EXHIBIT 10.243
INCENTIVE AGREEMENT
This incentive agreement (this "Agreement"), dated as of March 28,
2002, is by and among Monksland Holdings B.V., a Dutch corporation
("Monksland"), Elan International Services, Ltd., a Bermuda corporation ("EIS"),
and Ligand Pharmaceuticals Incorporated, a Delaware corporation ("Ligand").
RECITALS
WHEREAS, Ligand issued (i) to Monksland on March 1, 2000 a Zero Coupon
Convertible Senior Note due 2008 at the issue price of $20,000,000 (the "Note")
upon repayment of $20,000,000 of a $40,000,000 note originally issued on July
14, 1999 under a Securities Purchase Agreement, dated as of November 6, 1998 (as
amended, the "Purchase Agreement"), by and among Ligand, EIS and Elan
Corporation, plc, a public limited company organized under the laws of Ireland
("Elan"), and (ii) to EIS, an Affiliate of Monksland (as defined in Rule 501 of
Regulation D under the Securities Act), on November 22, 1999 an Amended and
Restated Series X Warrant for the Purchase of 91,406 Shares of Common Stock of
Ligand (the "Warrant"); and
WHEREAS, Ligand has requested that Monksland convert the Note into,
and that EIS exercise the Warrant for, shares of Common Stock, and Monksland
agrees to so convert the Note plus $ 4,736,824 of accrued interest on the Note
into shares of Common Stock and EIS agrees to so exercise the Warrant for shares
of Common Stock.
NOW, THEREFORE, in consideration of the covenants and mutual
agreements set forth herein and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
Section 1. AGREEMENT TO ISSUE INCENTIVE SHARES.
In consideration for Monksland's agreement to convert all of the
aggregate issue price of the Note plus $4,736,824 of accrued interest into
Common Stock under the terms and conditions of the Note, as set forth on the
Conversion Notice for the Note, dated as of the date hereof, and for EIS's
agreement to exercise the Warrant in full for Common Stock under the terms and
conditions of the Warrant, as set forth in the Purchase Form for the Warrant,
dated as of the date hereof, Ligand will issue 102,151 shares of Common Stock
(the "Incentive Shares") to EIS, subject to the terms and conditions of this
Agreement.
Section 2. REPRESENTATIONS AND WARRANTIES OF LIGAND.
(i) Except as otherwise set forth in the Schedule of Exceptions (as updated
on March 28, 2002) attached hereto as EXHIBIT A, the representations and
warranties of Ligand contained in the Purchase Agreement that are qualified by
any Material Adverse Effect or materiality are true and correct in all respects
and the representations and warranties of Ligand contained in the Purchase
Agreement that are not so qualified are true and correct in all material
respects, in each case, on and as of the date hereof, except to the extent that
such representations and warranties expressly relate to an earlier date, and
Ligand has performed all covenants and agreements and satisfied all conditions
on its part to be performed or satisfied under the Purchase Agreement at or
prior to the date hereof;
(ii) As of the date hereof and since June 30, 1998, except as set forth in
the SEC Reports or the Schedule of Exceptions (as updated on March 28, 2002), no
event or development has occurred, and no information has become known, that,
individually or in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect;
(iii) The issuance of the Incentive Shares has not been enjoined
(temporarily or permanently);
(iv) Each of the Purchase Agreement, the New Registration Rights Agreement,
the License Agreement and, to the extent outstanding, the Securities, are, and
after giving effect to the issuance of the Incentive Shares, will be, valid and
enforceable against Ligand, except that (A) the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought and (B) any rights to indemnity or
contribution under the New Registration Rights Agreement may be limited by
federal and state securities laws and public policy considerations, and no event
that constitutes a breach of or a default under (or an event which, with notice
or passage of time or both would constitute a default under) this Agreement, the
New Registration Rights Agreement, the License Agreement or, to the extent
outstanding, the Securities, by Ligand has occurred and is continuing or, after
giving effect to the issuance and sale of the Incentive Shares, will have
occurred and be continuing;
(v) Under the Preferred Share Rights Agreement, dated as of September 13,
1996, between Ligand and Xxxxx Fargo Bank, N.A., as amended (the "Rights
Agreement"), no event has occurred that has caused or will cause, and none of
the execution of this Agreement or the consummation of the transactions
contemplated hereby, including the issuance of the Incentive Shares, will cause,
rights issued thereunder to become exercisable or a "Distribution Date" to
occur, assuming compliance by Elan and its Affiliates with the provisions of
Section 14(c) of the Purchase Agreement; and
(vi) The New Registration Rights Agreement has been duly amended to include
the Incentive Shares within the definition of Registrable Securities thereunder.
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Section 3. REPRESENTATIONS AND WARRANTIES OF EIS.
(i) EIS acknowledges that the issuance of the Incentive Shares will not be
registered under the Securities Act or any other applicable securities laws, and
that the Incentive Shares will be issued in transactions not requiring
registration under the Securities Act and, unless so registered, the Incentive
Shares may not be offered, sold or otherwise transferred except in compliance
with the registration requirements of the Securities Act or any other applicable
securities law, pursuant to an exemption therefrom or in a transaction not
subject thereto and in each case in compliance with the conditions for transfer
set forth in paragraph (iii) below;
(ii) EIS is outside of the United States and is not a "U.S. person" (as
such term is defined in Regulation S);
(iii) Until the expiration of the "one-year distribution compliance period"
within the meaning of Rule 903 of Regulation S, EIS will not sell or otherwise
transfer the Incentive Shares, except (i) to Ligand or its Subsidiaries, (ii)
pursuant to an effective registration statement that has been declared effective
under the Securities Act, (iii) in an offshore transaction in accordance with
Rule 904 of Regulation S or (iv) pursuant to any other available exemption from
the registration requirements of the Securities Act, including Rule 144. After
the expiration of such "one-year distribution compliance period," EIS will not
sell or otherwise transfer the Incentive Shares, except pursuant to registration
under the Securities Act or an available exemption therefrom and, in any case,
in accordance with the provisions of Regulation S and applicable state
securities laws;
(iv) EIS understands that the certificates representing the Incentive
Shares will, so long as appropriate, bear the legend set forth in clause (vi) of
Section 4(a) of the Purchase Agreement;
(v) EIS agrees that Ligand shall be entitled to make a notation on its
records and give instructions to any transfer agent of the Common Stock in order
to implement the restrictions on transfer set forth in the Purchase Agreement;
(vi) EIS (a) believes that it has received all information it considers
necessary or appropriate and has had an opportunity to ask questions and receive
answers from Ligand regarding the terms and conditions of the issuance and sale
of the Incentive Shares and the business, properties, prospects and financial
condition of Ligand; PROVIDED that this clause (vi) shall in no way limit or
modify the representations and warranties of Ligand set forth in Section 3 of
the Purchase Agreement or the right of EIS to rely thereon; (b) acknowledges
that it is a sophisticated investor and that an investment in the Incentive
Shares involves a high degree of risk; and (c) understands that the valuation
price of the Incentive Shares may or may not exceed the last publicly quoted per
share "asked" price of the Common Stock on the date hereof;
(vii) EIS will be acquiring the Incentive Shares for its own account for
the purpose of
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investment and not (a) with a view to, or for sale in connection with, any
distribution thereof or (b) for the account or on behalf of any "U.S. person"
(as such term is defined in Regulation S); EIS understands, acknowledges and
agrees that it must bear the economic risk of its investment in the Incentive
Shares for an indefinite period of time and that prior to any offer or sale of
such securities, Ligand may require, as a condition to effecting a transfer of
the Incentive Shares, an opinion of its counsel, acceptable to Ligand, as to the
registration or exemption therefrom under the Securities Act;
(viii) EIS was not formed specifically for the purpose of acquiring the
Incentive Shares under this Agreement;
(ix) Neither EIS nor any of its Affiliates has entered into, directly or
indirectly, within the past 90 days, nor will EIS or any of its Affiliates enter
into, directly or indirectly, until the expiration of the "one-year distribution
compliance period" within the meaning of Rule 903 of Regulation S (x) any short
selling of any equity security of Ligand (including, without limitation, the
Common Stock) or (y) any hedging transaction with respect to any equity security
of Ligand, including, without limitation, puts, calls, or other option
transactions, option writing and equity swaps, unless in compliance with the
Securities Act;
(x) EIS, on behalf of itself and its Affiliates, acknowledges that the
issuance of the Incentive Shares shall not result in an adjustment to either the
Conversion Price of the Note under Section 6(i) thereof or the Exercise Price of
the Warrant under Section 9 thereof.
Section 4. ACKNOWLEDGMENT OF LIGAND.
Ligand acknowledges that, notwithstanding anything in the Purchase
Agreement, the acquisition of the Incentive Shares by EIS shall not be violative
of any standstill provision contained in the Purchase Agreement, including
Section 14(c) thereof, or any standstill provision otherwise applicable to EIS,
and that the Incentive Shares shall be afforded all of the rights and exceptions
afforded the Shares under such applicable provisions; PROVIDED that Ligand shall
have no obligation to amend the Rights Agreement with respect to the Incentive
Shares.
Section 5. MISCELLANEOUS.
(i) APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS
THEREOF RELATING TO CONFLICTS OF LAW.
(ii) WAIVER. No failure or delay on the part of a party hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial
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exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
(iii) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(iv) TERMS. Capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in the Purchase Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto and delivered as of the date first written above.
MONKSLAND HOLDINGS B.V.
By: /S/XXXXXX XXXXX
Name: XXXXXX XXXXX
Title: MANAGING DIRECTOR
By: /S/ILLEGIBLE
Name: AMACO (NETHERLANDS) B.V.
Title: MANAGING DIRECTOR
ELAN INTERNATIONAL SERVICES, LTD.
By: /S/XXXXX XXXXXX
Name: XXXXX XXXXXX
Title: PRESIDENT
LIGAND PHARMACEUTICALS INCORPORATED
By: /S/XXXX X. XXXXX
Name: XXXX X. XXXXX
Title: SENIOR VP & CFO
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SCHEDULE OF EXCEPTIONS
As Updated March 28, 2002
THIS SCHEDULE OF EXCEPTIONS IS MADE AND GIVEN PURSUANT TO SECTION 3 OF THE
SECURITIES PURCHASE AGREEMENT DATED AS OF NOVEMBER 6, 1998 (THE "AGREEMENT").
THE SECTION NUMBERS IN THIS SCHEDULE OF EXCEPTIONS CORRESPOND TO THE SECTION
NUMBERS IN THE AGREEMENT; HOWEVER, ANY INFORMATION DISCLOSED HEREIN UNDER ANY
SECTION NUMBER SHALL BE DEEMED TO BE DISCLOSED AND INCORPORATED INTO ANY OTHER
SECTION NUMBER UNDER THE AGREEMENT WHERE SUCH DISCLOSURE WOULD OTHERWISE BE
APPROPRIATE. ANY TERMS DEFINED IN THE AGREEMENT SHALL HAVE THE SAME MEANING WHEN
USED IN THIS SCHEDULE OF EXCEPTIONS AS WHEN USED IN THE AGREEMENT UNLESS THE
CONTEXT OTHERWISE REQUIRES.
NOTHING HEREIN CONSTITUTES AN ADMISSION OF ANY LIABILITY OR OBLIGATION OF
THE COMPANY NOR AN ADMISSION AGAINST THE COMPANY'S INTEREST. THE INCLUSION OF
ANY AGREEMENT OR OTHER MATTER HEREIN OR ANY EXHIBIT HERETO SHOULD NOT BE
INTERPRETED AS INDICATING THAT THE COMPANY HAS DETERMINED THAT SUCH AN AGREEMENT
OR OTHER MATTER IS NECESSARILY MATERIAL TO THE COMPANY. PURCHASER ACKNOWLEDGES
THAT CERTAIN INFORMATION CONTAINED IN THIS SCHEDULE MAY CONSTITUTE MATERIAL
CONFIDENTIAL INFORMATION RELATING TO THE COMPANY WHICH MAY NOT BE USED FOR ANY
PURPOSE OTHER THAN IN CONNECTION WITH PURCHASER'S DECISION TO PURCHASE CERTAIN
SECURITIES OF THE COMPANY PURSUANT TO THE AGREEMENT.
SCHEDULE 3(E)
Rights granted pursuant to the Registration Rights Agreement have expired
pursuant to its terms and such rights have been replaced with the New
Registration Rights Agreement.
SCHEDULE 3(F)(I)
Glycomed, Inc.
Allergan Ligand Retinoid Therapeutics, Inc.
Seragen, Inc.
Seragen Technology, Inc.
Ligand Pharmaceuticals (Canada) Incorporated
Ligand Pharmaceuticals International, Inc.
Ligand Pharmaceuticals UK, Ltd.
Ligand JVR, Inc.
SCHEDULE 3(F)(II)
Epimmune, Inc. ("Epimmune") has rights to make certain payments under an
agreement with the Company in shares of Epimmune common stock.
The Company is a member of Nexus Properties VI LLC ("Nexus VI"), holding a
1% interest. Nexus VI owns the parcel of land and the Company's headquarters at
00000 Xxxxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx.
The Company owns 6,000,000 shares of the Series B Preferred Stock of
X-Ceptor Therapeutics, Inc.
SCHEDULE 3(M)
For purposes of this Schedule of Exceptions, Section 3(f) of the Agreement,
Section 3(n) of the Agreement, Section 3(p) of the Agreement and Section 3(q) of
the Agreement, "SEC Reports" shall mean the forms, reports, registration
statements and documents filed by the Company from and including December 31,
1996 through March 28, 2002.
SCHEDULE 3(O)
Seragen, Inc., our subsidiary, and Ligand were named parties to XXXXXX X.
XXXXXX, ET AL. V. BOSTON UNIVERSITY, ET AL., a putative shareholder class action
filed on December 17, 1998 in the Court of Chancery in the State of Delaware in
and for New Castle County, C.A. No. 16570NC, by Xxxxxx X. Xxxxxx and others
against Boston University and others, including Seragen, its subsidiary Seragen
Technology, Inc. and former officers and directors of Seragen. The complaint, as
amended, alleged that Ligand aided and abetted purported breaches of fiduciary
duty by the Seragen-related defendants in connection with the acquisition of
Seragen by Ligand and made certain misrepresentations in related proxy materials
and seeks compensatory and punitive damages of an unspecified amount. On July
25, 2000, the Delaware Chancery Court granted in part and denied in part
defendants' motions to dismiss. Seragen, Ligand, Seragen Technology, Inc. and
our acquisition subsidiary, Knight Acquisition Corporation were dismissed from
the action. Claims of breach of fiduciary duty remain against the remaining
defendants, including the former officers and directors of Seragen. The hearing
on the plaintiffs' motion for class certification took place on February 26,
2001. The court certified a class consisting of shareholders as of the date of
the acquisition and on the date of an earlier business unit sale by Seragen. The
litigation is currently in the discovery phase. While Ligand and its subsidiary
Seragen have been dismissed from the action, such dismissal is subject to a
possible subsequent appeal upon judgment in the action against the remaining
parties.
On December 11, 2001, a lawsuit was filed in the United States District
Court for the District of Massachusetts against the Company by the Trustees of
Boston University and other former stakeholders of Seragen. The complaint
alleges breach of contract, breach of the implied covenants of good faith and
fair dealing and unfair and deceptive trade practices based on, among other
things, allegations that the Company wrongfully withheld approximately $2.1
million in consideration due the plaintiffs under the Seragen acquisition
agreement. The complaint seeks payment of the withheld consideration and treble
damages. The complaint has not been served and the Company has not responded to
the complaint.
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On September 21, 2000, a class action lawsuit was filed in the Superior
Court of the State of California against Ligand and a specified former employee
of Ligand. The complaint, as amended, alleges claims of invasion of privacy,
negligence, fraud and deceit, and negligent infliction of emotional distress
based on, among other things, an allegation that Ligand, as
successor-in-interest to our Glycomed subsidiary and by reason of its position
as employer, negligently and fraudulently allowed a former employee to access
and publish private information of the plaintiffs. The parties have signed a
settlement pursuant to which plaintiffs will dismiss this litigation with
prejudice.
SCHEDULE 3(Q)
In connection with the FDA's approval of the drug Avinza for marketing on
March 21, 2002, the Company made a milestone payment to Elan in the amount of $5
million by issuing to the Purchaser 302,554 shares of the Company's common
stock.
SCHEDULE 3(S)
The Company has entered into capital lease and equipment note payable
agreements. The Company has also entered into operating lease agreements for
office and research facilities with varying terms. These agreements provide for
security interests in the underlying assets. In early 1998, the Company entered
into a 17-year lease and the Company loaned the construction partnership $3.7
million which will be repaid with interest over a 10-year period.
SCHEDULE 3(T)
See Schedule 3(o).
SCHEDULE 3(U)
The Company has become aware that a United States patent has been issued
to, and foreign counterparts have been filed by, Xxxxxxx XxXxxxx ("XxXxxxx")
which covers pharmaceutical uses of 9-cis-retinoic acid (LGD1057) which may
conflict with the Company's rights under its patent applications. The U.S.
Patent and Trademark Office ("PTO") has informed the Company that the
overlapping claims are patentable to the Company and initiated an interference
proceeding to determine whether the Company or XxXxxxx is entitled to a patent
by having been first to invent the common subject matter. The Company cannot be
assured of a favorable outcome in the interference proceeding because of factors
not known at this time which may impact the outcome. In addition, the
interference proceeding may delay the decision of the PTO regarding the
Company's application for the current formulations of Oral and Topical Panretin
(LGD1057) products. The XxXxxxx patent does not cover the use of the current
formulations of Oral and Topical Panretin (LGD1057) to treat leukemias such as
APL and sarcomas such as KS, or the treatment of skin diseases such as
psoriasis, if the Company does not prevail in the interference proceeding, the
XxXxxxx patent might block the Company's use of Oral Panretin (LGD1057) in
certain cancers, and the Company may not be able to obtain patent protection for
the Oral and Topical Panretin (LGD1057) products.
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The Company has received notice from Oncogene Science, Inc. ("OSI") stating
that the activities of the Company's STATs program may infringe one or more
patents issued to OSI. The Company believes a number of companies in the
biotechnology industry received similar letters. The Company has received a
preliminary opinion of its outside patent counsel that its activities do not
infringe OSI's patents.
Novartis AG has filed an opposition to our European patent that covers the
principal active ingredient of our ONTAK(R) drug.
SCHEDULE 3(AA)
See Schedule 3(e) above.
The Company has granted registration rights pursuant to the New
Registration Rights Agreement.
SCHEDULE 3(DD)
The Company has previously informed representatives of Purchaser of its
engagement of Xxxxxx Brothers and Bear, Xxxxxxx & Co. Inc. in connection with
the transactions contemplated by the Agreement and/or the License Agreement,
including the issuance of the Shares.
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