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EXHIBIT 10.7
AGREEMENT
This Agreement ("Agreement") is entered into as of May 11, 1998 among
Xxx Xxxxx and Company, an Indiana corporation ("Lilly"), Ligand Pharmaceuticals
Incorporated, a Delaware corporation ("Ligand"), and Seragen, Inc., a Delaware
corporation ("Seragen"). All of the provisions of this Agreement (except
Sections 2(b), 2(c), 2(e), 11 and 13 or as otherwise provided in this Agreement)
shall be effective as set forth in Sections 2(a), 2(c) and 2(d) (the "Effective
Date"); and Sections 2(b), 2(c), 2(e), 11 and 13 shall be effective as of the
date hereof between Lilly and Ligand only. Seragen shall not be a party to this
Agreement and none of the provisions hereof shall be deemed to be for the
benefit of Seragen until such time as Seragen executes this Agreement as of the
closing (the "Closing") of the proposed merger (the "Merger") of Seragen with
and into Knight Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of Ligand ("Knight Acquisition"), as set forth below. All references
to "Seragen" in this Agreement shall include the surviving corporation of the
Merger, pursuant to the terms of that certain Agreement and Plan of
Reorganization dated as of May 11, 1998 (the "Reorganization Agreement"), a copy
of which has been furnished to Lilly. Upon the consummation of the Merger,
Seragen will be a wholly owned subsidiary of Ligand and Ligand will cause
Seragen to execute this Agreement as of the Closing.
WHEREAS, Lilly and Seragen are parties to the Sales and Distribution
Agreement (as amended through the date hereof, the "Sales Agreement") dated as
of August 3, 1994, as previously amended by an Amendment to Sales and
Distribution Agreement dated May 28, 1996, and to the Development Agreement
dated as of August 3, 1994 (as amended through the date hereof, the "Development
Agreement"), each of the Sales Agreement and the Development Agreement having
been amended by an Amendment dated December 16, 1994, an Amendment re: Steering
Committee effective June 30, 1995, an Amendment to Sales and Distribution
Agreement and Development Agreement dated April 7, 1997, a certain letter
agreement dated June 5, 1997, and a certain letter agreement dated May 11, 1998,
in each case between Lilly and Seragen (collectively, the Sales Agreement and
the Development Agreement shall be known as the "Seragen Agreements");
WHEREAS, the Sales Agreement governs certain marketing and distribution
rights with respect to Seragen's fusion protein technology;
WHEREAS, the Development Agreement governs the conduct of certain basic
and clinical research performed with respect to Seragen's fusion protein
technology;
WHEREAS, Ligand and Lilly are parties to the Option and Wholesale
Purchase Agreement dated November 25, 1997, as the same may be amended from time
to time ("Wholesale Purchase Agreement");
WHEREAS, Ligand desires to have the option in certain circumstances to
(i) reject the Ligand Option (as defined in the Wholesale Purchase Agreement)
and its rights and obligations under the Wholesale Purchase Agreement (other
than the rights and obligations set forth in Section 1.3 of the Wholesale
Purchase Agreement), (ii) to accept the assignment by Lilly of all of Lilly's
rights and obligations under the Seragen Agreements, subject to the terms and
conditions
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of this Agreement (the "Assignment"), and, in the event Ligand elects subclause
(ii) above, Lilly desires to effect the Assignment or (iii) to exercise the
Ligand Option.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter recited, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
shall have the same meaning herein as in the Seragen Agreements, as applicable.
When used in this Agreement, each of the following terms shall have the meanings
set forth below:
"BLA" shall mean a biologics license application.
"Confidential Information" shall mean all information,
inventions, knowhow and data disclosed by one party to the other party, or its
respective affiliates or agents, pursuant to this Agreement, whether in oral,
written, graphic or electronic form and whether in existence as of the effective
date or developed or acquired in the future, except where such information (i)
is public knowledge at the time of disclosure by the disclosing party, (ii)
becomes public knowledge through no fault of the receiving party, (iii) was in
the possession of the receiving party at the time of disclosure by the
disclosing party as evidenced by proper business records or (iv) is disclosed to
the receiving party by a third party, to the extent such third party's
disclosure was not in violation of any obligation of confidentiality.
"Confidential Information" shall also include all information that would have
been included in the definition of "Confidential Information" under the Seragen
Agreements, which information shall be deemed to be subject to the nondisclosure
and nonuse obligations contained herein notwithstanding the assignment of the
Seragen Agreements hereunder.
"Cover" (including variations thereof such as "Covering",
"Covered", and "Coverage") shall mean the manufacture, use, import, offer for
sale or sale of the Product would infringe a Valid Claim; provided, with respect
to process or manufacturing patent, that a Valid Claim therein effectively
precludes third parties from manufacturing, using, importing, offering for sale
or selling the Product. The determination of whether the Product is Covered by a
particular Valid Claim shall be made on a country by country basis. A Valid
Claim shall be deemed to provide effective preclusion hereunder where (i) there
is no competing Product being marketed or (ii) if the Product is being marketed
by a competitor, it infringes the Valid Claim (including any period in which,
and provided that, the Valid Claim is being litigated).
"DAB389IL-2" shall mean a fusion protein developed by Seragen
comprising the first 389 amino acids of the A and B fragments of the diptheria
toxin combined with interleukin-2. The term shall include pharmaceutical
formulations comprising a DAB389IL-2 developed under the Seragen Agreements.
"Data Exclusivity Period" shall mean the period, if any,
during which the FDA, or other equivalent regulatory agency in the case of
countries other than the United States, prohibits reference, for purposes of
seeking Regulatory Approval, to clinical and other data contained in the
Regulatory Approval package relating to the Product, without the consent of the
party holding the new drug application or equivalent Regulatory Approval.
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"Dollar" shall mean United States dollars.
"First Commercial Sale" shall mean the first sale for use by
the general public of the Product after receipt of Regulatory Approval in that
country.
"Ligand Option Period" shall have the meaning given it in the
Wholesale Purchase Agreement.
"Net Sales" shall mean the gross amount invoiced by Ligand,
Seragen or any affiliate or sublicensee of either Ligand or Seragen to unrelated
third parties for the Product, Less: (i) trade, quantity and cash discounts
actually allowed; (ii) discounts, refunds, rebates, chargebacks, retroactive
price adjustments and any other allowances which effectively reduce the net
selling price; (iii) actual product returns and allowances; (iv) the
manufacturing cost of drug delivery systems, including royalties payable
thereon; (v) any tax imposed on the production, sale, delivery or use of the
Product (excluding federal, state or local taxes based on income); (vi)
distribution expenses reasonably documented by Ligand; and (vii) any other
similar and customary deductions (as defined and accepted by GAAP), actually
incurred. Such amounts shall be determined from the books and records of Ligand,
Seragen and any affiliate or sublicense of either Ligand or Seragen which shall
be maintained in accordance with GAAP.
"Product" shall mean the finished, salable pharmaceutical form
of DAB389IL-2.
"Regulatory Approval" shall mean all authorizations by the
appropriate governmental entity or entities necessary for commercial sale of the
Product (including exports) in a jurisdiction in which Ligand or any affiliate
or sublicensee elects to market the Product, including, without limitation,
approval of labeling, price, reimbursement and manufacturing.
"Royalty Term" shall mean, with respect to the Product in each
country, (A) if the manufacture, use, import, offer for sale or sale of the
Product in such country is Covered by a Seragen Patent, the period of time equal
to the longer of (1) ten (10) years from the date of First Commercial Sale of
the Product in such country (or, if First Commercial Sale occurs prior to
January 1, 2000, in such country, for ten (10) years from January 1, 2000) or
(2) the expiration of the last-to-expire applicable patent in such country;
provided, however, if the manufacture, use, import, offer for sale or sale of
the Product is Covered only by a Valid Claim of a pending patent application in
such country, the Royalty Term shall expire, except as provided in (B) below,
five (5) years from the date of the First Commercial Sale in such country unless
(y) the pending patent application Covering such Product issues prior to the end
of such five (5) year period, in which case the Royalty Term shall not expire at
the end of such five (5) year period, or (z) the pending patent application
Covering such Product issues after the end of such five (5) year period, in
which case the Royalty Term shall expire at the end of such five (5) year period
but shall be reinstated from the date the patent issues, or (B) if the
manufacture, use, import offer for sale or sale of the Product in such country
is not so Covered by a Seragen Patent, the period of time equal to the Data
Exclusivity Period in such country.
"Seragen Agreements" shall have the meaning set forth in the
preamble to this Agreement.
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"Seragen Patents" shall mean all patents, both foreign and
domestic (including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all patent applications
(including provisional applications, divisions, continuations and
continuations-in-part), heretofore or hereafter filed or having any legal force
in any country together with any patents that have issued or in the future issue
therefrom, which are owned, controlled, or licensed (with the right to disclose
and sublicense and subject to the rights of third parties existing thereon), in
whole or in part, by Seragen or any affiliate of Seragen, and which Cover the
Product.
"Valid Claim" shall mean any claim (a) issued in an unexpired
patent which has not been held unenforceable, unpatentable or invalid by a
decision of a court or other governmental agency of competent jurisdiction
following exhaustion of all possible appeal processes, and which has not been
admitted to be invalid or unenforceable through reissue, reexamination or
disclaimer, or (b) of a pending patent application, so long as such patent
application is being diligently prosecuted.
2. Effectiveness of this Agreement, Assignment of Seragen Agreements;
Effectiveness of Wholesale Purchase Agreement.
(a) In the event the Closing occurs prior to first Regulatory
Approval, this Agreement shall become effective as of the Closing and
thereafter: (i) the Wholesale Purchase Agreement shall be deemed to have expired
without the exercise of the Ligand Option (as defined in the Wholesale Purchase
Agreement) or the Cash/Royalty Option and the Wholesale Purchase Agreement shall
be of no further force or effect; (ii) Ligand shall have no further right to
exercise its option under Section 6.1 (b) of the Collaboration Agreement dated
November 25, 1997, among Lilly, Ligand and Allergan Ligand Retinoid
Therapeutics, Inc.; and (iii) Ligand shall have no further right to exercise its
option under Section 5.1 (b) of the Development and License Agreement
(Targretin) dated November 25, 1997, between Lilly and Ligand.
(b) (i) In the event first Regulatory Approval is received
prior to the Closing (which Regulatory Approval has been received on or before
January 31, 1999) and Ligand is in compliance with Section 5.9 of the
Reorganization Agreement through the date of such Regulatory Approval (as
determined pursuant to that certain letter agreement dated the date hereof
between Ligand, Lilly and Seragen), within fifteen (15) days following receipt
of the first Regulatory Approval, Ligand shall elect one of the following
alternatives, by written notice to Lilly within such fifteen (15)-day period:
(A) to exercise the Cash/Royalty Option (as defined in Section 1.3 of the
Wholesale Purchase Agreement) and thereby elect to receive an equity investment
and an increase in certain royalties under Section 1.3 of the Wholesale Purchase
Agreement; or (B) to proceed with the Assignment by Lilly, subject to the terms
and conditions of this Agreement.
(ii) In the event first Regulatory Approval is received prior
to the Closing (which Regulatory Approval has been received following January
31, 1999) and Ligand
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is in compliance with Section 5.9 of the Reorganization Agreement through the
date of such Regulatory Approval (as determined pursuant to that certain letter
agreement dated the date hereof between Ligand, Lilly and Seragen), within
fifteen (15) days following receipt of the first Regulatory Approval ("Notice
Period"), Ligand shall elect one of the following alternatives, by written
notice to Lilly within the Notice Period: (A) to proceed with the Assignment by
Lilly, subject to the terms and conditions of this Agreement; or (B) to
terminate this Agreement. In the event Ligand elects to terminate this Agreement
under this Section 2(b)(ii), the Wholesale Purchase Agreement shall be deemed
terminated and Ligand shall have no right to exercise either the Ligand Option
or the Cash/Royalty Option.
(iii) (A) In the event first Regulatory
Approval is received prior to the Closing and Ligand is not in compliance with
Section 5.9 of the Reorganization Agreement through the date of such Regulatory
Approval (as determined pursuant to that certain letter agreement dated the date
hereof between Ligand, Lilly and Seragen), Ligand shall elect one of the
following alternatives, by written notice to Lilly within the Notice Period: (I)
to exercise the Cash/Royalty Option (as defined in Section 1.3 of the Wholesale
Purchase Agreement) and thereby elect to receive an equity investment and an
increase in certain royalties under Section 1.3 of the Wholesale Purchase
Agreement; or (II) to exercise the Ligand Option (as defined in Section 1.1 of
the Wholesale Purchase Agreement) and thereby elect to act as Lilly's exclusive
wholesaler of the Product, subject to the terms and conditions of the Wholesale
Purchase Agreement.
(B) Notwithstanding the foregoing, Lilly
may extend the Notice Period, in its sole discretion, by written notice to
Ligand during the Notice Period, for a period not to exceed ninety (90) days
("Extended Notice Period"). Ligand shall not be permitted to exercise the
Cash/Royalty Option or the Ligand Option without Lilly's prior written consent
during the Extended Notice Period until that day which is three (3) business
days prior to the last day of the Extended Notice Period at which time, if the
Closing has not occurred, Ligand may exercise either the Cash/Royalty Option or
the Ligand Option.
(iv) No First Commercial Sale shall occur within the
Notice Period or the Extended Notice Period. During the period of time following
first Regulatory Approval through to First Commercial Sale, Lilly and Ligand
shall cooperate to insure preparations for product launch proceed in an
expeditious manner to ensure Product is made available to patients as soon as
possible.
(c) If Ligand exercises the Cash/Royalty Option pursuant to
Sections 2(b)(i) or 2(b)(iii) above, the sole surviving right and obligations of
Ligand and Lilly shall be as set forth in Section 1.3 of the Wholesale Purchase
Agreement and upon delivery of the Cash/Royalty Notice: (i) the Wholesale
Purchase Agreement shall have no effect other than as set forth in Section 1.3
of such agreement; (ii) Ligand shall exercise its option under Section 6.1(b) of
the Collaboration Agreement dated November 25, 1997, among Lilly, Ligand and
Allergan Ligand Retinoid Therapeutics, Inc.; (iii) Ligand shall exercise its
option under Section 5.1(b) of the Development and License Agreement (Targretin)
dated November 25, 1997, between Lilly and Ligand; and (iv) this Agreement shall
terminate.
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(d) If Ligand elects to proceed with the Assignment pursuant
to Sections 2(b)(i) or (ii) above, the Assignment shall be deemed to have
occurred and this Agreement shall be effective as of the date of delivery of
notice by Ligand to Lilly pursuant to Sections 2(b)(i) or (ii) above and
thereafter: (i) the Wholesale Purchase Agreement shall be deemed to have expired
without the exercise of the Ligand Option (as defined in the Wholesale Purchase
Agreement) or the Cash/Royalty Option and the Wholesale Purchase Agreement shall
be of no farther force or effect; (ii) Ligand shall have no further right to
exercise its option under Section 6.1(b) of the Collaboration Agreement dated
November 25, 1997, among Lilly, Ligand and Allergan Ligand Retinoid
Therapeutics, Inc.; and (iii) Ligand shall have no further right to exercise its
option under Section 5.1(b) of the Development and License Agreement (Targretin)
dated November 25, 1997, between Lilly and Ligand.
(e) If Ligand exercises the Ligand Option pursuant to Section
2(b)(iii) above, the sole surviving right and obligations of Ligand and Lilly
shall be as set forth in the Wholesale Purchase Agreement and upon delivery of
notice of exercise pursuant to Section 1.2 of the Wholesale Purchase Agreement:
(i) the Wholesale Purchase Agreement shall have be in full force and effect
other than Section 1.3 of such agreement; (ii) Ligand shall have no further
right to exercise its option under Section 6.1(b) of the Collaboration Agreement
dated November 25, 1997, among Lilly, Ligand and Allergan Ligand Retinoid
Therapeutics, Inc.; (iii) Ligand shall have no further right to exercise its
option under Section 5.1(b) of the Development and License Agreement (Targretin)
dated November 25, 1997, between Lilly and Ligand; and (iv) this Agreement shall
terminate.
(f) In the event the Reorganization Agreement is terminated
prior to Regulatory Approval, this Agreement shall have no further force or
effect and Ligand's sole options shall be to exercise the Ligand Option or, if
the Reorganization Agreement is terminated on or prior to January 31, 1999, the
Cash/Royalty Option under the Wholesale Purchase Agreement.
(g) Upon the Assignment, except for the obligations reaffirmed
by Lilly pursuant to Section 4 below, Lilly hereby assigns all of its rights and
obligations under the Seragen Agreements in whole to Ligand and Ligand hereby
assumes all of Lilly's rights and obligations under the Seragen Agreements in
whole without recourse to Lilly. From and after the date of assignment
hereunder, as between Lilly on the one hand, and Ligand (and Seragen, as of the
Closing) on the other hand, all rights and obligations relating to the Product
shall be governed by this Agreement and that certain letter agreement between
Ligand, Lilly and Seragen dated the date hereof.
3. Payment of Preclinical, Clinical and Registration Expenses.
(a) Lilly shall (i) in the event the Closing has not yet
occurred, reimburse Ligand for Ligand's payments to Seragen under the Seragen
Agreements with respect to and (ii) in the event that the Closing has occurred,
pay to Seragen, the direct costs (provided such costs would have been
reimbursable under the Seragen Agreements) incurred by Seragen (the "Product
Costs") associated with (A) the submitting clinical data (Seragen Phase III
protocol 04-10) to the United States Food and Drug Administration ("FDA") and
(B) seeking approval of that
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submission by the FDA as required by the Seragen Agreements until the earlier of
the date on which (x) a BLA for the Product is rejected, (y) a not approved,
approvable or approved letter from the FDA is received for the Product or (z) a
BLA for the Product is withdrawn. "Product Costs" shall not include any internal
costs of Seragen except for internal costs of the nature previously reimbursed
by Lilly under the Seragen Agreements.
(b) Lilly shall (i) in the event the Closing has not yet
occurred, reimburse Ligand for Ligand's payments to Seragen under the Seragen
Agreements with respect to and (ii) in the event that the Closing has occurred,
pay to Seragen, an amount up to $6.85 million (less amounts spent by Lilly after
October 15, 1997 in connection with Seragen protocols 04-11 and 04-14, and
amounts related to registration efforts for the Product) for expenditures (as
set forth in the Seragen Agreements) incurred by Seragen and Ligand for
completion of Seragen protocols 04-11 and 04-14 following approval of the
Products by FDA. Ligand will be responsible for any expenditures in excess of
the $6.85 million to be paid by Lilly pursuant to this Section 3 as set forth in
the Seragen Agreements. If any portion of the $6.85 million referred to above is
not used or reasonably required to pay the expenses referred to in this Section
3(b), Lilly shall be entitled to retain the unused portion.
(c) Ligand shall, during the time that Lilly is obligated to
pay amounts under this Section 3, furnish or cause to be furnished to Lilly on a
quarterly basis a written report of the Product Costs and other expenditures
incurred as set forth in Sections 3(a) and 3(b) above in the immediately
preceding calendar quarter (the "Quarterly Report"). Each Quarterly Report shall
be due on the seventy-fifth (75th) day following the close of each calendar
quarter and shall set forth in reasonable detail a listing of the Product Costs,
the purposes of such expenditures and the persons to whom such amounts were
paid. Ligand shall, or shall cause Seragen to, keep accurate records in
sufficient detail to enable the amounts due hereunder to be determined and to be
verified by the independent public accountants described hereunder.
(d) Lilly shall pay Ligand or Seragen, as the case may be, for
all amounts due hereunder in Dollars by any bank wire transfer in next day
funds. The payments due hereunder shall be made on or before the forty-fifth
(45th) day following receipt by Lilly of the Quarterly Report.
(e) Lilly may, at its own expense, obtain an audit of any
Quarterly Report by independent certified public accounts designated by Lilly
and reasonably acceptable to Ligand. Such request shall be made within one year
from receipt by Lilly of a Quarterly Report. The independent certified public
accountant shall have the right to examine all records kept pursuant to this
Section and shall report to Lilly the findings of said examination of records
insofar as necessary to verify the Quarterly Report. Such findings shall be
maintained in confidence by Lilly. In the event such accounting shows Lilly is
entitled to any refund of amounts paid, Ligand shall refund such amount by any
bank wire transfer in next day funds within thirty (30) days following Ligand's
receipt of the auditor's report. In the event the amount of the overpayment by
Lilly is greater than 10% of the amount actually due, Ligand shall promptly
reimburse Lilly for the cost of the audit.
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4. Ajinomoto Agreement. Lilly hereby reaffirms its agreement, contained
in that certain letter agreement dated June 5, 1997, between Lilly and Seragen
(the "Letter Agreement"), to pay to Ajinomoto Co., Inc. ("Ajinomoto") certain
amounts that may become due by Seragen to Ajinomoto under the terms of the
License Agreement dated December 13, 1994, as amended by the Amendment to the
License Agreement dated June 1, 1997, in both cases between Seragen and
Ajinomoto (the "Ajinomoto Agreement"). As of the date hereof, Lilly has paid
$2.15 million of the aggregate of $4.3 million that Lilly has agreed to pay to
Ajinomoto. The remaining amounts that Lilly hereby reaffirms its agreement to
pay as set forth in the Letter Agreement total $2.15 million. Lilly further
agrees that promptly after its receipt of written request from Ligand at any
time during the term of this Agreement, Lilly shall designate Ligand (or Seragen
as requested by Ligand) as a "Partner" under, and shall provide the written
notice required by, the License Agreement dated June 9, 1997, between Lilly and
Ajinomoto ("Ajinomoto Agreement"). In the event Ligand (or Seragen as requested
by Ligand) is designated a Partner under the Ajinomoto Agreement, Ligand shall
pay, or cause to be paid, all royalties to Ajinomoto as required by such
Ajinomoto Agreement.
5. Waiver of US Approval Milestone. Pursuant to Section 2.3 of the Sales
Agreement, as amended through the date hereof, Lilly is obligated to provide
Seragen with a milestone payment of One Million Dollars ($1,000,000) within
fifteen (15) calendar days after first Regulatory Approval (as defined in the
Sales Agreements) of the Product in the United States (the "US Approval
Milestone"). Lilly and Ligand have agreed that payment of the US Approval
Milestone shall be waived by Ligand on behalf of Seragen if Regulatory Approval
of the Product in the United States is obtained following the Closing. In the
event Regulatory Approval of the Product in the United States is obtained on or
prior to Closing, Lilly will make timely payment of the US Approval Milestone.
Within thirty (30) days following the Closing, Ligand shall, or shall cause
Seragen to, remit Five Hundred Thousand Dollars ($500,000) to Lilly; if the
Closing never occurs, Ligand shall have no obligation to remit the amounts set
forth in this sentence.
6. Ligand Payments to Lilly Upon Product Approval and Sales Milestones.
(a) Ligand shall pay to Lilly the following amounts:
(i) Five Million Dollars ($5,000,000) upon the later
of (A) thirty (30) days following Seragen's
receipt from FDA of notice of final approval of
the labeling for the BLA related to the Product
or (B) thirty (30) days from the Closing (the
"BLA Consideration"); and
(ii) Five Million Dollars ($5,000,000) upon delivery
to Lilly of a quarterly report provided under
Section 8(c) of this Agreement showing that the
cumulative, worldwide Net Sales of the Product
have reached Twenty Million Dollars
($20,000,000) (the "Sales Consideration").
(iii) If and only if the Reorganization Agreement is
terminated following the Effective Date, (A) an
additional Five Million Dollars ($5,000,000)
within thirty (30) days following the
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termination of the Reorganization Agreement
("Additional BLA Consideration") and (B) an
additional Five Million Dollars ($5,000,000)
upon payment of the Sales Consideration pursuant
to Section 6(a)(ii) above ("Additional Sales
Consideration").
(iv) The BLA Consideration, the Additional BLA
Consideration, the Sales Consideration and the
Additional Sales Consideration, if any, may be
paid in the form of cash, common stock, par
value $.001 per share, of Ligand ("Common
Stock"), or a combination of both as determined
by Ligand in its sole discretion. For purposes
of determining the value of shares of Common
Stock, if any, distributed pursuant to this
Section 6, Common Stock shall be valued at the
average of the closing prices of Common Stock on
the NASDAQ National Market for the twenty (20)
consecutive trading days immediately preceding
the date which is five (5) consecutive days
prior to the date of: (i) the issuance of the
shares of Common Stock by Ligand under Sections
6(a)(i) or 6(a)(iii)(A); or (ii) the delivery of
the report by Ligand under Section 6(a)(ii). The
delivery of shares of Common Stock by Ligand and
the acceptance of such shares by Lilly pursuant
to this Section 6 shall not constitute a breach
by Lilly of its obligations under Section 4.2 of
the Stock Purchase Agreement dated November 25,
1997, between Lilly and Ligand.
7. Forgiveness of Bulk Prepayment. Pursuant to the Seragen Agreements,
Lilly paid to Seragen Five Million Dollars ($5,000,000) to be repaid via a
credit against Bulk Sales Price (as defined in the Seragen Agreements) due
Seragen by Lilly under the Sales Agreement (the "Bulk Prepayment"). If and only
if the Closing occurs, Lilly shall forgive the entire amount of the Bulk
Prepayment and neither Seragen nor Ligand shall have any obligation to advance
the credit against the Bulk Prepayment provided for in Section 2.2 of the Sales
Agreement.
8. Ligand Payment of Royalties to Lilly.
(a) Subject to the terms and conditions of this Agreement
including, without limitation, Section 9 of this Agreement, and during the
Royalty Term, in partial consideration of the terms set forth herein, Ligand
shall pay Lilly the following royalties based on worldwide Net Sales of the
Product for all indications during a calendar year as set forth below. No
royalties shall be due on Net Sales of Products during calendar years 1998 and
1999, even if sales are actually made during such calendar years.
Worldwide royalties
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2002 and
Year Year thereafter during
2000 2001 the Royalty Term
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Percent of net sales 13% 18% 20%*
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* If and only if the Reorganization Agreement is terminated following the
Effective Date, royalties in the calendar year 2002 and thereafter
during the Royalty Term shall be 22%.
(b) Royalty payments under this Agreement shall be made to
Lilly at the time of delivery of the quarterly report under Section 8(c) below.
If at any time legal restrictions prevent the prompt remittance of any payments
with respect to any country where the Product is sold, Ligand or its
sublicensees or marketing partners shall have the right and option to make such
payments by depositing the amount thereof in local currency to Lilly's account
in a bank or depository in such country.
(c) During the term of this Agreement and after the First
Commercial Sale of the Product in any country, Ligand shall furnish or cause to
be furnished to Lilly on a quarterly basis a written report or reports covering
each calendar quarter (each such calendar quarter being sometimes referred to
herein as a "reporting period") showing (i) the Net Sales of the Product in each
country during the Royalty Term by Ligand, its affiliates, sublicensees and
assigns, (ii) the royalties which shall have accrued under this Section 8 in
respect of such sales and the basis for calculating those royalties and (iii)
until such time as the Sales Consideration is paid under Section 6(a)(ii) of
this Agreement, the cumulative Net Sales of the Product from the date of First
Commercial Sale in any country through the end of the reporting period. Such
reports shall be mailed to : Xxx Xxxxx and Company, Attn: Royalty
Administration, D.C. 0000, Xxxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000.
With respect to sales of the Product invoiced in
Dollars, the Net Sales amounts and the amounts due to Lilly hereunder shall be
expressed in Dollars. With respect to sales of the Product invoiced in a
currency other than Dollars, the Net Sales shall be calculated using Ligand's
then current standard exchange rate methodology for the translation of foreign
currency sales into Dollars. Each quarterly report shall be accompanied by a
list of the exchange rates used in calculating Net Sales covered by such
quarterly report. Ligand will at Lilly's reasonable request but not more
frequently than once a calendar quarter inform Lilly as to the specific exchange
rate translation methodology, if any, used for a particular country or
countries. In the event that any exchange rate translation methodology changes,
Ligand will inform Lilly of the change in the quarterly report next due.
Each quarterly report shall be due on the
seventy-fifth (75th) day following the close of each reporting period. Ligand
shall keep accurate records in sufficient detail to enable the amounts due
hereunder to be determined and to be verified by the independent public
accountants described hereunder. Ligand shall furnish annually to Lilly
appropriate evidence of payment of any tax or other amount required by
applicable laws or regulations to be deducted from any royalty payment,
including any tax or withholding levied by a foreign taxing authority in respect
of the payment or accrual of any royalty.
(d) Upon the written request of Lilly, at Lilly's expense and
not more than once in or in respect of any calendar year, independent public
accountants designated by Lilly and
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reasonably acceptable to Ligand shall verify the accuracy of the sales reports
furnished by Ligand in respect of any calendar year ending not more than
thirty-six (36) months prior to the date of such notice. Upon the expiration of
thirty-six (36) months following the end of any calendar year, the calculation
of amounts payable with respect to such fiscal year shall be binding and
conclusive upon Lilly, and Ligand and its sublicensees and marketing partners
shall be released from any liability or accountability with respect to payments
for such year. The report prepared by such independent public accountant, a copy
of which shall be sent or otherwise provided to Ligand by such independent
public accountant at the same time it is sent or otherwise provided to Lilly,
shall contain the conclusions of such independent public accountant regarding
the audit and will specify that the amounts paid to Lilly pursuant thereto were
correct or, if incorrect, the amount of any underpayment or overpayment. If such
independent public accountant's report shows any underpayment, Ligand shall
remit or shall cause its sublicensees or marketing partners to remit to Lilly
within thirty (30) days after Ligand's receipt of such report, (i) the amount of
such underpayment and (ii) if such underpayment exceeds ten percent (10%) of the
total amount owed for the calendar year then being audited, the reasonable and
necessary fees and expenses of such independent public accountant performing the
audit, subject to reasonable substantiation thereof. Any overpayments shall be
fully creditable against amounts payable in subsequent payment periods. Lilly
agrees that all information delivered or subject to review under this Section or
under any sublicensee or marketing agreement is Confidential Information (as
defined below) and that Lilly shall retain all such information in confidence.
(e) In the event of any sublicense of Product rights by Ligand
to third parties, the terms of such sublicense shall require the sublicensee to
furnish the appropriate reports under this Section 8 to Lilly.
9. Ligand Sublicense of Rights in Certain Territories. In lieu of, and
not in addition to, the obligations set forth in Section 8 to pay royalties with
respect to Net Sales in such territories, in the event that Ligand outlicenses
rights to the Product in a territory other than North America or Europe, Ligand
shall pay to Lilly, within thirty (30) days of Ligand's receipt of the payments
described below: (a) one-half (1/2) of the net upfront, milestone, technology
access or other cash payments received by Ligand from the sublicensee, but not
including any purchase of Ligand equity, loans to Ligand or any noncash
consideration (to the extent practicable, Ligand will work with the licensee to
have Lilly paid its portion of such payments directly in such territory from the
gross amount of the payment, provided, however, that such direct payment does
not cause Ligand to incur any obligations that it would not otherwise have that
would result in Ligand receiving less than one-half of the gross amount of such
payment) and (b) one-half (1/2) of the net royalty payments that Ligand receives
in consideration for the conveyance of such rights.
10. Lilly Fill/Finish of Product.
(a) Lilly shall perform the final formulation, sterile
filling, packaging and labeling of bulk DAB389IL-2 ("Bulk Material") supplied by
Seragen (or Ligand) ("Fill/Finish"). Lilly shall perform Fill/Finish in
accordance with specifications agreed upon by Ligand and Lilly (and in the event
the Closing has not occurred, pursuant to specifications required by Seragen)
prior to the first shipment of Bulk Material to Lilly and in accordance with all
applicable laws and
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regulations (the "Fill/Finish Specifications") and the other terms and
conditions set forth in Appendix A to this Agreement.
(b) In consideration of Lilly's Fill/Finish obligations
hereunder, Ligand shall pay to Lilly a fee of $3 per 300(greek mu)g vial
(frozen) for the first three years of the Fill/Finish Term (as defined in
Appendix A). For years four and five, the $3 fee per 300(greek mu)g vial would
increase at a rate of 10% per year.
(c) Ligand and Lilly each agree to use reasonable efforts to
complete as promptly as possible after the date of this Agreement a separate
agreement pursuant to which Lilly shall provide Fill/Finish for the Product. The
terms of such agreement will be consistent with the provisions of this Section
10 and Appendix A attached hereto and shall supersede the terms of this Section
10 and Appendix A attached hereto.
11. Additional Agreements by Lilly. Until the earlier of the Effective
Date or the termination of this Agreement pursuant to Section 13(q), Lilly shall
not amend (in a manner that would impair Ligand's rights under this Agreement),
terminate or agree to terminate the Seragen Agreements, or take any action which
would give rise to a right of termination by Seragen under the Seragen
Agreements or deliver the Option Termination Notice (as defined in the Wholesale
Purchase Agreement) without the prior written consent of Ligand, which can be
withheld at its sole discretion, unless and until Lilly's costs and expenses
(whether paid to Ligand under Section 3 of this Agreement or to Seragen under
the Seragen Agreements prior to the Effective Date) exceed the sum of (a) $6.85
million and (b) Product Costs (collectively, the "Cap"); provided
notwithstanding this Section 11, Lilly shall remain subject to this Section 11
if Ligand bears all costs and expenses under this Section 11: (y) in excess of
the Cap; and (z) only for the purpose of determining costs to be borne by
Ligand, costs of preparation, submission and management of regulatory
applications and all other Lilly activities related to the development and
approval of the Product, including internal costs (as determined by Lilly from
its books and records in accordance with its standard cost allocation practices)
and all out-of-pocket expenses.
12. Representations and Warranties. Each party hereby represents and
warrants to each of the other parties to this Agreement that as of the date
hereof and as of the date of assignment of this Agreement pursuant to Section 2
of this Agreement:
(a) Authorization. Such party (i) has the corporate power and
authority and the legal right to enter into this Agreement and perform its
obligations hereunder and (ii) has taken all necessary corporate action on its
part required to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder.
(b) Governmental Approvals. All necessary consents, approvals
and authorizations of all governmental authorities required to be obtained by
such party in connection with this Agreement have been obtained.
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13. Miscellaneous Provisions.
(a) Governing Law. The Agreement shall be governed by the laws
of the State of Indiana, without regard to Indiana choice of law provisions.
(b) Dispute Resolution Process. In the event of any dispute
relating to this Agreement, the parties shall, prior to instituting any lawsuit,
arbitration or other dispute resolution process on account of such dispute,
present such dispute to Xxxxx Xxxxxxxx or his successor as Chief Executive
Officer of Ligand on behalf of Ligand, and August Watanabe or his successor as
Chief Scientific Officer of Lilly on behalf of Lilly; provided, however, that
this provision shall not prevent either party from seeking a preliminary
injunction or other equitable relief in the event such party believes it will
suffer irreparable harm. These executives shall confer and consider each party's
view and shall attempt in good faith to resolve the dispute between themselves
or, if they are unable to so resolve the dispute, to establish a mechanism to
resolve the dispute promptly and efficiently. In the event said executives are
unable to resolve such dispute or agree upon a mechanism to resolve such dispute
within thirty (30) days, either party shall be entitled to institute litigation
and seek such remedies as may be available.
(c) Notices. All notices required or permitted to be given
under this Agreement shall be in writing and shall be deemed given, upon
receipt, if mailed by registered or certified mail (return receipt requested),
postage prepaid, or sent by overnight delivery (receipt verified) to the address
below, or given personally or transmitted by facsimile to the number indicated
below (with confirmation).
To Lilly:
Xxx Xxxxx and Company
Lilly Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
To Ligand:
Ligand Pharmaceuticals Incorporated
00000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
Any party may, by written notice to the others, designate a new address or fax
number to which notices to the party giving the notice shall thereafter be
mailed or faxed.
(d) Force Majeure. If either party's performance hereunder is
affected by any extraordinary, unexpected and unavoidable event such as acts of
God, floods, fires, riots, war, accidents, labor disturbances, breakdown of
plant or equipment, lack or failure of transportation
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facilities, unavailability of equipment, sources of supply or labor, raw
materials, power or supplies, infectious diseases of animals, or by the reason
of any law, order, proclamation, regulation, ordinance, demand or requirement of
the relevant government or any sub-division, authority or representative
thereof, or by reason of any other cause whatsoever (provided that in all such
cases the party claiming relief on account of such event can demonstrate that
such event was extraordinary, unexpected and unavoidable by the exercise of
reasonable care) ("Force Majeure") it shall as soon as reasonably practicable
notify the other party of the nature and extent thereof and take all reasonable
steps to overcome the Force Majeure and to minimize the loss occasioned to that
other party. Neither party shall be deemed to lose any rights under this
Agreement or be in breach of this Agreement or otherwise be liable to the other
party by reason of any delay in performance or nonperformance of any of its
obligations hereunder, except with respect to payment obligations, to the extent
that such delay and nonperformance is due to any Force Majeure of which it has
notified the other party and the time for performance of that obligation shall
be extended accordingly.
(e) Withholding, Taxes. If either party is required by the
United States government or other authorities to withhold any tax on the amounts
payable by that party to the other party under this Agreement, that party shall
be allowed to do so, and shall in such case remit payments to the other party
net of such withheld amount, provided that the withholding party furnishes the
other party with reasonable evidence of such withholding payment in electronic
or written form as soon as practicable after such withholding in order that the
other party may use the withholding tax paid as a tax credit.
(f) Entire Agreement. This Agreement, the Confidentiality
Agreements between Ligand and Lilly dated September 30, 1996, January 23, 1997
and May 8, 1997, between Ligand and Lilly and that certain letter agreement
between Ligand, Lilly and Seragen of even date herewith sets forth the entire
agreement and understanding of the parties relating to the subject matter
contained herein and merges all prior discussions and agreements between them.
No party shall be bound by any representation other than as expressly stated in
this Agreement, or by a written amendment to this Agreement signed by authorized
representatives of both parties.
(g) Non-Waiver. The failure of a party in any one or more
instances to insist upon strict performance of any of the terms and conditions
of this Agreement shall not be construed as a waiver or relinquishment, to any
extent, of the right to assert or rely upon any such terms or conditions on any
future occasion.
(h) Relationship of Parties. The relationship created by this
Agreement is solely a buyer-seller relationship and is not any form of joint
venture, partnership, franchise, or other agency relationship. Neither party
shall, under any circumstance, have any authority or otherwise purport to bind
the other party to any express or implied contract or to represent or otherwise
bind the other party before or in connection with any proceeding by any
governmental agency. Except as set forth in this Agreement, nothing herein is
intended to grant or imply any license or other rights in favor of a party to
any patent, trademark, copyright, trade secret, technology, know-how or other
rights of the other party relating to the Product or the ingredients thereof.
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(i) Severability. If any term, covenant or condition of this
Agreement or the application thereof to any party or circumstance shall, to any
extent, be held to be invalid or unenforceable, then (i) the remainder of this
Agreement, or the application of such term, covenant or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the parties that the basic purposes of this Agreement are to be effectuated.
(j) Assignment. Any party may discharge any obligations and
exercise any right hereunder through an affiliate although such party shall
remain ultimately responsible for the proper discharge of all obligations
hereunder notwithstanding any assignment or delegation to any such affiliate
(references to a party shall include any affiliate of such party to whom such an
assignment or delegation has been made in accordance with this Agreement).
Ligand may assign the Agreement and its rights and obligations hereunder at any
time although Ligand shall remain ultimately responsible for the proper
discharge of all obligations hereunder notwithstanding any assignment or
delegation (references to Ligand shall include any assignee of Ligand to whom
such assignment or delegation has been made in accordance with this Agreement).
Except as provided in this Section 130), Lilly shall not delegate duties of
performance or assign, in whole or in part, rights or obligations under this
Agreement without the prior written consent of Ligand, not to be unreasonably
withheld, and any attempted delegation or assignment without such written
consent shall be of no force or effect. This Agreement shall be binding upon the
permitted successors and assigns of the parties.
(k) Headings. The headings contained in this Agreement have
been added for convenience only and shall not be construed as limiting or
defining the content of said sections or paragraphs.
(l) Interpretation. This Agreement has been jointly prepared
by the parties and their respective legal counsel and ambiguities shall not be
strictly construed against either party.
(m) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which shall
constitute together the same document.
(n) Compliance with Laws. Each party shall, and shall cause
its respective Affiliates to, comply in all material respects with all federal,
state, local and foreign laws, statutes, rules and regulations applicable to the
parties and their respective activities under this Agreement.
(o) Further Actions. Each party agrees to execute,
acknowledge, and deliver such further instruments, and to do all such other
acts, as may be necessary or appropriate to carry out the purposes and intent of
this Agreement.
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(p) Confidential Information. Unless otherwise set forth in
this Agreement, for a period from the earlier of the date of First Commercial
Sale or the Closing until five (5) years following the termination of this
Agreement, each party and its respective affiliates shall maintain in confidence
all Confidential Information, and shall not, except as contemplated by this
Agreement, disclose Confidential Information or use Confidential Information for
its benefit or the benefit of others, without the consent of the disclosing
party (the "Disclosing Party"). Documents made available to the receiving party
(the "Receiving Party") shall remain the property of the Disclosing Party and
shall be returned upon written request of the Disclosing Party, except that one
copy of all such information may be retained for legal archival purposes by the
Receiving Party. Each party may disclose Confidential Information for the
purpose of making various regulatory filings and complying with applicable
governmental regulations, and to sublicensees (potential and actual), marketing
partners (potential and actual), consultants and others having a need to know
for the purposes of development, manufacture or marketing of Product, provided
that such sublicensees, marketing partners, consultants and others shall also
agree to appropriate and comparable confidentiality and non-use provisions. In
addition, each party shall be entitled to disclose Confidential Information to
the extent required by applicable law, orders of courts, regulatory authorities
or similar bodies having jurisdiction over the party ("Legal Process"). The
Receiving Party shall promptly notify the Disclosing Party of any request or
demand by Legal Process for disclosure of Confidential Information. With respect
to any disclosure of Confidential Information, including the text of this
Agreement, for the purpose of complying with applicable government regulations,
the disclosing party shall give the other party an opportunity to review and
comment upon the extent of any such disclosure of Confidential Information prior
to disclosure. Neither Lilly nor Ligand/Seragen shall disclose any information
about this Agreement without the prior written consent of Ligand or Lilly,
respectively. Consent shall not be required, however, for (a) disclosures to tax
or other governmental authorities or to potential or actual sublicensees, or
marketing partners to the extent required or contemplated by this Agreement,
provided, that in connection with such disclosure, each party agrees to use its
commercially reasonable efforts to secure confidential treatment of such
information, (b) disclosures of information for which consent has previously
been obtained or (c) information which had previously been publicly disclosed.
Each party shall have the further right to disclose the terms of this Agreement
as required by applicable law, including the rules and regulations promulgated
by the Securities and Exchange Commission, and to disclose such information to
shareholders or potential investors as is customary for publicly held companies.
Any copy of this Agreement to be filed with the Securities and Exchange
Commission shall be redacted to the satisfaction of Ligand and Lilly; provided,
in the event that the Securities and Exchange Commission objects to the
redaction of any portion of the Agreement after the initial submission, the
filing party shall inform the other party of the objections and shall in good
faith respond to the objections in an effort to limit the disclosure required by
the Securities and Exchange Commission, but in any event the filing party shall
be free to include any portions of the Agreement it deems necessary to respond
to the objections in any future filings. Without limiting the generality of the
foregoing and except in the circumstance where a party's outside counsel advises
the party that immediate disclosure is required, in the event that a Receiving
Party, intends to disclose Confidential Information as permitted under this
Section 13(p), such a party will provide to the Disclosing Party a copy of the
information to be disclosed and an opportunity to comment thereon prior to such
disclosure, and, to the extent practicable, consult
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with the Disclosing Party on the necessity for the disclosure and the text of
the proposed release within a reasonable time in advance of the proposed
disclosure. The confidentiality obligations of this Section 13(p) shall survive
the termination or expiration of the Agreement.
(q) Termination of Agreement This Agreement shall terminate:
(i) in the event the Effective Date does not occur on or prior to January 31,
1999; provided in the event that Ligand or Seragen has exercised the Option (as
such term is defined in the Extension Option Agreement dated the date hereof
between Ligand, Seragen, Marathon Biopharmaceuticals, LLC, 520 Commonwealth Real
Estate Corporation and 660 Corporation), such date shall be extended upon each
exercise of the Option to the then effective termination date of such Option; or
(ii) if the Reorganization Agreement is terminated prior to First Commercial
Sale, on the date on which the Reorganization Agreement is terminated.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
XXX XXXXX AND COMPANY
By:
-------------------------------------
Title:
----------------------------------
LIGAND PHARMACEUTICALS
INCORPORATED
By:
-------------------------------------
Title:
----------------------------------
SERAGEN, INC.
By:
-------------------------------------
Title:
----------------------------------
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APPENDIX A
The additional terms and conditions which shall govern Lilly's
performance of its Fill/Finish obligations hereunder and Ligand's payment for
such services are as follows:
1. PAYMENT FOR FILL/FINISH. Ligand agrees to pay in full within thirty
(30) days (with a 2% cash discount if paid within twenty (20) days of the
original shipping date) each invoice delivered by Lilly to Ligand for the
Fill/Finish activities sold under this Agreement in accordance with the
applicable provisions of this Agreement; and to pay interest on all overdue
amounts owing from Ligand to Lilly hereunder outstanding for more than 30 days
("overdue") at the Prime Rate as published in The Wall Street Journal in effect
from time to time plus six percent (6%) per annum (or the highest amount allowed
by law, if such lawful amount is lower than the foregoing) from the date the
amounts become overdue.
2. TAX EXEMPTION CERTIFICATES. Ligand agrees to provide to Lilly a copy
of Ligand's sales tax exemption certificate, whether it be a resale certificate,
blanket exemption, or direct payment exemption under applicable laws, and to
notify Lilly promptly of any change which affects Ligand's exemption status and
to provide such other information or certifications as Lilly may reasonably
request in order to minimize tax liability and to comply with applicable tax or
other regulations of each of the jurisdictions worldwide in which Ligand sells
the Product.
3. CONTROLS. Lilly agrees to establish such internal controls and
maintain such records as will assure compliance with its obligations under this
Agreement and the ability of Ligand and appropriate regulatory authorities to
conduct a meaningful review of such records.
4. FORECASTS. Ligand agrees to provide sales forecasts at such times and
in such detail as Lilly may reasonably request in order to determine Fill/Finish
requirements.
5. CERTAIN COVENANTS OF LILLY. Lilly covenants and agrees as follows:
(a) To carry out the Fill/Finish operations in accordance with
the applicable regulatory approvals required for the Product.
(b) To carry inventory of the Product and to ship the Product
to Ligand's third party distributors.
(c) To use commercially reasonable efforts to maintain the
Product under proper conditions, both in storage and in transit to customers,
including such refrigeration as may be reasonably required; to supply only
Product that, at the time of shipment, has an expiry date of not less than sixty
(60) days after the date of shipment, and are not damaged, or shopworn; and to
provide to Ligand quarterly upon Ligand's request a listing of Lilly's complete
and current inventory of Product by item and package size certified to be
accurate by Lilly.
(d) To deliver to Ligand the forms of all pre-launch and
launch materials that Lilly's Oncology Global Business Unit may have prepared
for the Product and also to permit
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Ligand's employees to meet with the Lilly marketing staff at Lilly's offices for
a reasonably limited period to assist Ligand in preparing to market the Product,
but Lilly shall have no further responsibility for promotion of the Product.
(e) Prior to the First Commercial Sale of the Product, the
parties shall agree upon the terms of a manufacturing requirements document
which shall set forth procedures for ordering and maintaining inventory, and the
coordination and timing of manufacture and delivery to meet customer orders,
compliance with adverse event reporting and other regulatory requirements and
such other matters as are incidental to this Agreement.
6. TRANSPORTATION COSTS. Lilly shall ship the Product F.O.B. shipping
point. Ligand will pay all transportation charges for the shipment of the
Product.
7. TITLE, RISK OF LOSS AND DAMAGE. Lilly shall assume risk of loss when
Ligand delivers Bulk Material to Lilly. Thereafter, risk of loss shall pass to
Ligand when the Product is duly delivered to the carrier. Ligand shall give
Lilly written notice of any claimed shipping error within thirty (30) days after
the date of shipment from Lilly. Failure of Ligand to give such notice within
such thirty (30)-day period shall be deemed a waiver of Ligand's claim for
shortages or incorrect shipments. Lilly will not be liable for and will not
grant a credit with respect to damage to the Product in the course of shipment
from Lilly, except as set forth in Section 8 below.
8. RETURN FOR CREDIT. Ligand shall have no right to return any Product
for any reason, except that Ligand may return for credit any Product that (i) is
unusable because of Lilly's delay or negligence in shipment or (ii) is not in
conformance with product specifications (described in the BLA for the Product),
if such nonconformity is caused by Lilly's Fill/Finish activities or Lilly's
failure to follow its quality assurance/quality control procedures. Upon request
by Ligand, Lilly will ship replacement Product to Ligand's third party
distributors.
9. WARRANTY. Seragen warrants that the Bulk Material delivered to Lilly
pursuant to this Agreement shall (i) at the time of shipment not be adulterated
or misbranded within the meaning of applicable federal, state or foreign laws as
in effect at the time of delivery as a result of any condition caused by
Seragen's manufacturing activities or resulting from Seragen's failure to follow
its quality assurance/quality control procedures, and (ii) not contain any
manufacturing defect caused by Seragen's manufacturing activities or resulting
from Seragen's failure to follow its quality assurance/quality control
procedures. Lilly warrants that the Product delivered to Ligand pursuant to this
Agreement shall (i) at the time of shipment not be adulterated or misbranded
within the meaning of applicable federal, state or foreign laws as in effect at
the time of delivery as a result of any condition caused by Lilly's Fill/Finish
activities or resulting from Lilly's failure to follow its quality
assurance/quality control procedures, and (ii) not contain any manufacturing
defect caused by Lilly's Fill/Finish activities or resulting from Lilly's
failure to follow its quality assurance/quality control procedures. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER SERAGEN NOR LILLY MAKES ANY
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE BULK MATERIALS OR THE
PRODUCT. ALL OTHER WARRANTIES, EXPRESS OR
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IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED BY SERAGEN AND
LILLY. IN NO EVENT SHALL SERAGEN OR LILLY BE LIABLE FOR INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST REVENUES OR PROFITS
OF LILLY (IN THE CASE OF SERAGEN) OR LIGAND (IN THE CASE OF LILLY).
10. BILLING, REBATES, ETC. Ligand shall be solely responsible for
billing and collection activities, rebate programs, return credit procedures and
similar activities related to its sales of Product, it being understood that
Lilly's responsibilities hereunder relate solely to Fill/Finish and shipment to
Ligand's third party distributors.
11. INSPECTION OF INVENTORY AND RECORDS. In the event Lilly inventories
Product, Ligand representative(s) will consult with and advise Lilly concerning
Lilly's inventory of Product and may inspect the same at a mutually agreed upon
time. A Ligand representative may also inspect records of Lilly to determine
compliance with Lilly's Fill/Finish obligations under this Agreement provided
that no such inspection shall relate to transactions occurring more than
eighteen (18) months prior to the date of such inspection, and provided further
that the inspection shall be performed by Ligand's regularly retained
independent auditors or employee. Any Confidential Information disclosed by
Lilly under this Section shall be maintained in confidence.
12. INDEMNITY AND INSURANCE.
(a) Except to the extent Ligand shall be entitled to
indemnification under subparagraph (b) below, Ligand shall hold harmless Lilly
and its affiliates and their respective employees and agents from and against
any and all liabilities, claims, demands, actions, suits, losses, damages, costs
and expenses (including reasonable attorney's fees) based upon
(i) use, sale, promotion, marketing or distribution
of the Product, including without limitation any product liability claims,
regardless of the theory under which such claims are brought, including any
claims for death, bodily injury or property damage arising from the use of the
Product, or
(ii) otherwise results from the negligence or willful
misconduct of Ligand or Seragen or a material breach of this Agreement by either
Ligand or Seragen, except to the extent caused by the negligence or willful
misconduct of Lilly or the material breach by Lilly of this Agreement.
(b) Except to the extent Lilly shall be entitled to
indemnification under subparagraph (a) above, Lilly shall indemnify and hold
harmless Ligand and its affiliates and their respective employees and agents
from and against any and all liabilities, claims, demands, actions, suits,
losses, damages, costs and expenses (including reasonable attorney's fees) based
upon the death or any bodily injury or property damages resulting from (i)
Lilly's Fill/Finish activities, storage, handling, or physical distribution of
Product (including product liability claims, regardless of the theory under
which such claims are brought),
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(ii) otherwise results from the negligence or willful
misconduct of Lilly or its material breach of this Agreement, except to the
extent caused by the negligence or willful misconduct of Ligand or the material
breach by Ligand of this Agreement; provided that, with respect to product
liability claims only, Lilly shall only have an obligation to indemnify or hold
harmless Ligand, its affiliates and their respective employees and agents to the
extent the injury alleged is caused by Lilly's Fill/Finish activities or Lilly's
failure to follow its quality assurance/quality control procedures.
(c) Each of the parties shall promptly notify the other of any
such claim or potential claim covered by any of the above subsections in this
Section 12 and shall include sufficient information to enable the other party to
assess the facts. Each of the parties shall cooperate fully with the other party
in the defense of all such claims. No settlement or compromise shall be binding
on a party hereto without its prior written consent, which shall not be
unreasonably withheld.
(d) Ligand and Lilly shall each have and maintain such type
and amounts of liability insurance covering their respective activities under
this Agreement as is normal and customary in the pharmaceutical industry
generally for parties similarly situated, and will upon request provide the
other party with a copy of its policies of insurance in that regard, along with
any amendments and revisions thereto.
13. RECALLS. In the event of a recall, whether voluntary or ordered by a
government agency in any jurisdiction worldwide ("Recall"), Ligand shall be
responsible for the coordination of Recall activities. Ligand shall bear and
timely pay all costs of notification, shipping and handling, retrieving the
Product subject to Recall already delivered to customers, and other expenses and
costs of the Recall, except to the extent that the Recall is a result of Lilly's
Fill/Finish activities or Lilly's failure to follow its quality
assurance/quality control procedures. Ligand shall provide Lilly with supporting
documentation of all reimbursable expenses and costs.
14. SUBCONTRACT BY LILLY. Lilly, directly or through one or more of its
Affiliates, shall provide the Fill/Finish activities for the Product as
contemplated by this Agreement for a period of five (5) years after the earlier
of the date of First Commercial Sale or the Closing, unless earlier terminated
under Section 15 below ("Fill/Finish Term"). During the Fill/Finish Term, Lilly
shall have the option to subcontract its obligation to provide Fill/Finish
activities for the Product as contemplated by this Agreement to any reputable
entity that (a) has the capacity to provide the Fill/Finish activities for the
Product as contemplated by this Agreement and (b) has or can obtain all
governmental and other permits, licenses and approvals necessary to enable the
entity to provide the Fill/Finish activities without interruption of supply of
Product. The subcontractor shall be subject to the approval of Ligand, which
approval shall not be unreasonably withheld. Upon Lilly's reasonable request,
Ligand and Seragen shall cooperate with Lilly in effecting the transfer of
Fill/Finish activities. Lilly shall remain responsible for the performance by
each such subcontractor of the Fill/Finish activities for the Product required
by this Agreement.
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00. TERMINATION OR CANCELLATION.
(a) Lilly's Fill/Finish obligations under this Agreement shall
be in effect from and after the earlier of the date of First Commercial Sale or
the Closing and shall terminate upon the expiration of the Term. Ligand shall
have the right to terminate Lilly's Fill/Finish obligations under this Agreement
prior to the expiration of the Term ninety (90)days prior written notice to
Lilly.
(b) After the Term, all then accrued rights under purchase
orders and invoices issued in compliance with this Appendix A, the indemnity and
recall provisions of Sections 12 and 13 of this Appendix A, and any rights
either party may then have as a result of any breach of this Appendix A by the
other party shall survive the Term.
A-5
