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Exhibit 10.13
ALTEON INC.
CHANGE IN CONTROL
SEVERANCE BENEFITS PLAN
Effective February 27, 1996
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Exhibit 10.13
TABLE OF CONTENTS
INTRODUCTION................................................................ 1
ARTICLE I
DEFINITIONS................................................................. 1
ARTICLE II
ENTITLEMENT TO BENEFITS..................................................... 5
2.1 ELIGIBILITY REQUIREMENTS.................................. 5
2.2 LIMITATION ON ENTITLEMENT TO BENEFITS..................... 5
ARTICLE III
SEVERANCE BENEFITS UNDER THE PLAN........................................... 5
3.1 AVAILABLE SEVERANCE BENEFITS.............................. 5
3.2 CONTINUATION OF BENEFITS UPON DEATH....................... 6
3.3 LIMITATION OF SEVERANCE BENEFITS.......................... 7
ARTICLE IV
AMENDMENT OR TERMINATION OF PLAN............................................ 7
ARTICLE V
MISCELLANEOUS............................................................... 7
5.1 PLAN INTERPRETATION....................................... 7
5.2 GENDER AND NUMBER......................................... 7
5.3 UNFUNDED OBLIGATIONS...................................... 8
5.4 TRANSFERABILITY OF BENEFITS............................... 8
5.5 NO GUARANTEE OF TAX CONSEQUENCES.......................... 8
5.6 CONSTRUCTION, GOVERNING LAWS.............................. 8
5.7 SEPARABILITY.............................................. 8
5.8 EMPLOYEE'S RIGHTS......................................... 9
5.9 ACTION BY THE COMPANY..................................... 9
ARTICLE VI
ERISA PROVISIONS............................................................ 9
6.1 CLAIM FOR BENEFITS........................................ 9
6.2 NAMED FIDUCIARY........................................... 10
6.3 GENERAL FIDUCIARY RESPONSIBILITIES........................ 10
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Exhibit 10.13
ALTEON INC.
CHANGE IN CONTROL SEVERANCE BENEFITS PLAN
INTRODUCTION
Alteon Inc. ("Company") has adopted the Alteon Inc. Change in Control
Severance Benefits Plan ("Plan") effective February 27, 1996 to reward its
Employees for loyal service to the Company by providing for Severance Benefits
to Employees upon certain terminations of employment after a Change in Control
of the Company. The Board of Directors of the Company ("Board"), has determined
that the establishment of the Plan is in the best interest of the Company and
its shareholders to protect and retain qualified Employees and to encourage
their full attention and dedication to the Company, free from distractions
caused by personal uncertainties and risks related to a pending or threatened
Change in Control of the Company.
ARTICLE I
DEFINITIONS
1.1 "Acquiring Person" means any "Person" or group of "Affiliates" or
"Associates" (as those terms are defined in Rule 12b-2 of the general rules and
regulations under the Securities Exchange Act of 1934, as amended) who is or
becomes the beneficial owner, directly or indirectly, of 20% or more of the
outstanding Stock.
1.2 "Administrator" means the Committee or the individual or
individuals appointed by the Committee to carry out the administration of the
Plan. In the event the Administrator has not been appointed or resigns from a
prior appointment, the Company shall be deemed to be the Administrator. Any
procedure, discretionary act, interpretation or construction taken by the
Administrator shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent and
terms of the Plan. All determinations by the Administrator shall be final and
binding upon Employees and all other parties having an interest in this Plan.
1.3 "Base Amount" shall be an Employee's "base amount" as defined and
determined under Section 280G of the Code and applicable Regulations at the time
of an Employee's Qualifying Termination.
1.4 "Base Compensation" means one-twelfth of an Employee's gross salary
(including any amounts deferred under any Company plan or program), for the
Compensation Period which includes his or her Qualifying Termination (or Change
in Control if an Employee's Base Amount is higher during such Compensation
Period).
1.5 "Board" means the Board of Directors of the Company.
1.6 "Change in Control" means:
(a) the Company is merged with or into or consolidated with
another corporation or other entity under circumstances where the shareholders
of the Company immediately prior to such merger or consolidation do not own,
after such merger or consolidation, shares representing at least fifty percent
(50%) of the
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Exhibit 10.13
voting power of the Company or the surviving or resulting corporation or other
entity, as the case may be; or
(b) the Company is liquidated or sells or otherwise disposes
of substantially all of its assets to another corporation or entity; or
(c) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) shall become the beneficial
owner (within the meaning of Rule 13d-3 under such Act) of forty percent (40%)
or more of the Common Stock of the Company other than pursuant to a plan or
arrangement entered into by such person and the Company or otherwise approved by
the Board; or
(d) during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the entire Board of
Directors shall cease for any reason to constitute a majority of the Board
unless the election or nomination for election by the Company's shareholders of
each new director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period.
1.7 "Code" means the Internal Revenue Code of 1986, as amended.
1.8 "Committee" means the Compensation Committee of the Board or any
successor to the Committee or any other committee appointed by the Board to
perform the functions of the Committee hereunder.
1.9 "Company" means Alteon Inc. and any successor thereto.
1.10 "Compensation Period" means the twelve month period for which an
Employee's annual compensation and benefits are determined by the Company.
1.11 "Continuing Director" means any member of the Board who is not an
Acquiring Person and who was a member of the Board prior to the time when the
Acquiring Person became an Acquiring Person. "Continuing Director" includes any
successor of a Continuing Director, while the successor is a member of the
Board, who is not an Acquiring Person or a representative or nominee of an
Acquiring Person and who is recommended or elected to succeed the Continuing
Director by a majority of the Continuing Directors.
1.12 "Employee" means any individual who is employed by and regularly
performs personal services for the Company.
1.13 "Employment Group A" means the group of Employees that includes
(a) officers of the Company who serve in a position of authority equal to or
greater than that possessed by a vice president of the Company, and (b)
departmental directors.
1.14 "Employment Group B" means the group of Employees that includes
associates of the Company.
1.15 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.16 "Plan" means the Alteon Inc. Change in Control Severance Benefits
Plan, as stated herein and as amended from time to time.
1.17 "Qualifying Termination" means, within two years after a Change in
Control, termination of employment other than Termination for Cause, as defined
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Exhibit 10.13
in Section 1.21, or resignation by an Employee within 90 days after a
detrimental change in the nature or scope of his or her employment or duties.
Detrimental change shall include, without limitation, the assignment of the
Employee to any duties substantially inconsistent with his or her then current
position, duties, responsibilities or status with the Company or a substantial
reduction in such duties or responsibilities, the removal of the Employee from,
or any failure to re-elect him or her to his or her then current positions, a
reduction in base salary or other employee benefits, the failure by the Company
to continue to provide the Employee with substantially similar bonus
opportunities, the relocation of the Employee's primary office of employment to
a location more than thirty-five (35) miles from the location of such office
prior to the relocation, and substantially increased travel requirements.
Notwithstanding anything herein to the contrary, if an Employee's
employment with the Company is terminated prior to the date on which a Change in
Control occurs, and if such Employee reasonably demonstrates that his or her
termination of employment (a) was at the request of a third party who had taken
steps reasonably calculated to effect such Change in Control or (b) otherwise
arose in connection with or anticipation of such Change in Control, then,
provided such Change in Control occurs, for all purposes of this Plan, such
Employee will have incurred a "Qualifying Termination" on the date immediately
prior to the date of such termination of employment. Notwithstanding the
foregoing, "Qualifying Termination" shall not include any termination prior to a
Change in Control which is undertaken by the Company in the ordinary course of
its business or in response to an adverse change in its business, financial
condition or results of operations.
1.18 "Regulations" means the Income Tax Regulations as promulgated by
the Secretary of the Treasury or his or her delegate, as amended from time to
time.
1.19 "Severance Benefits" means benefits provided under the Plan
pursuant to Article III.
1.20 "Stock" means the Company's Common Stock.
1.21 "Termination for Cause" means:
(a) as to any Employee for whom there is then in effect an
employment agreement with the Company, the Employee's termination for cause or
as a result of death or disability, in each case as defined in and permitted by
such employment agreement; and
(b) as to any Employee for whom there is not then in effect an
employment agreement with the Company, the Employee's termination of employment
with the Company due to the Employee's:
(i) conviction for, or plea of nolo contendere to, a felony or
a crime involving moral turpitude;
(ii) commission of an act of personal dishonesty or breach of
fiduciary duty involving personal profit in connection with the Employee's
employment by the Company;
(iii) commission of an act which the Administrator shall
reasonably, in its sole discretion, have found to have involved willful
misconduct or gross negligence on the part of the Employee, in the conduct of
his or her duties;
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Exhibit 10.13
(iv) habitual absenteeism;
(v) material breach of any material provision of any agreement
between the Employee;
(vi) willful and continued failure to perform substantially
his or her duties with the Company (other than any such failure resulting from
his or her incapacity due to physical or mental illness); or
(vii) death or disability.
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Exhibit 10.13
ARTICLE II
ENTITLEMENT TO BENEFITS
2.1 ELIGIBILITY REQUIREMENTS
Each Employee is eligible for benefits upon a Qualifying Termination,
subject to Section 2.2 below. Benefits under this Plan shall be in addition to,
and not in substitution for, benefits, including, without limitation, severance
benefits and bonus payments, to which an Employee is entitled pursuant to any
agreement or understanding between the Company and the Employee.
2.2 LIMITATION ON ENTITLEMENT TO BENEFITS
Notwithstanding any other provision of this Plan, no Employee shall be
entitled to receive benefits under this Plan upon a Qualifying Termination if,
prior to the Change in Control, a majority of the Continuing Directors who are
then members of the Board of Directors of the Company approve, and do not
rescind, a resolution providing that no benefits shall be paid to terminated
Employees upon the occurrence of the Change in Control.
ARTICLE III
SEVERANCE BENEFITS UNDER THE PLAN
3.1 AVAILABLE SEVERANCE BENEFITS
Each Employee who has incurred a Qualifying Termination shall be
entitled to the following Severance Benefits, based on his or her status as a
member of Employment Group A or Employment Group B:
(a) Employment Group A. If an Employee who has incurred a
Qualifying Termination is a member of Employment Group A, the Employee shall
receive:
(1) continuation of his or her Base Compensation payable each
month for the twenty-four months following his or her date of Qualifying
Termination (or the Change in Control, if later), or, at the election of the
Employee, a lump sum payment equal to the present value as of the date of
Qualifying Termination (or the Change in Control, if later) of such payments
discounted at the rate prescribed under Section 1.280G-1 Q & A-24(c)(2) of the
Regulations;
(2) continuation of participation in all benefit programs and
plans providing for health or life insurance in which the Employee participated
and upon the same terms available either immediately prior to the Change in
Control or the date of Qualifying Termination (whichever would provide the
Employee with greater benefits) until the earlier of (a) eighteen (18) months
after his or her date of Qualifying Termination (or the Change of Control, if
later) or (b) as to any benefit program or plan, the date on which he or she is
first eligible to receive from another source a benefit program or plan
substantially similar to and no less favorable than the benefit program or plan
provided by the Company. If the terms of any benefit plan do not permit
continued participation by the Employee, then the Company will pay to the
Employee each month during the period provided in the preceding sentence the
amounts set forth in the following sentences. With respect to health insurance
the Company will pay the Employee an amount equal to the full monthly premium
paid by it for the coverage in effect for the Employee and his or her dependents
on the Employee's date of Qualifying Termination or the Change in Control
(whichever would provide the Employee with greater benefits). With respect to
life insurance the Company will pay the Employee an amount equal to the monthly
premium on any life insurance policy
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Exhibit 10.13
obtained by the Employee which provides benefits substantially similar to the
life insurance provided to the Employee under the Company's benefit plans on his
or her date of Qualifying Termination or the Change in Control (whichever would
provide the Employee with greater benefits) up to a maximum of one and one-half
(1-1/2) times the monthly cost to the Company of providing life insurance to the
Employee on his or date of Qualifying Termination or Change in Control, as the
case may be.
(b) Employment Group B. If an Employee who has incurred a
Qualifying Termination is a member of Employment Group B, the Employee shall
receive continuation of his or her Base Compensation payable each month for two
months, plus one additional month for each year of service (up to a maximum
payment period of 24 months), following his or her date of Qualifying
Termination (or the Change in Control, if later), or, at the election of the
Employee, a lump sum payment equal to the present value as of the date of
Qualifying Termination (or the Change in Control, if later) of such payments
discounted at the rate prescribed under Section 1.280G-1 Q & A-24(c)(2) of the
Regulations.
3.2 CONTINUATION OF BENEFITS UPON DEATH
Upon the death of an Employee who has incurred a Qualifying
Termination, the continuation of his or her Base Compensation determined in
accordance with Section 3.1(a)(1) or 3.1(b) of this Plan shall be paid to the
beneficiary designated by the Employee under this Plan. If no beneficiary is
designated, such payments shall be made to his or her surviving spouse, if any,
or to his or her estate. In addition, the survivors of a deceased Employee from
Employment Group A who had incurred a Qualifying Termination shall have such
rights to other benefits as would be available to the survivors of a deceased
Employee in Employment Group A who had not incurred a Qualifying Termination.
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Exhibit 10.13
3.3 LIMITATION OF SEVERANCE BENEFITS
In the event that the present value of any Severance Benefits, as set
forth in this Plan, combined with any other benefits which constitute "parachute
payments" within the meaning of Section 280G of the Code would be subject to the
excise tax imposed by Section 4999 of the Code ("Excise Tax"), then the amount
of Severance Benefits may be reduced to the amount which the Employee, in his or
her sole discretion, determines would result in no portion of such benefits (or
only such portion thereof as is acceptable to the Employee) being subject to the
Excise Tax. The determination by the Employee of any reduction shall be
conclusive and binding upon the Company.
The Company shall reduce such Severance Benefits only upon written
notice, received from the Employee not later than thirty days after the date on
which he or she becomes eligible for benefits, indicating the amount of such
reduction.
ARTICLE IV
AMENDMENT OR TERMINATION OF PLAN
The Committee or the Board may at any time amend or terminate this
Plan, provided that at the time of such amendment or termination Continuing
Directors comprise a majority of the Committee or the Board, as the case may be,
and a majority of the Continuing Directors then serving on the Committee or the
Board, as the case may be, approve such amendment or termination.
Notwithstanding anything to the contrary contained herein, the Plan may not be
amended in any respect or terminated after the occurrence of a Change in
Control.
ARTICLE V
MISCELLANEOUS
5.1 PLAN INTERPRETATION
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. This Plan shall be read in its entirety and
not severed except as provided in Section 5.6.
5.2 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
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Exhibit 10.13
5.3 UNFUNDED OBLIGATIONS
All benefits due an Employee or an Employee's beneficiary under this
Plan are unfunded and unsecured and are payable out of the general funds of the
Company. The Company, in its sole and absolute discretion, may establish a
"grantor trust" for the payment to one or more Employees of any or all benefits
and obligations under this Plan, the assets of which shall be at all times
subject to the claims of creditors of the Company as provided for in the trust,
provided that the trust does not alter the characterization of the Plan as an
"unfunded plan" for purposes of the ERISA. The trust shall make distributions in
accordance with the terms of the Plan.
The Company may, in its discretion, set aside the necessary funds to
satisfy and discharge the Company's obligations under this Plan. Any funds
remaining after the satisfaction and discharge of all obligations under this
Plan shall be returned to the Company, its successors or assigns.
5.4 TRANSFERABILITY OF BENEFITS
The right to receive payment of any benefits under this Plan shall not
be transferred, assigned or pledged except by beneficiary designation or by will
or under the laws of descent and distribution.
5.5 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Administrator nor the Company makes any commitment or
guarantee regarding tax consequences to an Employee under any federal, state, or
local income tax laws, resulting from the receipt of any Severance Benefits
provided under this Plan (or other benefits which are contingent upon a Change
in Control). Any Employee who may be subject to Excise Tax may reduce his or her
Severance Benefits as provided in Section 3.2. Each Employee acknowledges that
all amounts payable hereunder shall be reduced by any and all federal, state and
local taxes, including applicable Excise Taxes, imposed upon the Employee or his
or her beneficiary which are required to be paid or withheld by the Company.
5.6 CONSTRUCTION, GOVERNING LAWS
Except to the extent that federal legislation or applicable regulation
shall govern, the validity and construction of the Plan and each of its
provisions shall be subject to and governed by the laws of the State of New
Jersey.
5.7 SEPARABILITY
If any provision of this Plan is found, held or deemed to be void,
unlawful or unenforceable under any applicable statute or other controlling law,
the remainder of this Plan shall continue in full force and effect.
5.8 EMPLOYEE'S RIGHTS
This Plan shall not be deemed to constitute a contract of employment
between the Company and any Employee or to be a consideration or an inducement
for the employment of any Employee. Nothing contained in this Plan shall be
deemed to give any Employee the right to be retained in the service of the
Company or to interfere with the right of the Company to discharge any Employee
at any time regardless of the effect which such discharge shall have upon his or
her entitlement to Severance Benefits under this Plan.
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Exhibit 10.13
5.9 ACTION BY THE COMPANY
Whenever the Company under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
ARTICLE VI
ERISA PROVISIONS
6.1 CLAIM FOR BENEFITS
(a) Any claim for Severance Benefits shall be made to the
Administrator. If the Administrator denies a claim, the Administrator may
provide notice to the Employee or beneficiary, in writing, within 90 days after
the claim is filed unless special circumstances require an extension of time for
processing the claim. If the Administrator does not notify the Employee of the
denial of the claim within the 90 day period specified above, then the claim
shall be deemed denied. The notice of a denial of a claim shall be written in a
manner calculated to be understood by the claimant and shall set forth:
(1) specific references to the pertinent Plan provisions
on which the denial is based;
(2) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
as to why such information is necessary; and
(3) an explanation of the Plan's claim procedure.
(b) Within 60 days after receipt of the above material, the
claimant shall have a reasonable opportunity to appeal the claim denial to the
Administrator for a full and fair review. The claimant or his or her duly
authorized representative may:
(1) request a review upon written notice to the
Administrator;
(2) review pertinent documents; and
(3) submit issues and comments in writing.
(c) A decision on the review by the Administrator will be made not
later than 60 days after receipt of a request for review, unless special
circumstances require an extension of time for processing (such as the need to
hold a hearing), in which event a decision should be rendered as soon as
possible, but in no event later than 120 days after such receipt. The decision
of the Administrator shall be written and shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, with
specific references to the pertinent Plan provisions on which the decision is
based.
6.2 NAMED FIDUCIARY
The Administrator shall be the named fiduciary pursuant to ERISA
Section 402 and shall be responsible for the management and control of the
operation and administration of the Plan.
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Exhibit 10.13
6.3 GENERAL FIDUCIARY RESPONSIBILITIES
The Administrator and any other fiduciary under ERISA shall discharge
their duties with respect to this Plan solely in the interest of the Employees
and their beneficiaries and:
(a) for the exclusive purpose of providing Severance Benefits to
Employees and their beneficiaries and defraying reasonable expenses of
administering the Plan;
(b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims; and
(c) in accordance with the documents and instruments governing the
Plan insofar as such documents and instruments are consistent with ERISA.
IN WITNESS WHEREOF, the Company has caused this Plan to be adopted and
executed by its duly authorized officer, this day of , 19 .
ALTEON INC.
By:
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