Exhibit 10.31
CERUS CORPORATION
CHANGE OF CONTROL SEVERANCE
BENEFIT PLAN
A PPROVED BY C OMPENSATION C OMMITTEE ON :
S EPTEMBER
15, 2005
A MENDED BY B OARD OF D IRECTORS ON :
D ECEMBER
11, 2008
Section 1. I
NTRODUCTION
.
The purpose of the Cerus Corporation
Change of Control Severance Benefit Plan (the “Plan”)
is to provide for the payment of severance benefits to certain
eligible employees of Cerus Corporation (the “Company”)
whose employment with the Company is terminated following a Change
of Control. This Plan shall supersede any severance benefit plan
(other than the Cerus Corporation Severance Benefit Plan), policy
or practice previously maintained by the Company. This Plan
document also is the Summary Plan Description for the
Plan.
Section 2. D
EFINITIONS
.
For purposes of the Plan, the
following terms are defined as follows:
(a)
“Board” means
the Board of Directors of the Company.
(b)
“Cause” means
any of the following:
(i) the Eligible Employee is convicted of any felony
or of any crime involving moral turpitude (including a no contest
or guilty plea);
(ii) the Eligible Employee participates in any fraud
or act of dishonesty against the Company;
(iii) the Eligible Employee willfully breaches the
Eligible Employee’s duties to the Company, including
insubordination, misconduct, excessive absenteeism, or persistent
unsatisfactory performance of job duties;
(iv) the Eligible Employee intentionally damages or
willfully misappropriates any property of the Company;
(v) the Eligible Employee materially breaches any
written agreement with the Company (including, but not limited to,
the Eligible Employee’s Proprietary Information Agreement);
or
(vi) the Eligible Employee engages in conduct that
demonstrates unfitness to serve as reasonably determined by the
Board.
1.
Notwithstanding the foregoing, prior to a
termination for Cause falling within (iii) or (vi) of the
foregoing Cause definition, the Board must provide the Eligible
Employee with written notice of the Eligible Employee’s
unsatisfactory conduct and a period of thirty (30) days to
cure such conduct, except that such written notice and opportunity
to cure are not required if the conduct is not capable of being
cured.
(c) “Change of Control” is
defined as one or more of the following events:
(i) a sale, lease or other disposition 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; or
(iii) a reverse merger in which the Company is the
surviving corporation but the holders of the Company’s
outstanding voting stock immediately prior to such transaction own,
immediately after the closing of the transaction, securities
representing less than fifty percent (50%) of the voting stock
of the Company or other surviving entity.
(d) “Code”
means the Internal Revenue Code of
1986, as amended.
(e)
“Company” means Cerus Corporation or, following a Change
of Control, the surviving entity resulting from such
transaction.
(f) “Continuation
Period” means the
first twelve (12) months following the Covered Termination
date.
(g) “Covered
Termination” means
termination by the Company without Cause (and other than as a
result of the employee’s death or disability) or a Good
Reason Resignation, either of which occurs on or within twelve
(12) months following the effective date of a Change of
Control and provided such termination constitutes a
“separation from service” within the meaning of
Treasury Regulation Section 1.409A-1(h).
(h) “Eligible
Employee” means an
executive employee of the Company who has been designated by the
Board in writing as an eligible employee, and whose employment with
the Company terminates due to a Covered Termination.
(i) “Good Reason
Resignation” means
a voluntary termination of employment by an Eligible Employee from
all positions he or she then-holds with the Company on or within
twelve (12) months after a Change of Control because the
Change of Control resulted in one of the following without the
Eligible Employee’s express written consent:
(i) a relocation of the Eligible Employee’s
assigned office more than forty-five (45) miles from its
location immediately prior to the Change of Control;
(ii) a material decrease in the Eligible
Employee’s base salary (except for salary decreases generally
applicable to the Company’s other executive employees);
or
2.
(iii) a material reduction in the scope of the
Eligible Employee’s duties and responsibilities from the
Eligible Employee’s duties and responsibilities in effect
immediately prior to the Change of Control.
Notwithstanding the foregoing, a
“Good Reason Resignation” shall only occur if:
(a) the Eligible Employee notifies the Company in writing,
within sixty (60) days after the occurrence of one of the
foregoing events, specifying the event(s) constituting “good
reason” and that he or she intends to terminate his or her
employment no earlier than thirty (30) days after providing
such notice; (b) the Company does not cure such condition
within thirty (30) days following its receipt of such notice
or states unequivocally in writing that it does not intend to
attempt to cure such condition; and (c) the Eligible Employee
resigns from employment within thirty (30) days following the
end of the period within which the Company was entitled to remedy
the condition constituting “good reason” but failed to
do so.
Section 3. E
LIGIBILITY
F OR B ENEFITS .
(a) General Rules.
Subject to the requirement set forth
in this Section, the Company will provide the severance benefits
described in Section 4 of the Plan to Eligible
Employees.
(b) Exceptions to Benefit
Entitlement. An employee,
whether or not otherwise an Eligible Employee, will 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 or change of control benefits that
is in effect on his or her termination date.
(ii) The employee’s employment with the Company
is involuntarily terminated by the Company for Cause.
(iii) The employee voluntarily terminates employment
with the Company and such termination does not constitute a Good
Reason Resignation. 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 has failed to execute or has
revoked the release described in Section 5(a).
(vi) The employee is offered immediate reemployment
by a successor to the Company or by a purchaser of its assets, as
the case may be, following a change in ownership of the Company or
a sale of all or substantially all the assets of a division or
business unit of the Company. For purposes of the foregoing,
“immediate reemployment” means that the
employee’s employment with the successor to the Company or
the purchaser of its assets, as the case may be, results in
uninterrupted employment such that the employee does not suffer a
lapse in pay as a result of the change in ownership of the Company
or the sale of its assets.
3.
Section 4. A MOUNT O F B ENEFIT .
(a) Base
Salary. The Company shall make a lump
sum cash severance payment to the Eligible Employee in an amount
equal to twelve (12) months of such Eligible Employee’s
Base Salary. This lump sum cash severance payment will be paid on
the 60 th day following the Eligible
Employee’s termination date. For purposes of calculating Plan
benefits under this Section 4, “Base Salary” shall
mean 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,
ignoring, however, any reduction in base salary that forms the
basis of the Eligible Employee’s resignation for Good Reason
(as applicable).
(b) Continued Insurance
Benefits . Provided that
the Eligible Employee elects continued coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”), the Company shall pay the portion of
premiums of the 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 or such
earlier date that the Eligible Employee (or his or her dependents)
ceases to be eligible for such coverage. In addition, in no event
will such premium payments be made following the date that the
Eligible Employee becomes eligible for group medical, dental or
vision coverage through a subsequent employer. The Eligible
Employee shall be required to notify the Company immediately if the
Eligible Employee becomes eligible to be covered by a group
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
applicable insurance premiums during the Continuation Period will
be credited as payment by the Eligible Employee for purposes of the
Eligible Employee’s payment required under COBRA. Therefore,
the period during which an Eligible Employee may elect whether or
not to continue the Company’s group medical, dental or vision
coverage under COBRA, the length of time during which COBRA
continuation coverage will be made available to the Eligible
Employee, and all other rights and obligations of the Eligible
Employee under COBRA 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 Eligible Employee will 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), (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 during
the Continuation Period shall not include any amounts payable by
the Eligible Employee under an Internal Revenue Code
Section 125 health care reimbursement plan, which amounts, if
any, are the sole responsibility of the Eligible
Employee.
(c) Acceleration of
Vesting. Effective as of
the date of the Covered Termination, the vesting and exercisability
of all options to purchase the Company’s stock that are held
by the Eligible Employee on such date shall be accelerated in full,
and any stock options then-held by the Eligible Employee shall
remain exercisable by the Eligible Employee for three
(3) months following such date or for such longer period as
may be provided by the agreement evidencing such options, but in no
event beyond the expiration date of such options.
4.
Section 5. L IMITATIONS ON B ENEFITS .
(a) Release.
To receive benefits under this Plan,
an Eligible Employee must execute and return to the Company a
release of claims in favor of the Company, in substantially the
form attached to this Plan as Exhibit A, Exhibit B or
Exhibit C (the “Release” ) no later
than forty-five (45) days following the Eligible
Employee’s termination of employment, and such Release must
become effective in accordance with its terms.
(b) Certain Reductions and
Offsets. The Company, in
its sole discretion, shall reduce an Eligible Employee’s
severance benefits under this Plan, in whole or in part, by any
other severance benefits, pay in lieu of notice, or other similar
benefits payable to the Eligible Employee by the Company that
become payable in connection with the Eligible Employee’s
termination of employment pursuant to (i) any applicable legal
requirement, including, without limitation, the Worker Adjustment
and Retraining Notification Act (the “WARN Act”),
(ii) a written employment or severance agreement with the
Company, or (iii) any Company policy or practice providing for
the Eligible Employee to remain on the payroll for a limited period
of time after being given notice of the termination of the Eligible
Employee’s employment. The benefits provided under this Plan
are intended to satisfy, to the greatest extent possible, any and
all statutory obligations that may arise out of an Eligible
Employee’s termination of employment, and the Plan
Administrator shall so construe and implement the terms of the
Plan. In the Company’s sole discretion, such reductions may
be applied on a retroactive basis, with severance benefits
previously paid being recharacterized as payments pursuant to the
Company’s statutory obligation.
(c) Mitigation.
Except as otherwise specifically
provided herein with respect to COBRA coverage, an Eligible
Employee 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 compensation earned by an Eligible
Employee as a result of employment by another employer or any
retirement benefits received by such Eligible Employee after the
date of the Covered Termination.
(d) 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.
(e) Non-Duplication of
Benefits. No Eligible
Employee is eligible to receive benefits under this Plan more than
one time.
(f) Indebtedness of Eligible
Employees. 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.
5.
(g) Parachute
Payments. If any payment
or benefit the Eligible Employee would receive in connection with a
Change of Control 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 options; reduction of employee
benefits. In the event that acceleration of vesting of stock
options is to be reduced, such acceleration of vesting shall be
cancelled in the reverse order of the date of grant of such options
(i.e., earliest granted option cancelled last).
The accounting firm engaged by the
Company for general audit purposes as of the day prior to the
effective date of the Change of Control 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 of Control, 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 determinations hereunder shall provide its calculations,
together with detailed supporting documentation, to the Company and
the Eligible Employee within fifteen (15) calendar days after
the date on which the Eligible Employee’s right to a Payment
is triggered (if requested at that time by the Company or the
Eligible Employee) or such other time as requested by the Company
or the Eligible Employee. If the 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 the Eligible Employee with a statement reasonably
acceptable to the Eligible Employee that no Excise Tax 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 the Eligible Employee.
Section 6. T
IME OF P AYMENT AND F ORM O F B ENEFITS .
(a) General Rules
. For the avoidance of doubt, in no
event shall payment of any Plan benefit set forth in Section 4
be made prior to the effective date of the Release described in
Section 5(a). In the event of an acceleration of the
exercisability of an option (or other award) pursuant to
Section 4(c) or, such option (or other award) shall not be
exercisable with respect to such acceleration of exercisability
unless and until the effective date of the Release described in
Section 5(a).
6.
(b) Application of
Section 409A .
(i) It is intended that each installment of the
payments and benefits provided under this Plan (the “
Severance Benefits ”) is a separate
“payment” for purposes Section 1.409A-2(b)(2)(i)
of the Treasury Regulations. For the avoidance of doubt, it is
intended that payments of the Severance Benefits satisfy, to the
greatest extent possible, the exemptions from the application of
Section 409A of the Code and the Treasury Regulations and
other guidance thereunder and any state law of similar effect
(collectively “ Section 409A ”) provided
under Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9) of
the Treasury Regulations. However, if the Plan Administrator
determines that the Severance Benefits constitute “deferred
compensation” under Section 409A and the Eligible
Employee is, on his or her separation from service, a
“specified employee” of the Company (as such term is
defined in Section 409A(a)(2)(B)(i) of the Code) then, solely
to the extent necessary to avoid the incurrence of the adverse
personal tax consequences under Section 409A, the timing of
the payment of the Severance Benefits shall be delayed so that on
the earlier to occur of: (i) the date that is six months and
one day after the Eligible Employee’s separation from service
and (ii) the date of the Eligible Employee’s death (such
applicable date, the “Specified Employee Initial
Payment Date&
