<PAGE>
EXHIBIT 10.5
October 6, 2005
Josefina T. Elchico
La Jolla Pharmaceutical Company
6455 Nancy Ridge Drive
San Diego, California 92121
Dear Jessie,
In order to
continue to retain your services and to incentivize you to
continue as an employee, subject to the
terms of this letter agreement (this
"Agreement"), La Jolla Pharmaceutical
Company (the "Company") hereby offers to
pay to you a success bonus, the payment of
which is conditioned upon the
Company's achievement of the strategic
objectives identified herein.
1. Strategic
Objectives. As part of this Agreement, you agree to continue
to make a valuable contribution to the
Company and to assist the Company with
the assessment and implementation of the
strategic alternatives the Company may
choose to pursue and to continue to
contribute to the development of Riquent(R)
and the Company's other drug development
efforts. You also agree to continue to
work towards closing the transactions
contemplated by that certain Securities
Purchase Agreement, dated of even date
herewith (the "Purchase Agreement").
2. Incentive
Elections. On or prior to October 19, 2005 (the "Election
Deadline"), you agree to elect which
Incentive Election (defined below) will be
awarded to you following the closing of the
transactions contemplated by the
Purchase Agreement (the "Closing") by
delivering to the Vice President of
Finance an executed election notice in
substantially the form of Exhibit A
attached hereto (the "Election Notice").
"Incentive Election" means,
collectively, the following:
(a) Incentive Election #1. If you
elect Incentive Election #1, you will
receive $50,500.00 (the "Closing Cash Amount") in cash within two
days
after the Closing. On the 180th day after the Closing, subject
to
Section 7, you will receive an additional incentive payment in
cash
equal to the Closing Cash Amount (the "Second Cash Payment").
(b) Incentive Election #2. If you
elect Incentive Election #2, you will
receive an amount equal to the Closing Cash Amount within two
business
days after the Closing. In addition, you will receive 67,333 shares
of
restricted stock under the La Jolla Pharmaceutical Company 2004
Equity
Incentive Plan (the "Plan"). The shares will be issued as soon
as
practicable after the Closing and, subject to Section 8, the
Company's
repurchase right with respect to such shares will lapse with
respect
to all of the shares on the one year anniversary of the
Closing.
(c) Incentive Election #3. If you
elect Incentive Election #3, you will
receive 134,667 shares of restricted stock under the La Jolla
Pharmaceutical Company 2004 Equity Incentive Plan. The shares will
be
issued as soon as practicable after the Closing and, subject to
Section 8, the Company's repurchase right with respect to such
<PAGE>
shares will lapse with respect to all of the shares on the one
year
anniversary of the Closing.
3. Gross-Up.
(a) In the event
that you elect Incentive Election #2 or Incentive Election
#3, the Company will pay you an additional
amount in cash (the "Gross-Up
Amount"). Subject to the Section 3(b), the
Gross-Up Amount will be (i) equal to
the amount of taxes that would be payable
by you with respect to your receipt of
shares of restricted stock as if you had
made an election under Section 83(b) of
the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) calculated
using the maximum federal and state tax
rates, and (iii) based on the fair
market value of the shares on the date of
grant. Although the calculation of the
Gross-Up Amount assumes that you will make
an election under Section 83(b) of
the Code, nothing herein shall require you
to make an election under Section
83(b) of the Code, and, for the sake of
clarity, even if you make no such
election, the Company will pay you the
Gross-Up Amount within five business days
of the date of the grant of shares of
restricted stock.
(b)
Notwithstanding Section 3(a) to the contrary, your Gross-Up Amount
may
be reduced if the payment of the Gross-Up
Amount to you plus the amount of the
cash bonuses paid or to be paid by the
Company pursuant to all of the other
Retention Agreements entered into by the
Company with other employees of the
Company as of the date hereof (the "Other
Retention Agreements") plus the amount
of any other gross-up amounts paid by the
Company pursuant to the Other
Retention Agreements exceeds $1,013,770 in
the aggregate (the "Maximum Retention
Payout Amount"). In the event that the
Maximum Retention Payout Amount would be
exceeded, your Gross-Up Amount, and each
other gross-up amount payable to other
employees pursuant to the Other Retention
Agreements, will be reduced by the
percentage (which percentage shall be equal
for all employees) that would cause
the sum of the total gross-up payments
(including your Gross-Up Payment) made by
the Company pursuant to the Other Retention
Agreements plus the total cash
bonuses paid or to be paid by the Company
pursuant to the Other Retention
Agreements not to exceed the Maximum
Retention Payout Amount.
(c) You
acknowledge and agree that you will owe taxes on the Gross-Up
Amount and that the Company will not gross
you up for such amount of taxes.
4. Default. If
you do not deliver the Election Notice to the Vice President
of Finance by the Election Deadline, then
you will be deemed to have chosen
Incentive Election #1 (the "Default
Election") and you will receive an amount
equal to the Closing Cash Payment within
two days after the Closing and, subject
to Section 7, an additional incentive
amount equal to the Closing Cash Payment
on the 180th day after the Closing.
5. Company
Obligations. The Company's obligations hereunder to make
payments in cash or to issue shares of
restricted stock is subject to, and
conditioned upon, the consummation of the
transactions contemplated by the
Purchase Agreement. If the Closing does not
occur, the Company shall have no
obligation to make any payments to you and
shall not be required to issue any
shares of stock to you.
2
<PAGE>
6. Issuance of
Shares.
(a) The
Company's obligation to issue you shares of restricted stock is
subject to: (a) the consummation of the
transactions contemplated by the
Purchase Agreement; (b) there being a
sufficient number of shares available for
issuance under the Plan and under the
Certificate of Incorporation of the
Company (the "Certificate"); (c) the Plan
being amended to allow for the
Company's repurchase restrictions to lapse
on the one year anniversary of the
Closing; and (d) compliance with (and the
amendment of, if necessary) the
limitation on the number of shares issuable
to any single person in a calendar
year contained in the Plan.
(b) In the event
that there are not a sufficient number of shares
authorized under the Plan or the
Certificate to enable the Company to issue the
shares on the Closing, then you agree that,
instead of receiving shares under
Incentive Election #2 or Incentive Election
#3, you will be deemed to have made
the Default Election and will receive the
benefits set forth in Incentive
Election #1.
(c) The
consideration given by you for shares issued to you pursuant to
the
terms of this Agreement will be deemed to
be the services provided by you to the
Company between the date hereof and the
date upon which the shares are issued to
you and shall, for purposes of the Delaware
General Corporation Law, be deemed
to be equal to at least $0.01 per share
issued to you.
7. Acceleration
of Cash Payments. With respect to Incentive Election #1, if
you
