EX-10.6 6 snss-ex106_330.htm EX-10.6 THIRD AMENDED AND RESTATED EXECUTIVE SEVERANCE BENEFITS AGREEMENT
Exhibit 10.6
THIRD AMENDED AND RESTATED
EXECUTIVE SEVERANCE BENEFITS AGREEMENT
This Third Amended and Restated Executive Severance Benefits Agreement (the “Agreement”) is entered into this 13th day of April, 2016 (the “Effective Date”), between Xxxxxx X. Xxxxxxx, Xx. (“Executive”) and Sunesis Pharmaceuticals, Inc. (the “Company”). This Agreement is intended to provide Executive with the compensation and benefits described herein upon the occurrence of specific events. Certain capitalized terms used in this Agreement are defined in Article 6.
Whereas, the Company and the Executive previously entered into an Executive Severance Benefits Agreement, dated August 4, 2005, which agreement was amended and restated by that certain Amended and Restated Executive Severance Benefits Agreement, dated May 28, 2008, and further amended and restated by that certain Second Amended and Restated Executive Severance Benefits Agreement, dated December 24, 2008, as amended on April 3, 2009 (collectively, the “Prior Benefits Agreement”); and
Whereas, the Company and the Executive again wish to amend and restate the Prior Benefits Agreement by entering into this Third Amended and Restated Executive Severance Benefits Agreement to clarify certain matters previously agreed to by the parties and to comply with the parties’ original intent that the Prior Benefits Agreement be interpreted, construed and administered in a manner that satisfies Section 409A of the Internal Revenue Code of 1986, as amended from time to time, among other things.
Article 1
Scope of and Consideration For This Agreement
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1.4 Confidentiality of Terms. Executive agrees to follow the Company’s strict policy that employees must not disclose, either directly or indirectly, any information, including any of the terms of this Agreement, regarding salary, bonuses, or stock purchase or option allocations to any person, including other employees of the Company; provided, however, that Executive may discuss such terms with members of his immediate family and any legal, tax or accounting specialists who provide Executive with individual legal, tax or accounting advice, with third parties as needed to enforce the terms of this Agreement, with other employees of the Company on a need to know basis if required to carry out Executive’s duties as the Company’s Chief Executive Officer or at the request of the Board.
Article 2
2.2 Covered Termination Option Acceleration.
(a) In the event of a Covered Termination of Executive’s employment prior to or more than twelve (12) months following the effective date of a Change of Control, the vesting and/or exercisability of each of Executive’s then-outstanding Stock Awards shall be automatically accelerated on the date of termination as to the number of Stock Awards that would vest in the ordinary course over the twelve (12) month period following the date of termination had Executive remained continuously employed by the Company during such period.
(b) In the event of a Covered Termination of Executive’s employment on or within twelve (12) months following the effective date of a Change of Control, the vesting and/or exercisability of one hundred percent (100%) of Executive’s then-outstanding unvested Stock Awards shall be automatically accelerated on the date of termination.
Article 3
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(b) Health Benefits. Provided that Executive elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (together with any state or local laws of similar effect, “COBRA”), the Company shall pay the premiums of Executive’s group health insurance coverage, including coverage for Executive’s eligible dependents, for a maximum period of the first twelve (12) months following such Covered Termination or such lesser number of months as Executive and Executive’s eligible dependents are eligible for such coverage; provided, however, that the Company shall pay premiums for Executive and Executive’s eligible dependents only for coverage for which they were enrolled immediately prior to the Covered Termination. Executive (and Executive’s eligible dependents, as applicable) shall be solely responsible for making a timely and accurate election for continuation of coverage pursuant to COBRA. No premium payments will be made following the effective date of Executive’s coverage by a health insurance plan of a subsequent employer. For the balance of the period that Executive and Executive’s eligible dependents are entitled to coverage under COBRA, if any, Executive shall maintain such coverage at Executive’s own expense.
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vesting of Executive’s unvested Stock Awards previously granted to him by the Company shall cease as of the date of termination and none of such unvested Stock Awards shall be exercisable following the date of such termination. The foregoing shall be in addition to, and not in lieu of, any and all other rights and remedies which may be available to the Company under the circumstances, whether at law or in equity.
Article 4
Limitations and Conditions Upon Benefits
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would otherwise have received through the Delayed Initial Payment Date if the commencement of the payment of the Agreement Payments had not been so delayed and (B) commence paying the balance of the Agreement Payments in accordance with the applicable payment schedules set forth in this Agreement.
Article 5
5.1 Best Pay Provision. Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any Payment under this Agreement would, when combined with all other Payments Executive receives from the Company or any successor or parent or subsidiary thereof, but for this Article 5, be subject to the Excise Tax, then such Payments shall be either (a) the full amount of such Payments or (b) such lesser amount as would result in no portion of the Payments being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local employment taxes, income taxes and the Excise Tax, results in Executive’s receipt, on an after-tax basis, of the greater amount of the Payments notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. If a reduced amount is to be paid, (i) the Executive shall have no rights to any additional payments and/or benefits constituting the Payments, and (ii) reduction in payments and/or benefits shall occur in the following order: (1) reduction of other cash payments (if any); (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 (if any) paid to the Executive. In the event that acceleration of compensation from the Executive’s equity awards is to be reduced, such acceleration of vesting shall be canceled in the reverse order of the date of grant.
Article 6
For purposes of the Agreement, the following terms are defined as follows:
6.1 “Base Salary” means Executive’s annual base salary as in effect during the last regularly scheduled payroll period immediately preceding the Covered Termination (or, in the case of a Covered Termination arising from Constructive Termination, the annual base salary as in effect immediately prior to the event that gives rise to a right to resign as a Constructive Termination).
6.2 “Board” means the Board of Directors of the Company.
6.3 “Cause” means that, in the reasonable determination of the Company, Executive:
(a) has committed an act of fraud or embezzlement or has intentionally committed some other illegal act that has a material adverse impact on the Company or any successor or parent or subsidiary thereof;
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(b) has been convicted of, or entered a plea of “guilty” or “no contest” to, a felony which causes or may reasonably be expected to cause substantial economic injury to or substantial injury to the reputation of the Company or any subsidiary or affiliate of the Company;
(c) has made any unauthorized use or disclosure of confidential information or trade secrets of the Company or any successor or parent or subsidiary thereof that has a material adverse impact on any such entity;
(d) has committed any other intentional misconduct that has a material adverse impact on the Company or any successor or parent or subsidiary thereof, or
(e) has intentionally refused or intentionally failed to act in accordance with any lawful and proper direction or order of the Board; provided such direction is not materially inconsistent with the Executive’s customary duties and responsibilities.
6.4 “Change of Control” means and includes each of the following:
(a) the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities entitled to vote generally in the election of directors (“voting securities”) of the Company that represent fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities, other than:
(i) an acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or
(ii) an acquisition of voting securities by the Company or a corporation owned, directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company;
Notwithstanding the foregoing, the following event shall not constitute an “acquisition” by any person or group for purposes of this Section: an acquisition of the Company’s securities by the Company that causes the Company’s voting securities beneficially owned by a person or group to represent fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities; provided, however, that if a person or group shall become the beneficial owner of fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the Company, become the beneficial owner of any additional voting securities of the Company, then such acquisition shall constitute a Change of Control; or
(b) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and
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(ii) after which no person or group beneficially owns voting securities representing fifty percent (50%) or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (ii) as beneficially owning fifty percent (50%) or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or
(c) the Company’s stockholders approve a liquidation or dissolution of the Company.
Notwithstanding the foregoing, a transaction shall not constitute a Change of Control if it is a transaction effected primarily for the purpose of financing the Company with cash (as determined by the Board in its discretion and without regard to whether such transaction is effectuated by a merger, equity financing or otherwise). The Board shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.
6.5 “Code” means the Internal Revenue Code of 1986, as amended from time to time and the Treasury Regulations thereunder.
6.6 “Company” means Sunesis Pharmaceuticals, Inc. or, following a Change of Control, the surviving entity resulting from such transaction.
6.7 “Constructive Termination” means that Executive voluntarily terminates employment with the Company (or any successor thereto) if and only if:
(a) one of the following actions have been taken without Executive’s express written consent:
(i) there is a material diminution in the authority, duties or responsibilities of Executive, or the assignment to Executive of duties that are materially inconsistent with and materially adverse to Executive’s position;
(ii) a change in the Executive’s direct reporting relationship so that Executive no longer reports directly to the Board;
(iii) there is a material reduction in Executive’s Base Salary (which the parties agree is a reduction of 5% or more), unless the base salaries of all other executives are similarly reduced (but in no event by an amount more than 10% each);
(iv) there is a material reduction in Executive’s target bonus on or within twelve (12) months following the effective date of a Change of Control (which the parties agree is a reduction of 20% or more of the target bonus, and which the parties agree is a material breach of the terms of Executive’s employment with the Company), unless the target bonuses of all other executives are similarly reduced (but in no event by an amount more than 40% each);
(v) Executive is required to relocate Executive’s principal place of employment to a facility or location that would increase Executive’s one way commute distance by more than thirty (30) miles from such Executive’s place of employment immediately prior to such change;
(vi) the Company materially breaches its obligations under this Agreement or any then-effective written employment agreement with Executive; or
(vii) any acquirer, successor or assignee of the Company materially fails to assume and perform, in all material respects, the obligations of the Company hereunder; and
(b) Executive provides written notice to the Company’s General Counsel within the ninety (90)-day period immediately following such action; and
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(c) such action is not remedied by the Company within thirty (30) days following the Company’s receipt of such written notice; and
(d) Executive’s resignation is effective not later than sixty (60) days after the expiration of such thirty (30) day cure period.
The termination of Executive’s employment as a result of Executive’s death or disability will not be deemed to be a Constructive Termination.
6.8 “Covered Termination” means an Involuntary Termination Without Cause or a Constructive Termination, in either case, provided such termination constitutes a “separation from service” under Treasury Regulation Section 1.409A-1(h).
6.9 “Excise Tax” means the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.
6.10 “Involuntary Termination Without Cause” means Executive’s dismissal or discharge other than for Cause. The termination of Executive’s employment as a result of Executive’s death or disability will not be deemed to be an Involuntary Termination Without Cause.
6.11 A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise.
6.12 “Stock Awards” means all stock options, restricted stock and such other awards granted pursuant to the Company’s stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof, and any awards into which such awards are converted by reason of a Change of Control (e.g., by reason of assumption, substitution or conversion by the successor entity or acquiring corporation).
Article 7
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7.5 Arbitration. Any dispute, claim or controversy based on, arising out of or relating to Executive’s employment or this Agreement shall be settled by final and binding arbitration in San Mateo County, California, before a single neutral arbitrator in accordance with the National Rules for the Resolution of Employment Disputes (the “Rules”) of the American Arbitration Association, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. Arbitration may be compelled pursuant to the California Arbitration Act (Code of Civil Procedure §§ 1280 et seq.). If the parties are unable to agree upon an arbitrator, one shall be appointed by the AAA in accordance with its Rules. Each party shall pay the fees of its own attorneys, the expenses of its witnesses and all other expenses connected with presenting its case; however, Executive and the Company agree that, to the extent permitted by law, the arbitrator may, in his or her discretion, award reasonable attorneys’ fees to the prevailing party. Other costs of the arbitration, including the cost of any record or transcripts of the arbitration, AAA’s administrative fees, the fee of the arbitrator, and all other fees and costs, shall be borne by the Company. This Section 7.5 is intended to be the exclusive method for resolving any and all claims by the parties against each other for payment of damages under this Agreement or relating to Executive’s employment; provided, however, that neither this Agreement nor the submission to arbitration shall limit the parties’ right to seek provisional relief, including, without limitation, injunctive relief, in any court of competent jurisdiction pursuant to California Code of Civil Procedure § 1281.8 or any similar statute of an applicable jurisdiction. Seeking any such relief shall not be deemed to be a waiver of such party’s right to compel arbitration. Both Executive and the Company expressly waive their right to a jury trial. Pursuant to California Civil Code Section 1717, each party warrants that it was represented by counsel in the negotiation and execution of this Agreement, including the attorneys’ fees provision herein.
7.11 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of California, without regard to such state’s conflict of laws rules.
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(Signature Page Follows)
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In Witness Whereof, the parties have executed this Agreement on the Effective Date written above.
Sunesis Pharmaceuticals, Inc. |
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Xxxxxx X. Xxxxxxx, Xx. | ||
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By: |
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/s/ Xxxx X. Xxxxxxxxx |
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/s/ Xxxxxx X. Xxxxxxx, Xx. |
Name: |
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Xxxx X. Xxxxxxxxx |
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Title: |
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EVP, Corporate Development and Finance, CFO |
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Exhibit A: Release (Individual Termination)
Exhibit B: Release (Group Termination)
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Exhibit A
RELEASE
(Individual Termination)
I understand that this Release, together with the Third Amended and Restated Executive Severance Benefits Agreement, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company, affiliates of the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Third Amended and Restated Executive Severance Benefits Agreement, which I have executed and of which this Release is a part.
1. Proprietary Information Obligations. I hereby confirm my obligations under my Confidentiality Agreement with the Company.
2. General Release. In exchange for severance benefits and other consideration provided to me by the Third Amended and Restated Executive Severance Benefits Agreement that I am not otherwise entitled to receive, I hereby generally and completely release the Company and its current and former directors, officers, employees, stockholders, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Release (collectively, the “Released Claims”). The Released Claims include, but are not limited to: (1) all claims arising out of or in any way related to my employment with the Company or its affiliates, or the termination of that employment; (2) all claims related to my compensation or benefits, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company or its affiliates; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), the federal Employee Retirement Income Security Act of 1974 (as amended), and the California Fair Employment and Housing Act (as amended). Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (1) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party, the charter, bylaws, or operating agreements of the Company, or under applicable law; or (2) any rights which are not waiveable as a matter of law. In addition, nothing in this Release prevents me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that I hereby waive my right to any monetary benefits in connection with any such claim, charge or proceeding. I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I have or might have against any of the Released Parties that are not included in the Released Claims.
4. Section 1542 Waiver. I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or
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suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company.
I acknowledge that to become effective, I must sign and return this Release to the Company on or after _______________________, so that it is received not later than twenty-one (21) days following the date it is provided to me, and I must not revoke it thereafter.
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Exhibit B
RELEASE
(Group Termination)
I understand that this Release, together with the Third Amended and Restated Executive Severance Benefits Agreement, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company, affiliates of the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Third Amended and Restated Executive Severance Benefits Agreement, which I have executed and of which this Release is a part.
1. Proprietary Information Obligations. I hereby confirm my obligations under my Confidentiality Agreement with the Company.
2. General Release. In exchange for severance benefits and other consideration provided to me by the Third Amended and Restated Executive Severance Benefits Agreement that I am not otherwise entitled to receive, I hereby generally and completely release the Company and its current and former directors, officers, employees, stockholders, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Release (collectively, the “Released Claims”). The Released Claims include, but are not limited to: (1) all claims arising out of or in any way related to my employment with the Company or its affiliates, or the termination of that employment; (2) all claims related to my compensation or benefits, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company or its affiliates; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), the federal Employee Retirement Income Security Act of 1974 (as amended), and the California Fair Employment and Housing Act (as amended). Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (1) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party, the charter, bylaws, or operating agreements of the Company, or under applicable law; or (2) any rights which are not waiveable as a matter of law. In addition, nothing in this Release prevents me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that I hereby waive my right to any monetary benefits in connection with any such claim, charge or proceeding. I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I have or might have against any of the Released Parties that are not included in the Released Claims.
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terminated, along with information on the eligibility factors used to select employees for the group termination and any time limits applicable to this group termination program.
(Signature Page Follows)
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I acknowledge that to become effective, I must sign and return this Release to the Company on or after ________________________, so that it is received not later than forty-five (45) days following the date it is provided to me, and I must not revoke it thereafter.
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