Exhibit 10.8
FORM OF
XOMA LTD.
AMENDED AND
RESTATED
CHANGE OF CONTROL SEVERANCE
AGREEMENT
This Amended and Restated Change of
Control Severance Agreement (the “ Agreement ”)
is made and entered into effective as of
, 200_ (the “ Effective Date ”), by and between
(the “ Employee ”) and XOMA Ltd., a Bermuda
company (the “ Company ”).
R E C I T A L S
A. It is expected that the Company
may from time to time consider the possibility of a Change of
Control (as hereinafter defined). The Board of Directors of the
Company (the “ Board ”) recognizes that such
consideration could be a distraction to the Employee and could
cause the Employee to consider alternative employment
opportunities.
B. The Board believes that it is in
the best interest of the Company and its shareholders to provide
the Employee with an incentive to continue the Employee’s
employment and to maximize the value of the Company upon a Change
of Control for the benefit of its shareholders.
C. In order to provide the Employee
with enhanced financial security and sufficient encouragement to
remain with the Company notwithstanding the possibility of a Change
of Control, the Company and the Employee entered into a Change of
Control Severance Agreement effective as of
, 200_ (the “ Original Agreement ”) to provide
the Employee with certain severance benefits upon the
Employee’s termination of employment following a Change of
Control.
D. The Company and the Employee wish
to enter into this Agreement to amend and restate the Original
Agreement.
E. XOMA (US) LLC, a wholly-owned
subsidiary of the Company, and the Employee have previously entered
into an employment agreement effective as of
, 200_, which has been amended and restated effective as of
, 200_ (the “ Existing Agreement ”) and provides
the Employee with certain severance benefits upon the
Employee’s termination of employment.
F. The parties intend that this
Agreement shall operate in addition to, and not in replacement of,
the Existing Agreement.
AGREEMENT
In consideration of the mutual
covenants herein contained and the continued employment of the
Employee by the Company, the parties agree as follows:
1. Definition of Terms . The
following terms referred to in this Agreement shall have the
following meanings:
(a) “ Cause ”
shall mean (i) the Employee has been convicted of any crime or
offense constituting a felony under applicable law, including,
without limitation, any act of dishonesty such as embezzlement,
theft or larceny, (ii) the Employee has acted or refrained
from acting in respect of any of the duties and responsibilities
which have been assigned to her/him in accordance with this
Agreement or the Existing Agreement and shall fail to desist from
such action or inaction within thirty (30) days after the
Employee’s receipt of notice from the Company of such action
or inaction and the Board determines that such action or inaction
constituted gross negligence or a willful act of malfeasance or
misfeasance of the Employee in respect of such duties, or
(iii) the Employee has breached any material term of this
Agreement or the Existing Agreement and shall fail to correct such
breach within thirty (30) days after the Employee’s
receipt of notice from the Company of such breach.
(b) “ Change of Control
” shall mean the occurrence of any of the following
events:
(i) a merger, amalgamation or
acquisition in which the Company is not the surviving or continuing
entity, except for a transaction the principal purpose of which is
to change the jurisdiction of the Company’s
organization;
(ii) the sale, transfer or other
disposition of all or substantially all of the assets of the
Company;
(iii) any other reorganization or
business combination in which fifty percent (50%) or more of
the Company’s outstanding voting securities are transferred
to different holders in a single transaction or series of related
transactions;
(iv) any approval by the
shareholders of the Company of a plan of complete liquidation of
the Company;
(v) any “person” (as
such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becoming the
“beneficial owner” (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the total voting
power represented by the Company’s then outstanding voting
securities; or
(vi) a change in the composition of
the Board, as a result of which fewer than a majority of the
directors are Incumbent Directors. “Incumbent
Directors” shall mean directors who (A) are directors of
the Company as of the date hereof, (B) are elected, or
nominated for election, to the Board with the affirmative votes of
the directors of the Company as
-2-
of the date hereof, or (C) are
elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of those directors whose
election or nomination was not in connection with any transaction
described in subsections (i) through (v) or in connection
with an actual or threatened proxy contest relating to the election
of directors of the Company.
(c) “ Change of Control
Protection Period ” shall mean the period commencing one
(1) month prior to the execution of the definitive agreement
for a Change of Control and eighteen (18) months following the
closing of a Change of Control.
(d) “ Compensation
Continuation Period ” shall mean the period of time
commencing with termination of the Employee’s employment as a
result of Involuntary Termination at any time within a Change of
Control Protection Period and ending with the date
months following the date of the Employee’s Involuntary
Termination.
(e) “ Code ”
shall mean the Internal Revenue Code of 1986, as
amended.
(f) “ Involuntary
Termination ” shall mean (i) the failure of a
successor or an acquiring company to offer the Employee the
position held by Employee on the date of this Agreement (or, if
higher, a subsequent position of the Employee) with the successor
or acquiring company following a Change of Control;
(ii) without the Employee’s express written consent, a
substantial reduction, without good business reasons, of the
rights, privileges and perquisites available to the Employee
immediately prior to such reduction; (iii) without the
Employee’s express written consent, a material diminution in
the authority, responsibilities, duties or reporting lines held or
possessed by the Employee prior to the Change of Control;
(iv) without the Employee’s express written consent, a
reduction by the Company of the Employee’s base salary or
target bonus as in effect immediately prior to such reduction;
(v) without the Employee’s express written consent, a
material reduction by the Company in the kind or level of employee
benefits to which the Employee is entitled immediately prior to
such reduction with the result that the Employee’s overall
benefits package is significantly reduced; (vi) without the
Employee’s express written consent, the relocation of the
regular offices of the Employee to a facility or a location more
than thirty (30) miles further from the Employee’s
current location (unless such new facility or location is closer to
the Employee’s residence); (vii) any purported
termination of the Employee by the Company which is not effected
for Cause or for which the grounds relied upon are not valid; or
(viii) the failure of the Company to obtain the assumption of
this Agreement by any successors contemplated in Section 7
below.
2. Term of Agreement . This
Agreement shall terminate upon the date that all obligations of the
parties hereto under this Agreement have been satisfied or, if
earlier, on the date, prior to a Change of Control Protection
Period, the Employee is no longer employed by the
Company.
-3-
3. 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, the Employee shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by
this Agreement or the Existing Agreement or as may otherwise be
established under the Company’s then existing employee
benefit plans or policies at the time of termination.
4. Change of Control and
Severance Benefits .
(a) Option Acceleration and
Extended Exercise Period . If the Employee’s employment
with the Company terminates as a result of an Involuntary
Termination at any time within a Change of Control Protection
Period, then the exercisability of all options granted to the
Employee by the Company (including any such options granted or
assumed by the surviving or continuing entity of the Change of
Control) and still outstanding (the “ Options ”)
shall automatically be accelerated so that all the Options may be
exercised immediately upon such Involuntary Termination for any or
all of the shares subject thereto and the post-termination exercise
period of each Option shall be extended to sixty (60) months
(but in no event beyond the remainder of the maximum term of the
Option). The Options shall continue to be subject to all other
terms and conditions of the Company’s share option plans and
the applicable option agreements between the Employee and the
Company.
(b) Outplacement Program . If
the Employee’s employment with the Company terminates as a
result of an Involuntary Termination at any time within a Change of
Control Protection Period, the Employee will immediately become
entitled to participate in a twelve (12) month executive
outplacement program provided by an executive outplacement service,
at the Company’s expense not to exceed fifteen thousand
dollars ($15,000).
(c) Termination Following a
Change of Control .
(i) Cash Severance Payment Upon
Involuntary Termination . If the Employee’s employment
with the Company terminates as a result of an Involuntary
Termination at any time within a Change of Control Protection
Period, then the Employee shall be entitled to receive a severance
payment equal to the sum of (A) an amount equal to
times the Employee’s annual base salary as in effect
immediately prior to the Involuntary Termination, plus (B) an
amount equal to
times Employee’s target bonus as in effect for the fiscal
year in which the Involuntary Termination occurs. Such severance
payments shall be in lieu of any other severance payment to which
the Employee shall be entitled as a result of such termination
pursuant to this Agreement, any employment agreement with or offer
letter from the Company or any of its affiliates or the
Company’s or any of its affiliate’s then existing
severance plans and policies. The severance payment described in
Section 4(c)(i)(A) shall be paid in monthly installments over
[ ]
-4-
months (the “ Severance
Payment Period ”), with the first two (2) of such
monthly installments being paid sixty (60) days after the date
of termination and the remaining monthly installments being paid
monthly thereafter until fully paid, and the severance payments
described in Section 4(c)(i)(B) shall be paid in a lump sum
sixty (60) days after the date of termination; provided,
however , that all of such severance payments shall be subject
to the requirements of Section 4(c)(iii) and Section 9
below.
(ii) Provision of Group Health
and Certain Other Benefits . In addition, during a period of
months following the termination of Employee’s employment as
a result of an Involuntary Termination at any time within a Change
of Control Protection Period, (A) the Company shall make
available and pay for the full cost of the coverage (plus an
additional amount to pay for the taxes on such payments, if any,
plus any taxes on such additional amount, such amount to be paid no
later than ten (10) days prior to the date such taxes are due)
of the Employee and Employee’s spouse and eligible dependents
under any group health plans of the Company on the date of such
termination of employment at the same level of health (i.e.,
medical, vision and dental) coverage and benefits as in effect for
the Employee or such covered dependents on the date immediately
preceding the date of the Employee’s termination;
provided , however , that (1) the Employee and
Employee’s spouse and eligible dependents each constitutes a
qualified beneficiary, as defined in Section 4980B(g)(1) of
the Internal Revenue Code of 1986, as amended; and (2) the
Employee elects continuation coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“
COBRA ”), within the time period prescribed pursuant
to COBRA; and (B) if Employee is, at the time of such
termination, an eligible participant in the Company’s
mortgage differential program, the Company shall continue to make
mortgage assistance payments to Employee pursuant to such program
as in effect at the time of such termination. Notwithstanding the
foregoing, the payments by the Company for such group health
coverage and/or mortgage assistance, as applicable, shall cease
prior to the expiration of the
month period in this Section 4(c)(ii) upon the employment of
the Employment by another employer. Furthermore, if, at the time of
the termination of Employee’s employment as a result of an
Involuntary Termination at any time within a Change of Control
Protection Period, Employee is the obligor of a
“forgivable” loan (i.e., a loan which by its terms is
to be considered forgiven by the Company and paid by the obligor in
circumstances other than actual repayment) from the Company, then,
notwithstanding any provisions of such loan to the contrary, such
loan shall remain outstanding, and the forgiveness thereof shall
continue, for a period of
months following such termination in accordance with the terms of
such loan in effect at the time of such termination; provided,
however, that at the end of such period of
months, the outstanding balance of such loan shall be immediately
due and payable, together with any accrued and unpaid interest
thereon.
(iii) Section 409A of the
Code . Notwithstanding any provision to the contrary in this
Agreement, if the Employee is deemed on the date of his or her
“separation from service” (within the meaning of Treas.
Reg. Section 1.409A-1(h)) with the Company to be a
“specified employee” (within the meaning of Treas. Reg.
Section 1.409A-1(i)), then with regard to any payment or
benefit (including, without limitation, any mortgage assistance
payment or loan forgiveness referred to above) that is considered
deferred compensation under Section 409A payable on account of
a “separation from service” that is
-5-
required to be delayed pursuant to
Section 409A(a)(2)(B) of the Code (after taking into account
any applicable exceptions to such requirement), such payment or
benefit shall be made or provided on the date that is the earlier
of (i) the expiration of the six (6)-month period measured
from the date of the Employee’s “separation from
service,” or (ii) the date of the Employee’s death
(the “ Delay Period ”). Upon the expiration of
the Delay Period, all payments and benefits delayed pursuant to
this Section 4(c) (whether they would have otherwise been
payable in a single sum or in installments in the absence of such
delay) shall be paid or reimbursed to the Employee in a lump sum
and any remaining payments and benefits due under this Agreement
shall be paid or provided in accordance with the normal payment
dates specified for them herein. Notwithstanding any provision of
this Agreement to the contrary, for purposes of any provision of
this Agreement providing for the payment of any amounts or benefits
upon or following a termination of employment, references to the
Employee’s “termination of employment” (and
corollary terms) with the Company shall be construed to refer to
Employee’s “separation from service” (within the
meaning of Treas. Reg. Section 1.409A-1(h)) with the
Company.
(iv) Voluntary Resignation or
Termination for Cause . If the Employee’s employment with
the Company terminates as a result of the Employee’s
voluntary resignation which is not an Involuntary Termination or if
the Employee is terminated for Cause at any time after a Change of
Control, then the Employee shall not be entitled to receive
severance or other benefits hereunder, but may be eligible for
those benefits (if any) as may then be established under the
Company’s then existing severance and benefits plans and
policies at the time of such termination.
(d) Disability or Death . If
the Employee’s employment with the Company terminates due to
the Employee’s death or disability following a Change of
Control, then the Employee shall not be entitled to receive
severance or other benefits hereunder, except for those (if any) as
may be then established under the Company’s then existing
severance and benefits plans and policies at the time of such
disability or death. In the event of the Employee’s death or
disability after the termination of the Employee’s employment
with the Company as a result of an Involuntary Termination within a
Change of Control Protection Period, the Employee’s personal
or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees shall be entitled to
receive severance or other benefits hereunder.
(e) Accrued Wages and Vacation;
Expenses . Without regard to the reason for, or the timing of,
the Employee’s termination of employment (and without
duplication of any similar benefits under any employment agreement
with the Company or any of its affiliates): (i) the Company
shall pay the Employee any unpaid base salary due for periods prior
to the date of termination; (ii) the Company shall pay the
Employee all of the Employee’s accrued and unused vacation
through the date of termination; and (iii) following
submission of proper expense reports by the Employee, the Company
shall reimburse the Employee for all expenses reasonably and
necessarily incurred by the Employee in connection with the
business of the Company prior to the date of termination. These
payments shall be made promptly upon termination, within the period
of time mandated by law, and in no event later than ten
(10) days after the date of termination.
-6-
5. Conditional Nature of
Severance Payments .
(a) Non-Compete . The
Employee shall not, to the detriment of the Company or any of its
affiliates, disclose or reveal to any unauthorized person any trade
secret or other confidential information relating to the Company or
its affiliates or to any businesses operated by them, and the
Employee confirms that such information constitutes the exclusive
property of the Company. The Employee shall not otherwise act or
conduct her/himself to the material detriment of the Company or its
affiliates, or in a manner which is inimical or contrary to the
interests thereof, and, for a period of twenty-four
(24) months following the termination of Employee’s
employment as a result of an Involuntary Termination at any time
within a Change of Control Protection Period, shall not, directly
or indirectly, engage in or render any service (whether to a
person, firm or business) in direct competition with the Company;
provided , however , that the Employee’s
ownership of less than five percent (5%) of the outstanding
stock of a corporation shall not itself be deemed to constitute
such competition. The Employee recognizes that the possible
restrictions on her/his activities which may occur as a result of
her/his performance of her/his obligations under this
Section 5(a) are required for the reasonable protection of the
Company and its investments. For purposes hereof, “in direct
competition” means engaged in the research, development
and/or production of biological materials intended for use as
therapeutic, prophylactic or diagnostic products in one or more of
the same indications, and that utilize one or more of the same
scientific bases (e.g., in the case of a therapeutic antibody,
targets the same signal initiating pathway), as a product or
product candidate the research, development and/or production of
which is an active part of the Company’s business plan at the
time of Employee’s termination.
(b) Non-D
