Exhibit 99.(A)
OPTION AND
WHOLESALE
PURCHASE AGREEMENT
THIS OPTION AND WHOLESALE PURCHASE AGREEMENT (the "Agreement") is entered
into as of November 25, 1997 (the "Effective Date") at Indianapolis, Indiana,
between XXX XXXXX AND COMPANY ("Lilly") and LIGAND PHARMACEUTICALS INCORPORATED
("Ligand").
Whereas, Lilly has entered into certain agreements and amendments thereto
with Seragen, Inc. ("Seragen") described in Section 5.13(g) below, copies of
which agreements and amendments have been provided by Lilly to Ligand (the
"Seragen Agreements"); and
Whereas, Lilly and Seragen are currently developing DAB389IL-2, known as
Ontak/TM/, pursuant to the Seragen Agreements, and Lilly has certain marketing,
sales, promotion, distribution and other rights with respect thereto and certain
manufacturing obligations as provided therein; and
Whereas, Lilly desires to grant to Ligand an option pursuant to which, if
and when Ontak/TM/ receives appropriate governmental approvals for marketing for
the treatment of cancer indications in humans, Lilly will, subject to the terms
and conditions of this Agreement and the Seragen Agreements, utilize Ligand as
Lilly's exclusive (even as to Lilly) wholesaler of Lilly products consisting of,
or containing as the active ingredient, Denileukin Diftitox (DAB389IL-2) (the
"Products"), to be sold under the Ontak/TM/ name for the treatment of cancer
indications in the territory defined below; and
Whereas, the parties intend that, at all times, the rights and obligations
described herein be consistent with and subject to the rights of Seragen under
the Seragen Agreements;
Now, therefore, in consideration of the foregoing, the mutual covenants set
forth below and other consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. LIGAND OPTION TO BECOME EXCLUSIVE WHOLESALER.
1.1 LIGAND OPTION. For a period equal to the earlier of (a) ninety (90)
days after the Effective Date of this Agreement, (b) until February 27, 1998, or
(c) until the date which is three (3) business days after the date on which
Ligand delivers to Lilly the notice referred to in Section 1.4, (the "Ligand
Option Period"), Ligand shall have the option (the "Ligand Option") to become
Lilly's exclusive wholesaler of the Products subject to the terms and conditions
contained in this Agreement.
1.2 MANNER OF EXERCISE. To exercise the Ligand Option, Ligand shall
deliver written notice of exercise to Lilly prior to the end of the Ligand
Option Period in the manner set forth in Section 5.9 of this Agreement.
1.3 EFFECT OF LAPSE OF LIGAND OPTION. In the event Ligand does not
exercise the Ligand Option prior to the end of the Ligand Option Period, or, in
the event Ligand delivers written notice to Lilly prior to the end of the Ligand
Option Period informing Lilly of its decision not to exercise the Ligand Option
(the "Rejection Notice"), this Agreement shall automatically terminate and the
parties only surviving rights and obligations under this Agreement shall be as
follows:
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(a) Subject to the terms and conditions set forth in the stock
purchase agreement described in Section 4.6, Lilly shall purchase from Ligand,
and Ligand shall sell and issue to Lilly, for Twenty Million Dollars
($20,000,000), the number of shares of Ligand's voting common stock (the
"Shares") equal to Twenty Million Dollars ($20,000,000) divided by one hundred
twenty percent (120%) of the average daily closing price for the Shares as
reported by the National Association of Securities Dealers, Inc. on the twenty
(20) consecutive trading days immediately preceding the date which is five (5)
days prior to the earlier of (A) the date of the Rejection Notice or (B) the
last day of the Ligand Option Period; and
(b) Ligand shall have the right to designate either Targretin (as
defined in that certain Development and License Agreement (Targretin) dated the
date of this Agreement), Compound 268 or Compound 324 (each as defined in that
certain Collaboration Agreement dated the date of this Agreement) for increased
royalties, which right shall be exercised in the manner set forth and on the
terms and conditions provided in Section 5.1(b) of the Targretin Agreement with
respect to Targretin, or Section 6.1(b) of the Collaboration Agreement with
respect to Compound 268 or Compound 324.
1.4 ***
2. CERTAIN COVENANTS OF LIGAND.
2.1 PROMOTION AND INVENTORIES.
(a) Ligand agrees to promote, sell and book sales of, the Products
in the Territory (as defined below) as the exclusive (even as to Lilly)
wholesaler of the Products for Lilly Indications (as defined in the Seragen
Agreements) in the Territory; and to purchase from Lilly Ligand's entire
requirements for the Products. Ligand acknowledges that pursuant to the Seragen
Agreements, Seragen has retained the right to market the Products for certain
indications and in certain geographic territories, and that Ligand's rights
hereunder shall relate only to those Products, those indications and those
territories to which Lilly has rights under the Seragen Agreements. The United
States, Canada, and, upon Ligand's appointment as exclusive wholesaler of the
Products in the European Union, as provided for in Section 3, the European Union
and the European Union Countries (as defined in the Seragen Agreements) are
referred to collectively in this Agreement as the "Territory."
(b) To the extent that Ligand shall, with the prior approval of both
Ligand and Lilly given or withheld in their respective sole discretion,
undertake the physical distribution of the Products, Ligand agrees to provide
full distribution efforts for the Products; to maintain the Products under
proper conditions, both in storage and in transit to its customers, *** ;
and to supply only Products that are not out-of-date, damaged, or shopworn;
provided, however, unless and until the parties agree otherwise, Lilly shall
provide the distribution services specified in Section 3.1(c). If Ligand does
undertake physical distribution, Ligand shall provide to Lilly quarterly upon
Lilly's
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request a listing of Ligand's complete and current inventory of Products by item
and package size certified to be accurate by Ligand.
2.2 SALES EFFORT. Ligand agrees to use commercially reasonable selling
efforts to, and otherwise promote, the Products, and not to:
(a) Refuse or fail to supply promptly the Products when specified;
(b) Fail to include in its system for determining its prices to its
customers any provisions necessary to comply with the other provisions of this
Agreement or enter into any agreement which would preclude Ligand from offering
for sale a Product at any price acceptable to Ligand; or
(c) Sell any Products to any party Ligand has reason to believe plans
to use the Products or sell the Products for use outside the Territory.
Ligand agrees that it shall hire and maintain a sales force appropriate for
marketing of the Products in the Territory, develop and implement appropriate
marketing plans, develop and utilize sales literature and other promotional
aids, hold symposia for key physicians, and otherwise perform the duties
associated with a promoter of the Products in the Territory.
2.3 SALES REPORTS.
(a) Ligand shall have the right, but not the obligation, to report
information regarding its sales of Products to one or more third parties
organized to collect and report sales data to its subscribers.
(b) During the term of this Agreement and after first commercial
sale of a Product, in the Territory, 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 (as defined in Schedule 3.1(a) to this
Agreement) of the Product in each country during the reporting period by Ligand,
its affiliates, sublicensees and assigns, and
(ii) the royalties which shall have accrued under this
Agreement in respect of such sales and the basis for calculating those
royalties. With respect to sales of the Products invoiced in United States
Dollars ("Dollars"), the Net Sales amounts and the amounts due to Lilly
hereunder shall be expressed in Dollars calculated by using Ligand's then-
current standard procedures and methodology.
With respect to sales of the Products 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 listing of the
exchange rates used in calculating Net Sales for 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
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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.
(c) All payments shall be made in Dollars at the time of quarterly
reporting. If at any time legal restrictions prevent the prompt remittance of
any payments with respect to any country where the Products are sold, Ligand,
its affiliates, assigns and 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.
(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 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, its Affiliates, 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
the 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 Ligand within thirty (30) days
after Ligand's receipt of such report,
(i) the amount of such underpayment and
(ii) if such underpayment exceeds *** 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
2.3 or under any sublicensee or marketing agreement is Confidential Information
(as defined in Section 5.14) and that Lilly shall retain all such information in
confidence.
2.4 PAYMENT FOR PRODUCTS. Ligand agrees to pay in full within thirty
(30) days *** each invoice delivered by Lilly to Ligand for the
Products 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
*** per
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annum (or the highest amount allowed by law, if such lawful amount is lower than
the foregoing) from the date the amounts become overdue. Ligand shall bear all
credit risk in the Territory relating to collections from customers and third
parties.
2.5 CONTROLLED SUBSTANCE DETERMINATION. In the event that any of the
Products are determined to be controlled substances or subject to any regulatory
requirements not provided for in this Agreement, the parties will agree on
reporting and other responsibilities sufficient to allow each of them to fulfill
their respective regulatory and other obligations relating thereto.
2.6 COMPLIANCE WITH APPLICABLE LAWS. Ligand agrees:
(a) To comply fully with all foreign, federal, state, and local laws,
regulations and rules applicable to its activities hereunder.
(b) To provide prompt notice to Lilly of any civil, criminal, or
administrative inquiry, inspection, investigation, or other action by any
foreign, federal, state, or local authority arising under or concerning any
laws, regulations or rules referred to in Section 2.6(a) or any other
governmental inquiry, inspection, investigation or action known to Ligand and
arising under or concerning any other laws, regulations or rules otherwise
applicable in any way to the Products or any acts or omissions of Ligand or
Ligand's employees or other agents or affiliates relating to the Products; to
provide Lilly with full and complete information regarding the status,
prosecution, proceeding and disposition of any such action; and, to the extent
Lilly may become a party to or otherwise involved in any such matter, to fully
cooperate with and assist Lilly in the prompt and lawful resolution of any such
matter.
(c) To furnish promptly to Lilly such information as Lilly may
reasonably request from time to time to evidence that Ligand is in compliance
with the applicable requirements of the laws, regulations and rules referred to
in Section 2.6(a) and (subject to other applicable provisions of this Agreement
concerning the funding of costs of regulatory compliance) to cooperate with
Lilly in meeting any obligations of Ligand and/or Lilly with respect to prior
approval, filing requirements or other compliance under any foreign, federal,
state or local laws, regulations or rules applicable within the Territory to the
Products or any labeling, materials or activities incidental to the marketing of
the Products.
(d) Not to market, sell or otherwise promote the Products in
violation of any of the requirements of the appropriate governmental or
regulatory authorities of the applicable jurisdiction(s) in the Territory; not
to make any false or misleading representations to customers or others regarding
Ligand, Lilly or the Products or any representations, warranties or guarantees
with respect to specifications, features or capabilities of the Products except
as contained in package labeling, package inserts, promotional material or other
communication media approved by Lilly; and not to promote or advertise the
Products in any manner or with any labeling, inserts, packaging or ingredients
not approved in advance by Lilly.
(e) Not to engage directly or indirectly in any transaction,
activity, or other act or omission that would violate the Foreign Corrupt
Practices Act, Anti-Referral Payments Law, any laws administered by the FDA, or
other similar laws of any other jurisdiction in the Territory.
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2.7 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 included
in the Territory in which Ligand sells Products.
2.8 CONTROLS. Ligand agrees to establish such internal controls and
maintain such records as will assure compliance with its obligations under this
Agreement and the ability of Lilly to conduct a meaningful review of such
records.
2.9 EVIDENCE OF FINANCIAL CONDITION. Ligand agrees to furnish Lilly upon
request a copy of its complete annual financial statement and other such
evidence of its financial condition necessary to establish, in the opinion of
Lilly, Ligand's ability to perform its obligations under this Agreement,
provided that this Section 2.9 shall not apply to any financial reporting period
as to which Ligand remains subject to and in compliance with the reporting
requirements of the Securities Exchange Act of 1934, as amended from time to
time.
2.10 OFFSET RIGHTS. Upon failure to pay any amount when due, cancellation
or termination of this Agreement, or with evidence of a condition of insolvency
of Ligand or a Ligand subsidiary, affiliate or location materially affecting
Ligand's obligations under this Agreement, Lilly reserves the right to offset
any amount due and owing Lilly against amounts otherwise owing under this
Agreement to Ligand or Ligand's subsidiaries, affiliates or locations.
2.11 FORECASTS. Ligand agrees to provide sales forecasts at such times and
in such detail as Lilly may reasonably request in order to determine
manufacturing requirements, including such information as Lilly may be required
to provide pursuant to the Seragen Agreements. Any such forecasts shall be
binding upon Ligand to the same extent as they would be on Lilly if made by
Lilly to Seragen.
3. CERTAIN COVENANTS OF LILLY.
3.1 WHOLESALE, SHIPMENT AND DISTRIBUTION TERMS. Lilly agrees:
(a) To sell the Products exclusively to Ligand for use for Lilly
Indications within the Territory to the extent that
(i) applicable regulatory approvals for sale of the Products
in the relevant jurisdiction have been obtained,
(ii) the Products are ordered by Ligand during the Term
(defined in Section 5.12 below) in compliance with other applicable provisions
of this Agreement, and
(iii) Lilly is able to obtain the lawful manufacture and
delivery of the Products from Seragen as contemplated by the Seragen Agreements
*** Such Products shall be sold to Ligand at the price determined
according to Schedule 3.1(a).
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Ligand acknowledges and agrees that Lilly intends to rely upon Seragen to
manufacture and supply the Products pursuant to the Seragen Agreements.
***
(b) To carry inventory of the Products, dropship the Products to the
location specified by Ligand in its orders and send a Ligand invoice to the
third party identified by Ligand.
(c) To use commercially reasonable efforts to maintain the Products
sold to Ligand under proper conditions, both in storage and in transit to
customers, *** 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 Products by item and package size certified to be accurate
by Lilly.
(d) Not to sell or market the Products directly or indirectly within
the Territory to any party other than Ligand, ***
(e) Prior to the first commercial sale of the Products in the
Territory, 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.
(f) To use *** to enforce its rights under the Seragen
Agreements in consultation with Ligand, to avoid or remedy, to the extent
practicable, any interruption in the supply of the Products or the failure of
any Products to meet applicable quality and other standards.
(g) To exercise its option under the Seragen Agreements to promote
and distribute the Products in the European Union, if (i) Ligand requests Lilly
to do so in writing and (ii) Ligand is, in Lilly's reasonable judgment, capable
of supporting sales and promotion and to the extent necessary regulatory
operations in the European Union sufficient to perform the duties assigned to it
under this Agreement. Upon the exercise of Lilly's option under this Section
3.1(g), Ligand shall become Lilly's sole wholesaler in the European Union
Countries and the provisions of this Agreement shall be amended with respect to
Ligand's obligations in the European Union countries to reflect such changes as
are necessary to reflect customary business and distribution practices in such
countries.
3.2 TRANSPORTATION COSTS. Lilly shall ship the Products F.O.B. shipping
point, transportation prepaid, subject to the following. Lilly will prepay
transportation charges in a manner consistent with the method of packaging and
shipment and good industry practice when routing is selected by Lilly. If
Ligand or customer requests special routing of a shipment which results in a
higher transportation cost than would be incurred as a result of the routing of
Lilly's selection, then the extra cost shall be added to the invoice.
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3.3 TITLE, RISK OF LOSS AND DAMAGE. Title and risk of loss shall pass to
Ligand when the Products are 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 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 Products in the course of shipment from Lilly.
3.4 RETURN FOR CREDIT. Ligand shall have no right to return the
Products 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, (ii) is
not in conformance with product specifications *** Upon
request by Ligand, Lilly will ship replacement Products to customers with an
invoice to the customer stating that there is no additional charge to the
customer for such replacement. Ligand shall pay the cost of such replacement
product unless the return is for credit as provided above, and shall in any
event pay applicable shipping costs.
3.5 WARRANTY. Lilly warrants that the Products 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 *** EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT, LILLY MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PRODUCTS. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED BY LILLY. IN NO EVENT SHALL LILLY BE
LIABLE FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, LOST REVENUES OR PROFITS OF LIGAND.
3.6 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 Products, it being understood that
Lilly's responsibilities hereunder relate solely to physical distribution of the
Products.
4. APPROVAL AND PRICING MILESTONES TO LILLY.
4.1 APPROVAL MILESTONE. Within thirty (30) days after the date on which
Ligand receives notice that the United States Food and Drug Administration
("FDA") has given final approval of the labeling for the Biologics License
Application ("BLA") for OntakO, Ligand shall issue that number of shares (the
"Approval Shares") of its voting common stock to Lilly as shall equal the sum of
$10 million divided by the average trading price of Ligand's voting common stock
over the twenty (20) consecutive trading days immediately preceding the date
which is five (5) consecutive days prior to the date the notice referred to
above is received.
4.2 PRICING MILESTONE. Within thirty (30) days after the date that the
Products are first sold at any time during the Term in the United States for use
in cancer indications (the "Product Pricing Date") at an average net selling
price or equivalent over a three-month period (the "Cycle Price") ***
as reported to Lilly in a manner consistent with the reporting of Net Sales
information pursuant to Section 2.3 (but excluding any prices which are clinical
study, introductory, or special discount prices), Ligand shall issue shares (the
"Pricing Shares") of its voting common stock to Lilly on
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the following terms and conditions determined with reference to the Cycle Price
and the average trading price of Ligand's voting common stock over the twenty
(20) consecutive trading days immediately preceding the date which is five (5)
consecutive days prior to the Product Pricing Date (the "Average Stock Price").
If the Cycle Price never *** or more during the Term, Lilly shall not be
entitled to any Pricing Shares. Otherwise, the number of Pricing Shares to be
issued to Lilly shall equal the number obtained by dividing the Target Value by
the Average Stock Price, whereby the Target Value is $10 million for a Cycle
Price *** and the Target Value declines, but not below $5 million, in inverse
proportion to any increase in the Cycle Price *** Examples of such
calculation for certain Cycle Prices are set forth below:
Target Value (in millions) (No. of Pricing Shares=
---------------------------------------------------
Cycle Price Relevant Target Value Divided by Average Stock Price)
----------- -----------------------------------------------------
$ *** $10.00
$ *** 8.75
$ *** 7.50
$ *** 6.25
$ *** 5.00
4.3 PRODUCT DISAPPROVAL/TARGRETIN DISCONTINUANCE. If the BLA for
Ontak/TM/ is deemed by the FDA to be not approved following review by the FDA,
and if Lilly has elected to terminate that certain Development and License
Agreement (Targretin) of even date herewith between the parties hereto relating
to Targretin pursuant to the provisions thereof granting certain rights of
termination to Lilly exercisable on or before December 15, 1998, Lilly, at
Ligand's option exercisable by giving written notice of exercise to Lilly
referring to this section, within thirty (30) days (subject to extensions by
Ligand to not later than one (1) year if Ligand is actively pursuing reversal of
the FDA's determination) after the later of the date of the notice that the FDA
deems the BLA unapprovable or termination by Lilly, shall within thirty (30)
days after receipt of such notice purchase $5 million of the voting common stock
of Ligand at the average trading price for the 20 consecutive trading days
immediately preceding the date which is five (5) days prior to the date of
delivery of such notice. Thereupon, all rights to the Products, including
without limitation Ontak/TM/, shall revert to Lilly; the parties shall have no
further rights hereunder; and Ligand shall have no further obligation to issue
additional shares under Sections 3.1 and 3.2.
4.4 LOW CYCLE PRICE TERMINATION RIGHT. If the average price of the
Product sold in the United States *** for use in
cancer indications determined over the first six months following the Product
Pricing Date (the "Low Price Termination Period") (excluding in calculating such
average price special introduction, or other promotional pricing not indicative
of normal pricing practices) *** Ligand may elect
within thirty (30) days after the last day of the Low Price Termination Period
to relinquish all of its rights under this Agreement by delivering notice of
termination of this Agreement to Lilly, and Lilly shall within thirty (30) days
after receipt of such notice purchase $5 million of the voting common stock of
Ligand at the average trading price for the twenty (20) consecutive trading days
immediately preceding the date which is five (5) consecutive days prior to the
date of delivery of such notice.
4.5 CERTAIN ADDITIONAL TERMINATION RIGHTS. *** Upon termination
of this Agreement under this Section 4.5:
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(a) All rights to Products shall revert to Lilly, and neither party
shall have any rights or obligations under this Agreement other than those which
may have accrued prior to termination; and
(b) If Lilly is the party exercising the right to terminate, and such
termination does not occur after a Bankruptcy Event (as defined below) then
Lilly shall,
(i) subject to the terms and conditions set forth in the stock
purchase agreement described in Section 4.6, purchase from Ligand, and Ligand
shall sell and issue to Lilly, within thirty (30) days of the date of the
Termination Notice, for Twenty Million Dollars ($20,000,000), the number of the
common voting shares of Ligand ("Shares") equal to Twenty Million Dollars
divided by one hundred twenty percent (120%) of the average daily closing price
for Shares reported by the National Association of Securities Dealers, Inc. on
the twenty (20) consecutive trading days immediately preceding the date which is
five (5) days prior to the date of delivery of the Termination Notice; and
(ii) Ligand shall have the right to designate either Targretin
(as defined in that certain Development and License Agreement (Targretin) dated
the date of this Agreement), Compound 268 or Compound 324 (each as defined in
that certain Collaboration Agreement dated the date of this Agreement) for
increased royalties, which right shall be exercised in the manner set forth and
on the terms and conditions provided in Section 5.1(b) of the Targretin
Agreement with respect to Targretin, or Section 6.1(b) of the Collaboration
Agreement with respect to Compound 268 or Compound 324.
(c) If Ligand is the party exercising the right to terminate and
(i) such termination does not occur after a Bankruptcy Event,
and
(ii) the Product receives final approval from the FDA of the
*** then Lilly shall, within thirty (30) days of receipt of notice of
the *** purchase the Ligand stock referred to in subparagraph (b)(i)
above and permit Ligand to designate a compound for increased royalties as
provided in subparagraph (b)(ii) above. As used herein "Bankruptcy Event" shall
mean that Seragen shall have consented to the appointment of a receiver or a
general assignment for the benefit of creditors, or filed or consented to the
filing of a petition under any bankruptcy or insolvency law or have any such
petition filed against it.
For purposes of this Section 4.5, the "Termination Option Period" shall
mean (y) with respect to a Cooperation Failure or an Enforcement Action, the
period of time from the end of the Ligand Option Period until *** whichever
first occurs, and (z) with respect to a *** For purposes of this Section
4.5, a "Cooperation Failure" shall mean any (x) refusal or failure by Seragen to
(i) perform any material obligation under the Seragen
Agreements that prevents Lilly from supplying Product to Ligand,
(ii) honor Lilly's orders for bulk drug substance, or
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(iii) cooperate with Lilly and Ligand in making regulatory
submissions and conducting clinical trials or (y) any other conduct or course of
conduct by Seragen which hinders in a material way supply, registration,
promotion or sale of Products under this Agreement and which in the case of (x)
(iii) continues for *** (subject to the ability of the parties to
shorten the period by mutual agreement). A Cooperation Failure will be deemed to
exist if the same uncooperative conduct or failure or refusal to act persists
for *** or if different manifestations of a lack of cooperation occur
over the *** period. ***
4.6 SHARE ISSUANCE PROCEDURE. Ligand shall issue and deliver to Lilly
duly prepared and endorsed stock certificates representing the shares, if any,
to be issued under this Section 4 no later than the dates respectively specified
in those sections, and in connection therewith Ligand and Lilly shall each
execute, deliver to each other and perform a Stock Purchase Agreement
containing, in the case of shares issued under Sections 4.1 or 4.2, terms
substantially similar to those set forth in Sections 3, 6, 7 and 9.11 of the
Stock Purchase Agreement between the parties of even date herewith (the "Stock
Purchase Agreement") and, in the case of shares issued pursuant to Sections 4.3,
4.4 or 4.5 as set forth in the form of Stock Purchase Agreement attached as
Schedule 4.6.
5. GENERAL PROVISIONS.
5.1 ORDERS FOR PRODUCTS.
(a) All orders for Products not inconsistent with the terms of this
Agreement shall be promptly accepted and executed by Lilly.
(b) In the event of a shortage of any of the Products, Lilly shall
have the right to delay or suspend deliveries of the Products to Ligand as
reasonably necessary. ***
(c) Lilly and Ligand will designate, by mutual agreement, the manner
of packaging the Products.
5.2 BILLING, CREDIT, AND PAYMENT.
(a) All orders for Products shall be invoiced as of the date shipped.
(b) Subject to the other applicable provisions of this Agreement,
each invoice will be payable, without the application of Credit Memorandum, by
means of an electronic funds transfer ("EFT") system designated or approved by
the mutual agreement of Lilly and Ligand, subject to the following:
(i) Ligand warrants to Lilly that each entry transmitted by it
or its agents or employees on its behalf to a depository financial institution
for the purpose of initiating an EFT
11
transaction is duly authorized by Ligand. Without Ligand's prior written
consent, Lilly shall not have the right to debit electronically any account of
Ligand.
(ii) Ligand shall not be deemed in default or lose any cash
discount by reason of any delay in receipt or non-receipt by Lilly of funds
transferred by EFT unless the delay or nonreceipt is the result of the negligent
or willful act or omission of Ligand.
(iii) With respect to any EFT entry originated by Lilly's bank,
or any delay in receipt by Ligand of approved credit funds transmitted by Lilly
by means of EFT, Lilly shall be liable to Ligand only for Lilly's or Lilly's
bank's negligent acts or omissions or failure to act in good faith and Lilly's
liability to Ligand shall be limited to reasonably foreseeable actual damages
proximately caused thereby.
(iv) With respect to the use of EFT by Ligand for the payment
of funds, Ligand shall be liable to Lilly only for Ligand's negligent acts or
omissions or failure to act in good faith and Ligand's liability to Lilly shall
be limited to reasonably foreseeable actual damages proximately caused thereby.
(v) Except as provided in (iii) and (iv) immediately above,
neither party shall be liable to the other for the act or omission of any
financial institution or any automated clearing house in connection with
the use of EFT for payment of funds and neither party shall be liable for
consequential damages to the other arising out of the use of EFT for
payment of funds.
(vi) Each party agrees promptly to return by EFT any
overpayment received by it.
(vii) Ligand agrees to execute all authorizations required by
Lilly or Lilly's or Ligand's depository financial institution(s) for payment and
receipt of funds by EFT and to notify Lilly promptly of any changes in those
authorizations.
(viii) To the extent applicable to the transfer of funds by EFT
under this Agreement, each party agrees to be bound by the Operating Rules and
Guidelines of the National Automated Clearing House Association as those
Operating Rules and Guidelines may be in effect from time to time.
(c) Lilly may require that each order from Ligand be accompanied by a
certified check or other form of payment satisfactory to Lilly in an amount
sufficient to cover the order less a cash discount of two percent (2%), or
require that Ligand provide security in an amount and form satisfactory to
Lilly, and may declare due and owing all outstanding indebtedness from Ligand,
including invoices on which extended dating has been granted, in the event (a)
reasonable grounds for insecurity arise with respect to the performance by
Ligand under this Agreement or (b) Ligand initiates or gives notice of its
intention to initiate, a filing under bankruptcy and insolvency or (c) Lilly has
given notice of termination of this Agreement or (d) Ligand becomes insolvent.
(d) Products shipped but not paid for at the time of the cancellation
or termination of this Agreement shall be paid for in accordance with the terms
of this Agreement.
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5.3 INSPECTION OF INVENTORY AND RECORDS. In the event Ligand inventories
Product, Lilly representative(s) will consult with and advise Ligand concerning
Ligand's inventory of Products and may inspect the same at a mutually agreed
upon time. A Lilly representative may also inspect records of Ligand to
determine compliance with Ligand's 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 Lilly's regularly retained independent
auditors or employee. Any Confidential Information disclosed by Ligand under
this Section 5.3 shall be maintained in confidence.
5.4 SALES OUTSIDE TERRITORY. This Agreement does not grant or imply to
Ligand any rights in any country outside the Territory.
5.5 BUYER-SELLER RELATIONSHIP. 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. Ligand shall not
under any circumstance have any authority or otherwise purport to bind Lilly to
any express or implied contract or to represent or otherwise bind Lilly before
or in connection with any proceeding by any governmental agency. Nothing herein
is intended to grant or imply any license or other rights in favor of Ligand to
any patent, trademark, copyright, trade secret, technology, know-how or other
rights of Lilly or Seragen relating to the Products or the ingredients thereof.
5.6 REPURCHASE OF INVENTORY STOCK. Upon cancellation or termination of
this Agreement, by expiration or otherwise, Lilly shall have the option to
repurchase Ligand's salable stock of Products, if any, at the net wholesale
prices then in effect as between Lilly and Ligand.
5.7 ASSIGNMENT. Neither party shall assign its rights or obligations
under this Agreement without first obtaining the written consent of the other
party, and any attempted assignment without such written consent shall be void
and of no effect, except that a merger, sale of all or substantially all of a
party's assets, tender or exchange offer, or other corporate reorganization in
which there is a change in control of a party, or a reorganization solely for
the purposes of changing a party's corporate domicile, shall not be considered
an assignment in violation of this Section 5.7.
5.8 CONTINGENCIES AFFECTING PERFORMANCE. Except as set forth in this
Agreement, neither party shall be liable for delay in performance or
nonperformance caused by fire, flood, storm, earthquake, or other act of God,
war, rebellion, riot, failure of carriers to furnish transportation, strikes,
lockouts or other labor disturbances, act of governmental authority, inability
to obtain material or equipment, or any other cause of like or different nature
beyond the control of such party.
5.9 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
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To Ligand:
Ligand Pharmaceuticals Incorporated
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
Any party may, by written notice to the other, designate a new address or
fax number to which notices to the party giving the notice shall thereafter be
mailed or faxed.
5.10 INDEMNITY AND INSURANCE.
(a) 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) sale of the Products in the Territory, 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 Products,
(ii) any of Ligand's activities under this Agreement including
Ligand's storage, promotion, marketing or distribution of the Products or the
use or sale of the Products in the Territory or (iii) which otherwise results
from Ligand's negligence or willful misconduct or its material breach of this
Agreement, except in the case of (i), (ii) or
(iii) to the extent caused by the negligence or willful
misconduct of Lilly or the material breach by Lilly of this Agreement or with
respect to product liability claims only, to the extent the injury alleged is
caused ***
(b) 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 *** (including product
liability claims, regardless of the theory under which such claims are brought),
(ii) Lilly's activities outside the Territory or
(iii) 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 ***
14
(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
5.10 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) ***
(e) 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.
5.11 RECALLS. In the event of a recall, whether voluntary or ordered by a
government agency in the Territory ("Recall"), and Lilly is then providing
physical distribution services, Lilly shall be responsible for the coordination
of Recall activities. Ligand and Lilly shall each bear and timely pay, as
coordinated and required by Lilly, an equal share of the costs of notification,
shipping and handling, retrieving the Products subject to Recall already
delivered to customers, and other expenses and costs of the Recall. Lilly shall
provide Ligand with supporting documentation of all reimbursable expenses and
costs.
5.12 TERMINATION OR CANCELLATION.
(a) This Agreement shall be in effect from the date hereof and
terminate upon termination for any reason of Lilly's rights to sell the Products
under the Seragen Agreements, unless sooner terminated as provided below in this
Section 5.12 (the "Term").
(b) Either party shall have the right to terminate this Agreement
after 60 days written notice to the other in the event the other party is in
material breach of this Agreement, unless the other party cures the breach
before the expiration of such period of time. Such notice shall set forth in
reasonable detail the specifics of the breach. Without limiting the generality
of the foregoing, any failure by Ligand to comply in all material respects with
the provisions of this Agreement concerning compliance with applicable laws,
regulations and rules shall constitute a material breach of this Agreement by
Ligand.
(c) This Agreement shall be terminated upon termination under
Sections 4.3, 4.4, and 4.5 as of the applicable dates specified therein.
(d) Upon termination of this Agreement for any reason, all then
accrued rights under purchase orders and invoices issued in compliance with this
Agreement, all then accrued rights of Lilly to acquire stock of Ligand under
Section 4, the indemnity and recall provisions of Sections 5.10 and 5.11, and
any rights either party may then have as a result of any breach of this
Agreement by the
15
other party shall survive termination of this Agreement. Upon termination of
this Agreement for any reason, and except as provided in the preceding sentence,
Ligand shall have no rights to require Lilly to sell the Products to Ligand or
otherwise grant to Ligand any license or other rights to the Products or the
technology relating thereto, and the parties shall have no obligations to each
other under this Agreement.
(e) Lilly shall not amend the Seragen Agreements in a manner that
would impair Ligand's rights under this agreement without the prior written
consent of Ligand. Prior to the date the Products are first sold at any time
during the Term in any jurisdiction in the Territory ("First Sale"), Lilly shall
not, without Ligand's written consent (which will not be unreasonably withheld),
terminate or agree to terminate the Seragen Agreements or take any action which
would give rise to a right of termination by Seragen, except as permitted by
this Agreement. Following the First Sale, Lilly shall not, without Ligand's
written consent, which can be withheld at its sole discretion, 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.
5.13 CERTAIN AGREEMENTS
(a) ***
(b) As soon as practicable after execution of this Agreement, Lilly
and Ligand shall endeavor in good faith to meet with Seragen and to agree upon
procedures for coordination of activities among Lilly, Ligand and Seragen,
including, without limitation, exchange of information, coordination of clinical
development activities, coordination of activities relating to regulatory
approvals and fulfillment of regulatory requirements.
(c) ***
(d) ***
(e) ***
16
(f) In the event either party receives notice of any claim by any
person relating to the provisions of this Agreement, the party receiving such
notice shall promptly notify the other parties. The parties shall each provide
reasonable assistance to the other in the defense of such claim, and neither
party shall enter into any settlement of any such claim without the consent of
the other, which shall not be unreasonably withheld.
(g) Ligand acknowledges that Ligand's rights hereunder and Lilly's
right to market, distribute and sell the Products and to enter into this
Agreement are subject in all respects to the rights of Seragen under the Seragen
Agreements and that Lilly confers no right hereunder except to the extent
consistent with the Seragen Agreements. As used herein, the "Seragen Agreements"
shall include that certain Sales and Distribution Agreement dated August 3,
1994, between Seragen, Inc. and Lilly, as amended by those certain amendments
dated May 28, 1996 and April 7, 1997, and that certain Development Agreement
dated August 3, 1994, between Seragen, Inc. and Lilly, as amended by those
certain amendments dated December 16, 1994 and June 30, 1995. Ligand will
provide such assistance consistent with the terms of this Agreement, as Lilly
may reasonably request, to assist Lilly in complying with the terms of this
Seragen Agreements. Ligand acknowledges that parties other than Ligand have or
may have rights to market and sell the Products or the active ingredient thereof
inside the Territory for certain indications and outside the Territory for use
in any disease indications and that Ligand's rights hereunder shall at all times
be subject to and exercised in compliance with the applicable provisions of the
Seragen Agreements.
(h) To the knowledge of Lilly, the sale of Product by Ligand as
contemplated by this Agreement will not infringe the patent or other
intellectual property rights of any third party. In the case of any claim of
infringement of a patent owned by a third party based upon the making, having
made, using, having used, importing, offering for sale, selling or having sold
Product, Ligand shall have the right to obtain a license from the third party
and credit *** of any royalty payable to the third
party against the amounts payable to Lilly under this Agreement but in no event
will Lilly's royalty be reduced by more than *** . If Lilly
and/or Ligand is sued for infringement by such third party, Ligand shall control
and defend or settle the action at its expense and shall pay any damages or
other monetary awards resulting therefrom, and Ligand shall be entitled to
credit *** of such monetary awards against amounts
payable to Lilly, but in no event will Lilly's payments each year be reduced
by more than *** .
(i) Ligand shall have the royalty-free right to use the trademark
Ontak/TM/ in connection with sales of the Products. If for any reason such
trademark is not available, Ligand shall be entitled to adopt such other
trademark as it may desire, subject to the consent of Lilly, which consent shall
not be unreasonably withheld. All expenses of registering and maintaining such
alternative xxxx shall be paid by Ligand.
5.14 CONFIDENTIAL INFORMATION. As used in this Agreement, "Confidential
Information" shall mean all information, inventions, know-how 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
17
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.
5.15 ENTIRE AGREEMENT. This Agreement shall (1) supersede all prior
proposals, letters, negotiations, contracts, agreements, and understandings
between Ligand and Lilly relating to the subject matter hereof, all of which are
hereby terminated; (2) constitute the complete agreement between Ligand and
Lilly; and (3) be controlling to the exclusion of all terms and conditions of
Ligand's purchase orders or other documents in conflict with this Agreement.
5.16 WAIVER. The failure of any party to enforce at any time any
provision of this Agreement shall not be a waiver of such provision or effect
the right of such party thereafter to enforce such provision. No waiver shall be
deemed a waiver of any other provision or of a subsequent breach whether of the
same or another provision.
5.17 GOVERNING LAW. This Agreement shall be interpreted in accordance
with, and governed by, the laws of the State of Indiana without regard to
principles of conflicts of law.
5.18 NONDISCLOSURE OF AGREEMENT. Neither party shall disclose any
information about this Agreement without the prior written consent of the other.
Consent shall not be required, however, for (a) disclosures to tax or other
governmental authorities, 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 has
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. 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 information about this Agreement as permitted
hereunder, such a party will provide to the other 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 with the other on the
necessity for the disclosure and the text of the proposed release within a
reasonable time in advance of the proposed disclosure.
18
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
Ligand:
LIGAND PHARMACEUTICALS INCORPORATED
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
By______________________________
LILLY:
XXX XXXXX AND COMPANY
Lilly Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
By_______________________________
August X. Xxxxxxxx
Executive Vice President
[Option and Wholesale Agreement
Signature Page]
19
SCHEDULE 3.1(a)
PURCHASE PRICE FOR ONTAK/TM/
PURSUANT TO WHOLESALE PURCHASE AGREEMENT (the "Agreement")
BETWEEN
XXX LILLY AND COMPANY AND LIGAND PHARMACEUTICALS INC.
The purchase price to be paid by Ligand for the Products pursuant to applicable
provisions of the Agreement shall be the greater of (i) ***
of the Net Sales of the Products, or (ii) *** per
*** .
"Net Sales" shall mean, with respect to the Product, ***
Such amounts shall be determined from the books and records of Ligand, Lilly,
and any affiliate or sublicensee of either of them as the case may be which
shall be maintained in accordance with GAAP.
In the event the Products are sold as part of a combination product, the parties
shall agree upon the price to be paid. For orders of the Products for the
initial commercial sales of the Products, and for any subsequent periods in
which actual Net Sales may subsequently vary from the prices of the Products
estimated by Lilly or in effect when the Products are ordered or shipped under
the Agreement, the purchase price and Net Sales amount for purposes of the
Agreement shall be based upon Lilly's good faith estimate of the Net Sales for
the applicable purchase order or period. Subsequently, the actual purchase
price paid shall be adjusted on a semiannual basis based upon the most recently
available Net Sales information. The parties shall cooperate in adjusting the
purchase price for the Products as necessary to reflect actual Net Sales of the
Products. Any amount due to or from a party on account of such adjustments
shall be paid by check or wire transfer within *** of
the completion of such calculation.
Pursuant to the Seragen Agreement, Lilly may be entitled to certain payments
from Seragen based upon usage of Products sold for Seragen Indications (as
defined in the Seragen Agreements) for Lilly Indications. In the event Lilly
actually receives any such payments, Lilly agrees to promptly pay to Ligand
*** of the amount so received less any costs of collection.
The price of any Products supplied by Lilly to Ligand for compassionate use or
treatment of medically indigent persons at no cost to such persons shall be
*** of the average net selling price in effect from time to time.
20
