form8_k.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report (Date of Earliest Event Reported): October 31,
2007
(Exact
name of registrant as specified in its charter)
(State
or
other jurisdiction of incorporation)
0-14710 52-2154066
(Commission
File
Number) (IRS
Employer Identification No.)
2910
Seventh Street, Berkeley, California
94710
(Address
of principal executive offices) (Zip
code)
Registrant's
telephone number, including area
code (510)
204-7200
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item 8.01. Other
Events
On
October 31, 2007, the Board of Directors (the “Board”) of XOMA Ltd. (the
“Company”) approved certain changes to the existing compensation arrangements of
certain of its officers and directors, as described below.
Changes
to Compensation Under Share Option Plans
Following
a review and analysis of the option practices among similarly-situated
companies, the Board, on the recommendation of its Compensation Committee,
granted options to purchase the following numbers of common shares of the
Company (“Common Shares”) to its Chairman of the Board, Chief Executive Officer
and President and each of the following other executive officers who were named
in the Summary Compensation Table of the Company’s 2006 Proxy
Statement:
|
Name/Title
|
Options
|
|
Steven
B. Engle
Chairman
of the Board, Chief Executive Officer and President
|
1,500,000 |
|
Patrick
J. Scannon, M.D., Ph.D.
Executive
Vice President and Chief Biotechnology Officer
|
400,000 |
|
J.
David Boyle II
Vice
President, Finance and Chief Financial
Officer
|
650,000 |
|
Christopher
J. Margolin
Vice
President, General Counsel and Secretary
|
265,000 |
In
addition, the Board, on the recommendation of its Compensation Committee, made
a
Company-wide grant of additional options to purchase an aggregate of
approximately 3,820,000 Common Shares to other employees of the
Company.
All
of
these options have an exercise price per Common Share of $3.67, equal to the
closing price on the Nasdaq Stock Market on the date of grant (the “Market
Price”), have a 10-year term and will become exercisable in accordance with the
Company’s customary schedule of exercisability. Of the options to
purchase an aggregate of approximately 6,635,000 shares described
above, options to purchase an aggregate of 5,185,000 shares were made subject
to
shareholder approval of a commensurate increase in the number of shares
available for the grant of options under the Company’s existing share option
plans, which the Company anticipates it will seek at its next annual general
meeting of shareholders, expected to take place in May of 2008.
Mr.
Margolin also received an additional option to purchase 15,000 Common Shares
at
an exercise price equal to the Market Price, which has a 10-year term and became
exercisable immediately upon grant.
In
addition, the Board approved, on the recommendation of its Nominating &
Governance Committee, a grant to Dr. Charles M. Fisher, Jr., a director, of
an
option to purchase 20,000 Common Shares under the Company’s existing share
option plan for directors, subject to shareholder approval of the amendments
to
the directors share option plan necessary to permit this grant.
The
Board
also approved, on the recommendation of its Compensation Committee, amendments
to the Company’s 1981 Share Option Plan and Restricted Share Plan to eliminate a
provision in each of those plans that limited the acceleration of exercisability
of options granted thereunder in the event of certain changes in control if
such
acceleration would trigger tax payments by the option holder under Section
280G
of the U.S. Internal Revenue Code. These amendments are filed
herewith as exhibits and are incorporated herein by reference.
Changes
to Compensation Under Incentive Compensation Plans
The
Board
also approved, on the recommendation of its Compensation Committee, amendments
to the Company’s existing Management Incentive Compensation Plan (the “MICP”),
CEO Incentive Compensation Plan (the “CICP”) and Bonus Compensation Plan (with
the MICP and the CICP, collectively, the “Incentive Plans”) to eliminate the
provisions thereof requiring payments thereunder to be made partly in Common
Shares. In the future (beginning with any awards for 2007), bonuses
awarded under the Incentive Plans will be paid entirely in cash. The
Incentive Plans had most recently provided for awards thereunder to be paid one
half in cash and one half in Common Shares. Changes were also made to
the bonus opportunity targets set forth in the MICP. The MICP, as
amended and restated to reflect these changes, is filed herewith as an exhibit
and is incorporated herein by reference.
Item 9.01. Financial
Statements and Exhibits
(d) Exhibits
10.1 Amendment
No. 3 to the XOMA Ltd. 1981 Share Option Plan
10.2
Amendment
No.
4 to the XOMA Ltd. Restricted Share Plan
10.3
Managment
Incentive Compensation Plan as amended and restated
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Dated: November
6,
2007 XOMA
LTD.
By:
/s/
Christopher J.
Margolin
Christopher J.
Margolin
Vice Presdient,
General
Counsel and Secretary
EXHIBIT
INDEX
Number Description
10.1 Amendment
No. 3 to the XOMA Ltd. 1981 Share Option Plan
10.2
Amendment No. 4 to the XOMA Ltd. Restricted Share
Plan
10.3 Management
Incentive Compensation Plan as amended and restated
Exhibit
10.1
Amendment
No. 3 to the
XOMA
LTD.
1981
SHARE OPTION PLAN
Effective
as of October 31, 2007 and pursuant to Board action, the XOMA Ltd. 1981 Share
Option Plan, as amended (the "Plan"), is hereby amended as follows:
Section
8(a) of the Plan is amended to read as follows:
(a) In
the event of one or more of the following transactions (“Corporate
Transaction”):
(i) (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) (ii) the
sale, transfer or other disposition of all or substantially all of the assets
of
the Company; or
(iii) (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.
Exhibit
10.2
Amendment
No. 4 to the
XOMA
LTD.
RESTRICTED
SHARE PLAN
Effective
as of October 31, 2007 and pursuant to Board action, the XOMA Ltd. Restricted
Share Plan, as amended (the "Plan"), is hereby amended as follows:
Section
3(a) of Article II of the Plan is amended to read as follows:
(a) In
the event of one or more of the following transactions (“Corporate
Transaction”):
(iv) (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 incorporation;
(v) (ii) the
sale, transfer or other disposition of all or substantially all of the assets
of
the Company; or
(vi) (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 affiliate
thereof) or to be replaced with a comparable option to purchase shares of
capital stock of the successor corporation (or affiliate thereof), such
comparability to be determined by the Plan Administrator.
Exhibit
10.3
Management
Incentive Compensation Plan
(As
Amended and Restated October 31, 2007)
|
I.
|
Introduction
and Summary.
|
This
document describes the XOMA Ltd. (“XOMA”) Management Incentive Compensation Plan
(the “Plan”), as approved by the Board of Directors. The Plan became
effective on July 1, 1993 and was amended October 27, 1993, December 31, 1998
and February 20, 2002. Subject to the ability of the Board of
Directors to terminate the Plan at any time, the Plan applies to fiscal years
ending December 31, 1993 and each December 31 thereafter.
Officers,
employees who have the title of Senior Director, Director or Manager, and
additional discretionary participants (“Discretionary Participants”) determined
by the Chief Executive Officer (“CEO”) to be critical to the achievement of
Company Objectives established by the Board of Directors, are eligible to
participate in this Plan and, depending on their performance and that of the
company, earn incentive compensation (“Incentive Compensation”) (Article III
contains the definitions of certain terms not otherwise defined in the places
such terms first appear in this Plan.) The CEO shall designate those
eligible employees who will participate in the Plan. Employees
receiving promotions, and new employees joining XOMA during a Plan Period,
who
thereby meet the eligibility criteria for participation in the Plan, will be
considered at the discretion of the CEO for participation in the Plan on a
pro
rata basis. The CEO will not participate in the Plan.
After
the
conclusion of each applicable Plan Period, the Board of Directors and the
Compensation Committee of the Board of Directors (the “Compensation Committee”)
will make a determination as to the performance of XOMA and Plan participants
in
meeting Company Objectives as well as individual objectives. Prior to
the commencement of each Plan Period, the Board of Directors acting on the
advice of the Compensation Committee, will establish a target Incentive
Compensation Pool (“Target Incentive Compensation Pool”). The Target
Incentive Compensation Pool will be expressed as a percentage of the aggregate
annual Base Salaries of all participants in the Plan for the applicable Plan
Period. Awards to individual participants will vary depending on (1)
the achievement of Company Objectives; (2) the size of the Target Incentive
Compensation Pool; (3) the individual’s Base Salary; and (4) the individual’s
performance during the applicable Plan Period and expected ongoing contribution
to XOMA. Awards may exceed or be lower than the Target Incentive
Compensation Pool on the basis of the calculation of the extent to which XOMA’s
Company Objectives have been met as set forth in Article IV.
Individual
awards will be granted in cash. Awards will be immediately vested on
the distribution date set by the Board of Directors acting in part on the advice
of the CEO and the Compensation Committee and expected to be in February or
March of the year succeeding the Plan Period.
The
distribution date of awards under the Plan for each Plan Period will be the
same
for all participants and is expected to be set no later than ninety days after
the end of each Plan Period.
Questions
concerning the Plan should be forwarded to the Vice President of Human
Resources. In all instances, the written provisions of the Plan and
other determinations of the Compensation Committee and the Board of Directors
shall govern and be final.
To
build
a company team that will achieve XOMA’s goals and objectives, to recognize
individual efforts, to attract and retain highly motivated individuals and
to
encourage outstanding performance and contributions to XOMA.
For
the
purpose of this Plan, the following definitions will apply:
|
A.
|
Base
Salaries. The term “Base Salaries” means total base
salaries before any deferred tax reductions, excluding overtime,
moving
allowances, participation in clinical studies, incentive or bonus
payments, shift differential, imputed income due to fringe benefits
such
as group insurance plans, and other compensatory items of this
type.
|
|
B.
|
Company
Objectives. The term “Company Objectives” means that list
of company objectives approved from time to time by the Board of
Directors
in its sole discretion for each Plan Period. The objectives may
be based on financial goals, scientific or commercial progress, profits,
return on investments or any other criteria established by the Board
of
Directors. The current Company Objectives, the milestones
within each Company Objective and their respective relative percentage
contribution to the overall Company Objectives shall be maintained
by the
Human Resources Department. The Required Minimum Company
Objective Percentage is set forth in Article
IV.
|
|
C.
|
Employee. The
term “Employee” means any individual on the XOMA payroll rendering
services for XOMA whose normal work week is 30 hours or more (excluding
consultants, advisors, and other similar individuals providing services
to
XOMA).
|
|
D.
|
Plan
Period. Subject to Article VI, the term “Plan Period” means
the fiscal period from July I to December 31, 1993 and, thereafter,
each
fiscal year ending
December 31.
|
|
E.
|
Plan
Term. Subject to Article VI, the term “Plan Term” means the
period commencing on July 1, 1993 and continuing until the termination
of
this Plan by the Board of
Directors.
|
|
A.
|
Eligibility. Officers,
employees who have the title of Senior Director, Director or Manager,
and
additional Discretionary Participants determined by the CEO to be
critical
to the achievement of the Company Objectives, are eligible for
participation in the Plan. Other than the officers who may
participate in the Plan who shall be designated in writing by the
Compensation Committee, the CEO shall designate in writing the employees
who will participate in the Plan. An individual who becomes an
Employee who meets the eligibility criteria for participation in
the Plan
after the beginning of a Plan Period, or is promoted after the beginning
of a Plan Period to a position eligible for participation in the
Plan,
will be considered by the Compensation Committee or the CEO, as the
case
may be, for participation in the Plan and, if designated in writing
to
participate, such Employee will have her/his award pro-rated as of
the
date of eligibility determined by the Compensation Committee or the
CEO,
as the case may be. Each participant must maintain eligibility and
continue as an Employee until the date of distribution to receive
the
distribution to be made on that
date.
|
|
B.
|
Length
of Plan. Subject to Article VI, the Plan will be effective
for the Plan Term.
|
|
1.
|
Determination
of Amounts Available for Incentive
Compensation.
|
a. Prior
to
the commencement of each Plan Period, the Compensation Committee acting on
behalf of the Board of Directors in its sole discretion will determine the
Target Incentive Compensation Pool. As soon as practicable after the
end of each Plan Period, the Compensation Committee will determine whether
and
to what extent the Company Objectives have been met. If a
determination is made that XOMA has not met the Company Objectives to the extent
required, the Compensation Committee may decline to award any Incentive
Compensation.
b. For
each
year during the Plan Term, unless 70% of the Company Objectives (the “Required
Minimum Company Objective Percentage”) have been met, no Incentive Compensation
will be awarded.
c. The
Target Incentive Compensation Pool is expressed as a percentage of the aggregate
annual Base Salaries of the participants in the Plan. The final
Incentive Compensation Pool (“Final Incentive Compensation Pool”) will be
determined by utilizing the method of calculation of the extent to which XOMA’s
Company Objectives have been met for the applicable Plan Period as set forth
in
Article IV.
|
2.
|
Calculation
of Individual Incentive Awards.
|
a. It
is the
intention of the Compensation Committee and the Board of Directors that awards
to participants shall vary depending on: (1) the extent of collective
achievement of Company Objectives; (2) each participant’s employment level in
the organization and Base Salary; and (3) each participant’s contributions to
the achievement of the Company Objectives as a result of: (x) achievement
of individual objectives and ongoing performance and (y) individual
contributions towards XOMA’s meeting of the Company Objectives without regard to
individual objectives.
b. Company
and individual performance objectives will be weighted depending upon
participant level. A 20% judgment factor will be included as an
individual performance measurement for all participants in the
Plan.
Company
and individual performance goals for participants in the Plan are to be weighted
as follows:
|
Participant
Level
|
|
Company
Objectives
|
|
|
Individual
Objectives
|
|
|
Performance
Objectives
|
|
|
Officer
|
|
|
50 |
% |
|
|
30 |
% |
|
|
20 |
% |
|
Senior
Director
|
|
|
40 |
% |
|
|
40 |
% |
|
|
20 |
% |
|
Director
|
|
|
40 |
% |
|
|
40 |
% |
|
|
20 |
% |
|
Manager
and Discretionary Participant
|
|
|
30 |
% |
|
|
50 |
% |
|
|
20 |
% |
c. The
bonus
opportunity ranges for participants in the Plan expressed as a percentage of
Base Salaries are as follows:
|
Participant
Level
|
|
Minimum
|
|
|
Target
|
|
|
Maximum
|
|
|
Officer
|
|
|
15 |
% |
|
|
30 |
% |
|
|
45 |
% |
|
Senior
Director
|
|
|
12.5 |
% |
|
|
25 |
% |
|
|
37.5 |
% |
|
Director
|
|
|
9 |
% |
|
|
18 |
% |
|
|
27 |
% |
|
Manager
|
|
|
6 |
% |
|
|
12 |
% |
|
|
18 |
% |
|
Discretionary
Participant
|
|
|
5 |
% |
|
|
10 |
% |
|
|
15 |
% |
d. Each
of
the individual Company Objectives shall be assigned a percentage reflecting
its
relative importance (the “Target Contribution Percentage”) to the achievement of
the overall Company Objectives as well as target results and results reflecting
best and worst case scenarios (denominated maximum or minimum for purposes
hereof). If the target results are achieved, the Target Contribution
Percentage is awarded. If results between the target and the best
case scenario are achieved, the Target Contribution Percentage is increased
proportionately up to a maximum of 150% of the Target Contribution Percentage
(the “Best Case Percentage Limitation”). No percentage contribution
in excess of the Best Case Percentage Limitation will be
awarded. Alternatively, if target results are not met but results
greater than the worst case scenario are achieved, the Target Contribution
Percentage will be decreased proportionately to a minimum of 50% of the Target
Contribution Percentage. Achievements below the worst case scenario
will result in a 0% contribution from the applicable Company
Objective.
e. The
performance of each participant in the Plan will be rated as soon as practicable
following the conclusion of the applicable Plan Period in the exercise of the
sole discretion of the individual or group indicated below. The
ratings for all officers will be approved by the Compensation
Committee. The ratings for all other participants will be approved by
the CEO. Participants whose performance for the Plan Period is rated
as unsatisfactory will not be eligible for participation in the Plan for that
Plan Period and no Incentive Compensation will be awarded for below minimum
performance.
f. The
total
value of all awards made for the applicable Plan Period will not exceed the
amount of the Final Incentive Compensation Pool determined for that Plan
Period. Thus, each individual award for a participant from the Final
Incentive Compensation Pool will vary depending on the participant’s rating,
employment level in the organization, Base Salary, and the individual ratings
of
all participants.
|
3.
|
Awards
to Participants.
|
a. Approval. All
awards will be approved following the end of a Plan Period by the Compensation
Committee acting on the advice of the Board of Directors and the
CEO.
b. Distribution
of Incentive Awards. The distribution dates for awards will be
established by the Board of Directors acting on the advice of the Compensation
Committee. It is expected that distributions will normally be made in
February or March of the succeeding year of the applicable Plan
Period.
c. Taxes
and Withholding. Each participant will bear any Federal, state,
and local taxes accruing with respect to any award under the Plan. As
required by law, XOMA will withhold in cash from any distributions amounts
required for Federal and state withholding tax purposes.
d. Termination
of participation.
i. Subject
to other provisions hereof, if a participant’s employment is terminated for any
reason, or for no reason, on or before December 31 of any Plan Period or at
any
time in any subsequent year prior to the distribution date on which awards
with
respect to any Plan Period are expected to be made, such participant shall
forfeit all rights to Incentive Compensation as yet unpaid pursuant to the
Plan,
unless the CEO determines in her/his sole discretion, that such Employee should
continue to participate.
ii. If
an
Employee changes employment status from full-time to part-time (less than 30
hours per week), any such change will terminate participation in the Plan and
all rights to payments awarded for any Plan Period but payable in a subsequent
year, unless the CEO determines in her/his sole discretion, that such Employee
should continue to participate.
iii. A
participant may elect to withdraw, without prejudice, from the Plan at any
time.
e. Eligibility
for Distribution. Subject to other provisions hereof, a
participant must also be an Employee of the Company continuously from the
conclusion of any Plan Period up to and including the date of distribution
of
the award to be eligible to receive such distribution.
f. Change
in Control Exception. Notwithstanding any other provision hereof,
(x) if within one year after a “change in control” (as defined below), a
participant’s employment with XOMA is involuntarily terminated other than for
cause, or (y) if a participant shall voluntarily terminate her or his employment
with XOMA within one year after a change in control because the nature of such
participant’s duties or compensation do not continue to be substantially
equivalent to what they were at the time of such change in control, then all
awards authorized but not yet distributed to such participant shall be
distributed to such participant.
For
the
purposes of this subsection, a “change in control” shall have occurred if any
person (as defined in Section 13 of the Securities Exchange Act of 1934, as
amended) acquires voting capital shares, (other than directly from XOMA) and
thereby becomes the owner of more than 20% of XOMA’s outstanding voting capital
shares (on a fully diluted basis) or XOMA enters into a merger, amalgamation
or
other consolidation (other than one in connection with a voluntary change of
corporate domicile or similar reorganization or recapitalization transaction)
in
which the shareholders of XOMA (as determined immediately prior to the merger,
amalgamation or other consolidation) do not own at least 50% of the outstanding
voting capital shares of the surviving or continuing entity after the merger,
amalgamation or other consolidation. Solely for the purposes of the
foregoing, a termination shall be deemed to have been made for “cause” in the
event a participant is terminated for any of the following reasons:
i. the
participant’s continued failure to substantially perform her or his duties with
XOMA, or
ii. gross
misconduct by the participant which is materially and demonstrably injurious
to
XOMA or its employees.
g. Death
of a participant. In the event of the death of a participant
while an Employee after the completion of any Plan Period but prior to the
distribution, the award will be made as soon as practicable to the deceased
participant’s beneficiary as indicated on the participant’s group insurance
enrollment card.
|
V.
|
No
Right to Employment.
|
Nothing
in this Plan shall give any participant the right to continued employment by
XOMA. Furthermore, under XOMA policy, employment at XOMA is “at will”
and can be terminated at any time by either party, with or without cause and
with or without notice.
This
Plan
may be modified or terminated by the Board of Directors at any
time.
|
A.
|
Nontransferability. Awards
shall not be transferable by a participant except by will or the
laws of
descent and distribution. A participant’s rights under the Plan
may not be pledged, mortgaged, hypothecated, or otherwise encumbered,
and
shall not be subject to claims of the participant’s
creditors.
|
|
B.
|
Unfunded
Status of Awards. The Plan is intended to constitute an
“unfunded” plan of incentive compensation. With respect to any
payments not yet made to a participant pursuant to an award, nothing
contained in the Plan or any Award shall give any such participant
any
rights that are greater than those of a general unsecured creditor
of
XOMA.
|