UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 3)
TARGANTA THERAPEUTICS CORPORATION
(Name of Subject Company)
TARGANTA THERAPEUTICS CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, par value $0.0001 per share
(Title of Class of Securities)
87612C100
(CUSIP Number of Class of Securities)
Daniel S. Char
Vice President, General Counsel and Secretary
222 Third St., Suite 2300
Cambridge, MA 02142
(617) 577-9020
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
With a copy to:
Marc A. Rubenstein, Esq.
Ropes & Gray LLP
One International Place
Boston, Massachusetts 02110
(617) 951-7000
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¨
Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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Purpose of the Amendment
This Amendment No. 3 (Amendment No. 3) amends the Solicitation/Recommendation Statement on
Schedule 14D-9, as originally filed with the Securities and Exchange Commission (SEC) on January
27, 2009 and as amended by Amendment No. 1 filed with the SEC on February 4, 2009 and Amendment No.
2 filed with the SEC on February 11, 2009 (the Schedule 14D-9) by Targanta Therapeutics
Corporation, a Delaware corporation (the Company). The Schedule 14D-9 and this Amendment No. 3
relate to the tender offer by Boxford Subsidiary Corporation, a Delaware corporation (the
Purchaser) and a wholly-owned subsidiary of The Medicines Company, a Delaware corporation (the
Parent), as disclosed in a Tender Offer Statement on Schedule TO, dated January 27, 2009 (as
amended and supplemented from time to time, the Schedule TO), filed by the Purchaser and the
Parent, to purchase all the outstanding shares of common stock, par value $0.0001 per share, of the
Company for consideration of (1) $2.00 per common share, net to the seller in cash, plus (2) the
contractual right to receive up to an additional $4.55 per common share in contingent cash payments
if specified regulatory and commercial milestones are achieved within agreed upon time periods,
upon the terms and subject to the conditions set forth in the Offer to Purchase, dated January 27,
2009 (the Offer to Purchase) and supplemented on February 13, 2009 (the Supplement), and in the
related Letter of Transmittal, which together with the Offer to Purchase constitutes the Offer.
The Offer to Purchase and the Letter of Transmittal were filed as Exhibits (a)(2) and (a)(3),
respectively, to the Schedule 14D-9. The Supplement is filed as Exhibit (a)(14) to this Amendment
No. 3.
The Offer is being made pursuant to the Agreement and Plan of Merger dated as of January 12, 2009
(the Merger Agreement), among the Company, the Purchaser and the Parent, pursuant to which,
following the consummation of the Offer and the satisfaction or waiver of certain conditions, the
Purchaser will be merged with and into the Company, with the surviving entity, the Company,
becoming a direct wholly-owned subsidiary of the Parent.
Capitalized terms used, but not otherwise defined, in this Amendment No. 3 shall have the meanings
given in the Schedule 14D-9. All information in the Schedule 14D-9 is incorporated by reference in
this Amendment No. 3, except that such information is hereby amended and supplemented to the extent specifically
provided herein.
Item 4. The Solicitation or Recommendation.
Item 4(a) of Schedule 14D-9 is hereby amended by replacing the first full paragraph on page 14 in
its entirety with the following:
From the period between December 10, 2008 and December 21, 2008, representatives of Leerink
Swann contacted 22 potential strategic partners to inform them that the Company would be interested
in setting up meetings with interested parties to explore acquisition opportunities or other
opportunities to develop oritavancin. The Companys management and representatives of Leerink Swann
identified these potential strategic partners based on the fact that these companies may have the
financial resources necessary to consummate an acquisition transaction with the Company, or
alternatively, to provide additional capital through a collaboration or other arrangement and
either had been previously contacted by the Company regarding a strategic partnership with the
Company or were known to have expressed interest in pursuing business development opportunities for
hospital-based therapies. None of the contacted parties indicated an interest in acquiring the
Company or in any other opportunities to collaborate with respect to oritavancin, although one
party indicated an interest in meeting with the Company during the upcoming JPMorgan Chase
Healthcare Conference in early January of 2009.
Item 4(a) of Schedule 14D-9 is hereby amended by replacing the second full paragraph on page 15 in
its entirety with the following:
On December 17, 2008, the Company Board conducted a telephonic meeting and discussed the
December 16 Proposal, including the costs associated with temporarily retaining commercialization
and development employees of interest to the Parent, the date on which the Companys management
estimated that it would exhaust its existing cash resources and the Parents requirement that the
Company enter into an exclusive negotiations arrangement until January 4, 2009. Attendees were Mr.
Leuchtenberger, Mr. Bancel, Mr. Bohlin, Mr. Courtney, Ms. Crane and Dr. Gordon, other
representatives of the Company and its financial and legal advisors. The Company Board established
a Transaction Committee as an ad hoc committee of the Company Board to evaluate the potential
transaction and elected Mr. Leuchtenberger, Mr. Bohlin, Mr. Courtney and Ms. Crane as members of
the committee. At the meeting, a representative of Leerink Swann indicated to the Company Board
that he believed it was unlikely that the Company would receive any serious indications of interest
from other parties prior to the upcoming
JPMorgan Chase Healthcare Conference and that the likelihood of a near-term financing was
uncertain. The Company Board considered the importance of a near-term financing to the value and
continued survival of the Company, including the near-term retention of the Companys key
development and commercialization employees since capabilities of those employees were important to
maintaining the value of the Company. A representative of Leerink Swann stated his belief that,
based on prior experience generally with the Parent and specifically in which Leerink Swann had
provided financial advisory services to a client in negotiating a potential transaction with the
Parent in which the Parent had made similar exclusivity demands as a condition of moving forward
with respect to the transaction, it was unlikely that the Parent would agree to work toward an
acquisition of the Company in the absence of an exclusivity arrangement. The Company Board
discussed the low probability that the Company would receive any serious expressions of interest
from other parties during the exclusivity period requested by the Parent. A representative of
Leerink Swann updated the Company Board on efforts to solicit interest and arrange meetings between
the Company and prospective acquirers at the upcoming JPMorgan Chase Healthcare Conference and
indicated that while several parties had expressed some interest in meeting with the Company, it
was too early to determine their levels of interest in acquiring the Company.
Item 4(a) of Schedule 14D-9 is hereby amended by replacing the last full paragraph on page 16 in
its entirety with the following:
On December 21, 2008, there were further negotiations between the Company and the Parent on
the terms of the proposal, including the terms of the exclusivity arrangements, the size of the
termination fee and other deal protection provisions. The Parent insisted on the termination fee
as proposed but agreed to remove the force the vote provision that required the Company to submit
the transaction to the stockholders and to the proposed exclusivity provisions providing for
exclusivity only until 5:00 p.m. EST on January 9, 2009. Additionally, the Parent agreed to allow
Leerink Swann to schedule meetings with third parties at the upcoming JPMorgan Chase Healthcare
Conference on the Companys behalf if a definitive agreement had not been entered into between the
Company and the Parent prior to 11:59 p.m. EST on January 6, 2009 (the December 21 Proposal).
With these modifications, the Transaction Committee of the Company Board voted to accept the
December 21 Proposal.
Item 4(a) of Schedule 14D-9 is hereby amended by replacing the first full paragraph on page 20 in
its entirety with the following:
Following the meeting of the Transaction Committee of the Company Board, Mr. Leuchtenberger
telephoned Dr. Meanwell to inform him that the Transaction Committee was prepared to accept the
economic terms for a transaction as set forth in the January 8 Proposal with certain modifications.
Later that night, Mr. Eldridge communicated to members of the Parents management and business
development team that, while the Transaction Committee had approved the economic terms set forth in
the January 8 Proposal, the Company decided not to sign the January 8 Proposal in order to allow
Leerink Swann to continue to schedule meetings with third parties that might be interested in
acquiring the Company during the week of January 12. Mr. Eldridge also informed the Parent that the
Transaction Committee had agreed to extend the exclusivity period until 11:59 p.m. EST on January
11, 2009. Mr. Eldridge further reported that the Transaction Committee requested changes to the
January 8 Proposal to modify the contingent cash payment payable upon EMEA approval of a Marketing
Authorization Application for the use of oritavancin in the treatment of cSSSI to include a cash
payment equal to $0.75 per Share if such approval were to occur after 2009 but prior to July 1,
2010 and reduce the termination fee to $4 million.
Item 4(b) of Schedule 14D-9 is hereby amended by adding the following sentence to the end of the
first full paragraph under the heading Historical Stock Trading Analysis on page 28:
Leerink Swann selected a discount rate of 15% in this analysis based on its calculation of the
weighted average cost of capital for a group of publicly-traded, commercial-stage specialty
pharmaceutical companies that Leerink Swann determined were representative of the profile of the
Company, assuming the successful clinical development and commercialization of oritavancin.
Item 4(b) of Schedule 14D-9 is hereby amended by adding the following sentence after the table in
the second full paragraph on page 29:
To obtain the specified reference range of $15.0 to $30.0 (mms), Leerink Swann used the following
mean, median, minimum and maximum equity values:
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Equity Value
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Per Share
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Mean
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$27.1 million
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$
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1.29
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Median
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$18.0 million
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$
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0.86
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Min
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$4.1 million
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$
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0.20
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Max
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$65.2 million
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$
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3.11
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Item 4(b) of Schedule 14D-9 is hereby amended by replacing the last paragraph beginning on page 29
in its entirety with the following:
Leerink Swann estimated a range of values for the Company based upon the discounted present
value of the Companys projected stock price in 2013. This analysis was based upon the Probability
Projections on a fully taxed and fully diluted basis, including that the Company would complete the
Assumed Equity Financing and issue $25 million of debt securities bearing 15% interest annually,
each of which Company management estimated was required in order to achieve its projections. In
performing this analysis, Leerink Swann utilized discount rates of 12.5% to 17.5% and price to
earnings multiples of 15.0x to 25.0x in 2014, referred to as One Year Forward P/E Multiple, and
12.5x to 17.5x in 2015, referred to as Two Year Forward P/E Multiple. Leerink Swann selected a
discount rate of 12.5% to 17.5% in this analysis based on its calculation of the weighted average
cost of capital for a group of publicly-traded, commercial-stage specialty pharmaceutical companies
that Leerink Swann determined were representative of the profile of the Company assuming the
successful clinical development and commercialization of oritavancin. The range was derived from a
range of historical market risk premiums attributed to small capitalization companies by an
industry expert familiar with capital market expectations. These multiples were derived based on
public filings and other publicly available information from the following ten selected publicly
traded high-growth, profitable biopharmaceutical companies. The multiples were derived using 2009
estimated earnings (the 1-Year Forward P/E range) for these companies.
Item 4(b) of Schedule 14D-9 is hereby amended by adding the following sentence after the table on
page 30:
To obtain the specified implied per share equity value ranges, Leerink Swann used the following
mean, median, minimum and maximum price to earnings multiples derived from the ten selected
companies:
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P/E 2009E
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Mean
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23.1x
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Median
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19.9x
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Min
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12.0x
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Max
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40.3x
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Item 4(b) of Schedule 14D-9 is hereby amended by adding the following sentences to the end of the
first paragraph on page 32:
Leerink Swann selected a discounted annual rate of 12.5% to 17.5% in this analysis based on its
calculation of the weighted average cost of capital for a group of publicly-traded,
commercial-stage specialty pharmaceutical companies that Leerink Swann determined were
representative of the profile of the Company, assuming the successful clinical development and
commercialization of oritavancin. The range was derived from a range of historical market risk
premiums attributed to small capitalization companies by an industry expert familiar with capital
market expectations.
Item 8. Additional Information.
Item 8 of Schedule 14D-9 is hereby amended by replacing the existing Item 8(g) in its entirety with
the following:
(g) Recent Developments.
On January 21, 2009, a lawsuit (the Action) was filed in the Superior Court for Suffolk
County, Massachusetts against the Company, each member of the Companys Board, the Parent and the
Purchaser. The Action is brought by Martin Albright and Vito Caruso, who claim to be stockholders
of the Company, on their own behalf, and seeks certification as a class action on behalf of all of
the Companys stockholders, except the defendants and their affiliates. The complaint alleges that
the defendants breached their fiduciary duties, and/or aided and abetted the breach of fiduciary
duties, owed to the Companys stockholders in connection with the Offer and that the consideration
being offered pursuant to the Offer is unfair. The complaint seeks injunctive relief enjoining the
Offer, or, in the event the Offer has been consummated prior to the courts entry of final
judgment, rescinding the Offer. The complaint also seeks an accounting for all damages and an
award of costs, including a reasonable allowance for attorneys and experts fees and expenses.
The plaintiffs amended the complaint on February 2, 2008 to allege that this Schedule 14D-9 is
materially misleading and/or incomplete. On February 17, 2009, the plaintiffs filed a Notice of
Motion and Motion for Preliminary Injunction, a Memorandum in Support of Motion for Preliminary
Injunction and affidavits in support of the motion from Juan E. Monteverde and Matthew Morris.
While the defendants believe that the Action is entirely without merit and that they have
valid defenses to all claims, in an effort to minimize the cost and expense of any litigation, on
February 19, 2009, the defendants entered into a memorandum of understanding (MOU) with the
parties to the Action providing for the settlement of the Action. Subject to court approval and
further definitive documentation, the MOU resolves the allegations by the plaintiffs against the
defendants in connection with the Merger Agreement and the transactions contemplated by the Merger
Agreement, including without limitation the Offer and the Merger, and provides a release and
settlement by the purported class of the Companys stockholders of all claims against the
defendants and their affiliates and agents in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement, including without limitation the Offer and the
Merger. In exchange for such release and settlement, pursuant to the terms of the MOU, the parties
agreed, after arms length discussions between and among the parties, that the Company would
provide additional supplemental disclosures to its Schedule 14D-9 (such disclosures being set forth
above). The Company believes that the supplemental disclosures are not required to be disclosed under
federal securities laws or under state law and are not material as a matter of law or in the
context of a stockholders decision to tender Shares into and accept the Offer. The defendants have also agreed not to oppose any fee application by plaintiffs counsel
that does not exceed $250,000. The settlement, including the payment by the Company or any successor
thereto of any such attorneys fees, is also contingent upon, among other things, the Merger
becoming effective under Delaware law. In the event that the settlement is not approved and such
conditions are not satisfied, the defendants will continue to vigorously defend the Action.
The foregoing summary is qualified in its entirety by reference to the complaint, the amended
complaint, filings related to the complaints and the Memorandum of Understanding, filed as Exhibits
(e)(9) through (e)(15) hereto, and are incorporated herein by reference.
Item 9. Exhibits.
Item 9 of Schedule 14D-9 is hereby amended by adding the following exhibits:
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Exhibit No.
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Description
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(a)(14)
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Supplement dated February 13, 2009 to the Offer to
Purchase dated January 27, 2009 (incorporated by
reference to Exhibit (a)(1)(G) to Amendment No. 3
to the Schedule TO of the Parent and the Purchaser
filed with the SEC on February 13, 2009).
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(e)(11)
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Notice of Motion and Motion for Preliminary
Injunction filed on February 17, 2009 in the
Superior Court for Suffolk County, Massachusetts.
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(e)(12)
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Memorandum in Support of Motion for Preliminary
Injunction filed on February 17, 2009 in the
Superior Court for Suffolk County, Massachusetts.
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(e)(13)
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Affidavit of Juan E. Monteverde filed on February
17, 2009 in the Superior Court for Suffolk County,
Massachusetts.
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(e)(14)
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Affidavit of Matthew Morris filed on February 17,
2009 in the Superior Court for Suffolk County,
Massachusetts.
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(e)(15)
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Memorandum of Understanding between the Company,
the Parent and the plaintiffs, dated as of
February 19, 2009.
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Annex I Information Statement
The compensation table for Pierre E. Etienne under Potential Payment upon Termination or Change of
Control on page Annex I-32 is hereby amended by replacing the existing table in its entirety with
the following:
Pierre E. Etienne, M.D., Former Chief Development Officer
Dr. Etienne left the Company on December 26, 2008, entitling him to receive
continuation of his annual base salary of $309,000 for the 12 months following his date of
departure.
Additionally, the compensation table for Mona L. Haynes under Potential Payment upon Termination or
Change of Control on page Annex I-34 is hereby amended by replacing the existing table in its
entirety with the following:
Mona L. Haynes, Chief Commercial Officer
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Involuntary
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termination or
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resignation for
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good reason in
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connection with
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Termination not
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or following a
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for cause
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change of control
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Death
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Disability
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Base Salary
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$
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137,500
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(1)
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$
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275,000
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(1)
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$
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137,500
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(1)
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$
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137,500
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(1)
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Bonus
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$
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68,750
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(2)
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$
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68,750
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(2)
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$
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68,750
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(2)
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Benefits
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$
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10,721
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(3)
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$
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21,855
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(3)
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$
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10,721
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(3)
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$
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10,721
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(3)
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Number of Stock Options
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143,000
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(4)
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Value
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(5)
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Total
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$
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216,971
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$
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365,605
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$
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148,221
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$
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216,971
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(1)
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Continuation of base salary for 6 months following termination. If
termination occurs within 24 months following a change of control,
continuation of base salary will be extended from 6 months to 12
months, resulting in aggregate payments of salary continuation of
$275,000.
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(2)
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Represents the maximum bonus of 25% of base salary. Pursuant to her
employment agreement, Ms. Haynes would be eligible to receive that
portion of any bonus (on a pro rated basis) that the Board of
Directors would have awarded to her as of her termination date.
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(3)
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Represents the cost of COBRA premiums (less employee portion of
premiums) for 6 months following termination. If termination occurs
within 24 months following change of control, such payment period
shall be extended from 6 to 12 months, resulting in an aggregate cost
of $21,855.
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(4)
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All of Ms. Haynes stock options would become fully vested if she
terminates her employment with the Company for good reason or if the
Company terminates her employment without cause at any time following
a change of control or without cause within 30 days prior to a change
of control. All Executive Officers and Directors are forfeiting any
Company Stock Options that are not otherwise terminated pursuant to
the terms of the Merger Agreement.
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(5)
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Assumes a termination event on December 31, 2008 when the closing price of the Shares was $0.61.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information
set forth in this statement is true, complete and correct.
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Dated: February 20, 2009
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TARGANTA THERAPEUTICS CORPORATION
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By:
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/s/ Daniel S. Char
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Daniel S. Char
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Vice President, General Counsel and Secretary
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