|
Exhibit
10.3
CELL GENESYS,
INC.
CHANGE OF CONTROL
SEVERANCE AGREEMENT
This Change of Control Severance
Agreement (the “Agreement”) is made and entered into by
and between
(“Employee”) and Cell Genesys, Inc. (the
“Company”), effective as of the latest date set forth
by the signatures of the parties hereto below (the “Effective
Date”).
RECITALS
A. It is expected that the Company from
time to time will consider the possibility of an acquisition by
another company or other change of control. The Board of Directors
of the Company (the “Board”) recognizes that such
consideration can be a distraction to the Employee and can cause
the Employee to consider alternative employment opportunities. The
Board has determined that it is in the best interests of the
Company and its shareholders to assure that the Company will have
the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Company.
B. The Board believes that it is in the
best interests of the Company and its shareholders to provide the
Employee with an incentive to continue his employment and to
motivate the Employee to maximize the value of the Company upon a
Change of Control for the benefit of its shareholders. The Board
believes that it is imperative to provide the Employee with certain
severance benefits upon Employee’s Involuntary Termination
following a Change of Control which provides the Employee with
enhanced financial security and provides incentive and
encouragement to the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.
C. The Board believes that it is
imperative to provide the Employee with certain severance benefits
upon Employee’s Involuntary Termination which provides the
Employee with enhanced financial security and provides incentive
and encouragement to the Employee to remain with the
Company.
D. Certain capitalized terms used in the
Agreement are defined in Section 6 below.
The parties hereto agree as
follows:
1. Term of Agreement . This
agreement shall terminate upon the date that all obligations of the
parties hereto with respect to this Agreement have been
satisfied.
2. At-Will Employment . The
Company and the Employee acknowledge that the Employee’s
employment is and shall continue to be at-will, as defined under
applicable law. If the Employee’s employment terminates for
any reason, including (without limitation) any termination prior to
a Change of Control, the Employee shall not be entitled to any
payments, benefits, damages, awards or compensation other than
as
provided by this Agreement, or as may
otherwise be available in accordance with the Company’s
established employee plans and practices or pursuant to other
agreements with the Company.
3. Severance Benefits
.
(a) Involuntary
Termination . If the Employee’s employment is terminated
as a result of an Involuntary Termination, then, subject to
Sections 3(g) and 5, the Employee shall be entitled to receive the
following severance benefits:
(1) Severance Payment
. A cash payment in an amount equal to [xx] months of the
Employee’s Annual Compensation, as measured upon the date of
the Involuntary Termination;
(2) Continued Employee
Benefits . One hundred percent (100%) Company-paid health,
dental, and vision insurance coverage at the same level of coverage
as was provided to Employee immediately prior to the Termination
Date (the “Company-Paid Coverage”). If such coverage
included the Employee’s dependents immediately prior to the
Involuntary Termination, such dependents shall be covered at
Company expense. Company-Paid Coverage shall continue until the
earlier of (i) [xx] months from the date of termination, or
(ii) the date upon which the Employee and his dependents
become covered under another employer’s group health, dental
and vision insurance plans that provide Employee and his dependents
with comparable benefits and levels of coverage. For purpose of
Title X of the Consolidated Budget Reconciliation Act of 1985
(“COBRA”), the date of the “qualifying
event” for Employee and his or her dependents shall be the
date upon which the Company-Paid Coverage terminates.
(3) Option, Restricted
Stock, and Restricted Stock Unit Accelerated Vesting . The
Employee shall receive acceleration with respect to that portion of
any then-unvested stock options, restricted stock, or restricted
stock units that would have vested within the [xx]-month period
following the Termination Date.
(b) Termination in
Connection with a Change of Control . If the Employee’s
employment terminates as a result of an Involuntary Termination at
any time within sixty (60) days prior to, or two
(2) years following, a Change of Control, then, subject to
Sections 3(g) and 5, the Employee shall be entitled to receive the
following severance benefits, in lieu of those severance benefits
provided pursuant to section 3(a) above:
(1) Severance Payment
. A cash payment in an amount equal to [xx] months of the
Employee’s Annual Compensation, as measured upon the date of
the Change in Control;
(2) Continued Employee
Benefits . One hundred percent (100%) Company-paid health,
dental and vision insurance coverage at the greater of (x) the
same level of coverage as was provided to such employee immediately
prior to the Change of Control or (y) the same level of
coverage as was provided to Employee immediately prior to the
Termination Date (the “Company-Paid Coverage”). If such
coverage included the Employee’s dependents immediately prior
to the Change of Control, such dependents shall be covered at
Company expense. Company-Paid Coverage shall continue until the
earlier of (i) [xx] months from the date of termination, or
(ii) the date upon which the Employee and his dependents
become covered under another employer’s group health, dental
and vision insurance plans that provide Employee and his dependents
with comparable benefits and levels of coverage. For purpose of
Title X of the Consolidated Budget Reconciliation Act of 1985
(“COBRA”), the date of the “qualifying
event” for Employee and his or her dependents shall be the
date upon which the Company-Paid Coverage terminates.
(3) Option, Restricted
Stock, and Restricted Stock Unit Accelerated Vesting . One
Hundred percent (100%) of the unvested portion of any stock
option, restricted stock, or restricted stock unit held by the
Employee shall automatically be accelerated in full so as to become
completely vested.
(4) Extension of
Post-Termination Exercise of Stock Options . The stock options
held by Employee shall become exercisable for a period of ten years
from their original date of grant by the Company, or, if shorter,
the maximum term of the options under the applicable equity plan
and award agreement, provided that this Section 3(b)(4) shall
remain subject to any provision of the applicable equity plan,
award agreement, Change of Control agreement or other agreement
providing for the termination of such stock options upon a Change
of Control.
If the Employee’s
employment terminates as a result of an Involuntary Termination,
thereby triggering benefits pursuant to Section 3(a), it is
possible that within sixty (60) days a Change of Control may
further trigger benefits under Section 3(b). To the extent the
Employee receives benefits pursuant to Section 3(a), and then
subsequently becomes entitled to benefits pursuant to
Section 3(b), any benefits previously received by the Employee
pursuant to Section 3(a) shall be deducted from those benefits
to which he is entitled pursuant to Section 3(b).
(c) Timing of Severance
Payments . Any severance payment to which Employee is entitled
under Section 3(a)(1) shall be paid by the Company to the
Employee (or to the Employee’s successors in interest,
pursuant to Section 7(b)) in cash and in full, not later than
(30) calendar days following the Termination Date. Any
severance payment to which Employee is entitled under
Section
3(b)(1) shall be paid by the
Company to the Employee (or to the Employee’s successors in
interest, pursuant to Section 7(b)) in cash and in full, not
later than (30) calendar days following the later to occur of
the closing of the Change of Control or the Termination
Date.
(d) Voluntary Resignation;
Termination For Cause . If the Employee’s employment
terminates by reason of the Employee’s voluntary resignation
(and is not an Involuntary Termination), or if the Employee is
terminated for Cause, then the Employee shall not be entitled to
receive a severance or other benefits except for those (if any) as
may then be established under the Company’s then existing
severance and benefits plans and practices or pursuant to other
agreements with the Company.
(e) Disability; Death
. If the Company terminates the Employee’s employment as a
result of the Employee’s Disability, or such Employee’s
employment is terminated due to the death of the Employee, then the
Employee shall not be entitled to receive severance or other
benefits except for those (if any) as may then be established under
the Company’s then existing severance and benefits plans and
practices or pursuant to other agreements with the
Company.
(f) Non-duplication of
Severance Benefits . In the event Employee becomes entitled to
severance benefits under this Section 3, such severance
benefits shall be paid in lieu of, and not in addition to,
severance benefits under any other agreement, program, or policy of
the Company.
(g) Release and Waiver
. This Section 3(g) shall apply notwithstanding anything else
contained in this Agreement or any stock option or other
equity-based award agreement to the contrary. As a condition
precedent to any Company obligation to the Employee pursuant to
Section 3, the Employee shall, upon or promptly following the
Termination Date, provide the Company with a valid, executed
general release agreement, a form of which is attached hereto as
Exhibit A, and such release agreement shall have not been revoked
by the Employee pursuant to any revocation rights afforded by
applicable law. The Company shall have no obligation to make any
payment or provide any benefit to the Employee pursuant to
Section 3 unless and until the release agreement contemplated
by this Section 3(g) becomes irrevocable by the Employee in
accordance with all applicable laws, rules and
regulations.
4. Attorney Fees, Costs and
Expenses . The Company shall promptly reimburse Employee, on a
monthly basis, for the reasonable attorney fees, costs and expenses
incurred by the Employee in connection with any action reasonably
and in good faith brought by Employee to enforce his rights
hereunder, regardless of the outcome of the action. Reimbursement
under this Section 4 will be available only during the
Employee’s lifetime. No such reimbursement shall be made
later than the end of the calendar year following the calendar year
in which the expense was incurred.
5. [ Limitation on Payments . In
the event that the severance and other benefits provided for in
this Statement or otherwise payable to the Employee
(i) constitute “parachute
payments” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”) and (ii) but for this Section 5,
would be subject to the excise tax imposed by Section 4999 of
the Code (the “Excise Tax”), then the Employee’s
severance benefits hereunder Section 3 shall be
either
(a) delivered in full,
or
(b) delivered as to such
lesser extent which would result in no portion of such severance
benefits being subject to the Excise Tax,
whichever of the foregoing amounts,
taking into account the applicable federal, state and local income
taxes and the Excise Tax, results in the receipt by the Employee on
an after-tax basis, of the greatest amount of severance benefits,
notwithstanding that all or some portion of such severance benefits
may be taxable under Section 4999 of the Code. Unless the
Company and the Employee otherwise agree in writing, any
determination required under this Section 5 shall be made in
writing in good faith by the accounting firm serving as the
Company’s independent public accountants immediately prior to
the Change of Control (the “Accountants”). In the event
of a reduction in benefits hereunder, the Employee shall be given
the choice of which benefits to reduce. For purposes of making the
calculations required by this Section 5, the Accountants may
make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and
4999 of the Code. The Company and the Employee shall furnish to the
Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this
Section. The Company shall bear all costs the Accountants may
reasonably incur in connection with any calculations contemplated
by this Section 5.]
[ ALTERNATIVE: Golden
Parachute Excise Tax Gross-Up . In the event that the benefits
provided for in this Agreement or otherwise payable to the Employee
constitute “parachute payments” within the meaning of
280G of the Internal Revenue Code of 1986, as amended (the
“Code”) and will be subject to the excise tax imposed
by Section 4999 of the Code, then the Employee shall receive
(i) payment from the Company sufficient to pay such excise
tax, and (ii) an additional payment from the Company
sufficient to pay the excise tax and federal and state income taxes
arising from the payments made by the Company to Employee pursuant
to this sentence. Unless the Company and the Employee otherwise
agree in writing, the determination of Employee’s excise tax
liability and the amount required to be paid under this
Section 5 shall be made in writing by the accounting firm
serving as the Company’s independent public accountants
immediately prior to the Change of Control (the
“Accountants”). For purposes of making the calculations
required by this Section 5, the Accountants may make
reasonable assumptions and approximations concerning applicable
taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code.
The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request
in order to make a determination under this Section. The Company
shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this
Section 5. Any payment made pursuant to this Section 5
shall be made no later than 2.5 months following the Termination
Date.]
6. Definition of Terms . The
following terms referred to in this Agreement shall have the
following meanings:
(a) Annual
Compensation . “Annual Compensation” means an
amount equal to the sum of Employee’s (i) annual Company
salary at the highest rate in the effect in the twelve months
immediately preceding the applicable measurement date, and
(ii) 100% of the Employee’s annual target bonus as in
effect immediately prior to the applicable measurement
date.
(b) Cause .
“Cause” shall mean either (i) any act of personal
dishonesty taken by the Employee in connection with his
responsibilities as an employee and intended to result in
substantial personal enrichment of the Employee, (ii) the
conviction of, or plea of nolo contendere to, a felony,
(iii) a willful act by the Employee which constitutes gross
misconduct and which is injurious to the Company, or
(iv) following delivery to the Employee of a written demand
for performance from the Company which describes the basis for the
Company’s belief that the Employee has not substantially
performed his duties, continued violations by the Employee of the
Employee’s obligations to the Company which are demonstrably
willful and deliberate on the Employee’s part.
(c) Change of Control
. “Change of Control” means the occurrence of any of
the following events:
(i) Any “person”
(as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becomes the “beneficial
owner” (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the
Company’s then outstanding voting securities;
(ii) A change in the
composition of the Board occurring within a two-year period, as a
result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” shall mean
directors who either (A) are directors of the Company as of
the date hereof, or (B) are elected, or nominated for
election, to the Board with the affirmative votes (either by a
specific vote or by approval of the proxy statement of Cell Genesys
in which such person is named as a nominee for election as
a
| 
