Contract
Exhibit 10.309
20 October 2006
Name
Address
City, State Zip
Address
City, State Zip
Dear :
The purpose of this letter agreement is to document the terms of the severance package to
which you will be entitled should your employment with Ligand Pharmaceuticals Incorporated (the
“Company”) terminate under certain specified circumstances.
Part One of this letter agreement sets forth certain definitional provisions to be in effect
for purposes of determining your benefit entitlements. Part Two specifies the terms and conditions
upon which you may become entitled to receive severance benefits. Severance benefits accrue under
this letter agreement in the event your employment with the Company were to be terminated
involuntarily in connection with certain changes in control of the Company. Part Three concludes
this letter agreement with a series of general terms and conditions applicable to your severance
benefits.
PART ONE — DEFINITIONS
Definitions. For purposes of this letter agreement, including in particular the application
of the special benefit limitations of Part Three, the following definitions will be in effect:
1. Average Compensation means your average W-2 wages from the Company for the five (5)
calendar years (or for the number of years you have been a Company employee, if less than
five) completed immediately prior to the calendar year in which the Change in Control is
effected. Any W-2 wages for a partial year of employment will be annualized, in accordance
with the frequency with which such wages are paid during such partial year, before inclusion
within your Average Compensation.
2. Board means the Company’s Board of Directors.
3. Change in Control means any of the following events:
(i) a merger or consolidation in which the Company is not the surviving entity, except
for a transaction the principal purpose of which is to change the state in which the Company
is incorporated,
(ii) the sale, transfer or other disposition of all or substantially all of the assets
of the Company other than in the ordinary course of business,
(iii) any reverse merger in which the Company ceases to exist as an independent
corporation and becomes the subsidiary of another corporation, except where there is an
insubstantial change in the de facto voting control of the Company (e.g. the creation of a
holding company),
(iv) any Hostile Take-Over,
(v) the acquisition by any person (or related group of persons), whether by tender or
exchange offer made directly to the Company’s stockholders, private purchases from one or
more of the Company’s stockholders, open market purchases or any other transaction, of
beneficial ownership of securities possessing more than thirty percent (30%) of the total
combined voting power of the Company’s outstanding securities,
(vi) the acquisition by any person (or related group of persons), whether by tender or
exchange offer made directly to the Company’s stockholders, private purchases from one or
more of the Company’s stockholders, open market purchases or any other transaction, of
additional securities of the Company which increase the total holdings of such person (or
group) to a level of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company’s outstanding securities, or
(vii) the acquisition by any person (or related group of persons), whether by tender or
exchange offer made directly to the Company’s stockholders, private purchases from one or
more of the Company’s stockholders, open market purchases or any other transaction, of
securities of the Company possessing sufficient voting power in the aggregate to elect an
absolute majority of the members of the Board (rounded up to the nearest whole number).
4. COBRA means the continuation-of-coverage provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
5. Code means the Internal Revenue Code of 1986, as amended.
6. Common Stock means the Company’s common stock, par value $0.001 per share.
7. Equity Incentive Plans means any of the following equity incentive plans of the Company:
1992 Stock Option/Stock Issuance Plan, the 2002 Stock Incentive Plan, and the Restricted
Stock Purchase Plan, together with any amendments or successors to such plans.
8. Equity Parachute Payment means, with respect to any Option (whether
Acquisition-Accelerated or Severance-Accelerated) or unvested Stock Issuance, the portion
deemed to be a parachute payment under Code Section 280G and the Treasury Regulations issued
thereunder. Such Equity Parachute Payment shall be calculated in accordance with the
valuation provisions established under Code Section 280G and the applicable Treasury
Regulations and will include an appropriate dollar adjustment to reflect the lapse of your
obligation to remain in the Company’s employ as a condition to your vesting in the
accelerated portion of such Option or Stock Issuance.
9. ERISA means the Employee Retirement Income Security Act of 1974, as amended.
10. Health Care Coverage means the health care benefits provided by the Company to you and
your eligible dependents for which you are eligible to continue coverage under the
provisions of COBRA.
11. Hostile Take-Over means either of the following events:
(i) the acquisition by any person (or related group of persons) whether by tender or
exchange offer made directly to the Company’s stockholders, private purchases from one or
more of the Company’s stockholders, open market purchases or any other transaction, of
beneficial ownership of securities possessing more than thirty percent (30%) of the total
combined voting power of the Company’s outstanding securities pursuant to a tender offer
made directly to the Company’s stockholders which the Board does not recommend such
stockholders to accept, or
(ii) a change in the composition of the Board over a period of thirty-six (36)
consecutive months or less such that a majority of the Board members (rounded up to the next
whole number) ceases, by reason of one or more contested elections for Board membership, to
be comprised of individuals who either (a) have been Board members continuously since the
beginning of such period or (b) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in clause (a) who
were still in office at the time such election or nomination was approved by the Board.
12. Involuntary Termination means the termination of your employment with the Company:
(i) upon your involuntary discharge or dismissal, or
(ii) upon your resignation in connection with any of the following changes to the terms
and conditions of your employment: (A) a change in your position with the Company which
materially reduces your level of responsibility, (B) a greater than ten percent (10%)
reduction in your level of compensation (including base salary, fringe benefits and
participation in non-discretionary bonus programs under which awards are payable pursuant to
objective financial or performance standards, but excluding equity compensation) or (C) a
relocation of your principal place of employment by more than fifty (50) miles.
The following guidelines shall determine whether one or more reductions in compensation
should be taken into account for purposes of clause (ii)(B):
(a) Any reduction in compensation which occurs in connection with an across-the-board
reduction in the level of compensation payable to the Company’s executive officers or senior
management shall not constitute grounds for a clause (ii)(B) resignation, unless implemented
within eighteen (18) months after a Change in Control.
(b) In the event of a Hostile Take-Over, the greater than ten percent (10%) standard of
clause (ii)(B) shall be reduced to zero percent (0%) so that any reduction in the level of
your compensation shall constitute grounds for a clause (ii)(B) resignation.
In no event shall an Involuntary Termination be deemed to occur should your employment
terminate by reason of death or permanent disability.
13. Option means any option granted to you under any of the Equity Incentive Plans which is
outstanding at the time of your Involuntary Termination or any earlier Change in Control.
Your outstanding options are to be divided into two separate categories as follows:
(i) Acquisition-Accelerated Options: any outstanding Option (or installment thereof)
which accelerates upon a Change in Control in accordance with the automatic acceleration
provisions of the Equity Incentive Plans.
(ii) Severance-Accelerated Options: any outstanding Option (or installment thereof)
which is not an Acquisition-Accelerated Option but which accelerates upon your Involuntary
Termination, whether or not in connection with a Change in Control, as part of your
severance benefits under this letter agreement.
14. Other Parachute Payments mean any payments in the nature of compensation to which you
may become entitled under this letter agreement (other than the Equity Parachute Payment) or
any other arrangement with the Company, to the extent such payments qualify as parachute
payments within the meaning of Code Section 280G(b)(2) and the Treasury Regulations issued
thereunder or would so qualify if the aggregate present value of such payments exceeded the
amount specified in Code Section 280G(b)(2)(ii).
15. Stock Issuance means the issuance of unvested shares of Common Stock under the Company’s
Restricted Stock Plan or any other Equity Incentive Plan.
17. Termination for Cause means an Involuntary Termination or resignation of your employment
with the Company by reason of your conviction of any felony or other criminal act, your
commission of any act of fraud or embezzlement, your unauthorized use or disclosure of
confidential or proprietary information or trade secrets of the Company or its subsidiaries,
or any other intentional misconduct on your part which adversely affects the business or
affairs of the Company in a material manner.
PART TWO — INVOLUNTARY TERMINATION BENEFITS
You will be entitled to receive the severance benefits specified below should there occur an
Involuntary Termination of your employment during the term of this letter agreement effected in
connection with a Change in Control, other than a Termination for Cause. However, in the absence
of a Hostile Take-Over, these benefits will be paid you only if (a) you agree to provide any
consulting services required of you under Part Two, Paragraph 4, (b) abide by the restrictive
covenants set forth in Part Two, Paragraph 5 and (c) execute a general release of claims against
the Company.
1. Severance Payments. You will receive severance payments from the Company in an aggregate
amount equal to the sum of (A) one (1) times the annual rate of base salary in effect for
you at the time of your Involuntary Termination or at the time of the relevant Change in
Control, whichever is higher plus (B) one (1) times the average of the bonuses (excluding
any signing bonus) paid to you for services rendered in the two (2) fiscal years immediately
preceding the fiscal year of your Involuntary Termination (annualized if paid for a partial
fiscal year). If a bonus is paid to you for only one of those years, then the bonus amount
under Clause (B) will be equal to one (1) times such bonus amount. The aggregate severance
payments shall be paid to you in a lump sum paid within 10 days of your Involuntary
Termination. In the event your Involuntary Termination occurs in connection with a Hostile
Take-Over, the provisions of Sections 4 and 5 of this Part Two will not apply.
2. Health Care Coverage. The Company will, in addition, pay you the estimated total of any
COBRA payments for you and your eligible dependents in order to continue your Health Care
Coverage for twelve (12) months after the effective date of your Involuntary Termination
(other than a Termination for Cause). This amount will be paid in a lump sum within 10 days
of your Involuntary Termination. The estimated payment will be the final and only payment
for Health Care Coverage and shall not be subject to later adjustment.
3. Option Acceleration and Lapse of Restrictions. Each of your outstanding Options under
the Equity Incentive Plans will (to the extent not then otherwise exercisable) automatically
accelerate so that each such Option will become immediately exercisable for the total number
of shares of Common Stock at the time subject to that Option. Each such accelerated Option,
together with all of your other vested Options, will remain exercisable for a period equal
to the greater of (i) the 15th day of the 3rd month, or (ii) December 31, after the date
the option otherwise would have expired following your Involuntary Termination. Such
Option(s) may be exercised for any or all of the option shares in accordance with the
exercise provisions of the option agreement evidencing the grant. In addition, all
restrictions applicable to the Stock Issuances you hold (to the extent those restrictions
have not previously lapsed in accordance with the terms of the issuance agreements) will
automatically lapse upon your Involuntary Termination (except a Termination for Cause).
4. Consulting Services. Unless your Involuntary Termination occurs in connection with a
Hostile Take-Over, in order to receive the severance under Paragraph 2 you may, at the
Company’s option, be required to enter into a consulting agreement making yourself available
to perform consulting services reasonably requested of you during the twelve (12)-month
period following your Involuntary Termination. You will be compensated at an hourly rate to
be agreed upon by you and the Company at the time such consulting services are to be
rendered, and you will be reimbursed for all reasonable out-of-pocket expenses incurred in
rendering such services upon your submission of appropriate documentation for those
expenses.
5. Restrictive Covenants. For the one hundred twenty (120)-day period following your
Involuntary Termination:
(i) You will not directly or indirectly, whether for your own account or as an
employee, director, consultant or advisor, provide services to any business enterprise which
is at the time in competition with any of the Company’s then existing or formally planned
product lines and which is located geographically in an area where the Company maintains
substantial business activities, unless you obtain the prior written consent of the Board of
Directors.
(ii) You will not directly or indirectly encourage or solicit any individual to leave
the Company’s employ for any reason or interfere in any other manner with the employment
relationships at the time existing between the Company and its current or prospective
employees.
(iii) You will not induce or attempt to induce any customer, supplier, distributor,
licensee or other business relation of the Company to cease doing business with the Company
or in any way interfere with the existing business relationship between any such customer,
supplier, distributor, licensee or other business relation and the Company.
You acknowledge that monetary damages may not be sufficient to compensate the Company for
any economic loss which may be incurred by reason of your breach of the foregoing
restrictive covenants. Accordingly, in the event of any such breach, the Company shall be
entitled to recover all severance benefits provided you under this letter agreement as well
as any other remedies available to the Company at law, including equitable relief in the
form of an injunction precluding you from continuing to engage in such breach.
None of the foregoing restrictive covenants in this section 5 shall be applicable in the
event your Involuntary Termination occurs in connection with a Hostile Take-Over.
6. Benefit Reduction.
(i) Benefit Reduction. If the Change in Control does not constitute a Hostile
Take-Over, first the dollar amount of your severance payment under Paragraph 1 of this Part
Two will be reduced to the extent necessary to assure that the present value of those
benefits will not, when added to the present value of your Equity
Parachute Payment and your Other Parachute Payments, exceed 2.99 times your Average
Compensation. For the avoidance of doubt, your severance payment will be reduced hereunder
only to the extent necessary to provide you with the maximum after-tax benefit available.
In the event of a Hostile Take-Over, no reduction will be made to your severance payment (or
any other benefit to which you become entitled hereunder), unless necessary to provide you
with the maximum after-tax benefit available, after taking into account any parachute excise
tax which might otherwise be payable by you under Code Section 4999 and any analogous State
income tax provision.
(ii) Resolution of Disputes. In the event there is any disagreement between you and
the Company as to whether one or more benefits to which you become entitled (whether under
this letter agreement or otherwise) in connection with a Change in Control constitute Equity
Parachute Payments or Other Parachute Payments, such dispute is to be resolved as follows:
A. The matter shall be submitted for resolution to independent counsel mutually
acceptable to you and the Company (“Independent Counsel”). The resolution reached by
Independent Counsel shall be final and controlling. However, should the Independent Counsel
determine that the status of the benefits in dispute can be resolved by obtaining a private
letter ruling from the Internal Revenue Service, a formal and proper request for such ruling
shall be prepared and submitted by Independent Counsel, and the determination made by the
Internal Revenue Service in the issued ruling shall be controlling. All expenses incurred
in connection with the retention of Independent Counsel and (if applicable) the preparation
and submission of the ruling request shall be paid by the Company.
B. The present value of each Equity Parachute Payment and each of the Other Parachute
Payments (including your severance payment and Health Care Coverage) shall be determined in
accordance with the provisions of Code Section 280G(d)(4) and the Treasury Regulations
issued thereunder using reasonable assumptions and approximations concerning applicable
taxes and relying on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code, provided that such determinations must be made with
substantial authority (within the meaning of Section 6662 of the Code) and provided,
however, that you shall be assumed to pay federal, state and local income taxes at
the highest marginal bracket..
The full amount of your severance benefit under Paragraph 1 of this Part Two shall not be
paid to you until any amounts in dispute under this Paragraph 6(ii) have been resolved in
accordance herewith. However, any portion of such severance payment which would not
otherwise exceed the benefit limitation of Paragraph 6(i) even if all amounts in dispute
under this Paragraph 6(ii) were to be resolved against you will be paid to you in accordance
with the applicable provisions of this letter agreement.
(iii) Overriding Limitation. You will in all events be entitled to receive the full
amount of your severance payment under Paragraph 1, to the extent those benefits, when added
to the present value of your Equity Parachute Payment and your Other
Parachute Payments (excluding such severance payment), will nevertheless qualify as
reasonable compensation within the standards established under Code Section 280G(b)(4).
(iv) Interpretation. The provisions of this Section 6 shall in all events be
interpreted in such manner as will avoid the imposition of excise taxes under Code Section
4999, and the disallowance of deductions under Code Section 280G(a), with respect to your
severance benefits under this letter agreement.
PART THREE — MISCELLANEOUS PROVISIONS
1. Termination for Cause. Should your termination constitute a Termination for Cause, then
the Company shall only be required to pay you (i) any unpaid compensation earned for
services previously rendered through the date of such termination and (ii) any accrued but
unpaid vacation benefits or sick days, (iii) any reimbursements then owed to you by the
Company and no benefits will be payable to you under this letter agreement.
2. Term of Agreement. The provisions of this letter agreement will continue in effect until
<DATE>.
3. General Creditor Status. The benefits to which you may become entitled under this letter
agreement (except those attributable to your Options or Stock Issuances) will be paid, when
due, from the general assets of the Company. Your right (or the right of the executors or
administrators of your estate) to receive any such payments will at all times be that of a
general creditor of the Company and will have no priority over the claims of other general
creditors of the Company.
4. Death. Should you die before receipt of all benefits to which you become entitled under
this letter agreement, then the payment of such benefits will be made, on the due date or
dates hereunder had you survived, to the executors or administrators of your estate. Should
you die before you exercise your Severance-Accelerated Options (if any) or any other of your
outstanding vested Options, then each such Option may be exercised, during the applicable
exercise period in effect hereunder for those options at the time of your death, by the
executors or administrators of your estate or by person to whom the Option is transferred
pursuant to your will or in accordance with the laws of inheritance.
5. Miscellaneous. The provisions of this letter agreement will be construed and interpreted
under ERISA. To the extent ERISA is inapplicable, then the laws of the State of California
shall control, without regard to that state’s choice of law provisions. This letter
agreement incorporates the entire agreement between you and the Company relating to the
subject of change-of-control severance benefits and merges and supersedes all prior
agreements and understandings with respect to such subject matter. For the avoidance of
doubt, this letter does not alter or supersede other written, general severance agreements
you may have with the Company. This letter agreement may only be amended by written
instrument signed by you and another duly-authorized officer of the Company. If any
provision of this letter agreement as applied to any party or to any circumstance should be
adjudged by an arbitrator or court of competent jurisdiction to be void or unenforceable for
any reason, the
invalidity of that provision shall in no way affect (to the maximum extent permissible by
law) the application of such provision under circumstances different from those so
adjudicated, the application of any other provision of this letter agreement, or the
enforceability or invalidity of this letter agreement as a whole. Should any provision of
this letter agreement become or be determined to be invalid, illegal or unenforceable in any
jurisdiction by reason of the scope, extent or duration of its coverage, then such provision
shall be deemed amended to the extent necessary to conform to applicable law so as to be
valid and enforceable or, if such provision cannot be so amended without materially altering
the intention of the parties, then such provision shall be stricken and the remainder of
this letter agreement shall continue in full force and effect.
6. Remedies. All rights and remedies provided pursuant to this letter agreement or by law
will be cumulative, and no such right or remedy will be exclusive of any other. A party may
pursue any one or more rights or remedies hereunder or may seek damages or specific
performance in the event of another party’s breach hereunder or may pursue any other remedy
by law or equity, whether or not stated in this letter agreement.
7. Arbitration. Any controversy which may arise between you and the Company with respect to
the construction, interpretation or application of any of the terms, provisions or
conditions of this letter agreement or any monetary claim arising from or relating to this
letter agreement will be submitted to and exclusively decided by final and binding
arbitration in San Diego, California in accordance with the rules of the American
Arbitration Association then in effect.
8. No Employment or Service Contract. Nothing in this letter agreement shall confer upon
you any right to continue in the employment of the Company for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the Company or
you, which rights are hereby expressly reserved by each, to terminate your employment at any
time for any reason whatsoever, with or without cause.
9. Proprietary Information. You hereby acknowledge that the Company may, from time to time
during your employment with the Company, disclose to you confidential information pertaining
to the Company’s business and affairs. All information and data, whether or not in writing,
of a private or confidential nature concerning the business or financial affairs of the
Company is and will remain subject to a separate Proprietary Information and Inventions
Agreement (or the like) between you and the Company.
Please indicate your acceptance of the foregoing provisions of this severance agreement by
signing the enclosed copy of this letter agreement and returning it to the Company.
Very truly yours,
LIGAND PHARMACEUTICALS INCORPORATED
Xxxxx X. Xxxxxxxxxxx
Chairman, President and interim CEO
Chairman, President and interim CEO
ACCEPTED BY AND AGREED TO
Signature: |
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