5 Outplacement Assistance.
On behalf of Executive, the Company shall reimburse Executive for
reasonable outplacement services actually incurred for a period of
one (1) year following a Covered Termination with an
outplacement service provider selected by the Company; provided,
however , that the total cost to the Company of such
outplacement services shall not exceed [
EVP/SVP : twenty-five thousand dollars ($25,000)]
[ VP : fifteen thousand dollars ($15,000)]
.
2.6 Stock Awards. All stock
awards granted to Executive consisting of stock options or
restricted stock (including stock bonus awards) that do not qualify
as Prior Stock Awards under the terms of the Predecessor Agreement
shall contain the following provisions:
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(a) Vesting and Exercisability . The vesting and
exercisability of Executive’s outstanding stock awards shall
be accelerated in full following a Covered Termination.
(b) Term . Executive shall have twelve (12) months
following a Covered Termination in which to exercise any
outstanding stock options, but in no event shall such period exceed
the expiration of the term of the stock option as set forth in the
stock option agreement.
ARTICLE 3
Limitations and
Conditions on Benefits
3.1 Release Prior to Payment of
Benefits. Upon the occurrence of a Covered Termination, and
prior to the provision or payment of any benefits under this
Agreement on account of such Covered Termination, Executive must
execute a general waiver and release in substantially the form
attached hereto and incorporated herein as Exhibit A ,
Exhibit B , or Exhibit C , as appropriate
(each a “ Release ”), and such release
must become effective in accordance with its terms. The Company may
modify the Release in its discretion to comply with changes in
applicable law until the date of a Covered Termination. Such
Release shall specifically relate to all of Executive’s
rights and claims in existence at the time of such execution and
shall confirm Executive’s obligations under the
Company’s standard form of proprietary information and
inventions agreement. It is understood that, as specified in the
applicable Release, Executive has a certain number of calendar days
to consider whether to execute such Release. If Executive does not
execute such Release within the applicable period, no benefits
shall be provided or payable under this Agreement pursuant to a
Covered Termination. It is further understood that if Executive is
age 40 or older at the time of a Covered Termination, Executive may
revoke the applicable Release within seven (7) calendar days
after its execution. If Executive revokes such Release within such
subsequent seven (7) day period, no benefits shall be provided
or payable under this Agreement pursuant to such Covered
Termination.
3.2 Parachute Payments.
(a) Parachute Payment Limitation . If any payment or
benefit (including payments and benefits pursuant to this
Agreement) Executive would receive in connection with a Change in
Control from the Company or otherwise (“
Payment ”) would (i) constitute a
“parachute payment” within the meaning of
Section 280G of 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 the
Company shall cause to be determined, before any amounts of the
Payment are paid to Executive, which of the following two
alternative forms of payment shall be paid to Executive:
(i) payment in full of the entire amount of the Payment (a
“ Full Payment ”), or (ii) payment
of only a part of the Payment so that Executive receives the
largest payment possible without the imposition of the Excise Tax
(a “ Reduced Payment ”). A Full Payment
shall be made in the event that the quotient obtained by dividing
(i) the excess of (a) the Full Payment, over (b) the
Reduced Payment, by (ii) the Reduced Payment, is greater than
ten percent (10%). A Reduced Payment shall be made in the event
that the quotient obtained by dividing (i) the excess of
(a) the Full Payment, over (b) the Reduced Payment, by
(ii) the Reduced Payment, is less than or equal
5
to ten
percent (10%). If a Reduced Payment is made, (i) the Payment
shall be paid only to the extent permitted under the Reduced
Payment alternative, and Executive shall have no rights to any
additional payments and/or benefits constituting the Payment, and
(ii) reduction in payments and/or benefits shall occur in the
following order unless Executive elects in writing a different
order ( provided, however , that such election shall be
subject to Company approval if made on or after the date on which
the event that triggers the Payment occurs): (1) reduction of
cash payments; (2) cancellation of accelerated vesting of
equity awards other than stock options; (3) cancellation of
accelerated vesting of stock options; and (4) reduction of
other benefits paid to Executive. In the event that acceleration of
compensation from Executive’s equity awards is to be reduced,
such acceleration of vesting shall be canceled in the reverse order
of the date of grant unless Executive elects in writing a different
order for cancellation.
(b) Gross-Up Payment . [ EVP/SVP
only; delete this section for other Executives:] If it is
determined that the Payment would result in an Excise Tax, the
Company shall pay and Executive shall be entitled to receive an
additional payment (a “ Gross-Up Payment
”) from the Company in an amount that after the payment of
all taxes (including, without limitation, (i) any income or
employment taxes, (ii) any interest or penalties imposed with
respect to such taxes, and (iii) any additional excise tax
imposed by Section 4999 of the Code) on the Gross-Up Payment,
Executive shall retain an amount equal to the full Excise Tax. For
purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to have: (x) paid federal income
taxes at the highest marginal rate of federal income and employment
taxation for the calendar year in which the Gross-Up Payment is to
be made, and (y) paid applicable state and local income taxes
at the highest rate of taxation for the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such
state and local taxes. Except as otherwise provided herein,
Executive shall not be entitled to any additional payments or other
indemnity arrangements in connection with the Payment or the
Gross-Up Payment.
(c) The independent registered public accounting firm
engaged by the Company for general audit purposes as of the day
prior to the effective date of the Change in Control shall make all
determinations required to be made under this Section 3.2. If
the independent registered public accounting firm so engaged by the
Company is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Company shall
appoint a nationally recognized independent registered public
accounting firm to make the determinations required hereunder. The
Company shall bear all expenses with respect to the determinations
by such independent registered public accounting firm required to
be made hereunder.
(d) The independent registered public accounting firm
engaged to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation, to
the Company and Executive within fifteen (15) calendar days
after the date on which Executive’s right to a Payment is
triggered (if requested at that time by the Company or Executive)
or such other time as requested by the Company or Executive. If the
independent registered public accounting firm determines that no
Excise Tax is payable with respect to a Payment, either before or
after the application of the Reduced Amount, it shall furnish the
Company and Executive with an opinion reasonably acceptable to
Executive that no Excise Tax
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will be
imposed with respect to such Payment. Any good faith determinations
of the accounting firm made hereunder shall be final, binding and
conclusive upon the Company and Executive.
3.3 Certain Reductions and
Offsets. To the extent that any federal, state or local laws,
including, without limitation, the Worker Adjustment and Retraining
Notification Act (the “ WARN Act ”) or
any other so-called “plant closing” laws, require the
Company to give advance notice or make a payment of any kind to
Executive because of Executive’s involuntary termination due
to a layoff, reduction in force, plant or facility closing, sale of
business, change in control, or any other similar event or reason,
the benefits payable under this Agreement shall be correspondingly
reduced. The benefits provided under this Agreement are intended to
satisfy any and all statutory obligations that may arise out of
Executive’s involuntary termination of employment for the
foregoing reasons, and the parties shall construe and enforce the
terms of this Agreement accordingly.
3.4 Mitigation. Except as
otherwise specifically provided herein, Executive shall not be
required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement
be reduced by any compensation earned by Executive as a result of
employment by another employer or by any retirement benefits
received by Executive after the date of a Covered
Termination.
3.5 Application of
Section 409A . All payments provided under this Agreement
are intended to constitute separate payments for purposes of
Treasury Regulation Section 1.409A-2(b)(2). The cash
severance payment provided under Section 2.2 shall be paid no
later than the later of: (i) December 31st of the calendar
year in which the Covered Termination occurs, or (ii) the
fifteenth (15th) day of the third calendar month following the date
of the Covered Termination. It is the intention of the preceding
sentence to apply the “short-term deferral rule” set
forth in Treasury Regulation Section 1.409A-1(b)(4) to such
payments. [ EVP/SVP/VP only : Amounts paid
pursuant to Section 2.3 are intended to be paid pursuant to
the exception provided by Treasury Regulation Section
1.409A- 1(b)(9)(v) (B).] Payments pursuant to
Section 2.6(a) are intended to be paid pursuant to the
exception provided by Treasury
Regulation Section 1.409A-1(b)(5)(v)(E). Payments
pursuant to Section 2.6(b) are intended to be paid pursuant to
the exception provided by Treasury Regulation
Section 1.409A-1(b)(5)(v)(C)(1). The continued life insurance
benefit provided under Section 2.4 is intended to qualify for
the exception for reimbursements or in-kind benefits provided under
Treasury Regulation Section 1.409A-3(i)(1)(iv). The
outplacement assistance payments provided under Section 2.5 is
intended to qualify for the exception for reimbursements provided
under Treasury Regulation Section 1.409A-1(9)(v)(A).
[ If Gross-Up Payment is to be provided
(EVP/SVP only ): The Gross-Up
Payment provided under Section 3. 2(b) shall be
paid by the end of Executive’s taxable year next following
the Executive’s taxable year in which the Executive remits
the related taxes as provided under Treasury
Regulation Section 1.409A- 3(i)(1)(v)
.]
3.6 Tax Withholding . All
such payments under this Agreement shall be subject to applicable
withholding for federal, state and local income and employment
taxes.
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3.7 Indebtedness of Executive
. If Executive is
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