WF&G Draft
11-4-05
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT (the "Agreement") is made and entered into
as of November __, 2005, by and between Ligand Pharmaceuticals Incorporated
("Ligand") and Third Point Offshore Fund, Ltd. ("Offshore Fund"), an affiliate
of Third Point LLC ("Third Point").
RECITALS
WHEREAS, Offshore Fund is a stockholder of Ligand and has sought,
among other things, to (i) cause Ligand to hold an annual meeting of
stockholders, (ii) gain representation on Ligand's board of directors (the
"Board"), and (iii) cause Ligand to take measures to explore strategic
alternatives;
WHEREAS, Ligand and Third Point had discussions with respect to the
scheduling of the annual meeting and Third Point's representation on the Board
but were unable to resolve their differences;
WHEREAS, on October 11, 2005, Offshore Fund filed a complaint
against Ligand in the Court of Chancery of the State of Delaware in and for New
Castle County (the "Court"), which action is titled Third Point Offshore Fund,
Ltd. v. Ligand Pharmaceuticals Incorporated seeking, inter alia, an order that
the Company schedule its annual meeting of stockholders (the "Action");
WHEREAS, the Court has scheduled a hearing in the Action for
November 14, 2005;
WHEREAS, the parties hereto desire to resolve fully, and settle, the
Action and have agreed to do so on the terms and conditions hereinafter set
forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
FURTHER AGREEMENTS
Section 1.1. Board Matters.
(a) Ligand shall as promptly as practicable, and in any event within
three business days after the date hereof, take all action necessary (including
the calling of a special meeting of the Board to approve such actions) to:
(i) expand the size of the Board so as to create three new
directorships on the Board in accordance with Article III of its amended
and restated bylaws,
(ii) appoint Xxxxxx X. Xxxx, Xxxxxxx X. Xxxxx and Xxxxxxxx
Xxxxxxx, MD (collectively, the "Third Point Nominees") to fill such
newly-created directorships, and
(iii) create a special committee of the Board (the "Special
Committee"), consisting of Xx. Xxxx, Xx. Xxxxxxx and one current member of
the Board, to explore and act with respect to Ligand's strategic
alternatives.
(b) The Special Committee shall be empowered to retain its own
investment bankers, attorneys and other advisers on such terms as the Special
Committee shall approve, to consider and take action with respect to any
strategic alternatives (subject only to the requirements of Section 141(c) of
the Delaware General Corporation Law), to negotiate with any third parties and
their representatives on behalf of Ligand with respect to any proposed strategic
alternatives, to obtain such information regarding Ligand and assistance from
the officers, employees and agents of Ligand and to take such other actions to
carry out its responsibilities as the Special Committee shall deem appropriate.
Ligand shall pay all expenses incurred by the Special Committee, including the
fees and expenses of its investment bankers, attorneys and other advisers.
(c) Ligand shall as promptly as practicable after the date hereof
take all actions necessary to call a meeting of its stockholders (the
"Stockholder Meeting") to elect eight directors to the Board and to cause the
record date for such Stockholder Meeting to be December 5, 2005 and the date of
the Stockholder Meeting to be January 15, 2006. At the Stockholder Meeting,
Offshore Fund and its affiliates shall nominate eight persons for election to
the Board, and such slate shall include the Third Point Nominees and five other
current members of the Board designated by Ligand (the "Slate"). Ligand shall
take all action necessary to reduce the size of the Board to eight effective
upon the election of the Slate. Ligand shall cooperate on a timely basis with
the Offshore Fund and its affiliates in the solicitation of proxies to elect the
Slate (but shall not solicit proxies if prohibited from doing so by applicable
law or the rules of the Securities and Exchange Commission (the "SEC")),
including providing Offshore Fund with all necessary information on its
designees and any other matters necessary to from time to time supplement or
amend the proxy materials filed by Offshore Fund and its affiliates with the SEC
(the "Third Point Proxy Materials"). To the extent Ligand prepares and
distributes proxy materials (the "Ligand Proxy Materials") with respect to the
matters to be voted on at the Stockholder Meeting or otherwise makes a
solicitation or recommendation with respect to the matters to be voted on at the
Stockholders Meeting, such Ligand Proxy Materials, solicitation or
recommendation shall support the election of the Slate to the Board. In
addition, to the extent Ligand desires to add any other proposals to the Ligand
Proxy Materials, it shall first discuss such proposals with Offshore Fund and
its affiliates and shall not include such proposals unless Offshore Fund
consents to their inclusion in the Ligand Proxy Materials, which consent shall
not be unreasonably withheld or delayed.
(d) Should any of the Third Point Nominees decide not to seek a
position on the Board, or after being elected to the Board decide to resign
therefrom, Offshore Fund shall be entitled to designate the replacement for such
Third Point Nominee or to fill the resulting vacancy on the Board, as
applicable, and Ligand shall take all necessary action to implement the
foregoing as promptly as practicable.
2
Section 1.2. Rights Agreement. Ligand shall as promptly as
practicable, and in any event within five business days after the date hereof,
take all action necessary to amend the definition of "Acquiring Person" in
Section 1 of the Amended and Restated Preferred Shares Rights Agreement, dated
as of September 13, 1996, as amended through March 22, 2004, by and between
Ligand and Mellon Investor Services LLC to change the references therein from
"10%" to "20%".
Section 1.3. Expenses. Ligand shall pay for all costs and expenses
incurred by Offshore Fund and its affiliates in connection with the Action, the
preparation and filing of the Third Point Proxy Materials and the solicitation
of proxies, whether incurred before or after the date hereof, including without
limitation legal and accounting fees and the fees of any proxy solicitor
retained by Offshore Fund and its affiliates. To the extent Offshore Fund or its
affiliates have already paid any such expenses, Ligand shall promptly reimburse
them for such payments.
Section 1.4. Dismissal of Litigation. Within 3 business days of the
Company completing all of the steps outlined in paragraph 1.1(a) through (c),
and paragraph 1.2, the parties will execute a stipulation of dismissal of the
Action without prejudice in the form annexed hereto as Exhibit A.
ARTICLE II.
MISCELLANEOUS PROVISIONS
Section 2.1. Representations and Warranties.
(a) Each of the parties hereto represents and warrants to the other
party that:
(i) such party has all requisite company authority and power
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby,
(ii) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all required company action on the part of such
party and no other proceedings on the part of such party are necessary to
authorize the execution and delivery of this Agreement or to consummate
the transactions contemplated hereby,
(iii) the Agreement has been duly and validly executed and
delivered by such party and constitutes the valid and binding obligation
of such party enforceable against such party in accordance with their
respective terms, and
(iv) this Agreement will not result in a violation of any
terms or provisions of any agreements to which such person is a party or
by which such party may otherwise be bound or of any law, rule, license,
regulation, judgment, order or decree governing or affecting such party.
(b) The parties hereto acknowledge, warrant and represent that they
have carefully read this Agreement, understand it, have consulted with and
received the advice of counsel regarding this Agreement, agree with its terms,
are duly authorized to execute it and freely, voluntarily and knowingly execute
it.
3
(c) By entering into this Agreement, none of the parties hereto
admits any of the allegations, if any, made by any other party, or any liability
of wrongdoing of any kind to each other, all of which each party expressly
denies. The parties enter into this Agreement resolving the controversies raised
without conceding liability of any kind, solely to avoid the expense,
uncertainty, inconvenience and distraction of litigation. This Agreement shall
not constitute, nor be introduced, treated, deemed or otherwise interpreted or
construed as (i) an admission, waiver, evidence or concession by any party of
any liability to any other party or (ii) evidence in any judicial or arbitration
proceeding except to enforce or defend the terms hereof.
Section 2.2. General.
(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and the respective successors, personal
representatives and assigns of the parties hereto.
(b) This Agreement contains the entire agreement between the parties
with respect to the subject matter hereof and thereof and supersedes all prior
and contemplated arrangements and understandings with respect thereto.
(c) This Agreement may be signed in counterparts, each of which
shall constitute an original and all of which together shall constitute one and
the same Agreement.
(d) This Agreement and the legal relations between the parties
hereto shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and performed therein, without
giving effect to the principles of conflicts of law thereof.
(e) Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid, but if any provision of
this Agreement is held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not render invalid or unenforceable any
other provision of this Agreement.
(f) It is hereby agreed and acknowledged that it will be impossible
to measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved person will be irreparably damaged and will
not have an adequate remedy at law. Any such person, therefore, shall be
entitled to injunctive relief, including specific performance, to enforce such
obligations, without the posting of any bond, and, if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law.
(g) Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
4
(h) Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America, in each case
located in the County of New Castle, for any action, proceeding or investigation
in any court or before any governmental authority arising out of or relating to
this Agreement and the transactions contemplated hereby (and agrees not to
commence any action, proceeding or investigation relating thereto except in such
courts), and further agrees that service of any process, summons, notice or
document by registered mail to its respective address set forth in this
Agreement shall be effective service of process for any action, proceeding or
investigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, proceeding or investigation arising out of this Agreement
or the transactions contemplated hereby in the courts of the State of Delaware
or the United States of America, in each case located in the County of New
Castle, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, proceeding or
investigation brought in any such court has been brought in an inconvenient
forum.
[Remainder of page intentionally left blank.]
5
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first written above.
LIGAND PHARMACEUTICALS INCORPORATED
By:
---------------------------------
Name:
Title:
THIRD POINT OFFSHORE FUND, LTD.
By:
---------------------------------
Name:
Title:
6
Exhibit A to
Settlement Agreement
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
THIRD POINT OFFSHORE FUND, LTD., )
)
Plaintiff, )
)
v. ) C.A. No. 1707-NC
)
LIGAND PHARMACEUTICALS )
INCORPORATED, )
)
Defendant. )
STIPULATION AND ORDER OF DISMISSAL
WHEREAS, plaintiff Third Point Offshore Fund, Ltd filed this action
on October 11, 2005 seeking an Order pursuant to 8 Del. C. ss. 211(c) scheduling
an annual meeting of the stockholders of defendant Ligand Pharmaceuticals,
Incorporated ("Ligand") for the election of directors (the "Annual Meeting");
and
WHEREAS, the parties have agreed to resolve these actions on the
terms set forth below:
IT IS HEREBY STIPULATED AND AGREED this ___ day of November, 2005,
by and among the parties, subject to the approval of the Court, as follows:
1. The Annual Meeting shall be held on January 17, 2006 without
adjournment or postponement (the "Annual Meeting"), except with prior Court
approval. The shares of stock represented at such meeting, either in person or
by proxy, and entitled to vote thereat, shall constitute a quorum for the
purpose of such meeting, notwithstanding any provision of the Certificate of
Incorporation or Bylaws of Ligand to the contrary.
7
2. The record date for determining those stockholders of Ligand
entitled to vote at the Annual Meeting shall be December 5, 2005 (the "Record
Date").
3. In the event that Ligand seeks to postpone the Annual Meeting to
a date later than January 17, 2006 as ordered herein, Ligand agrees that it
shall not assert as a basis for such request its inability to solicit proxies
because of its failure to publicly file audited financial statements, and Ligand
hereby waives the affirmative defenses set forth in Ligand's Answer to the
Complaint in this Action dated October 19, 2005.
4. This action is hereby dismissed without prejudice, but this Court
shall retain jurisdiction pending the holding and completion of the Annual
Meeting and to ensure compliance with the provisions of this Stipulation and
Order, and to hear and determine any other matters relating to the Annual
Meeting.
MORRIS, NICHOLS, ARSHT & XXXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxxxx (#2755)
Xxxxx X. Xxxxxx, Xx. (#4262)
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for Plaintiff Third Point
Offshore Fund, Ltd.
8
OF COUNSEL:
XXXXXXX XXXX & XXXXXXXXX LLP
Xxxxx Xxxxxxx
The Equitable Center
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
(000) 000-0000
XXXXXXXX, XXXXXX & FINGER, P.A.
-------------------------------------
Xxxxxxx X. XxXxxxxxx (#3188)
Xxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for Defendant
Ligand Corporation
SO ORDERED this __ day
of November __, 2005.
---------------------------------
Vice Chancellor
9
