Attached files
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| EX-10.1 - EXHIBIT 10.1 - PDL BIOPHARMA, INC. | ex10_1.htm |
UNITED STATES
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): May 21, 2011
PDL BioPharma, Inc.
(Exact name of Company as specified in its charter)
000-19756
(Commission File Number)
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Delaware
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94-3023969
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(State or Other Jurisdiction of Incorporation)
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(I.R.S. Employer Identification No.)
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932 Southwood Boulevard
Incline Village, Nevada 89451
(Address of principal executive offices, with zip code)
(775) 832-8500
(Company’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Severance Agreement
On May 21, 2011, the Board of Directors (the “Board”) of PDL BioPharma, Inc. (the “Company”) authorized the Company to enter into severance agreements with each of its executive officers (the “Severance Agreement”) that provide for certain compensation, benefits and accelerated vesting rights if the executive officer’s employment is terminated without Cause or he or she resigns for Good Reason, as those terms are defined in the Severance Agreement.
Specifically, the Severance Agreement provides that, upon termination of the executive officer’s employment without Cause or his or her resignation for Good Reason, the executive officer will be entitled to receive, subject to the execution of a general release of all claims against the Company, the following severance payment and benefits: (i) a percentage of the executive officer’s annual base salary, (ii) a percentage of the executive officer’s target annual bonus for the year in which the separation occurs, (iii) payment of the executive officer’s COBRA premiums, if any, for a certain number of months, (iv) acceleration of vesting of a pro-rated amount of the restricted stock awards granted pursuant to any outstanding long-term incentive plan, including the 2012 LTIP (as defined and described below), (v) payment of any accrued but unpaid dividends or other distributions, plus interest, paid on the restricted stock awards which are accelerated pursuant to clause (iv) and (vi) payment of a pro-rated amount of the executive officer’s target cash payment that the executive officer is eligible to earn under any long-term incentive plan, including the 2012 LTIP. Any severance payments under the Severance Agreement will be paid in a lump sum within 5 days after the effective date of the executive officer’s release of claims.
The amount of severance each executive officer is eligible to receive pursuant to clauses (i), (ii) and (iii) above is set forth in the chart below:
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Name
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Title
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% of Annual
Base Salary
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% of Target
Annual Bonus
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Number of Months of
COBRA Premiums
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John P. McLaughlin
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President and Chief Executive Officer
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100%
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100%
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12
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Christine R. Larson
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Vice President and Chief Financial Officer
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100%
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75%
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12
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Christopher L. Stone
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Vice President, General Counsel and Secretary
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100%
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75%
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12
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Caroline Krumel
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Vice President and Principal Accounting Officer
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50%
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50%
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6
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Danny J Hart, Jr.
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Associate General Counsel and Assistant Secretary
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50%
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50%
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6
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The Severance Agreement has no specified term and may be terminated by the Company upon 6 months notice. In the event of a change in control, the Severance Agreement may not be terminated until 24 months following the date of the change in control. The description of the Severance Agreement is not complete and is qualified in its entirety by reference to the full text of the Severance Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
2012 Long-Term Incentive Plan
On May 21, 2011, the Board approved a long-term incentive plan to compensate, retain and incentivize its executive officers (the “2012 LTIP”). The Board designated the effective date of the 2012 LTIP as January 1, 2011.
Under the 2012 LTIP, each executive officer is eligible for awards consisting of (i) restricted stock and (ii) a cash payment. Each executive officer’s restricted stock award was granted on May 23, 2011, and the number of shares underlying the restricted stock award was determined based on the closing price of the Company’s common stock on May 23, 2011, which was $6.59 per share.
The target cash payment and the restricted stock award for each executive officer are set forth in the chart below:
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Name
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Title
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Target Cash
Payment
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Value of
Restricted
Stock Award
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Number of Shares
Underlying Restricted
Stock Award
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John P. McLaughlin
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President and Chief Executive Officer
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$469,000
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$201,000
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30,501
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Christine R. Larson
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Vice President and Chief Financial Officer
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$281,400
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$120,600
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18,300
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Christopher L. Stone
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Vice President, General Counsel and Secretary
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$258,000
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$110,600
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16,783
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Caroline Krumel
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Vice President and Principal Accounting Officer
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$70,400
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$30,200
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4,583
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Danny J Hart, Jr.
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Associate General Counsel and Assistant Secretary
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$58,600
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$25,100
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3,809
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Subject to the acceleration provisions set forth in the Severance Agreement described above and the 2012 LTIP described below, the restricted stock award will fully vest on December 31, 2012, provided the executive officer remains employed by the Company through such date. Dividend payments and other distributions made on the restricted stock during the vesting period of the restricted stock will accrue through the vesting period and will be paid, plus interest, to the executive officer upon vesting of the restricted stock award. In the event of a change in control, the 2012 LTIP provides that vesting of the restricted stock award, including any accrued but unpaid dividends or other distributions, plus interest, and the target cash payment, including any Adjustments (as defined below) earned on the target cash payment, will accelerate and pay in connection with the change in control.
Payment of the target cash payment under the 2012 LTIP will be made on or as soon as practicable after December 31, 2012, provided the executive officer remains employed by the Company through December 31, 2012. In addition, if any of the performance goals adopted by the Board set forth below are achieved on or before December 31, 2012, the executive officer may receive an additional cash payment equal to a percentage of the target cash payment (the “Adjustment”). The amount of the Adjustment and the achievement of each performance goal will be determined by the Compensation Committee of the Board, in its sole discretion, provided that the aggregate maximum cash payment that any executive officer may receive under the 2012 LTIP may not exceed two times his or her target cash payment. The Adjustment for each performance goal is set forth in the chart below:
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Performance Goal
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Adjustment
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Protection of European Union Queen et al. Patent Rights
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40 | % | ||
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Sale or Merger of Company
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20-50 | % | ||
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Recapitalization of Company
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10 | % | ||
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Royalty Rights Acquisition
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30-50 | % | ||
The following examples demonstrate the calculation of the Adjustments.
If, at December 31, 2012, Mr. McLaughlin remains employed by the Company and the Company has successfully protected its European Union Queen et al. patent rights and completed its recapitalization, then Mr. McLaughlin’s cash payment will be equal to $703,500 ($469,000 (employment through December 31, 2012) + 187,600 (EU intellectual property) + $46,900 (recapitalization) = $703,500).
Alternatively, if, at December 31, 2012, Mr. McLaughlin remains employed by the Company and the Company successfully achieved maximum performance of all of the foregoing performance goals on or before December 31, 2012, then, while the cash payment would be equal to $1,172,500 ($469,000 (employment through December 31, 2012) + 187,600 (EU intellectual property) + $234,500 (merger) + $46,900 (recapitalization) + $234,500 (royalty rights) = $1,172,500), the maximum cash payment would be limited to two times the target cash amount or $938,000 (two times his target cash payment of $469,000).
Item 9.01 Financial Statements and Exhibits.
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Exhibit No.
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Description
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10.1
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Form of Executive Officer Severance Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PDL BIOPHARMA, INC.
(Company)
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By:
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/s/ John P. McLaughlin
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John P. McLaughlin
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President and Chief Executive Officer
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Dated: May 26, 2011
EXHIBIT INDEX
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Exhibit No.
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Description
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Form of Executive Officer Severance Agreement
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