Former Elan chief executive and chairman Donal Geaney has secured €3.5 million from the drug group in settlement of his legal action for some $16.33 million (€13.50 million) in damages over share options he claims were denied to him.

The settlement brings to a close Mr Geaney's relationship with a group he led at the time of its rapid growth in the dotcom era.

In talks that continued throughout yesterday, Mr Geaney agreed to withdraw his action for damages in the commercial division of the High Court. The case was scheduled to continue for three weeks.

"The settlement, with no admission of liability on the part of the company, was for a sum of €3.5 million plus an agreed sum for costs," Elan said in a statement last night. A spokeswoman for Mr Geaney said: "Elan will be contributing significantly towards his costs. He very much welcomes the settlement and is pleased to put the matter behind him."

The two sides began talks over the weekend in advance of a hearing before Mr Justice Peter Kelly yesterday morning, which was to open the case in the commercial division of the court.

The judge had agreed at that hearing to adjourn the proceedings until this morning after Michael Collins SC for Elan consented to a request for such an adjournment from Paul Gardiner SC, who was acting for Mr Geaney.

Mr Geaney led Elan in the period that saw it became the most valuable stock on the Dublin exchange before its value collapsed in the midst of a Securities & Exchange Commission accounting practices investigation.

He is chairman of the National Pensions Reserve Fund and chairman of the Irish Aviation Authority. He also sits on the court of Bank of Ireland.

Mr Geaney claimed he was entitled to options to buy 1.15 million Elan shares at $24 and options to buy 150,000 shares at $37 for two years after his departure from the group last July.

Elan claimed the options were valid for only 90 days after Mr Geaney left the group. He took his action last October after Elan deemed that the options had expired.

Mr Geaney claimed he had a telephone conversation after his removal from office, with Elan chairman Dr Garo Armen and another director, Dan Tully, a former head of Merrill Lynch.

He claimed Dr Armen confirmed he would be treated in the same manner as other senior executives who left or would be leaving the company.

The effect of such a commitment was that he would have 24 months from the date of the termination of his employment in which to exercise his share options.

Elan denied this, claiming Mr Geaney was granted a new two-year contract, with the relationship being severed at the end of the contract. It said there was never a negotiation in respect of extending the option exercise after the contract ended.

Mr Geaney was in court yesterday. He is ill and, to facilitate that illness, the court had planned to sit daily from 10am to 1pm except in situations when his presence was not required.

When Mr Justice Kelly asked whether the adjournment would be of any benefit to the court, Mr Gardiner said he believed "a very considerable benefit" would be derived. He added that he could not put it any further. Mr Collins said they would not apply for the adjournment unless they thought it would be of benefit.

The judge said there had been ample opportunity before yesterday morning for discussions.