NPS PHARMACEUTICALS, iNC.
CHANGE IN CONTROL SEVERANCE PAY PLAN
Adopted by the Board of Directors
August 8, 2007
6.1 "Administrator" means the Company, acting through its General Counsel, or such other person appointed by the Board.
6.2 "Base Pay" means the Covered Employee's annual regular straight-time salary as in effect on the date of termination of employment.
6.3 "Board" means the Board of Directors of the Company.
6.4 "Cause" means (i) an act of material dishonesty by the Covered Employee in connection with the Covered Employee's responsibilities as an employee, (ii) the Covered Employee's conviction of, or plea of nolo contendere to, a felony, (iii) the Covered Employee's gross misconduct in connection with the Covered Employee's responsibilities as an employee, (iv) the Covered Employee's violation of the Company's written policies and procedures; or (v) the Covered Employee's continued failure to perform his or her responsibilities as an employee after the Covered Employee has received a written demand for such performance.
6.5 "Change in Control" means (i) a dissolution or liquidation or sale of all or substantially all of the assets of the Company; (ii) a merger or consolidation in which the Company is not the surviving corporation; (iii) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise; (iv) a strategic corporate event, such as a merger or acquisition, where the Company is technically the surviving entity, but which the
Board determines in its sole discretion that other elements of a Change in Control are present, i.e., a substantial change in the management team or composition of the Board; (v) a transaction which the Board determines in its sole discretion to constitute a Change in Control of the Company: or (vi) any other capital reorganization in which more than 50% of the shares of the Company entitled to vote are exchanged. A Change in Control does not include the occurrence of an event described in (i), (ii), (iii) or (iv) where the sole parties to the event are NPS Pharmaceuticals, Inc. and one of its subsidiaries.
6.6 "Company" means NPS Pharmaceuticals, Inc., a Delaware corporation, and any of its wholly owned subsidiaries and any successor by merger, acquisition, consolidation or otherwise that assumes the obligations of the Company under the Plan.
6.7 "Covered Employee" means a regular full-time employee of the Company who is paid at Grade 9 or above of the Company's Compensation Structure for Executives and Non-Executives.
6.8 "Full-Time Employee" means those employees whose employment status is expected to last four consecutive months or longer working 80 percent or more of the normal possible annual working hours for that position.
6.9 "Determination Period" means the time period, not to exceed twenty-four (24) months, beginning on the date of the Change in Control.
6.10 "Involuntary Termination" means the Company's termination of employment of the Covered Employee after a Change in Control other than for Cause.
6.11 "Materially Altered" means without the Covered Employee's written consent, (i) a material reduction in the Covered Employee's authority, duties or responsibilities relative to the Covered Employee's authority, duties or responsibilities in effect prior to such reduction where such reduction was imposed without Cause, (ii) a material diminution in the Covered Employee's base compensation, where such reduction was imposed without Cause, or (iii) a material change in the geographical relocation at which the Covered Employee must perform his or her duties as an employee of the Company.
6.12 "Plan" means the NPS Pharmaceuticals, Inc. Change in Control Severance Pay Plan, as set forth in this document, and as hereafter amended from time to time.
6.13 "Release Period" means the forty-five (45) day period, commencing on the date of the Covered Employee's Separation from Service, by which he or she must sign the Release in order to receive a Severance Benefit, as provided in Exhibit B.
6.14 "Section 409A" means Section 409A of the Internal Revenue Code of 1986, as amended. This Plan is intended to comply with all of the requirements of Section 409A and any regulatory, administrative or judicial guidance thereunder and shall be administered and interpreted in accordance with those requirements.
6.15 "Separation from Service" means separation from Service as defined under Section 409A.
6.16 "Severance Benefit" means the compensation and other benefits the Covered Employee will be provided pursuant to Section 8.
6.17 "Severance Period" means the time period, not to exceed twenty-four months, beginning on the date of a Covered Employee's Separation from Service as a result of an Involuntary Termination or the Covered Employee's job prospects being Materially Altered as a result of a Change in Control. The Severance Period for each job classification is set forth on Exhibit A.
6.18 "Short Term Incentive" means the target percentage of the Covered Employee's Base Salary in the Short Term Incentive Plan as determined by the Company in effect on the date of termination of employment. It does not include the short term incentive earned but not paid prior to the Covered Employee's date of termination.
6.19 "Total Cash Compensation Target" means the Covered Employee's Annual Base Pay and target Short Term Incentive divided by twelve (12) months and multiplied by the number of months of the Covered Employee's Severance Period.
8.1.1 "Termination Following a Change in Control. Except as provided in Section 13, at any time within the Determination Period for a Covered Employee following a Change in Control (i) the Covered Employee's job prospects are Materially Altered followed by the termination of the Covered Employee's employment in accordance with the notice and cure requirements of this Section 8.1.1, or (ii) the Covered Employee's employment is Involuntarily Terminated, other than for Cause or death or permanent disability, then the Covered Employee may be entitled to his or her Severance Benefit under the Plan.
In the instance of the Involuntarily Termination of the Covered Employee, other than for Cause or death or permanent disability, the Covered Employee shall be entitled to receive the Severance Benefit described in the remainder of this Section 8.1 from the Company, provided the Covered Employee signs the Release in a timely manner as provided in Section 8.2.
In the instance of the Covered Employee's job prospects being Materially Altered, the Covered Employee must exercise his or her rights under the Plan by providing the Company with written notice that his or her job prospects have been Materially Altered within ninety (90) days of the date of such Material Alteration, upon the notice of which the Company will be provided a period of thirty (30) days during which it may remedy the condition giving rise to the Material Alteration of the Covered Employee's job prospects. In such instance, the Covered Employee's employment with the Company shall terminate following the expiration of the thirty (30) day cure period without the Company remedying the condition giving rise to the Material Alteration of the Covered Employee's job prospects, following which, provided the Covered Employee signs the Release in a timely manner as provided in Section 8.2, the Covered Employee will receive the following Severance Benefit from the Company:
8.1.2 "Total Cash Compensation Target. Within 10 days of the completion of the Release Period, if the Covered Employee has executed and not revoked the Release as required by Section 8.2 herein and the return of the Company's property as required by Section 25 herein, the Covered Employee will be paid a lump sum single payment equal to his or her Total Cash
Compensation Target; provided, however, that if the Covered Employee is a specified employee (as defined under Section 409A) as of his or her date of Separation from Service and the lump sum single payment equal to his or her Total Cash Compensation Target is determined to be nonqualified deferred compensation subject to Section 409A, then such payment shall be made on date which is the earlier of: (a) the date six months after the Covered Employee's Separation from Service, or (b) the date of the Covered Employee's death.
8.1.3 "Covered Employees in Canada. For Covered Employees in Canada, the amount of severance pay for a Covered Employee whose severance pay is governed by the Employment Standards Act will be the greater of that determined under Section 8.1.1 or the amount required under the Employment Standards Act.
8.1.4 "Continued Medical Benefits. If Covered Employee, and any spouse and/or dependents of Covered Employee ("Family Members"), has medical and dental coverage on the date of Covered Employee's termination of employment under a group health plan sponsored by the Company, the Company will reimburse Covered Employee for the total applicable premium cost for medical and dental coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986, 29 U.S.C. Sections 11611168; 26 U.S.C. Section 4980B(f), as amended, and all applicable regulations (referred to collectively as "COBRA") for Covered Employee and his Family Members during the full term of the Severance Period (to the extent COBRA coverage lasts for the full term); provided, that the Company shall have no obligation to reimburse Covered Employee for the premium cost of COBRA coverage beginning on or after the date Covered Employee and his Family Members first become eligible to obtain comparable benefits from a subsequent employer.
8.1.5 "Stock Option Accelerated Vesting and Extended Exercise Period. Provisions for acceleration of vesting upon a Change in Control as defined above may be found in the Company's Employee Stock Option Plans in effect on February 19, 2003 or thereafter, and options previously granted thereunder and then outstanding. Those Stock Option Plans and Options also provide for an extended time for exercise of such Options upon an Involuntary Termination initiated by the Covered Employee or a termination initiated by the Company in either case upon a Change in Control for Company employees generally and for Covered Employees in particular. The terms of such stock option plans and grants made thereunder remain in full force and effect.
8.1.6 "Short Term Incentive Earned Prior to Date of Termination. In the event that the Covered Employee's date of termination is prior to the date that the amount of short term incentive earned by employees of the Company for that year is determined, if any, the Covered Employee will be entitled to receive, in addition to the Total Cash Compensation Target, a pro rata share of his or her actual short term incentive target for such year, if any, e.g., if the Covered Employee's date of termination is July 1, he or she will be entitled to receive 50% of his or her actual short term incentive. Such pro rata short term incentive payment will be paid according to the terms of the Company's compensation program in effect for the calendar year in which the Involuntary Termination of the Covered Employee occurs, but not later than March 15 of the calendar year after the calendar year of the Separation from Service of the Covered Employee. The Covered Employee's pro rata share of actual short term incentive for such year will be paid to the Covered Employee at the same time that it is paid to employees of the Company generally but not later than March 15 of the calendar year after the calendar year of the Separation from Service of the Covered Employee, regardless of the Covered Employee's date of termination of employment.
8.1.7 "Additional Limitation. Anything in this Plan to the contrary notwithstanding, in the event that any compensation, payment or distribution by the Company to or for the benefit of the Covered Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise (the "Severance Payments"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code"), the following provisions shall apply:
If the Severance Payments, reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes payable by the Covered Employee on the amount of the Severance Payments which are in excess of the Threshold Amount, are greater than or equal to the Threshold Amount, the Covered Employee shall be entitled to the full benefits payable under this Plan.
If the Threshold Amount is less than (x) the Severance Payments, but greater than (y) the Severance Payments reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes on the amount of the Severance Payments which are in excess of the Threshold Amount, then the Severance Payments shall be reduced (but not below zero) to the extent necessary so that the sum of all Severance Payments shall not exceed the Threshold Amount. In such event, the Severance Payments shall be reduced in the following order: (1) cash payments not subject to Section 409A; (2) cash payments subject to Section 409A; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits. To the extent any payment is to be made over time (e.g., in installments, etc.), then the payments shall be reduced in reverse chronological order.
For the purposes of this Section 8.1.7, "Threshold Amount" shall mean three times the Covered Employee's "base amount" within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and "Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by the Covered Employee with respect to such excise tax.
8.2 Release. As a condition to receiving Severance Benefits under this Plan, each Covered Employee will be required to sign a waiver and release of all claims arising out of the termination of the Covered Employee's employment with the Company and its subsidiaries and affiliates, substantially in the form set forth on Exhibit B.
8.3 Vacation and PTO Days. Any unused vacation or personal time off ("PTO") pay accrued as of a Covered Employee's date of Involuntary Termination will be paid at the time the Covered Employee receives his or her Total Cash Compensation Target payment. No Covered Employee may use any accrued but unused vacation or PTO pay to extend his or her Involuntary Termination date or to postpone or delay the start of his or her Severance Period.
the Plan, and any interpretation by the Administrator of any term or condition of the Plan, or any related document, will be conclusive and binding on all persons and be given the maximum possible deference allowed by law. The Administrator has the authority to act for the Company (in a non-fiduciary capacity) as to any matter pertaining to the Plan; provided, however, that this authority does not apply with respect to (a) the Company's power to amend or terminate the Plan or (b) any action that could reasonably be expected to increase significantly the cost of the Plan, the authority to take such actions is subject to the prior approval of the Board.
needed to review the request, the claimant (or representative) will be given written notice of the reason for the delay.
written representations that are in addition to or contrary to the terms of the Plan and its written amendments shall be binding on the Plan, the Administrator or the Company.
NPS Pharmaceuticals, Inc. Change in Control
NPS Pharmaceuticals, Inc.
NPS Pharmaceuticals, Inc.
550 Hills Drive, 3rd Floor
Agent for Service of
NPS Pharmaceuticals, Inc.
27.1 You may examine (without charge) all Plan documents, including any amendments and copies of all documents filed with the U.S. Department of Labor, such as the Plan's annual report (IRS Form 5500). These documents are available for your review in the Company's Human Resources Department.
27.2 You may obtain copies of all Plan documents and other Plan information upon written request to the Plan Administrator. A reasonable charge may be made for such copies.
27.3 In addition to creating rights for Covered Employees, ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate the Plan (called "fiduciaries") have a duty to do so prudently and in the interests of you and the other Covered Employees. No one, including the Company or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit under the Plan or exercising your rights under ERISA. If your claim for a severance benefit is denied, in whole or in part, you must receive a written explanation of the reason for the denial. You have the right to have the denial of your claim reviewed. (The claim review procedure is explained in Sections 10 and 11 above.)
27.4 Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and to pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim that is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court.
27.5 In any case, the court will decide who will pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds that your claim is frivolous.
27.6 If you have any questions regarding the Plan, please consult the Company's Human Resources Department. If you have any questions about this statement or about your rights under ERISA, you may contact the nearest area office of the Employee Benefits Security Administration (formerly the Pension and Welfare Benefits Administration), U.S. Department of Labor, listed in your telephone directory, or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W. Washington, D.C. 20210.
SEVERANCE PERIOD FOR EACH JOB CLASSIFICATION
SEVERANCE PERIOD FOR EACH JOB CLASSIFICATION
1. Employees in Grades 9-11: 9 Months Total Cash Compensation Target.
2. Non-Officer Vice Presidents (Tier 5): 12 Months Total Cash Compensation Target.
3. Officer Level Vice Presidents (Tiers 2-4): 18 Months Total Cash Compensation Target
4. Chief Executive Officer and Chief Operating Officer: 24 Months Total Cash Compensation Target
WAIVER AND RELEASE AGREEMENT
WAIVER AND RELEASE AGREEMENT
Notwithstanding the foregoing, the Employee does not waive rights, if any, the Employee may have to unemployment insurance benefits or workers' compensation benefits. The Employee does not waive any claims or rights under the ADEA which may arise from events occurring after the date of this Agreement.
DATED this ____ day of ______, 200__.
The foregoing instrument was acknowledged before me this ____ day of _____, 200__, by [Employee].
Residing at: _______________________