EXHIBIT 10.284
[Ligand Letterhead]
March 11, 2005
Xxxxxx Negro-Xxxxx, M.D., Ph.D.
Executive Vice President, Research and
Development, & Chief Scientific Officer
LIGAND PHARMACEUTICALS INCORPORATED
00000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Dear Xxxxxx:
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 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
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March 11, 2005
Page 3
(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:
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March 11, 2005
Page 4
(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
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March 11, 2005
Page 5
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.
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March 11, 2005
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16. 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 continue to be paid you only for so long
as you remain available for any consulting services required of you under Part
Two, Paragraph 4 and abide by the restrictive covenants set forth in Part Two,
Paragraph 5.
1. Severance Payments. You will receive severance payments from the Company
for a period of twelve (12) months following your Involuntary Termination
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 equal installments
over the twelve-month period in accordance with the Company's normal
payroll practices and subject to all applicable withholding taxes. The
severance payments will immediately terminate if and only if (i) you
should cease to remain available for the consulting services required of
you under Section 4, or (ii) you fail to abide by the restrictive
covenants set forth in Section 5 . However, in the event your Involuntary
Termination occurs in connection with a Hostile Take-Over, your severance
payments will be paid to you in the form of a single lump sum amount
within thirty (30) days after such Involuntary Termination, and the
provisions of
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March 11, 2005
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Sections 4 and 5 of this Part Two will not apply.
2. Health Care Coverage. The Company will, at its expense, make any COBRA
payments for you and your eligible dependents in order to continue your
Health Care Coverage until the earlier of (i) twelve (12) months after the
effective date of your Involuntary Termination (other than a Termination
for Cause) or (ii) the first date that you are covered under another
employer's (or, in the event of rehire, the Company's) health benefit
program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such payments will be in
lieu of any other continued health care coverage to which you or your
dependents would otherwise be entitled pursuant to the requirements of
Code Section 4980B by reason of your termination of employment.
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 of twelve (12) months following your Involuntary
Termination until the end of the specified ten (10)-year option term. 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, you will make 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:
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March 11, 2005
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(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, in addition to the cessation of the
severance benefits provided you under this letter agreement and any
remedies available to the Company at law, be entitled to obtain 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 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. 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
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March 11, 2005
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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.
The full amount of your severance benefit under Paragraph 1 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
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March 11, 2005
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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 for a period of five (5) years from the date hereof.
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
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March 11, 2005
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provisions. This letter agreement incorporates the entire agreement
between you and the Company relating to the subject of severance benefits
and supersedes all prior agreements and understandings with respect to
such subject matter. 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.
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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
/s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
Chairman, President and CEO
ACCEPTED BY AND AGREED TO
Signature: /s/ Xxxxxx Negro-Xxxxx
Dated: 3/11/05
