Document:

exhibit10_7d.htm

Exhibit 10.7D

 

AMENDED AND RESTATED

 

EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (“Agreement”), effective as of this 30th day of December, 2008, by and between XOMA (US) LLC (“XOMA” or the “Company”), a Delaware limited liability company with its principal office at 2910 Seventh Street, Berkeley, California, and Charles C. Wells (“Employee”), an individual residing at 10145 Nantucket Drive, San Ramon, California.  

 

WHEREAS, the Company and Employee entered into an Employment Agreement effective as of August 14, 2007 (the “Original Agreement”) to assure the Company of the continued services of Employee;

 

WHEREAS, the Company wishes to enter into this Agreement to amend and restate the Original Agreement; and  

 

WHEREAS, Employee is willing to enter into this Agreement and to continue to serve in the employ of the Company upon the terms and conditions hereinafter provided;  

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto hereby agree as follows:  

 

1. Employment. The Company agrees to continue to employ Employee, and Employee agrees to continue to be employed by the Company, for the period referred to in Section 3 hereof and upon the other terms and conditions herein provided.  

 

2. Position and Responsibilities. The Company agrees to employ Employee in the position of Vice President, Human Resources and Information Technology, and Employee agrees to serve as Vice President, Human Resources and Information Technology, for the term and on the conditions hereinafter set forth. Employee agrees to perform such services not inconsistent with his position as shall from time to time be assigned to him by the Chairman of the Board, President and Chief Executive Officer of the Company (the “Chairman”).  

 

3. Term and Duties.  

 

(a) Term of Employment. This Agreement shall become effective and the term of employment pursuant to this Agreement shall commence on August 14, 2007 and will continue until August 13, 2008, and will be automatically extended (without further action by the parties) for one year thereafter and again on each subsequent anniversary thereof unless notice of nonextension of the term is given by either the Employee or the Company more than 90 days prior to the next scheduled expiration date or unless Employee’s employment is terminated by the Company or he resigns from the Company’s employ as described herein. 

 

  

  

  

(b) Duties. During the period of his employment hereunder Employee shall serve the Company as its Vice President, Human Resources and Information Technology, and except for illnesses, vacation periods and reasonable leaves of absence, Employee shall devote all of his business time, attention, skill and efforts to the faithful performance of his duties hereunder.  So long as Employee is Vice President, Human Resources and Information Technology of the Company, he will discharge all duties incidental to such office and such further duties as may be reasonably assigned to him from time to time by the Chairman.  

 

4. Compensation and Reimbursement of Expenses.  

 

(a) Compensation. For all services rendered by Employee as Vice President, Human Resources and Information Technology during his employment under this Agreement, the Company shall pay Employee as compensation a base salary at a rate of not less than $280,000.00 per annum. All taxes and governmentally required withholding shall be deducted in conformity with applicable laws.

 

(b) Reimbursement of Expenses. The Company shall pay or reimburse Employee for all reasonable travel and other expenses incurred by Employee in performing his obligations under this Agreement in a manner consistent with past Company practice. The Company further agrees to furnish Employee with such assistance and accommodations as shall be suitable to the character of Employee’s position with the Company, adequate for the performance of his duties and consistent with past Company practice.

 

5. Participation in Benefit Plans. The payments provided in Section 4 hereof are in addition to benefits Employee is entitled to under any group hospitalization, health, dental care, disability insurance, surety bond, death benefit plan, travel and/or accident insurance, other allowance and/or executive compensation plan, including, without limitation, any senior staff incentive plan, capital accumulation programs, restricted or non-restricted share purchase plan, share option plan, retirement income or pension plan or other present or future group employee benefit plan or program of the Company for which key executives are or shall become eligible, and Employee shall be eligible to receive during the period of his employment under this Agreement, all benefits and emoluments for which key executives are eligible under every such plan or program to the extent permissible under the general terms and provisions of such plans or programs and in accordance with the provisions thereof.  

 

6. Payments to Employee Upon Termination of Employment.  

 

(a) Termination. Upon the occurrence of an event of termination (as hereinafter defined) during the period of Employee’s employment under this Agreement, the provisions of this paragraph 6(a) and paragraph 6(b) shall apply. As used in this Agreement, an “event of termination” shall mean and include any one or more of the following:  

 

(i) The termination by the Company of Employee’s employment hereunder for any reason other than pursuant to paragraph 6(c) and shall include any termination of the Employee’s employment upon expiration of the term of this

 

  

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Agreement due to the Company giving written notice of its intention not to extend the term of this Agreement as provided in paragraph 3(a); or  

 

(ii) Employee’s resignation from the Company’s employ for Good Reason in accordance with the terms hereof.  “Good Reason” shall mean, unless remedied by the Company within thirty (30) days after the receipt of written notice from the Employee as provided below or consented to in writing by the Employee, (A) the material diminution of any material duties or responsibilities of the Employee; or (B) a material reduction in the Employee's base salary; provided, however, that the Employee must have given written notice to the Company of the existence of any such condition within ninety (90) days after the initial existence thereof (and the failure to provide such timely notice will constitute a waiver of the Employee’s ability to terminate employment for Good Reason as a result of such condition), and the Company will have a period of thirty (30) days from receipt of such written notice during which it may remedy the condition; provided further, however, that any termination of employment by the Employee for Good Reason must occur not later than one hundred eighty (180) days following the initial existence of the condition giving rise to such Good Reason.

 

(b) Severance Pay and Other Benefits.   The following provisions of this Section 6(b) shall apply upon the occurrence of an event of termination under paragraph 6(a).

 

(i) Cash Severance Pay.  Upon the occurrence of an event of termination under paragraph 6(a), the Company shall, subject to the provisions of Section 7 below, pay Employee, or in the event of his subsequent death, his beneficiary or beneficiaries of his estate, as the case may be, as severance pay or liquidated damages, or both, (A) a severance payment in an amount equal to 0.75 times the Employee’s annual base salary as in effect immediately prior to the termination, and (B) a severance payment equal to the sum of (1) 0.75 times the Employee’s annual target bonus as in effect for the fiscal year in which the termination occurs, and (2) an amount equal to a pro-rated portion of the Employee’s annual target bonus as in effect for the fiscal year in which the termination occurs calculated by multiplying the annual target bonus by a fraction, the numerator of which shall be the number of calendar months (including a portion of any such month) that the Employee was employed with the Company prior to the occurrence of the termination during such fiscal year, and the denominator of which shall be 12.  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 other 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, except in those circumstances where the provisions of the Amended and Restated Change of Control Severance Agreement, effective as of December 30, 2008, between Employee and XOMA Ltd., by such agreement’s express terms, apply, in which case the provisions of such agreement providing for severance payment(s) to Employee as a result of such termination shall apply in lieu of the provisions of this Agreement relating thereto.  The severance payment described in Section 6(b)(i)(A) shall be paid in monthly installments over

 

  

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nine (9) 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 6(b)(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 6(b)(iii) and Section 6(b)(v) below.

 

(ii) Group Health Coverage and Certain Other Benefits.  In addition, during a period of nine (9) months following an event of termination under paragraph 6(a), (A) the Company shall 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 (the “Code”); 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 nine (9) month period in this Section 6(b)(ii) upon the employment of the Employment by another employer.  Furthermore, if, at the time of the termination of Employee’s employment under paragraph 6(a), 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 nine (9) 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 nine (9) 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

 

  

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(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 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 9(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) Outplacement Program.  Upon the occurrence of an event of termination under paragraph 6(a), the Employee will immediately become entitled to participate in a six (6) month executive outplacement program provided by an executive outplacement service, at the Company’s expense not to exceed eight thousand dollars ($8,000).

 

(v) Release of Claims.  As a condition of entering into this Agreement and receiving the severance benefits under this Section 6(b), the Employee agrees to execute, on or before the date that is fifty (50) days following the date of termination, and not revoke a release of claims agreement substantially in the form attached hereto as Exhibit A upon the termination of the Employee’s employment with the Company.  Such release shall not, however, apply to the rights and claims of the Employee under this Agreement, any indemnification agreement between the Employee and XOMA Ltd. (or its successor or acquirer), the bye-laws of XOMA Ltd. (or its successor or acquirer), the share award agreements between the Employee and XOMA Ltd. (or its successor or acquirer), or any employee benefit plan of which the Employee is a participant and under which all benefits due under such plan have not yet been paid or provided.

 

(c) Other Termination of Employment. Notwithstanding paragraphs 6(a) and (b) or any other provision of this Agreement to the contrary, if on or after the date of this Agreement and prior to the end of the term hereof:

 

(i)  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;

 

  

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(ii) Employee shall act or refrain from acting in respect of any of the duties and responsibilities which have been assigned to him in accordance with this Agreement and shall fail to desist from such action or inaction within thirty (30)  days after Employee’s receipt of notice from the Company of such action or inaction and the Board of Directors determines that such action or inaction constituted gross negligence or a willful act of malfeasance or misfeasance of Employee in respect of such duties; or

 

(iii) Employee shall breach any material term of this Agreement and shall fail to correct such breach within thirty (30) days after Employee’s receipt of notice from the Company of such breach (provided such breach can be cured);  

 

then, and in each such case, the Company shall have the right to give notice of termination of Employee’s services hereunder (or pay Employee in lieu of notice) as of a date (not earlier than fourteen (14) days from such notice) to be specified in such notice and this Agreement (other than the provisions of Section 7 hereof) shall terminate on such date.  

 

7. Post-Termination Obligations. All payments and benefits to Employee under this Agreement shall be subject to Employee’s compliance with the following provisions during the term of his employment and for the Severance Payment Period:  

 

(a) Confidential Information and Competitive Conduct. Employee shall not, to the detriment of the Company, 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 Employee confirms that such information constitutes the exclusive property of the Company. Employee shall not otherwise act or conduct 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 twelve (12) months following an event of termination under paragraph 6(a), 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 Employee’s ownership of less than five percent (5%) of the outstanding stock of a corporation shall not be itself be deemed to constitute such competition. Employee recognizes that the possible restrictions on his activities which may occur as a result of his performance of his obligations under this paragraph 7(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-Disparagement.  The Employee and the Company agree to refrain from any defamation, libel or slander of the other and its respective officers, directors, employees, representatives, investors, shareholders, administrators, affiliates, divisions,

 

  

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subsidiaries, predecessor and successor corporations and assigns or tortious interference with the contracts and relationships of the other and its respective officers, directors, employees, representatives, investors, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations and assigns.  

 

(c) Failure of Employee to Comply. If, for any reason other than death or disability, Employee shall, without written consent of the Company, fail to comply with the provisions of paragraphs 7(a) or 7(b) above, his rights to any future payments or other benefits hereunder shall terminate, and the Company’s obligations to make such payments and provide such benefits shall cease.  

 

(d) Remedies. Employee agrees that monetary damages would not be adequate compensation for any loss incurred by the Company by reason of a breach of the provisions of this Section 7 and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.  

 

8. Effect of Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreements between the Company and Employee, but shall not supersede the Change of Control Severance Agreement referred to above, any indemnification agreement between the Employee and XOMA Ltd. (or its successor or acquirer), the share award agreements between the Employee and XOMA Ltd. (or its successor or acquirer), or any employee benefit plan of which the Employee is a participant and under which all benefits due under such plan have not yet been paid or provided.  

 

9. General Provisions.  

 

(a) Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of, Employee and the Company and their respective permitted successors and assigns.  

 

(b) Legal Expenses. In the event that Employee incurs legal expenses in contesting any provision of this Agreement and such contest results in a determination that the Company has breached any of its obligations hereunder, Employee shall be reimbursed by the Company for such legal expenses.

 

(c) Compliance with Section 409A of the Code.

 

(i)           It is intended that this Agreement will comply with Section 409A of the Code and any regulations and guidelines promulgated thereunder (collectively, “Section 409A”), to the extent the Agreement is subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent.  If an amendment of the Agreement is necessary in order for it to comply with Section 409A of the Code, the parties hereto will negotiate in good faith to amend the Agreement in a manner that preserves the original intent of the parties to the extent reasonably possible.  No action or failure to act pursuant to this Section 9(c) shall subject the Company to any claim, liability, or expense, and the Company shall not have any obligation to indemnify or otherwise protect the Employee from the obligation to pay any taxes, interest or penalties pursuant to Section 409A of the Code.

 

  

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(ii)           With respect to any reimbursement or in-kind benefit arrangements of the Company and its subsidiaries that constitute deferred compensation for purposes of Section 409A, except as otherwise permitted by Section 409A, the following conditions shall be applicable: (A) the amount eligible for reimbursement, or in-kind benefits provided, under any such arrangement in one calendar year may not affect the amount eligible for reimbursement, or in-kind benefits to be provided, under such arrangement in any other calendar year (except that the health and dental plans may impose a limit on the amount that may be reimbursed or paid), (B) any reimbursement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (C) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days after termination of employment”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  Whenever payments under this Agreement are to be made in installments, each such installment shall be deemed to be a separate payment for purposes of Section 409A.

 

10. Successors and Assigns.  

 

(a) Assignment by the Company. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company and, unless clearly inapplicable, reference herein to the Company shall be deemed to include its successors and assigns.  

 

(b) Assignment by Employee. Employee may not assign this Agreement in whole or in part.  

 

11. Modification and Waiver.  

 

(a) Amendment of Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.  

 

(b) Waiver. No term or condition of this Agreement shall be deemed to have been waived except by written instrument of the party charged with such waiver. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived.  

 

12. Severability. In the event any provision of this Agreement or any part hereof is held invalid, such invalidity shall not affect any remaining part of such provision or any other provision. If any court construes any provision of this Agreement to be illegal, void or unenforceable because of the duration or the area or matter covered thereby, such court shall reduce the duration, area or matter of such provision, and, in its reduced form, such provision shall then be enforceable and shall be enforced.  

 

13. Governing Law. This Agreement has been executed and delivered in the State of California, and its validity interpretation, performance, and enforcement shall be governed by the laws of said State.

 

  

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IN WITNESS WHEREOF, XOMA has caused this Agreement to be executed by its duly authorized officer, and Employee has signed this Agreement, all as of the day and year first above written.  

 

	
XOMA (US) LLC

 

 

	
/s/ Steven Engle

	
By:   Steven Engle

         Chairman of the Board, Chief

         Executive Officer and President

 

 

	
/s/ Charles C. Wells

Charles C. Wells

  

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EXHIBIT A

 

FORM RELEASE OF CLAIMS AGREEMENT

 

 

This Release of Claims Agreement (this “Agreement”) is made and entered into by and between XOMA (US) LLC (the “Company”) and Charles C. Wells (the “Employee”).

 

WHEREAS, the Employee was employed by the Company; and

 

WHEREAS, the Company and the Employee have entered into an employment agreement effective as of December 30, 2008 (the “Employment Agreement”).

 

NOW THEREFORE, in consideration of the mutual promises made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Employee (collectively referred to as the “Parties”) desiring to be legally bound do hereby agree as follows:

 

1. Termination.  The Employee’s employment with the Company terminated on ___________, 20__.

 

2. Consideration.  Subject to and in consideration of the Employee’s release of claims as provided herein, the Company has agreed to pay the Employee certain benefits and the Employee has agreed to provide certain benefits to the Company, both as set forth in the Employment Agreement.

 

3. Release of Claims.  The Employee agrees that the foregoing consideration represents settlement in full of all currently outstanding obligations owed to the Employee by the Company.  The Employee, on the Employee’s own behalf and the Employee’s respective heirs, family members, executors and assigns, hereby fully and forever releases the Company and its past, present and future officers, agents, directors, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, parents, predecessor and successor corporations, and assigns, from, and agrees not to sue or otherwise institute or cause to be instituted any legal or administrative proceedings concerning any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that the Employee may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date (as defined below) of this Agreement including, without limitation:

 

(a) any and all claims relating to or arising from the Employee’s employment relationship with the Company and the termination of that relationship;

 

(b) any and all claims relating to, or arising from, the Employee’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law and securities fraud under any state or federal law;

 

(c) any and all claims for wrongful discharge of employment, termination in violation of public policy, discrimination, breach of contract (both express and implied), breach of a covenant of good faith and fair dealing (both express and implied), promissory estoppel,

  

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negligent or intentional infliction of emotional distress, negligent or intentional misrepresentation, negligent or intentional interference with contract or prospective economic advantage, unfair business practices, defamation, libel, slander, negligence, personal injury, assault, battery, invasion of privacy, false imprisonment and conversion;

 

(d) any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, The Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, and Labor Code Section 201, et seq. and Section 970, et seq. and all amendments to each such Act as well as the regulations issued thereunder;

 

(e) any and all claims for violation of the federal or any state constitution;

 

(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and

 

(g) any and all claims for attorneys’ fees and costs.

 

The Employee agrees that the release set forth in this Section 4 shall be and remain in effect in all respects as a complete general release as to the matters released.  Notwithstanding the foregoing, this release does not extend to any obligations now or subsequently incurred under this Agreement, the Employment Agreement, the Indemnification Agreement between the Employee and the Company (or its successor or acquirer), the outstanding stock award agreements between the Employee and the Company (or its successor or acquirer), or any employee benefit plan of which the Employee is a participant and under which all benefits due under such plan have not yet been paid or provided.

 

4. Acknowledgment of Waiver of Claims under ADEA.  The Employee acknowledges that the Employee is waiving and releasing any rights the Employee may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary.  The Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement.  The Employee acknowledges that the consideration given for this waiver and release agreement is in addition to anything of value to which the Employee was already entitled.  The Employee further acknowledges that the Employee has been advised by this writing that (a) the Employee should consult with an attorney prior to executing this Agreement; (b) the Employee has at least twenty-one (21) days within which to consider this Agreement; (c) the Employee has seven (7) days following the execution of this Agreement by the Parties to revoke the Agreement; and (d) this Agreement shall not be effective until the revocation period has expired.  Any revocation should be in writing and delivered to the Company by the close of business on the seventh (7th) day from the date that the Employee signs this Agreement.

  

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5. Civil Code Section 1542.  The Employee represents that the Employee is not aware of any claims against the Company other than the claims that are released by this Agreement.  The Employee acknowledges that the Employee has been advised by legal counsel and is familiar with the provisions of California Civil Code Section 1542, which provides as follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HER OR HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HER OR HIM MUST HAVE MATERIALLY AFFECTED HER OR HIS SETTLEMENT WITH THE DEBTOR.

 

The Employee, being aware of said code section, agrees to expressly waive any rights the Employee may have thereunder, as well as under any other statute or common law principles of similar effect.

 

6. No Pending or Future Lawsuits.  The Employee represents that the Employee has no lawsuits, claims or actions pending in the Employee’s name, or on behalf of any other person or entity, against the Company or any other person or entity referred to herein.  The Employee also represents that the Employee does not intend to bring any claims on the Employee’s own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein except, if necessary, with respect to the agreements listed in the last sentence of Section 4 of this Agreement.

 

7. Confidentiality.  The Employee agrees to use the Employee’s best efforts to maintain in confidence the existence of this Agreement, the contents and terms of this Agreement, and the consideration for this Agreement (hereinafter collectively referred to as “Release Information”).  The Employee agrees to take every reasonable precaution to prevent disclosure of any Release Information to third parties and agrees that there will be no publicity, directly or indirectly, concerning any Release Information.  The Employee agrees to take every precaution to disclose Release Information only to those attorneys, accountants, governmental entities and family members who have a reasonable need to know of such Release Information.

 

8. No Adverse Cooperation.  The Employee agrees the Employee will not act in any manner that might damage the business of the Company.  The Employee agrees that the Employee will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges or complaints by any third party against the Company and/or any officer, director, employee, agent, representative, shareholder or attorney of the Company, unless compelled under a subpoena or other court order to do so.

 

9. Costs.  The Parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Agreement.

 

10. Authority.  The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement.  The Employee represents and warrants that the

  

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Employee has the capacity to act on the Employee’s own behalf and on behalf of all who might claim through the Employee to bind them to the terms and conditions of this Agreement.

 

11. No Representations.  The Employee represents that the Employee has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement.  Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

 

12. Severability.  In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

 

13. Entire Agreement.  This Agreement and the Employment Agreement and the agreements and plans referenced therein represent the entire agreement and understanding between the Company and the Employee concerning the Employee’s separation from the Company, and supersede and replace any and all prior agreements and understandings concerning the Employee’s relationship with the Company and the Employee’s compensation by the Company.  This Agreement may only be amended in writing signed by the Employee and an executive officer of the Company.

 

14. Governing Law.  This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of the State of California.

 

15. Effective Date.  This Agreement is effective eight (8) days after it has been signed by the Parties (the “Effective Date”) unless it is revoked by the Employee within seven (7) days of the execution of this Agreement by the Employee.

 

16. Counterparts.  This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

 

17. Voluntary Execution of Agreement.  This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims.  The Parties acknowledge that:

 

(a) they have read this Agreement;

 

(b) they have been represented in the preparation, negotiation and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

 

(c) they understand the terms and consequences of this Agreement and of the releases it contains; and

 

(d) they are fully aware of the legal and binding effect of this Agreement.

  

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

 

	
XOMA (US) LLC

 

 

	
By:           __________________

	
Title:        __________________

	
Date:        __________________

 

 

	
EMPLOYEE

 

 

	
________________________

	
Charles C. Wells

 

	
Date:        __________________

  

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Exhibit 10.1

 

XOMA LTD.

 

1981 SHARE OPTION PLAN

 

(As Amended and Restated Through

July 21, 2010)

 

1.           PURPOSE OF THE PLAN

 

The 1981 Share Option Plan ("Plan") is intended to promote the interests of XOMA Ltd. (the "Company") by providing (i) those key employees of the Company and its subsidiaries who are primarily responsible for the management, growth and financial success of the Company or its subsidiaries and (ii) those consultants who provide valuable services to the Company or its subsidiaries, with the opportunity to acquire a proprietary interest, or increase their proprietary interest, in the Company and thereby encourage such individuals to remain in the employ or service of the Company or its subsidiaries.

 

2.           ADMINISTRATION OF THE PLAN

 

(a)           The Plan shall be administered by the Company's Board of Directors (the "Board").  The Board, however, may at any time appoint a committee ("Committee") of two (2) or more "non-employee directors" (within the meaning of Rule 16b-3(b)(3) of the Securities and Exchange Commission as amended  October 30, 1996 or any successor provision thereto) to administer one or more provisions of the Plan, including the option grant, option surrender and option acceleration provisions, or to provide recommendations to the Board with respect to the Board's administration of those provisions.  It is also intended that the non-employee directors shall also be "outside directors" (within the meaning of Section 162(m) of the Internal Revenue Code).  However, the mere fact that a Committee member shall fail to qualify as a non-employee director or an outside director shall not invalidate any options granted by the Committee which are otherwise validly made under the Plan.  Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time.

 

(b)           The Plan Administrator (either the Board or the Committee, to the extent the Committee has been delegated responsibility for the administration of the Plan) shall have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for the proper administration of the Plan and to make such determinations under, and issue such interpretations of, the Plan and any outstanding option as it may deem necessary or advisable.  Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan or any outstanding option.

 

3.           ELIGIBILITY FOR OPTION GRANTS

 

(a)           Key employees (including officers and directors) of the Company (or its subsidiaries) and consultants (other than non-employee directors) who provide valuable services to the Company (or its subsidiaries) are eligible to receive options under the Plan.  Directors who

 

  

  

  

are not employees of the Company (or its subsidiaries) are not eligible to receive such options or to participate otherwise in the Plan.

(b)           The Committee, or the Board if no Committee is appointed pursuant to subsection 2(a), shall have full authority to determine the number of shares to be covered by each option grant, the time or times at which each granted option is to become exercisable, the maximum term for which the option may remain outstanding and whether the granted option is to be an incentive share option ("Incentive Option") which satisfies the requirements of Section 422A of the Internal Revenue Code or a non-statutory option not intended to meet such requirements.

 

(c)           For the purposes of the Plan, each corporation (other than the Company) in an unbroken chain of corporations beginning with the Company will be considered to be a subsidiary of the Company, provided each such corporation other than the last corporation in the unbroken chain owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

4.           SHARES SUBJECT TO THE PLAN

 

(a)           The shares issuable under the Plan shall be shares of the Company's authorized but unissued common shares ("Common Share(s)").  The maximum number of shares issuable over the term of the Plan shall not exceed 37,300,000 shares, subject to adjustment as provided in Section 4(c).  The maximum number of Common Shares authorized for issuance under the Plan shall, however, be reduced, on a one-for-one basis, for each Common Share issued under the Company's Restricted Share Plan (the "Share Plan").

 

For any one individual, the number of shares for which options or share appreciation rights may be granted under the Plan, beginning October 30, 1996 and ending at the expiration of the term of the Plan, may not exceed 7,000,000.

 

(b)           Should an option be terminated for any reason prior to exercise or surrender in full, the shares subject to the portion of the option not so exercised or surrendered shall be available for subsequent option grant under the Plan or for subsequent option grant or share issuance under the Share Plan.  Shares subject to an option (or portion of an option) surrendered in accordance with Section 7 of the Plan and shares repurchased by the Company pursuant to its repurchase rights under the Plan shall not be available for subsequent reissue under either this Plan or the Share Plan.

 

(c)           If any change is made to the Common Shares issuable under the Plan by reason of any share dividend, share split, combination of shares, recapitalization, or other change affecting the outstanding Common Shares as a class without receipt of consideration, then appropriate adjustments will be made to (i) the maximum number of shares issuable under the Plan and (ii) the number and/or class of shares and the option price per Common Share subject to each outstanding option in order to prevent the dilution or enlargement of benefits thereunder.  The adjustments determined by the Plan Administrator will be final, binding and conclusive.

 

  

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(d)           Common Shares issuable upon exercise of an option granted under the Plan may be subject to such restrictions on transfer, repurchase rights or other restrictions as are determined by the Plan Administrator.

 

5.           TERMS AND CONDITIONS OF OPTIONS

 

Each option granted under the Plan shall be evidenced by a share option agreement that complies with (or incorporates) each of the terms and conditions of this Section 5 and identifies such option as either an Incentive Option or non-statutory option.  Individuals who are not employees of the Company or its subsidiaries may only be granted non-statutory options.  Each instrument evidencing an Incentive Option shall, in addition, comply with the applicable provisions of Section 6.

 

(a)           Option Price.

 

(1)           Subject to the provisions of subsection (a)(2) below, the option price per share will be fixed by the Plan Administrator but in no event shall it be less than one hundred percent (100%) of the fair market value per Common Share on the date of the option grant.

 

(2)           If the individual to whom an Incentive Option or a non-statutory option is granted is at such time the owner of shares (as determined under Section 425(d) of the Internal Revenue Code) possessing 10% or more of the total combined voting power of all classes of shares of the Company or any one of its subsidiary corporations (such person to be herein referred to as a "10% Shareholder"), then the option price per share shall not be less than one hundred ten percent (110%) of the fair market value per Common Share on the grant date.

 

(3)           The option price shall become immediately due upon exercise of the option and, subject to the provisions of Section 10, shall be payable in one of the following alternative forms specified below (as determined by the Plan Administrator and set forth in the instrument evidencing the grant):

 

(A)           Full payment in cash or cash equivalents; or

 

(B)           Full payment in Common Shares valued at fair market value on the Exercise Date (as such term is defined below) in an amount equal to the option price; or

 

(C)           Full payment in a combination of Common Shares valued at fair market value on the Exercise Date and cash or cash equivalents, equal in the aggregate to the option price; or

 

(D)           Payment effected through a broker-dealer sale and remittance procedure pursuant to which the optionee (I) shall provide irrevocable written instructions to the designated broker-dealer to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds, an amount equal to the

 

  

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aggregate option price payable for the purchased shares plus all applicable Federal and State income and employment taxes required to be withheld by the Company by reason of such purchase and (II) shall provide written directives to the Company to deliver the certificates for the purchased shares directly to such broker-dealer.

 

For purposes of this subsection (a)(3), the Exercise Date is the date on which written notice of the exercise of the option is given to the Company.  Except to the extent the sale and remittance procedure of clause (D) above is utilized, payment of the option price for the purchased shares shall accompany such notice.

 

(4)           For purposes of subsections (1), (2) and (3) above (and for all other valuation purposes under the Plan), the fair market value per Common Share shall be determined in accordance with the following provisions:

 

(A)           If the Common  Shares are not at the time listed or admitted to trading on any stock exchange but is traded in the over-the-counter market, the fair market value shall be the closing selling price per Common Share on the date in question, as such price is reported by the National Association of Securities Dealers through its Nasdaq National Market or any successor system.  If there is no reported closing selling price for Common Shares on the date in question, then the closing selling price on the last preceding date for which such quotation exists shall be determinative of fair market value.

 

(B)           If the Common Shares are at the time listed or admitted to trading on any stock exchange, then the fair market value shall be the closing selling price per Common Share on the date in question on the stock exchange determined by the Plan Administrator to be the primary market for the Common Shares, as such price is officially quoted on such exchange.  If there is no reported sale of Common Shares on such exchange on the date in question, then the fair market value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists.

 

(C)           If the Common Shares are at the time neither listed nor admitted to trading on any stock exchange nor traded in the over-the-counter market (or if the Plan Administrator determines that the value as determined pursuant to subsection (A) or (B) above does not reflect fair market value), then the Plan Administrator shall determine fair market value after taking into account such factors as it deems appropriate, including one or more independent professional appraisals.

 

(b)           Term and Exercise of Options; Transferability.  Each option granted under the Plan shall be exercisable at such time or times and during such period as is determined by the Plan Administrator and set forth in the share option agreement evidencing such option; provided, however, that no option granted under the Plan shall have a term in excess of ten (10) years from its date of grant.

 

  

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Options (other than Incentive Options) may in the discretion of the Plan Administrator, be granted on terms which permit their transfer or assignment to the spouse of the optionee or a descendent of the optionee (any such spouse or descendent, an "Immediate Family Member") or a corporation, partnership, limited liability company or trust so long as all of the shareholders, partners, members or beneficiaries thereof, as the case may be, are either the optionee or an Immediate Family Member of the optionee, provided that (i) there may be no consideration for any such transfer, (ii) the share option agreement pursuant to which such options are granted must expressly provide for transferability in a manner consistent with the foregoing, and (iii) subsequent transfers of transferred options will be prohibited other than by will or the laws of descent and distribution.  Following transfer, any such options will continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of the option agreement the term "optionee" will refer to the transferee.  The events of termination of employment will continue to be applied with respect to the original optionee, following which the options will be exercisable by the transferee only to the extent, and for the periods specified, in the option agreement.  With respect to Incentive Options, the option shall be exercisable during the lifetime of the optionee only by the optionee and shall not be assignable or transferable by the optionee otherwise than by will or by the laws of descent and distribution.

 

(c)           Investment Purpose.  If necessary or advisable to comply with applicable federal or state securities laws, any option granted under the Plan may be granted on the condition that the optionee agree that the Common Shares purchased thereunder are for investment purposes only and not for resale or distribution and that such shares shall be disposed of only in accordance with such laws.  As a condition to issuance of any shares purchased upon the exercise of any option granted pursuant to the Plan, the optionee, his executor, administrator, heir, legatee or transferee (as the case may be) receiving such shares may be required to deliver to the Company an instrument, in form and substance satisfactory to the Company and its counsel, implementing such agreement.  Any such condition may be eliminated by the Plan Administrator if the Plan Administrator determines it is no longer necessary or advisable.

 

(d)           Effect of Termination of Employment.

 

(1)           Termination Generally.  Should an optionee cease to be an employee of the Company while the holder of one or more outstanding options granted to such optionee under the Plan for any reason other than as provided under subsections (2), (3) or (4) below, then such option or options shall not remain exercisable (except as otherwise specifically authorized under Section 11) for more than a twelve (12) month period (or such shorter period as is determined by the Plan Administrator and set forth in the option agreement) following the date of such cessation of employee status, and each such option shall, during such twelve (12) month or shorter period, be exercisable only to the extent of the number of shares (if any) for which the option is exercisable on the date of such cessation of employee status.  Under no circumstances, however, shall any such option be exercisable after the specified expiration date of the option term.  Upon the expiration of such twelve (12) month or shorter period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be exercisable.

 

  

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(2)           Termination on Death.  Should an optionee cease to be an employee of the Company while the holder of one or more outstanding options under the Plan by reason of death, then such option or options shall become fully exercisable on the date of death even if such options were not fully exercisable prior to death, and shall remain exercisable for a twelve (12) month period following the date of death.  Under no circumstances, however, shall any such option be exercisable after the specified expiration date of the option term.  Upon the expiration of such twelve (12) month period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be exercisable.  In the case of any option granted to an optionee under the Plan and exercisable following the optionee's death, such options shall be exercisable by the personal representative of the optionee's estate or by the person or persons to whom the option is transferred pursuant to subsection (b) above, provided such exercise occurs prior to the earlier of (i) the expiration of a twelve (12) month period following the date of the optionee's death or (ii) the specified expiration date of the option term.

 

(3)           Termination on Retirement.  Should an optionee cease to be an employee of the Company while the holder of one or more outstanding options under the Plan by reason of retirement at or after age fifty-five (55) and where the optionee’s age plus years of full-time employment with the Company exceed seventy (70) ("Retirement"), then such option or options shall become fully exercisable as of the date of Retirement (even if such options were not fully exercisable prior to Retirement) and shall remain exercisable for the full option term as if the optionee had continued in employment.  Upon the expiration of the option term, the option shall terminate and cease to be exercisable.

 

(4)           Termination for Cause or Unauthorized Disclosure.  If (i) the optionee's status as an employee is terminated for cause (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement or any unauthorized disclosure or use of confidential information or trade secrets) or (ii) the optionee makes or attempts to make any unauthorized use or disclosure of confidential information or trade secrets of the Company or its subsidiaries, then upon the occurrence of any such event all outstanding options granted the optionee under the Plan shall immediately terminate and cease to be exercisable.

 

(5)           Discretion to Accelerate Exercisability. Notwithstanding subsection (1) above, the Plan Administrator shall have the discretion to establish as a provision applicable to the exercise of one or more options granted under the Plan that during the period of exercisability following cessation of employee status (as provided in such subsections), the option may be exercised not only with respect to the number of shares for which it is exercisable at the time of the optionee's cessation of employee status but also with respect to one or more installments of purchasable shares for which the option otherwise would have become exercisable had such cessation of employee status not occurred.

 

  

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(6)           Employment by Company or Subsidiary.  For purposes of the foregoing provisions of this Section 5(d), the optionee shall be deemed to be an employee of the Company for so long as the optionee remains in the employ of the Company or one or more of its subsidiaries.

 

(7)           Consultant.  If the option is granted to a consultant or other independent contractor, then the instrument evidencing the granted option shall include provisions comparable to subsections (1), (2), (3) and (4) above, and may include provisions comparable to subsection (5) above, with respect to the optionee's termination of service with the Company or its subsidiaries.

 

(e)           Shareholder Rights.  An option holder shall have no shareholder rights with respect to any shares covered by the option until such option holder has exercised the option, paid the option price and been issued the purchased shares.

 

(f)           Repurchase Rights.  The Common Shares acquired upon the exercise of options granted under the Plan may be subject to one or more repurchase rights of the Company in accordance with the following provisions:

 

(1)           The Plan Administrator may in its discretion determine that it shall be a term and condition of one or more options granted under the Plan that the Company (or its assigns) shall have the right, exercisable upon the optionee's cessation of employee status or service, to repurchase at the original option price any or all unvested Common Shares at the time held by such individual under the Plan.  Any such repurchase right shall be exercisable by the Company (or its assigns) upon such terms and conditions (including the establishment of the appropriate vesting schedule and other provisions for the expiration of such right in one or more installments) as the Plan Administrator may specify in the instrument evidencing such right.

 

(2)           The Plan Administrator shall also have full power and authority to provide for the automatic termination of the Company's outstanding repurchase rights, in whole and in part, and thereby accelerate the vesting of any or all purchased shares, upon the occurrence of any Corporate Transaction specified in Section 8.

 

6.           SPECIAL LIMITATIONS ON INCENTIVE OPTIONS

 

The terms and conditions specified below shall be applicable to all Incentive Options granted under the Plan.  Options which are specifically designated as "non-statutory" options when issued under the Plan shall not be subject to such terms and conditions:

 

(a)           Dollar Limitations on Incentive Options Granted After December 31, 1986.  The aggregate fair market value (determined as of the respective date or dates of grant) of the Common Shares for which one or more options granted after December 31, 1986 to any employee under the Plan (or any other option plan of the Company or its parent or subsidiaries) may for the first time become exercisable as incentive share options under the Federal tax laws during any one post-1986 calendar year shall not exceed the sum of One Hundred Thousand

 

  

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Dollars ($100,000).  To the extent the employee holds two or more such post-1986 options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability thereof as incentive share options under the Federal tax laws shall be applied on the basis of the order in which such options are granted.

 

(b)           10% Shareholder.  If the individual to whom the Incentive Option is granted is a 10% Shareholder (as defined in Section 5(a)(2) above), then the option shall not have a term in excess of five (5) years from such grant date.

 

Except as modified by the preceding provision of this Section 6, all the provisions of the Plan shall be applicable to the Incentive Options granted hereunder.

 

7.  SHARE APPRECIATION RIGHTS

 

(a)           One or more option holders may, upon such terms and conditions as the Plan Administrator may establish at the time of the option grant or at any time thereafter, be granted the right to surrender all or part of an unexercised option in exchange for a distribution from the Company in an amount equal to the excess of (i) the fair market value (at date of surrender) of the number of shares in which the optionee is at the time vested under the surrendered option or portion thereof over (ii) the aggregate option price payable for such vested shares.  No surrender of an option, however, shall be effective unless it is approved by the Plan Administrator.  If the surrender is so approved, then the distribution to which the option holder shall accordingly become entitled under this Section 7 may be made in Common Shares valued at fair market value at date of surrender, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate.

 

(b)           If the surrender of an option is rejected by the Plan Administrator, then the option holder shall retain whatever rights the option holder had under the surrendered option (or surrendered portion thereof) on the date of surrender and may exercise such rights at any time prior to the later of (i) the expiration of the 5 business-day period following receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance with the terms of the instrument evidencing such option, but in no event may such rights be exercised at any time after ten (10) years (or five (5) years in the case of a 10% Shareholder) after the date of the option grant.

 

(c)           Notwithstanding the foregoing provisions of this Section 7, should twenty-five percent (25%) or more of the Company's outstanding voting shares be acquired pursuant to a tender or exchange offer (i) which is made by a person or group of related persons other than the Company or a person that directly or indirectly controls, is controlled by or is under common control with the Company and (ii) which the Board does not recommend the Company's shareholders to accept, then each officer or director who is at the time subject to the short-swing profit restrictions of the Federal securities laws shall have the right (exercisable for a period not to exceed thirty (30) days) to surrender any or all options held by such individual under the Plan, to the extent such options are at the time exercisable for vested shares, and receive in exchange

 

  

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therefor an appreciation distribution from the Company calculated in accordance with Section 7(a).  The approval of the Plan Administrator shall not be required for such surrender, and the distribution to which such individual shall become entitled upon such surrender shall be made entirely in cash.

 

8.           SALE, MERGER, REORGANIZATION, ETC.

 

(a)           In the event of one or more of the following transactions (“Corporate Transaction”):

 

(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 incorporation;

 

(ii)           the sale, transfer or other disposition of all or substantially all of the assets of the Company; or

 

(iii)           any other business combination in which fifty percent (50%) or more of the Company’s outstanding voting shares is transferred to different holders in a single transaction or a series of related transactions,

 

then each option at the time outstanding under the Plan and not then otherwise fully exercisable shall, immediately prior to the specified effective date for the Corporate Transaction, become fully exercisable for up to the total number of Common Shares purchasable under such option and may be exercised for all or any portion of the shares for which the option is so accelerated.  However, an outstanding option shall not be so accelerated if and to the extent such option is in connection with the Corporate Transaction either to be assumed by the successor corporation or parent thereof or to be replaced with comparable options to purchase capital stock of the successor corporation or parent thereof, such comparability to be determined by the Plan Administrator.

 

(b)           Upon the consummation of the Corporate Transaction, all outstanding options under the Plan shall, to the extent not previously exercised or assumed by the successor corporation or its parent company, terminate and cease to be exercisable.

 

(c)           If the Company is the surviving or continuing entity in any Corporate Transaction or the outstanding options under the Plan are to be assumed in connection with such Corporate Transaction, then each such continuing or assumed option shall be appropriately adjusted immediately after such Corporate Transaction to apply and pertain to the number and class of securities which would have been issuable to the optionee in consummation of the Corporate Transaction, had such option been exercised immediately prior to the effective date of such Corporate Transaction.  Appropriate adjustments shall also be made to the option price payable per share, provided the aggregate option price shall remain the same.  In addition, the class and number of securities available for issuance under the Plan following the consummation of such Corporate Transaction shall be appropriately adjusted.

 

  

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(d)           In connection with any Corporate Transaction, the exercisability as an incentive share option under the Federal tax laws of any accelerated post-1986 option shall be subject to the applicable dollar limitation of Section 6(b)(1).

 

(e)           The grant of options under the Plan shall not affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, amalgamate, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

9.           [RESERVED]

 

10.           LOANS OR GUARANTEE OF LOANS

 

The Plan Administrator may, in its discretion, assist any optionee who is a current or former employee of the Company (including an optionee who is an officer or director of the Company) in the exercise of one or more options granted to such optionee under the Plan, including the satisfaction of any Federal and State income and employment tax obligations arising therefrom, by (i) authorizing the extension of a loan from the Company to such optionee, (ii) permitting the optionee to pay the option price for the purchased Common Shares in installments over a period of years, or (iii) authorizing a guarantee by the Company of a third-party loan to the optionee.  The terms of any loan, installment method of payment or guarantee (including the interest rate and terms of repayment) shall be upon such terms as the Plan Administrator specifies in the share option agreement.  Such loans, installment payments and guarantees may be granted with or without security or collateral, but the maximum credit available to the optionee may not exceed (A) the aggregate option price for the purchased shares (less their par value, which must in all events be paid in cash) plus (B) any Federal and State income and employment tax liability incurred by the optionee in connection with such exercise.

 

11.           EXTENSION PERIODS

 

The Plan Administrator shall have full power and authority, exercisable in its sole discretion, to extend, either at the time the option is granted or at any time while the option remains outstanding, the period of time for which the option is to remain exercisable following the optionee's termination of employee status from the twelve (12) month or shorter period set forth in the option agreement to such greater period of time as the Plan Administrator shall deem appropriate; provided, however, that in no event shall such option be exercisable after the specified expiration date of the option term.

 

12.           AMENDMENT OF THE PLAN AND OPTIONS

 

(a)           The Board has complete and exclusive power and authority to amend or modify the Plan in any or all respects whatsoever; provided, however, that, except to the extent necessary to qualify any or all options under the Plan as Incentive Options, no such amendment or modification may adversely affect rights and obligations of an option holder with respect to options at the time outstanding under the Plan unless the option holder consents to such

 

  

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amendment.  In addition, the Board may not, without the approval of the Company's shareholders, amend the Plan to (i) materially increase the maximum number of shares issuable under the Plan (except for permissible adjustments under Section 4(c)), (ii) materially increase the benefits accruing to individuals who participate in the Plan, or (iii) materially modify the class of individuals eligible to receive options thereunder.

 

(b)           Options may be granted under the Plan to purchase Common Shares in excess of the number of shares then available for issuance under the Plan, provided (i) an amendment to increase the maximum number of shares issuable under the Plan is adopted by the Board prior to the initial grant of any such option and is thereafter submitted to the Company's shareholders for approval and (ii) each option so granted is not to become exercisable, in whole or in part, at any time prior to the obtaining of such shareholder approval.

 

13.           EFFECTIVE DATE AND TERM OF PLAN

 

(a)           The Plan was initially adopted by the Board on November 15, 1981 and approved by the shareholders on May 10, 1982.  The Plan was restated and amended by the Board on April 3, 1987, and such restatement was approved by the Company's shareholders on May 13, 1987.  Amendments to the restated Plan were adopted by the Board on September 20, 1988, December 16, 1988 and February 21, 1989 to increase the number of shares issuable under the Plan.  Such amendments were approved by the Company's shareholders on May 19, 1989.  The Plan was further amended and restated on March 21, 1990 and approved in 1991 to increase the number of shares issuable under the Plan and to extend the term of the Plan to March 21, 2000.  The Plan was further restated and approved in 1992 to increase the number of shares issuable under the Plan, and again in 1996 to further increase the number of shares issuable under the Plan.  The restatement of the Plan was adopted by the Board on October 30, 1996 and was approved by the Company's shareholders at the 1997 Annual Meeting.  Further amendments to the amended and restated Plan to increase the number of shares issuable under the Plan were adopted by the Board on February 25, 1998 and approved by the shareholders at the 1998 Annual Meeting.  The Plan was further amended to reflect the change of domicile from Delaware to Bermuda and the new restatement of the Plan was adopted by the Board on February 24, 1999.  Amendments to the Plan were adopted by the Board and approved by the Company’s shareholders on May 30, 2001 to increase the number of shares issuable under the Plan and to extend the term of the Plan to November 15, 2011.

 

(b)           The provisions of this restated and amended Plan shall apply only to options granted under the Plan from and after May 30, 2001.  All options issued and outstanding under the Plan immediately prior to May 30, 2001 shall continue to be governed by the terms and conditions of the Plan (and the respective instruments evidencing each such option) as in effect on the date each such option was previously granted, and nothing in this restatement shall be deemed to affect or otherwise modify the rights or obligations of the holders of such options with respect to the acquisition of Common Shares thereunder.

 

  

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(c)           Unless sooner terminated in accordance with Section 8, the Plan will terminate upon the earlier of (i) November 15, 2011 or (ii) the date on which all shares available for issuance under the Plan have been issued or cancelled pursuant to the exercise or surrender of options granted hereunder.  If the date of termination is determined under clause (i) above, then options outstanding on such date shall not be affected by the termination of the Plan and will thereafter continue to have force and effect in accordance with the provisions of the share option agreements evidencing such options.

 

14.           USE OF PROCEEDS

 

Any cash proceeds received by the Company from the sale of shares pursuant to options granted under the Plan shall be used for general corporate purposes.

 

15.           WITHHOLDING

 

The Company's obligation to deliver shares upon the exercise of any option or the surrender of any option granted under the Plan is subject to the option holder's satisfaction of all applicable Federal, State and local income and employment tax withholding requirements.

 

16.           SPECIAL TAX WITHHOLDING ELECTION

 

(a)           The Plan Administrator may, in its discretion and in accordance with the provisions of this Section 16 and such supplemental rules as the Plan Administrator may from time to time adopt, provide any or all holders of non-statutory options under the Plan with the election to have the Company withhold, from the shares purchased under each non-statutory option, one or more Common Shares having an aggregate fair market value equal to the designated percentage (any multiple of 5% up to 100% as specified by the optionee) of the Federal and State tax liability incurred in connection with the exercise of such non-statutory option.  In addition, should the optionee deliver shares acquired under the Share Plan in payment of the option price for one or more options exercised under the Plan and the Company cancel its first refusal rights with respect to the delivered shares, the shares withholding election may extend to the optionee's entire tax obligation with respect to both the taxable gain on the purchased shares and the compensation income recognized upon the cancellation of the Company's first refusal rights with respect to the delivered shares.

 

(b)           Any such withholding election made by a holder of a non-statutory option under the Plan shall be subject to the following terms and conditions:

 

(i)           The election must be made on or before the date the amount of the Federal and State withholding tax liability incurred in connection with the exercise of such non-statutory option is determined (the "Tax Determination Date").

 

(ii)           The election shall be irrevocable.

 

  

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(iii)           The election shall be subject to the approval of the Plan Administrator, and no Common Shares shall be accepted in satisfaction of the withholding taxes incurred in connection with the exercise of such option except to the extent the election is approved by the Plan Administrator.

 

(iv)           The Common Shares to be withheld pursuant to the election shall be valued on the Tax Determination Date in accordance with the valuation procedures in effect under Section 5(a)(4).

 

(v)           In no event may the optionee's requested withholding exceed the dollar amount of the Federal and State income tax liability incurred as a result of the exercise of the non-statutory option.

 

(c)           In lieu of the direct withholding provisions of subparagraph (a) above, one or more optionees may also be granted the election to deliver pre-existing Common Shares to the Company in satisfaction of the entire Federal and State tax liability incurred in connection with the exercise of his/her non-statutory shares option and delivery of any Common Shares in payment of the option price.  The delivered shares shall be valued on the Tax Determination Date in accordance with the valuation procedures in effect under Section 5(a)(4).

 

17.           REGULATORY APPROVALS

 

The implementation of the Plan, the granting of any option under the Plan, and the issuance of Common Shares upon the exercise or surrender of any such option is subject to the Company's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it, and the Common Shares issued pursuant to it.

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