The chief executive of struggling biotech firm Elan has negotiated improved severance terms with the company in the event of a takeover.
Any change of control at the helm of the Irish drugs company that leads to Kelly Martin's dismissal as chief executive will cost the company almost $5 million (€4.11 million).
Under his initial contract, Mr Martin was entitled to severance payments amounting to two times his salary and bonus in the event of his "involuntary dismissal". However, a new agreement filed with the US Securities and Exchange Commission (SEC) this week has extended the period of severance payments to three years.
The deal, signed only last week, amends Mr Martin's position in the event of a "change in control" at the company. It will be triggered should Mr Martin's employment be terminated following such a move.
The improved terms will also be activated should the company enter an agreement up to 90 days after his removal from office that leads to a change of control of the company.
Speculation about Elan's future mounted after the company's decision - taken jointly with its partner Biogen in February - to suspend sales of Tysabri, the multiple sclerosis (MS) treatment on which the company had pinned its future.
Mr Martin has consistently stated his intention to remain at the helm of the company.
He has also repeatedly expressed his confidence that Tysabri, which had shown itself to be far more effective than previous treatments for MS, would return to the market.
Elan and Biogen have recently concluded a review of data on more than 2,000 multiple sclerosis patients after three patients taking part in trials of Tysabri contracted a rare and generally fatal neurological condition - progressive multifocal leukoencephalopathy (PML).
The companies expect to meet officials from the regulator, the Food and Drug Administration, in the next month to determine the prospects for a resumption of sales of the drug. Both groups have taken steps to prepare for a resumption of patient trials of the drug, which were also suspended in February.
Mr Martin was appointed in January 2003 as Elan recovered from an earlier stock market collapse triggered by concerns over its accounting, which themselves raised concerns about the company's future independence.
The agreement filed this week contains a new provision covering the payment of legal fees in the event of a dispute over the severance terms.
It also modifies certain other elements of Mr Martin's pay package.
The Elan chief will retain rights to benefits under the company's health and medical plans for the full severance period or until such time as he takes up other employment.
He will be able to exercise any outstanding share options immediately upon "involuntary termination" of his contract and for two years thereafter.
The agreement provides that Elan will have to continue paying his severance benefits to his estate in the event of his death within the three-year period following any dismissal as a result of a change in control at the company.
