UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____. COMMISSION FILE NUMBER: 0-20720
LIGAND PHARMACEUTICALS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0160744
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10275 SCIENCE CENTER DRIVE 92121-1117
SAN DIEGO, CA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (858) 550-7500
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of April 30, 2000, the registrant had 55,126,848 shares of common stock
outstanding.
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
QUARTERLY REPORT
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
COVER PAGE................................................................................................1
TABLE OF CONTENTS.........................................................................................2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999.................3
Consolidated Statements of Operations for the three months ended
March 31, 2000 (unaudited) and 1999 (unaudited)....................................................4
Consolidated Statements of Cash Flows for the three months ended March
31, 2000 (unaudited) and 1999 (unaudited)..........................................................5
Notes to Consolidated Financial Statements(unaudited)..............................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....9
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk...............................17
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings........................................................................*
ITEM 2. Changes in Securities and Use of Proceeds................................................18
ITEM 3. Defaults upon Senior Securities..........................................................*
ITEM 4. Submission of Matters to a Vote of Security Holders......................................*
ITEM 5. Other Information........................................................................*
ITEM 6. Exhibits and Reports on Form 8-K.........................................................18
SIGNATURE................................................................................................20
</TABLE>
* No information provided due to inapplicability of item.
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 23,877 $ 29,903
Short-term investments 23,805 17,252
Accounts receivable, net 2,461 1,657
Inventories 5,908 5,732
Other current assets 2,360 2,135
------------------ ------------------
Total current assets 58,411 56,679
Restricted investments 1,724 2,011
Property and equipment, net 13,045 20,542
Acquired technology, net 43,207 38,969
Other assets 13,171 16,444
------------------ ------------------
$ 129,558 $ 134,645
================== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 4,822 $ 5,395
Accrued liabilities 10,966 8,173
Deferred revenue 2,381 3,028
Current portion of equipment financing obligations 4,222 4,105
------------------ ------------------
Total current liabilities 22,391 20,701
Long-term portion of equipment financing obligations 6,186 6,907
Accrued acquisition obligation 2,700 2,900
Convertible note 2,500 2,500
Convertible subordinated debentures 42,645 41,977
Zero coupon convertible senior notes 65,778 85,250
------------------ ------------------
Total liabilities 142,200 160,235
------------------ ------------------
Commitments (Note 5)
Stockholders' deficit:
Convertible preferred stock, $.001 par value; 5,000,000
shares authorized; none issued -- -- -- --
Common stock, $.001 par value; 80,000,000 shares
authorized; 55,112,707 shares and 53,018,248 shares issued
at March 31, 2000 and December 31, 1999, respectively 55 53
Paid-in capital 475,780 448,784
Deferred warrant expense (3,114) (3,460)
Accumulated other comprehensive loss (48) (607)
Accumulated deficit (485,304) (470,349)
------------------ ------------------
(12,631) (25,579)
Less treasury stock, at cost (1,114 shares) (11) (11)
------------------ ------------------
Total stockholders' deficit (12,642) (25,590)
------------------ ------------------
$ 129,558 $ 134,645
================== ==================
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
--------------- ------------
<S> <C> <C>
Revenues:
Product sales $ 4,863 $4,366
Collaborative research and development
and other revenues 6,806 5,618
Contract manufacturing -- -- 297
--------------- ------------
Total revenues 11,669 10,281
--------------- ------------
Costs and expenses:
Cost of products sold 2,080 1,267
Contract manufacturing -- -- 1,316
Research and development 12,498 14,469
Selling, general and administrative 7,792 5,875
--------------- ------------
Total costs and expenses 22,370 22,927
--------------- ------------
Loss from operations (10,701) (12,646)
--------------- ------------
Other income (expense):
Interest income 741 750
Interest expense (3,461) (2,663)
Debt conversion expense (2,025) -- --
Other, net 491 -- --
--------------- ------------
Total other income (expense) (4,254) (1,913)
--------------- ------------
Net loss $(14,955) $(14,559)
=============== ============
Basic and diluted net loss per share $ (0.28) $ (0.32)
=============== ============
Shares used in computing net loss per share 53,804 45,794
=============== ============
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------------------- --------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (14,955) $ (14,559)
Adjustments to reconcile net loss to net cash used by operating activities:
Accretion of debt discount and interest 2,218 1,401
Debt conversion expense 2,025 -- --
Depreciation and amortization of property and equipment 1,097 1,309
Amortization of acquired technology 762 336
Amortization of deferred warrant expense 346 -- --
Gain on sale of manufacturing assets (437) -- --
Gain on sale of investment security (426) -- --
Other 4 44
Change in operating assets and liabilities net of effects from sale of
manufacturing assets:
Accounts receivable (1,026) (3,497)
Inventories (176) (1)
Other current assets (22) (104)
Accounts payable and accrued liabilities (2,626) (5,917)
Deferred revenue (647) (1,005)
------------------- --------------------
Net cash used in operating activities (13,863) (21,993)
------------------- --------------------
INVESTING ACTIVITIES
Purchase of short-term investments (6,586) (9,364)
Proceeds from short-term investments 42 10,811
Increase in other assets (382) (3,549)
Decrease in other assets 861 3,102
Purchase of property and equipment (327) (518)
Net proceeds from sale of manufacturing assets 9,676 -- --
Proceeds from sale of investment security 1,119 -- --
Payment of accrued acquisition obligation (200) -- --
------------------- --------------------
Net cash provided by investing activities 4,203 482
------------------- --------------------
FINANCING ACTIVITIES
Principal payments on equipment financing obligations (1,007) (775)
Net proceeds from issuance of common stock 3,951 186
Proceeds from equipment financing arrangements 403 -- --
Net change in restricted investments 287 310
------------------- --------------------
Net cash provided by (used in) financing activities 3,634 (279)
------------------- --------------------
Net decrease in cash and cash equivalents (6,026) (21,790)
Cash and cash equivalents at beginning of period 29,903 32,801
------------------- --------------------
Cash and cash equivalents at end of period $ 23,877 $ 11,011
=================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 2,198 $ 2,242
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion of zero coupon convertible senior note to common stock $ 21,022 $ -- --
Accrual of ONTAK obligation for acquired technology 5,000 -- --
Issuance of common stock for debt conversion incentive 2,025 -- --
Issuance of common stock to satisfy accrued acquisition obligation -- -- 10,000
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements of Ligand Pharmaceuticals
Incorporated ("Ligand" or the "Company") for the three months ended March 31,
2000 and 1999 are unaudited. These financial statements reflect all adjustments,
consisting of only normal recurring adjustments which, in the opinion of
management, are necessary to fairly present the consolidated financial position
as of March 31, 2000 and the consolidated results of operations for the three
months ended March 31, 2000 and 1999. The results of operations for the period
ended March 31, 2000 are not necessarily indicative of the results to be
expected for the year ending December 31, 2000. For more complete financial
information, these financial statements, and the notes thereto, should be read
in conjunction with the audited consolidated financial statements for the year
ended December 31, 1999 included in the Ligand Pharmaceuticals Incorporated Form
10-K filed with the Securities and Exchange Commission ("SEC").
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, Ligand
Pharmaceuticals International, Inc., Glycomed Incorporated, Ligand
Pharmaceuticals (Canada) Incorporated, and Seragen, Inc. ("Seragen"). Seragen
includes Marathon Biopharmaceuticals, Inc. ("Marathon"), its wholly owned
subsidiary. The assets of Marathon were sold on January 7, 2000 (see note 2).
All significant intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made to amounts included in
the prior period financial statements to conform to the presentation for the
period ended March 31, 2000.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
disclosures made in the accompanying notes to the consolidated financial
statements. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENT. In December 1999, the SEC issued Staff Accounting
Bulletin ("SAB") No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. SAB No.
101 provides guidance in applying generally accepted accounting principles to
revenue recognition in financial statements, including the recognition of
nonrefundable up-front fees received in conjunction with a research and
development arrangement. SAB No. 101 requires that license and other up-front
fees received from research collaborators be recognized over the term of the
agreement unless the fee is in exchange for products delivered or services
performed that represent the culmination of a separate earnings process. In
March 2000, SAB No. 101 was amended to delay the implementation date to the
second quarter of 2000 to provide additional time to study the guidance. The
evaluation of the impact of SAB No. 101 on the current and prior years has not
been completed. However, to the extent SAB No. 101 would be applicable and have
a material impact, the Company would implement this new pronouncement beginning
with the second quarter of 2000.
NET LOSS PER SHARE. Net loss per share is computed using the weighted average
number of common shares outstanding. Basic and diluted net loss per share
amounts are equivalent for the periods presented as the inclusion of common
stock equivalents in the number of shares used for the diluted computation would
be anti-dilutive.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using the first-in-first-out method. Inventories comprise the
following ($,000):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------- ---------------
<S> <C> <C>
Raw materials $ 717 $ 705
Work-in-process 3,668 3,645
Finished goods 1,523 1,382
--------------- ---------------
$ 5,908 $ 5,732
=============== ===============
</TABLE>
6
<PAGE>
OTHER ASSETS. Other assets comprise the following ($,000):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------- ---------------
<S> <C> <C>
Investment in X-Ceptor $ 4,842 $ 5,246
Prepaid royalty buyout 3,876 3,944
Deferred rent 3,394 3,381
Intangible assets (Note 2) -- -- 2,651
Other 1,059 1,222
--------------- --------------
$ 13,171 $ 16,444
============== ==============
</TABLE>
ACCRUED LIABILITIES. Accrued liabilities comprise the following ($,000):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------- --------------
<S> <C> <C>
ONTAK obligation (Note 5) $ 5,000 $ -- --
Compensation 2,774 2,981
Interest 991 1,972
Royalties 929 411
Other 1,272 2,809
-------------- -------------
$ 10,966 $ 8,173
============= =============
</TABLE>
COMPREHENSIVE INCOME. Comprehensive income represents the change during the
periods presented in unrealized gains and losses on available-for-sale
securities less reclassification adjustments for gains or losses included in net
income. The accumulated unrealized gains or losses are reported as accumulated
other comprehensive income (loss) as a separate component of stockholders'
deficit. Comprehensive income for the three month periods ended March 31, 2000
and 1999 is as follows ($,000):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
----------------- ------------------
<S> <C> <C>
Comprehensive income $ 9 $ 28
================= ==================
</TABLE>
2. SALE OF CONTRACT MANUFACTURING ASSETS
In January 2000, Ligand sold the assets associated with the contract
manufacturing business of Marathon for approximately $10.2 million. In
connection with the sale, Seragen entered into a long-term supply agreement with
the acquirer of the assets for the manufacture of ONTAK and the performance of
certain process and production development work for Seragen's next-generation
ONTAK product. Seragen has minimal purchase commitments under the agreement and
the purchase commitments are consistent with Ligand's prior costs to manufacture
ONTAK. The assets sold consist primarily of property and equipment of $6.7
million and intangibles of $2.7 million. The Company recognized a gain of
$437,000 on this transaction which is included in other income.
3. CONVERSION OF ZERO COUPON CONVERTIBLE SENIOR NOTES
In March 2000, Elan Corporation, plc ("Elan") converted an additional $20
million in zero coupon convertible senior notes plus accrued interest,
convertible at $14 per share, into 1,501,543 shares of the Company's Common
Stock. The Company provided Elan a $2 million early conversion incentive through
the issuance of an additional 98,580 shares of the Company's Common Stock. The
incentive was recorded as debt conversion expense in other income (expense).
4. RESEARCH AND DEVELOPMENT COLLABORATION
In February 2000, the Company and Organon Company ("Organon") entered into
a research and development collaboration to focus on small molecule compounds
with potential effects for the treatment and prevention of gynecological
diseases mediated through the progesterone receptor. Under the terms of the
collaboration, Ligand received an up-front payment and receives funding during
the research phase of the arrangement. In addition, if the collaboration is
successful, the Company may receive milestone and royalty payments on a
product-by-product basis. Organon was granted exclusive worldwide rights to
manufacture and sell any products resulting from the collaboration.
7
<PAGE>
5. COMMITMENTS
Under the terms of the Development, License and Supply Agreement with Elan
related to its product Morphelan(TM), Elan could receive up to $4.5 million from
Ligand upon submission of the Morphelan new drug application and another $5
million from Ligand upon approval of Morphelan for marketing by the U.S. Food
and Drug Administration.
In connection with the agreement between Seragen and Eli Lilly and Company
("Lilly") under which Lilly assigned to Seragen its sales and marketing rights
to ONTAK, Lilly will receive $5 million from Ligand upon cumulative net sales of
ONTAK reaching $20 million. Cumulative net sales of ONTAK were approximately
$11.9 million through March 31, 2000. The Company has accrued the ONTAK
obligation with a related increase to acquired technology.
8
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This quarterly report may contain predictions, estimates and other
forward-looking statements that involve a number of risks and uncertainties,
including those discussed below at "Risks and Uncertainties" below. This outlook
represents our current judgment on the future direction of our business. Such
risks and uncertainties could cause actual results to differ materially from any
future performance suggested below. We undertake no obligation to release
publicly the results of any revisions to these forward-looking statements to
reflect events or circumstances arising after the date of this quarterly report.
Panretin(R) and Targretin(R) are registered trademarks of Ligand
Pharmaceuticals Incorporated, and ONTAK(R) is a registered trademark of Seragen,
Inc., our wholly owned subsidiary.
OVERVIEW
We develop and market drugs that address critical unmet medical needs of
patients in the areas of cancer, skin diseases, and men's and women's
hormone-related diseases, as well as osteoporosis, metabolic disorders and
cardiovascular and inflammatory diseases. Our drug discovery and development
programs are based on gene transcription technology, primarily related to
Intracellular Receptors, also known as IRs, and Signal Transducers and
Activators of Transcription, also know as STATs.
In February 1999, we were granted U.S. Food and Drug Administration ("FDA")
marketing approval for our first two products, Panretin gel for the treatment of
Kaposi's sarcoma in AIDS patients and ONTAK for the treatment of patients with
persistent or recurrent cutaneous T-cell lymphoma or CTCL. In December 1999, the
FDA approved Targretin capsules for the treatment of CTCL in patients who are
refractory to at least one prior systemic therapy. We also submitted a New Drug
Application ("NDA") to the FDA in December 1999 for Targretin gel for the
treatment of patients with early stage CTCL.
We have been unprofitable since our inception. We expect to incur
substantial additional operating losses until the commercialization of our
products generates sufficient revenues to cover our expenses. We expect that our
operating results will fluctuate from quarter to quarter as a result of
differences in the timing of expenses incurred and revenues earned from product
sales, collaborative research and development, and other arrangements. Some of
these fluctuations may be significant.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 ("2000"), AS COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1999 ("1999")
Total revenues for 2000 were $11.7 million, an increase of $1.4 million as
compared to 1999 revenues of $10.3 million. Net loss for 2000 was $14.9 million
or $(0.28) per share, an increase of $300,000 as compared to the 1999 net loss
of $14.6 million or $(0.32) per share. The principal factors causing these
changes are discussed below.
Product sales for 2000 were $4.9 million, as compared to $4.4 million in
1999. The change is due to $3.7 million in 2000 revenues from sales of ONTAK,
approved by the FDA in February 1999, up from $500,000 in 1999, $798,000 in 2000
revenues from sales of Targretin capsules, approved by the FDA in December 1999,
offset by a decrease of $3.5 million on sales of Panretin gel. Demand for
Panretin gel during 2000 was largely satisfied by wholesaler purchases made in
1999.
Collaborative research and development and other revenues for 2000 were
$6.8 million, an increase of $1.2 million over 1999. The increase was primarily
due to a $2 million nonrefundable up-front fee received in connection with a
research and development collaboration entered into in February 2000. This
up-front fee could be subject to the new accounting pronouncement discussed on
pages six and eleven herein. In addition, we earned $1.4 million of revenue in
2000 under a research and development collaboration entered into in September
1999, offset by $1.5 million of revenue earned in 1999 related to marketing and
distribution agreements. The quarter-to-quarter comparison of collaborative
research and development and other revenues is as follows ($,000):
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------------- --------------
<S> <C> <C>
Collaborative research and development $ 6,806 $ 3,943
Milestone revenues -- -- 175
Marketing and distribution agreements -- --
1,500
---------------- --------------
$ 6,806 $ 5,618
================= ==============
</TABLE>
Contract manufacturing revenues for 1999 were $297,000. These revenues were
generated under contract manufacturing agreements performed at Marathon
Biopharmaceuticals, Inc. ("Marathon"), a subsidiary of Seragen. The assets of
Marathon were sold on January 7, 2000. For additional details, please see note 2
of the notes to consolidated financial statements.
Cost of products sold increased from $1.3 million in 1999 to $2.1 million
in 2000. The increase is due to the increased sales of ONTAK in 2000, which
resulted in greater manufacturing costs, technology amortization, and royalty
expenses as compared to Panretin gel, which accounted for the majority of sales
in 1999.
In 1999, contract manufacturing costs of $1.3 million were incurred at the
Marathon facility. No such costs were incurred in 2000 as a result of the sale
of the Marathon assets.
Research and development expenses were $12.5 million in 2000, compared to
$14.5 million in 1999. The decrease is due to a general reduction of research
and development activities with an increased focus on commercialization of our
new products. Specifically, research and development costs were incurred in 1999
related to Targretin capsules, submitted as a NDA in June 1999 and approved by
the FDA in December 1999, and Targretin gel, submitted as a NDA in December
1999.
Selling, general and administrative expenses were $7.8 million in 2000, up
from $5.9 million in 1999. The increase was due primarily to increased selling
and marketing costs associated with the expansion of our sales force from 20 to
40 representatives in late 1999, marketing activities related to the launch of
Targretin capsules in January 2000, and continued promotion of ONTAK and
Panretin gel.
Interest expense in 2000 was $3.5 million, an increase of $798,000 over
1999. The increase is due to the accretion related to the zero coupon
convertible senior notes issued to entities affiliated with Elan Corporation,
plc ("Elan") in the fourth quarter of 1998 ($40 million) and the third quarter
of 1999 ($60 million) offset by conversions of a portion of the notes by Elan in
the fourth quarter of 1999 ($20 million) and the first quarter of 2000 ($20
million).
The debt conversion expense of $2 million relates to the incentive provided
to Elan for their conversion of the $20 million of notes in March 2000. For
additional details regarding the note conversion, please see note 3 of the notes
to consolidated financial statements.
Other income in 2000 includes a gain of $437,000 on the sale of the
Marathon assets, a gain of $426,000 on the sale of an investment security,
offset by our equity in the losses of X-Ceptor Therapeutics, Inc. of $372,000.
We have federal, state, and foreign income tax net operating loss
carryforwards and federal and state research tax credit carryforwards which are
available subject to Internal Revenue Code 382 and 383 carryforward limitations.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations through private and public offerings of our
equity securities, collaborative research and development and other revenues,
issuance of convertible notes, capital and operating lease transactions,
equipment financing arrangements, investment income and product sales.
As of March 31, 2000, we had acquired a total of $36.5 million in property,
laboratory and office equipment, and tenant leasehold improvements.
Substantially all of the balance has been funded through capital lease and
equipment financing arrangements. Our equipment financing arrangements extend
through September 30, 2000 with $1.9 million of financing currently available
under those arrangements. We lease our office and research facilities under
operating lease arrangements with varying terms through August 2015.
10
<PAGE>
Working capital was $36 million as of March 31, 2000, unchanged from the
end of 1999. Cash and cash equivalents, short-term investments and restricted
investments totaled $49.4 million at March 31, 2000 as compared to $49.2 million
at December 31, 1999. We primarily invest our cash in United States government
and investment grade corporate debt securities.
In January 2000, we sold the contract manufacturing assets of Marathon for
$10.2 million, resulting in net cash proceeds as of March 31, 2000 of $9.7
million. Significant cash in flows also included $3.9 million of cash received
from the issuance of common stock upon the exercise of outstanding stock options
and warrants and $1.1 million from the sale of an investment security.
Significant cash out flows included $13.9 million of net cash used to finance
operating activities and $1 million of payments under equipment financing
obligations.
In March 2000, Elan converted a total of $20 million of zero coupon
convertible senior notes plus accrued interest into common stock. We may issue
an additional $10 million in such notes to Elan under the terms of our
agreements with Elan.
We may be required to make milestone payments of up to $9.5 million to Elan
under the Morphelan license agreement and $5 million to Lilly upon cumulative
sales of ONTAK reaching $20 million. These payments may be made in cash or our
common stock. For additional details, please see note 5 of the notes to
consolidated financial statements. In addition, as of April 30, 2000, warrants
to purchase approximately 1.1 million shares of our common stock, with an
exercise price of $7.12 per share, were outstanding and expire on June 3, 2000.
We believe our available cash, cash equivalents, marketable securities and
existing sources of funding will be adequate to satisfy our anticipated
operating and capital requirements through 2000. Our future operating and
capital requirements will depend on many factors, including: the effectiveness
of our commercialization activities; the pace of scientific progress in our
research and development programs; the magnitude of these programs; the scope
and results of preclinical testing and clinical trials; the time and costs
involved in obtaining regulatory approvals; the costs involved in preparing,
filing, prosecuting, maintaining and enforcing patent claims; competing
technological and market developments; the ability to establish additional
collaborations or changes in existing collaborations; and the cost of
manufacturing.
NEW ACCOUNTING PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, REVENUE RECOGNITION IN FINANCIAL
STATEMENTS. SAB No. 101 provides guidance in applying generally accepted
accounting principles to revenue recognition in financial statements, including
the recognition of nonrefundable up-front fees received in conjunction with a
research and development arrangement. SAB No. 101 requires that license and
other up-front fees received from research collaborators be recognized over the
term of the agreement unless the fee is in exchange for products delivered or
services performed that represent the culmination of a separate earnings
process. In March 2000, SAB No. 101 was amended to delay the implementation date
to the second quarter of 2000 to provide additional time to study the guidance.
The evaluation of the impact of SAB No. 101 on the current and prior years has
not been completed. However, to the extent SAB No. 101 would be applicable and
have a material impact, we would implement this new pronouncement beginning with
the second quarter of 2000.
RISKS AND UNCERTAINTIES
The following is a summary description of some of the many risks we face in
our business. You should carefully review these risks in evaluating our
business, including the businesses of our subsidiaries. You should also consider
the other information described in this report.
OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION INVOLVES A NUMBER OF UNCERTAINTIES
AND WE MAY NEVER GENERATE SUFFICIENT REVENUES FROM THE SALE OF PRODUCTS TO
BECOME PROFITABLE.
We were founded in 1987. We have incurred significant losses since our
inception. At March 31, 2000, our accumulated deficit was $485.3 million. To
date, we have received the majority of our revenues from our collaborative
arrangements and only recently have begun receiving revenues from the sale of
pharmaceutical products. To become profitable, we must successfully develop,
clinically test, market and sell our products. Even if we achieve profitability,
we cannot predict the level of that profitability or whether we will be able to
sustain profitability. We expect that our operating results will fluctuate from
period to period as a result of differences in when we incur expenses and
receive revenues from product sales, collaborative arrangements and other
sources. Some of these fluctuations may be significant.
11
<PAGE>
Most of our products will require extensive additional development,
including preclinical testing and human studies, as well as regulatory
approvals, before we can market them. We do not expect that any products
resulting from our product development efforts or the efforts of our
collaborative partners, other than those for which marketing approval has been
received, will be available for sale until the first half of the 2000 calendar
year at the earliest, if at all. There are many reasons that we may fail in our
efforts to develop our other potential products, including the possibility that:
o we may discover during preclinical testing or human studies that our
potential products are ineffective or cause harmful side effects,
o the products may fail to receive necessary regulatory approvals from the
FDA or foreign authorities in a timely manner or at all,
o we may fail to produce the products, if approved, in commercial quantities
or at reasonable costs,
o the products once approved, may not achieve commercial acceptance, or
o the proprietary rights of other parties may prevent us from marketing the
products.
WE NEED TO BUILD MARKETING AND SALES FORCES IN THE UNITED STATES AND EUROPE
WHICH WILL BE AN EXPENSIVE AND TIME-CONSUMING PROCESS.
Developing the sales force to market and sell products is a difficult,
expensive and time-consuming process. We recently developed a sales force for
the U.S. market and currently rely on another company to distribute our
products. The distributor is responsible for providing many marketing support
services, including customer service, order entry, shipping and billing, and
customer reimbursement assistance. In Europe, we will rely initially on other
companies to distribute and market our products. In 1999, we entered into
agreements for the marketing and distribution of our products in Spain,
Portugal, Greece, Italy, and Central and South America and we established a
subsidiary, Ligand Pharmaceuticals International, Inc., with a branch in London,
England, to manage our European marketing and operations. We may not be able to
continue to establish and maintain the sales and marketing capabilities
necessary to successfully commercialize our products. To the extent we enter
into co-promotion or other licensing arrangements, any revenues we receive will
depend on the marketing efforts of others, which may or may not be successful.
SOME OF OUR KEY TECHNOLOGIES HAVE NOT BEEN USED TO PRODUCE MARKETED PRODUCTS AND
MAY NOT BE CAPABLE OF PRODUCING SUCH PRODUCTS.
To date, we have dedicated most of our resources to the research and
development of potential drugs based upon our expertise in our IR and STATs
technologies. Even though there are marketed drugs that act through IRs, some
aspects of our IR technologies have not been used to produce marketed products.
In addition, we are not aware of any drugs that have been developed and
successfully commercialized that interact directly with STATs. Much remains to
be learned about the location and function of IRs and STATs. If we are unable to
apply our IR and STAT technologies to the development of our potential products,
we will not be successful in developing new products.
OUR DRUG DEVELOPMENT PROGRAMS WILL REQUIRE SUBSTANTIAL ADDITIONAL FUTURE
CAPITAL.
Our drug development programs require substantial additional capital,
arising from costs to:
o conduct research, preclinical testing and human studies,
o establish pilot scale and commercial scale manufacturing processes and
facilities, and
o establish and develop quality control, regulatory, marketing, sales and
administrative capabilities to support these programs.
Our future operating and capital needs will depend on many factors,
including:
o the pace of scientific progress in our research and development programs
and the magnitude of these programs,
o the scope and results of preclinical testing and human studies,
o the time and costs involved in obtaining regulatory approvals,
o the time and costs involved in preparing, filing, prosecuting, maintaining
and enforcing patent claims,
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<PAGE>
o competing technological and market developments,
o our ability to establish additional collaborations,
o changes in our existing collaborations,
o the cost of manufacturing scale-up, and
o the effectiveness of our commercialization activities.
If additional funds are required and we are unable to obtain them on terms
favorable to us, we may be required to cease or reduce further commercialization
of our products, to sell some or all of our technology or assets or to merge
with another entity.
OUR PRODUCTS MUST CLEAR SIGNIFICANT REGULATORY HURDLES PRIOR TO MARKETING.
Before we obtain the approvals necessary to sell any of our potential
products, we must show through preclinical studies and clinical trials or human
testing that each product is safe and effective. Our failure to show any
product's safety and effectiveness would delay or prevent regulatory approval of
the product and could adversely affect our business. The clinical trials process
is complex and uncertain. The results of preclinical studies and initial
clinical trials may not necessarily predict the results from later large-scale
clinical trials. In addition, clinical trials may not demonstrate a product's
safety and effectiveness to the satisfaction of the regulatory authorities. A
number of companies have suffered significant setbacks in advanced clinical
trials or in seeking regulatory approvals, despite promising results in earlier
trials. The FDA may also require additional clinical trials after regulatory
approvals are received, which could be expensive and time-consuming, and failure
to successfully conduct those trials could jeopardize continued
commercialization.
The rate at which we complete our clinical trials depends on many factors,
including our ability to obtain adequate supplies of the products to be tested
and patient enrollment. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites and the eligibility criteria for the trial. Delays in patient
enrollment may result in increased costs and longer development times. In
addition, some of our collaborative partners have rights to control product
development and clinical programs for products developed under the
collaborations. As a result, these collaborators may conduct these programs more
slowly or in a different manner than we had expected. Even if clinical trials
are completed, we or our collaborative partners still may not apply for FDA
approval in a timely manner or the FDA still may not grant approval.
WE MAY NOT BE ABLE TO PAY AMOUNTS DUE ON OUR OUTSTANDING INDEBTEDNESS.
We and our subsidiaries may not have sufficient funds to make required
payments due under existing debt. If we or our subsidiaries do not have adequate
funds, we will be forced to refinance the existing debt and may not be
successful in doing so. Our subsidiary, Glycomed, is obligated to make payments
under convertible subordinated debentures in the total principal amount of $50
million. The debentures pay interest semi-annually at a rate of 7 1/2% per
annum, are due in 2003 and convertible into our common stock at $26.52 per
share. In addition, at March 31, 2000, we had outstanding a $2.5 million
convertible note to SmithKline Beecham Corporation due in 2002 with interest at
prime and convertible at $13.56 per share. We also had outstanding $65.8 million
in zero coupon convertible senior notes to Elan, due 2008 with an 8% per annum
yield to maturity and convertible at $14 per share. Glycomed's failure to make
payments when due under its debentures would cause us to default under the
outstanding notes to Elan or other notes we may issue to Elan.
WE MAY REQUIRE ADDITIONAL STOCK OR DEBT FINANCINGS TO FUND OUR OPERATIONS WHICH
MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS.
We have incurred losses since our inception and do not expect to generate
positive cash flow to fund our operations for one or more years. As a result, we
may need to complete additional equity or debt financings to fund our
operations. Our inability to obtain additional financing could adversely affect
our business. Financings may not be available on acceptable terms. In addition,
these financings, if completed, still may not meet our capital needs and could
result in substantial dilution to our stockholders. For instance, the zero
coupon convertible senior notes outstanding to Elan are convertible into common
stock at the option of Elan, subject to some limitations. In addition, we may
issue additional notes to Elan with up to a total issue price of $10 million,
which also would be convertible into common stock. If adequate funds are not
available, we may be required to delay, reduce the scope of or eliminate one or
more of our drug development programs. Alternatively, we may be forced to
attempt to continue development by entering into arrangements with collaborative
partners or others that require us to relinquish some or all of our rights to
technologies or drug candidates that we would not otherwise relinquish.
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WE FACE SUBSTANTIAL COMPETITION.
Some of the drugs that we are developing and marketing will compete with
existing treatments. In addition, several companies are developing new drugs
that target the same diseases that we are targeting and are taking IR-related
and STAT-related approaches to drug development. Many of our existing or
potential competitors, particularly large drug companies, have greater
financial, technical and human resources than us and may be better equipped to
develop, manufacture and market products. Many of these companies also have
extensive experience in preclinical testing and human clinical trials, obtaining
FDA and other regulatory approvals and manufacturing and marketing
pharmaceutical products. In addition, academic institutions, governmental
agencies and other public and private research organizations are developing
products that may compete with the products we are developing. These
institutions are becoming more aware of the commercial value of their findings
and are seeking patent protection and licensing arrangements to collect payments
for the use of their technologies. These institutions also may market
competitive products on their own or through joint ventures and will compete
with us in recruiting highly qualified scientific personnel. Any of these
companies, academic institutions, government agencies or research organizations
may develop and introduce products and processes that compete with or are better
than ours. As a result, our products may become noncompetitive or obsolete.
OUR SUCCESS WILL DEPEND ON THIRD-PARTY REIMBURSEMENT AND MAY BE IMPACTED BY
HEALTH CARE REFORM.
Sales of prescription drugs depend significantly on the availability of
reimbursement to the consumer from third party payors, such as government and
private insurance plans. These third party payors frequently require drug
companies to provide predetermined discounts from list prices, and they are
increasingly challenging the prices charged for medical products and services.
Our current and potential products may not be considered cost-effective and
reimbursement to the consumer may not be available or sufficient to allow us to
sell our products on a competitive basis.
In addition, the efforts of governments and third party payors to contain
or reduce the cost of health care will continue to affect the business and
financial condition of drug companies. A number of legislative and regulatory
proposals to change the health care system have been discussed in recent years.
In addition, an increasing emphasis on managed care in the United States has and
will continue to increase pressure on drug pricing. We cannot predict whether
legislative or regulatory proposals will be adopted or what effect those
proposals or managed care efforts may have on our business. The announcement
and/or adoption of such proposals or efforts could adversely affect our profit
margins and business.
WE RELY HEAVILY ON COLLABORATIVE RELATIONSHIPS AND TERMINATION OF ANY OF THESE
PROGRAMS COULD REDUCE THE FINANCIAL RESOURCES AVAILABLE TO US.
Our strategy for developing and commercializing many of our potential
products includes entering into collaborations with corporate partners,
licensors, licensees and others. To date, we have entered into collaborations
with Organon, Warner-Lambert Company, Eli Lilly and Company, SmithKline Beecham
Corporation, American Home Products, Abbott Laboratories, Sankyo Company Ltd.,
Glaxo-Wellcome plc, Allergan, Inc., and Pfizer Inc. These collaborations provide
us with funding and research and development resources for potential products
for the treatment or control of metabolic diseases, hematopoiesis, women's
health disorders, inflammation, cardiovascular disease, cancer and skin disease,
and osteoporosis. These agreements also give our collaborative partners
significant discretion when deciding whether or not to pursue any development
program. We cannot be certain that our collaborations will continue or be
successful.
In addition, our collaborators may develop drugs, either alone or with
others, that compete with the types of drugs they currently are developing with
us. This would result in less support and increased competition for our
programs. If products are approved for marketing under our collaborative
programs, any revenues we receive will depend on the manufacturing, marketing
and sales efforts of our collaborators, who generally retain commercialization
rights under the collaborative agreements. Our current collaborators also
generally have the right to terminate their collaborations under specified
circumstances. If any of our collaborative partners breach or terminate their
agreements with us or otherwise fail to conduct their collaborative activities
successfully, our product development under these agreements will be delayed or
terminated.
We may have disputes in the future with our collaborators, including
disputes concerning which of us owns the rights to any technology developed. For
instance, we were involved in litigation with Pfizer, which we settled in April
1996, concerning our right to milestones and royalties based on the development
and commercialization of droloxifene. These and other possible disagreements
between us and our collaborators could delay our ability and the ability of our
collaborators to achieve milestones or our receipt of other payments. In
addition, any disagreements could delay, interrupt or terminate the
collaborative research, development and commercialization of certain potential
products, or could result in litigation or
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arbitration. The occurrence of any of these problems could be time-consuming
and expensive and could adversely affect our business.
OUR SUCCESS DEPENDS ON OUR ABILITY TO OBTAIN AND MAINTAIN OUR PATENTS AND OTHER
PROPRIETARY RIGHTS.
Our success will depend on our ability and the ability of our licensors to
obtain and maintain patents and proprietary rights for our potential products
and to avoid infringing the proprietary rights of others, both in the United
States and in foreign countries. Patents may not be issued from any of these
applications currently on file or, if issued, may not provide sufficient
protection. In addition, if we breach our licenses, we may lose rights to
important technology and potential products.
Our patent position, like that of many pharmaceutical companies, is
uncertain and involves complex legal and technical questions for which important
legal principles are unresolved. We may not develop or obtain rights to products
or processes that are patentable. Even if we do obtain patents, they may not
adequately protect the technology we own or have licensed. In addition, others
may challenge, seek to invalidate, infringe or circumvent any patents we own or
license, and rights we receive under those patents may not provide competitive
advantages to us. Further, the manufacture, use or sale of our products may
infringe the patent rights of others.
Several drug companies and research and academic institutions have
developed technologies, filed patent applications or received patents for
technologies that may be related to our business. Others have filed patent
applications and received patents that conflict with patents or patent
applications we have licensed for our use, either by claiming the same methods
or compounds or by claiming methods or compounds that could dominate those
licensed to us. In addition, we may not be aware of all patents or patent
applications that may impact our ability to make, use or sell any of our
potential products. For example, United States patent applications may be kept
confidential while pending in the Patent and Trademark Office, and patent
applications filed in foreign countries are often first published six months or
more after filing. Any conflicts resulting from the patent rights of others
could significantly reduce the coverage of our patents and limit our ability to
obtain meaningful patent protection. If other companies obtain patents with
conflicting claims, we may be required to obtain licenses to those patents or to
develop or obtain alternative technology. We may not be able to obtain any such
license on acceptable terms or at all. Any failure to obtain such licenses could
delay or prevent us from pursuing the development or commercialization of our
potential products.
We have had and will continue to have discussions with our current and
potential collaborators regarding the scope and validity of our patent and other
proprietary rights. If a collaborator or other party successfully establishes
that our patent rights are invalid, we may not be able to continue our existing
collaborations beyond their expiration. Any determination that our patent rights
are invalid also could encourage our collaborators to terminate their agreements
where contractually permitted. Such a determination could also adversely affect
our ability to enter into new collaborations.
We may also need to initiate litigation, which could be time-consuming and
expensive, to enforce our proprietary rights or to determine the scope and
validity of others' rights. If litigation results, a court may find our patents
or those of our licensors invalid or may find that we have infringed on a
competitor's rights. If any of our competitors have filed patent applications in
the United States which claim technology we also have invented, the Patent and
Trademark Office may require us to participate in expensive interference
proceedings to determine who has the right to a patent for the technology.
We have learned that Hoffmann-La Roche Inc. has received a United States
patent and has made patent filings in foreign countries that relate to our
Panretin(R) capsules and gel products. We filed a patent application with an
earlier filing date than Hoffmann-La Roche's patent, which we believe is broader
than, but overlaps in part with, Hoffmann-La Roche's patent. We currently are
investigating the scope and validity of Hoffmann-La Roche's patent to determine
its impact upon our products. The Patent and Trademark Office has informed us
that the overlapping claims are patentable to us and has initiated a proceeding
to determine whether we or Hoffmann-La Roche are entitled to a patent. We may
not receive a favorable outcome in the proceeding. In addition, the proceeding
may delay the Patent and Trademark Office's decision regarding our earlier
application. If we do not prevail, the Hoffmann-La Roche patent might block our
use of Panretin(R) capsules and gel in certain cancers.
We also rely on unpatented trade secrets and know-how to protect and
maintain our competitive position. We require our employees, consultants,
collaborators and others to sign confidentiality agreements when they begin
their relationship with us. These agreements may be breached and we may not have
adequate remedies for any breach. In addition, our competitors may independently
discover our trade secrets. Any of these actions might adversely affect our
business.
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WE RELY ON THIRD-PARTY MANUFACTURERS.
We currently have no manufacturing facilities and we rely on others for
clinical or commercial production of our marketed and potential products. To be
successful, we will need to manufacture our products, either directly or through
others, in commercial quantities, in compliance with regulatory requirements and
at acceptable cost. Any extended and unplanned manufacturing shutdowns could be
expensive and could result in inventory and product shortages. If we are unable
to develop our own facilities or contract with others for manufacturing
services, our ability to conduct preclinical testing and human clinical trials
will be adversely affected. In addition, our revenues could be adversely
affected if we are unable to supply currently marketed products. This in turn
could delay our submission of products for regulatory approval and our
initiation of new development programs. In addition, although other companies
have manufactured drugs acting through IRs and STATs on a commercial scale, we
may not be able to do so at costs or in quantities to make marketable products.
The manufacturing process also may be susceptible to contamination, which
could cause the affected manufacturing facility to close until the contamination
is identified and fixed. In addition, problems with equipment failure or
operator error also could cause delays.
OUR BUSINESS EXPOSES US TO PRODUCT LIABILITY RISKS AND WE MAY NOT HAVE
SUFFICIENT INSURANCE TO COVER ANY CLAIMS.
Our business exposes us to potential product liability risks. A successful
product liability claim or series of claims brought against us could result in
payment of significant amounts of money and divert management's attention from
running the business. Some of the compounds we are investigating may be harmful
to humans. For example, retinoids as a class are known to contain compounds,
which can cause birth defects. We may not be able to maintain our insurance on
acceptable terms, or our insurance may not provide adequate protection in the
case of a product liability claim. To the extent that product liability
insurance, if available, does not cover potential claims, we will be required to
self-insure the risks associated with such claims.
WE ARE DEPENDENT ON OUR KEY EMPLOYEES, THE LOSS OF WHOSE SERVICES COULD
ADVERSELY AFFECT US.
We depend on our key scientific and management staff, the loss of whose
services could adversely affect our business. Furthermore, we are currently
experiencing a period of rapid growth, which requires us to hire many new
scientific, management and operational personnel. Recruiting and retaining
qualified management, operations and scientific personnel to perform research
and development work also is critical to our success. We may not be able to
attract and retain such personnel on acceptable terms given the competition
among numerous drug companies, universities and other research institutions for
such personnel.
WE USE HAZARDOUS MATERIALS WHICH REQUIRES US TO INCUR SUBSTANTIAL COSTS TO
COMPLY WITH ENVIRONMENTAL REGULATIONS.
In connection with our research and development activities, we handle
hazardous materials, chemicals and various radioactive compounds. We cannot
completely eliminate the risk of accidental contamination or injury from the
handling and disposing of hazardous materials. In the event of any accident, we
could be held liable for any damages that result, which could be significant. In
addition, we may incur substantial costs to comply with environmental
regulations.
OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY VOLATILITY IN THE MARKETS.
The market prices and trading volumes for our securities, and the
securities of emerging companies like us, have historically been highly volatile
and have experienced significant fluctuations unrelated to operating
performance. Future announcements concerning us or our competitors may impact
the market price of our common stock. These announcements might include:
o the results of research or development testing,
o technological innovations,
o new commercial products,
o government regulation,
o receipt of regulatory approvals by competitors,
o our failure to receive regulatory approvals,
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o developments concerning proprietary rights, or
o litigation or public concern about the safety of the products.
YOU MAY NOT RECEIVE A RETURN ON YOUR SHARES OTHER THAN THROUGH THE SALE OF YOUR
SHARES OF COMMON STOCK.
We have not paid any cash dividends on our common stock to date, and we do
not anticipate paying cash dividends in the foreseeable future. Accordingly,
other than through a sale of your shares, you may not receive a return.
OUR SHAREHOLDER RIGHTS PLAN AND CHARTER DOCUMENTS MAY PREVENT TRANSACTIONS THAT
COULD BE BENEFICIAL TO YOU.
Our shareholder rights plan and provisions contained in our certificate of
incorporation and bylaws may discourage transactions involving an actual or
potential change in our ownership, including transactions in which you might
otherwise receive a premium for your shares over then-current market prices.
These provisions also may limit your ability to approve transactions that you
deem to be in your best interests. In addition, our board of directors may issue
shares of preferred stock without any further action by you. Such issuances may
have the effect of delaying or preventing a change in our ownership.
PART I. FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
At March 31, 2000 our investment portfolio includes fixed-income securities
of $21.7 million. These securities are subject to interest rate risk and will
decline in value if interest rates increase. However, due to the short duration
of our investment portfolio, an immediate 10% change in interest rates would
have no material impact on our financial condition, results of operations or
cash flows.
We generally conduct business including sales to foreign customers, in U.S.
dollars and as a result we have very limited foreign currency exchange rate
risk. The effect of an immediate 10% change in foreign exchange rates would not
have a material impact on our financial condition, results of operations or cash
flows.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 1, 2000, we issued to Elan International Services, Ltd. ("EIS"), a
subsidiary of Elan Corporation, plc 1,600,123 shares of our common stock related
to the conversion of $20 million in zero coupon convertible senior notes plus
accrued interest. The shares of common stock were issued to a single entity,
EIS, under a claim of exemption under Regulation S promulgated by the Securities
and Exchange Commission or, alternatively, under Section 4(2) of the Securities
Act of 1933, as amended.
ITEM 6 (A) EXHIBITS
<TABLE>
<S> <C>
Exhibit 2.1 (1) Agreement and Plan of Reorganization dated May 11, 1998, by and among the Company, Knight
Acquisition Corp. and Seragen, Inc. (Exhibit 2.1).
Exhibit 2.2 (1) Option and Asset Purchase Agreement, dated May 11, 1998, by and among the Company, Marathon
Biopharmaceuticals, LLC, 520 Commonwealth Avenue Real Estate Corp. and 660 Corporation (Exhibit 10.3).
Exhibit 2.3 * Asset Purchase Agreement among CoPharma, Inc., Marathon Biopharmaceuticals, Inc., Seragen, Inc. and
Ligand Pharmaceuticals Incorporated dated January 7, 2000. (The schedules referenced in this
agreement have not been included because they are either disclosed in such agreement or do not
contain information which is material to an investment decision. The Company agrees to furnish a
copy of such schedules to the Commission upon request.)
Exhibit 3.1 (1) Amended and Restated Certificate of Incorporation of the Company (Exhibit 3.2).
Exhibit 3.2 (1) Bylaws of the Company, as amended (Exhibit 3.3).
Exhibit 3.3 (2) Amended Certificate of Designation of Rights, Preferences and Privileges of Series A Participating
Preferred Stock of Ligand Pharmaceuticals Incorporated.
Exhibit 4.1 (3) Preferred Shares Rights Agreement, dated as of September 13, 1996, by and between Ligand
Pharmaceuticals Incorporated and Wells Fargo Bank, N.A. (Exhibit 10.1)
Exhibit 4.2 (4) Amendment to Preferred Shares Rights Agreement, dated as of November 9, 1998, between the Company
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (Exhibit 99.1).
Exhibit 4.3 (5) Second Amendment to the Preferred shares Rights Agreement, dated as of December 23, 1998, between
the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (Exhibit 1).
Exhibit 10.219 * Supply and Development Agreement among Ligand Pharmaceuticals Incorporated, Seragen, Inc. and
CoPharma, Inc. dated January 7, 2000.
Exhibit 10.220 * Research, Development and License Agreement by and between Organon Company and Ligand Pharmaceuticals
Incorporated dated February 11, 2000.
Exhibit 10.221 Seventeenth Addendum to Amended Registration Rights Agreement dated June 24, 1994 between Ligand
Pharmaceuticals Incorporated and Elan International Services, Ltd., effective March 1, 2000.
Exhibit 10.222 Incentive Agreement dated March 1, 2000 among Ligand Pharmaceuticals Incorporated, Elan
International Services, Ltd. and Monksland Holdings, BV. (The schedules referenced in this
agreement have not been included because they are either disclosed in such agreement or do not
contain information which is material to an investment decision. The Company agrees to furnish a
copy of such schedules to the Commission upon request.)
Exhibit 10.223 Zero Coupon Convertible Senior Note Due 2008 dated July 14, 1999 and amended March 1, 2000 between
Ligand Pharmaceuticals Incorporated and Monksland Holdings, BV, No. R-3A.
Exhibit 27.1 Financial Data Schedule
</TABLE>
(1) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the numbered exhibit filed with the Company's Registration
Statement on Form S-4 (No. 333-58823) filed on July 9, 1998.
(2) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the same numbered exhibit filed with the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1999.
(3) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the numbered exhibit filed with the Company's Registration
Statement on Form S-3 (No. 333-12603) filed on September 25, 1996, as
amended.
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(4) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the numbered exhibit filed with, the Registration Statement on
Form 8-A/A Amendment No. 1 (No. 0-20720) filed on November 10, 1998.
(5) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the numbered exhibit filed with, the Registration Statement on
Form 8-A/A Amendment No. 2 (No. 0-20720) filed on December 24, 1998.
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterisk (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment
under Rule 246-2 of the Securities Exchange Act of 1934.
ITEM 6 (B) REPORTS ON FORMS 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 2000.
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LIGAND PHARMACEUTICALS INCORPORATED
March 31, 2000
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ligand Pharmaceuticals Incorporated
Date: MAY 15, 2000 By /S/PAUL V. MAIER
------------ ---------------------------------
Paul V. Maier
Senior Vice President and Chief Financial Officer
20
Exhibit 2.3
===============================================================================
ASSET PURCHASE AGREEMENT
among
COPHARMA, INC.,
MARATHON BIOPHARMACEUTICALS, INC.,
SERAGEN, INC.
and
LIGAND PHARMACEUTICALS INCORPORATED
===============================================================================
-----------------------
January 7, 2000
-----------------------
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of January 7, 2000, among CoPharma, Inc.,
a Delaware corporation (the "Buyer"), Marathon Biopharmaceuticals, Inc., a
Delaware corporation (the "Seller"), Seragen, Inc., a Delaware corporation and
the holder of all of the issued and outstanding capital stock of Seller (the
"Shareholder") and Ligand Pharmaceuticals Incorporated, a Delaware corporation
("Ligand").
WITNESSETH
WHEREAS, the Seller is in the business of biotechnical research,
development and manufacture of pharmaceutical and healthcare related products
(the "BUSINESS").
WHEREAS, the Shareholder is the beneficial and record owner of all of the
issued and outstanding shares of capital stock of the Seller; and
WHEREAS, the Seller wishes to sell to the Buyer, and the Buyer wishes to
purchase, substantially all of the assets of the Seller upon the terms and
conditions of this Agreement;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth below, the parties hereby agree as follows:
SECTION 1 - SALE AND PURCHASE OF ASSETS
1.1 SALE OF ASSETS. Subject to the provisions of this Agreement, at the
Closing (as defined in Section 1.8 hereof), the Seller agrees to sell and the
Buyer agrees to purchase, all right, title to and interest in all of the
properties, assets and business of the Seller of every kind and description,
tangible and intangible, real, personal or mixed, and wherever located,
including, without limitation, all accounts receivable, inventory, equipment,
intellectual property rights and all of Seller's good will and the exclusive
right to use the name of Seller as all or part of a trade or corporate name;
PROVIDED, HOWEVER, that there shall be excluded from such purchase and sale the
Excluded Assets (as defined in Section 1.2 hereof). The assets, property and
business of Seller to be sold to and purchased by the Buyer (or its designee)
under this Agreement are hereinafter sometimes referred to as the "PURCHASED
ASSETS."
1.2 EXCLUDED ASSETS. The "EXCLUDED ASSETS" shall comprise (i) Seller's
stock record books, corporate record books containing minutes of meetings of
directors and stockholders and such other records as have to do exclusively with
Seller's organization or stock capitalization, (ii) except as otherwise set
forth in the following sentence, the Seller's cash and cash equivalents (it
being specifically understood that accounts receivable are not cash equivalents
and are part of the Purchased Assets acquired by the Buyer) on the Closing Date
(as defined in Section 1.8 hereof), (iii) the Excluded Inventory (as defined
below) and (iv) accounts receivable from Ligand and Shareholder. The Purchased
Assets include all cash and cash equivalents generated or received by the Seller
or the Business following December 31, 1999, all of which such cash and cash
equivalents shall be acquired by the Buyer. The cash and cash equivalents
generated or received by the Seller or the Business after December 31, 1999, all
of which are part of the
<PAGE>
Purchased Assets, include, without limitation, the amount of *** paid to
the Seller by ***. The Seller shall have access to the other books and records
of the Seller at reasonable times for purposes of handling tax matters and
dealing with liabilities and claims.
The "EXCLUDED INVENTORY" consists of: (i) Batches of PDS (as such terms are
defined in the Supply and Development Agreement attached hereto as EXHIBIT A
(the "SUPPLY AGREEMENT")) identified on SCHEDULE 1.2(I) attached hereto, (ii)
batches of ONTAK fermentation pellets identified on SCHEDULE 1.2(II) and (iii)
the reagents and cell lines which are specifically identified on SCHEDULE
1.2(III); provided, however, that the items described in subsections (i) through
(iii) above shall be Excluded Inventory only to the extent (A) they are still
being stored in the Seller's facilities on the Closing Date and (B) they have
been sold to the Shareholder prior to the Closing Date.
The incomplete Batches of PDS (A) which are listed on SCHEDULE 1.2(I), (B)
also appear on Exhibit G to the Supply Agreement and (C) which have not failed
QA release or been rejected for any other reason as of the Effective Date (as
defined in the Supply Agreement), will be completed by the Buyer following the
Closing in accordance with the terms of Section 2.17 of the Supply Agreement.
The Seller will make the ONTAK fermentation pellets listed on SCHEDULE 1.2(II)
available to the Buyer in accordance with Sections 2.08 or 2.16 of the Supply
Agreement for use in connection with the Buyer's manufacture of PRODUCT (as
defined in the Supply Agreement) and performance of the other services called
for from Buyer pursuant to the Supply Agreement. The Seller will also make all
reagents, identified on SCHEDULE 1.2(III) which have application to the
manufacture of PRODUCT or the performance of the other services called for from
Buyer pursuant to the Supply Agreement, available to the Buyer in accordance
with Sections 2.08 or 2.16 of the Supply Agreement for use in connection with
the Buyer's manufacture of PRODUCT and performance of other services called for
from Buyer pursuant to the Supply Agreement.
1.3 LIMITATION OF ASSUMPTION OF LIABILITIES. Upon the sale and purchase of
the Purchased Assets, the Buyer shall assume and agree to pay or discharge when
due (i) the accrued liabilities and obligations of the Seller which are to be
performed after the Closing Date (as defined in Section 1.8 below) and which are
described on SCHEDULE 1.3(I), (ii) the accounts payable of the Seller which are
to be paid after the Closing Date and which are described on SCHEDULE 1.3(II)
and (iii) the deferred revenue liabilities and obligations of Seller which are
to be performed after the Closing Date and which are described on SCHEDULE
1.3(III). The liabilities to be assumed by the Buyer under this Agreement are
hereinafter sometimes referred to as the "ASSUMED LIABILITIES."
Except as otherwise specifically provided in this Section 1.3, (a) Buyer
shall not assume or be liable for any obligation or liability of Seller, of any
kind or nature, known, unknown, contingent or otherwise, including without
limitation: (i) any liability of Seller (excluding expenses assumed by the Buyer
pursuant to Section 9.1 hereof) incurred in connection with this
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
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Agreement and the transactions provided for herein, including, without
limitation, brokerage, accounting and counsel fees and expenses pertaining to
the performance by Seller of its obligations hereunder, (ii) any product
liabilities for products manufactured by the Seller prior to the Closing, (iii)
any liability or obligation of Seller which is not an Assumed Liability, arising
out of any contract or agreement, including any indebtedness for borrowed money
from third parties or from the shareholders or other affiliates of the Seller,
(iv) any obligations, including continuation of benefits, to Seller's employees
or former employees, including without limitation, any pension, retirement, or
profit-sharing plan or trust, or any obligations under the Consolidated Omnibus
Budget Reconciliation Act of 1985, (v) any litigation, proceeding, claim by any
person or entity or other obligation of Seller (except for such obligations that
are specifically included in the Assumed Liabilities) relating to the Business
or operations of Seller or otherwise relating to the Purchased Assets prior to
the Closing Date, whether or not such litigation, proceeding, claim or
obligation is pending, threatened, or asserted before, on, or after the Closing
Date, (vi) except as otherwise provided in Section 9.1 of this Agreement, Taxes
(as defined in Section 2.8) whether relating to periods before or after the
Closing Date, and (vii) any obligations under any law, including but not limited
to antitrust, civil rights, health, safety, labor, discrimination and
environmental laws; and (b) Seller shall be solely responsible for, and shall
discharge, any and all liabilities and obligations of Seller not included within
the Assumed Liabilities. The assumption of the Assumed Liabilities by the Buyer
hereunder shall be treated as independent of its existing business and shall not
enlarge any rights of third parties under contracts or arrangements with the
Buyer or Seller. Nothing herein shall prevent the Buyer from contesting in good
faith any of the Assumed Liabilities.
1.4 PURCHASE PRICE AND PAYMENT. In consideration of the sale of the
Purchased Assets to Buyer, at the Closing, the Buyer shall deliver to the Seller
the amount of Ten Million Dollars ($10,000,000) in cash by certified or bank
check or by wire transfer of immediately available funds to an account
designated by the Seller, as determined by the Seller in its sole discretion.
1.5 TRANSFER OF PURCHASED ASSETS. At the Closing, Seller shall execute and
deliver or cause to be delivered to the Buyer good and sufficient instruments of
transfer transferring to the Buyer all right, title to and interest in all the
Purchased Assets. Such instruments of transfer (a) shall be in the form and will
contain the warranties, covenants and other provisions (not inconsistent with
the provisions hereof) which are usual and customary for transferring the type
of property involved under the laws of the jurisdictions applicable to such
transfers, (b) shall be in form and substance satisfactory to the Buyer and its
counsel, and (c) shall effectively vest in the Buyer good and marketable title
(except in the case of the leasehold interests of Seller which are set forth on
Schedule 2.18 of the Seller and Shareholder Disclosure Schedule attached hereto,
for which leasehold interests such instruments of transfer will vest valid
leasehold interests in the Buyer) to all the Purchased Assets free and clear of
all liens, restrictions and encumbrances, except Permitted Liens (as defined
below). The Seller shall cooperate in all respects with reasonable requests by
the Buyer in connection with transferring possession and ownership of the
Purchased Assets to the Buyer. The Buyer shall be responsible for all
liabilities arising out of the Buyer's use of the Purchased Assets or operation
of the Business following the Closing Date, except for liabilities arising from
matters which constitute grounds for a Buyer Claim (as defined in Section 7.1).
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For purposes of this Agreement, "Permitted Liens" means such of the
following as to which no enforcement, collection, execution, levy or foreclosure
proceeding shall have commenced: mechanic's, materialman's, supplier's, vendor's
or similar liens (A) arising in the ordinary course of business under the leases
which are listed, by lessor name, on SCHEDULE 1.5, and (B) which secure amounts
which are not yet due and payable under such leases which do not exceed the
amounts listed as Assumed Liabilities under such leases on SCHEDULE 1.3.
1.6 DELIVERY OF RECORDS AND CONTRACTS. At the Closing, Seller shall deliver
or cause to be delivered to the Buyer all written leases, contracts, commitments
and rights evidencing Purchased Assets and Assumed Liabilities, with such
assignments thereof and consents to assignments as are necessary to assure the
Buyer of the full benefit of the same. Seller shall also deliver to the Buyer at
the Closing all of Seller's business records, books and other data relating to
the Purchased Assets and the Business (except corporate records and other
property of Seller excluded under Section 1.2) and Seller shall take all
requisite steps to put the Buyer (or its designee) in actual possession and
operating control of the Purchased Assets.
1.7 BUYER DESIGNEES. The Buyer shall have the right, in its sole
discretion, to designate one or more direct or indirect subsidiaries to purchase
the Purchased Assets subject to this Agreement and fulfill the other obligations
and exercise the other rights of the Buyer hereunder. Notwithstanding the
foregoing, the Buyer shall at all times remain responsible to the Seller to
perform all obligations of the Buyer to Seller hereunder.
1.8 CLOSING. Subject to the satisfaction of the conditions set forth in
Sections 5 and 6, the closing of the sale and purchase contemplated hereby (the
"CLOSING"), shall take place by facsimile exchange of executed documents (with
originals to follow by overnight courier) at 10:00 a.m., Pacific Time, on
January 7, 2000, unless the parties shall have agreed in writing to a
postponement or for the Closing to be conducted in such other manner or such
other time or date as the Buyer and the Seller agree in writing (the date of
such Closing shall hereinafter be referred to as the "CLOSING DATE").
1.9 CLOSING DELIVERIES. The parties shall execute and deliver all documents
as noted in Section 1.5 above at the Closing.
1.10 ALLOCATION OF PURCHASE PRICE. Within 60 days of the Closing, Buyer
shall allocate the purchase price among the Purchased Assets. Such allocation
shall be made in accordance with the provisions of Section 1060 of the Internal
Revenue Code of 1986, as amended (the "CODE"), and in a manner mutually agreed
upon by the Buyer and the Seller and shall be binding upon Buyer and Seller for
all purposes (including financial accounting purposes, financial and regulatory
reporting purposes and tax purposes). Buyer and Seller also each agree to file
tax returns consistently with the foregoing and in accordance with Section 1060
of the Code.
1.11 POST CLOSING ADJUSTMENT TO PURCHASE PRICE. The Purchase Price set
forth in Section 1.4 hereof shall be subject to adjustment after the Closing
Date as follows:
1.11.1 After the Closing Date, the Seller shall determine the value as
of the Closing Date of (i) the Net Trade Accounts Receivable (as defined below),
(ii) the Net Trade Accounts Payable (as defined below) and (iii) the Accrued
Liabilities (as defined below), all in a
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manner consistent with the Seller's practices in preparing its balance
sheet as of September 30, 1999, and the Seller shall give the Buyer notice of
the Seller's determination of these amounts (the "SELLER NOTICE"), not later
than the 10th business day after the Closing Date, which notice shall be
accompanied by a worksheet and other information indicating in reasonable detail
the manner in which the Seller calculated these values. The Buyer will afford to
the Seller reasonable access to the books and records in the Buyer's possession
which are necessary for the Seller to determine the values as of the Closing
Date of the Net Trade Accounts Receivable, Net Trade Accounts Payable and
Accrued Liabilities and to complete its financial statements for the period
ended December 31, 1999.
1.11.2 "Net Trade Accounts Receivable" shall mean the Seller's
accounts receivable which are included in the Purchased Assets, net of
allowances for overdue or uncollectable amounts and net of amounts for product
not accepted by the customer in accordance with the terms of the Seller's
contracts with such customer. "Net Trade Accounts Payable" shall mean the
Seller's accounts payable which are part of the Assumed Liabilities in respect
of purchases incurred in the ordinary course of business determined in
accordance with GAAP. "Accrued Liabilities" shall mean the Seller's accrued
liabilities to the extent such accrued liabilities are Assumed Liabilities,
including deferred revenue liabilities, determined in accordance with GAAP,
provided, however, that Accrued Liabilities shall not include Net Trade Accounts
Payable.
1.11.3 In the event that the Buyer disputes any of the values
contained in the Seller Notice, it shall notify the Seller in writing (the
"DISPUTE NOTICE") of the amount, nature and basis of such dispute, within 10
business days after the delivery by the Seller to the Buyer of the Seller
Notice. In the event of such a dispute the parties will use their best efforts
to resolve such dispute between themselves. If the parties are unable to resolve
the dispute or any part thereof within 10 business days after the date of the
Dispute Notice, the parties shall submit the dispute, or the remaining
unresolved portions thereof, to Arthur Andersen LLP (the "Accountants") for
resolution. The Accountants shall be directed by the Buyer and the Seller to
resolve the unresolved dispute(s) within 20 business days after submission. The
determination of the Accountants shall be binding and conclusive upon all of the
parties hereto. All determinations pursuant to this subsection shall be made by
the Accountants in writing and shall be delivered by the Accountants to the
Buyer and the Seller.
1.11.4 The fees and expenses of the Accountants in connection with the
resolution of any dispute pursuant to subsection 1.11.3 shall be shared equally
by the Seller and the Buyer.
1.11.5 Upon the expiration of the 10 business day period for giving
the Dispute Notice, if no Dispute Notice is given, the valuations contained in
the Seller Notice shall be deemed accepted by the Buyer. If a Dispute Notice is
given within such 10 business day period the final valuations shall be the
amounts agreed to by the parties, if such agreement is reached, otherwise the
final valuations shall be the amounts determined by the Accountants.
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1.11.6 Within the later of: (i) 60 business days of the Closing Date,
(ii) the resolution of any dispute in accordance with Section 1.11.3 above, or
(iii) only for the first *** of any amount due from the Buyer to the Seller
pursuant to Section 1.11.6(e) below, January 1, 2001; the following adjustments
will be made:
(a) If the final valuation of the Net Trade Accounts Receivable as of
the Closing Date is greater than ***, the Buyer shall pay to the Seller the
amount of the excess.
(b) If the final valuation of the Net Trade Accounts Receivable as of
the Closing Date is less than ***, the Seller shall pay to the Buyer the amount
of the difference.
(c) If the final valuation of the Net Trade Accounts Payable as of the
Closing Date is greater than ***, the Seller shall pay to the Buyer the amount
of the excess.
(d) If the final valuation of the Net Trade Accounts Payable as of the
Closing Date is less than ***, the Buyer shall pay to the Seller the amount of
the difference.
(e) If the final valuation of the Accrued Liabilities as of the
Closing Date is less than ***, the Buyer shall pay to the Seller the amount of
the difference.
(f) If the final valuation of the Accrued Liabilities as of the
Closing Date is greater than ***, the Seller shall pay to the Buyer the amount
of the excess.
1.11.7 All payments called for by Section 1.11.6 shall be paid by
cashier's or certified check or by wire transfer of immediately available funds
to an account designated by the party entitled to such payment.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE SHAREHOLDER
For purposes of this Agreement, (i) "Knowledge of the Seller and
Shareholder," (ii) "Known to the Seller and Shareholder," (iii) "Seller's and
Shareholder's Knowledge" and (iv) similar terms mean the actual knowledge of the
Seller or the Shareholder after due investigation.
The Seller and the Shareholder, jointly and severally (except as to any
representation and warranty of beneficial ownership and title to shares of
capital stock of the Seller, which shall be several), represent and warrant to
the Buyer that, except as set forth in the disclosure schedule attached hereto
(the "SELLER AND SHAREHOLDER DISCLOSURE SCHEDULE"), which Seller and Shareholder
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs in this Section 2:
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
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2.1 ORGANIZATION AND QUALIFICATION. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and lawful authority to own, lease and
operate its assets, properties and business and to carry on its business as now
being and as heretofore conducted. The Seller is qualified to transact business
as a foreign corporation in the Commonwealth of Massachusetts. Except as
provided above, the Seller is not required to be qualified or otherwise
authorized to transact business as a foreign corporation in any jurisdiction (in
the United States and outside of the United States) in which such qualification
or authorization is required by law and in which the failure to so qualify or be
authorized could have a material adverse effect on the Seller or its assets,
properties, business, operations or condition (financial or otherwise). The
Seller does not file and is not required to file any franchise, income or other
tax returns in any other jurisdiction (in the United States or outside of the
United States), other than its jurisdiction of incorporation and in the
Commonwealth of Massachusetts, based upon the ownership or use of property
therein or the derivation of income therefrom. The Seller does not own or lease
property in any jurisdiction (in the United States or outside the United States)
other than the Commonwealth of Massachusetts.
2.2 CAPITALIZATION AND TITLE TO SHARES.
2.2.1 OUTSTANDING CAPITAL STOCK. The Seller is authorized to issue one
hundred (100) shares of Common Stock, $0.01 par value per share, of which all
one hundred (100) shares are issued and outstanding, none is held in its
treasury and all are owned beneficially and of record by the Shareholder, free
and clear of any claim, lien or other encumbrance. No other class of capital
stock of the Seller is authorized or outstanding. All of the issued and
outstanding shares of the Seller's capital stock are duly authorized and are
validly issued, fully paid, nonassessable and free of pre-emptive rights. None
of the issued and outstanding shares have been issued in violation of any
federal or state law.
2.2.2 OPTIONS OR OTHER RIGHTS. There are no outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other agreements
of any kind to purchase or otherwise to receive from Seller any of the
outstanding, authorized but unissued, unauthorized or treasury shares of the
capital stock or any other security of Seller, and there is no outstanding
security of any kind convertible into or exchangeable for such capital stock.
There are no shareholder agreements, voting trusts or agreements, proxies or
other agreements, instruments or understandings with respect to the outstanding
shares of capital stock of Seller.
2.3 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Each of the Seller and the
Shareholder has the corporate power and all authority and approvals required to
enter into, execute and deliver this Agreement and the other related agreements
referenced herein and necessary for the consummation of the transactions
contemplated by this Agreement (the "RELATED AGREEMENTS") and to perform fully
its respective obligations hereunder and thereunder, and each of this Agreement
and the Related Agreements has been or will be duly executed and delivered and
is the valid and binding obligations of each of the Seller and the Shareholder
enforceable in accordance with its terms.
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2.4 SUBSIDIARIES AND OTHER AFFILIATES. The Seller does not have any
subsidiary or directly or indirectly own or have any investment in any of the
capital stock of, or any other proprietary interest in, or is a party to a
partnership or joint venture with, any other person.
2.5 CHARTER AND BY-LAWS. The Seller has heretofore delivered to the Buyer
true and complete copies of its Certificate of Incorporation (certified by the
Secretary of State of the State of Delaware) and By-laws as in effect on the
date hereof. The minute books of the Seller contain true and complete records of
all meetings and consents in lieu of meetings of the Board of Directors (and any
committees thereof) and of the shareholders of the Seller since the time of its
incorporation and accurately reflect all transactions referred to in such
minutes and consents in lieu of meetings. The stock books of the Seller are
true, complete and correct.
2.6 FINANCIAL STATEMENTS. The unaudited balance sheet of the Seller as at
September 30, 1999 and November 30, 1999, and the related statement of
operations and retained earnings for the eight and ten months then ended,
previously delivered to the Buyer, fairly present in all material respects the
financial condition and results of operations of the Seller as at September 30,
1999 and November 30, 1999, and for the eight and ten months then ended, in
accordance with GAAP consistently applied throughout the period covered thereby
subject to normal year-end adjustments, none of which will be material. The
foregoing financial statements of the Seller as at September 30, 1999 (the
"INTERIM BALANCE SHEET DATE") and November 30, 1999, and for the eight and ten
months then ended, are sometimes called the "INTERIM FINANCIALS" and the balance
sheets included therein are sometimes herein called the "INTERIM BALANCE
SHEETS."
2.7 NO MATERIAL ADVERSE CHANGE. Since the Interim Balance Sheet Date,
(a) there have been no changes in the assets, properties, Business,
operations or condition (financial or otherwise) of the Seller which either
individually or in the aggregate materially and adversely affect the Seller or
the Purchased Assets, nor to the Knowledge of the Seller and the Shareholder (as
defined below) is there any such change that is threatened, nor has there been
any damage, destruction or loss materially and adversely affecting the assets,
properties, Business, operations or condition (financial or otherwise) of the
Seller, whether or not covered by insurance; and
(b) the Seller has not:
(i) incurred any indebtedness for borrowed money, except for the
intercompany advances (the "INTERCOMPANY ADVANCES") which are listed
on Section 2.7(b)(i) of the Seller and Shareholder Disclosure
Schedule;
(ii) declared or paid any dividend or declared or made any other
distribution of any kind to its shareholders, or made any direct or
indirect redemption, retirement, purchase or other acquisition of any
shares of its capital stock;
(iii) except for the Intercompany Advances, made any loan or
advance to any of its shareholders, officers, directors, employees,
consultants, agents or other representatives (other than travel
advances made in the ordinary course of business), or made any other
loan or advance otherwise than in the ordinary course of business;
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(iv) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, employees,
consultants, agents or other representatives, other than (A) payments
to, or commitments to pay, persons made in the ordinary course of
business and (B) payments made under the Marathon BioPharmaceuticals,
Inc. Retention Plan which payments are identified on Section
2.7(b)(iv)(B) of the Seller and Shareholder Disclosure Schedule;
(v) except in the ordinary course of business: entered into any
lease (as lessor or lessee); sold, abandoned or made any other
disposition of any of its assets or properties, granted or suffered
any lien or other encumbrance on any of its assets or properties;
entered into or amended any contract or other agreement to which it is
a party, or by or to which it or its assets or properties are bound or
subject, or pursuant to which it agrees to indemnify any party or to
refrain from competing with any party;
(vi) except for inventory or equipment acquired in the ordinary
course of business, made any acquisition of all or any part of the
assets, properties, capital stock or business of any other person;
(vii) except for the Intercompany Advances, incurred any
contingent liability as a guarantor or otherwise with respect to the
obligations of others or cancelled any material debt or claim owing
to, or waived any material right of, the Seller;
(viii) incurred any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
properties, assets or Business of the Seller; or
(ix) made any change in accounting methods or practices, credit
practices or collection policies used by the Seller; and
(c) the Seller has conducted its business only in the ordinary course
and consistently with its prior practices.
2.8 TAX MATTERS.
(a) The Seller has paid or caused to be paid all federal, state,
county, local, foreign and other taxes, including, without limitation, income
taxes, estimated taxes, alternative minimum taxes, excise taxes, sales taxes,
use taxes, import duties, value-added taxes, gross receipts taxes, franchise
taxes, capital stock taxes, employment and payroll-related taxes, withholding
taxes, stamp taxes, transfer taxes, windfall profit taxes, environmental taxes
and property taxes, whether or not measured in whole or in part by net income
and all deficiencies, or other additions to such taxes and interest, fines and
penalties thereon (hereinafter, "TAXES" or, individually, a "TAX") required to
be paid by the Seller through the date hereof whether disputed or not. All Taxes
required to be collected or withheld by the Seller have been duly collected or
withheld and have been or will be duly remitted or deposited in accordance with
law. The provisions for Taxes reflected in the Interim Financials are adequate
to cover any and all Tax liabilities of the Seller in respect of its assets,
properties, business and operations during the periods covered by said Interim
Financials and all prior periods. To the Knowledge of the Seller and the
Shareholder, there is no Tax deficiency or claim for additional Taxes or
interest thereon
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or penalties in connection therewith, asserted or threatened to be asserted
against the Seller by any taxing authority.
(b) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
2.9 COMPLIANCE WITH LAWS.
(a) The Seller is not in violation of any order, judgment, injunction,
award or decree binding upon it. The Seller is not in violation of any federal,
state, local or foreign law, ordinance, rule or regulation or any other
requirement of any governmental or regulatory body, court or arbitrator
applicable to its Business or assets, including, without limitation, regulations
and requirements of the Food and Drug Administration ("FDA"), Occupational
Safety and Health Administration ("OSHA"), and laws, ordinances, regulations and
other requirements respecting health, labor, employment and employment
practices, terms and conditions of employment and wages and hours, or relating
to the uses of its assets, zoning, pollution or protection of the environment,
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes, except where the violation
of the foregoing would not have a material adverse effect on any of the
Purchased Assets or the Business. The Seller has never received notice of, and
there has never been, any citation, fine or penalty imposed or asserted against
the Seller for, any such violation or alleged violation.
(b) Set forth on SCHEDULE 2.9 of the Seller and Shareholder Disclosure
Schedule are all of the licenses, permits, franchises, orders or approvals of
any federal, state, local or foreign governmental or regulatory body, including,
but not limited to, licenses issued by, FDA, OSHA or otherwise relating to
health, employment and environmental matters (collectively, "PERMITS") that are
material to the conduct of Seller's Business and the uses of its assets. The
Seller holds all Permits necessary to operate its Business as presently
conducted and as currently contemplated to be conducted. Such Permits are in
full force and effect and, except as set forth on SCHEDULE 2.9 of the Seller and
Shareholder Disclosure Schedule, such Permits will be transferred to the Buyer
as part of the Purchased Assets. No violations are or have been recorded with
any governmental or regulatory body in respect of any Permit; and no proceeding
is pending or, to the Knowledge of the Seller and the Shareholder, threatened to
revoke or limit any Permit.
2.10 CONSENTS; NO BREACH. All consents, permits, authorizations, orders and
approvals from any person, and filings or registrations with any person,
pursuant to applicable law or contracts or other agreements with the Seller,
that are required in connection with the performance of the Seller's and the
Shareholder's obligations under this Agreement, or the assignment of the
Purchased Assets or the assumption of the Assumed Liabilities are set forth on
SCHEDULE 2.10 of the Seller and Shareholder Disclosure Schedule. The execution,
delivery and
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performance of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any provision of the Certificate of Incorporation or By-laws of the
Seller; (ii) except as set forth on SCHEDULE 2.10 of the Seller and Shareholder
Disclosure Schedule, violate, conflict with or result in the breach of any of
the terms or conditions of, result in modification of the effect of, or
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time or both constitute) a default under, any
material instrument, contract or other agreement to which the Seller or the
Shareholder is a party or to which either of them or the Purchased Assets may be
bound or subject; (iii) violate any order, judgment, injunction, award or decree
of any court, arbitrator or governmental or regulatory body against, or binding
upon, the Seller or the Shareholder or upon the Purchased Assets or the
Business; (iv) violate any statute, law or regulation of any jurisdiction as
such statute, law or regulation relates to the Seller or the Shareholder or to
the Purchased Assets or the Business; (v) violate any Permit; (vi) except as set
forth in SCHEDULE 2.10 of the Seller and Shareholder Disclosure Schedule,
require the approval or consent of any foreign, federal, state, local or other
governmental or regulatory body or the approval or consent of any other person;
or (vii) result in the creation of any lien or other encumbrance on the
Purchased Assets; except where the violation of or failure to comply with any of
the foregoing would not have a material adverse effect on any of the Purchased
Assets.
2.11 ACTIONS AND PROCEEDINGS. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory body or
arbitration tribunal against or involving the Seller or the Purchased Assets.
Except as set forth on SCHEDULE 2.11 of the Seller and Shareholder Disclosure
Schedule, there are no actions, suits or claims or legal, administrative or
arbitral proceedings or, to the Knowledge of the Seller and the Shareholder,
investigations (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) pending or, to the Knowledge of the Seller and
the Shareholder, threatened against or involving the Seller or the Purchased
Assets. To the Knowledge of the Seller and the Shareholder, there is no fact,
event or circumstance that may give rise to any suit, action, claim,
investigation or proceeding that individually or in the aggregate could have a
material adverse effect upon the transactions contemplated hereby or upon the
Purchased Assets or the Business.
2.12 CONTRACTS AND OTHER AGREEMENTS. SCHEDULE 2.12 of the Seller and
Shareholder Disclosure Schedule sets forth all of the following contracts and
other agreements to which the Seller is a party or by or to which it or its
assets or properties are bound or subject:
(i) contracts and other agreements with any current or former
officer, director, shareholder, employee, consultant, agent or other
representative of the Seller and contracts and other agreements for
the payment of fees or other consideration to any entity in which any
officer or director of the Seller has an interest;
(ii) contracts and other agreements with any labor union or
association representing any employee of the Seller or otherwise
providing for any form of collective bargaining;
(iii) contracts and other agreements for the purchase or sale of
materials, supplies, equipment, merchandise or services that contain
an escalation,
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renegotiation or redetermination clause or that obligate the
Seller to purchase all or substantially all of its requirements of a
particular product from a supplier, or for periodic minimum purchases
of a particular product from a supplier;
(iv) contracts and other agreements for the sale of any of the
assets or properties of the Seller other than in the ordinary course
of business or for the grant to any person of any options, rights of
first refusal, or preferential or similar rights to purchase any of
such assets or properties;
(v) partnership or joint venture agreements;
(vi) contracts or other agreements under which the Seller agrees
to indemnify any party or to share the tax liability of any party;
(vii) contracts, options and other agreements for the purchase of
any asset, tangible or intangible calling for an aggregate purchase
price or payments in any one year of more than $10,000 in any one case
(or in the aggregate, in the case of any related series of contracts
and other agreements);
(viii) contracts and other agreements that cannot by their terms
be canceled by the Seller and any successor or assignee of the Seller
without liability, premium or penalty on no less than thirty days
notice;
(ix) contracts and other agreements with customers or suppliers
for the sharing of fees, the rebating of charges or other similar
arrangements;
(x) contracts and other agreements containing obligations or
liabilities of any kind to holders of the securities of the Seller as
such (including, without limitation, an obligation to register any of
such securities under any federal or state securities laws);
(xi) contracts and other agreements containing covenants of the
Seller not to compete in any line of business or with any person or
covenants of any other person not to compete with the Seller in any
line of business;
(xii) contracts and other agreements relating to the acquisition
by the Seller of any operating business or the capital stock of any
other person;
(xiii) contracts and other agreements requiring the payment to
any person of a commission or fee, including contracts or other
agreements with consultants which provide for aggregate payments in
excess of $10,000;
(xiv) contracts, indentures, mortgages, promissory notes, loan
agreements, guaranties, security agreements, pledge agreements, and
other agreements relating to the borrowing of money or securing any
such liability;
(xv) distributorship or licensing agreements;
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(xvi) contracts under which the Seller will acquire or has
acquired ownership of, or license to, intangible property, including
software (other than (A) over-the-counter "shrink wrap" software or
(B) software licensed by the Seller as an end user for less than
$10,000 and not distributed by it);
(xvii) leases, subleases or other agreements under which the
Seller is lessor or lessee of any real property; or
(xviii) any other material contract or other agreement whether or
not made in the ordinary course of business that has or may have a
material adverse effect on the Business or the Purchased Assets.
There have been delivered or made available to the Buyer true and complete
copies of all of the contracts and other agreements (and all amendments, waivers
or other modifications thereto) set forth on SCHEDULE 2.12 of the Seller and
Shareholder Disclosure Schedule. All of such contracts and other agreements are
valid, subsisting, in full force and effect, binding upon the Seller, and to the
Knowledge of the Seller and the Shareholder, binding upon the other parties
thereto in accordance with their terms, and the Seller has paid in full or
accrued all amounts now due thereunder and has satisfied in full or provided for
all of its liabilities and obligations thereunder which are presently required
to be satisfied or provided for, and is not in default under any of them, nor,
to the Knowledge of the Seller and the Shareholder, is any other party to any
such contract or other agreement in default thereunder, nor does any condition
exist that with notice or lapse of time or both would constitute a default
thereunder.
2.13 REAL ESTATE. The Seller does not own any property or any buildings or
other structures and does not have any options or any contractual obligations to
purchase or acquire any interest in real property. The leasehold interests of
the Seller set forth in SCHEDULE 2.13 of the Seller and Shareholder Disclosure
Schedule are subject to no lien or other encumbrance that could have a material
adverse effect on any of the Purchased Assets or the Business.
2.14 ACCOUNTS AND NOTES RECEIVABLE. All accounts and notes receivable
reflected on the Interim Balance Sheets and all accounts and notes receivable
arising subsequent to the Interim Balance Sheet Date, have arisen in the
ordinary course of business of the Seller, represent valid and enforceable
obligations due to the Seller, have been and are subject to no set-off or
counter-claim, and have been collected or are fully collectible in the ordinary
course of business of the Seller in the aggregate recorded amounts thereof in
accordance with their terms. Except as set forth in SCHEDULE 2.14 of the Seller
and Shareholder Disclosure Schedule the Seller has no accounts or notes
receivable from any person, firm or corporation which is affiliated with the
Seller or from any director, officer or employee of the Seller.
2.15 INVENTORY. Except for (i) Batches of PDS which are listed on SCHEDULE
1.2(I) as Excluded Inventory and which have failed QA release or have been
rejected for other reasons, which failed or rejected Batches of PDS will be
removed from the facility at 97 South Street, Hopkinton, Massachusetts and
disposed of by Seller in accordance with all applicable laws and regulations
prior to the Closing Date at the sole cost of the Seller and (ii) for reagents
listed on Schedule 1.2(iii) as Excluded Inventory which are not applicable to
the manufacture of PRODUCT or the Buyer's performance of any other services
contemplated by the Supply
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Agreement; the inventory of the Seller is and will be in good and merchantable
condition and suitable and saleable or usable in the manufacture of saleable
finished goods in the ordinary course of business. Purchase commitments for raw
materials and parts are not in excess of normal requirements and none are at
prices materially in excess of current market prices. Since the Interim Balance
Sheet Date no inventory items have been sold or disposed of except through sales
in the ordinary course of business. The Seller's level of inventory and raw
materials is consistent with the Seller's ordinary practices and course of
business.
2.16 TANGIBLE PROPERTY. The plant, machinery, equipment, furniture,
leasehold improvements, fixtures, vehicles, structures, any related capitalized
items and other tangible property that is included in the Purchased Assets
("TANGIBLE PROPERTY") are in good operating condition and repair, ordinary wear
and tear excepted, are free of defects that would have a material adverse effect
on Buyer's use of the assets after the Closing and the Seller has not received
notice that any of its Tangible Property is in violation of any existing law or
any building, zoning, health, safety or other ordinance, code or regulation.
Prior to the Closing Date, the Seller maintained and kept current all of the
Tangible Property that is part of the Purchased Assets, and all documentation
that may be required by regulatory authorities for the Tangible Property that is
part of the Purchased Assets, including but not limited to equipment history
files, including maintenance logs, use logs and cleaning logs (if any), and
validation files or operating procedures.
2.17 INTANGIBLE PROPERTY.
(a) Except as set forth on SCHEDULE 2.17 of the Seller and Shareholder
Disclosure Schedule, the Seller has exclusive ownership of all patents,
trademarks, service marks, trade names and copyrights; all applications to
register any of the foregoing; all franchises, trade secrets, inventions,
customer lists, manufacturing or other processes, designs, computer software,
data compilations, research results and other confidential information and
legally protected proprietary rights; whether any of the foregoing are owned or
licensed (collectively, "PROPRIETARY RIGHTS") that are material to the Business
of the Seller and that are used in its Business as presently conducted or to be
used in its Business as it is contemplated to be conducted and the Seller has
the right to use, free and clear of claims or rights of others, all such
Proprietary Rights. Buyer will have the same rights under the Seragen License
Agreements listed in SCHEDULE 2.17(A) of the Seller and Shareholder Disclosure
Schedule following the Closing as the Seller had under such agreements prior to
the Closing.
(b) Neither the Seller or the Shareholder has received any notices of
infringement by the Seller of any Proprietary Rights of others, and, to the
Knowledge of the Seller and the Shareholder none of the present activities, or
contemplated activities under planning or development, of the Seller, or the
Seller's products or Purchased Assets infringe on any Proprietary Rights of
others, including unauthorized use of any confidential information or trade
secrets of any person, including without limitation any former employer of any
past or present employees of the Seller. Neither the Seller or the Shareholder
is aware of any infringement or violation by others of the Proprietary Rights of
the Seller, including any violation of Seller's confidential information.
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(c) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights (or applications
therefor) which are owned by or licensed to Seller or used or to be used by
Seller in its Business as presently conducted or contemplated are listed in
SCHEDULE 2.17(C) of the Seller and Shareholder Disclosure Schedule ("REGISTERED
RIGHTS"). All of the Registered Rights owned by the Seller have been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Register of Copyrights, or the corresponding offices
of other jurisdictions as identified on said Schedule, and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations in the United States and in each such other
jurisdiction. To the Knowledge of the Seller and the Shareholder all of the
Registered Rights licensed to the Seller have been duly registered in, filed in
or issued by the United States Patent and Trademark Office, the United States
Register of Copyrights, or the corresponding offices of other jurisdictions as
identified on said Schedule, and have been properly maintained and renewed in
accordance with all applicable provisions of law and administrative regulations
in the United States and in each such other jurisdiction.
(d) The Seller's policies and procedures designed to establish and
preserve its ownership of its Proprietary Rights are described in SCHEDULE
2.17(D) of the Seller and Shareholder Disclosure Schedule. In particular,
without limitation of the foregoing, the Seller has (i) disclosed or made
available confidential information and trade secrets of the Seller only to
employees or consultants of the Seller who required such disclosure or access
for the business purposes of the Seller and who have executed written
confidentiality agreements governing their use of such confidential information
and trade secrets; and (ii) required all professional and technical employees to
execute agreements under which such employees are required to convey to Ligand
or Seller ownership of all inventions and developments conceived or created by
them in the course of their employment, ownership of all of which such
inventions and developments which were owned by Ligand have been assigned by
Ligand to Seller prior to the Closing.
(e) To the Knowledge of the Seller and the Shareholder, none of the
activities of the employees of the Seller on behalf of the Seller violates any
agreements or arrangements which any such employees have with former employers
currently in effect.
2.18 TITLE TO ASSETS; LIENS. The Seller owns outright and has good and
marketable title (except in the case of the leasehold interests of Seller which
are set forth on Schedule 2.18 of the Seller and Shareholder Disclosure Schedule
attached hereto, for which the Seller has valid leasehold interests) to all of
Purchased Assets, including, without limitation, all of the Purchased Assets
reflected on the Interim Balance Sheets, free and clear of any claim, lien or
other encumbrance, except for Permitted Liens. The Seller is the true and lawful
owner of the Purchased Assets (except in the case of the leasehold interests of
Seller which are set forth on Schedule 2.18 of the Seller and Shareholder
Disclosure Schedule attached hereto, for which the Seller has valid leasehold
interests) and has the right to sell and transfer to the Buyer good and
marketable title to the Purchased Assets (except in the case of the leasehold
interests of Seller which are set forth on Schedule 2.18 of the Seller and
Shareholder Disclosure Schedule attached hereto, for which the Seller has the
right to sell and transfer to the Buyer all rights under such leasehold
interests ), free and clear of all claims, liens or other encumbrances of any
kind, except for Permitted Liens. Upon delivery of the Purchased Assets and the
instruments of transfer as herein provided and payment therefore, the Buyer will
acquire all right, title to and interest in the
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Purchased Assets and will have good and marketable title (except in the case of
the leasehold interests of Seller which are set forth on Schedule 2.18 of the
Seller and Shareholder Disclosure Schedule attached hereto, for which the Buyer
will have valid leasehold interests) to the Purchased Assets, free and clear of
any claim, lien or other encumbrance of any kind except for Permitted Liens.
2.19 RETAINED LIABILITIES. After the Closing, the Seller will have
sufficient assets and sufficient insurance coverage to discharge, and will
discharge, all obligations of the Seller including, but not limited to, all
liabilities for the payment of taxes incurred by the Seller.
2.20 ABSENCE OF UNDISCLOSED LIABILITIES. As at the Interim Balance Sheet
Date, the Seller had no liabilities of any nature, whether accrued, absolute,
contingent or otherwise (including, without limitation, liabilities as guarantor
or otherwise with respect to obligations of others or liabilities for Taxes due
or then accrued or to become due), required to be shown on the Interim Balance
Sheets that were not fully and adequately reflected or reserved against on the
Interim Balance Sheets. The Seller has no such liabilities, other than
liabilities (i) fully and adequately reflected or reserved against on the
Interim Balance Sheets, (ii) incurred since the Interim Balance Sheet Date in
the ordinary course of business or (iii) set forth on SCHEDULE 2.20 to the
Seller and Shareholder Disclosure Schedule.
2.21 CUSTOMERS AND DISTRIBUTORS. SCHEDULE 2.21 of the Seller and
Shareholder Disclosure Schedule sets forth any representative or distributor of
Seller's products (whether pursuant to a commission, royalty or other
arrangement) and the five customers who accounted for the largest sales of the
Seller for the ten (10) months ended November 30, 1999 (collectively, the
"CUSTOMERS AND DISTRIBUTORS"). To the Knowledge of the Seller and Shareholder
the relationships of the Seller with its Customers and Distributors are
generally good commercial working relationships.
2.22 EMPLOYEE BENEFIT PLANS.
2.22.1 PLANS. SCHEDULE 2.22 of the Seller and Shareholder Disclosure
Schedule sets forth a list of every Employee Program (as defined below) that has
been maintained (as such term in further defined below) by the Seller at any
time during the ten-month period ending on the Closing.
2.22.2 QUALIFICATION UNDER THE CODE. Each Employee Program which has
ever been maintained by Seller and which has at any time been intended to
qualify under Section 401(a) or 501(c) of the Code has received a favorable
determination or approval letter from the Internal Revenue Service ("IRS")
regarding its qualification under such section and has, in fact, been
continuously qualified under the applicable section of the Code since the
effective date of such Employee Program. No event or omission has occurred which
would cause any such Employee Program to lose its qualification under the
applicable Code section.
2.22.3 COMPLIANCE WITH LAWS. The Seller does not know, and has no
reason to know of any failure of any party to comply with any laws applicable to
the Employee Programs that have been maintained by the Seller. With respect to
any Employee Program ever maintained by the Seller, there has occurred no
"prohibited transaction," as defined in Section 406 of the
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Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Section
4975 of the Code, or breach of any duty under ERISA or other applicable law
(including, without limitation, any health care continuation requirements or any
other tax law requirements, or conditions to favorable tax treatment, applicable
to such plan) which could result, directly or indirectly, in any taxes,
penalties or other liability to the Buyer. No litigation, arbitration, or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program.
2.22.4 CERTAIN PLANS. Neither the Seller nor any Affiliate (as defined
below) has ever (i) maintained any Employee Program which has been subject to
Title IV of ERISA (including, but not limited to, any Multiemployer Plan (as
defined below)) or (ii) provided health care or any other non-pension benefits
to any employees after their employment is terminated (other than as required by
part 6 of subtitle B of title I or ERISA) or has ever promised to provide such
post-termination benefits.
2.22.5 DOCUMENTS DELIVERED. With respect to each Employee Program
maintained by the Seller within three years preceding the Closing, complete and
correct copies of the following documents (if applicable to such Employee
Program) have previously been delivered to the Buyer: (i) all documents
embodying or governing such Employee Program, and any funding medium for the
Employee Program (including, without limitation , trust agreements) as they may
have been amended to the date hereof; (ii) the summary plan description for such
Employee Program (or other descriptions of such Employee Program provided to
employees) and all modifications thereto; (iii) any insurance policy (including
any fiduciary liability insurance policy) related to such Employee Program; and
(iv) any documents evidencing any loan to an Employee Program that is a
leveraged employee stock ownership plan.
2.22.6 DEFINITIONS. For the purposes of this Section:
(a) "EMPLOYEE PROGRAM" means (i) all employee benefit plans within the
meaning of ERISA Section 3(3), including, but not limited to, multiple employer
welfare arrangements (within the meaning of ERISA Section 3(4)), plans to which
more than one unaffiliated employer contributes and employee benefit plans (such
as foreign or excess benefit plans) which are not subject to ERISA; and (B) all
stock or cash option plans, restricted stock plans, stock purchase plans, bonus
or incentive award plans, severance pay policies or agreements, deferred
compensation agreements, supplemental income arrangements, vacation plans,
health, disability, life insurance and all other employee benefit plans,
agreements, and arrangements not described in (A) above. In the case of an
Employee Program funded through an organization described in Code Section
501(c)(9), each reference to such Employee Program shall include a reference to
such organization.
(b) An entity "MAINTAINS" an Employee Program if such entity sponsors,
contributes to, or provides (or has promised to provide) benefits under such
Employee Program, or has any obligation (by agreement or under applicable law)
to contribute to or provide benefits under such Employee Program, or if such
Employee Program provides benefits to or otherwise covers employees of such
entity (or their spouses, dependents or beneficiaries).
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(c) An entity is an "AFFILIATE" of the Seller if it would have ever
been considered a single employer with Seller under ERISA Section 4001(b) or
part of the same "controlled group" as Seller for purposes of ERISA Section
302(d)(8)(C).
(d) "MULTIEMPLOYER PLAN" means a (pension or non-pension) employee
benefit plan to which more than one employer contributes and which is maintained
pursuant to one or more collective bargaining agreements.
2.23 EMPLOYER RELATIONS. As of the date of this Agreement the Seller has an
aggregate of approximately 47 employees and generally enjoys a good
employer-employee relationship. The Seller is not delinquent in any material
respects in payments to any of its employees or consultants for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to the date hereof or amounts required to be reimbursed to
such employees and immediately following the Closing the Seller will pay all
such amounts which are due. Upon termination of the employment of said
employees, neither the Seller nor the Buyer will by reason of anything done
prior to the Closing be liable to any of said employees or consultants for
severance pay or any other payments (other than accrued salary, vacation or sick
pay in accordance with the Seller's normal policies). SCHEDULE 2.23 of the
Seller and Shareholder Disclosure Schedule contains a list of all employees and
consultants of Seller. In each case such Schedule includes the current job title
and aggregate annual compensation of each such individual. Seller does not
currently employ, and will not have employed at any point in the six calendar
months prior to and including the Closing Date, 50 or more full-time employees
in any single facility or town in Massachusetts. Seller does not employ 100 or
more employees (excluding employees who work less than 20 hours per week or who
have worked for Seller less than six of the last twelve months) and will not
have employed 100 or more employees at any point during the 90 days prior to and
including the Closing Date.
2.24 INSURANCE. SCHEDULE 2.24 of the Seller and Shareholder Disclosure
Schedule sets forth a list of all policies or binders of fire, liability,
product liability, workmen's compensation, vehicular, directors and officers and
other insurance held by or on behalf of the Seller. Such policies and binders
are in full force and effect, all premiums with respect thereto are currently
paid, are reasonably believed to be adequate for the businesses engaged in by
the Seller and are in conformity with the requirements of all contracts to which
the Seller is a party and to the Knowledge of the Seller and the Shareholder,
are valid and enforceable in accordance with their terms. The Seller is not in
default with respect to any provision contained in any such policy or binder nor
has the Seller failed to give any notice or present any claim under any such
policy or binder in due and timely fashion. There are no outstanding unpaid
claims under any such policy or binder. The Seller has not received notice of
cancellation or non-renewal of any such policy or binder. Such policies will not
cover the Buyer's use of the Purchased Assets after the Closing Date nor will
such policies be transferred to the Buyer.
2.25 BROKERAGE. No broker, finder, agent or similar intermediary has acted
on behalf of the Seller or the Shareholder in connection with this Agreement or
the transactions contemplated hereby, and there are no brokerage commissions,
finders fees or similar fees or commissions payable in connection therewith
based on any agreement, arrangement or understanding with the Seller or any of
the Shareholders, or any action taken by them.
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2.26 HAZARDOUS MATERIALS. Except as set forth on SCHEDULE 2.26 to the
Seller and Shareholder Disclosure Schedule, the Seller has never generated, used
or handled any Hazardous Materials (as defined below) in violation of applicable
law, nor has the Seller treated, stored or disposed of any Hazardous Materials
at any site owned or leased by the Seller or shipped any Hazardous Materials for
treatment, storage or disposal at any other site or facility in violation of
applicable law. To the Knowledge of the Seller and the Shareholder no other
person has ever generated, used, handled, stored or disposed of any Hazardous
Materials at any of the premises currently owned by or leased to the Seller
during the period of Seller's ownership or lease, nor to the Knowledge of the
Seller or the Shareholder has there been or is there threatened any release of
any Hazardous Materials on or at any such site or premises during such period.
The Seller does not presently own, operate, lease or use, nor has it previously
owned, operated, leased, or used any site on which underground storage tanks are
or were located. No lien has ever been imposed by any governmental agency on any
property, facility, machinery, or equipment owned, operated, leased or used by
Seller in connection with the presence of any Hazardous Materials. For purposes
of this Section 2.26, "HAZARDOUS MATERIALS" shall mean and include any
"hazardous waste" as defined in either the United States Resource Conservation
and Recovery Act or regulations adopted pursuant to said Act, and also any
"hazardous substances" or "hazardous materials" as defined in the United States
Comprehensive Environmental Response, Compensation and Liability Act. The Seller
has provided to Buyer copies of all documents, records and information available
to Seller concerning any environmental or health and safety matter relevant to
Seller, whether generated by Seller or others, including, without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, permits, licenses, approvals, consents and
other authorizations related to environmental or health and safety matters
issued by any governmental agency.
2.27 SUFFICIENCY OF PURCHASED ASSETS. The Purchased Assets transferred to
the Buyer, as provided in Section 1 hereof, include all property and rights
necessary for the Buyer to conduct, following the Closing, the Business, and no
property excluded from the Purchased Assets constitutes property or rights
material to the conduct of the Business. The Business is the only business
conducted by the Seller prior to the Closing.
2.28 YEAR 2000 COMPLIANCE. All equipment, assets and systems material to
the operation of the Business, contained in the Purchased Assets, which utilize
date related information in any manner: (1) are capable of recognizing,
processing, managing, representing, interpreting, and manipulating correctly
date-related data for dates from, into and between the twentieth and
twenty-first centuries and the years 1999 and 2000, including calculating,
comparing, sorting, storing, tagging and sequencing, without resulting in or
causing material logical or mathematical errors or inconsistencies in any
user-interface, functionalities or otherwise, including data input and
retrieval, data storage, data fields, calculations, reports, processing or any
other input or output, (2) accurately perform leap year calculations and (3)
will not cause any other technology to fail or generate errors related to such
dates (provided that the information technology used in communicating with the
equipment, assets and systems contained in the Purchased Assets properly
exchange date/time data with the equipment, assets and systems contained in the
Purchased Assets).
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2.29 FULL DISCLOSURE. All documents and other papers delivered by or on
behalf of the Seller or the Shareholder in connection with this Agreement and
the transactions contemplated hereby are true and complete. No representation or
warranty of the Seller or the Shareholder contained in this Agreement, and, to
the Knowledge of the Seller and the Shareholder, no document or other paper
furnished by or on behalf of the Seller or the Shareholder to the Buyer (or any
of its agents) pursuant to this Agreement or in connection with the transactions
contemplated hereby, taken as a whole, contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements made, in the context in which made, not false
or misleading. There is no fact Known to the Seller or the Shareholder that has
not been disclosed to the Buyer in this Agreement or the Schedules hereto that
materially adversely affects, or (in the reasonable business judgment of the
Seller or the Shareholder based on facts of which they have Knowledge) is likely
to materially adversely affect (A) the Business, (B) any of the Purchased
Assets, (C) the Buyer's operation of the Business, or (D) the Buyer's use of the
Purchased Assets following the Closing in a manner substantially similar to the
Seller's use of the Purchased Assets prior to the Closing.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller and the Shareholder that,
except as set forth in the disclosure schedule attached hereto (the "BUYER
DISCLOSURE SCHEDULE"), which Buyer Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Section 3:
3.1 ORGANIZATION. The Buyer is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the corporate power
and lawful authority to own, lease and operate its assets, properties and
business and to carry on its business as now being and as heretofore conducted.
3.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. The Buyer has the
corporate power and all corporate authority and approvals required to enter
into, execute and deliver this Agreement and the Related Agreements and to
perform fully its obligations hereunder and thereunder. Each of this Agreement
and the Related Agreements has been or will be duly executed and delivered and
the valid and binding obligation of the Buyer enforceable in accordance with its
terms. 3.3 BROKERAGE. No broker, finder, agent or similar intermediary has acted
on behalf of the Buyer in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with the Buyer or any action taken by
the Buyer.
3.4 ACTIONS AND PROCEEDINGS. There are no actions, suits or claims, legal,
administrative or arbitral proceedings pending or, to the Knowledge of the
Buyer, threatened against or involving the Buyer that individually or in the
aggregate could have a material adverse effect upon the transactions
contemplated hereby. To the Knowledge of the Buyer, there is no fact, event or
circumstance that may give rise to any suit, action, claim, investigation or
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proceeding that individually or in the aggregate could have a material adverse
effect upon the transactions contemplated hereby.
3.5 NO BREACH. The execution, delivery and performance of this Agreement
and the Related Agreements and the consummation of the transactions contemplated
hereby and thereby will not (i) violate any provision of the Certificate of
Incorporation or By-laws of the Buyer; (ii) violate, conflict with or result in
the breach of any of the terms or conditions of, result in modification of the
effect of, or otherwise give any other contracting party the right to terminate,
or constitute (or with notice or lapse of time or both constitute) a default
under, any material instrument, contract or other agreement to which the Buyer
is a party or to which it or any of its assets or properties may be bound or
subject; (iii) violate any order, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body against, or binding upon,
the Buyer or upon the securities, properties, assets or business of the Buyer;
(iv) violate any statute, law or regulation of any jurisdiction as such statute,
law or regulation relates to the Buyer or to the securities, properties, assets
or business of the Buyer; (v) result in the creation of any lien or other
encumbrance on the assets or properties of the Buyer, or (vi) require the
approval or consent of any foreign, federal, state, local or other governmental
or regulatory body; PROVIDED, HOWEVER, that the Buyer makes no representation or
warranty concerning any approvals or consents which may be required for, or in
connection with, the transfer of any Permits required for the Buyer's operation
of the Business or the Buyer's use of the facility at 97 South Street,
Hopkinton, Massachusetts (the "Facility") or the Purchased Assets following the
Closing or, except as explicitly set forth otherwise in the Supply Agreement,
the performance of any of the Buyer's obligations under the Supply Agreement.
3.6 KNOWLEDGE OF THE BUYER. For purposes of this Agreement, (i) "Knowledge
of the Buyer," (ii) "Known to the Buyer," (iii) "Buyer's Knowledge" and (iv)
similar terms mean the actual knowledge of the Buyer after due investigation.
SECTION 4 - COVENANTS AND AGREEMENTS
The parties covenant and agree as follows:
4.1 ASSISTANCE RELATING TO DRUG MASTER FILE.
(a) The Seller shall be responsible for providing the necessary
regulatory documents to the United States Food and Drug Administration (the
"FDA"), including appropriate forms for the Drug Listing Branch and a letter,
accompanied by a revised organizational chart, informing the FDA of the transfer
of ownership and the absence of impact of the transfer on the manufacturing and
testing processing for PRODUCT (as defined in the Supply Agreement), in
connection with the transactions contemplated by this Agreement. The Seller will
provide guidance and assistance as required during the preparation and review of
these initial documents. The Seller will be responsible for the timely
submission of the documents to FDA and all subsequent updates.
(b) The Buyer agrees to reimburse the Seller for all of the
reasonable, documented and invoiced out-of-pocket costs incurred by the Seller
while providing assistance to the Buyer
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under the provisions of Section 4.1(a). Such costs shall be paid by the Buyer
within thirty (30) days after the date of the Buyer's receipt of the invoice.
4.2 CONDUCT OF BUSINESS. In the event that there is not a simultaneous
signing of this Agreement and Closing, during the period from the date hereof to
the Closing Date, Seller shall observe the following covenants:
4.2.1 AFFIRMATIVE COVENANTS PENDING CLOSING. The Seller will:
(a) PRESERVATION OF PERSONNEL. Use reasonable efforts to preserve
intact and keep available the services of Seller's present employees;
(b) PRESERVATION OF RELATIONSHIPS WITH SUPPLIERS AND CUSTOMERS. Use
reasonable efforts to preserve intact its relationships with its suppliers and
customers;
(c) INSURANCE. Use reasonable efforts to keep in effect casualty,
public liability, worker's compensation and other insurance policies in coverage
amounts not less than those in effect on the date of this Agreement;
(d) PRESERVATION AND ADVANCEMENT OF THE BUSINESS; MAINTENANCE OF
PROPERTIES, CONTRACTS. Use reasonable efforts to preserve and advance its
Business, advertise, promote and market its products in accordance with past
practices over the last ten months, keep its properties intact, preserve its
goodwill and its business, maintain all physical properties in good repair and
operating condition subject only to ordinary wear and tear, in each case in
accordance with past practices, and perform and comply in all material respects
with the terms of the contracts set forth in SCHEDULE 2.12 hereto;
(e) MAINTAIN CURRENT PRODUCTION SCHEDULE FOR ONTAK. Use reasonable
efforts to maintain its current production schedule for ONTAK;
(f) INTELLECTUAL PROPERTY RIGHTS. Use commercially reasonable efforts
to preserve and protect its Proprietary Rights; and
(g) ORDINARY COURSE OF BUSINESS. Operate its business solely in the
ordinary course and in the normal, usual and customary manner, consistent with
its past practices.
4.2.2 NEGATIVE COVENANTS PENDING CLOSING. The Seller will not:
(a) DISPOSITION OF ASSETS. Sell or transfer, or mortgage, pledge or
create or permit to be created any security interest on, any of its assets,
other than sales in the ordinary course of business;
(b) LIABILITIES. Incur any obligation or liability other than in the
ordinary course of Seller's business or incur any indebtedness for borrowed
money, except for the Intercompany Advances;
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(c) COMPENSATION. Increase the rates of direct or bonus compensation
payable or to become payable to any officer, employee, agent or consultant or
prepay any loans to the Seller from any such person;
(d) CAPITAL STOCK. Make any change in the number of shares of its
capital stock authorized, issued or outstanding, or grant (or accelerate the
exercisability of) any option, warrant or other right to purchase, or to convert
any obligation into, shares of its capital stock, or declare or pay any dividend
on, or make any redemption, purchase or other acquisition of, any shares of its
capital stock, or sell or transfer any shares of its capital stock;
(e) CHARTER AND BY-LAWS. Amend the Certificate of Incorporation or
By-Laws of the Seller; or
(f) ACQUISITIONS. Make any acquisition of property other than in the
ordinary course of the Business.
4.3 CONTINUED EFFECTIVENESS OF REPRESENTATIONS AND WARRANTIES. In the event
that there is not a simultaneous signing of this Agreement and Closing, from the
date hereof through the Closing Date, the parties hereto shall use reasonable
efforts to conduct their respective businesses and affairs in such a manner so
that their respective representations and warranties contained in this Agreement
shall continue to be true and correct in all material respects on and as of the
Closing Date as if made on and as of the Closing Date, and each party shall
promptly be given notice of any event, condition or circumstance occurring from
the date hereof through the Closing Date that would constitute a violation or
breach of this Agreement by another party. In the event such violation or breach
of this Agreement shall occur on or prior to the Closing Date, the breaching
party shall promptly use its best efforts to remedy the same.
4.4 TAXES. The Seller shall prepare and timely file, in a manner consistent
with prior years, all Tax reports and returns required to be filed after the
date hereof and on or before the Closing Date, and shall timely pay any Taxes
and estimated Taxes, required to be paid by it (including without limitation
pursuant to Section 6655 of the Code) after the date hereof and on or before the
Closing Date. All transfer and excise Taxes payable by the Seller (or by Buyer
or by Seller and Buyer) to any jurisdiction (in the United States and outside
the United States) by reason of the sale and transfer of the Purchased Assets
pursuant to this Agreement shall be paid or provided for by the Buyer after the
Closing.
4.5 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing Date,
the Buyer shall be entitled, through its employees and representatives, to have
such access to the assets, properties, business, operations, customers,
suppliers, key employees and accountants of Seller, as is reasonably necessary
or appropriate in connection with the Buyer's investigation of Seller and
provided that the Buyer shall give reasonable prior notice of any such requested
access to the Seller, Ligand and the Shareholder. Any such investigation and
examination shall be conducted at reasonable times and under reasonable
circumstances so as to minimize any disruption to or impairment of the Seller's
business and the Seller shall cooperate fully therein. No investigation by the
Buyer shall diminish or obviate any of the representations, warranties,
covenants or agreements of the Seller or the Shareholders under this Agreement.
In order that the Buyer may have full opportunity to make such review, the
Seller and the Shareholders shall furnish the
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representatives of the Buyer during such period with all such information and
copies of such documents concerning the affairs of the Seller as such
representatives may reasonably request and cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully with such
representatives in connection with such review and to make full disclosure to
the Buyer of all material facts affecting the assets, properties, business,
operations and financial condition of the Seller. If this Agreement terminates,
the Buyer and its affiliates shall keep confidential and shall not use in any
manner any information or documents obtained from Seller concerning its assets,
properties, business and operations, unless readily ascertainable from public or
published information, or trade sources, or already known or subsequently
developed by the Buyer independently of any investigation of the Seller, or
received from a third party not under an obligation to the Seller to keep such
information confidential, or otherwise required by law. If this Agreement
terminates, any documents obtained from the Seller will be returned or
destroyed, at the Seller's option.
4.6 PROPRIETARY INFORMATION. The Seller agrees that from and after the
Closing Date it shall hold in confidence, and use its best efforts as to
present, and the efforts a reasonable person would use in protecting their own
proprietary information as to former, to have all of its present and former
officers, directors and personnel hold in confidence, all knowledge and
information of a secret or confidential nature with respect to the Purchased
Assets or the Seller's Business prior to the Closing and shall not disclose,
publish or make use of the same without the prior written consent of the Buyer.
The foregoing undertaking shall not apply to information that (i) shall have
become public knowledge other than by breach by the Seller or the Shareholder of
this Agreement or (ii) is required to be disclosed under court or governmental
order, rule or regulation.
4.7 EXCLUSIVITY. The Seller and the Shareholder shall not, and the Seller
shall use its best efforts to cause its affiliates and each of its officers,
directors, employees, representatives and agents not to, directly or indirectly,
(a) encourage, solicit, initiate, engage or participate in discussions or
negotiations with any person or entity (other than the Buyer) concerning any
merger, consolidation, sale of material assets, tender offer, recapitalization,
proxy solicitation or other business combination ("ALTERNATIVE TRANSACTION")
involving the Seller or the Purchased Assets or (b) provide any non-public
information concerning the Purchased Assets or the Seller's Business,
properties, assets or operations to any person or entity (other than the Buyer
and other than in the ordinary course of business). The Seller shall immediately
notify the Buyer of, and shall disclose to the Buyer all details of, any
inquiries relating to any Alternative Transaction.
4.8 MATTERS RELATED TO EMPLOYEES.
4.8.1 TERMINATION BY SELLER OF EMPLOYEES. Effective on the Closing
Date the Seller shall terminate each of its employees. The Seller agrees that it
shall provide to each such terminated employee all notices required to be
provided under applicable law.
4.8.2 TRANSFER OF WORK FORCE. The Seller hereby consents to the hiring
by the Buyer of such of the Seller's employees as the Buyer chooses and waives,
with respect to the employment of such employees by the Buyer, any claims or
rights that the Seller may have against the Buyer or any such employees under
any noncompetition, confidentiality or other agreement relating to the terms and
conditions of employment.
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4.8.3 TRANSITION TO BUYER BENEFIT PLANS. The Seller agrees to use
commercially reasonable efforts to assist the Buyer in the transition of such of
the Seller's employees as Buyer chooses to hire to coverage under the Buyer's
employee benefit plans.
4.8.4 COOPERATION. Commencing on the date of this Agreement, Seller
agrees to cooperate fully with Buyer with respect to the employment-related
actions which are necessary or reasonably desirable to accomplish the
transactions contemplated by this Agreement, including the provision of records
and information as the Buyer may reasonably request (including job titles, short
and long-term disability coverage, life insurance coverage, operator
certification and workers' compensation records and information; provided,
however, that the Seller shall have no obligation to disclose to the Buyer any
personnel records or information about any of the Seller's employees if the
Seller determines in its reasonable discretion that such disclosure may violate
legally protected privacy rights of its employees) and the making of all
appropriate filings under applicable laws.
4.8.5 WITHHOLDING. With respect to the employees who are hired by the
Buyer and who are required to be furnished a Form W-2 for the calendar year in
which the Closing occurs, the Seller and the Buyer agree to follow the "standard
procedure" set forth in Revenue Procedure 96-60 with respect to discharging
their respective income and employment tax withholding and reporting obligations
with respect to such employees.
4.8.6 PAYMENT OF ACCRUED SALARY, VACATION, ETC. As soon as practicable
after the Closing Date, Seller shall pay to all of its terminated employees (A)
all accrued vacation and (B) all salary, overtime and other remuneration earned,
accrued and payable for all periods up to such termination, in a manner
consistent with Seller's policies for terminated employees and the requirements
of applicable law.
4.9 EXPENSES. Except as otherwise provided in this Agreement, each of
Buyer, on the one hand, and the Seller and the Shareholder, on the other, shall
bear their respective expenses incurred in connection with the preparation,
execution and performance of this Agreement and the transactions contemplated
hereby, including, without limitation, all fees and expenses of agents,
representatives, counsel and accountants and no such expenses shall be included
in any of the Assumed Liabilities.
4.10 AUTHORIZATION FROM OTHERS. Prior to the Closing Date, the Buyer, the
Seller and the Shareholder shall use their best efforts to obtain all
authorizations, consents and permits of others required to permit the
consummation by them of the transactions contemplated by this Agreement,
including but not limited to, all consents set forth on SCHEDULE 2.10 of the
Seller and Shareholder Disclosure Schedule, except to the extent waived by the
Buyer in writing. To the extent that the assignment of any lease, contract,
commitment or right which are among the Purchased Assets shall require the
consent of other parties thereto and the Buyer shall have waived the receipt of
such consent at the Closing, this Agreement shall not constitute an assignment
thereof; however, the Seller and the Shareholder shall use their best efforts
after the Closing, without further consideration, to obtain such consents or
waivers to assure the Buyer of the benefits of such leases, contracts,
commitments or rights. Nothing herein shall be deemed a waiver by the Buyer of
its right to receive at the Closing an effective assignment of each of the
leases, contracts, commitments or rights of the Seller which are among the
Purchased Assets.
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4.11 CONSUMMATION OF AGREEMENT. Each of the Buyer, the Shareholder and the
Seller shall use such party's respective best efforts to perform and fulfill all
conditions and obligations to be performed and fulfilled by them under this
Agreement and further to ensure that to the extent in their collective control
or capable of influence by them, no breach of any of the Buyer's, the Seller's
or the Shareholder's respective representations, warranties and agreements
hereunder or contemplated hereby occurs or exists on or prior to the Closing
Date to the end that the transactions contemplated by this Agreement shall be
fully carried out.
4.12 COLLECTION OF ASSETS. Subsequent to the Closing, the Buyer shall have
the right and authority to collect all receivables and other items transferred
and assigned to it by Seller hereunder and to endorse with the name of Seller
any checks received on account of such receivables or other items, and Seller
agrees that it will promptly transfer or deliver to the Buyer from time to time,
any cash or other property that Seller may receive with respect to any claims,
contracts, licenses, leases, commitments, sales orders, purchase orders,
receivables of any character or any other items which are among the Purchased
Assets.
4.13 USE OF NAME AND DISCHARGE OF SELLER AND SHAREHOLDER LIABILITIES. At
and following the Closing, the Seller and the Shareholder shall cause any and
all persons in which any of them has an interest (including without limitation,
Seller) to cease and desist from using the name "Marathon," "Marathon
Biopharmaceuticals," or "Marathon Biopharmaceuticals, Inc." or any variation
thereof as all or part of a trade or corporate name. Following the Closing, the
Seller and the Shareholder shall discharge all obligations of the Seller which
are not Assumed Liabilities on or before the maturity thereof.
4.14 FURTHER ASSURANCES. Without further consideration, each of the parties
shall execute such documents, further instruments of transfer and assignment and
other papers and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby.
4.15 TAX CLEARANCE CERTIFICATES. As soon as reasonably practicable and in
any event within 4 months after the Closing Date, the Seller shall provide the
Buyer with (i) a certificate of payment/goodstanding from the Commission of
Revenue as provided in Massachusetts General Laws Chapter 62C, Section 44(a);
and (ii) a copy of a waiver of tax lien issued by the Commissioner of Revenue
pursuant to Massachusetts General Laws Chapter 62C, Sections 51 and 52.
SECTION 5 - CONDITIONS PRECEDENT TO
THE OBLIGATION OF THE BUYER TO CLOSE
The obligation of the Buyer to enter into and complete the Closing is
subject, at the option of the Buyer acting in accordance with the provisions of
this Agreement with respect to termination hereof, to the fulfillment of the
following conditions, any one or more of which may be waived by it:
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of the Seller and the Shareholder contained in this Agreement shall
be true on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. Each
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of the Seller and the Shareholder shall have performed and complied with all
covenants and agreements required by this Agreement to be performed or complied
with by such parties on or prior to the Closing Date. Seller and Shareholder
shall have delivered to the Buyer a certificate, dated the Closing Date and
signed by an officer of the Seller and an officer of the Shareholder to the
foregoing effect and stating that all conditions to the Buyer's obligations
hereunder have been satisfied.
5.2 THIRD PARTY CONSENTS. The Buyer shall have received evidence of the
receipt of all authorizations, consents and permits of others required to permit
the consummation by the Buyer and the Seller of the transactions contemplated by
this Agreement, including but not limited to, all consents set forth on SCHEDULE
2.10 of the Seller and Shareholder Disclosure Schedule, except to the extent
waived by the Buyer in writing.
5.3 FINANCING. The Buyer shall have completed a financing raising the funds
necessary for the Buyer to pay the Purchase Price.
5.4 SUPPLY AND DEVELOPMENT AGREEMENT. The Buyer and the Shareholder shall
have executed and delivered the Supply Agreement.
5.5 NONCOMPETITION AGREEMENT. Each of the Seller, Ligand and the
Shareholder shall have executed and delivered the Noncompetition Agreement in
substantially the form attached hereto as EXHIBIT B.
5.6 OPINION OF COUNSEL TO THE SELLER AND THE SHAREHOLDERS. The Buyer shall
have received the opinion of Brobeck Phleger & Harrison LLP, counsel to the
Seller and the Shareholder, dated the Closing Date, addressed to the Buyer, and
substantially in the form of EXHIBIT C hereto.
5.7 LITIGATION. No action, suit or proceeding shall have been instituted
before any court or governmental or regulatory body, or instituted or threatened
by any governmental or regulatory body, to restrain, modify or prevent the
carrying out of the transactions contemplated hereby, or to seek damages or a
discovery order in connection with such transactions, or that has or may have,
in the reasonable opinion of the Buyer, a materially adverse effect on the
Purchased Assets or the Business.
5.8 DELIVERY OF INSTRUMENTS OF TRANSFER. Seller shall have delivered or
caused to be delivered to the Buyer instruments of transfer in conformity with
Section 1.5 above.
5.9 CLOSING CERTIFICATES. Buyer shall receive such closing certificates as
it deems necessary, such certificates to be in form and substance satisfactory
to the Buyer.
5.10 SATISFACTORY COMPLETION OF DUE DILIGENCE. The Buyer shall have
completed its due diligence concerning the Seller, the Purchased Assets and the
transactions contemplated hereby to its satisfaction.
5.11 GOVERNMENTAL APPROVALS. All federal, state and local government
approvals required for the uninterrupted operation of the 97 South Street,
Hopkinton, Massachusetts plant and the other operations of Seller acquired by
Buyer shall have been obtained.
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5.12 NO MATERIAL CHANGE. There shall have been no material adverse change
in the Seller's financial condition, Business, assets, operations or prospects,
nor shall any event have occurred which so far as can reasonably be foreseen on
the Closing Date appears reasonably likely materially and adversely to affect
the financial condition, business, assets, operations or prospects of the
Seller.
5.13 EMPLOYMENT. Anthony Rotunno and John O'Loughlin shall have accepted
employment with the Buyer and shall have signed such documents and agreements as
Buyer requested in connection with accepting such employment.
5.14 SELLER NAME CHANGE AND DISCHARGE OF LIABILITIES. The Seller shall have
delivered to the Buyer evidence of the Seller's compliance with Section 4.13
above.
5.15 LEASE OR SUBLEASE. The Buyer shall have received a lease or sublease
to the premises at 97 South Street, Hopkinton, Massachusetts in a form deemed
acceptable by the Buyer.
SECTION 6 - CONDITIONS PRECEDENT
TO THE OBLIGATION OF SELLER TO CLOSE
The obligation of the Seller and the Shareholder to enter into and complete
the Closing is subject, at the option of the Seller and the Shareholder acting
in accordance with the provisions of this Agreement with respect to termination
hereof, to the fulfillment of the following conditions, any one or more of which
may be waived:
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of the Buyer contained in this Agreement shall be true on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date. The Buyer shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the Closing Date. The Buyer shall have delivered to the Seller a
certificate, dated the Closing Date and signed by an officer of the Buyer, to
the foregoing effect and stating that all conditions to the obligations of the
Seller hereunder have been satisfied.
6.2 DELIVERY OF ASSUMPTION AGREEMENT. The Buyer shall have delivered or
caused to be delivered to Seller an agreement for assumption of the Assumed
Liabilities by the Buyer containing provisions (not inconsistent with the
provisions hereof) which are usual and customary for assuming the liabilities
involved.
6.3 SUPPLY AND DEVELOPMENT AGREEMENT. The Buyer and the Shareholder shall
have executed and delivered the Supply Agreement.
6.4 LITIGATION. No action, suit or proceeding shall have been instituted
before any court or governmental or regulatory body, or instituted or threatened
by any governmental or regulatory body, to restrain, modify or prevent the
carrying out of the transactions contemplated hereby, and such action, suit or
proceeding shall not have been stayed.
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6.5 NO MATERIAL CHANGE. There shall have been no material adverse change in
the Buyer's financial condition, business, assets, operations or prospects, nor
shall any event have occurred which so far as can reasonably be foreseen on the
Closing Date appears reasonably likely materially and adversely to affect the
financial condition, business, assets, operations or prospects of the Buyer.
6.6 LEASE OR SUBLEASE. The Buyer shall have received a lease or sublease to
the premises at 97 South Street, Hopkinton, Massachusetts in a form deemed
acceptable by the Seller.
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SECTION 7 - INDEMNIFICATION AND GUARANTY
7.1 SURVIVAL. Notwithstanding any right of any party to fully investigate
the affairs of the other party and notwithstanding any knowledge of facts
determined or determinable by such party pursuant to such investigation or right
of investigation, each party has the right to rely fully upon the
representations, warranties, covenants and agreements of each other party in
this Agreement or in any Schedule, certificate or financial statement delivered
by any party pursuant hereto. All such representations, warranties, covenants
and agreements shall survive the execution and delivery hereof and the Closing
hereunder and be indemnified in accordance with this Section 7, and, except as
otherwise specifically provided in this Agreement, shall thereafter survive for
a period of four (4) consecutive years after the Closing Date (or such longer
period as it takes to resolve matters covered by Claims Notices, as defined in
Section 7.4.1, which have been given prior to the expiration of such period, but
such extension shall apply only to matters related to such Claims Notices).
As used in this Section 7, the following terms have the following meanings:
(i) "TAX CLAIM" means any claim based upon, arising out of or
otherwise in respect of (A) issues raised on audit by Tax authorities with
respect to the Seller's Business on or before the Closing Date or (B) any
other Tax liabilities of the Seller, including any liability of the Seller
for the unpaid Taxes of any person under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise.
(ii) "SELLER CLAIM" means any claim based upon, arising out of or
otherwise in respect of (A) any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of the Buyer contained in
this Agreement or (B) the Buyer's use of the Purchased Assets or operation
of the Business following the Closing Date, except for liabilities arising
from matters which constitute grounds for a Buyer Claim.
(iii) "BUYER CLAIM" means any (A) Tax Claim, (B) claim based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach
of any representation, warranty, covenant or agreement of the Seller or the
Shareholder contained in this Agreement, (C) claim based upon, arising out
of or otherwise in respect of any and all liabilities and obligations of
any nature whatsoever of or relating to: (I) the Seller or the Shareholder
or their businesses either prior to or after the Closing, excluding any
liabilities and obligations expressly assumed by the Buyer pursuant to
Section 1.3 or (II) the Purchased Assets prior to the Closing, excluding
any liabilities and obligations expressly assumed by the Buyer pursuant to
Section 1.3, (D) claim made by any third party with respect to the
infringement or alleged infringement of any Proprietary Rights belonging or
licensed to such third party which may arise from the use by the Buyer of
the Purchased Assets (provided, however, that in the case of the Buyer's
use of rights under the Seragen License Agreements listed in Schedule
2.17(a) of the Seller and Shareholder Disclosure Schedule, a Buyer Claim
will only include claims with respect to
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infringement or alleged infringement of Proprietary Rights belonging
to or licensed to third parties to the extent the Buyer's use of such
rights is substantially similar to the Seller's use of such rights prior to
the Closing or is consistent with the Buyer's performance of its
obligations under the Supply Agreement) and (E) claim made by any employee
or former employee of the Seller (including any employees of Seller who are
subsequently hired by the Buyer) arising out of or otherwise in respect of
their employment or termination by the Seller.
7.2 OBLIGATION OF THE SELLER AND THE SHAREHOLDERS TO INDEMNIFY. Subject to
the limitations set forth below and to the termination provisions set forth in
Section 8.1, the Seller and the Shareholder, jointly and severally, agree to
indemnify, defend and hold harmless the Buyer (and its directors, officers,
employees, affiliates and assigns) from and against all losses, liabilities,
damages, deficiencies, costs or expenses (including interest and penalties
imposed or assessed by any judicial or administrative body and reasonable
attorneys fees) ("LOSSES") based upon, arising out of or otherwise in respect of
any Buyer Claim.
7.3 OBLIgATION OF THE BUYER TO INDEMNIFY. Subject to the limitations set
forth below and to the termination provisions set forth in Section 8.1, the
Buyer agrees to indemnify, defend and hold harmless the Seller and the
Shareholder (and their respective directors, officers, employees, affiliates and
assigns) from and against any Losses based upon, arising out of or otherwise in
respect of any Seller Claim.
7.4 NOTICE AND OPPORTUNITY TO DEFEND.
7.4.1 NOTICE OF ASSERTED LIABILITY. Promptly after receipt by any
party hereto (the "INDEMNITEE") of notice of any demand, claim or circumstances
which, with the lapse of time, would give rise to a claim or the commencement
(or threatened commencement) of any action, proceeding or investigation (an
"ASSERTED LIABILITY") that may result in a Loss, the Indemnitee shall give
notice thereof (the "CLAIMS NOTICE") to any other party or parties obligated to
provide indemnification pursuant to Sections 7.2 or 7.3 hereof (the
"INDEMNIFYING PARTY"). The Claims Notice shall describe the Asserted Liability
in reasonable detail, and shall indicate the amount (estimated, if necessary) of
the Loss that has been or may be suffered by the Indemnitee.
7.4.2 OPPORTUNITY TO DEFEND. The Indemnifying Party may elect to
compromise or defend, and control the defense of, at its own expense and by
counsel reasonably satisfactory to the Indemnitee, any Asserted Liability,
provided that the Indemnitee shall have no liability under any compromise or
settlement agreed to by the Indemnifying Party which it has not approved in
writing. If the Indemnifying Party elects to compromise or defend such Asserted
Liability, it shall within 30 days (or sooner, if the nature of the Asserted
Liability so requires) notify the Indemnitee of its intent to do so, and the
Indemnitee shall cooperate upon the request and at the expense of the
Indemnifying Party, in the compromise of, or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, or fails to notify the Indemnitee of its election as herein
provided, the Indemnitee may pay, compromise or defend such Asserted Liability
and receive full indemnification for its Losses as provided in Sections 7.2 and
7.3 hereof. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such Asserted
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Liability by the Indemnifying Party or the Indemnitee, respectively. If the
Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are reasonably requested for such defense and shall otherwise
cooperate with the Indemnifying Party, in which event the Indemnitee shall be
reimbursed for its out-of-pocket expense.
7.5 OTHER BENEFITS. In determining the amount of any Loss, there shall be
taken into account any tax benefit, insurance proceeds or other similar recovery
or offset realized, directly or indirectly, by the Indemnitee.
7.6 PAYMENT OF INDEMNIFICATION OBLIGATION. The Indemnifying Party agrees to
pay promptly to any Indemnitee the amount of all Losses and other obligations to
which the indemnification obligation set forth in this Section 7 relates. All
indemnification by the Seller, the Shareholder or the Buyer, as the case may be,
hereunder shall be effected by payment of cash or delivery of a cashier's or
certified check in the amount of the indemnification liability.
7.7 INTEREST ON UNPAID INDEMNIFICATION OBLIGATIONS. If all or part or any
indemnification obligation under this Agreement is not paid when due, the
Indemnifying Party shall pay the Indemnitee interest on the unpaid amount of
such obligation for each day from the date that the Indemnitee paid such sum
until payment in full, payable on demand, at the lower of the maximum rate
permitted by law or the "Prime Rate" as announced from time to time in the
Eastern Edition of THE WALL STREET JOURNAL plus two percent (2%) per annum.
7.8 LIMITATION ON INDEMNIFICATION OBLIGATION.
7.8.1 The Seller and the Shareholder shall have no liability to the
Buyer (and its directors, officers, employees, affiliates and assigns) for
amounts payable pursuant to their indemnification obligations in this Section 7
until the total of all such Losses incurred by the Buyer (and it directors,
officers, employees, affiliates and assigns) exceed *** (***) in the aggregate
(the "Threshold Amount"), and then indemnification by the Seller and the
Shareholder shall apply only to all such Losses in excess of the Threshold
Amount.
7.8.2 The Buyer shall have no liability to the Seller or the
Shareholder (and their respective directors, officers, employees, affiliates and
assigns) for amounts payable pursuant to its indemnification obligations in this
Section 7 until the total of all such Losses incurred by the Seller and the
Shareholder (and their respective directors, officers, employees, affiliates and
assigns) exceed *** (***) in the aggregate (the "Buyer Threshold Amount"), and
then indemnification by the Buyer shall apply only to all such Losses in excess
of the Buyer Threshold Amount.
7.8.3 The Seller and the Shareholder shall have no liability to the
Buyer (and its directors, officers, employees, affiliates and assigns) pursuant
to their indemnification
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
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obligations in this Section 7 for any further Losses (subject to the threshold
requirements set forth in Section 7.8.1 above) payable by the Seller and/or the
Shareholder pursuant to such indemnification obligations once the Losses paid
for by the Seller and/or the Shareholder pursuant to such indemnification
obligations exceed (i) ***(***) in the aggregate through December 31, 2001 or
(ii) *** (***) in the aggregate through December 31, 2003, provided however,
that if the total of all Losses paid by the Seller and/or the Shareholder
pursuant to such indemnification obligations for matters covered by Claims
Notices given prior to December 31, 2001 exceeds *** (***), there shall be no
obligation on the part of the Buyer (or its directors, officers, employees,
affiliates and assigns) to refund any of such sums.
7.9 GUARANTY OF LIGAND. Ligand unconditionally guarantees the due and
punctual payment and performance of Seller's and Shareholder's obligations set
forth in this Section 7. This guaranty is an irrevocable guaranty of payment
(and not just of collection) and shall continue in effect notwithstanding any
extension or modification of the terms of this Agreement, any assumption of any
such guaranteed obligation by any other party or any other act or event which
might otherwise operate as a legal or equitable discharge of Ligand. Ligand
hereby waives any special suretyship defenses and notice requirements. This
guaranty is in no way conditioned upon any requirement that the Buyer first
attempt to collect or enforce any guaranteed obligation from or against the
Seller or the Shareholder. So long as any obligation of the Seller or the
Shareholder to the Buyer remains unpaid or discharged, Ligand hereby waives all
rights to subrogation arising out of any payment by Ligand pursuant to this
Section 7.9.
SECTION 8 - TERMINATION OF AGREEMENT
8.1 TERMINATION. In the event that this Agreement is executed prior the
Closing Date, this Agreement may be terminated on or prior to the Closing as
follows:
(i) at the election of the Seller upon written notice to the Buyer
from Seller if, on or after January 14, 2000, any one or more of the
conditions to the obligation of the Seller to close has not been fulfilled;
(ii) at the election of the Buyer upon written notice to the Seller
if, on or after January 14, 2000, any one or more of the conditions to its
obligation to close has not been fulfilled;
(iii) at the election of the Seller upon written notice to the Buyer
from Seller, if the Buyer has breached any representation, warranty,
covenant or agreement contained in this Agreement and has not, within
fifteen (15) business days of receipt by the Buyer of written notice from
the Seller of such breach of representation, warranty, covenant or
agreement, cured such breach;
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
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(iv) at the election of the Buyer upon written notice to the Seller if
the Seller or any of the Shareholders has breached any representation,
warranty, covenant or agreement contained in this Agreement and has not,
within fifteen (15) business days of receipt by the Seller of written
notice from the Buyer of such breach of representation, warranty, covenant
or agreement, cured such breach; or
(v) by mutual written agreement of the Seller and the Buyer.
8.2 EFFECT OF TERMINATION. If this Agreement is terminated and the
transactions contemplated hereby are not consummated as provided above, each and
every representation and warranty contained in this Agreement or any Schedule
hereto, or any certificate, document or other instrument delivered by the
parties in connection herewith, shall expire and none of the parties hereto
shall be under any liability whatsoever with respect to any such representation
or warranty; provided, however, that notwithstanding the foregoing, each party
shall be and remain liable to the other in the event that the failure so to
close hereunder shall occur as a consequence of the failure of a party to fully
perform its covenants and agreements hereunder or the material breach by a party
of its representations or warranties contained herein. Notwithstanding the
foregoing, Sections 4.5, 4.6 and 4.9 shall survive any termination of this
Agreement and continue in full force and effect.
SECTION 9 - MISCELLANEOUS
9.1 SALES, TRANSFER AND DOCUMENTARY TAXES, ETC. Buyer shall bear and pay
promptly all Massachusetts sales, transfer and documentary taxes, if any, due as
a result of the transfer of the Purchased Assets to the Buyer.
9.2 PUBLICITY. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by the Seller, Ligand and the Buyer.
9.3 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid or by overnight mail via a reputable national
overnight courier. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, two days after the date of deposit in the United States mails, or if
sent via overnight mail, one day after the date of deposit with a reputable
national overnight courier, as follows:
(i) if to the Buyer, to:
CoPharma, Inc.
97 South Street
Hopkinton, Massachusetts 01748
Attn: President
with a copy to:
Palmer & Dodge LLP
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One Beacon Street
Boston, Massachusetts 02108-3190
Attn: Lynnette C. Fallon, Esq.
(ii) if to the Seller:
Marathon BioPharmaceuticals, Inc.
c/o Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, CA 92121
Attn: William L. Respess, Esq.
with a copy to:
Brobeck Phleger & Harrison LLP
550 West C Street
San Diego, CA 92101-3532
Attn: Faye H. Russell, Esq.
(iii) if to the Shareholder or Ligand to the address
set forth on the signature page hereto.
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9.4 ENTIRE AGREEMENT. This Agreement (including the Schedules), the Related
Agreements and all other documents executed in connection with the consummation
of the transactions contemplated herein contain the entire agreement among the
parties with respect to the purchase of the Purchased Assets and related
transactions, and supersedes all prior agreements, written or oral, with respect
thereto.
9.5 WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES; PRESERVATION OF
REMEDIES. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
The rights and remedies of any party based upon, arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty, covenant
or agreement contained in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties) as to which there is
not inaccuracy or breach.
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9.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts.
9.7 ENFORCEABILITY IN JURISDICTIONS; CONSENT. The parties hereto intend to
and hereby confer jurisdiction to enforce the provisions of this Agreement,
expressly including without limitation, the provisions of Section 7 hereof, upon
the courts of Massachusetts. The parties hereto hereby acknowledge and agree
that any breach of their respective obligations under this Agreement or any
other agreement executed in connection herewith shall be deemed to have occurred
at Boston, Massachusetts and that such party has purposely established minimum
contact in Boston, Massachusetts within the meaning of all applicable law. Each
of the parties hereto consents to the jurisdiction of said court or courts in
Massachusetts and to service of process by certified mail, return receipt
requested, or by any other manner provided by law. In the case of any claim
involving the parties hereto, any legal action, suit or proceeding arising out
of or relating to such claim may be instituted against such persons in any state
or federal court located in Boston, Massachusetts and each such party agrees not
to assert, by way of motion, as a defense, or otherwise, in any such action,
suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such courts, that the action, suit or proceeding is brought in
an inconvenient forum, that the venue of the action, suit or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court.
9.8 BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and legal
representatives. This Agreement is not assignable except by operation of law or
by the Buyer to any of its affiliates.
9.9 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require.
9.10 COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
9.11 EXHIBITS AND SCHEDULES. The Exhibits and Schedules are a part of this
Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
9.12 HEADINGS. The headings in this Agreement are for reference only, and
shall not affect the interpretation of this Agreement.
9.13 CONSTRUCTION The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the
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context requires otherwise. The word "including" shall mean including without
limitation. Nothing in the Schedules attached to this Agreement shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
9.14 SPECIFIC PERFORMANCE. Each of the parties acknowledges and agrees that
the other parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
9.15 NO BENEFIT TO OTHERS. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and their heirs, personal representatives, successors and assigns, and
they are not intended as, and shall not be construed as, conferring any rights
on any other persons.
9.16 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable in any
jurisdiction, the remainder of this Agreement, and the application of such
provision to such person or circumstance in any other jurisdiction or to other
persons or circumstances in any jurisdiction, shall not be affected thereby, and
to this end the provisions of this Agreement shall be severable.
[The remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date first above written.
BUYER
-----
COPHARMA, INC.
By: /S/ SAMUEL K. ACKERMAN
--------------------------
Name: Samuel K. Ackerman, M.D.
Title: President
SELLER
------
MARATHON BIOPHARMACEUTICALS, INC.
By: /S/ PHIL DUFFY
Name:
Title: President
Address: 10275 Science Center Drive
San Diego, California 92121
SHAREHOLDER
-----------
SERAGEN, INC.
By: /S/ PAUL V. MAIER
Name:
Title: CEO
Address: 10275 Science Center Drive
San Diego, California 92121
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LIGAND PHARMACEUTICALS INCORPORATED
By: /S/ WILLIAM L. RESPESS
Name:
Title:
Address: 10275 Science Center Drive
San Diego, California 92121
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TABLE OF CONTENTS
<TABLE>
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SECTION 1 - SALE AND PURCHASE OF ASSETS..............................................................1
1.1 Sale of Assets.................................................................................1
1.2 Excluded Assets................................................................................1
1.3 Limitation of Assumption of Liabilities........................................................2
1.4 Purchase Price and Payment.....................................................................3
1.5 Transfer of Purchased Assets...................................................................3
1.6 Delivery of Records and Contracts..............................................................4
1.7 Buyer Designees................................................................................4
1.8 Closing........................................................................................4
1.9 Closing Deliveries.............................................................................4
1.10 Allocation of Purchase Price...................................................................4
1.11 Post Closing Adjustment to Purchase Price......................................................4
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDER.........................6
2.1 Organization and Qualification.................................................................6
2.2 Capitalization and Title to Shares.............................................................7
2.3 Authority to Execute and Perform Agreements....................................................7
2.4 Subsidiaries and Other Affiliates..............................................................7
2.5 Charter and By-laws............................................................................7
2.6 Financial Statements...........................................................................8
2.7 No Material Adverse Change.....................................................................8
2.8 Tax Matters....................................................................................9
2.9 Compliance with Laws...........................................................................9
2.10 Consents; No Breach...........................................................................10
2.11 Actions and Proceedings.......................................................................11
2.12 Contracts and Other Agreements................................................................11
2.13 Real Estate...................................................................................13
2.14 Accounts and Notes Receivable.................................................................13
2.15 Inventory.....................................................................................13
</TABLE>
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2.16 Tangible Property.............................................................................13
2.17 Intangible Property...........................................................................14
2.18 Title to Assets; Liens........................................................................15
2.19 Retained Liabilities..........................................................................15
2.20 Absence of Undisclosed Liabilities............................................................15
2.21 Customers and Distributors....................................................................16
2.22 Employee Benefit Plans........................................................................16
2.23 Employer Relations............................................................................17
2.24 Insurance.....................................................................................18
2.25 Brokerage.....................................................................................18
2.26 Hazardous Materials...........................................................................18
2.27 Sufficiency of Purchased Assets...............................................................19
2.28 Year 2000 Compliance..........................................................................19
2.29 Full Disclosure...............................................................................19
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE BUYER.............................................20
3.1 Organization..................................................................................20
3.2 Authority to Execute and Perform Agreements...................................................20
3.3 Brokerage.....................................................................................20
3.4 Actions and Proceedings.......................................................................20
3.5 No Breach.....................................................................................20
3.6 Knowledge of the Buyer........................................................................21
SECTION 4 - COVENANTS AND AGREEMENTS................................................................21
4.1 Assistance Relating to Drug Master File.......................................................21
4.2 Conduct of Business...........................................................................21
4.3 Continued Effectiveness of Representations and Warranties.....................................23
4.4 Taxes.........................................................................................23
4.5 Corporate Examinations and Investigations.....................................................23
4.6 Proprietary Information.......................................................................23
4.7 Exclusivity...................................................................................24
</TABLE>
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4.8 Matters Related to Employees..................................................................24
4.9 Expenses......................................................................................25
4.10 Authorization from Others.....................................................................25
4.11 Consummation of Agreement.....................................................................25
4.12 Collection of Assets..........................................................................25
4.13 Use of Name and Discharge of Seller and Shareholder Liabilities...............................26
4.14 Further Assurances............................................................................26
4.15 Tax Clearance Certificates....................................................................26
SECTION 5 - CONDITIONS PRECEDENT TO THE OBLIGATION OF THE BUYER TO CLOSE............................26
5.1 Representations, Warranties and Covenants.....................................................26
5.2 Third Party Consents..........................................................................26
5.3 Financing.....................................................................................27
5.4 Supply and Development Agreement..............................................................27
5.5 Noncompetition Agreement......................................................................27
5.6 Opinion of Counsel to the Seller and the Shareholders.........................................27
5.7 Litigation....................................................................................27
5.8 Delivery of Instruments of Transfer...........................................................27
5.9 Closing Certificates..........................................................................27
5.10 Satisfactory Completion of Due Diligence......................................................27
5.11 Governmental Approvals........................................................................27
5.12 No Material Change............................................................................27
5.13 Employment....................................................................................27
5.14 Seller Name Change and Discharge of Liabilities...............................................27
5.15 Lease or Sublease.............................................................................28
SECTION 6 - CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE...............................28
6.1 Representations, Warranties and Covenants.....................................................28
6.2 Delivery of Assumption Agreement..............................................................28
6.3 Supply and Development Agreement..............................................................28
</TABLE>
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6.4 Litigation....................................................................................28
6.5 No Material Change............................................................................28
6.6 Lease or Sublease.............................................................................28
SECTION 7 - INDEMNIFICATION AND GUARANTY............................................................29
7.1 Survival......................................................................................29
7.2 Obligation of the Seller and the Shareholders to Indemnify....................................30
7.3 Obligation of the Buyer to Indemnify..........................................................30
7.4 Notice and Opportunity to Defend..............................................................30
7.5 Other Benefits................................................................................31
7.6 Payment of Indemnification Obligation.........................................................31
7.7 Interest on Unpaid Indemnification Obligations................................................31
7.8 Limitation on Indemnification Obligation......................................................31
7.9 Guaranty of Ligand............................................................................32
SECTION 8 - TERMINATION OF AGREEMENT................................................................32
8.1 Termination...................................................................................32
8.2 Effect of Termination.........................................................................32
SECTION 9 - MISCELLANEOUS...........................................................................33
9.1 Sales, Transfer and Documentary taxes, Etc....................................................33
9.2 Publicity.....................................................................................33
9.3 Notices.......................................................................................33
9.4 Entire Agreement..............................................................................34
9.5 Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies....................34
9.6 Governing Law.................................................................................34
9.7 Enforceability in Jurisdictions; Consent......................................................34
9.8 Binding Effect; No Assignment.................................................................35
9.9 Variations in Pronouns........................................................................35
9.10 Counterparts..................................................................................35
9.11 Exhibits and Schedules........................................................................35
</TABLE>
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9.12 Headings......................................................................................35
9.13 Construction..................................................................................35
9.14 Specific Performance..........................................................................36
9.15 No Benefit to Others..........................................................................36
9.16 Severability..................................................................................36
</TABLE>
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EXHIBITS
A - Form of Supply and Development Agreement
B - Form of Noncompetition Agreement
C - Form of Opinion of Seller's Counsel
SCHEDULES
Schedule 1.2 Excluded Inventory
Schedule 1.3 Assumed Liabilities
Seller and Shareholder Disclosure Schedule
Buyer Disclosure Schedule
Exhibit 10.219
SUPPLY AND DEVELOPMENT AGREEMENT
This Supply and Development Agreement (this "Agreement") is made and
entered into as of the 7th day of January, 2000 (the "Effective Date"), by and
among
LIGAND PHARMACEUTICALS INCORPORATED, a corporation organized
and existing under the laws of Delaware and having its principal
place of business at 10275 Science Center Drive, San Diego,
California 92121 (hereinafter called "LIGAND"),
SERAGEN, INC., a corporation organized and existing under
the laws of Delaware and having its principal place of business
at 99 South Street, Hopkinton, Massachusetts 01748 (hereinafter
called "SERAGEN"), and
COPHARMA, INC., a corporation organized and existing under
the laws of Delaware and having a principal place of business at
45 Moulton Street, Cambridge, MA 02138 (hereinafter called
"COPHARMA").
WHEREAS, SERAGEN has developed a new biological entity designated as DAB389IL-2,
denileukin difitox, the active ingredient in ONTAK(R), prepared as a purified
drug substance (hereinafter "PDS"), and intends to further refine the process
for the manufacture of first generation PDS and to develop a process for the
manufacture of a second generation final formulated bulk product (hereinafter
"FFBP"); and
WHEREAS, SERAGEN desires to have COPHARMA perform certain process development
support, manufacturing, validation and analytical services and services related
to the refinement of the PDS manufacturing process and development of the FFBP
manufacturing process, as described in Article III and Exhibit D of this
Agreement (the "Technology Services"); and
WHEREAS, SERAGEN will be responsible for the commercial development and sale of
PRODUCT on a worldwide basis; and
WHEREAS, SERAGEN desires to have COPHARMA manufacture (including therein,
without limitation, fermentation of ONTAK pellets if required), store, test and
supply commercial PRODUCT on a worldwide basis, test the final drug product
(FDP), perform stability testing, and perform reference standard qualification
as described in Article II of this Agreement, all in accordance with United
States current Good Manufacturing Practices (cGMPs;Title 21 C.F.R., Parts 210
211, and 600 as applicable) and their functional foreign equivalents thereof;
and all other regulatory requirements and filings as applicable; and
WHEREAS, SERAGEN may, from time to time, desire to purchase from COPHARMA
additional services such as, but not limited to, clinical product storage, cell
line stock, storage,
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and reference standard storage and regulatory/CMC consulting all in accordance
with United States current Good Manufacturing Practices (cGMPs;Title 21 C.F.R.,
Parts 210, 211, and 600 as applicable) and their functional foreign equivalents
thereof; and all other regulatory requirements and filings as applicable; and
WHEREAS, COPHARMA is willing to undertake the manufacture, storage, testing and
commercial supply of PRODUCT to SERAGEN and the provision of the Technology
Services to SERAGEN and may chose to provide other services requested by SERAGEN
as described above according to the terms, conditions and covenants hereinafter
set FORTH.
NOW, THEREFORE, the parties hereto, in consideration of the promises and the
mutual covenants and agreements contained herein, the sufficiency of which are
hereby acknowledged, agree as follows:
ARTICLE I
DEFINITIONS
1.01 DEFINED TERMS. In addition to terms otherwise defined in this Agreement,
the following terms have the specified meanings for purposes of this Agreement:
"Affiliate" shall mean any corporation, firm, partnership, individual or other
form of business organization which is now or hereafter owned or controlled by a
Party or, any corporation in which a Party owns at least fifty percent (50%) of
the stock entitled to vote for directors or otherwise controls the election of
directors, and any corporation, firm, partnership, individual or other form of
business organization in which a Party has the maximum ownership interest it is
permitted to have in the country where such business organization exists.
"Batch" shall mean an amount of PRODUCT sufficient to fill *** ( *** ) vials,
each vial containing *** of PRODUCT.
"Lot" shall mean *** vials of Final Drug Product packaged into its final dosage
form.
"cGMPs" shall mean:
(i) as of the Effective Date of this Agreement, the current
Good Manufacturing Practices standards required by the FDA as set
forth in Title 21 C.F.R., Parts 210, 211 and 600 as applicable,
in the United States Food, Drug & Cosmetic Act, as amended, or
the applicable FDA regulations, policies or guidelines in effect,
at the time of manufacture, for the manufacture and testing of
pharmaceutical materials as applied to bulk pharmaceuticals,
biologics, and
(ii) in the future, may also include the corresponding
equivalent requirements of the Canadian, European, Japanese and
South American jurisdictions in which
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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FDP is to be marketed and sold, and such other jurisdictions
of which SERAGEN informs COPHARMA from time to time that FDP is
to be marketed and sold, provided that the requirements of
additional jurisdictions will become part of cGMPs only in
accordance with the terms of this Agreement.
"DAB389IL-2" shall mean a fusion protein developed by SERAGEN and sold in the
United States under the trademark ONTAK(R) comprising the first 389 amino acids
of the A and B fragments of the diphtheria toxin combined with interleukin-2.
"Facility" means the manufacturing, testing and production facility at 97 South
Street, Hopkinton, Massachusetts.
"Food and Drug Act" means the Food, Drug and Cosmetic Act, 21 U.S.C. ' 301-391.
"FDA" shall mean the United States Food and Drug Administration (U.S.A).
"Final Formulated Bulk Product" or "FFBP" shall mean the second generation
formulated DAB389IL-2 protein complete and ready for lyophilization, as
developed in accordance with the Technology Services described in Exhibit D.
"Final Drug Product" or "FDP" shall mean PRODUCT packaged into its final dosage
form (liquid or lyophilized product in vials).
"Intellectual Property" shall mean all know-how, copyrights, designs, databases,
mask works, patents, trademarks, trade names and other proprietary data and
rights, and all registrations and applications therefor.
"Manufacturing and Release Requirements" shall mean any and all specifications
and release requirements mutually agreed on between the Parties for PRODUCT and
its manufacture, including, without limitation, all product, raw materials,
solvents, reagents, processing, storage, shipping and packaging specifications
and necessary test protocols, product release specifications for PRODUCT,
certificates of analysis and other documentation required to describe, control
and assure the quality manufacture and testing of PRODUCT, which Manufacturing
and Release Requirements for PDS are as specifed in Biologics License
Application #97-1325 and its supplements and for FFBP will be attached upon the
completion of the Technology Services, and such Manufacturing and Release
Requirements may be changed only upon the written agreement of the parties. The
current Manufacturing and Release Requirements for PDS are described on Exhibit
A.
"MRR Documentation" means all production and release documentation specified in
the Manufacturing and Release Requirements, as described in Exhibit A.
"Party" or "party" shall mean either SERAGEN, COPHARMA or, subject to the terms
set forth below, LIGAND, and the term "Parties" or "parties" shall, as
appropriate, mean SERAGEN, COPHARMA and LIGAND. LIGAND shall be considered a
Party to this Agreement only for
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the purpose of being subject to the provisions of Section 2.05 and Sections
7.01, 7.06, 7.07 and 7.08 of this Agreement and for being liable to COPHARMA for
a breach of such provisions, including liability pursuant to Article VIII to the
same extent SERAGEN would be liable for such a breach.
"Process Improvements" shall mean any improvement made to the method of
manufacture of PRODUCT.
"PRODUCT" shall mean purified drug substance (PDS, i.e. first generation) or
final formulated bulk product (FFBP, i.e. second generation, provided that
PRODUCT shall only include FFBP once all Technology Services are complete and
all necessary approvals and validations for the manufacture and shipment of FFBP
have been received by the Parties), collectively, manufactured by COPHARMA
pursuant to the terms of this Agreement.
"PRODUCT Intellectual Property" shall mean all Intellectual Property which is
specifically related to PRODUCT and its method of manufacture, including Process
Improvements which are specifically related to PRODUCT. PRODUCT Intellectual
Property shall not include Intellectual Property (including Process
Improvements) which represent general know-how relating to the development and
manufacture of biopharmaceuticals and that have applications to and or value for
developing and manufacturing biopharmaceuticals other than the PRODUCT.
"Purified Drug Substance" or "PDS" shall mean the first generation formulated
DAB389IL-2 protein complete and ready for fill/finish, as described in Exhibit
"A".
"Regulatory Agency " shall mean:
(i) as of the Effective date of this Agreement, the FDA and all other U.S.
regulatory agencies with authority over the manufacture and/or shipment of
PRODUCT, and
(ii) in the future may also include equivalent foreign regulatory agencies
including, but not limited to, those of Europe, Canada, Japan, and South America
in which FDP is to be marketed and sold, and such other jurisdictions of which
SERAGEN informs COPHARMA from time to time that FDP is to be marketed and sold,
provided that regulatory agencies in additional jurisdictions will be included
in the definition of Regulatory Agency only in accordance with the terms of this
Agreement.
"Regulatory Requirements" means the Guidelines for Bulk Pharmaceuticals and the
cGMPs in effect at the particular time, issued or required by the Regulatory
Agency for the methods to be used in, and the facilities and controls to be used
for, the manufacture, processing, packaging and storage of the manufactured
PRODUCT.
"Specifications" shall mean any and all specifications mutually agreed on
between the Parties for the manufacture of PRODUCT, including, without
limitation, all product, raw materials, solvents, reagents and processing
specifications contained within the Manufacturing and Release Requirements.
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"Agreement" means this Supply and Development Agreement entered into by and
between COPHARMA, SERAGEN and LIGAND, as amended or modified from time to time.
"Technology Services" means those services set forth in Exhibits "D" and "E" to
this Agreement.
ARTICLE II
COMMERCIAL SUPPLY OF PRODUCT AND RELATED SERVICES
2.01 VALIDATION REQUIREMENTS.
(a) CURRENT VALIDATIONS. SERAGEN represents and warrants to COPHARMA that
as of the Effective Date all equipment, manufacturing processes and procedures,
cleaning processes and procedures and analytical test methodologies (together
"Equipment and Procedures") which are used in the manufacture and testing of
PRODUCT have been properly validated under all applicable Regulatory
Requirements and that all such validations are in accordance with cGMPs and are
in full force and effect and will remain so immediately following the Effective
Date. SERAGEN further represents and warrants to COPHARMA that as of the
Effective Date all validations of the Equipment and Procedures which SERAGEN
deems necessary have been received and are in full force and effect and will
remain so immediately following the Effective Date.
(b) MAINTENANCE OF VALIDATIONS. COPHARMA shall use commercially reasonable
efforts to maintain the validations in effect immediately following the
Effective Date for all Equipment and Procedures. COPHARMA shall use commercially
reasonable efforts to maintain such validations in accordance with cGMPs.
(c) ADDITIONAL VALIDATIONS Validations in connection with the manufacture
and testing of FFBP for the United States will be executed under the terms and
conditions of this agreement as described in Article III and Exhibits D and E.
The parties agree to negotiate in good faith the cost implications of any
additional validations in connection with PRODUCT. The parties agree that with
respect to additional validations required in connection with PRODUCT,
additional regulatory agencies will not be deemed "Regulatory Agencies" for
purposes of the remainder of this Agreement, and the requirements of any
additional jurisdictions will not be deemed part of "cGMPs" for purposes of the
remainder of this Agreement, until COPHARMA and SERAGEN have successfully
received all required validations and approvals necessary in connection with the
marketing and sale of PRODUCT in the associated jurisdictions.
2.02 REGULATORY INSPECTIONS. COPHARMA shall prepare for, submit to and endeavor
to pass all inspections deemed necessary by the Regulatory Agencies. The parties
agree to negotiate in good faith the cost implications of such preparations,
inspections and corrective actions specific to PRODUCT.
2.03 COMMERCIAL SUPPLY. COPHARMA shall, from time to time, as requested by
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SERAGEN, supply SERAGEN with PRODUCT produced, tested, packaged and shipped
according to the Manufacturing and Release Requirements under the terms and
conditions of this Agreement, and in accordance with all Regulatory
Requirements. SERAGEN shall be notified in writing of all significant process
deviations, manufacturing failures, errors/accidents and out of specification
results within one (1) working day. SERAGEN and COPHARMA agree that for purposes
of this Article 2.03, email messages shall be deemed notification in writing.
SERAGEN and COPHARMA shall agree to investigations of significant process
deviations, manufacturing failures, errors/accidents and out of specification
results if indicated prior to manufacture of subsequent Batches.
2.04 FDP RELEASE AND STABILITY TESTING. COPHARMA shall, from time to time as
requested by SERAGEN, perform validated analytical release and stability testing
for FDP according to SERAGEN approved standard operating procedures (SOP's ) or
protocols. COPHARMA shall perform the work detailed in all protocols under cGMP
conditions, and shall perform the work as detailed in the protocols within the
time agreed, including laboratory testing, QA review of data and final report.
In the event that SERAGEN requests a repeat of a test/protocol, COPHARMA shall
begin the work within *** (***) *** of the request, and complete the work within
the time specified in the original protocols. In the event that analytical
release or stability test results fail to meet Specifications or acceptance
criteria as defined in the protocols, COPHARMA will undertake any resulting
investigations and other actions required as per cGMPs.
2.05 EXCLUSIVITY. COPHARMA shall not manufacture PRODUCT for itself, or for any
other entity other than SERAGEN, except with the prior written consent of
SERAGEN. SERAGEN and LIGAND, and each of their Affiliates, agree to purchase
and/or sell PRODUCT produced exclusively by COPHARMA during the term of this
Agreement, but retain the right to qualify a second source of supply of PRODUCT.
In the event that SERAGEN identifies a second source, COPHARMA agrees to support
at SERAGEN's expense the transfer to the second source of manufacturing methods
and processes which constitute PRODUCT Intellectual Property, including but not
limited to the manufacturing Batch records, solution preparation documents,
pertinent QC assay and manufacturing SOPs, equipment specifications, QC assay
validation protocols, process validation protocols, and technical transfer
assistance at the discretion of COPHARMA.
2.06 FORECASTS. Upon the Effective Date, SERAGEN shall provide COPHARMA with a
binding take or pay *** (***) *** forecast for PRODUCT, consisting of a minimum
of *** (***) Batches (excluding any development batches called for as part of
the Technology Services) for the ***. *** prior to expiration of ***, and ***
thereafter for the duration of this Agreement, SERAGEN will supply COPHARMA with
a binding *** forecast for PRODUCT for the ***. By *** of *** SERAGEN will issue
a PO for the PRODUCT requirements for the *** of the following *** and by *** of
*** SERAGEN will issue a PO for the PRODUCT requirements for the *** of the ***.
Delivery of the first *** Batches of PRODUCT against the PO for the *** of the
*** will be no sooner than ***, and delivery of the first *** Batches of PRODUCT
against the PO for the *** of the *** will be no sooner than ***. PRODUCT will
be delivered at a
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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maximum rate of *** Batches *** thereafter.
For the ***, only, the PO for the *** will be issued by *** of *** and the PO
for the *** will be issued by ***. Delivery of the first *** Batches of PRODUCT
against the PO for the *** will be no sooner than ***, and delivery of the first
*** Batches of PRODUCT against the PO for the *** will be delivered no sooner
than ***. PRODUCT will be delivered at a maximum rate of *** Batches ***
thereafter.
Notwithstanding the maximum Batch delivery rate set forth above, additional
PRODUCT Batches may be delivered to SERAGEN at any time on mutual agreement of
the parties if adequate PRODUCT inventory is available.
COPHARMA shall notify SERAGEN within 10 business days of receipt of each
forecast if it anticipates that it will be unable to meet any or all of the
forecasted requirements, provided, however, that failure to make such
notification will not obligate COPHARMA to supply amounts of PRODUCT beyond the
limitations set forth below in this Section 2.06.
COPHARMA may reject, and is under no obligation to fulfill, any purchase order
for PRODUCT which, when aggregated with previously received purchase orders and
any development batches called for under the Technology Services, (i) exceeds by
more than ***% the current *** forecast or the current *** forecast previously
delivered by SERAGEN in accordance with this Section 2.06, (ii) exceeds ***
Batches in any given calendar year or *** Batches in any six-month period, (iii)
exceeds the production capacity of *** Batches every two weeks or *** Batches
per month of COPHARMA'S facility at 97 South Street, Hopkinton, Massachusetts,
or (iv) cannot be filled due to circumstances arising under Section 11.10.
COPHARMA shall notify SERAGEN in writing of any rejection within ten (10) days
of receipt of the purchase order being rejected. Any purchase order which is not
rejected within this ten (10) days of receipt shall be deemed accepted by
COPHARMA.
2.07 MANUFACTURING MATERIALS. COPHARMA shall be responsible for planning and
ordering an adequate supply of other components meeting the Specifications that
are necessary to manufacture PRODUCT. Further, COPHARMA shall provide facilities
to adequately store and maintain all raw materials, starting materials,
reagents, intermediates and PRODUCT within Specifications. COPHARMA shall ensure
that, to the extent COPHARMA and SERAGEN have agreed upon a price for such
services, appropriate diligence, caution and management are taken in COPHARMA'S
storage and control of key cell lines and other reagents owned by SERAGEN which
are directly related to the manufacture and testing of ONTAK, such as, but not
limited to, ***.
2.08 CREDIT FOR CURRENT STOCKS OF MATERIALS AND REAGENTS. As of the Effective
Date SERAGEN has the raw materials, starting materials, reagents and other
components (the "Components") to manufacture *** (***) Batches of PRODUCT. As of
the Effective Date the Components are being stored at the Facility. SERAGEN
agrees that following the Effective Date
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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it will make these materials available to COPHARMA for use by COPHARMA in
the manufacture and supply of PRODUCT. COPHARMA will credit against SERAGEN'S
payment due for PRODUCT or other services provided pursuant to this Agreement a
total of *** representing the value of such Components. The *** will be credited
to SERAGEN in ***.
2.09 MANUFACTURING PROCESS. All PRODUCT provided to SERAGEN by COPHARMA shall
meet the Specifications, which cannot be changed unless agreed to in a dated,
written document signed by the Parties. In addition, if any Regulatory Agency
having jurisdiction in any country where SERAGEN is selling FDP requires any
changes to the Specifications, COPHARMA shall make reasonable efforts to make
the required changes, at SERAGEN's expense. In the event amendments or
supplements are required to the Specifications for the purpose of complying with
current Regulatory Requirements, the parties shall mutually agree on appropriate
amendments or supplements.
2.10 PROCESS IMPROVEMENTS. Each of COPHARMA and SERAGEN shall have the right to
request changes to implement Process Improvements or to reduce the cost of
manufacturing, by written notice delivered to the other party. COPHARMA and
SERAGEN shall meet as soon as possible after such notification to discuss such
changes and the continued provision of PRODUCT under this Agreement. No change
shall be implemented by COPHARMA, whether requested by either of the parties or
requested or required by any governmental agency, until SERAGEN has agreed in
writing to such change. Under no circumstances shall this section be construed
to require either party to agree to changes that do not comply with cGMP
Requirements.
2.11 QUALITY CONTROL AND QUALITY ASSURANCE. COPHARMA shall conduct quality
control testing and release the PRODUCT (hereafter referred to as "COPHARMA QA
release") in accordance with (a) the methods and procedures described in the
Manufacturing and Release Requirements, and (b) current Regulatory Requirements.
Unless otherwise authorized by SERAGEN, shipment of PRODUCT shall not occur
prior to SERAGEN's release of the PRODUCT, which release will be based solely
upon SERAGEN'S review of the MRR Documentation supplied by COPHARMA. COPHARMA
shall retain all records pertaining to testing as required by cGMP.
2.12 NON-CONFORMING MANUFACTURED PRODUCT. COPHARMA shall provide SERAGEN'S
quality assurance and compliance department with copies of completed MRR
Documentation listed in Exhibit A, and shall endeavor to do so within 10
business days of COPHARMA QA release of PRODUCT. Within thirty (30) days after
COPHARMA QA release of each batch of PRODUCT and receipt of all MRR
Documentation, SERAGEN shall determine by review of the MRR Documentation
whether or not the given Batch of PRODUCT conforms to the Manufacturing and
Release Requirements, and was manufactured in accordance with cGMPs; provided
that COPHARMA provides timely answers to information requests and resolution of
issues arising from SERAGEN's review of MRR Documentation. If within the thirty
(30) days SERAGEN QA makes a determination that SERAGEN believes the Batch to be
nonconforming,
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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SERAGEN shall have the right to reject the Batch in its entirety and shall
notify COPHARMA promptly of this decision. If SERAGEN does not reject the Batch
within such thirty (30) day period the Batch will be deemed accepted by SERAGEN.
Acceptance of the Batch by SERAGEN triggers payment as described in Article VI.
Any dispute between COPHARMA and SERAGEN as to whether or not a Batch that has
been rejected by SERAGEN is nonconforming will be resolved in accordance with
the procedures set forth in Section 2.15 below.
2.13 REPLACEMENT BATCH. COPHARMA shall notify SERAGEN promptly of a rejection of
a Batch by COPHARMA QA, or any delay or irregularity encountered during
manufacture which could lead to a rejection. SERAGEN and COPHARMA shall promptly
and mutually agree upon new dates for the initiation and completion by COPHARMA
of the manufacture of a replacement Batch of PRODUCT if required to meet any
outstanding purchase order.
In the event that a replacement Batch is commenced prior to a rejection and the
Parties subsequently determine that the replacement Batch is not required,
SERAGEN will bear the costs associated with the manufacture of the replacement
Batch, up to the time of such determination. SERAGEN and COPHARMA will negotiate
in good faith terms for the continuance or discontinuation of the manufacture of
any such replacement Batch.
Subject to prior resolution of the dispute in accordance with the procedures set
forth in Section 2.15, below in the event there is a dispute between COPHARMA
and SERAGEN over whether a Batch is nonconforming, COPHARMA shall replace all
non-conforming shipments at its expense, refund any payments made for the
nonconforming shipment, and shall reimburse SERAGEN for any reasonable charges
incurred by SERAGEN for shipping or storage, if applicable, of the
non-conforming shipment. Any replacement Batch of PRODUCT to be manufactured by
COPHARMA shall be invoiced by COPHARMA in accordance with the purchase order
placed by SERAGEN for the nonconforming shipment of PRODUCT.
2.14 DESTRUCTION OF NONCONFORMING PRODUCT. COPHARMA shall destroy, after
thorough investigation and upon determination that no further action can be
taken, at COPHARMA's sole cost and expense, in accordance with all applicable
laws and regulations (including, without limitation, environmental laws and
regulations) and in a manner to which SERAGEN has given its prior written
approval, PRODUCT deemed to be nonconforming in its possession that has been
replaced or is to be replaced, and such PRODUCT shall not be sold, reprocessed,
salvaged, reclaimed or otherwise reused in any manner by COPHARMA. SERAGEN, or
its designees, shall return all rejected Batches to COPHARMA, at COPHARMA's
expense, for destruction. Representatives of SERAGEN shall be permitted to
witness the destruction of nonconforming PRODUCT under this section, and shall
receive from COPHARMA proof of such destruction, upon written request.
2.15 RESOLUTION OF DISPUTES. In the event of dispute between the Parties over
the validity of a Batch rejection for failure to meet PRODUCT Specifications,
the Parties agree to submit a representative sample of the rejected Batch to a
qualified independent cGMP test facility to be agreed upon by the Parties, and
to accept the results of the testing performed by that facility as binding with
regard to that Batch. The testing procedures utilized must be formerly
transferred
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and qualified at the independent test facility prior to performing the testing.
The expense of such testing shall be borne by the losing Party.
In the event that the Parties cannot resolve a dispute regarding conformance
with cGMPs and/or required MRR Documentation, the Parties shall submit the issue
to a mutually agreed upon expert cGMP organization. The findings of the expert
cGMP organization shall be binding on the Parties, absent manifest error.
COPHARMA shall bear such expenses of the cGMP organization if the findings
confirm the non-conformity, and SERAGEN shall bear such expenses if the findings
confirm that the PRODUCT was manufactured in accordance with cGMPs and/or
required MRR Documentation. The Parties agree to make all efforts in good faith
to resolve disputes within 60 days.
2.16 ADDITIONAL SERVICES. Clinical product storage, cell line stock, storage,
and reference standard storage and regulatory/CMC consulting requested by
SERAGEN will be provided by COPHARMA all in accordance with cGMPs; and all other
regulatory requirements and filings as applicable. A list of these additional
services is shown in Exhibit F. The work scope and pricing of these additional
services will be agreed to by the parties by the end of January 2000. The
parties understand and agree that if the fermentation of additional ONTAK
pellets is required in connection with the manufacture of PRODUCT, such
additional fermentation will constitute an additional service requested by
SERAGEN pursuant to this Section 2.16 and that if the parties are unable to
agree upon the terms, including price, for the provision of such service,
COPHARMA will be released from any obligation to supply PRODUCT until and unless
such agreement is reached.
2.17 COMPLETION OF PRODUCT BATCHES WHICH ARE INCOMPLETE AS OF THE EFFECTIVE
DATE. SERAGEN represents and warrants to COPHARMA that as of the Effective Date
(upon which date COPHARMA is taking over operation of the Facility from Marathon
Biopharmaceuticals, Inc., a wholly-owned subsidiary of SERAGEN) the PRODUCT
Batches set forth on Exhibit G have not been completed. SERAGEN represents and
warrants to COPHARMA that Exhibit G sets forth a list of each unfinished Batch.
COPHARMA agrees that following the Effective Date it will complete the
manufacture of the unfinished Batches listed on Exhibit G. As such Batches are
finished COPHARMA will invoice SERAGEN for such Batches in the amounts set forth
on Exhibit G and SERAGEN shall make payment for such Batches in the amounts
specified on Exhibit G following the payment procedures set forth in this
Agreement for Batches wholly manufactured by COPHARMA. For Batches which are in
process as of the Effective Date and are completed by COPHARMA following the
Effective Date, the Parties agree that COPHARMA bears no responsibility or
liability for any work on such Batches through the Effective Date and the
Parties agree that the representations, warranties, covenants and obligations of
COPHARMA contained in this Agreement are applicable to such Batches only to the
extent of the work on the Batches which COPHARMA completes.
2.18 REMOVAL OF REJECTED MATERIALS Within 30 days of execution of this
agreement, SERAGEN and COPHARMA will convene a Material Review Board ("MRB") to
determine disposition of rejected PRODUCT Batches and rejected fermentation
pellets. Materials that are deemed rejected by this MRB will be disposed of
according to approved procedures.
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ARTICLE III
DEVELOPMENT SERVICES AND FEES
3.01 TECHNOLOGY SERVICES. COPHARMA agrees to provide and deliver to SERAGEN, on
the terms set forth in this Agreement, the services described in Exhibit "D"
(the "Technology Services"). All Batches of PDS or FFBP provided under the
Technology Services shall be manufactured in accordance with appropriate
application of GMP principles (i.e. using specified raw materials, preapproved
development batch records available at the time of manufacture and subject to QA
review of both parties.)
3.02 TECHNOLOGY SERVICES FEES. In consideration of COPHARMA's providing the
Technology Services, SERAGEN agrees to pay COPHARMA for the Technology Services
according to the payment schedule attached to this Agreement as Exhibit "E."
3.03 PAYMENT TERMS. COPHARMA will invoice SERAGEN on a monthly basis for
Technology Services performed by COPHARMA for SERAGEN during the prior month,
except for payment for GMP Comparability Batches or other GMP Batches produced
under Technology Services, which shall be invoiced in the same manner as other
PRODUCT Batches. Payment shall be due from SERAGEN to COPHARMA within thirty
(30) days of receipt of each invoice
3.04 MODIFICATION OF SERVICES. In the event the Parties agree to amend the scope
of the Technology Services to be provided to account for changes in the
specifications for FFBP, the Parties shall negotiate in good faith appropriate
adjustments to the fees payable under Exhibit E. Any adjustments to Exhibits D
or E shall be effective only if in writing.
3.05 PAYMENT LIMITS. The aggregate payment for Technology Services in year 2000
shall not exceed *** (***). The aggregate payment for Technology Services in
year 2001 shall not exceed *** (***). If the maximum expenditures for the
Technology Services set forth in this Section 3.05 are met in a given year and
SERAGEN does not agree to waive such limit and continue to pay for additional
Technology Services in accordance with the provisions of Section 3.03, then
COPHARMA may immediately cease any further work on the Technology Services and
all of COPHARMA'S obligations to provide the Technology Services will
immediately terminate for that year. Further work on the Technology Services
during the following year will continue from the stage where it was halted
during the previous year.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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ARTICLE IV
MATTERS RELATED TO MANUFACTURE OF PRODUCT AND PROVISION OF
TECHNOLOGY SERVICES
4.01 FACILITIES; STAFFING; MATERIALS; EQUIPMENT. COPHARMA shall perform all
manufacturing, storage, handling, packaging and testing of PRODUCT, testing of
FDP and the Technology Services at its facility located at 97 South Street,
Hopkinton, Massachusetts or other testing facility as agreed to by the parties.
COPHARMA shall use commercially reasonable efforts to maintain at all times such
staffing, supplies and equipment as are sufficient to ensure that it has the
ability to supply PRODUCT and to perform the Technology Services in accordance
with the terms of this Agreement. COPHARMA shall provide SERAGEN with sixty (60)
days prior written notice, and receive SERAGEN'S prior written consent, before
making any changes in the raw materials, process, procedures, suppliers,
facilities, equipment, testing, packaging, labeling specifications or other
significant changes and can not implement that change until necessary approvals
are obtained from Regulatory Agencies by SERAGEN. A list of raw materials and
other components to be used in the manufacture of PRODUCT is attached hereto as
EXHIBIT C. COPHARMA shall formally qualify and approve suppliers of raw
materials, reagents, solvents, and packaging components used in the manufacture
of PRODUCT according to COPHARMA's written procedures consistent with cGMPs.
Pursuant to cGMPs, only suppliers approved by COPHARMA's supplier qualification
program shall be used in the manufacture of PRODUCT.
4.02 SUBCONTRACTING. Without SERAGEN's prior written consent, COPHARMA shall not
enter into any subcontract with any third party for the provision of services
under this Agreement, including the manufacture, storage, handling, packaging
and testing of PRODUCT and FDP and the provision of the Technology Services. Any
third party or contract laboratory used for the testing of PRODUCT or
intermediates must, (i) be approved by SERAGEN in advance, (ii) have signed a
confidentiality agreement with SERAGEN and (iii) have completed a successful
qualification/validation between COPHARMA, or SERAGEN, or a SERAGEN designated
contractor. A copy of the qualification/validation and procedures and results
must be submitted by COPHARMA to SERAGEN for their approval prior to COPHARMA'S
use of the contractor for the designated purposes.
4.03 AUDITS; ACCESS. SERAGEN'S authorized representative(s), after arranging at
least five (5) business days in advance with COPHARMA, shall be allowed during
regular business hours to examine and inspect that portion of the COPHARMA
facilities required for the performance of this Agreement, including periodic
inspections relating to the manufacture, testing, handling, storage, packaging
and labeling of PRODUCT and to inspect and request copies of all MRR
Documentation related to this Agreement, including, but not limited to, the
following: Batch records, validation documentation, analytical results on raw
materials, components, intermediates and final products, deviation reports, in
process testing and PRODUCT reports, trend analysis reports, inspection reports
generated by regulatory authorities and responses to reports and
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inspections by regulatory authorities (both edited to maintain client
confidentiality). SERAGEN shall also be allowed to conduct routine annual cGMP
audits of COPHARMA facilities. SERAGEN shall send a request to schedule an audit
with COPHARMA within sixty (60) days of the proposed audit.
4.04 COOPERATION. COPHARMA shall provide reasonable cooperation in order that
SERAGEN, among other things, may from time to time confirm COPHARMA's compliance
with the provisions of Article IV, including COPHARMA's due and reasonable care
in the storage of biological materials and COPHARMA's full compliance with all
applicable Regulatory Requirements.
4.05 INFORMATION. COPHARMA shall provide SERAGEN copies of all MRR Documentation
relating to the services provided and PRODUCT supplied under this Agreement. All
such MRR Documentation shall be provided in a timely manner at the request of
SERAGEN.
4.06 TAXES. Subject to the provisions of this Section 4.06, SERAGEN shall
reimburse COPHARMA for all tariffs, duties and excise, sales or use, value added
or other taxes or levies (collectively, "TAXES") that may be paid by COPHARMA
with respect to the manufacture and sale to SERAGEN of the PRODUCT or the
provision of the Technology Services or any other services by COPHARMA to
SERAGEN pursuant to this Agreement. Notwithstanding the foregoing, SERAGEN shall
have no reimbursement obligations under this Section 4.06 to the extent that (i)
such Taxes are based on COPHARMA'S net income or (ii) such Taxes are recoverable
or offset by COPHARMA, in whole or in part, as a credit, rebate, deduction or
otherwise.
ARTICLE V
STANDARDS OF CARE AND COMPLIANCE WITH LAW
5.01 GENERAL. COPHARMA shall supply PRODUCT and Technology Services in
accordance with current regulatory standards prevailing in the biopharmaceutical
industry. Without limiting the foregoing, COPHARMA shall exercise all due and
reasonable care with regard to any biological raw materials, work-in-process,
clinical products or finished products in its custody relating to the PRODUCT
and its manufacture or the Technology Services.
5.02 COMPLIANCE WITH APPLICABLE LAW. COPHARMA shall comply with all applicable
laws, requirements, rules, regulations and standards prescribed by public
authorities (including the Food and Drug Act), in supplying PRODUCT and the
Technology Services and shall maintain all necessary records to comply with
these applicable laws, requirements, rules, regulations and standards. Without
limiting the foregoing, COPHARMA shall comply with current Regulatory
Requirements.
5.03 DOCUMENTS AND REPORTS. COPHARMA shall use commercially reasonable efforts
to ensure that documents required to be retained according to cGMPs are stored
in a confidential manner to maintain their integrity and protection from fire
and other hazards, for the required length of storage. COPHARMA shall
participate and provide information and data, excluding confidential business
and proprietary information of COPHARMA, as are reasonably requested
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by SERAGEN to support drug product complaint investigations, annual product
reviews, and error/accident reporting. COPHARMA shall cooperate fully with
SERAGEN in promptly filing all documents and reports required or reasonably
requested by any Regulatory Agency in a form reasonably acceptable to SERAGEN,
and shall provide SERAGEN with such information and assistance as SERAGEN may
require with regard to those filings, including all reports, authorizations,
certificates, methodologies, specifications and other documentation in the
possession of or under the control of COPHARMA, and shall ensure that the
content of all submissions is suitable for regulatory filings.
5.04 DEBARMENT. COPHARMA represents and warrants to SERAGEN that it has neither
been debarred nor is subject to debarment and that it will take commercially
reasonable precautions to not use in any capacity, in connection with PRODUCT or
the Technology Services to be supplied under this Agreement, any person who has
been debarred pursuant to subsections 306(a) or 306(b) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 335a(a)) or who is the subject of a conviction
described in such section. COPHARMA agrees to inform SERAGEN immediately in
writing if it is, or it becomes aware that any person who is performing services
hereunder on behalf of COPHARMA is, debarred or is the subject of a conviction
described in subsections 306(a) or 306(b) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 335a(a)) or if any action, suit, claim, investigation,
or proceeding is pending or, to the knowledge of COPHARMA, threatened relating
to the debarment of COPHARMA or any person performing services on behalf of
COPHARMA hereunder.
5.05 COMPLAINTS; ANNUAL PRODUCT REVIEWS; ACCIDENT REPORTING; ADVERSE EVENTS;
ERROR/ACCIDENT REPORTING. COPHARMA shall participate and provide information and
data, excluding confidential business and proprietary information of COPHARMA,
as are reasonably requested by SERAGEN to support drug product complaint
investigations, annual product reviews, and error/accident reporting. In the
event that COPHARMA receives any complaint or report of adverse drug event(s) as
defined by 21 C.F.R. 600.80 (an "Adverse Event") regarding the PRODUCT,
regardless of its association with the PRODUCT, then COPHARMA shall notify
SERAGEN in writing, by facsimile [858-550-1860] on or before the fifth calendar
day following the receipt thereof; provided that COPHARMA shall notify SERAGEN
in writing, by facsimile [858-550-1860] and by telephone [858-550-7750] within
twenty four (24) hours of any fatal or life-threatening adverse event. SERAGEN
shall have primary responsibility for fielding, investigating and responding to
all PRODUCT complaints and Adverse Events. COPHARMA shall cause its
manufacturing, quality assurance and quality control personnel to cooperate
fully with SERAGEN, as appropriate and needed, to investigate any PRODUCT
complaints or Adverse Events and to provide such information or assistance as is
reasonably requested by SERAGEN in order to support SERAGEN's compliance with
Adverse Event, field alert and other reporting requirements imposed by any
Regulatory Agency. SERAGEN, as the product licensee for Regulatory Agency
purposes, shall have the right to exercise full functional control over the
resolution of complaints and Adverse Events as required by all applicable
regulations. The Parties shall each report to the other on the resolution of
complaints and Adverse Events.
5.06 NOTIFICATION OF POTENTIAL LIABILITY. Each Party shall notify the other in
writing as soon as is reasonably possible following any event, including the
receipt of any notice, warning,
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citation, finding, report or service of process or the occurrence of any
release, spill, upset or discharge of hazardous wastes or substances, related to
the PRODUCT or the Technology Services that could reasonably be expected to give
rise to liability on the part of the other Party under any law, rule or
regulation prescribed by a public authority or otherwise.
5.07 GOVERNMENTAL COMMUNICATIONS AND INSPECTIONS. COPHARMA will notify SERAGEN
within twenty-four (24) hours of COPHARMA'S receipt of notice of any inspections
of COPHARMA'S facilities relating to PRODUCT or the Technology Services, whether
pre-scheduled or unannounced, by a Regulatory Agency and if possible shall give
SERAGEN the opportunity to be present and observe such an inspection. The
findings of these inspections shall be provided by COPHARMA to SERAGEN in a
manner which protects the confidential information of third parties, to the
extent they relate to or impact the manufacture, testing, packaging, storage or
handling of PRODUCT for SERAGEN or the provision of Technology Services to
SERAGEN. COPHARMA will notify SERAGEN within twenty-four (24) hours of receipt
of any communications from a Regulatory Agency relating to the PRODUCT or the
Technology Services, including any communication or directive from a Regulatory
Agency commencing or threatening seizure of any PRODUCT or other removal from
the market of any PRODUCT. If a written communication, the notifying Party shall
attach a copy. Otherwise, the notifying Party shall provide a reasonable
description to the other Party of the communication. SERAGEN shall have the
right to review in advance and approve any response to the communication or
investigation submitted by COPHARMA related to PRODUCT. The Parties shall
cooperate fully with each other in providing the information needed for any such
communication.
5.08 NOTIFICATION AND INVESTIGATION OF ALLEGED DEFECTS. In the event that any
PRODUCT is alleged or proven not to meet the Specifications, the Party receiving
notice of the failure shall notify the other Party immediately, and both Parties
shall cooperate fully regarding the investigation and disposition of the matter.
5.09 ALLOCATION OF BURDEN OF PRODUCT RECALL. In the event (a) any government
authority issues a request, directive or order that FDP prepared from PRODUCT
supplied by COPHARMA to SERAGEN be recalled, or (b) a court of competent
jurisdiction orders such a recall, or (c) SERAGEN or COPHARMA shall reasonably
determine that the PRODUCT should be recalled, the parties shall take all
appropriate corrective actions, and shall cooperate in the investigations
surrounding the recall. In the event that such recall results from any cause or
event arising from the manufacture, storage or handling of the PRODUCT by
COPHARMA in a manner which does not comply with the Manufacturing and Release
Requirements (excluding defects relating to packaging or labeling supplied by or
prepared at the direction of SERAGEN), COPHARMA shall be responsible for all
expenses of the recall (except that COPHARMA and SERAGEN shall share such
expenses equally if such recall is due to a failure by SERAGEN to meet the
Manufacturing and Release Requirements during a Process Improvement requested by
or approved by SERAGEN) and COPHARMA shall promptly replace such PRODUCT at no
additional cost to SERAGEN consistent with directions received from the
appropriate governmental authority. In all other cases, SERAGEN shall be
responsible for the expenses of recall, including the cost of replacement
material for the PRODUCT. For the purposes of this
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Agreement, the expenses of recall shall include, without limitation, the
expenses of notification and destruction or return of the recalled PRODUCT and
all other costs incurred in connection with such recall, but shall not include
lost profits of either party.
5.10 MATERIAL SAFETY. During the term of this Agreement and for one year
thereafter, COPHARMA shall promptly provide SERAGEN with all new information,
excluding confidential business and proprietary information of COPHARMA, within
its possession or control or otherwise available to COPHARMA from time to time
regarding handling precautions, toxicity and hazards associated with the
manufactured PRODUCT.
5.11 WASTE DISPOSAL. COPHARMA will conduct the manufacture, packaging, storage
and testing of PRODUCT for SERAGEN and the provision of the Technology Services,
including the disposal of all wastes generated thereby, in conformance with
COPHARMA'S waste handling procedures and appropriate local, provincial or
national environmental laws or regulations. SERAGEN shall provide COPHARMA with
any information required for the environmental assessment, such as disposal
requirements, etc. In this regard, COPHARMA will provide SERAGEN, upon SERAGEN's
written request, with information, documents, and permits reasonable requested
by SERAGEN for SERAGEN to perform an environmental assessment to be made
available to the Regulatory Agency through SERAGEN'S Biologics License
Application (BLA), BLA supplements and/or U.S. license, and as required by other
appropriate regulatory authorities, prior to supply of PRODUCT to SERAGEN.
ARTICLE VI
PRODUCT PRICING, PAYMENT AND DELIVERY
6.01 PRICING. Pricing of PRODUCT and of FDP release testing during the period
ending *** of this Agreement shall be as specified in Exhibit B attached hereto.
Pricing of additional services provided according to Section 2.16 during the
period ending *** shall be agreed to by the parties by the end of January 2000.
Pricing of PRODUCT stability testing and FDP stability testing during the period
ending December 31, 2000 shall be as specified on Exhibit B.
For periods after ***, the parties will negotiate the pricing of PRODUCT,
of FDP release testing, and of additional services in good faith. For periods
after ***, the parties will negotiate the pricing of PRODUCT and FDP stability
testing in good faith. Pricing for fermentation of additional ONTAK pellets, if
required in connection with the manufacture of PRODUCT, will be in addition to
the fees set forth in Exhibit "B" and shall be negotiated by the parties in
accordance with Section 2.16 of this Agreement.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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6.02 PAYMENT TERM.
(a) Except as otherwise set forth below, terms of payment for PRODUCT,
shall be net thirty (30) days from COPHARMA QA release of PRODUCT and receipt
from COPHARMA of a corresponding invoice by SERAGEN, provided there is then a
valid purchase order from SERAGEN in effect for such released PRODUCT, unless a
Batch is deemed nonconforming within said thirty (30) day period. Payment shall
be net thirty (30) days following resolution of a dispute over nonconforming
PRODUCT. Payment for PRODUCT, however, does not in any way impact SERAGEN's
rights pursuant to Articles 2.11-2.15. The invoice from COPHARMA shall credit
advance payments made by SERAGEN under subpart (b) to cover estimated material
costs for PRODUCT.
(b) As applies to production of PRODUCT: On *** of each year COPHARMA shall
invoice SERAGEN for *** the raw materials costs for the Batches ordered by PO
the preceding *** at the rate of ***/Batch. The remainder of the raw materials
costs for the *** PO will be invoiced by COPHARMA to SERAGEN the following ***.
On *** of each year, COPHARMA shall invoice SERAGEN for *** the raw materials
costs for the Batches ordered by PO the preceding *** at the rate of ***/Batch.
The remainder of the raw materials and preparation costs for the *** PO will be
invoiced by COPHARMA to SERAGEN the following *** .
For the year 2000 only COPHARMA shall invoice SERAGEN ***, 2000 for *** the
raw materials costs for the Batches ordered by PO by *** of 2000 at the rate of
***/Batch. The remainder of the raw materials costs for the *** PO will be
invoiced by COPHARMA to SERAGEN the following ***. On *** of 2000, COPHARMA
shall invoice SERAGEN for *** the raw materials costs for the Batches ordered by
PO on *** of 2000 at the rate of ***/Batch. The remainder of the raw materials
and preparation costs for the *** PO will be invoiced by COPHARMA to SERAGEN the
following *** .
Payment by SERAGEN to COPHARMA shall be net thirty (30) days from the
receipt of an invoice from COPHARMA for such estimated costs.
(c) Terms of payment for FDP release testing shall be net thirty (30) days
from COPHARMA QA approval of the Certificate of Analysis and receipt by SERAGEN
of an invoice for the testing services.
(d) Terms of payment for stability testing shall be net thirty (30) days
from receipt by SERAGEN of an invoice submitted by COPHARMA on the last day of
every month for scheduled work performed during that month.
(e) Terms of payment for additional services provided under Section 2.16
shall be net thirty (30) days from receipt by SERAGEN of an invoice submitted by
COPHARMA on the last
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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day of every month for scheduled work performed during that month.
6.03 ***
6.04 MATTERS AFFECTING PRICE OF PRODUCT AND FDP TESTING. The pricing of PRODUCT
and FDP release and stability testing set forth on Exhibit B is based upon the
current Manufacturing and Release Requirements for first generation PRODUCT, the
anticipated Manufacturing and Release Requirements for second generation
PRODUCT, and the current release and stability testing procedures for FDP, as
well as current regulatory requirements. In the event that any regulatory
requirements change or the manner of producing the PRODUCT or performing release
and stability testing for FDP, as set forth on Exhibit A or as anticipated for
second generation PRODUCT, changes, in such a way to increase or decrease the
cost or burden on COPHARMA to manufacture the PRODUCT or perform such release
and stability testing, the parties agree to negotiate an appropriate price
adjustment.
Similarly, the pricing of PRODUCT and FDP release and stability testing set
forth on Exhibit B is based upon the number of inquiries, requests for
information and explanation, and similar forms of correspondence which COPHARMA
would expect to have from a customer of its contract manufacturing services. In
the event that the burden of answering and dealing with such inquiries, requests
for information and explanation, and other similar forms of correspondence from
SERAGEN is greater than the burden associated with the provision of similar
services to other customers the parties agree to negotiate appropriate pricing
increases.
6.05 DELIVERY OF PRODUCT. Delivery shall be FOB the COPHARMA Plant located at 97
South Street, Hopkinton, Massachusetts or such other location as agreed to by
the parties. SERAGEN shall, at its cost, ensure that adequate insurance
coverage, for full replacement cost, exists on PRODUCT in transit to SERAGEN or
its designee in the event that such PRODUCT is damaged, destroyed or lost, and
shall bear all costs of such insurance. Title to and risk of loss of PRODUCT
shall pass to SERAGEN or its designee at the time of SERAGEN QA release of
PRODUCT.
ARTICLE VII
CONFIDENTIALITY AND INTELLECTUAL PROPERTY
7.01 CONFIDENTIALITY The Parties recognize that all non-public information
including, where appropriate and without limitation, any information, know-how,
patent disclosures, patent applications, structures, models, techniques,
processes, compositions, compounds, apparatus and other confidential or
proprietary data and information relating to the same of one Party disclosed to
the other Party pursuant to this Agreement is of proprietary value and is to be
considered highly confidential ("Proprietary Information"). The Parties agree
not to use (except in accordance with this Agreement), and not to disclose to
any third party, any Proprietary Information except with the prior written
consent of the other Party. The foregoing obligations
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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shall survive the expiration or termination of this Agreement for a period
of ten (10) years. For purposes of this Article VII, all confidential
information specifically relating to the PRODUCT and its manufacture acquired or
generated by COPHARMA on behalf of SERAGEN as a result of this Agreement shall
be considered to be Proprietary Information disclosed by SERAGEN to COPHARMA,
provided, however, that this shall not impact COPHARMA'S rights to file patent
applications and prosecute, maintain, enforce and defend such applications and
subsequently issued patents pursuant to the terms of Section 7.05 of this
Agreement covering such Proprietary Information. The obligations of non-use and
nondisclosure shall not apply to Proprietary Information that:
(a) is known by the receiving Party at the time of its receipt, and not
through a prior disclosure by the disclosing Party, as documented by written
records;
(b) is at the time of disclosure or thereafter becomes published or
otherwise part of the public domain without breach hereof by the receiving
Party;
(c) is subsequently disclosed to the receiving Party by a third party who
has no confidentiality obligation to the disclosing Party with respect to the
information disclosed;
(d) is developed by the receiving Party independently of Proprietary
Information or other information received from the disclosing Party and such
independent development can be properly demonstrated by the receiving Party;
(e) is disclosed to governmental or other regulatory authorities in order
to obtain patents or to gain approval to conduct clinical trials or to market
the PRODUCT, but such disclosure may be only to the extent reasonably necessary
to obtain such patents or authorizations;
(f) is necessary to be disclosed to sublicensees, agents, consultants,
affiliates, or other third parties for the research and development,
manufacturing, or marketing of the PRODUCT (or for such parties to determine
their interest in performing such activities) in accordance with this Agreement
on the condition that such third parties agree to be bound by the
confidentiality obligations and use restrictions contained in this Agreement and
that the term of such obligations and restrictions for such third parties shall
be no less than the term of such obligations and restrictions hereunder, but
such disclosure may be only to the extent reasonably necessary for such
purposes; or
(g) is required to be disclosed by law or court order, PROVIDED that notice
is promptly delivered to the other Party in order to provide it with an
opportunity to seek a protective order or other similar order with respect to
such Proprietary Information, but such disclosure may be only to the extent
reasonably necessary to comply with the required disclosure, whether or not a
protective order or other similar order is obtained by the other Party.
7.02 LICENSE. SERAGEN represents and warrants to COPHARMA that SERAGEN owns all
rights necessary to manufacture, market, sell and distribute the PRODUCT and to
perform the Technology Services. During the term of this Agreement, SERAGEN
hereby grants to
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COPHARMA a paid-up, royalty-free, non-exclusive license, without the right to
sublicense or transfer, to all rights held by SERAGEN necessary to manufacture
PRODUCT and to perform the Technology Services for SERAGEN under this Agreement,
but only for such purposes and only to the extent necessary for COPHARMA to
perform its obligations under this Agreement. The parties agree that the grant
contained in this section is personal to COPHARMA only and COPHARMA agrees to
make use of SERAGEN's confidential information only in accordance with this
license and only by COPHARMA.
7.03 INTELLECTUAL PROPERTY.
(a) All Intellectual Property worldwide to ideas, innovations or inventions
(whether or not patentable) developed solely by COPHARMA and its employees
during the course of fulfilling its obligations under this Agreement, including
any Process Improvements for manufacture of PRODUCT, shall be solely owned by
COPHARMA.
(b) Intellectual Property worldwide to ideas, innovations or inventions
(whether or not patentable) developed solely by SERAGEN and its employees while
this Agreement is in force, including any Process Improvements, shall be solely
owned by SERAGEN.
(c) Intellectual Property worldwide to ideas, innovations or inventions
(whether or not patentable ) developed jointly by COPHARMA and SERAGEN and their
respective employees while this Agreement is in force, including any Process
Improvements, shall be jointly owned by the Parties.
(d) COPHARMA agrees to promptly disclose to SERAGEN as they occur any
PRODUCT Intellectual Property developed by COPHARMA during the course of
fulfilling its obligations under this Agreement. COPHARMA represents and
warrants that all of its employees are obligated by written agreement to assign
to COPHARMA any of their inventions that arise as a result of the provision of
services under this Agreement.
7.04 EXCLUSIVE LICENSE. COPHARMA hereby grants to SERAGEN an irrevocable,
worldwide, royalty free, fully paid-up exclusive license, with right to
sublicense, under PRODUCT Intellectual Property or other Intellectual Property
necessary or desirable to manufacture PRODUCT owned in whole or in part by
COPHARMA, only for SERAGEN to make, have made, use and sell PRODUCT, and to
offer PRODUCT for sale. The parties agree that this license does not apply to
the use of Intellectual Property for purposes other than to make, have made, use
and sell PRODUCT and COPHARMA retains all other rights to Intellectual Property,
including the right to license such other rights. Upon request by SERAGEN,
COPHARMA agrees to execute any documents necessary for SERAGEN to exercise its
rights under the exclusive license granted under this provision.
7.05 PATENTS. With respect to Intellectual Property owned solely by SERAGEN or
jointly by SERAGEN and COPHARMA under this Agreement, SERAGEN shall decide, at
its sole discretion, whether, when and where to file a patent application and if
SERAGEN decides to file a patent application, it shall be solely responsible for
filing, prosecuting, maintaining, enforcing
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and defending such application or subsequently issued patent. Upon request by
SERAGEN, COPHARMA shall provide SERAGEN with reasonable assistance in obtaining
any copyright, patent or other Intellectual Property protection covering any
Intellectual Property created or developed under this Agreement and owned solely
or jointly by SERAGEN, provided that COPHARMA's costs are paid for by SERAGEN.
With respect to Intellectual Property owned solely by COPHARMA, COPHARMA shall
first decide whether, when and where to file a patent application. If COPHARMA
decides to file a patent application to protect Intellectual Property, it shall
be solely responsible for filing, prosecuting, maintaining, enforcing and
defending such application or subsequently issued patent. If COPHARMA decides
not to file a patent application to protect PRODUCT Intellectual Property, or
decides to abandon an existing patent or patent application covering PRODUCT
Intellectual Property, it shall promptly notify SERAGEN of its decision and
SERAGEN shall have the right to file a patent application to protect the PRODUCT
Intellectual Property, or to maintain the existing patent or patent application.
If SERAGEN exercises its rights to assume responsibility for PRODUCT
Intellectual Property abandoned by COPHARMA under this provision, COPHARMA shall
assign its rights to the PRODUCT Intellectual Property to SERAGEN and shall
provide SERAGEN with reasonable assistance in obtaining patent protection,
provided that COPHARMA's costs are paid for by SERAGEN.
7.06 NO PUBLICITY. No Party shall disclose the terms related to this Agreement
without the prior written consent of the other Party. Nothing in the foregoing,
however, shall prohibit a Party from making such disclosures to the extent
deemed necessary under applicable federal or state securities laws or any rule
or regulation of any nationally recognized securities exchange; in such event,
however, the disclosing Party shall use good faith efforts to consult with the
other Party prior to such disclosure and, where applicable, shall request
confidential treatment to the extent available. In addition, COPHARMA may
disclose the identity of SERAGEN as a customer of COPHARMA to other customers
and potential customers.
7.07 TRADEMARKS AND TRADE NAMES. The Parties hereby acknowledge and agree that
neither Party has acquired, nor shall it acquire by virtue of this Agreement or
the activities contemplated hereby, any interest in any of the other Party's
trademarks or trade names.
7.08 INJUNCTIVE RELIEF. The Parties hereto understand and agree that remedies at
law may be inadequate to protect against any breach of any of the provisions of
this Article 7 by any Party or their employees, agents, officers or directors or
any other person acting in concert with it or on its behalf. Accordingly, each
Party shall be entitled to the granting of injunctive relief by a court of
competent jurisdiction against any action that constitutes any such breach of
this Article 7.
7.09 NO OTHER RIGHTS. Except as otherwise expressly set forth in this Agreement,
it is understood and agreed by the Parties that this Agreement does not grant
any license or other right under any Intellectual Property of the Parties.
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ARTICLE VIII
INDEMNIFICATION
8.01 INDEMNIFICATION BY SERAGEN. SERAGEN shall indemnify and hold harmless
COPHARMA and its Affiliates, and their respective directors, officers,
shareholders, employees, consultants and agents from and against all suits,
claims, losses, demands, liabilities, damages, costs and expenses (including
court costs, reasonable attorney's fees and reasonable investigative costs)
(together "Liabilities") in connection with any suit, demand or action by any
third party (a "Third Party Action") arising out of, resulting from or relating
to: (a) the further processing, formulation, storage, labeling, promotion,
marketing, use or sale of PRODUCT by SERAGEN, as long as the PRODUCT met or
exceeded the Manufacturing and Release Requirements provided herein at the time
of its release to SERAGEN and was manufactured in accordance with cGMPs, (b)
breach of any representation, warranty, covenant or agreement contained in this
Agreement by SERAGEN, (c) SERAGEN's negligence, recklessness or willful
misconduct or the negligence, recklessness or willful misconduct of any employee
or agent of SERAGEN, (d) any representation or warranty made by SERAGEN to its
customers or users with respect to the PRODUCT, other than a representation that
the PRODUCT conformed to the Manufacturing and Release Requirements at the time
of its release to SERAGEN, or (e) any Third Party Action alleging that the
PRODUCT or the production of the PRODUCT or provision of the Technology Services
pursuant to the Agreement infringes any patent or other proprietary rights
except to the extent such Third Party Action relates to the use of COPHARMA's
patents or other proprietary rights which are not deemed Proprietary Information
of SERAGEN; except in each case to the extent that any of the foregoing arises
out of or results from the breach by COPHARMA of the terms of this Agreement or
failure of COPHARMA to provide PRODUCT that meets or exceeds the Manufacturing
and Release Requirements at the time of release to SERAGEN and was manufactured
in accordance with cGMPs.
8.02 INDEMNIFICATION BY COPHARMA. COPHARMA shall indemnify and hold harmless
SERAGEN and its Affiliates, and their respective directors, officers,
shareholders, employees, consultants and agents from any and all Liabilities to
third parties to the extent that such Liability arises from: (a) COPHARMA'S
failure to meet the Manufacturing and Release Requirements, (b) COPHARMA'S
negligence, recklessness, or willful misconduct in the manufacture, handling,
storage, testing or packaging of PRODUCT, (c) COPHARMA'S failure to manufacture
PRODUCT in accordance with cGMPs, (d) COPHARMA'S failure to reasonably comply
with all laws, regulatory filings, rules or regulations applicable to its
performance under this Agreement, or (e) breach of any representation, warranty,
covenant or agreement contained in this Agreement by COPHARMA.
8.03 INDEMNIFICATION PROCEDURES. As a condition of the indemnification rights
provided in this Article 8, the indemnified Party shall promptly notify the
indemnifying party in writing of any claim, action or suit (the "Asserted
Liability") potentially giving rise to the indemnification obligation hereunder.
The indemnifying party may elect to compromise or defend, and control the
defense of, at its own expense and by counsel reasonably satisfactory to the
indemnified party, any such Asserted Liability, provided that the indemnified
party shall have no liability under any compromise or settlement agreed to by
the indemnifying party which it has not
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approved in writing. The indemnified party shall cooperate upon the request
and at the expense of the indemnifying party, in the compromise of, or defense
against, such Asserted Liability. If the indemnifying party elects not to
compromise or defend the Asserted Liability, or fails to notify the indemnified
party of its election as herein provided, the indemnified party may pay,
compromise or defend such Asserted Liability and receive full indemnification
for its losses as provided in Sections 8.01 or 8.02 hereof, including all costs
of defending such suit. In any event, the indemnified party and the indemnifying
party may participate, at their own expense, in the defense of such Asserted
Liability. If the indemnifying party chooses to defend any claim, the
indemnified party shall make available to the indemnifying party any books,
records or other documents within its control that are reasonably requested for
such defense and shall otherwise cooperate with the indemnifying party, in which
event the indemnified party shall be reimbursed for its out-of-pocket expense.
8.04 SURVIVAL OF REMEDIES. All limitations on either Party's remedies and
liabilities under this Article VIII shall survive the expiration, termination or
cancellation of this Agreement.
8.05 LIMITATION OF LIABILITY.
(a) NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT,
INCIDENTIAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS ARISING OUT OF THE
PERFORMANCE OF THIS AGREEMENT.
(b) THE MAXIMUM AGGREGATE LIABILITY OF COPHARMA FOR ALL CAUSES OF ACTION
ARISING OUT OF OR RELATED TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
LIABILITY ARISING UNDER ARTICLE 8.02 (INDEMNIFICATION), LIABILITY ARISING FROM A
BREACH OF THIS AGREEMENT OR NONPERFORMANCE UNDER THIS AGREEMENT, AND LIABILITY
ARISING OUT OF OR RELATED TO THE MANUFACTURE OF PRODUCT, THE PROVISION OF THE
TECHNOLOGY SERVICES, AND THE PROVISION OF OTHER SERVICES PROVIDED BY COPHARMA
PURSUANT TO THIS AGREEMENT, SHALL BE THE DIFFERENCE BETWEEN (A) THE SUM OF (I)
THE AMOUNT WHICH COPHARMA WOULD BE ABLE TO RECOVER IN CONNECTION WITH ANY SUCH
CAUSES OF ACTION UNDER THE INSURANCE POLICY DESCRIBED IN SECTION 8.06(B) BELOW
IF COPHARMA TOOK COMMERCIALLY REASONABLE STEPS TO MAINTAIN AND COLLECT UNDER
SUCH INSURANCE AND (II) THE AMOUNT PAID BY SERAGEN TO COPHARMA PURSUANT TO THIS
AGREEMENT FOR THE MANUFACTURE OF PRODUCT, THE PROVISION OF THE TECHNOLOGY
SERVICES AND THE PROVISION OF SUCH OTHER SERVICES DURING THE TWELVE (12) MONTHS
PRIOR TO ANY EVENT GIVING RISE TO LIABILITY AND (B) THE AMOUNT OF ALL PREVIOUS
AGGREGATE LIABILITY OF COPHARMA FOR CAUSES OF ACTION ARISING OUT OF OR RELATED
TO THIS AGREEMENT. THE LIMITATION ON COPHARMA'S AGGREGATE LIABILITY CONTAINED IN
THE PRECEDING SENTENCE SHALL NOT APPLY TO LIABILITY ARISING FROM COPHARMA'S
WILLFUL MISCONDUCT IN THE MANUFACTURE, HANDLING, STORAGE, TESTING OR PACKAGING
OF PRODUCT; PROVIDED THAT
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THIS SENTENCE SHALL NOT APPLY TO COPHARMA'S FAILURE TO MANUFACTURE AND SUPPLY
PRODUCT PURSUANT TO THIS AGREEMENT, EVEN IF WILLFUL.
8.06 INSURANCE.
(a) Throughout the Term, SERAGEN shall obtain and maintain comprehensive
general liability insurance (including broad form general liability, completed
operations and products liability, personal injury liability, blanket
contractual liability and broad form property damage liability) with limits of
not less than $3,000,000 combined single limit for bodily injury and property
damage liability per occurrence and annual aggregate, containing a
cross-liability or severability of interests clause. Without limiting the
foregoing, SERAGEN shall obtain and maintain, at its sole expense, product
liability insurance relating to the PRODUCT that is comparable in type and
amount to the insurance it maintains with respect to its most similar other
products. With respect to all insurance coverage required under this clause (a):
(i) SERAGEN shall, promptly upon COPHARMA's request, furnish COPHARMA with
certificates of insurance evidencing such insurance; and (ii) all policies shall
include provisions for at least 30 days' prior written notice of any material
change or cancellation (whether for non-payment or otherwise).
(b) Throughout the Term, COPHARMA shall obtain and maintain comprehensive
general liability insurance (including broad form general liability, completed
operations and products liability, blanket contractual liability and broad form
property damage liability) with limits of not less than $3,000,000 combined
single limit for bodily injury and property damage liability per occurrence and
annual aggregate, containing a cross-liability or severability of interests
clause. During the Term, COPHARMA shall obtain and maintain worker's
compensation insurance as required under Massachusetts law and employer's
liability insurance with a limit of not less than $1,000,000. With respect to
all insurance coverage required under this clause (b): (i) COPHARMA shall,
promptly upon SERAGEN's request, furnish SERAGEN with certificate of insurance
evidencing such insurance; and (ii) all policies shall include provisions for at
least 30 days' prior written notice of any material change or cancellation
(whether for non-payment or otherwise). COPHARMA shall use its best efforts to
obtain and maintain five-year tail coverage for the above-mentioned insurance.
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<PAGE>
ARTICLE IX
WARRANTIES AND REPRESENTATIONS
9.01 REPRESENTATIONS AND WARRANTIES OF EACH PARTY. Each Party represents and
warrants to the other that (a) it is a corporation, duly organized and validly
existing under the laws of the State of Delaware; (b) it has all requisite
corporate power and authority to own its properties, conduct its business as
presently conducted, and enter into and perform its obligations under this
Agreement; (c) it has taken all necessary corporate action to authorize this
Agreement; (d) it has duly executed and delivered this Agreement and this
Agreement constitutes its legal and valid obligation, enforceable against it in
accordance with its terms; (e) the execution and delivery of this Agreement and
the performance of its obligations hereunder do not and will not (i) violate any
other agreement or instrument of any nature to which it is a party or by which
it is bound, (ii) violate any law, rule or regulation to which it is subject or
by which it is bound, or (iii) require any filing, approval, authorization,
permit or license from or with any governmental authority which has not been
made or obtained, PROVIDED, HOWEVER, that COPHARMA makes no representation or
warranty concerning any approvals or consents which may be required for, or in
connection with, the transfer of any Permits (as defined in the Asset Purchase
Agreement, dated the date hereof, between COPHARMA, SERAGEN, LIGAND and Marathon
Biopharmaceuticals, Inc. (the "Asset Purchase Agreement")) required for
COPHARMA'S operation of the Business (as defined in the Asset Purchase
Agreement) or COPHARMA'S use of the Facility or the Purchased Assets (as defined
in the Asset Purchase Agreement) following the Closing (as defined in the Asset
Purchase Agreement) or the performance of any of the COPHARMA'S obligations
under this Agreement.
9.02 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SERAGEN. SERAGEN represents
that it is not aware of any asserted or threatened claim or demand that it
believes may be enforced against its patents and other proprietary rights
relating to the PRODUCT or the Technology Services, and in entering into this
Agreement, to its knowledge it will not infringe on any patent or other
proprietary rights of any third party. SERAGEN further represents that
operations which are critical to its performance under this Agreement,
particularly with regard to computer systems and applications, will be "Year
2000 ready". "Year 2000 ready" means that operations will not be adversely
affected by the occurrence of the year 2000 and that computer systems and
applications will operate and (1) will correctly store, represent and process
(including sort) all dates (including single and multi-century formulas and leap
year calculations), such that errors will not occur when the date being used is
in the year 2000, or in a year preceding or following the year 2000; and (2)
will not cause or result in an abnormal termination or ending.
9.03 REPRESENTATIONS AND WARRANTIES OF COPHARMA. COPHARMA represents and
warrants that, at the time of delivery of the PRODUCT to SERAGEN, the PRODUCT
will (a) have been manufactured, stored and shipped in accordance with current
Regulatory Requirements and cGMPs, (b) will meet or exceed the Manufacturing and
Release Requirements, and (c) not be adulterated or misbranded under the Food
and Drug Act or any other applicable law, rule or regulation.
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9.04 REMEDIES. In the event that any PRODUCT provided by COPHARMA was not
manufactured in accordance with cGMPs, and/or fails to meet the Manufacturing
and Release Requirements or the warranties provided herein, SERAGEN'S sole
remedy with respect to a rejected Batch shall be the re-supply, at COPHARMA'S
cost, of (1) lost fermentation pellets; and (2) said non-conforming PRODUCT in a
non-defective form meeting the Manufacturing and Release Requirements.
9.05 DISCLAIMER OF WARRANTIES. THE PARTIES ACKNOWLEDGE AND AGREE THAT ALL
SERVICES PROVIDED UNDER THIS AGREEMENT WILL BE PERFORMED BY COPHARMA AT THE
DIRECTION OF SERAGEN. COPHARMA DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTIBILITY OR
FITNESS FOR A PARTICULAR PURPOSE, ANY WARRANTIES ARISING FROM COURSE OF DEALING
OR USAGE OF TRADE OR ANY WARRANTIES OF PATENT VALIDITY OR FREEDOM OF OR FROM
PATENT INFRINGMENT, WITH RESPECT TO ANY PRODUCT OR SERVICES DELIVERED UNDER THIS
AGREEMENT (OTHER THAN THOSE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT).
ARTICLE X
TERM AND TERMINATION
10.01 TERM. This Agreement shall commence on the later of (i) January 7, 2000
and (ii) the Closing Date (as defined in Section 1.8 of the Asset Purchase
Agreement) (the later of (i) or (ii) being the "Effective Date") and shall
continue in full force and effect until ***, unless earlier terminated, in whole
or in part, in accordance with the provisions of Section 10.02, 10.03, 10.04,
10.05, 10.06 or 10.07 below (the "Term"). Beginning ***, the parties will enter
into negotiations for a period not to exceed *** (***) *** concerning whether
they desire to extend this Agreement beyond ***, and if so, the terms and
conditions for any such extension.
10.02 TERMINATION FOR BREACH OR DEFAULT. On any material breach of or default
under this Agreement by either Party (the "Breaching Party"), the other Party
(the "Non-Breaching Party") shall have the right to serve notice (a "Preliminary
Termination Notice") on the Breaching Party of the Non-Breaching Party's
intention to terminate this Agreement if the breach is not cured within ***
following the Breaching Party's receipt of the Preliminary Termination Notice.
The Preliminary Termination Notice shall state the cause for the Non-Breaching
Party's intention to terminate this Agreement. If the Breaching Party does not
remedy the breach or default within the *** period, the Non-Breaching Party
shall have the right to terminate this Agreement effective immediately upon
provision of further notice (the "Final Termination Notice") to the Breaching
Party, and following the provision of the Final Termination Notice, this
Agreement and all rights, privileges and licenses granted under this Agreement
shall automatically terminate and neither Party shall have any further rights,
duties or obligations under this Agreement except
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
26
<PAGE>
as may have then accrued under this Agreement before termination or except
as otherwise provided in this Agreement. If, at any time before receipt of the
Final Termination Notice, the Breaching Party has remedied the default, this
Agreement shall continue in full force and effect as if the Final Termination
Notice had not been given.
COPHARMA may terminate the Agreement for a material breach of or default under
the Agreement by LIGAND in the same manner as COPHARMA would terminate above for
such a breach or default by SERAGEN.
10.03 TERMINATION FOR FORCE MAJEURE. If an event under Section 11.10 causes the
failure of performance of a party for a period of ninety (90) days or more, any
Party to this Agreement, including the Party whose performance has failed
pursuant to Section 11.10, shall have the right to terminate this Agreement upon
written notice to the other Parties.
10.04 TERMINATION FOR REGULATORY ISSUES RELATED TO FACILITY TRANSFER. If any
Regulatory Agency or other governmental agency or instrumentality objects to the
transfer of the Facility to COPHARMA or COPHARMA'S manufacture of PRODUCT at the
Facility following the Effective Date, or suspends or terminates any validation
or approval in connection with such Facility transfer then both parties resolve
to work together diligently to resolve the problems and implement remedies
sufficient to regain approval. All obligations to supply and order PRODUCT shall
be suspended until necessary approvals are reinstated.
10.05 BANKRUPTCY. SERAGEN shall have the right to terminate this Agreement
effective immediately in the event COPHARMA files a voluntary petition in
bankruptcy, is adjudicated as bankrupt, makes a general assignment for the
benefit of creditors, admits in writing that it is insolvent or fails to
discharge within fifteen (15) days an involuntary petition in bankruptcy filed
against it COPHARMA shall have the right to terminate this Agreement effective
immediately in the event SERAGEN or LIGAND files a voluntary petition in
bankruptcy, is adjudicated as bankrupt, makes a general assignment for the
benefit of creditors, admits in writing that it is insolvent or fails to
discharge within fifteen (15) days an involuntary petition in bankruptcy filed
against it.
10.06 TERMINATION OF TECHNOLOGY SERVICES. With respect only to Technology
Services provided under Article III, either Party may terminate this Agreement
upon ***written notice to the other Party. Termination under this Section 10.06
shall not affect the commercial supply and related services provided under
Article II, except that if the Technology Services are not completed PRODUCT
shall not be deemed to include FFBP.
10.07 TERMINATION OF ADDITIONAL SERVICES. With respect only to additional
services provided under Section 2.16, either Party may terminate this Agreement
upon *** written notice to the other Party. Termination under this Section 10.07
shall not affect the commercial supply and related services provided under
Article II or development services provided under Article III.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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<PAGE>
10.08 CONSEQUENCES OF TERMINATION.
(a) Nothing in this Agreement shall be construed to release either Party
from any obligation that matured (including, without limitation, the obligation
to make payment for PRODUCT manufactured or Technology Services or other
services rendered prior to such termination, or thereafter, if rendered in
accordance in this Section 10.08) or any breach of this Agreement that occurred
before the effective date of termination; provided, however, that upon any
termination of this Agreement COPHARMA shall cease any further provision of
Technology Services and, except as set forth below, shall cease all other
services under this Agreement as well. Upon a termination of this Agreement, in
addition to payment for the PRODUCT, Technology Services and other services
rendered prior to such termination, SERAGEN shall be responsible for paying to
COPHARMA the amounts of any outstanding commitments to which COPHARMA has
obligated itself in connection with COPHARMA'S performance under this Agreement
and which COPHARMA is unable, using reasonable commercial efforts, to terminate.
(b) In the event of termination of this Agreement for a material breach or
default by COPHARMA (except for matters covered by Section 11.10 of this
Agreement), COPHARMA shall, if COPHARMA is able and SERAGEN elects for COPHARMA
to do so, *** Upon purchase by SERAGEN in accordance with this Agreement, the
materials and components specified in (i) of the preceding sentence shall become
the exclusive property of SERAGEN.
In the event that this Agreement is terminated for a breach or default of
SERAGEN or LIGAND then, in addition to the provisions set forth above, SERAGEN
shall pay to COPHARMA, as liquidated damages and not as a penalty, (i) the
amount SERAGEN would have had to pay if COPHARMA had manufactured all remaining
PRODUCT called for by the forecasts for PRODUCT in effect at the time of such
termination, less the estimated costs COPHARMA would have incurred in providing
such PRODUCT according to article 6.02(b) and (ii) the amount SERAGEN would have
had to pay if COPHARMA had performed the remaining Technology Services called
for through December 31, 2001, less the estimated costs COPHARMA would have
incurred in providing such Technology Services. Such payments shall be made in a
lump sum amount on the date of the termination of this Agreement.
The obligations under Sections 4.06, Taxes, this Article X, Section 5.09,
Allocation of Burden of Product Recall, Article IX, Warranties and
Representations, Article VII, Confidentiality and Intellectual Property and
Article VIII, Indemnification, shall survive expiration or termination of this
Agreement or any extensions thereof. With respect to confidential information
exchanged under Article VII, upon termination of this Agreement the receiving
Party shall return all confidential information to the disclosing Party.
10.09 LIMITATION OF LIABILITY.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
28
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(a) NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT,
INCIDENTIAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS ARISING OUT OF THE
PERFORMANCE OF THIS AGREEMENT.
(b) THE MAXIMUM AGGREGATE LIABILITY OF COPHARMA FOR ALL CAUSES OF ACTION
ARISING OUT OF OR RELATED TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
LIABILITY ARISING UNDER ARTICLE 8.02 (INDEMNIFICATION), LIABILITY ARISING FROM A
BREACH OF THIS AGREEMENT OR NONPERFORMANCE UNDER THIS AGREEMENT (INCLUDING
LIABILITY ASSOCIATED WITH OR ARISING OUT OF SERAGEN'S ATTEMPT TO FIND ALTERNATE
SOURCES OF SUPPLY IN THE EVENT OF COPHARMA'S NONPERFORMANCE OR BREACH), AND
LIABILITY ARISING OUT OF OR RELATED TO THE MANUFACTURE OF PRODUCT, THE PROVISION
OF THE TECHNOLOGY SERVICS, AND THE PROVISION OF OTHER SERVICES PROVIDED BY
COPHARMA PURSUANT TO THIS AGREEMENT, SHALL BE THE DIFFERENCE BETWEEN (A) THE SUM
OF (I) THE AMOUNT WHICH COPHARMA WOULD BE ABLE TO RECOVER IN CONNECTION WITH ANY
SUCH CAUSES OF ACTION UNDER THE INSURANCE POLICY DESCRIBED IN SECTION 8.06(B)
ABOVE IF COPHARMA TOOK COMMERCIALLY REASONABLE STEPS TO MAINTAIN AND COLLECT
UNDER SUCH INSURANCE AND (II) THE AMOUNT PAID BY SERAGEN TO COPHARMA PURSUANT TO
THIS AGREEMENT FOR THE MANUFACTURE OF PRODUCT, THE PROVISION OF THE TECHNOLOGY
SERVICES AND THE PROVISION OF SUCH OTHER SERVICES DURING THE TWELVE (12) MONTHS
PRIOR TO ANY EVENT GIVING RISE TO LIABILITY AND (B) THE AMOUNT OF ALL PREVIOUS
AGGREGATE LIABILITY OF COPHARMA FOR CAUSES OF ACTION ARISING OUT OF OR RELATED
TO THIS AGREEMENT. THE LIMITATION ON COPHARMA'S AGGREGATE LIABILITY CONTAINED IN
THE PRECEDING SENTENCE SHALL NOT APPLY TO LIABILITY ARISING FROM COPHARMA'S
WILLFUL MISCONDUCT IN THE MANUFACTURE, HANDLING, STORAGE, TESTING OR PACKAGING
OF PRODUCT; PROVIDED THAT THIS SENTENCE SHALL NOT APPLY TO COPHARMA'S FAILURE TO
MANUFACTURE AND SUPPLY PRODUCT PURSUANT TO THIS AGREEMENT, EVEN IF WILLFUL.
(c) IN ADDITION TO BEING SUBJECT TO THE LIMITATION ON AGGREGATE LIABILITY
SET FORTH ABOVE, IN THE EVENT THAT SERAGEN MUST COVER FOR ANY BREACH OR
NONPERFORMANCE OF COPHARMA, THE MAXIMUM LIABILITY OF COPHARMA TO SERAGEN FOR THE
COSTS ASSOCIATED WITH ANY SUCH COVER SHALL BE *** PER BATCH OF PRODUCT FOR WHICH
SUCH COVER IS REQUIRED.
10.10 LIMITATION OF REMEDIES FOLLOWING DECEMBER 31, 2002. Notwithstanding any
other provisions of this Agreement to the contrary, SERAGEN'S sole remedy for
any breach or nonperformance under this Agreement by COPHARMA which occurs on or
after December 31, 2002, shall be to (i) terminate this Agreement, (ii) require
COPHARMA to transfer all raw
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
29
<PAGE>
materials used in the manufacture of PRODUCT which have been paid for by
SERAGEN and are in COPHARMA'S possession to an alternate supplier of PRODUCT
designated by SERAGEN and (iii) have COPHARMA technical personnel available for
reasonable assistance in effecting such transfer of the manufacture of PRODUCT
for a period of six (6) months from the effective date of termination. SERAGEN
shall not be entitled to any damages in connection with a termination covered by
this Section 10.10.
ARTICLE XI
MISCELLANEOUS
11.01 NOTICES. All notices or other communications that are required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given when delivered by registered or certified mail, return receipt
requested, postage prepaid, by facsimile transmission, by reputable overnight
courier service of national reputation, or by hand, addressed as follows:
If to COPHARMA:
COPHARMA, INC.
97 South Street
Hopkinton, Massachusetts 01748
Facsimile: (508) 497-0777
Attention: President
If to SERAGEN:
Seragen, Inc., c/o Ligand Pharmaceuticals Inc.
10275 Science Center Drive
San Diego, CA 92121
Attention: Phillip Duffy, Vice President
Manufacturing & Technical Operations
Facsimile: (858) 550-1826
30
<PAGE>
If to LIGAND:
10275 Science Center Drive
San Diego, CA 92121
Attention: Phillip Duffy, Vice President
Manufacturing & Technical Operations
Facsimile: (858) 550-1826
or to such other address as either Party may be notice to the other Party have
directed.
11.02. FURTHER ASSURANCES. Each Party to this Agreement covenants and agrees
that it will promptly, during the term and on the request of the other Party,
execute, acknowledge and deliver or otherwise properly authenticate, as may be
required by law, all documents, instruments, applications, assignments,
registrations, or other legal papers necessary to effectuate the provisions of
this Agreement.
11.03 ASSIGNMENT. SERAGEN may assign this Agreement and the rights and
obligations hereunder granted to SERAGEN without prior written approval of
COPHARMA, provided that the party to whom the Agreement is assigned agrees in
writing with COPHARMA to be bound by all of the terms of this Agreement.
COPHARMA shall not assign this Agreement without the prior written consent of
SERAGEN, which consent shall not be unreasonably withheld, however, COPHARMA
may, without such written consent, assign this Agreement, and its rights and
objections hereunder, in connection with the transfer or sale of all or
substantially all of its business, or in the event of its merger or
consolidation or change in control or similar transaction. In the event of any
assignment, performance shall be guaranteed by the assignor in form satisfactory
to the other Party.
11.04 EFFECTS. This Agreement is binding on, and shall redound to the benefit
of, the Parties to this Agreement and their respective successors and permitted
assigns. Except as otherwise expressly provided in this Agreement, this
Agreement does not create or confer, and is not to be construed as creating or
conferring, any right, remedy, claim or benefit on any third party, other than
the respective successors and permitted assigns of the Parties to this
Agreement.
11.05 WAIVERS AND AMENDMENTS. Any amendment or supplementation of this Agreement
or any waiver of any term or condition of this Agreement shall be effective only
if in writing. A waiver of any breach of any of the terms or conditions of this
Agreement is not in any way to be construed as a waiver of any subsequent
breach.
11.06 SEVERABILITY. In the event that any one or more of the provisions of this
Agreement is determined to be invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such provision
in any other respect and the remaining
31
<PAGE>
provisions of this Agreement shall not, at the election of the Party for whom
the benefit of the provision exists, be in any way impaired.
11.07 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which together constitute one and the same instrument.
11.08 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without regard to
the conflict-of-laws rules of Massachusetts law.
11.09 ENTIRE AGREEMENT. This Agreement (including the Exhibits), the Asset
Purchase Agreement of even date herewith and of its all attachments, and all
other documents executed in connection with the consummation of the transactions
contemplated by these agreements contain the entire agreement among the parties
with respect to the supply of PRODUCT and related transactions, and supersedes
all prior agreements, written or oral, with respect thereto.
11.10 FORCE MAJEURE. Any delays in or failure by either Party in performance of
any obligations hereunder shall be excused if and to the extent caused by such
occurrences beyond such Party's reasonable control, including, but not limited
to, acts of God, strikes, or other labor disturbances, war, whether declared or
not, sabotage, product shortages, acts or omissions of governmental authorities,
including, without limitation, failure to receive required regulatory approvals
or revocation or suspension of required regulatory approvals, and other causes,
whether similar or dissimilar to those specified which cannot reasonably be
controlled by the Party who failed to perform. Upon request from SERAGEN,
COPHARMA shall use commercially reasonable efforts to provide contingency plans
for occurrences as described in this Section at such time as they may be
required, provided that COPHARMA shall not be required, as part of such
contingency plans, to take steps which are commercially unreasonable.
11.11 INDEPENDENT CONTRACTORS. The status of the Parties under this Agreement is
that of independent contractors. Neither Party shall have the right to enter
into any agreements on behalf of the other Party, nor may either Party represent
to any person that it has any such right or authority. Nothing in this Agreement
is to be construed as establishing a partnership or joint venture relationship
between the Parties.
11.12 HEADINGS. Headings are used in this Agreement for convenience only and
shall not affect any construction or interpretation of this Agreement.
[The remainder of this page intentionally left blank.]
32
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
SERAGEN, INC. COPHARMA, INC.
By: /S/PAUL V. MAIER By: /S/SAMUEL ACKERMAN
------------------ --------------------
Title: CEO Title:
-------------- --------------
Date: -------------- Date: --------------
LIGAND PHARMACEUTICALS
INCORPORATED
By: /S/WILLIAM L. RESPESS
----------------------
Title:
------------------------
Date:
------------------------
[Signature page to Supply and Development Agreement]
33
<PAGE>
EXHIBIT "A"
MANUFACTURING AND RELEASE REQUIREMENTS
Manufacturing and Release Requirements for PDS are as specified in Biologics
License Application #97-1325 and its supplements.
MRR Documentation is defined as copies of the following:
a) All production batch records
b) All QC Test/Request Forms (result worksheets) and associated data
c) Dynamic monitoring performed during processing
d) Any alert/action notifications generated during processing
e) Any planned or unplanned deviations associated with the PRODUCT
f) Any out of specification result investigations associated with the PRODUCT
g) The Certificate of Analysis for the batch lot comparing testing to
specifications
h) The appropriate disposition notification for the Batch
i) The Client Authorization/Notification form
34
<PAGE>
EXHIBIT "B"
PRICING
COPHARMA will provide SERAGEN's PRODUCT requirements during the term of the
Agreement at a price of *** per Batch for PDS and *** per Batch for FFBP.
COPHARMA will provide FDP release testing at a price of *** per Lot for the year
2000 and at a price of *** per Lot for each succeeding year through ***.
COPHARMA will provide stability testing (PRODUCT and FDP) at a price of
***/timepoint for clinical Lots and a price of ***/timepoint for commercial
Batches and Lots.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
35
<PAGE>
EXHIBIT "C"
KEY RAW MATERIALS AND APPROVED SUPPLIERS
36
<PAGE>
RAW MATERIALS - CLIENT USE
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
RAW MATERIALS - CLIENT USE
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
RAW MATERIALS - CLIENT USE
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
QA APPROVED VENDOR LIST
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
QA APPROVED VENDOR LIST
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT "D"
TECHNOLOGY SERVICES
I. ONTAK 1ST GENERATION POLYSORBATE MODIFICATION
***
II. ONTAK SECOND GENERATION DEVELOPMENT
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT "E"
FEES FOR TECHNOLOGY SERVICES
TECHNOLOGY SERVICES FEES FOR PDS
YEAR 2000
<TABLE>
<CAPTION>
PART I ITEMS:
SERVICE ITEMS PRICING EST. COMPLETE
<S> <C> <C>
*** *** ***
</TABLE>
* Dates are estimated starting dates, not completion dates, for real time
stability studies
<TABLE>
<CAPTION>
PART II ITEMS:
SERVICE ITEMS PRICING EST. COMPLETE
<S> <C> <C>
*** *** ***
</TABLE>
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
TECHNOLOGY SERVICES FEES FOR FFBP AND PDS
YEAR 2001
<TABLE>
<CAPTION>
PART I ITEMS:
SERVICE ITEMS PRICING EST. COMPLETE
<S> <C> <C>
*** *** ***
</TABLE>
<TABLE>
<CAPTION>
PART II ITEMS:
SERVICE ITEMS PRICING EST. COMPLETE
<S> <C> <C>
*** *** ***
</TABLE>
* Dates are estimated starting dates, not completion dates, for real time
stability studies
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT "F"
ADDITIONAL SERVICES
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT "G"
INCOMPLETE PRODUCT BATCHES
THE COSTS FOR COMPLETION OF INCOMPLETE PRODUCT BATCHES ARE AS FOLLOWS:
BATCH # COST TO COMPLETE
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Exhibit 10.220
RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT
by and between
ORGANON COMPANY
and
LIGAND PHARMACEUTICALS INCORPORATED
dated
FEBRUARY 11, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 - DEFINITIONS............................................................................ 4
ARTICLE 2 - RESEARCH PROGRAM ...................................................................... 9
ARTICLE 3 - MANAGEMENT OF THE RESEARCH PROGRAM ................................................... 12
ARTICLE 4 - DEVELOPMENT PROGRAM .................................................................. 14
ARTICLE 5 - LICENSES -- RESEARCH, DEVELOPMENT,
MARKETING AND MANUFACTURING .......................................................... 15
ARTICLE 6 - ROYALTIES, MILESTONES AND OTHER PAYMENTS.............................................. 16
ARTICLE 7 - INFRINGEMENT ACTIONS BY THIRD PARTIES................................................ 21
ARTICLE 8 - CONFIDENTIALITY....................................................................... 21
ARTICLE 9 - PUBLICATION .......................................................................... 23
ARTICLE 10 - PATENTS AND INVENTIONS................................................................. 24
ARTICLE 11 - REPRESENTATIONS AND WARRANTIES........................................................ 26
ARTICLE 12 - TERM AND TERMINATION ................................................................. 28
ARTICLE 13 - FORCE MAJEURE......................................................................... 31
ARTICLE 14 - ASSIGNMENT............................................................................ 31
ARTICLE 15 - REGULATORY MATTERS..................................................................... 32
ARTICLE 16 - SEVERABILITY.......................................................................... 32
ARTICLE 17 - INDEMNIFICATION ...................................................................... 33
ARTICLE 18 - MISCELLANEOUS ........................................................................ 33
</TABLE>
2
Ligand Initial [/s/WR]
Organon Initial [/s/JV]
<PAGE>
RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT
THIS RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT, (this "Agreement"),
effective the 11th day of February, 2000 (the "Agreement Date"), is by and
between N.V. ORGANON COMPANY (herein "Organon"), having its principal place of
business at Molenstraat 110, 5340BH, Oss, Netherlands, and LIGAND
PHARMACEUTICALS INCORPORATED (herein "Ligand"), a Delaware corporation, having
its principal place of business at 10275 Science Center Drive, San Diego,
California 92121. Organon and Ligand may be referred to herein individually as a
"Party" or collectively as the "Parties".
R E C I T A L S
WHEREAS, Ligand has developed certain expertise and acquired certain
proprietary rights relating to the discovery and development of pharmaceutical
products for the treatment and prevention of diseases, which products act
through the progesterone receptor;
WHEREAS, Organon has certain expertise in the discovery, development,
marketing and sales of pharmaceutical products which act through the
progesterone receptor;
WHEREAS, Organon and Ligand desire to engage in a joint research and
development effort to discover and/or design Nonsteroidal Compounds which act
through the progesterone receptor and to develop pharmaceutical products from
such compounds (the "Collaboration"); and
WHEREAS, in conjunction with such joint research and development,
Organon desires to sponsor certain research activities to be carried out by
Ligand, and Ligand and Organon desire that Organon commercialize products
resulting from the joint research;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, Organon and Ligand agree as follows:
3
Ligand Initial [/s/WR]
Organon Initial [/s/JV]
<PAGE>
ARTICLE 1
DEFINITIONS
For the purposes of this Agreement, the terms defined in this Article 1
shall have the respective meanings set forth below:
"ACT" shall have the meaning set forth in Section 10.5.
"AFFILIATE" shall mean, with respect to a Party, any other business entity
which directly or indirectly controls, is controlled by, or is under common
control with, such Party. As used in this definition of "Affiliate", the term
"control" shall mean direct or indirect beneficial ownership of more than ***%
of the voting or income interest in such business entity or if it directly or
indirectly possesses the power to direct or cause the direction of the
management and policies of the other business entity by any means whatsoever.
"AFFILIATED CUSTOMER" shall mean, with respect to a Party, any Affiliate or
Sublicensee.
"ANDA" shall have the meaning set forth in Section 10.5.
"BACKGROUND TECHNOLOGY" shall mean all technology, inventions, information,
data, know-how, compounds and materials (whether or not patented or patentable)
that (a) relate to the discovery, design, synthesis, delivery, development,
testing, use, manufacture or sale of Collaboration Compounds, Collaboration Lead
Compounds or Products for use in the Field, (b) exist as of the Commencement
Date, (c) are owned or Controlled by a Party hereto, and (d) are considered
necessary for the conduct of the Collaboration by both Parties. Background
Technology owned or Controlled by Ligand shall be referred to herein as "Ligand
Background Technology. Background Technology owned or Controlled by Organon
shall be referred to herein as "Organon Background Technology".
"BACKUP COMPOUND" shall have the meaning set forth in Section 6.10.2.
"CLAIM" shall have the meaning set forth in Article 17.
"CLINICAL CANDIDATE" shall mean a Collaboration Compound in Clinical
Development.
"CLINICAL DEVELOPMENT" shall mean the development of any Collaboration
Compound in the Field from and after the initiation of a Phase I clinical trial,
through and including product registration.
"COLLABORATION" shall have the meaning set forth in the third paragraph in
the Recitals.
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"COLLABORATION COMPOUND" shall mean a Nonsteroidal Compound which is first
identified, first confirmed, first discovered, or first synthesized and
identified by either Ligand or Organon as mediating the activity of the
Designated Target during the Research Term and those Nonsteroidal Compounds
under development by Organon as of the Commencement Date that mediate the
activity of the Designated Target.
"COLLABORATION LEAD COMPOUND" shall mean a Collaboration Compound or
Background Technology compound, other than Ligand Background Technology
compounds that are "Existing Compounds," and whose commercial use is restricted,
*** that has met criteria established by the JRC of safety and efficacy for
advancement into Pre-Clinical Development during the Research Term or any
extension thereof and which is selected by Organon as a Collaboration Lead
Compound according to Section 4.1. Attached hereto as Exhibit D is a complete
list of the Ligand Background Technology compounds whose commercial use is
restricted ***.
"COLLABORATION TECHNOLOGY" shall mean (a) all Collaboration Compounds and
information related thereto; (b) such technology, inventions, information, data,
know-how and materials (whether or not patented or patentable) that (i) a Party
hereto owns or Controls, (ii) related to the Field and (iii) are conceived,
generated or reduced to practice during the Research Term pursuant to the
Research Program, including, without limitation, improvements on either Party's
Background Technology; and (c) all patents, trade secrets and other intellectual
property rights covering any of (a) or (b).
"COMMENCEMENT DATE" shall mean February 11, 2000.
"COMPETING PRODUCT" shall mean, with respect to each specified
Collaboration Compound or Product, any other Collaboration Compound or Product
which (a) exhibits therapeutic or prophylactic activity which is similar to that
exhibited by such specified Collaboration Compound or Product, or (b) which is
being developed for *** for which the specified Collaboration Compound or
Product is also being developed.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section 8.2
"CONTROL" OR "CONTROLLED" shall mean possession of the ability to grant the
licenses or sublicenses as provided for herein without violating the terms of
any agreement or other arrangement with any Third Party.
"DESIGNATED TARGET" shall mean the progesterone receptor, including all
isoforms and variants thereof.
"DEVELOPMENT CANDIDATE" shall mean a Collaboration Lead Compound which
meets Organon's standard SOPP criteria and enters Pre-Clinical Development and
for which Organon has developed a synthesis which it believes can be used for
making quantities adequate for Clinical
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Development and which has been used to generate sufficient quantities of the
material for Pre-Clinical Development and Phase I.
"EUROPE" shall mean The Netherlands, France, Germany, Great Britain, Italy
and Spain.
"EXTENSION TERM" shall have the meaning set forth in Article 2.11.
"FDA" shall mean the United States Food and Drug Administration or any
successor entity thereto.
"FIELD" shall mean the discovery, characterization, design and development
of Nonsteroidal Compounds for the treatment or prevention of diseases whose
beneficial effects are mediated through the Designated Target.
"FINAL DEVELOPMENT PLAN" shall mean a detailed plan prepared by Organon for
completing the preclinical development of a Collaboration Compound based on a
Ligand chemical template which is adequate for submission of an IND and which is
to be carried out in the time period described in Section 12.9 (a).
"FTES" shall mean one or more researchers with appropriate qualifications
employed by Ligand or Organon and assigned to work on the Collaboration with
such time and effort to constitute one such researcher working on the
Collaboration on a full time basis for no less than ***(***) hours per year.
"IND" shall mean an Investigational New Drug Application as defined in the
United States Food, Drug and Cosmetic Act and the regulations promulgated
thereunder, or any corresponding foreign equivalent.
"INDEMNIFIED GROUP" shall have the meaning set forth in Article 17.
"INVENTION" shall have the meaning set forth in Section 10.2.
"INVENTOR" shall have meaning set forth in Section 10.2.
"JOINT RESEARCH COMMITTEE" or "JRC" shall mean the joint research committee
composed of representatives of Ligand and Organon described in Section 3.1
hereof.
"NDA" shall mean a New Drug Application as defined in the United States
Food, Drug and Cosmetic Act and the regulations promulgated thereunder, or any
corresponding foreign equivalent.
"NET SALES" shall mean with respect to a Product, or product subject to
royalty under this Agreement , the gross amount invoiced to Non-Affiliated
Customers for all units of such Product,
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or product subject to royalty under this Agreement , sold by Organon and its
Affiliated Customers, after deduction for the following items ***.
"NON-AFFILIATED CUSTOMER" shall mean any purchaser of Product who is not an
Affiliated Customer.
"NONSTEROIDAL COMPOUND" shall mean a compound which is not a Steroid.
"PATENT RIGHTS" shall mean, with respect to Organon or Ligand (a) all
patent applications heretofore or hereafter filed in any country within the
Territory owned or Controlled by or licensed to Ligand or Organon during the
Term of this Agreement, together with any and all United States and foreign
patents that have issued or in the future issue therefrom, and (b) all
divisionals, continuations, continuations-in-part, reexaminations, reissues,
renewals, substitutions, confirmation, registrations, revalidations, extensions
or additions to any such patents and patent applications and patents issuing
thereon; all to the extent and only to the extent that Ligand or Organon now has
or hereafter will have the right to grant licenses or other rights thereunder.
Patent Rights owned or Controlled by Ligand shall be referred to herein as
"Ligand Patent Rights. Patent Rights owned or Controlled by Organon shall be
referred to herein as "Organon Patent Rights".
"PHASE I", "PHASE II", and "PHASE III" shall mean Phase I (or Phase I/II),
Phase II and Phase III clinical trials, respectively, in each case as prescribed
by the applicable Regulatory Agency's regulations.
"PRE-CLINICAL DEVELOPMENT" shall mean, after selection of a Collaboration
Lead Compound under Section 4.1, all activities undertaken by Organon to develop
the Collaboration Lead Compound in the Field up to and including the initiation
of Phase I clinical trials or, in the U.S., filing of an IND on such
Collaboration Lead Compound, which are determined by the JRC or Organon to be
necessary or desirable to file an IND on such Collaboration Lead Compound,
including the preparation and filing of an IND.
"PRIMARY SCREENING" shall mean conducting any assay, screen or other test
on a compound under the Research Program to determine initially whether such
compound mediates the activity of the Designated Target, including without
limitation such assays, screens and other tests set forth in the Technical
Operating Plan and which Ligand currently has in its possession.
"PRODUCT" shall mean a pharmaceutical product which has as one of its
active ingredients a Collaboration Lead Compound that has been approved by the
applicable Regulatory Agency for marketing in a country for treatment,
palliation or prevention of disease in the Field.
"PRODUCT-LIGAND" shall mean a Product resulting from a Collaboration Lead
Compound that is based on a chemical template originated by Ligand.
"PRODUCT-ORGANON" shall mean a Product resulting from a Collaboration Lead
Compound that is based on a chemical template originated by Organon from an
Organon Background Technology compound.
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"PROJECT LEADER" shall have the meaning set forth in Section 3.3.
"REGULATORY AGENCY" shall mean the FDA and agencies of other governments of
other countries having similar jurisdiction over the development, manufacturing,
registration and marketing of pharmaceutical products.
"RESEARCH PROGRAM" shall mean the program of research in which Ligand and
Organon will participate and which is described generally in the Technical
Operating Plan.
"RESEARCH TERM" shall have the meaning set forth in Section 2.2.
"SECONDARY SCREENING" shall mean conducting any assay, screen or other test
using intracellular receptors on a Collaboration Compound for the purpose of
confirming the results of the Primary Screening or to test such Collaboration
Compound for cross-reactivity with other than the Designated Target.
"STEROID" shall mean a compound possessing ***.
"SUBLICENSEE" shall mean any Third Party who is granted the right to sell a
Product.
"TECHNICAL OPERATING PLAN" shall mean the research plan for the conduct of
the collaboration set forth in present form in Exhibit B hereto. The Technical
Operating Plan may be modified from time to time by the JRC in accordance with
Section 3.1.2.
"TERM OF THIS AGREEMENT" shall mean the period from the Agreement Date
until, with respect to each Product, the expiration of the last royalty
obligation owed by one Party to the other with respect to such Product, or until
this Agreement is otherwise terminated pursuant to its terms.
"TERRITORY" shall mean the entire world.
"THIRD PARTY" shall mean any party other than Organon or Ligand or an
Affiliate of either of them.
"TRIGGER EVENT" shall have the meaning set forth in Section 6.10.1.
"VALID CLAIM" shall mean a claim of an issued, unexpired and unabandoned
patent included within the Patent Rights owned or Controlled by a Party, which
has not been held unenforceable or invalid by a court or other governmental
agency of competent jurisdiction, and which has not been disclaimed or admitted
to be invalid or unenforceable through reissue or otherwise.
"WITHHELD PARTY" shall have the meaning set forth in Section 6.6.
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"WITHHOLDING PARTY" shall have the meaning set forth in Section 6.6.
ARTICLE 2
RESEARCH PROGRAM
2.1. CONDUCT OF RESEARCH. Each Party shall diligently conduct the work
assigned to it in the Technical Operating Plan in a professional manner and in
compliance with all requirements of applicable laws and regulations. Promptly
after the Agreement Date, each Party shall disclose to the other all Background
Technology then possessed by it which it deems to be relevant to the Field and
which it deems to be necessary or helpful for the other Party to perform the
work set out in the Technical Operating Plan. Each Party agrees to commit the
qualified and experienced personnel, facilities, equipment, expertise and other
resources necessary to perform its obligations under the Research Program.
2.2. RESEARCH TERM. The term of the Research Program ("Research Term")
shall begin on the Commencement Date and shall terminate on the second
anniversary of the Commencement Date, unless Organon elects to extend the
Research program in accordance with article 2.11 or terminate the Research
Program early in accordance with article 12.7.
2.3. ALLOCATION OF PERSONNEL. During the Research Term Ligand shall
allocate ***(***) FTEs for the areas of activity agreed to by the JRC and set
forth in the Technical Operating Plan. Organon shall allocate *** (***) FTEs for
the areas of activity agreed to by the JRC and set forth in the Technical
Operating Plan.
2.4. SCREENING RESPONSIBILITY. Ligand shall have primary responsibility for
conducting *** and *** as set forth in the Technical Operating Plan and as
designated by the JRC.
2.5. TRANSFER OF BACKGROUND TECHNOLOGY. Commencing after the Commencement
Data, and from time to time thereafter, each Party shall disclose to the other
Party such of its Background Technology as is reasonably necessary to enable the
other Party to perform Collaboration activities hereunder in accordance with the
Technical Operating Plan. During the Research Term, each Party will provide the
other Party with reasonable technical assistance relating to the use and
practice of such Party's Background Technology, solely to the extent permitted
under the licenses granted to the other Party herein. Absent an express decision
by the JRC, Ligand Background Technology will not be applied to the development
of Collaboration Compounds which are based on an Organon originated chemical
template.
2.6. SUBCONTRACTS. Neither Ligand nor Organon shall subcontract to Third
Parties portions
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of the Technical Operating Plan to be performed by it or contract with
consultants to provide services specifically relating to the Technical Operating
Plan to any Third Party without the prior consent of the JRC, which consent
shall not be unreasonably withheld. Any such subcontractor shall enter into a
confidentiality agreement with the contracting Party which shall require such
subcontractor to maintain Confidential Information in confidence, and any such
subcontractor shall be required to comply in all material respects with all
requirements of applicable laws and regulations, together with all applicable
good laboratory practices and good manufacturing practices. The contracting
Party shall negotiate and execute the applicable agreement with such Third
Party, at its expense, and shall supervise and be responsible under this
Agreement for such subcontracted work. All such subcontracts shall contain terms
consistent with the terms of this Agreement.
2.7. INFORMATION AND REPORTS CONCERNING COLLABORATION TECHNOLOGY. All
Collaboration Technology made by either Party will be promptly disclosed to the
other Party, with significant discoveries or advances being communicated as soon
as practical after such information is obtained or its significance is
appreciated. The Parties will exchange at least monthly verbal or written
reports presenting a meaningful summary of their activities performed under this
Agreement. In addition to the foregoing, each Party shall promptly provide to
the other, as necessary, biological materials and the structures of all
Collaboration Compounds prepared or developed by such Party pursuant to the
Research Program.
2.8. FUNDING OF THE RESEARCH PROGRAM. In consideration for Ligand's
performance of its obligations under the Research Program, Organon shall pay
Ligand an amount for the FTEs employed by Ligand in the Research Program
according to the following schedule:
During year 2000: $*** per FTE per year.
From January 1st 2001 to December 31, 2001: $*** per FTE per year
***
During the Research Term, Organon shall pay Ligand quarterly in advance for
services to be performed by Ligand's FTEs under the Research Program upon
receipt of an invoice from Ligand. The first payment shall be due and payable on
the Commencement Date and shall include payment for any services to be rendered
between the Commencement and the next calendar quarter. Subsequent payments
shall be due and payable on the first day of each calendar quarter starting with
the calendar quarter starting on April 1, 2000. Ligand shall apply the research
funding it receives from Organon under this Agreement solely toward the conduct
of research with the goal of achieving the objectives of the Research Program.
2.9. ***. During the Research Term Ligand and Organon shall conduct
research with respect to identifying Collaboration Lead Compounds based on both
Ligand and Organon chemical
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templates. Except as permited in Article 12, during the Research Term, ***.
2.10 RECORDS.
2.10.1 RECORDS. Ligand and Organon each shall maintain records, in
sufficient detail and in accordance with recognized scientific practices
appropriate for patent purposes, which shall be complete and accurate and shall
fully and properly reflect all work done and results achieved in the performance
of the Research Program (including all data in the form required under all
applicable laws and regulations). Such records shall include books, records, raw
data, reports, research notes, charts, graphs, comments, computations, analyses,
recordings, photographs, computer programs and documentation thereof, computer
information storage means, samples of materials and other graphic or written
data generated in connection with the Research Program including any data
required to be maintained pursuant to all requirements of applicable laws, rules
and regulations.
2.10.2 INSPECTION OF RECORDS. During the Research Term and ***, Ligand
and Organon each shall have the right, during normal business hours and upon
reasonable notice, to inspect all such records of the other Party to the extent
reasonably required for the performance of its obligations under this Agreement
(with the Party owning the records determining what is reasonably required).
Each Party shall maintain such records and the information of the other Party
contained therein in confidence in accordance with Article 8 and shall not use
such records or information except to the extent otherwise permitted by this
Agreement. Ligand shall maintain sufficient records to verify the calculation of
Ligand's allocation of Ligand FTEs to the Research Program as required under
Section 2.3. Ligand shall supply Organon with quarterly reports of the FTE
allocation to the Research Program. Not more than once each year during the
Research Term and *** Organon shall have the right, during normal business hours
and upon reasonable notice, to audit such records to verify such allocation.
Organon shall treat all financial information subject to review under this
Section 2.10 as confidential in accordance with the terms of Article 8. Ligand
shall promptly reimburse Organon for any overcharge for services provided under
the Research Program.
2.11. EXTENSION OF RESEARCH TERM. Organon shall have the right to further
extend the Research Term for additional ***(***) *** periods (the "Extension
Term") by giving Ligand written notice at least *** (***) *** before the second
anniversary of the Commencement Date with respect to the first such Extension
Term and *** (***) *** before the expiration of any subsequent Extension Term;
provided, however, that the cummulative Extension Term shall not exceed ***
(***) *** unless agreed to by Ligand. The amount paid to Ligand per FTE during
any extension shall be in accordance with Section 2.8.
2.12 ***
2.13 *** In accordance with ARTICLE 312.160, Title 21, Code of US Federal
Regulations, the Parties certify that the Background Technology compounds and
Collaboration Compounds
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transferred from one Party to the other under this Agreement will be used
only for laboratory research or clinical research in accordance with applicable
law. ***
ARTICLE 3
MANAGEMENT OF THE RESEARCH PROGRAM
3.1 JOINT RESEARCH COMMITTEE.
3.1.1 COMPOSITION OF THE JRC. The Research Program and all
pre-clinical testing of Collaboration Compounds before commencing Pre-Clinical
Development shall be conducted under the direction of the JRC. The JRC shall be
composed of three (3) named representatives of Organon and three (3) named
representatives of Ligand. The named representatives shall designate one member
to serve as chairperson of the JRC for the first year of the Research Term.
Thereafter, the JRC will appoint a successor chairman. Each Party will identify
its representatives to the JRC within thirty (30) days after the Commencement
Date and each Party shall have the right to replace its representatives at any
time in its sole discretion after giving notice to the other Party.
3.1.2 RESPONSIBILITIES OF THE JRC. The purposes of the JRC shall be to
review, direct, supervise and coordinate all operational and scientific aspects
of the Research Program and all pre-clinical testing of Collaboration Compounds
before commencement of Pre-Clinical Development. As part of its
responsibilities, the JRC shall (a) promptly after the Commencement Date affirm
criteria of safety and efficacy set forth in the Technical Operating Plan for
advancement of Collaboration Compounds into Pre-Clinical Development as
Collaboration Lead Compounds and establish joint research teams to carry out the
Research Program, (b) review the research by Ligand and Organon under the
Research Program and the pre-clinical testing of Collaboration Compounds before
commencement of Pre-Clinical Development and amend the Technical Operating Plan
accordingly, (c) monitor the progress of the Research Program and evaluate the
work performed and the results obtained in relation to the goals of the Research
Program, (d) plan future activities under, and make any necessary or desirable
modifications to, the Research Program and the Technical Operating Plan, (e)
recommend Collaboration Compounds for further evaluation by the Parties under
the Research Program and for Pre-Clinical Development and Clinical Development
by Organon, and (f) perform such other functions to which the Parties agree. The
Party hosting each meeting of the JRC promptly shall prepare and deliver to the
other Party within fifteen (15) business days after the date of such meeting,
minutes of such meeting setting forth all decisions of the JRC relating to the
Research Program in form and content reasonably acceptable to the other Party.
3.1.3 MEETINGS OF THE JRC. The JRC shall meet at least once each
quarter during the Research Term, at such times and places as agreed to by
Ligand and Organon, alternating between San Diego, California and Oss, The
Netherlands, or such other locations as the Parties shall agree. The JRC and any
of its members may meet or attend meetings by telephone or video conference. The
JRC will communicate regularly by telephone, facsimile and video conference.
Meetings and telephone and video conferences of the JRC may be attended by such
other directors,
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officers, employees, consultants and other agents of Ligand and Organon as the
Parties from time to time reasonably agree. Ligand and Organon will bear their
own costs in attending such meetings.
3.1.4 ACTIONS BY THE JRC. All decisions of the JRC shall be made by
unanimous vote of all of the members.
3.2 DISAGREEMENTS. All disagreements within the JRC shall be resolved by
presenting the disagreement to David E. Robinson or his successor as Chief
Executive Officer on behalf of Ligand, and the Managing Director R&D on behalf
of Organon, or their designees, for good faith resolution, for a period of
***(***) ***. If such disagreement is not resolved by the end of such *** (***)
*** period, the Parties shall be free to pursue any legal or equitable remedy
available to them.
3.3 PROJECT LEADERS. Ligand and Organon each shall appoint a person (a
"Project Leader") to coordinate its part of the Research Program. The Project
Leaders shall be the primary contacts between the Parties with respect to the
Research Program. Each Party shall notify the other within thirty (30) days of
the date of the Commencement Date of the appointment of its Project Leader and
shall promptly notify the other Party upon changing this appointment.
ARTICLE 4
DEVELOPMENT PROGRAM
4.1. PRE-CLINICAL DEVELOPMENT. The JRC will review the characteristics of
the Collaboration Compounds identified under the Research Program, and the JRC
will attempt to select certain Collaboration Compounds to be recommended to
Organon for further work in the Field as a "Collaboration Lead Compound".
Further, Organon shall have the right in its sole discretion, but without the
obligation, during the Term of the Agreement to select (either on its own or in
response to a recommendation from the JRC) Collaboration Compounds or Background
Technology compounds for such further work in the Field. Upon a written
recommendation by the JRC, Organon will use diligent efforts to conduct all
needed studies on such Collaboration Compound or Background Technology compound
to determine if such Collaboration Compound or Background Technology compound
shall be selected by Organon as a "Collaboration Lead Compound" and shall make
such selection within *** (***) *** of such recommendation by the JRC. If so
selected, Organon shall conduct Pre-Clinical Development of each such selected
Collaboration Compound in such manner as Organon shall determine in its sole
discretion, upon availability of an adequate supply of the Collaboration
Compound for Pre-Clinical Development and Phase I, and shall inform Ligand and
the JRC of the progress and results thereof. If not selected, then Ligand shall
have the right ***(***) *** following the date of recommendation by the JRC to
develop and commercialize the compound as if it were an abandoned Collaboration
Compound in accordance with Section 5.3.1
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if the abandoned Collaboration Compound is based on a chemical template
originated by Ligand.
4.2. CLINICAL DEVELOPMENT. Organon shall use diligent efforts to pursue the
Clinical Development and commercialization of each Collaboration Lead Compound
at its own expense and under its sole discretion. Notwithstanding anything else
in this Agreement, but subject to Ligand's rights under Section 5.3, Organon
shall have the sole discretion to determine (a) which Products to develop or
market or to continue to develop or market, (b) which Products to seek
regulatory approval for, and (c) when and where and how and on what terms and
conditions, to market such Products in the Territory.
4.3 DEVELOPMENT INFORMATION. Organon shall be the owner of any data,
information, inventions and discoveries generated as a result of the
Pre-Clinical Development, Clinical Development and commercialization of
Collaboration Lead Compounds and Products. Within thirty (30) days after the end
of each twelve (12) month period following the commencement of Preclinical
Development by Organon of the first Collaboration Lead Compound, Organon shall
provide to Ligand a reasonably detailed written development report which shall
describe the progress of the Preclinical Development and/or Clinical Development
of the Collaboration Lead Compound or Product and the filing and obtaining of
the approvals necessary for marketing. The report shall contain not less than
the information identified in Exhibit A hereto.
ARTICLE 5
LICENSES -- RESEARCH, DEVELOPMENT,
MARKETING AND MANUFACTURING
5.1 CROSS-LICENSES TO BACKGROUND TECHNOLOGY. Each Party hereby grants and
agrees to grant to the other a worldwide, non-exclusive, royalty-free license to
use and practice such Party's Background Technology solely to the extent
necessary for the other Party to perform its obligations under the Research
Program, until the termination of the Research Term. Notwithstanding the
foregoing, the granting Party may terminate such license granted by it hereunder
immediately upon its termination of this Agreement for breach by the other Party
under Section 12.3.
5.2 LICENSE GRANT TO ORGANON. Ligand hereby grants to Organon an exclusive,
worldwide license, with the right to sublicense, which license shall be
exclusive even as to Ligand, under Ligand's Patent Rights and Collaboration
Technology owned or Controlled by or licensed to Ligand, including Ligand's
rights in any jointly owned Patent Rights to the extent necessary, to develop,
make, have made, use, manufacture, have manufactured, import, promote, offer for
sale, sell, distribute, market and commercialize (with the right to sublicense)
any Products in the Field.
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The rights granted Organon by Ligand under this Section 5.2 do not include the
right to commercialize compounds which ***.
5.3 LIGAND RIGHTS.
5.3.1 At any time ***, Ligand shall have the right in its sole
discretion at its sole expense, for its own benefit or together with an
Affiliate or Third Party, to develop and commercialize in the Territory those
Collaboration Lead Compounds which Organon notifies Ligand that it has abandoned
or elected not to develop in the Field if the abandoned Collaboration Lead
Compound is based on a chemical template originated by Ligand, provided that
Organon, or any of its Affiliates or Sublicensees is not developing or
commercializing the Collaboration Lead Compound for any other pharmaceutical
purpose and not conducting Pre-Clinical Development or Clinical Development with
respect to, or selling or commercializing, a Competing Product.
5.3.2 Except in the case of termination by Organon under Section 12.3
below, if Organon notifies Ligand that ***, Ligand shall have the right in its
sole discretion at its sole expense, for its own benefit or together with an
Affiliate or Third Party, to commercialize such Product in such abandoned
country, provided that Organon, its Affiliates or Sublicensees is ***.
5.3.3 In the event that Organon decides, in its sole discretion, to
license a Product to Third Parties, it shall first notify Ligand in writing and
offer to negotiate such arrangement with Ligand. If Ligand notifies Organon that
it desires to negotiate for such rights within ***(***) *** of receipt of
notification from Organon, the Parties shall in good faith and for a period of
*** (***) ***, negotiate the terms of any such commercial arrangement. If no
definitive written agreement on such terms is reached within such *** (***) ***
period, Organon may at any time thereafter transfer such rights to a Third
Party.
5.3.4 If Ligand exercises its rights under Sections 5.3.1 or 5.3.2
with respect to any Collaboration Lead Compound or Product owned by or licensed
to Organon, Organon (a) shall grant to Ligand an exclusive license (with the
exclusive right to sublicense) to make, have made, use and sell (i) such
abandoned Collaboration Lead Compounds in the Field in the Territory or (ii)
such Products in the Field in the country(ies) for which Organon has abandoned
the Product, (b) shall provide Ligand, at Ligand's expense, with all such
information and data which Organon, its Affiliates or Sublicensees reasonably
has available in such country or the Territory as the case may be, for example
access to drug master file, clinical and QA data and the like, and shall execute
such instruments as reasonably necessary , to effectuate such license , and (c)
thereafter shall have no further rights under this Agreement in the Territory
with respect to such Collaboration Lead Compound or in the abandoned
country(ies) with respect to such Product except as expressly provided in this
Agreement. If Ligand exercises the right to develop and commercialize a
Collaboration Lead Compound or Product under Sections 5.3.1 or 5.3.2, upon
exercise that right shall be exclusive and with the right to grant sublicenses.
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ARTICLE 6
ROYALTIES, MILESTONES AND OTHER PAYMENTS
6.1. REIMBURSEMENT FOR RESEARCH AND DEVELOPMENT. As consideration for
research and development expense incurred by Ligand in the Field, upon receipt
of an invoice from Ligand, Organon shall pay Ligand a fee of ***(***) due and
payable upon ***.
6.2. ROYALTIES PAYABLE BY ORGANON. In consideration for the technology and
know-how provided by Ligand to the Research Program and for the licenses granted
to Organon herein, Organon shall pay to Ligand a royalty on worldwide sales of
Products by Organon and Affiliated Customers to Non-Affiliated Customers of
Organon equal to a percentage of the annual Net Sales of such Products, where
the percentage rate applicable to a particular sale shall be determined based on
the total annual Net Sales of Products and whether the Product is a
Product-Ligand or a Product-Organon according to the following rate schedule:
<TABLE>
<CAPTION>
Annual Net Sales (in millions)
ROYALTY PERCENTAGE OF EACH PRODUCT IN THE TERRITORY
PRODUCT-LIGAND PRODUCT-ORGANON
<S> <C> <C>
***% ***% up to ***
***% ***% in excess of *** and up to ***
***% ***% in excess of *** and up to ***
***% ***% in excess of ***
</TABLE>
By way of clarification, the royalty on a Product-Ligand with annual Net Sales
of *** million would be ***% for the first *** million, ***% for the second ***
million, ***% for the next *** million and ***% for the remaining *** million.
The royalties shall be payable with respect to a particular Product, on a
country-by-country basis, until the later of (a) expiration in the particular
country of the last to expire Valid Claim owned or Controlled by Ligand or
jointly owned by Ligand and Organon that is necessary to make, use, import for
sale or sell such Product in such country, or (b) *** (***) *** from the date of
the first sale of such Product to a Third Party in such country; provided that
such royalty obligation shall terminate upon ***.
6.3 ADJUSTMENTS TO ROYALTY.
(a) No ROYALTY CREDIT. All royalties Organon is already obligated as of the
Agreement Date, or becomes obligated after the Agreement Date, to pay to any
Third Party in connection with the manufacture, use or sale of a Collaboration
Lead Compound or Product shall be the sole obligation of Organon and shall not
affect royalties payable to Ligand under this Agreement.
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6.4 CURRENCY OF PAYMENT. All payments to be made under this Agreement shall
be made in United States dollars in the United States by wire transfer to a bank
account designated by the Party to be paid. Royalties earned shall first be
determined in the currency of the country in which they are earned and then
converted to its equivalent in United States currency. The buying rates of
exchange for the currencies involved into the currency of the United States
quoted by Citibank (or its successor in interest) in New York, New York at the
close of business on the last business day of the quarterly period in which the
royalties were earned shall be used to determine any such conversion.
6.5 PAYMENT AND REPORTING. The royalties due under Section 6.2 shall be
paid quarterly, within three (3) months after the close of each calendar
quarter, or earlier if practical (i.e., on or before the last day of each of the
months of June, September, December and March), immediately following each
quarterly period in which such royalties are earned. With each such quarterly
payment, the payer shall furnish the payee a royalty statement setting forth on
a country-by-country basis the total number of units, gross amount invoiced,
deductions taken according to each category listed in the Net Sales definition,
and Net Sales of each royalty-bearing Product sold hereunder for the quarterly
period for which the royalties are due.
6.6 TAXES WITHHELD. Any income or other tax that one Party hereunder, its
Affiliates or Sublicensees is required to withhold (the "Withholding Party") and
pay on behalf of the other Party hereunder (the "Withheld Party") with respect
to the royalties payable under this Agreement shall be deducted from and offset
against said royalties prior to remittance to the Withheld Party; provided,
however, that in regard to any tax so deducted, the Withholding Party shall give
or cause to be given to the Withheld Party such assistance as may reasonably be
necessary to enable the Withheld Party to claim exemption therefrom or credit
therefor, and in each case shall furnish the Withheld Party proper evidence of
the taxes paid on its behalf.
6.7 COMPUTATION OF ROYALTIES. All sales of Products between the selling
Party and any of its Affiliated Customers shall be disregarded for purposes of
computing Net Sales and royalties under this Section 6, but in such instances
royalties shall be payable only upon sales of the selling Party and its
Affiliated Customers to Non-Affiliated Customers. Nothing herein contained shall
obligate either Party to pay the other Party more than one royalty on any unit
of a Product.
6.8 LICENSES TO AFFILIATES AND SUBLICENSEES. Each Party shall, at the other
Party's reasonable request, enter into license and/or royalty agreements
directly with the other Party's Affiliates and permitted Sublicensees, in lieu
of the license grant to or royalty obligation of the requesting Party; provided
such agreements would not decrease the amount of royalties which would be owed
hereunder. Such agreements shall contain the same language as contained herein
with appropriate changes in parties and territory, and this Agreement shall be
amended as appropriate. No such license and/or royalty agreement will relieve
Organon or Ligand, as the case may be, of its obligations hereunder, and such
Party will guarantee the obligations of its Affiliate or sublicense in any such
agreement. Royalties received directly from one Party's Affiliates and
Sublicensees shall be credited towards such Party's royalty obligations under
this Agreement, as applicable.
6.9 RESTRICTIONS ON PAYMENTS. Payment of royalties under this Agreement
shall be adjusted
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or excused to the extent necessary to comply with statutes, laws, codes or
government regulations in a particular country which restrict or prevent such
royalty payments by the seller of Products.
6.10 Milestone Payments.
6.10.1 TRIGGER EVENTS: As additional consideration for Ligand's
participation in the Research Program, Organon shall pay Ligand, at the times
set forth below, milestone payments set forth below with respect to each
Collaboration Lead Compound based on a chemical template originated by Ligand to
achieve such milestone, except as permitted in Section 6.10.2. Organon shall pay
Ligand, at the times set forth below, ***% of the milestone payments set forth
below with respect to each Collaboration Lead Compound based on a chemical
template originated by Organon,
a. ***
b. ***
c. ***
d. ***
e. ***
For convenience of reference, each of the events described in clauses (a)
through (e) above is referred to herein as a "Trigger Event".
6.10.2 BACKUP COMPOUNDS. Except as provided in this Section 6.10.2,
***. If development of the more advanced Collaboration Lead Compound is
abandoned prior to occurrence of the Trigger Event described in Section
6.10.1(e), Organon will have to make *** per cent (***%) of the milestone
payments for Trigger Events achieved by the Backup Compound that were not
achieved by the abandoned Collaboration Lead Compound. If the Backup Compound
reaches a Trigger Event before the Collaboration Lead Compound for which it is a
backup compound, Organon will make *** per cent (***%) of the milestone payment
for that and each subsequent Trigger Event reached by the Backup Compound but
shall not be required to make the milestone payment for that and each subsequent
Trigger Event realized by the Collaboration Lead Compound for which a milestone
payment is made for the Backup Compound. If a Backup Compound reaches Trigger
Event 6.10.1(b) for a different therapeutic indication than that for which the
Collaboration Lead Compound is being developed, Ligand shall be paid the
6.10.1(a) milestone and the 6.10.1(b) milestone and thereafter the Backup
Compound shall be treated under 6.10.1 as a Collaboration Lead Compound. If a
Collaboration Lead Compound reaches Trigger Event 6.10.1(e) and Organon
continues to develop a Backup Compound for it, upon reaching the next Trigger
Event for that Backup Compound Organon shall pay Ligand the milestone payment
for that and all prior Trigger
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Events reached by the Backup Compound and thereafter the Backup Compound shall
be treated under 6.10.1 as a Collaboration Lead Compound.
6.11 AUDITS.
6.11.1 AUDITS. Upon the written request of Ligand and not more than
once in each calendar year, Organon shall permit an independent certified public
accounting firm of nationally recognized standing, selected by Ligand and
reasonably acceptable to Organon, at Ligand's expense, to have access during
normal business hours to such of the records of Organon as may be reasonably
necessary to verify the accuracy of the royalty reports hereunder for eight (8)
quarters prior to the date of such request. The accounting firm shall be bound
by confidentiality obligations and shall disclose to Ligand only whether the
records are correct or not and, if applicable, the amount of any discrepancies.
6.11.2 If such accounting firm concludes that additional royalties
were owed during such period, Organon shall pay the additional royalties within
*** (***) *** of the date Ligand delivers to Organon such accounting firm's
written report so concluding. The fees charged by such accounting firm shall be
paid by Ligand; provided, however, if the audit discloses that the royalties
payable by Organon for the audited period are more than *** percent (***%) of
the royalties actually paid for such period, then Organon shall pay the
reasonable fees and expenses charged by such accounting firm.
6.11.3 Organon shall include in each permitted sublicense granted by
it pursuant to the Agreement a provision requiring the Sublicensee to make
reports to Organon, to keep and maintain records of sales made pursuant to such
sublicense and to grant access to such records by Ligand's accounting firm to
the same extent required of Organon under the Agreement. Upon the expiration of
twenty-four (24) months following the end of any year, the calculation of
royalties payable with respect to such year shall be binding and conclusive upon
Ligand, Organon and its Sublicensees, and such Sublicensees shall be released
from any liability or accountability with respect to royalties for such year.
ARTICLE 7
INFRINGEMENT ACTIONS BY THIRD PARTIES
If a Party, or to its knowledge, any of its Affiliates or Sublicensees
shall be sued or threatened to be sued for infringement of a patent or other
intellectual property rights of a Third Party because of the reasonable
development, manufacture, use or sale of Collaboration Compounds, Collaboration
Lead Compounds or Products or any other action undertaken by such Party under
this Agreement, such Party shall promptly notify the other in writing of the
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institution or threat of such action. The Party sued or threatened to be sued
shall have the right, in its sole discretion, to control the defense and
settlement of such claim at its own expense, in which event the other Party
shall cooperate fully in the defense of such suit and furnish to the Party sued
all evidence and assistance in its control. Any judgments, settlements or
damages payable with respect to legal proceedings covered by this Article 7
shall be paid by the Party which controls the litigation, subject to any claims
against the other Party for breach of this Agreement or otherwise available at
law or in equity. Any Third Party royalty payments required to be paid as the
result of a judgment or settlement under this Article 7 shall be paid by the
Party controlling the suit subject to any claims against the other Party for
breach of this Agreement or otherwise available at law or in equity; provided,
however, (a) in the case of a Product sold by Organon, if such Third Party
royalty payments or damages arise from the infringement of a patent published or
granted before the date of this Agreement having a claim or claims which cover
the screening activities of Ligand or use of Ligand Background Technology under
the Research Program, the Third Party royalty payments or damages shall be
creditable against the royalty due Ligand under Article 6; or (b) in the case of
a Product sold by Organon, if such Third Party royalty payments arise from the
infringement of a granted patent published after the date of this Agreement
having a claim or claims which cover the screening activities of Ligand or use
of Ligand Background Technology under the Research Program, *** per cent (***% )
of the Third Party royalty payments shall be creditable against the royalty due
Ligand under Article 6, but in no event shall the royalty due Ligand be reduced
by more than ***per cent (***%) under this subsection (b).
ARTICLE 8
CONFIDENTIALITY
8.1 NONDISCLOSURE OBLIGATIONS. Except as otherwise provided in this Article
8 and subject to Article 9 hereof, during the Term of this Agreement and for a
period of *** (***) *** thereafter, (a) both Parties shall maintain in
confidence all Collaboration Technology and information and data developed
pursuant to the Collaboration and solely owned by the disclosing Party or
jointly owned by the Parties; and (b) both Parties shall also maintain in
confidence and use only for purposes of this Agreement all Background Technology
and all other information and data supplied by the other Party under this
Agreement.
8.2 PERMITTED DISCLOSURES. For purposes of this Article 8, information and
data described in clauses (a) or (b) of Section 8.1 above shall be referred to
as "Confidential Information". To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement, (a) a Party may disclose Confidential Information it is otherwise
obligated under this Article 8 not to disclose to its Affiliates, Sublicensees,
consultants, outside contractors, clinical investigators, agent, suppliers and
other Third Parties on a need-to-know basis on condition that such persons or
entities agree to keep the Confidential Information confidential for the same
time periods
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and to the same extent as such Party is required to keep the Confidential
Information confidential; (b) a Party or its Affiliates or Sublicensees may
disclose such Confidential Information to government or other regulatory
authorities to the extent that such disclosure is reasonably necessary to
conduct Pre-Clinical Development, Clinical Development or commercialization of
Collaboration Lead Compounds or Products or to obtain patents on Collaboration
Compounds, Collaboration Lead Compounds or Products ; (c) a Party may disclose
Confidential Information as required by applicable law, regulation or judicial
process, provided that, where practicable, such Party shall give the other Party
prior written notice thereof and adequate opportunity to object to any such
disclosure or to request confidential treatment thereof; and (d) a Party may
disclose Confidential Information as permitted under Article 9.
The obligation not to disclose or use the Confidential Information shall
not apply to any part of the Confidential Information that (i) is or becomes
patented, published or otherwise part of the public domain other than by acts of
the Party obligated not to disclose such Confidential Information or its
Affiliates or Sublicensees in contravention of this Agreement; or (ii) is
disclosed to the receiving Party or its Affiliates or Sublicensees by a Third
Party, provided such Confidential Information was not obtained by such Third
Party directly or indirectly from the other Party on a confidential basis; or
(iii) prior to disclosure under this Agreement, was already in the possession of
the receiving Party or any of its Affiliates or Sublicensees, provided such
Confidential Information was not obtained directly or indirectly from the other
Party on a confidential basis; (iv) is independently developed by the receiving
Party or any of its Affiliates of sublicenses without aid or use of the
Confidential Information; or (v) is disclosed in a press release agreed to by
both Parties under Section 8.3 below.
8.3. PUBLICITY. All publicity, press releases and other announcements
relating to this Agreement or the transactions contemplated hereby (other than
publications by Organon of results of Pre-Clinical Development, Clinical
Development or post-marketing research) shall be reviewed in advance by, and
shall be subject to the approval of, both Parties; provided, however, that
either Party may (a) disclose the terms of this Agreement to the extent required
to comply with applicable securities laws and in that case , the non-disclosing
Party shall have the right to review and comment on such disclosure prior to its
submission and the disclosing Party shall cooperate to minimize the scope and
content of such disclosure, and (b) disclose the terms of this Agreement to
prospective lenders, investment bankers and other financial institutions of its
choice solely for purposes of financing the business operations of such Party,
but only if the disclosing Party obtains a signed confidentiality agreement with
such entity upon terms similar to those contained in this Article 8. The Parties
have agreed to issue a press release in the form attached hereto as Exhibit C
following execution of this Agreement.
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ARTICLE 9
PUBLICATION
The Parties shall cooperate in appropriate publication of the results of
the Research Program, but subject to the predominating interest to obtain patent
protection for any patentable subject matter. To this end, it is agreed that
prior to any public disclosure of such results, the Party proposing disclosure
shall send the other Party a copy of the information to be disclosed, and shall
allow the other Party *** from the date of receipt in which to determine whether
the information to be disclosed contains subject matter for which patent
protection should be sought prior to disclosure, or otherwise contains
Confidential Information of the reviewing Party which such Party desires to
maintain as a trade secret. If notification is not received during the ***, the
Party proposing disclosure shall be free to proceed with the disclosure. If due
to a valid business reason or a belief by the non-disclosing Party that the
disclosure contains subject matter for which a patentable invention should be
sought, then prior to the expiration of the ***, the non-disclosing Party shall
so notify the disclosing Party, who shall then delay public disclosure of the
information for an additional period of up to *** to permit the preparation and
filing of a patent application on the subject matter to be disclosed or other
action to be taken. The Party proposing disclosure shall thereafter be free to
publish or disclose the information. The determination of authorship for any
paper shall be in accordance with accepted scientific practice. In no event may
any publication or other disclosure contain a Party's Confidential Information
without such Party's prior written consent. Ligand shall not publish the results
of the Pre-Clinical Development or the Clinical Development of any Collaboration
Lead Compound or any other information or data relating to a Collaboration
Compound, Collaboration Lead Compound or Product without Organon's prior written
consent. Organon may publish the results of the Pre-Clinical Development and
Clinical Development without Ligand's prior written consent provided that no
such publication shall contain Confidential Information solely owned by Ligand.
ARTICLE 10
PATENTS AND INVENTIONS
10.1 OWNERSHIP OF BACKGROUND TECHNOLOGY. Except as otherwise set forth
herein, each Party shall retain ownership or Control, as the case may be, over
its Background Technology. The owner of any patentable Background Technology
shall have the right, at its option and expense, to prepare, file and prosecute
(including without limitation in administrative proceedings such as oppositions
and interferences) in its own name any patent applications with respect to such
Background Technology and to maintain any patents issued.
10.2 OWNERSHIP OF COLLABORATION TECHNOLOGY. Except as otherwise set forth
herein, ownership of Collaboration Technology (whether or not patentable) shall
be owned by the Party(ies)
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whose employee(s) are determined to be inventors in accordance with United
States laws of inventorship. Subject to Section 10.3, the owner (the "Inventor")
of any patentable Collaboration Technology (an "Invention") shall have the
right, at its option and expense and through attorneys and agents of its choice,
to prepare, file and prosecute (including any proceedings relating to reissues,
reexaminations, protests, interferences and requests for patent extensions or
supplementary protection certificates) in its own name any patent applications
with respect to any Invention owned by it and to maintain any patents issued. In
connection therewith, the non-Inventor Party agrees to cooperate with the
Inventor at the Inventor's expense in the preparation and prosecution of all
such patent applications and in the maintenance of any patents issued. The
obligations set forth in this Section 10.2 shall survive the expiration or
termination of this Agreement.
10.3 JOINT INVENTIONS. ***; however, subject to Section 10.2, Organon will
have the rights and responsibilities of the Inventor as described in this
Section 10 with respect to the preparation, filing, prosecution and maintenance
of patent applications in the name of both owners for any such patentable, ***
and Ligand shall have the rights and responsibilities of *** therein. Organon
shall have the right but not the obligation to pay all expenses in connection
with the preparation, filing and prosecution of patent applications that claim
patentable, ***. Organon shall from time to time notify Ligand of the amount of
such expenses, and Ligand shall promptly thereafter pay Organon ***percent
(***%) of its out-of-pocket expenses. As used in the preceding sentence
"out-of-pocket expenses" means direct costs, excluding internal labor costs.
Ligand may elect in writing to disclaim all interest in any jointly invented
Invention, in which case (a) such Invention will be solely owned by Organon, and
Ligand will cooperate to assure Organon's sole ownership, (b) Ligand will have
no further interest in such Invention, by ownership, license or otherwise, and
(c) Ligand will not be responsible for reimbursing Organon for any expenses
incurred by Organon from and after the date that Organon receives Ligand's
written disclaimer. Organon may elect in writing to disclaim all interest in any
jointly invented Inventions, in which case (i) such Invention will be solely
owned by Ligand and Ligand shall be solely liable for any expenses incurred with
respect to such Invention after Organon's disclaimer, and Organon will cooperate
to assure Ligand's sole ownership, (ii) Organon will have no further interest in
such Invention, by ownership, license or otherwise, and (iii) Organon will, at
Ligand's cost and request, continue the preparation, filing and prosecution of
the relevant patent application(s) for up to four weeks following Organon's
delivery of written disclaimer, if failure to so continue would have a material
adverse impact on such patent application(s).
10.4 PROTECTION OF PATENT RIGHTS.
(a) The Inventor shall prepare, prosecute and maintain (and shall use
reasonable efforts to keep the other Party currently informed of all steps to be
taken in such preparation, prosecution and maintenance) all of its Patent Rights
which claim an Invention and upon request shall furnish the other Party with
copies of such Patent Rights and other related correspondence relating to such
Invention to and from patent offices and permit the other Party to offer its
comments thereon before the Inventor makes a submission to a patent office which
could materially affect the scope or validity
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of the patent coverage that may result. The Inventor will inform the
Non-Inventor of the countries in which it intends to file for Patent Rights. The
non-Inventor Party shall offer its comments promptly, including any request that
the Patent Rights be filed in additional countries. Ligand and Organon shall
each promptly notify the other of any infringement or unauthorized use of an
Invention which comes to its attention.
(b) If the Inventor fails to (i) fulfill its obligations under this Section
10, (ii) protect against abandonment of a Patent Right which claims an
Invention, or (iii) file for Patent Rights in a country requested by the
Non-Inventor, the Inventor shall permit the non-Inventor Party, at its option
and expense, to undertake such obligations, and thereafter such Patent Rights
shall be deemed to be assigned to such non-Inventor Party in the affected
countries. The Party not undertaking such actions shall fully cooperate with the
other Party and shall provide to the other Party whatever assignments and other
documents that may be needed in connection therewith. The Party finally
conducting legal actions or proceedings against an alleged infringer or other
Party shall be entitled to any damages or costs awarded against such infringer
or other Party.
(c) In the event Ligand or Organon becomes aware of any actual or
threatened infringement of any Patent Right of either Party which claims an
Invention, that Party shall promptly notify the other, and the Parties'
representatives shall promptly discuss how to proceed in connection with such
actual or threatened infringement. If both Parties participate in the conduct of
a legal action pursuant to this Section 10.4(c), (i) if one Party files, the
actual costs and expenses of such action shall be reimbursed first to the filing
Party and then to the participating Party out of any damages or other monetary
awards recovered therein in favor of Organon or Ligand, or (ii) if both Parties
file, the actual costs and expenses of such action shall be reimbursed
proportionally between the Parties out of any damages or other monetary awards
recovered therein in favor of Organon or Ligand, based on the actual costs and
expenses incurred by each Party in connection with such action. Any remaining
damages received by Organon shall then be treated as Net Sales of Product by
Organon. If one Party alone conducts such legal action, ***percent (***%) of the
actual costs and expenses of such action shall be reimbursed to such Party out
of any damages or other monetary awards; any remaining damages shall then be
treated as Net Sales of Product. If either Party commences any actions or
proceedings (legal or otherwise) pursuant to this Section 10.4(c), it shall
prosecute the same vigorously at its expense and shall not abandon or compromise
them or fail to exercise any rights of appeal without giving the other Party the
right to take over the prosecuting Party's conduct at such other Party's own
expense.
10.5 NOTIFICATION OF PATENT TERM RESTORATION AND THIRD PARTY ABBREVIATED
NEW DRUG APPLICATIONS. Ligand or Organon, as the case may be, shall notify the
other Party of (a) the issuance of each U.S. patent, or foreign patent where
extension is possible, included within the Patent Rights which claim an
Invention, giving the date of issue and patent number for each such patent, and
(b) each notice pertaining to any patent included within the Patent Rights which
claim an Invention which it receives as patent owner pursuant to the Drug Price
Competition and Patent Term Restoration Act of 1984 (hereinafter called the
"Act") or equivalent foreign laws, including notices
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pursuant to 21 U.S.C. ss.355(b)(3) and ss.355(j)(2)(B)from persons who have
filed an abbreviated NDA ("ANDA"). Such notices shall be given promptly, but in
any event within ten (10) calendar days of each such patent's date of issue or
receipt of each such notice pursuant to the Act, whichever is applicable. The
Parties will assist with each other's efforts to seek patent extensions within
the meaning of this Section 10.5.
10.6 Any dispute between the Parties regarding the inventorship of an
Invention or Joint Invention made under the Research Program shall be resolved
through appointment of an independent patent counsel, mutually acceptable to the
Parties, after consideration of all evidence submitted by the Parties. The
expense of the independent patent counsel shall be borne equally by Ligand and
Organon.
10.7 TRADE SECRETS. If a Party owns an Invention which can be usefully
practiced as a trade secret, it shall have the right to not seek Patent Rights
on that Invention and all rights to use that trade secret shall revert to it
upon expiration or termination of the Research Program. In the case of a jointly
owned Invention, if the Parties do not agree to keep it a trade secret, at the
request of either Party, the procedures of Articles 10.3 and 10.4 shall apply to
said Invention.
ARTICLE 11
REPRESENTATIONS AND WARRANTIES
Each Party hereby represents and warrants to the other Party as follows:
11.1 CORPORATE EXISTENCE AND POWER. Such Party (a) is a corporation duly
organized, validly existing and in good standing under the laws of the state in
which it is incorporated, (b) has the corporate power and authority and the
legal right to own and operate its property and assets, to lease the property
and assets it operates under lease, and to carry on its business as it is now
being conducted, and (c) is in compliance with all requirements of applicable
law, except to the extent that any noncompliance would not have a material
adverse effect on such Party's ability to perform its obligations under this
Agreement.
11.2 AUTHORIZATION AND ENFORCEMENT OF OBLIGATIONS. Such Party (a) has the
corporate power and authority and the legal right to enter into this Agreement
and to perform its obligations hereunder, and (b) has taken all necessary
corporate action on its part to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder. This Agreement has
been duly executed and delivered on behalf of such Party, and constitutes a
legal, valid, binding obligation, enforceable against such Party in accordance
with its terms and does not conflict with Ligand's obligations under the
agreement made between Ligand and American Home Products Incorporated prior to
the Agreement Date .
11.3 CONSENTS. All necessary consents, approvals and authorizations of all
governmental authorities and other persons required to be obtained by such Party
in connection with the execution, delivery and performance of this Agreement
have been and shall be obtained.
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11.4 NO CONFLICT. Notwithstanding anything to the contrary in this
Agreement, the execution and delivery of this Agreement and the performance of
such Party's obligations hereunder do not conflict with or violate any
requirement of applicable laws or regulations or any of the terms of its
certificate of incorporation or by-laws.
11.5 INTELLECTUAL PROPERTY. Such Party (a) owns or is the licensee in good
standing of all Patent Rights presently contemplated to be used by it in
connection with the Research Program, except to the extent that such use is to
be based upon patents, trademarks and other intellectual property furnished by
the other Party; (b) is not in default with respect to any license agreement
related to the Research Program; (c) has received no notice of infringement or
misappropriation of any alleged rights asserted by any Third Party in relation
to any Background Technology to be used by it in connection with the Research
Program and (d) is not aware of any patent, trade secret or other right of any
Third Party which could materially adversely affect its ability to carry out its
responsibilities under this Agreement or the other Party's ability to exercise
or exploit any license granted to it under this Agreement. Such Party agrees to
immediately notify the other Party in writing in the event such Party hereafter
becomes in default under any license agreement referred to in (b) above, or
receives a notice of the type referred to in (c) above or becomes aware of any
patent trade secret or other right of the nature referred to in subpart (d) of
the preceding sentence.
11.6 DISCLAIMER OF WARRANTIES. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED
AS A REPRESENTATION MADE, OR WARRANTY GIVEN, BY LIGAND OR ORGANON (A) THAT ANY
PATENT WILL ISSUE BASED UPON ANY PENDING PATENT APPLICATION WITHIN THE PATENT
RIGHTS, (B) THAT ANY PATENT WITHIN THE PATENT RIGHTS WHICH ISSUES WILL BE VALID,
OR (C) THAT, EXCEPT FOR THE PROVISIONS OF SECTION 11.5 HEREIN WHICH SHALL NOT BE
AFFECTED BY THIS SECTION 11.6, THE USE OF ANY LICENSE GRANTED HEREUNDER OR THE
USE OF ANY PATENT RIGHTS WILL NOT INFRINGE THE PATENT OR PROPRIETARY RIGHTS OF
ANY THIRD PARTY. FURTHERMORE, NEITHER LIGAND NOR ORGANON MAKES ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PATENT
RIGHTS EXCEPT AS PROVIDED IN SECTION 11.5. LIGAND AND ORGANON EACH SPECIFICALLY
DISCLAIM THAT THE RESEARCH PROGRAM OR THE PRE-CLINICAL DEVELOPMENT OR CLINICAL
DEVELOPMENT WILL BE SUCCESSFUL, IN WHOLE OR IN PART, OR THAT ANY CLINICAL OR
OTHER STUDIES UNDERTAKEN BY IT WILL BE SUCCESSFUL. ORGANON DOES NOT WARRANT THAT
ITS EFFORTS TO RESEARCH, DEVELOP OR COMMERCIALIZE ANY COLLABORATION COMPOUND,
COLLABORATION LEAD COMPOUND OR PRODUCT WILL RESULT IN REGULATORY APPROVAL OF ANY
PRODUCT, NOR DOES ORGANON WARRANT THAT ANY SUCH PRODUCT WILL ACHIEVE ANY LEVEL
OF NET SALES OR BE CONTINUED IF IT OBTAINS REGULATORY APPROVAL. EXCEPT AS
OTHERWISE EXPRESSLY STATED HEREIN, EACH PARTY HEREBY DISCLAIMS ANY WARRANTY,
EXPRESSED OR IMPLIED, AS TO ANY PRODUCT SOLD OR PLACED IN COMMERCE BY OR ON
BEHALF OF ORGANON OR ITS AFFILIATES OR SUBLICENSEES.
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<PAGE>
ARTICLE 12
TERM AND TERMINATION
12.1 EXPIRATION. Unless terminated earlier by agreement of the Parties or
pursuant to this Article 12, this Agreement shall expire on the expiration of
the last to expire of all obligations to pay royalties under this Agreement.
12.2 TERMINATION OF AGREEMENT AT END OF RESEARCH TERM. Organon shall have
the right to terminate this Agreement at the end of the Research Term, or any
extension thereof, by giving Ligand ***(***) *** written notice if no
Collaboration Lead Compound has been selected. Each Party shall then return to
the other Party the Background Technology of such other Party that is in its
possession. After such termination Ligand shall have the right to develop and
market Collaboration Compounds based on a Ligand chemical template without the
obligation to pay milestones or royalties to Organon and Organon shall have the
right to develop and market Collaboration Compounds based on an Organon chemical
template without the obligation to pay milestones or royalties to Ligand.
12.3 TERMINATION FOR BREACH. A Party shall have the right to terminate the
Term of this Agreement for a material breach of this Agreement; provided,
however, that termination cannot occur until ***(***) *** after the giving of
notice of intention to terminate to the breaching Party and only if the breach
is not cured during such *** (***) *** period.
In the event of an uncured breach of a material obligation under this
Agreement, the non-breaching Party may terminate the Term of this Agreement and
each Party shall retain such ownership interest in the Collaboration Technology
as it shall hold on the date of the termination, provided, however, that (i) the
licenses granted to the non-breaching Party under Article 5 shall remain in full
force and effect (and the breaching Party shall transfer to the non-breaching
Party such Background Technology and Collaboration Technology as shall be
necessary to permit the non-breaching Party to continue conduct of the Research
Program) but the breaching Party shall forfeit all rights to develop and promote
all Collaboration Compounds, Collaboration Lead Compounds and Products, (ii) the
breaching Party shall not conduct any further research in the Field for a period
of *** from the effective date of such early termination, (iii) all licenses
granted to such breaching Party under this Agreement may be immediately
terminated by the non-breaching Party, (iv) any royalties due the breaching
Party under this Agreement shall be reduced by *** percent (***%), and (v) if
the breach relates specifically to a Collaboration Lead Compound or Product,
this Agreement may only be terminated as it relates to such Collaboration Lead
Compound or Product and shall remain in full force and effect as it relates to
all other Collaboration Lead Compounds and Products.
12.4 TERMINATION OF AGREEMENT BY ORGANON. Organon shall have the right to
terminate
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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<PAGE>
this Agreement by giving written notice to Ligand of its intention to do so in
the event that neither Ligand nor Organon is able to obtain a license for
technology that is necessary for the conduct of the Research Program and that is
claimed in Third Party patents, or other intellectual property. Notice of
termination cannot be effective less than *** (***) *** from the date upon which
Organon advises Ligand in writing that such technology is necessary for the
conduct of the Research Program. The termination shall be effective *** (***)
*** after the giving of the notice. Upon termination each Party shall return to
the other Party the Background Technology of such other Party that is in its
possession. If Organon has selected a Collaboration Lead Compound prior to
termination under this section it shall be required to pay Ligand milestones and
royalties for its development and commercialization of the Collaboration Lead
Compound as a Product as if this agreement remains in full force and effect.
12.5 EFFECT OF EXPIRATION OR TERMINATION. Expiration or termination of this
Agreement shall not relieve the Parties of any obligation accruing prior to such
expiration or termination. The representations and warranties contained in this
Agreement as well as those rights and obligations contained in the terms of this
Agreement which by their intent or meaning have validity beyond the Term of this
Agreement shall survive the termination or expiration of this Agreement. The
provisions of Sections 2.10.2 and 4.3, and Articles 5, 8, 9, 11, and 17 shall
survive the expiration or termination of this Agreement. Any rights and
obligations which have accrued prior to termination or expiration of this
Agreement in any respect shall survive such termination or expiration.
12.6 BANKRUPTCY. Either Party shall have the right to terminate this
Agreement effective immediately in the event the other Party files a voluntary
petition in bankruptcy, is adjudicated as bankrupt, makes a general assignment
for the benefit of creditors, admits in writing that it is insolvent or fails to
discharge within fifteen (15) days an involuntary petition in bankruptcy filed
against it.
12.7 EARLY TERMINATION OF THE RESEARCH PROGRAM. Organon shall have the
right to terminate the Research Program, without termination of this Agreement,
by giving Ligand written notice of its intention to do so not later than
***(***) *** from the Commencement Date. The termination of the Research Program
will be effective *** (***) *** after the Commencement Date. After termination
of the Research Program Ligand shall have the right to use only Ligand
Background Technology in the Field, without restriction, including the right to
collaborate with a Third Party to develop Products based on a chemical template
originated by Ligand.
12.8 RIGHTS UPON ARTICLE 14 ASSIGNMENT. If Ligand makes a permitted
assignment of this Agreement under Article 14 other than to its Affiliate whose
performance it guarantees, Organon may terminate the Research Program with
Ligand and undertake the development of Products from Collaboration Compounds
and Collaboration Lead Compounds under the same terms and conditions of this
Agreement applicable when the Research Program runs its full course.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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<PAGE>
12.9 OTHER TERMINATION RIGHTS.
a) Ligand shall have the right to terminate this Agreement in the
following circumstances: (i) if no Collaboration Compound based on a chemical
template originated by Ligand is declared a Development Candidate during the
Research Term (including any extension thereof as permitted by this Agreement or
by mutual agreement of Organon and Ligand), (ii) if no Development Compound
based on a chemical template originated by Ligand has become a Clinical
Candidate by the end of a period commencing on the end of the Research term and
ending *** later unless, prior to the expiration of the *** period, Organon has
presented Ligand with a Final Development Plan for a Development Compound based
on a chemical template originated by Ligand; (iii) *** after presentation of the
Final Development Plan if the Development Compound to which it is directed has
not become a Clinical Candidate; or (iv) if, after the end of the Research Term
(including any extensions thereof), Clinical Development of a Clinical Candidate
which is a Collaboration Compound based on a chemical template originated by
Ligand is abandoned except in the circumstance where another Development
Candidate or Clinical Candidate based on a clinical template originated by
Ligand has progressed in development such that, if it were the only such
compound in development, Ligand could not terminate under this Section 12.9.
b) In consideration of Ligand entering this Agreement, Organon agrees
not to declare a Collaboration Compound based on a chemical template originated
by Organon to be a Development Candidate during the period beginning on the
Commencement Date and ending on the second anniversary of the Commencement Date.
c) In the case of termination of this Agreement by Ligand pursuant to
subsection (a), all rights to Ligand Background Technology and Collaboration
Compounds based on a chemical template originated by Ligand shall resort to
Ligand. If Ligand develops and commercializes a Collaboration Compound based on
a Ligand chemical template after termination under subsection (a) above, it
shall owe no milestone or royalty payment to Organon based on the development
and commercialization of that Collaboration Compound. If Organon develops and
commercializes a Collaboration Compound based on an Organon chemical template
after termination under subsection (a) above, it shall owe no milestone or
royalties to Ligand based on development and commercialization of that
Collaboration Compound.
ARTICLE 13
FORCE MAJEURE
Neither Party shall be held liable or responsible to the other Party nor be
deemed to have defaulted under or breached this Agreement for failure or delay
in fulfilling or performing any term of this Agreement when such failure or
delay is caused by or results from causes beyond the
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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<PAGE>
reasonable control of the affected Party including but not limited to fire,
floods, embargoes, war, acts of war (whether war be declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other Party, provided that the Party so affected
shall use its best efforts to avoid or remove such causes of non-performance and
shall continue performance hereunder with the utmost dispatch whenever such
causes are removed.
ARTICLE 14
ASSIGNMENT
This Agreement may not be assigned or otherwise transferred, nor, except as
expressly provided hereunder, may any right or obligations hereunder be assigned
or transferred ***; provided, however, that *** may, without such consent,
assign this Agreement and its rights and obligations hereunder in connection
with the transfer or sale of all or substantially all of its business pertaining
to this Agreement, or in the event of its merger or consolidation or change in
control or similar transaction. Any permitted assignee shall assume all
obligations of its assignor under this Agreement. This Agreement shall be
binding upon, subject to the terms of the foregoing sentence, inure to the
benefit of the Parties' successors, legal representatives and assigns. A
permitted assignment under this Article 14 by Ligand shall not preclude the
exercise of Organon's right to terminate the Research Program under Section
12.8.
ARTICLE 15
REGULATORY MATTERS
15.1 SIDE EFFECTS AND ADVERSE EVENTS. Ligand shall advise Organon within
the time limits required by applicable FDA laws and regulations (or similar
foreign laws and regulations) by telefax or overnight delivery service addressed
to the attention of its Vice President, Medical Affairs of any unexpected side
effect, adverse reaction or injury which has been brought to Ligand's attention
at any place and which is alleged to have been caused by a Product. Organon
shall have all rights and responsibilities to report such side effect, adverse
reaction or injury to the appropriate regulatory authorities as required by
applicable law.
15.2 PRODUCT RECALL. In the event that Organon determines that an event,
incident or circumstance has occurred which may result in the need for a recall
or other removal of any Product, or any lot or lots thereof, from the market, it
shall notify Ligand with respect thereto. Organon shall, in its sole discretion,
have the right to order any such recall or other removal and Ligand shall
cooperate with such recall.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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<PAGE>
15.3 REGULATORY MATTERS. From and after the Commencement Date, the
preparation, filing and prosecution of INDs, NDAs and other regulatory filings
required to be filed with any Regulatory Agency in respect of a Product will be
in the name of, under sole control of, and at the responsibility of Organon and
its Affiliates. Further, Organon and/or its Affiliates shall own all regulatory
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<PAGE>
documentation relating to such filings. The costs of preparation, filing and
prosecution of regulatory filings with regard to Products incurred on or after
the Commencement Date shall be borne entirely by Organon as long as Organon
retains rights to commercialize such Product hereunder. Organon shall be solely
responsible for all contacts and communications with governmental and regulatory
authorities with respect to all matters relating to any Product (including
reporting adverse drug reactions). Unless required by law, Ligand shall have no
contacts or communications with any governmental or regulatory authority
regarding any Product without the prior written consent of Organon. Ligand shall
provide Organon with copies of all communications received from any governmental
or regulatory authority relating to any Product and shall allow Organon at its
discretion to control and/or participate in any further contacts or
communications in connection therewith.
ARTICLE 16
SEVERABILITY
If any term or provision of this Agreement is held to be invalid, illegal
or unenforceable by a court or other governmental authority of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other term or provision of this Agreement, which shall remain in full force
and effect. The holding of a term or provision to be invalid, illegal or
unenforceable in a jurisdiction shall not have any effect on the application of
the term or provision in any other jurisdiction.
ARTICLE 17
INDEMNIFICATION
Each of Organon and Ligand agrees to indemnify, hold harmless, and defend
the other Party and its Affiliates and their respective employees, agents,
officers, directors and permitted assigns (such Party's "Indemnified Groups")
from and against any claims by a Third Party resulting in the award or payment
of any judgments, expenses (including reasonable attorney's fees), damages and
awards (collectively a "Claim") arising out of or resulting from (a) its
negligence or willful misconduct, (b) a breach of any of its representations,
warranties or obligations hereunder, or (c) such Party's research and
development, manufacture, use, promotion, marketing or sale of any Collaboration
Compounds, Collaboration Lead Compounds or Products, except to the extent that
such Claim arises out of or results from the negligence or misconduct of a Party
seeking to be indemnified and held harmless or the negligence or misconduct of a
member of such Party's Indemnified Group. A condition of this obligation is
that, whenever a member of the Indemnified Group has information from which it
may reasonably conclude an incident has occurred which could give rise to a
Claim, such indemnified Party shall immediately give notice to the indemnifying
Party of all pertinent data surrounding such incident and, in the event a Claim
is made, all members of the Indemnified Group shall assist the indemnifying
Party and cooperate in the gathering of information with respect to the time,
place and circumstances and in obtaining the names and addresses of any
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<PAGE>
injured Parties and available witnesses. No member of the Indemnified Group
shall make any payment or incur any expense in connection with any such Claim
without prior written consent of the indemnifying party, provided, however, that
an indemnitee may take any reasonably appropriate action that is necessary to
preserve or avoid prejudice to its interests after the indemnifying party has
been notified of the Claim if the indemnitor states that it does not believe
that the indemnification obligations described herein apply to such Claim or if
the indemnitor does not or cannot perform its indemnity obligations hereunder.
The indemnifying Party shall have the right, but not the obligation, to control
any such action. The obligations set forth in this Article 17 shall survive the
expiration or termination of this Agreement.
ARTICLE 18
MISCELLANEOUS
18.1 NOTICES. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the Parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery, or U.S. overnight courier), U.S. overnight
courier, postage prepaid (where applicable), or delivered by certified mail,
postage prepaid, return receipt requested to the address indicated below, or to
such other address as the addressee shall have last furnished in writing to the
addressor and (except as otherwise provided in this Agreement) shall be
effective upon receipt by the addressee.
If to Ligand: Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
With a copy to: Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: Chief Scientific Officer
If to Organon: Organon
Molenstraat 110
5340 BH Oss
The Netherlands
Attention: Director Research
With a copy to: AKZONOBEL Nederland B.V.
Wethouder van Eschstraat 1
5342 AV Oss
The Netherlands
Attention: Legal Affairs Department
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<PAGE>
18.2 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without reference to its
conflicts of law provisions, and shall not be governed by the United Nations
Convention on Contracts for the International Sale of Goods.
18.3 ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the Parties with respect to the subject matter hereof. All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly merged in and made a part of this Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by both Parties hereto.
18.4 HEADINGS. The captions to the several Articles and Sections hereof are
not a part of this Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.
18.5 INDEPENDENT CONTRACTORS. Each of Organon and Ligand acknowledges and
agrees that neither it nor any of its employees are employees of the other Party
and that neither it nor any of its employees are eligible to participate in any
employee benefit plans of such other Party. Each of Organon and Ligand further
acknowledges that neither it nor any of its employees are eligible to
participate in any such benefit plans even if it is later determined that its or
any of its employees' status during the period of this Agreement was that of an
employee of the other Party. In addition, each of Organon and Ligand waives any
claim that it may have under the terms of any such benefit plans or under any
law for participation in or benefits under any of the other Party's benefit
plans.
18.6 WAIVER. The waiver by either Party hereto of any right hereunder or
the failure to perform or of a breach by the other Party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other Party whether of a similar nature or otherwise.
18.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18.8 GOVERNING LANGUAGE: This Agreement has been prepared and executed in
the English language. No authorized translation has been prepared or executed.
In the event that any translation is prepared, the English language version of
this Agreement shall govern. All written correspondence between the parties
shall be in the English language, including all reports due under this
Agreement.
18.9 DISPUTE RESOLUTION.
a) The Parties shall attempt in good faith to resolve promptly any dispute
arising out of or relating to this Agreement by negotiation. If the matter can
not be resolved in the normal course of business any interested party shall give
the other party written notice of any such dispute not resolved, after which the
dispute shall be referred to the senior executives of the Parties as described
in Section 3.2 for resolution of JRC disputes , who shall likewise attempt to
resolve the
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<PAGE>
dispute.
If a dispute has not been resolved by negotiation within ***(***) *** of
the disputing party's written notice, or if the parties fail to meet within ***
(***) *** from such notice, the parties shall endeavour to settle the dispute by
mediation under the supervision of and in accordance with the guidelines of the
Centre for Dispute Resolution (CEDR) in London, UK. Unless otherwise agreed,
both parties or each individual party may request the CEDR to appoint an
independent mediator. The language of mediation shall be English and the seat of
the mediation shall be New York, New York.
b) If the dispute has not been resolved by non-binding means as provided in
subsection (a) above within ninety (90) days of the initiation of such
procedure, the dispute shall be finally and exclusively settled in New York, New
York, or any other mutually agreed upon venue under the Uncitral Arbitration
Rules by three (3) independent arbitrators appointed in accordance with said
Rules. The appointing authority shall be the American Arbitration Association.
The language of the arbitration shall be English. The arbitration, except as
provided in the paragraph below, shall be in lieu of any other remedy and the
award shall be final, binding and enforceable by any court having jurisdiction
for that purpose.
This Article shall, however, not be construed to limit or to preclude
either party from bringing any action in any court of competent jurisdiction for
injunctive or other provisional relief as necessary or appropriate.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Research, Development
and License Agreement as of the date first set forth above.
ORGANON COMPANY LIGAND PHARMACEUTICALS
INCORPORATED
By: /S/ C.NICHOLSON By: /S/ WILLIAM L. RESPESS
--------------------- --------------------------
William L. Respess
Title: Director Research Title: Senior Vice President,
General Counsel and
Secretary
By: /S/ M J VERGOUWEN
---------------------
Title: Managing Director R&D
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<PAGE>
EXHIBIT A
REPORTING REQUIREMENTS
Each report required under Section 4.3 will include the following:
1. The declaration of a Collaboration Compound to be a Collaboration Lead
Compound.
2. The Projected and actual dates of filing of each IND for a Collaboration
Lead Compound.
3. Projected and actual initiation dates for clinical trials for each
Collaboration Lead Compound for all indications.
4. Projected and actual dates of completion of clinical phases.
5. A summary of the purpose of each clinical trial of a Collaboration Lead
Compound.
6. The projected and actual completion dates of each trial of a Collaboration
Lead Compound.
7. Any projected and actual dates of NDA submissions for each Collaboration
Lead Compound and any FDA response thereto.
8. Copies of any publications (preclinical and clinical) by Organon or its
investigators or Organon's third party collaborators/investigators
concerning Collaboration Lead Compounds upon request by Ligand.
9. Copies of materials presented to financial analysts concerning a
Collaboration Lead Compound upon request by Ligand.
<PAGE>
EXHIBIT B
TECHNICAL OPERATING PLAN
DEVELOPMENT OF PR AGONIST CLINICAL CANDIDATES
FOR ***
I. RESEARCH PROGRAM GOAL
To use Ligand's existing non-steroidal progestin templates to
develop clinical candidates which:
***
II. PR PROGRAM RATIONALE
***
III. PROFILE FOR A NOVEL NON-STEROIDAL PROGESTIN AGONIST
***
IV. INDICATIONS
A. PRIMARY
***
B. SECONDARY
***
V. MOLECULAR AND CELL-BASED PROFILING ASSAYS (PHASE I)
A. REPRESENTATIVE LIGAND ASSAYS
***
VI. EFFICACY AND SELECTIVITY ASSAYS
A. IN VITRO MODELS (PHASE I/II)
***
B. IN VIVO MODELS (PHASE I/II)
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT B
TECHNICAL OPERATING PLAN
VII. MEDICINAL CHEMISTRY
A. ASSUMPTIONS
***
B. DRUG DISCOVERY ACTIVITIES
***
VIII. ACTIVITIES IN SUPPORT OF PRE-CLINICAL CANDIDATE OPTIMIZATION
A. BIOLOGY
***
B. CHEMISTRY
***
IX. APPENDICES
THE FOLLOWING (DRAFT) LISTS OF CRITERIA AND CONSIDERATIONS FOR THE
ORGANON-LIGAND CO-OPERATION ON NON-STEROIDAL, TISSUE SELECTIVE
PR-MODULATORS, IS PROVISIONAL AND INTENDED AS A POINT OF REFERENCE FOR THE
CRITERIA, STANDARDS AND CONSIDERATIONS TO BE INCORPORATED IN A FUTURE
PHARMACOCHEMICAL PLAN (PCP).
Abbreviations:
S&T:Synthesis & Testing
SOPP: Collaboration Lead Compound
PCP:PharmacoChemical Plan
A. S & T - AND SOPP-CRITERIA
***
B. QUALITATIVE SOPP-CRITERIA
(to be elaborated in PCP)
***
C. ORGANON STANDARD SOPP-CHECKLIST
(to be discussed and finalized in the PCP)
***
D. POTENCY-CRITERIA
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT B
TECHNICAL OPERATING PLAN
E. FLOW-CHART FOR S & T PHASE
----------------------------------------------------------
Flow Chart of S&T PHASE
----------------------------------------------------------
***
F. DRAFT "CO"-STANDARDS
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT C
------------------------------------------------------------------------------
PROPOSED PRESS RELEASE TIMETABLE
------------------------------------------------------------------------------
IF RECEIPT OF FUNDS IS CONFIRMED BY LIGAND ON MONDAY, FEBRUARY 14, 2000,
THEN ISSUE RELEASE MONDAY, FEBRUARY 14, 2000, AFTER MARKET CLOSES AT
5:15 P.M. EST
IF CONFIRMATION OF RECEIPT OF FUNDS IS NOT RECEIVED BY MID-DAY MONDAY,
THEN ISSUE RELEASE TUESDAY, FEBRUARY 15, 2000 BEFORE MARKET OPENS AT
8:15 A.M. EST OR
TUESDAY, FEBRUARY 15, 2000 AFTER MARKET CLOSES AT 5:15 P.M. EST
------------------------------------------------------------------------------
Ligand Contact: Paul V. Maier
(858) 550-7573
Organon Contact: Dr. E.C. Havenaar
+31.412.662132
LIGAND AND ORGANON ENTER INTO RESEARCH COLLABORATION
-- COLLABORATION WILL FOCUS ON RESEARCH OF COMPOUNDS FOR THE TREATMENT AND
PREVENTION OF GYNECOLOGICAL DISORDERS --
SAN DIEGO, CALIFORNIA AND OSS, THE NETHERLANDS - February __, 2000 - Ligand
Pharmaceuticals Incorporated (Nasdaq: LGND) and Organon announced today that
they have signed a Collaboration Agreement to focus on the discovery,
characterization, design and development of small molecule compounds with
potential effects for the treatment and prevention of gynecological diseases
mediated through the progesterone receptor.
The objective of the collaboration is the discovery of new non-steroidal
compounds which are tissue-selective in nature and may have fewer side effects.
Such compounds may provide utility in hormone replacement therapy, oral
contraception, reproductive diseases, and other hormone-related disorders.
"The research collaboration with Organon marks Ligand's tenth research
collaboration to date and Ligand's fourth collaboration focusing on sex hormone
modulators," said Ligand Chairman, President and CEO David E. Robinson. "The
Organon collaboration should aid Ligand in its strategy of building a
diversified royalty-based business focusing on the development of Ligand's broad
technology platform, which includes the estrogen and progesterone receptor
modulators. Four products from existing collaborations focusing on these hormone
modulators are currently in clinical development."
Under the terms of the agreement, Ligand has received undisclosed up front
payments for research reimbursements and may receive milestone and royalty
payments on a product-by-product basis. Organon has been granted exclusive
worldwide rights to manufacture and sell any products resulting from the
collaboration.
Driek Vergouwen, Managing Director R&D of Organon commented on the new
collaboration: "The
<PAGE>
collaboration with Ligand complements our internal research and development
programs in the areas of gynecology. Promising compounds resulting from this
collaboration could significantly augment Organon's existing portfolio of
marketed medicines in this field."
Andres Negro-Vilar, M.D., Ph.D., Ligand Senior Vice President of Research
and Development and Chief Scientific Officer, said, "Organon's strength in the
research, development and marketing of gynecological products in areas such as
contraception, hormone replacement therapy, osteoporosis and infertility
complements Ligand's leadership and technology in female hormone research. The
significant experience and pharmaceutical expertise of Organon will allow the
pursuit of development of our technology in large health care markets." N.V.
ORGANON
NV Organon develops and produces pharmaceutical products in fields such as
gynaecology, psychiatry, athero-thrombosis, and auto-immune diseases. The
company employs more than 11,500 employees worldwide. The company invests over
17 percent of its sales income in its drug discovery and development programmes.
NV Organon is one of the pharmaceutical business units of Akzo Nobel. Akzo
Nobel, based in the Netherlands, serves customers throughout the world with
healthcare products, coatings, and chemicals. The company currently employs
approximately 68,000 people in almost 75 countries. Consolidated sales for 1999
will total about EUR 12 billion (NLG 26 billion). LIGAND PHARMACEUTICALS
INCORPORATED
Ligand Pharmaceuticals Incorporated discovers, develops and markets new
drugs that address critical unmet medical needs of patients in the areas of
cancer, skin diseases, and men's and women's hormone-related diseases, as well
as osteoporosis, metabolic disorders and cardiovascular and inflammatory
diseases. In addition to the recently approved Targretin(R) capsules, Ligand had
two drugs approved during 1999 for marketing in the U.S. -- ONTAK(R) and
Panretin(R) gel -- that are being marketed through its specialty cancer and
HIV-center sales force in the U.S. Targretin(R) gel is currently under review by
the FDA for marketing approval in the U.S., and two additional oncology-related
products -- Morphelan(TM) (licensed from Elan) and Panretin(R) capsules -- are
in late-stage development. Ligand's proprietary drug discovery and development
programs are based on its leadership position in gene transcription technology,
primarily related to Intracellular Receptors (IR) and Signal Transducers and
Activators of Transcription (STATs).
This news release may contain certain forward-looking statements by Ligand
and actual results could differ materially from those described as a result of
factors outside of the control of Ligand. There can be no assurance that (a) the
collaborative arrangement will be successful or continued, (b) Ligand will
receive any further reimbursement amounts for the prior development of its
technology or any milestone payments for the discovery and/or development of any
compounds, (c) any compounds will be discovered and/or be deemed
<PAGE>
appropriate for further testing, pre-clinical development or clinical
development, (d) any products under development by Ligand or any of its
collaborative partners, including Organon, will receive approval from the FDA or
other authorities to market any of these products; (e) if successfully developed
and thereafter approved, there will be a market for the drugs. Additional
information concerning these and other factors affecting Ligand's business can
be found in press releases as well as in Ligand's public periodic filings with
the Securities and Exchange Commission, available via our web site at
HTTP://WWW.LIGAND.COM. Ligand undertakes no obligations to update the matters
discussed herein to reflect events after the date of this press release.
# # #
NOTE: Panretin(R)and Targretin(R)are registered trademarks of Ligand
Pharmaceuticals Incorporated, and ONTAK(R)is a registered trademark of Seragen,
Inc., a wholly owned subsidiary of Ligand.
# # #
<PAGE>
EXHIBIT D
(23 pages including cover page)
LIST OF THE LIGAND BACKGROUND TECHNOLOGY COMPOUNDS SUBJECT TO RESTRICTIONS ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT D
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Exhibit 10.221
SEVENTEENTH ADDENDUM TO AMENDED REGISTRATION RIGHTS AGREEMENT
This Seventeenth Addendum ("Addendum") to the Amended Registration Rights
Agreement dated June 24, 1994, as amended through the date hereof ("Registration
Rights Agreement") between Ligand Pharmaceuticals Incorporated (the "Company")
and Elan International Services, Ltd. ("EIS") is effective as of March 1, 2000.
RECITALS
A. The Company has issued 98,580 shares of the Company's Common Stock (the
"Incentive Shares") to EIS pursuant to the terms of that certain Incentive
Agreement dated March 1, 2000 among the Company, EIS and Monksland Holdings,
B.V.
B. This Addendum serves to include the EIS Shares within the definition of
"Registrable Securities" under the Registration Rights Agreement pursuant to
Section 2.6(a) of the Registration Rights Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in the Registration Rights Agreement, the parties agree as follows:
1. Section 1.1, paragraph (f) of the Registration Rights Agreement is
hereby restated in its entirety as follows:
"(f) The term "Registrable Securities" means (i) the Common
Stock issuable or issued upon exercise of those warrants issued to
certain Existing Investors and pursuant to which such Existing
Investors were previously granted registration rights by the Company,
(ii) the shares of Common Stock (or the shares of such other class of
stock into which the Common Stock is converted) issuable upon
conversion of those certain Unsecured Convertible Promissory Notes
issued to American Home Products Corporation pursuant to the Stock and
Note Purchase Agreement dated September 2, 1994, (iii) the 35,957
shares of Common Stock issuable or issued upon exercise of the Warrant
issued to Genentech, Inc. in connection with the merger of L.G.
Acquisition Corp., a wholly-owned subsidiary of the Company, with and
into Glycomed Incorporated, which shares are reflected on SCHEDULE A
attached to the Fourth Addendum to this Agreement, (iv) the 164,474
shares of Common Stock (or that number of shares of such other class of
stock into which the Common Stock is converted) issued to S.R. One
Limited pursuant to a Stock and Note Purchase Agreement dated February
3, 1995 (the "Stock and Note Purchase Agreement"), which shares are
reflected on SCHEDULE A attached to the Eighth Addendum to this
Agreement, and the shares of Common Stock (or the shares of such other
class of stock into which the Common Stock is converted) issuable upon
conversion of those certain Unsecured Convertible Promissory Notes
dated October 30, 1997 (the "S.R. One Notes") issued pursuant to the
Stock and Note Purchase Agreement (and upon such conversion of the S.R.
One Notes, SCHEDULE A shall be updated to include such shares), (v) the
274,423 shares of Common Stock (or that number of shares of such other
class of stock into which the Common Stock is
<PAGE>
converted) issued to SmithKline Beecham plc pursuant to a Stock
Purchase Agreement dated April 24, 1998 (the "SmithKline Stock
Purchase Agreement"), which shares are reflected on SCHEDULE A
attached to the Ninth Addendum to this Agreement, and the shares of
Common Stock (or the shares of such other class of stock into which
the Common Stock is converted) issuable upon conversion of that
certain Warrant (the "Warrant") issued pursuant to the SmithKline
Stock Purchase Agreement (and upon such conversion of the Warrant,
SCHEDULE A shall be updated to include such shares), (vi) the
1,278,970 shares of Common Stock (or that number of shares of such
other class of stock into which the Common Stock is converted) issued
to Elan International Services, Ltd. pursuant to the Stock Purchase
Agreement dated September 30, 1998, which shares are reflected on
SCHEDULE A attached to the Tenth Addendum to this Agreement, (vii) the
437,768 shares of Common Stock (or that number of shares of such other
class of stock into which the Common Stock is converted) issued to
Elan International Services, Ltd. pursuant to the Securities Purchase
Agreement, dated November 6, 1998 (the "Elan Securities Purchase
Agreement"), which shares are reflected on SCHEDULE A attached to the
Eleventh Addendum to this Agreement, (viii) the shares of Common Stock
(or the shares of such other class of stock into which the Common
Stock is converted) issuable upon conversion of the Zero Coupon
Convertible Senior Notes due 2008 (the "Elan Notes") issued pursuant
to the Elan Securities Purchase Agreement (and upon such conversion of
the Elan Notes, SCHEDULE A shall be updated to include such shares),
(viii) the 429,185 shares of Common Stock (or the shares of such other
class of stock into which the Common Stock is converted) issued to
Elan Corporation, plc pursuant to the Development, License and Supply
Agreement dated November 9, 1998 (the "Elan License Agreement"), which
shares are reflected on SCHEDULE A attached to the Eleventh Addendum
to this Agreement, (ix) the shares of Common Stock that may be issued
to Elan Corporation, plc pursuant to the Elan License Agreement (and
upon each such issuance, SCHEDULE A shall be updated to include such
shares), (x) the shares of Common Stock (or the shares of such other
class of stock into which the Common Stock is converted) issuable to
Elan International Services, Ltd. upon exercise of that certain
Warrant (the "EIS Warrant") dated August 4, 1999 (and upon such
exercise of the EIS Warrant, SCHEDULE A shall be updated to include
such shares), (xi) the 289,750 shares of Common Stock (or the shares
of such other class of stock into which the Common Stock is converted)
issued to Warner Lambert Company pursuant to the Purchase Agreement
dated September 1, 1999, which shares are reflected on SCHEDULE A
attached to the Thirteenth Addendum to this Agreement, (xii) the
52,742 shares of Common Stock (or the shares of such other class of
stock into which the Common Stock is converted) issued to EIS pursuant
to the Stock Purchase Agreement dated September 30, 1999, which shares
are reflected on SCHEDULE A attached to the Fourteenth Addendum to
this Agreement, (xiii) the shares of Common Stock (or the shares of
such other class of stock into which the Common Stock is converted)
issuable upon exercise of those certain Series X Warrants dated
October 6, 1999 (the "X-Ceptor Warrants") (and upon any such exercise
of the X-Ceptor Warrants, SCHEDULE A shall be updated to include such
shares), (xiv) the 188,572
2
<PAGE>
shares of Common Stock (or that number of shares of such other class of
stock into which the Common Stock is converted) issued to Elan
International Services, Ltd. pursuant to the Incentive Agreement, dated
December 31, 1999, which shares are reflected on SCHEDULE A attached to
the Sixteenth Addendum to this Agreement, (xv) the 194,400 shares of
Common Stock (or that number of shares of such other class of stock
into which the Common Stock is converted) issued to Elan International
Services, Ltd. pursuant to the Incentive Agreement, dated March 1,
2000, which shares are reflected on SCHEDULE A attached to the
Seventeenth Addendum to this Agreement, and (xvi) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i), (ii), (iii), (iv), (v),
(vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xiv) and (xv)
above, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which rights under this Agreement are
not assigned."
2. SCHEDULE A of the Registration Rights Agreement is hereby restated in
its entirety as attached to this Addendum.
3. This Addendum may be executed in one or more counterparts.
4. This Addendum shall be binding upon the Company, EIS, each holder of
Registrable Securities and each future holder of Registrable Securities pursuant
to Section 2.6(a) of the Registration Rights Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date
first above written.
LIGAND PHARMACEUTICALS INCORPORATED
By: /S/PAUL V. MAIER
Its: Senior VP & CFO
ELAN INTERNATIONAL SERVICES, LTD.
By: /S/KEVIN INSLEY
Its: President & CFO
[SIGNATURE PAGE TO SEVENTEENTH ADDENDUM
TO AMENDED REGISTRATION RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
to
Seventeenth Addendum to
Amended Registration Rights Agreement
<TABLE>
<CAPTION>
- ---------------------------------------------------- ----------------------
SHARES
NAME ISSUED
- ---------------------------------------------------- ----------------------
<S> <C>
American Home Products Corporation 374,626
American Home Products Corporation 374,626
American Home Products Corporation 249,749
American Home Products Corporation 124,875
Aspen Venture Partners, L.P. 2,659
Elan Corporation, plc 429,185
Elan International Services, Ltd. 5,802,635
Enterprise Partners 3,745
Genentech, Inc. 35,957
Kleiner Perkins Caufield & Byers 7,688
ML Venture Partners II, L.P. 2,417
S.R. One, Limited 164,474
SmithKline Beecham 274,423
Venrock Associates 3,441
Venrock Associates II, L.P. 1,540
Warner Lambert Company 289,750
Windsor Venture Lease Partners Ltd., Inc. 283
TOTAL: 8,142,073
- ---------------------------------------------------- ----------------------
</TABLE>
A-1
Exhibit 10.222
INCENTIVE AGREEMENT
This incentive agreement (this "Agreement"), dated as of March 1,
2000, by and among Monksland Holdings, BV, a Dutch corporation ("Monksland"),
Elan International Services, Ltd., a Bermuda corporation ("EIS"), and Ligand
Pharmaceuticals Incorporated, a Delaware corporation ("Ligand").
RECITALS
WHEREAS, Ligand issued to Monksland on July 14, 1999 a Zero Coupon
Convertible Senior Note due 2008 at the issue price of $40,000,000 (the "Note")
under a Securities Purchase Agreement, dated as of November 6, 1998 (the
"Purchase Agreement") by and among Ligand, EIS and Elan Corporation, plc, a
public limited company organized under the laws of Ireland ("Elan"); and
WHEREAS, Ligand has requested that Monksland convert a portion of the
Note to shares of Ligand common stock on or before March 1, 2000 and Monksland
concurrent with this Agreement is converting $20,000,000 of the issue price of
the Note plus $1,021,610 accrued interest to shares of Ligand common stock.
NOW, THEREFORE, in consideration of the covenants and mutual
agreements set forth herein and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
Section 1. Agreement to Convert
In consideration for 98,580 shares of Ligand common stock (the
"Incentive Shares") to be issued by Ligand to EIS, an affiliate of Monksland, at
the request of Monksland, and subject to the terms and conditions of this
Agreement, Monksland hereby agrees to convert $20,000,000 of the issue price of
the Note plus $1,021,610 accrued interest under the terms and conditions of the
Note as of the date hereof. Also, at the request of Monksland, the shares to be
issued by Ligand upon conversion of such portion of and interest on the Note
shall be issued to EIS at the request of Monksland.
Section 2. Representations & Warranties of Ligand
(i) Except as otherwise set forth in the Schedule of Exceptions (as updated
on March 1, 2000) attached hereto as EXHIBIT A, the representations and
warranties of Ligand contained in the Purchase Agreement that are qualified by
Material Adverse Effect or materiality
<PAGE>
are true and correct in all respects and the representations and warranties of
Ligand contained in the Purchase Agreement that are not so qualified are true
and correct in all material respects, in each case, on and as of the date
hereof, except to the extent that such representations and warranties expressly
relate to an earlier date, and Ligand has performed all covenants and agreements
and satisfied all conditions on its part to be performed or satisfied under the
Purchase Agreement at or prior to the date hereof;
(ii) As of the date hereof and since June 30, 1998, except as set forth in
the Additional SEC Reports, no event or development has occurred, and no
information has become known, that, individually or in the aggregate, has or
would be reasonably likely to have a Material Adverse Effect;
(iii) The issuance of the Incentive Shares has not been enjoined
(temporarily or permanently);
(iv) Each of the Purchase Agreement, the Registration Rights Agreement or
the New Registration Rights Agreement, as the case may be, the License Agreement
and, to the extent outstanding, the Securities, are, and after giving effect to
the issuance of the Incentive Shares, will be, valid and enforceable against
Ligand, except that (A) the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought and (B) any rights to indemnity or contribution under
the Registration Rights Agreement or the New Registration Rights Agreement, as
the case may be, may be limited by federal and state securities laws and public
policy considerations, and no event that constitutes a breach of or a default
under (or an event which, with notice or passage of time or both would
constitute a default under) this Agreement, the Registration Rights Agreement or
the New Registration Rights Agreement, as the case may be, the License Agreement
or, to the extent outstanding, the Securities, by Ligand has occurred and is
continuing or, after giving effect to the issuance and sale of the Incentive
Shares, will have occurred and be continuing;
(v) Under the Preferred Share Rights Agreement, dated as of September 13,
1996, between Ligand and Wells Fargo Bank, N.A., as amended (the "Rights
Agreement"), no event has occurred that has caused or will cause, and none of
the execution of this Agreement or the consummation of the transactions
contemplated hereby, including the issuance of the Incentive Shares, will cause,
rights issued thereunder to become exercisable or a "Distribution Date" to
occur, assuming compliance by Elan and its Affiliates with the provisions of
Section 14(c) of the Purchase Agreement; and
(vi) The Registration Rights Agreement has been duly amended to include the
Incentive Shares within the definition of Registrable Securities thereunder.
Section 3. Representations & Warranties of EIS
2
<PAGE>
(i) EIS acknowledges that the Incentive Shares will not be registered under
the Securities Act or any other applicable securities laws, will be issued in
transactions not requiring registration under the Securities Act and, unless so
registered, may not be offered, sold or otherwise transferred except in
compliance with the registration requirements of the Securities Act or any other
applicable securities law, pursuant to an exemption therefrom or in a
transaction not subject thereto and in each case in compliance with the
conditions for transfer set forth in paragraph (iii) below;
(ii) EIS is outside the United States and is not a "U.S. person" (as such
term is defined in Regulation S);
(iii) Until the expiration of the "one-year distribution compliance period"
within the meaning of Rule 903 of Regulation S, EIS will not sell or otherwise
transfer the Incentive Shares, except (i) to Ligand or its Subsidiaries, (ii)
pursuant to an effective registration statement which has been declared
effective under the Securities Act, (iii) in an offshore transaction in
accordance with Rule 904 of Regulation S or (iv) pursuant to any other available
exemption from the registration requirements of the Securities Act, including
Rule 144. After the expiration of such "one-year distribution compliance
period," EIS will not sell or otherwise transfer the Incentive Shares, except
pursuant to registration under the Securities Act or an available exemption
therefrom and, in any case, in accordance with the provisions of Regulation S
and applicable state securities laws;
(iv) EIS understands that the certificates representing the Incentive
Shares will, so long as appropriate, bear the legend set forth in clause (vi) of
Section 4(a) of the Purchase Agreement;
(v) EIS agrees that Ligand shall be entitled to make a notation on its
records and give instructions to any transfer agent of the Common Stock in order
to implement the restrictions on transfer set forth in the Purchase Agreement;
(vi) EIS believes that it has received all information it considers
necessary or appropriate and has had an opportunity to ask questions and receive
answers from Ligand regarding the terms and conditions of the issuance and sale
of the Incentive Shares and the business, properties, prospects and financial
condition of Ligand; PROVIDED that this clause (vi) shall in no way limit or
modify the representations and warranties of Ligand set forth in Section 3 of
the Purchase Agreement or the right of EIS to rely thereon; it is a
sophisticated investor and that an investment in the Incentive Shares involves a
high degree of risk; and that the valuation price of the Incentive Shares may or
may not exceed the last publicly quoted per share "asked" price of the Common
Stock on the date hereof;
(vii) EIS will be acquiring the Incentive Shares for its own account for
the purpose of investment and not (i) with a view to, or for sale in connection
with, any distribution thereof or (ii) for the account or on behalf of any "U.S.
person" (as such term is defined in Regulation S); EIS understands, acknowledges
and agrees that it must bear the economic risk of its investment
3
<PAGE>
in the Incentive Shares for an indefinite period of time and that prior to any
offer or sale of such securities, Ligand may require, as a condition to
effecting a transfer of the Incentive Shares, an opinion of its counsel,
acceptable to Ligand, as to the registration or exemption therefrom under the
Securities Act;
(viii) EIS was not formed specifically for the purpose of acquiring the
Incentive Shares under this Agreement;
(ix) EIS nor any of its Affiliates has, directly or indirectly, within the
past 90 days nor will such persons until the expiration of the "one-year
distribution compliance period" within the meaning of Rule 903 of Regulation S
commencing from the later to occur of (i) the last Additional Closing occurring
on or before March 1, 2000 and (ii) the last License Share Issuance occurring on
or before the expiration or termination of the License Agreement directly or
indirectly, enter into any short selling of any equity security of Ligand
(including, without limitation, the Common Stock) or any hedging transaction
with respect to any equity security of Ligand, including, without limitation,
puts, calls, or other option transactions, option writing and equity swaps,
unless in compliance with the Securities Act;
(x) EIS acknowledges that, until November 9, 2000, it shall not, directly
or indirectly, without the prior written consent of Ligand, Transfer the
Incentive Shares; PROVIDED that EIS may Transfer the Incentive Shares to any of
its Affiliates and any Affiliate of EIS may Transfer the Incentive Shares to EIS
or any Affiliate of EIS, subject to EIS's agreements set forth herein; and
(xi) EIS acknowledges that the issuance of the Incentive Shares shall not
result in an adjustment to the Conversion Price of the Notes under Section 6(i)
thereof.
Section 4. Acknowledgment of Ligand
Ligand acknowledges notwithstanding anything in the Purchase
Agreement, the acquisition of the Incentive Shares by EIS, shall not be
violative of any standstill provision contained in the Purchase Agreement,
including Section 14(c), or otherwise applicable to EIS, and that the Incentive
Shares shall be afforded all of the rights and exceptions afforded the Shares
under such applicable provisions; provided that Ligand shall have no obligation
to amend the Rights Agreement with respect to the Incentive Shares.
Section 5. Miscellaneous
(i) APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS
THEREOF RELATING TO CONFLICTS OF LAW.
4
<PAGE>
(ii) WAIVER. No failure or delay on the part of a party hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder.
(iii) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(iv) TERMS. Capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in the Purchase Agreement.
5
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto and delivered as of the date first written above.
MONKSLAND HOLDINGS, BV
By: /S/ KEVIN INSLEY
--------------------
Name: KEVIN INSLEY
Title:AUTHORIZED SIGNATORY
ELAN INTERNATIONAL SERVICES, LTD.
By: /S/ KEVIN INSLEY
--------------------
Name: KEVIN INSLEY
Title:PRESIDENT & CFO
LIGAND PHARMACEUTICALS INCORPORATED
By: /S/ PAUL V. MAIER
--------------------
Name: PAUL V. MAIER
Title:SENIOR VP & CFO
6
Exhibit 10.223
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR PURSUANT TO A VALID EXEMPTION THEREFROM AND HAS BEEN SOLD IN RELIANCE ON THE
EXEMPTION FROM REGISTRATION PROVIDED BY REGULATION S UNDER THE ACT ("REGULATION
S"). THE SECURITY EVIDENCED HEREBY MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S (SS.230.901
THROUGH SS.230.905, AND PRELIMINARY NOTES).
THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT, DATED AS OF NOVEMBER 6, 1998, BY
AND AMONG THE COMPANY, ELAN INTERNATIONAL SERVICES, LTD. AND ELAN CORPORATION,
PLC, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY
OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT
CHARGE.
LIGAND PHARMACEUTICALS INCORPORATED
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
No. R-3A
Issue Date: July 14, 1999
Issue Price: $20,000,000
($481.22 for each $1,000 Principal Amount)
Original Issue Discount: $21,560,752
($518.78 for each $1,000 Principal Amount)
Ligand Pharmaceuticals Incorporated, a Delaware corporation, promises
to pay to Monksland Holdings, B.V. or registered assigns, on November 9, 2008,
the Principal Amount of Forty-one Million, Five Hundred and Sixty Thousand,
Seven Hundred and Fifty-two Dollars ($41,560,752) or such Principal Amount as
may result from an Accrual Increase as specified on the other side of this
Security.
<PAGE>
-2-
This Security shall not bear interest except as specified on the other
side of this Security. Original Issue Discount will accrue as specified on the
other side of this Security. This Security is convertible into Common Stock as
specified on the other side of this Security.
Additional provisions of this Security are set forth on the other side
of this Security.
This Security is a Zero Coupon Convertible Note due 2008 issued in
replacement of the Zero Coupon Convertible Note due 2008, No. R-3, issued to
Monksland Holdings, B.V. on July 14, 1999 (the "Initial Security") pursuant to
the Securities Purchase Agreement, dated as of November 6, 1998, by and among
Ligand Pharmaceuticals Incorporated, Elan International Services, Ltd. and Elan
Corporation, plc (the "Purchase Agreement"). The Initial Security is hereby
canceled.
<PAGE>
-3-
IN WITNESS WHEREOF, Ligand Pharmaceuticals Incorporated has caused
this instrument to be duly executed.
LIGAND PHARMACEUTICALS INCORPORATED
By:/S/ PAUL V. MAIER
---------------------------
Name: PAUL V. MAIER
Title: SENIOR VP & CFO
Attest
By:/S/ WILLIAM L. RESPESS
---------------------------
Name:
Title:
Dated: March 1, 2000
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
1. INTEREST
(a) This Security shall not bear interest, except as specified in this
paragraph or in paragraph 12 hereof. If the Principal Amount hereof or any
portion of such Principal Amount is not paid when due (whether upon acceleration
pursuant to paragraph 9 hereof, upon the date set for payment of the Redemption
Price pursuant to paragraph 3 hereof, upon the date set for payment of a
Purchase Price or a Company Change of Control Purchase Price pursuant to
paragraph 4 hereof, upon the date set for payment of the Elan Change of Control
Purchase Price pursuant to paragraph 5 hereof or upon the Stated Maturity of
this Security) or if shares of Common Stock (and cash in lieu of fractional
shares) in respect of a conversion of this Security in accordance with paragraph
6 hereof are not delivered when due, then, in each such case, the overdue amount
shall bear interest at the rate of 10.0% per annum, compounded semiannually (to
the extent that the payment of such interest shall be legally enforceable),
which interest shall accrue from the date such overdue amount was due to the
date payment of such amount, including interest thereon, has been made. All such
interest shall be payable on demand. The accrual of such interest on overdue
amounts shall be in lieu of, and not in addition to, the continued accrual of
Original Issue Discount.
(b) Original Issue Discount (the difference between the Issue Price
and the Principal Amount of a Security) in the period during which a Security
remains outstanding shall accrue at 8.0% per annum, on a semiannual bond
equivalent basis using a 360-day year consisting of twelve 30-day months,
commencing on the Issue Date of this Security, and shall cease to accrue on the
earlier of (i) the date on which the Principal Amount hereof or any portion of
such Principal Amount becomes due and payable and (ii) any Redemption Date,
Purchase Date, Company Change of Control Payment Date, Elan Change of Control
Payment Date or Conversion Date.
(c) In the event that the Company defaults in the performance or
observance of any agreement, covenant, term or condition contained in the
Registration Rights Agreement or the New Registration Rights Agreement, as the
case may be, and such default continues for a period of 30 days after receipt by
the Company of notice thereof (provided that, if such default is
<PAGE>
-2-
not cured on or prior to the last day of such 30 day period and such breach is
then capable of being cured and the Company is then working in good faith to
cure such default, such 30 day period shall be extended by an additional 20 days
from the last day of such 30 day period) (a "Registration Rights Default"), the
Company acknowledges that the Holders of the Securities will suffer damages and
that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, the Company agrees that, as liquidated damages, the rate
at which Original Issue Discount or interest pursuant to paragraph 1(a) or 12
hereof, if any, accrues shall be increased over and above the rate stated in
paragraph 1(b), 1(a) and 12(a), respectively (an "Accrual Increase"), by an
additional 50 basis points for each 90-day period in which a Registration Rights
Default continues; PROVIDED that the aggregate of such Accrual Increase shall
not exceed 200 basis points over and above the rate set forth in paragraph 1(b),
1(a) and 12(a) hereof, as the case may be; PROVIDED, FURTHER, that any Accrual
Increase shall immediately cease upon the cure of any such Registration Rights
Default. Whenever, in this Security, there is mentioned, in any context,
Principal Amount, Original Issue Discount or interest, or any other amount
payable under or with respect to this Security, including the Redemption Price,
the Purchase Price, the Company Change of Control Purchase Price and the Elan
Change of Control Purchase Price, such mention shall be deemed to include
mention of an Accrual Increase to the extent that, in such context, such Accrual
Increase is, was or would be in effect.
2. METHOD OF PAYMENT
Holders must surrender Securities to the Company to collect payments
in respect of the Securities. The Company will pay cash amounts in money of the
United States that at the time of payment is legal tender for payment of public
and private debts (and all references in the Securities to "$" or "dollars"
shall refer to such currency) by wire transfer in immediately available funds,
to an account or accounts designated in writing by each Holder not less than 5
Business Days prior to the date of the applicable payment.
3. REDEMPTION AT THE OPTION OF THE COMPANY
(a) No sinking fund is provided for the Securities. The Securities are
redeemable as a whole at any time, or in part from time to time, at the option
of the Company, at the redemption prices (each, a "Redemption Price") set forth
in
<PAGE>
-3-
paragraph 3(b) hereof; PROVIDED that the Securities are not redeemable prior
to November 9, 2001.
(b) The table below shows the Redemption Prices of a Security per
$1,000 Principal Amount on the dates shown below and at Stated Maturity, which
prices reflect accrued Original Issue Discount calculated to each such date. The
Redemption Price of a Security redeemed between such dates would include an
additional amount reflecting the additional Original Issue Discount accrued
since the next preceding date in the table to the actual Redemption Date.
<TABLE>
<CAPTION>
(2)
Accrued
(1) Original (3)
Security Issue Redemption
Issue Discount Price
REDEMPTION DATE Price At 8.0% (1) + (2)
- ---------------
<S> <C> <C> <C>
November 9, 2001............................ $481.22 $96.26 $577.48
November 9, 2002............................ 481.22 143.38 624.60
November 9, 2003............................ 481.22 194.34 675.56
November 9, 2004............................ 481.22 249.47 730.69
November 9, 2005............................ 481.22 309.09 790.31
November 9, 2006............................ 481.22 373.58 854.80
November 9, 2007............................ 481.22 443.34 924.56
At maturity................................. 481.22 518.78 1,000.00
</TABLE>
If converted to a semiannual coupon note following the occurrence of a
Tax Event, the Securities will be redeemable at the Restated Principal Amount
PLUS interest accrued and unpaid from, and including, the date of such
conversion to, but excluding, the Redemption Date.
(c) If less than all of the Securities are to be redeemed, the Company
shall select the Securities to be redeemed pro rata. If any Security selected
for redemption is thereafter surrendered for conversion in part, the converted
portion of such Security shall be deemed (so far as may be), solely for purposes
of determining the aggregate Principal Amount of Securities to be redeemed by
the Company, the portion selected for redemption. Nothing in this paragraph 3
shall affect the right of any Holder to convert any Security pursuant to
paragraph 6 hereof.
(d) Provisions of this Security that apply to the redemption of all of
a Security also apply to the redemption of any portion of such Security.
<PAGE>
-4-
(e) At least 30 days but not more than 60 days before a Redemption
Date, the Company shall cause notice of redemption to be mailed, by first-class
mail, postage prepaid, to each Holder of Securities at such Holder's address
appearing on the register maintained by the Company. Such notice shall identify
the Securities to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the Conversion Price in effect on the date of such notice;
(iv) that Securities called for redemption may be converted at any
time prior to the close of business on the Redemption Date;
(v) that Securities called for redemption must be surrendered to the
Company to collect the Redemption Price and the procedures to be followed
to so surrender such Securities;
(vi) if fewer than all the outstanding Securities are to be redeemed,
the identification and Principal Amounts of the particular Securities to be
redeemed;
(vii) that, unless the Company defaults in payment of the Redemption
Price, Original Issue Discount on the Securities called for redemption and
interest, if any, will cease to accrue on and after the Redemption Date;
(viii) that Holders whose Securities are being redeemed only in part
will, without charge, be issued a new Security equal in Principal Amount to
the unredeemed portion of the Securities; and
(ix) that the Redemption Price for any Security called for redemption
will be paid one Business Day following the later of (x) the Redemption
Date and (y) the date such Security is surrendered to the Company.
(f) Once notice of redemption is given, Securities called for
redemption shall become due and payable on the Redemption Date and at the
Redemption Price stated in such notice, except for Securities that are
converted. The Redemption Price for the Securities called for redemption shall
be paid one Business Day following the later of (x) the Redemption Date
<PAGE>
-5-
and (y) the date such Securities are surrendered to the Company.
(g) Receipt by the Company of the Securities called for redemption
prior to, on or after the Redemption Date shall be a condition to the receipt by
the Holder of the Redemption Price therefor.
(h) Upon surrender of a Security that is redeemed in part, the Company
shall, without charge, execute and deliver to the Holder a new Security equal in
Principal Amount to the unredeemed portion of such Security.
4. PURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER
(a) PURCHASE AT THE OPTION OF THE HOLDER. The Company shall be
obligated to purchase, at the option of the Holder, the Securities held by such
Holder on the following purchase dates (each, a "Purchase Date") and at the
following purchase prices per $1,000 Principal Amount (each, a "Purchase
Price"), which Purchase Prices reflect accrued Original Issue Discount to each
such date. Such Purchase Prices may be paid, at the option of the Company, in
cash or by the issuance and delivery of shares of Common Stock, subject to the
conditions set forth in paragraph 4(a)(iv) hereof.
<TABLE>
<CAPTION>
(2)
Accrued
(1) Original (3)
Security Issue Purchase
Issue Discount Price
PURCHASE DATE Price At 8.0% (1) + (2)
- -------------
<S> <C> <C> <C>
November 9, 2002............................ $481.22 $143.38 $624.60
November 9, 2005............................ 481.22 309.09 790.31
</TABLE>
If, prior to the Purchase Date, the Securities have been converted to
a semiannual coupon note following the occurrence of a Tax Event, the Purchase
Price will be equal to the Restated Principal Amount PLUS interest accrued and
unpaid from, and including, the date of such conversion to, but excluding, the
Purchase Date.
(i) In order to have Securities purchased pursuant to this paragraph
4(a), the Holder shall (x) deliver to the Company (for each Security or
portion thereof to be purchased) a written notice of purchase in the form
attached to this Security as Annex A (a "Purchase Notice") at any time on
or prior to the close of business on such
<PAGE>
-6-
Purchase Date and (y) surrender such Securities to the Company prior
to, on or after the Purchase Date, such surrender being a condition to
receipt by the Holder of the Purchase Price therefor.
Provisions of this Security that apply to the purchase of all of a
Security also apply to the purchase of any portion of such Security.
Subject to the right of a Holder to convert Securities as to which a
Purchase Notice has been delivered into Common Stock at any time prior to
the close of business on the Purchase Date, such Holder may not withdraw
such Purchase Notice.
Any purchase of Securities contemplated pursuant to this paragraph
4(a) shall be consummated by the delivery of the Purchase Price to be
received by the Holder (in cash or Common Stock, as the case may be) one
Business Day following the later of (x) the Purchase Date and (y) the date
such Securities are surrendered to the Company.
(ii) The Securities to be purchased pursuant to this paragraph 4(a)
may be paid for, at the option of the Company, in cash or Common Stock,
subject to the conditions set forth in paragraph 4(a)(iv) hereof. The
Company shall designate, in the Company Notice (as defined below) delivered
pursuant to paragraph 4(a)(v) hereof, whether the Company will purchase the
Securities for cash or Common Stock; PROVIDED that the Company will pay
cash for fractional shares of Common Stock pursuant to paragraph
4(a)(iv)(A) hereof. The Company may not change its election with respect to
the consideration to be paid once the Company has given the Company Notice,
except pursuant to paragraph 4(a)(iv)(B) hereof.
(iii) On each Purchase Date, if the Company Notice shall state that
the Company will purchase Securities for cash, the Securities in respect of
which a Purchase Notice has been given shall be purchased by the Company
with cash in an amount equal to the aggregate Purchase Price of such
Securities.
(iv) On each Purchase Date, if the Company Notice shall state that the
Company will purchase Securities for Common Stock, the Securities in
respect of which a Purchase Notice has been given shall be purchased by the
Company by the issuance of a number of whole shares of Common
<PAGE>
-7-
Stock equal to the quotient obtained by dividing (x) the amount of
cash to which the Holder would have been entitled had the Company elected
to pay the Purchase Price of such Securities in cash by (y) the average of
the Closing Prices of the Common Stock for the 20 consecutive trading days
ending on and including the second trading day immediately preceding the
Purchase Date, subject to paragraph 4(a)(iv)(A) hereof.
(A) The Company will not issue a fractional share of Common Stock
in payment of the Purchase Price. Instead, the Company will pay cash
in an amount equal to the current market value of the fractional
share. The current market value of a fraction of a share of Common
Stock shall be determined by multiplying the average of the Closing
Prices of the Common Stock for the 20 consecutive trading days ending
on and including the second trading day immediately preceding the
Purchase Date by such fraction and rounding to the nearest whole cent,
with one-half cent being rounded upward. It is understood that if a
Holder elects to have more than one Security purchased, the number of
whole shares of Common Stock shall be based on the aggregate amount of
Securities to be purchased.
(B) The Company's right to elect to purchase the Securities of
any Holder through the issuance of shares of Common Stock shall be
conditioned upon the following: (x) assuming compliance with all
applicable state securities or "Blue Sky" laws, and assuming the
accuracy of the statements of such Holder set forth in the Purchase
Notice, the issuance of such shares of Common Stock shall be exempt
from the registration requirements of Section 5 of the Securities Act,
(y) no consent, approval, authorization or order of any court or
governmental agency or body or third party shall be required for the
issuance by the Company of such shares of Common Stock and (z) such
Holder shall have received an Opinion of Counsel (which shall be
included with the Company Notice) stating that the terms of the
issuance of such Common Stock are in conformity with this paragraph
4(a), that such Common Stock has been duly authorized and, upon
issuance, will be validly issued, nonassessable and fully paid, will
not be issued in violation of any preemptive or similar rights and
will be free of any liens, encumbrances or restrictions on transfer
<PAGE>
-8-
imposed by the Company other than those imposed by the Securities Act
and applicable state securities or "Blue Sky" laws (provided that such
Opinion of Counsel may state that, insofar as it relates to the
absence of preemptive or similar rights, it is given upon the best
knowledge of such counsel) and that clause (x) of this paragraph
4(a)(iv)(B) has been satisfied.
(C) If the conditions set forth in paragraph 4(a)(iv)(B) hereof
are not satisfied as of the Purchase Date, and the Company shall have
elected to purchase the Securities through the issuance of shares of
Common Stock, the Company shall, without further notice, pay the
Purchase Price in cash.
(v) The Company shall cause a notice of its election to pay the
Purchase Price with cash or Common Stock (the "Company Notice") to be sent
by first-class mail, postage prepaid, to the Holders at their addresses
appearing in the register maintained by the Company. The Company Notice
shall be sent to Holders on a date not less than 20 Business Days prior to
the Purchase Date (such date being herein referred to as the "Company
Notice Date"); PROVIDED that, in the event that the Company shall not have
-------- delivered the Company Notice on or prior to the Company Notice
Date, the Company shall be deemed to have irrevocably elected to pay the
Purchase Price in cash. The Company Notice shall state the manner of
payment elected and shall contain the following information:
In the event that the Company has elected to pay the Purchase Price
with Common Stock, the Company Notice shall state that each Holder will
receive Common Stock (except for any cash amount to be paid in lieu of
fractional shares) in accordance with this paragraph 4(a) and shall be
accompanied by the Opinion of Counsel described in paragraph 4(a)(iv)(B)
hereof.
In any case, each Company Notice will include the Purchase Notice to
be completed by the Holder and shall state:
(A) the Purchase Price on such Purchase Date and the Conversion
Price in effect on the date of the Company Notice;
<PAGE>
-9-
(B) that Securities must be surrendered to the Company to collect
payment and any procedures to be followed in so surrendering the
Securities;
(C) that Securities as to which a Purchase Notice has been given
may be converted at any time prior to the close of business on the
applicable Purchase Date;
(D) that, unless the Company defaults in the payment of the
Purchase Price, Original Issue Discount on all Securities in respect
of which a Purchase Notice has been delivered or interest, if any,
will cease to accrue on and after the Purchase Date;
(E) that Holders whose Securities are being purchased only in
part will, without charge, be issued a new Security equal in Principal
Amount to the unpurchased portion of the Securities; and
(F) that the Purchase Price for any Security as to which a
Purchase Notice has been given will be paid one Business Day following
the later of (x) the Purchase Date and (y) the date such Security is
surrendered to the Company.
(vi) All shares of Common Stock delivered upon purchase of the
Securities shall be newly issued shares or treasury shares, shall be
duly and validly issued, fully paid and nonassessable, shall not be
issued in violation of any preemptive or similar rights and shall be
free of any liens, encumbrances or restrictions on transfer other than
those imposed by the Securities Act and applicable state securities or
"Blue Sky" laws.
(vii) Receipt of such Security by the Company prior to, on or
after the Purchase Date shall be a condition to the receipt by the
Holder of the Purchase Price therefor.
(viii) On the Business Date immediately following the later of
(x) the Purchase Date and (y) the date on which such Securities are
surrendered to the Company, the Company shall deliver to each Holder
entitled to receive Common Stock a certificate for the number of full
shares of Common Stock issuable in payment of the Purchase Price and
cash in lieu of any fractional shares.
<PAGE>
-10-
(ix) If a Holder is paid in Common Stock, the Company shall pay
any documentary, stamp or similar issue or transfer tax due on such
issuance of Common Stock.
(x) Upon surrender of a Security that is to be purchased only in
part, the Company shall, without charge, execute and deliver to the
Holder a new Security equal in Principal Amount to the unpurchased
portion of such Security.
(b) PURCHASE AT THE OPTION OF THE HOLDER UPON COMPANY CHANGE OF
CONTROL. Upon a Change of Control of the Company, the Company shall be obligated
to make an offer to purchase all outstanding Securities (the "Company Change of
Control Offer") at a purchase price per $1,000 Principal Amount (the "Company
Change of Control Purchase Price") equal to the sum of (x) the Issue Price PLUS
(y) accrued Original Issue Discount to the Company Change of Control Payment
Date. If, prior to the Company Change of Control Payment Date, the Securities
have been converted to a semiannual coupon note following the occurrence of a
Tax Event, the Company Change of Control Purchase Price will be equal to the
Restated Principal Amount PLUS interest accrued and unpaid from, and including,
the date of such conversion to, but excluding, the Company Change of Control
Payment Date.
(i) Within 10 days after the occurrence of a Change of Control of
the Company, the Company shall cause a notice of the Company Change of
Control Offer (the "Company Change of Control Offer Notice") to be
sent by first-class mail, postage prepaid, to the Holders at their
addresses appearing in the register maintained by the Company,
stating:
(A) the event or events causing such Change of Control of
the Company and the date such Change of Control occurred;
(B) that the Company Change of Control Offer is being made
pursuant to this paragraph 4(b);
(C) the Company Change of Control Purchase Price and the
purchase date (which shall be a Business Day no earlier than 10
days nor later than 30 days from the date such notice is mailed
(the "Company Change of Control Payment Date"));
<PAGE>
-11-
(D) that a Company Change of Control Purchase Notice (as
defined below) must be delivered to the Company on or prior to
the close of business on the Company Change of Control Payment
Date and that Securities must be surrendered to the Company prior
to, on or after the Company Change of Control Payment Date to
collect payment, including any procedures to be followed in so
surrendering the Securities;
(E) that any Security as to which a Company Change of
Control Purchase Notice has not been delivered will continue to
accrue Original Issue Discount or interest, if any;
(F) the Conversion Price in effect on the date of the
Company Change of Control Offer Notice and any adjustments
thereto resulting from such Change of Control;
(G) that the Securities as to which a Company Change of
Control Purchase Notice has been given may be converted into
Common Stock at any time prior to the close of business on the
Company Change of Control Payment Date;
(H) that, unless the Company defaults in the payment of the
Company Change of Control Payment, Original Issue Discount on all
Securities as to which a Company Change of Control Purchase
Notice has been delivered or interest, if any, will cease to
accrue on and after the Company Change of Control Payment Date;
(I) that Holders whose Securities are being purchased only
in part will, without charge, be issued a new Security equal in
Principal Amount to the unpurchased portion of the Securities;
and
(J) that the Company Change of Control Purchase Price for
any Security as to which a Company Change of Control Purchase
Notice has been given will be paid one Business Day following the
later of (x) the Company Change of Control Payment Date and (y)
the date such Security is surrendered to the Company.
(ii) A Holder may elect to have its Securities purchased pursuant to a
Company Change of Control Offer upon delivery of a written notice of
purchase (the "Company
<PAGE>
-12-
Change of Control Purchase Notice") to the Company at any time prior
to the close of business on the Company Change of Control Payment Date,
stating:
(A) the certificate number of each Security which the Holder will
deliver to be purchased; and
(B) the portion of the Principal Amount of such Security which
the Holder has elected to have purchased.
(iii) Receipt of such Security by the Company prior to, on or after
the Company Change of Control Payment Date shall be a condition to the
receipt by the Holder of the Company Change of Control Purchase Price
therefor.
(iv) Provisions of this Security that apply to the purchase of all of
a Security also apply to the purchase of any portion of such Security.
(v) Any purchase of Securities contemplated pursuant to this paragraph
4(b) shall be consummated by the delivery of the Company Change of Control
Purchase Price to be received by the Holder one Business Day following the
later of (x) the Company Change of Control Payment Date and (y) the date
such Securities are surrendered to the Company.
(vi) If any Security is to be purchased only in part, the Company
shall, without charge, issue to the Holder a new Security equal in
Principal Amount to the unpurchased portion of such Security.
(vii) The Company will comply with the requirements of Section 14(e)
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Securities pursuant to a Company
Change of Control Offer. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this
paragraph 4(b), the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its
obligations under this paragraph 4(b) by virtue thereof.
<PAGE>
-13-
5. PURCHASE AT THE OPTION OF THE COMPANY UPON
ELAN CHANGE OF CONTROL
(a) Upon a Change of Control of Elan occurring prior to November 9,
2001, the Company may, at its option, repurchase (the "Elan Change of Control
Purchase") the Securities held by Elan or any of its Affiliates on the date of
such Change of Control, in whole but not in part, at a cash purchase price per
$1,000 Principal Amount (the "Elan Change of Control Purchase Price") equal to
the greater of (i) the sum of (A) the Issue Price PLUS (B) accrued Original
Issue Discount to the Elan Change of Control Payment Date (provided that if,
prior to the Elan Change of Control Payment Date, the Securities have been
converted to a semiannual coupon note following the occurrence of a Tax Event,
the sum set forth in this clause (i) shall be the Restated Principal Amount PLUS
interest accrued and unpaid from, and including, the date of such conversion to,
but excluding, the Elan Change of Control Payment Date) and (ii) the product of
(a) the number of shares of Common Stock into which the Securities to be
redeemed may be converted pursuant to paragraph 6 hereof on the day immediately
preceding the Elan Change of Control Payment Date and (b) the average of the
Closing Prices of the Common Stock for the 20 consecutive trading days ending on
and including the second trading day immediately prior to the Elan Change of
Control Payment Date (as defined below); PROVIDED that, as a condition to any
such repurchase, the Company shall repurchase all, but not less than all, of the
Initial Shares, the Shares, the Conversion Shares and the License Shares, in
each case, held by Elan and its Affiliates on the date of such Change of
Control, pursuant to and in accordance with the terms of the Purchase Agreement.
(b) If an Elan Change of Control Purchase is to be made by the
Company, the Company shall, on or prior to the 10th day following receipt of an
Elan Change of Control Notice, cause an irrevocable notice of the Elan Change of
Control Purchase (the "Elan Change of Control Purchase Notice") to be sent by
first-class mail, postage prepaid, to Elan stating:
(i) that the Elan Change of Control Purchase is being made pursuant to
this paragraph 5;
(ii) the Elan Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 10 days nor later than 20
days from the date of the Elan Change of Control Purchase Notice (the "Elan
Change of Control Payment Date"));
<PAGE>
-14-
(iii) that the Elan Change of Control Purchase Price for any Security
as to which the Elan Change of Control Purchase Notice relates will be paid
on the Business Day following the later of (x) the Elan Change of Control
Payment Date and (y) the date such Security is surrendered to the Company;
(iv) that Elan shall, and shall cause its Affiliates to, surrender to
the Company on or prior to the Elan Change of Control Payment Date all
Securities owned by any of them on the date of the Change of Control of
Elan and the procedures to be followed in so surrendering such Securities;
and
(v) that, unless the Company defaults in the payment of the Elan
Change of Control Purchase Price, Original Issue Discount on all such
Securities or interest, if any, will cease to accrue on and after the Elan
Change of Control Payment Date and, effective upon the date of the Change
of Control of Elan, such Securities shall cease to be convertible.
(c) In the event that the Company fails to deliver the Elan Change of
Control Purchase Notice on or prior to the 10th day following receipt of an Elan
Change of Control Notice pursuant to paragraph 5(b) hereof, such failure shall
be deemed to be a waiver by the Company of its right to repurchase the
Securities pursuant to this paragraph 5.
(d) Upon the giving of the Elan Change of Control Purchase Notice
pursuant to this paragraph 5, such notice may not be revoked by the Company and
all Securities as to which such Elan Change of Control Purchase Notice relates
shall become due and payable in accordance with this paragraph 5 at the Elan
Change of Control Purchase Price.
(e) Receipt of such Securities by the Company prior to, on or after
the Elan Change of Control Payment Date shall be a condition to the receipt by
the Holder of the Elan Change of Control Purchase Price therefor.
6. CONVERSION
(a) A Holder of a Security may, on or prior to November 9, 2008,
convert in whole at any time or in part from time to time such Security into
Common Stock; PROVIDED, HOWEVER, that if a Security is called for redemption,
the Holder may convert it at any time before the Redemption Date. A Secu-
<PAGE>
-15-
rity in respect of which the Holder has delivered a Purchase Notice or
a Company Change of Control Purchase Notice exercising the option of such Holder
to require the Company to purchase such Security may, notwithstanding such
notice, convert the Security in accordance with this paragraph 6 until the close
of business on the Payment Date or the Company Change of Control Payment Date,
as the case may be. Upon the occurrence of a Change of Control of Elan, the
Securities then held by Elan and its Affiliates may not be converted on or prior
to the 10th day following the giving of an Elan Change of Control Notice;
PROVIDED that, if an Elan Change of Control Purchase Notice is given by the
Company pursuant to paragraph 5(b) hereof, the Securities may not be converted
unless the Company defaults in the payment of the Elan Change of Control
Purchase Price for all Securities as to which such Elan Change of Control
Purchase Notice relates. Notwithstanding the foregoing, neither Elan nor any of
its Affiliates may convert any Security held by it if, at the time of such
conversion, Elan is in violation of Section 14(c) of the Purchase Agreement.
(b) This Security shall be convertible into a number shares of Common
Stock equal to (x) the Issue Price plus all accrued Original Issue Discount to
the applicable Conversion Date (as defined below) (provided that if, prior to
the applicable Conversion Date, the Securities have been converted to a
semiannual coupon note following the occurrence of a Tax Event, this clause (x)
shall be the Restated Principal Amount PLUS interest accrued and unpaid from,
and including, the date of such conversion to, but excluding, such Conversion
Date) DIVIDED BY (y) $14.00, as adjusted to the Conversion Date (the "Conversion
Price"). Provisions of this Security that apply to conversion of all of a
Security also apply to conversion of a portion of such Security.
(c) The shares of Common Stock issuable upon conversion of this
Security shall, to the extent required, bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR PURSUANT TO A VALID EXEMPTION THEREFROM. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE
<PAGE>
-16-
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S (SS.230.901 THROUGH SS.230.905, AND PRELIMINARY
NOTES). HEDGING TRANSACTIONS INVOLVING THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE ACT.
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN A SECURITIES PURCHASE
AGREEMENT, DATED AS OF NOVEMBER 6, 1998, BY AND AMONG THE
COMPANY, ELAN INTERNATIONAL SERVICES, LTD. AND ELAN
CORPORATION, PLC, AND THE COMPANY RESERVES THE RIGHT TO REFUSE
THE TRANSFER OF SUCH SHARES UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER
HEREOF WITHOUT CHARGE.
(d) To convert this Security a Holder must (i) complete and duly sign
a conversion notice in the form attached hereto as Annex B (the "Conversion
Notice") and deliver such notice to the Company and (ii) surrender this Security
to the Company. The date on which a Holder of Securities satisfies all the
foregoing requirements is the conversion date (the "Conversion Date"). Not more
than three Business Days after the Conversion Date, the Company shall deliver to
the Holder a certificate for the number of full shares of Common Stock issuable
upon such conversion and cash in lieu of any fractional share. The Person in
whose name the certificate is registered shall be treated as a stockholder of
record on and after the Conversion Date; PROVIDED, HOWEVER, that no surrender of
a Security on any date when the stock transfer books of the Company shall be
closed shall be effective to constitute the Person or Persons entitled to
receive the shares of Common Stock upon such conversion as the record holder or
holders of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the Person or Persons entitled to receive such shares of
Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; such conversion shall be at the Conversion Price in effect on the date
that such Security shall have been surrendered for conversion, as if the stock
transfer books of the Company had not been
<PAGE>
-17-
closed. Upon conversion of a Security, such Person shall no longer be
a Holder of such Security. Any Security for which a Conversion Notice is
delivered on any Business Day shall be deemed to be converted simultaneously
with all other Securities for which a Conversion Notice is delivered on such
Business Day, subject to the surrender of such Securities to the Company
pursuant to this paragraph 6.
(e) If a Holder converts more than one Security at the same time, the
number of shares of Common Stock issuable upon such conversion shall be based on
the sum of (x) the aggregate Issue Price PLUS (y) the aggregate accrued Original
Issue Discount, in each case, of the Securities converted; PROVIDED that if,
prior to the applicable Conversion Date, the Securities have been converted to a
semiannual coupon note following the occurrence of a Tax Event, such conversion
shall be based on the sum of (x) the aggregate Restated Principal Amount PLUS
(y) the aggregate interest accrued and unpaid from, and including, the date of
such conversion to, but excluding, such Conversion Date. Upon surrender of a
Security that is converted in part, the Company shall execute and deliver to the
Holder a new Security in a denomination equal in Principal Amount to the
unconverted portion of the Security surrendered. If the last day on which a
Security may be converted is not a Business Day, such Security may be
surrendered to the Company on the next succeeding Business Day.
(f) The Company shall not issue a fractional share of Common Stock
upon conversion of a Security. Instead, the Company shall deliver cash in an
amount equal to the current market value of the fractional share. The current
market value of a fraction of a share shall be determined to the nearest
1/10,000th of a share by multiplying the average of the Closing Prices of the
Common Stock for the 20 consecutive trading days immediately prior to the
applicable Conversion Date by such fraction and rounding to the nearest whole
cent, with one-half cent being rounded upward.
(g) If a Holder converts a Security, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon such conversion.
(h) The Company shall reserve out of its authorized but unissued
Common Stock a sufficient number of shares of Common Stock to permit the
conversion of the Securities. All shares of Common Stock delivered upon
conversion of the Securities shall be newly issued shares or treasury shares,
shall be
<PAGE>
-18-
validly issued, nonassessable and fully paid, shall not be issued in
violation of any preemptive or similar rights and shall be free of any liens,
encumbrances or restrictions on transfer imposed by the Company other than those
imposed by the Securities Act and applicable state securities or "Blue Sky"
laws. The Company shall cause all such reserved shares of Common Stock to be
listed on the Nasdaq National Market or any other United States securities
exchange or market where the Common Stock is principally traded.
(i) The Conversion Price shall be adjusted from time to time by the
Company as follows:
(i) In case the Company shall, at any time or from time to time on or
after the Issue Date, (A) pay a dividend or make a distribution on its
Common Stock in shares of Common Stock, (B) subdivide its outstanding
Common Stock into a greater number of shares, (B) combine its outstanding
Common Stock into a smaller number of shares or (D) issue by
reclassification of its Common Stock any other shares of its Capital Stock,
then, in each such case, the Conversion Price in effect immediately prior
to such action shall be adjusted so that the Holder of any Security
thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock or other Capital Stock of the Company
which such Holder would have owned or have been entitled to receive after
the happening of any of the events described above had such Security been
converted immediately prior to the happening of such event. If any dividend
or distribution of the type described in clause (A) above is not so paid or
made, the Conversion Price shall again be adjusted to the Conversion Price
which would then be in effect if such dividend or distribution had not been
declared. An adjustment made pursuant to this paragraph 6(i)(i) shall
become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of subdivision, combination or reclassification.
If, after an adjustment made pursuant to this paragraph 6(i)(i), the Holder
of any Security thereafter converted shall become entitled to receive
shares of two or more classes of Capital Stock of the Company, the board of
directors of the Company shall determine the allocation of the adjusted
Conversion Price between or among such classes of Capital Stock, which
determination shall be final and binding on all Holders. After such
allocation, the Conversion Price of each class of Capital Stock of the
Company shall there-
<PAGE>
-19-
after be subject to adjustment on terms comparable to those applicable to
Common Stock in this paragraph 6(i).
(ii) If, at any time or from time to time on or after the Issue Date,
the Company issues or sells any Common Stock for consideration in an amount
per share less than the average of the Closing Prices of the Common Stock
for the 20 consecutive trading days ending on and including the second
trading day immediately prior to such issuance or sale, the Conversion
Price shall be adjusted in accordance with the following formula:
P
-
E' = E x O + M
-----
A
where:
E' = the adjusted Conversion Price.
E = the then current Conversion Price.
O = the number of shares of Common stock outstanding
immediately prior to the issuance or sale of such
additional shares of Common Stock.
P = the aggregate consideration received for the issuance
or sale of such additional shares of Common Stock.
M = the average Closing Prices of the Common Stock for
the 20 consecutive trading days ending on and including
the second trading day immediately prior to the date of
the issuance or sale of such additional shares of
Common Stock.
A = the number of shares of Common Stock outstanding
immediately after the issuance or sale of such
additional shares of Common Stock.
The adjustments shall be made successively whenever any such issuance
or sale is made, and shall become effective immediately after such issuance
or sale.
This paragraph 6(i)(ii) does not apply to:
1
<PAGE>
-20-
(A) the issuance of the License Shares pursuant to and in
accordance with the License Agreement and the Purchase Agreement;
(B) the conversion of the Securities or the conversion, exercise
or exchange of any other securities convertible into, or exercisable
or exchangeable for, Common Stock;
(C) the issuance of Common Stock pursuant to a valid and binding
written agreement with any Person, the terms of which provide that
such Common Stock is to be issued on a date after the execution of
such agreement and upon the occurrence of specified events (other than
solely the passage of time);
(D) the issuance Common Stock to the shareholders of any Person
which mergers into the Company or any Subsidiary of the Company in
proportion to such shareholders' ownership of the securities of such
Person, upon such merger; or
(E) Common Stock issued in a bona fide public offering pursuant
to a firm commitment or "best efforts" underwriting.
(iii) If, at any time or from time to time on or after the Issue Date,
the Company shall issue rights, options or warrants to all holders of its
Common Stock entitling them (for a period expiring within 60 days after the
record date mentioned below) to subscribe for or purchase shares of Common
Stock at a price per share less than the greater of (x) the average of the
Closing Prices of the Common Stock for the 20 consecutive trading days
ending on and including the second trading day immediately prior to the
record date and (y) the then current Conversion Price, the Conversion Price
shall be adjusted in accordance with the following formula:
N X P
-----
E' = E x O + M
------
O + N
where:
E' = the adjusted Conversion Price.
E = the then current Conversion Price.
2
<PAGE>
-21-
O = the number of shares of Common Stock outstanding on
the record date fixed for determination of stockholders
entitled to participate in such issuance.
N = the number of additional shares of Common Stock
offered pursuant to such issuance.
P = the offering price per share of such additional
shares of Common Stock.
M = the greater of (x) the average of the Closing Prices
of the Common Stock for the 20 consecutive trading days
ending on and including the second trading day
immediately prior to the record date and (y) the then
current Conversion Price.
The adjustment shall be made successively whenever any such
issuance is made and shall become effective immediately after the
record date fixed for the determination of stockholders entitled to
participate in such issuance.
To the extent that shares of Common Stock are not delivered after
the expiration of such rights, options or warrants, the Conversion
Price shall be readjusted to the Conversion Price which would then be
in effect had the adjustments made upon the issuance of such rights,
options or warrants been made on the basis of delivery of only the
number of shares of Common Stock actually delivered. If such rights,
options or warrants are not so issued, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in
effect if the record date for the determination of stockholders
entitled to participate in such distribution had not been fixed. In
determining whether any rights, options or warrants entitle the
Holders to subscribe for or purchase shares of Common Stock at a price
per share less than the average of the Closing Prices of the Common
Stock for the 20 consecutive trading days ending on and including the
second trading day immediately preceding the record date, and in
determining the aggregate offering price of such shares of Common
Stock, there shall be taken into account any consideration received by
the Company for such rights, options or warrants, the value of such
consideration, if other than cash, to be determined in good faith by
the board of directors of the Company (irrespective of the accounting
treatment thereof), which determination shall be final and binding on
all Holders. Such determination
<PAGE>
-22-
shall be described in a board resolution. Notwithstanding the
foregoing provisions of this paragraph 6(i)(iii), an event which would
otherwise give rise to an adjustment under this paragraph 6(i)(iii)
shall not give rise to such an adjustment if the Company includes the
Holders in such distribution on a pro rata basis as if each such
Holder held the number of shares of Common Stock into which such
Holder's Securities are convertible on the record date fixed for
determination of the stockholders entitled to participate in such
distribution and with the same notice as is provided to such
stockholders.
This paragraph 6(i)(iii) does not apply to transactions described
in paragraph 6(i)(iv).
(iv) If, at any time or from time to time on or after the Issue
Date, the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock any class of Capital Stock of the Company
(other than Common Stock) or evidences of its indebtedness or assets
(excluding cash dividends or other cash distributions from current or
retained earnings other than any Extraordinary Cash Dividend) or
rights, options or warrants to subscribe for or purchase any of the
foregoing, the Conversion Price shall be adjusted in accordance with
the following formula:
E' = E x M - F
-----
M
where
E' = the adjusted Conversion Price.
E = the then current Conversion Price.
M = the greater of (x) the average of the Closing Prices
of the Common Stock for the 20 consecutive trading days
ending on and including the second trading day
immediately prior to the record date mentioned below
and (y) the then current Conversion Price.
F = the fair market value on the record date fixed for
determination of the stockholders entitled to
participate in such distribution of the assets,
securities, rights, options or warrants applicable to
one share of Common stock. The
<PAGE>
-23-
board of directors shall determine such fair market
value in good faith (irrespective of the accounting
treatment thereof), which determination shall be final
and binding on the Holders. Such determination shall
be described in a board resolution.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date fixed for the determination of stockholders entitled to
receive such distribution. To the extent that shares of Common Stock
are not so delivered after the expiration of such rights, options, or
warrants, the Conversion Price shall be readjusted to the Conversion
Price which would then be in effect had the adjustment made upon the
issuance of such rights, options or warrants been made on the basis of
the delivery of only the number of shares of Common Stock actually
delivered. Notwithstanding the foregoing provisions of this paragraph
6(i)(iv), an event which would otherwise give rise to an adjustment
under this paragraph 6(i)(iv) shall not give rise to such an
adjustment if the Company includes the Holders in such distribution on
a pro rata basis as if each such Holder held the number of shares of
Common Stock into which such Holder's Securities are convertible on
the record date fixed for determination of the stockholders entitled
to participate in such distribution and with the same notice as is
provided to such stockholders.
This paragraph 6(i)(iv) does not apply to any transaction
described in paragraph 6(i)(iii) hereof.
(v) If, at any time or from time to time on or after the Issue
Date, the Company shall (x) enter into any valid and binding written
agreement with any Person to issue or sell Common Stock on a date
after the execution of such agreement and upon the occurrence of
specified events (other than solely the passage of time) or (y) issue
or sell any securities convertible into, or exercisable or
exchangeable for, Common Stock, in each case, for consideration per
share of Common Stock less than the average of the Closing Prices of
the Common Stock for the 20 consecutive trading days ending on and
including the second trading day immediately prior to, in the case of
clause (x), the date of execution of such agreement, and, in the case
of clause (y), the date of such issuance or sale, the Conversion Price
shall be adjusted in accordance with the following formula:
<PAGE>
-24-
P
-
E' = E x O + M
-----
O + D
where:
E' = the adjusted Conversion Price.
E = the then current Conversion Price.
O = the number of shares of Common Stock outstanding
immediately prior to, in the case of clause (x) above,
the date of execution of such agreement, and, in the
case of clause (y) above, the issuance or sale of such
securities.
P = (a) in the case of clause (x) above, the minimum
aggregate amount of consideration payable to the
Company upon the issuance or sale of such Common Stock
(including the minimum aggregate amount of cash
payments to be made by the Company to the other Person
or Persons party to such agreement in lieu of which
such Common Stock may be issued) and (b) in the case of
clause (y) above, the aggregate consideration received
for the issuance or sale of such securities PLUS the
minimum aggregate amount of additional consideration,
other than the surrender of such securities, payable to
the Company upon conversion, exercise or exchange of
such securities.
M = the Closing Prices of the Common stock for the 20
consecutive trading days ending on and including the
second trading day immediately prior to, in the case of
clause (x) above, the date of execution of such
agreement, and, in the case of clause (y) above, the
date of such issuance or sale.
D = the maximum stated number of shares deliverable
pursuant to such agreement or upon conversion, exercise
or exchange of such securities, as the case may be.
The adjustment shall be made successively whenever any such
agreement is executed or such issuance or sale is made, and shall
become effective immediately after the execution of such agreement or
such issuance or sale.
<PAGE>
-25-
If all of the Common Stock deliverable pursuant to any such
agreement or upon conversion, exercise or exchange of such securities
have not been issued upon the expiration or termination of such
agreement or when such securities are no longer outstanding, as the
case may be, then the Conversion Price shall be readjusted to the
Conversion Price which would then be in effect had the adjustment made
upon the execution of such agreement or the issuance or sale of such
securities been made on the basis of the actual number of shares of
Common Stock issued pursuant to such agreement or upon conversion,
exercise or exchange of such securities.
This paragraph 6(i)(v) does not apply to:
(A) any stock options issued to employees and consultants
(other than officers or directors) of the Company pursuant to any
employee stock option or purchase plan or program approved by the
board of directors of the Company;
(B) the issuance of the Securities; or
(C) any transaction described in paragraph 6(i)(iii) or
(iv).
In the event of any change in the number of shares of Common
Stock deliverable, or in the consideration payable to the Company,
pursuant to any such agreement or upon the conversion, exercise or
exchange of such securities, including, but not limited to, a change
resulting from any anti-dilution provisions thereof, the Conversion
Price shall, on the date of such change, be recomputed to reflect such
change.
(vi) For purposes of any computation respecting consideration
received pursuant to paragraph 6(i)(ii) and (v) hereof, the following
shall apply:
(A) in the case of the issuance or sale of shares of Common
Stock for cash, the consideration shall be the amount of such
cash; PROVIDED that in no event shall any deduction be made for
any commissions, discounts or other expenses incurred by the
Company in connection therewith;
<PAGE>
-26-
(B) in the case of the issuance or sale of shares of Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the board of
directors of the Company (irrespective of the accounting
treatment thereof), which determination shall be final and
binding on the Holders. Such determination shall be described in
a board resolution; and
(C) in the case of any agreement referred to in clause (x)
of paragraph 6(i)(v) hereof or the issuance or sale of securities
referred to in clause (y) of paragraph 6(i)(v) hereof, the
consideration, if any, to be received by the Company for the
issuance or sale of Common Stock pursuant to such agreement or
upon the conversion, exercise or exchange of such securities
shall determined in the same manner as provided in clauses (A)
and (B) of this paragraph 6(i)(vi).
(vii) No adjustment in the Conversion Price need be made unless the
adjustment would require a decrease of at least 1% in the Conversion Price
then in effect; PROVIDED that any adjustment that would otherwise be
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this paragraph 6(i) shall be
made to the nearest cent or to the nearest 1/10,000th of a share, as the
case may be.
(viii) No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest. No
adjustment need be made for a change in the par value or no par value of
the Common Stock. To the extent that the Securities become convertible into
cash, no adjustment need by made thereafter as to the amount of cash into
which such Securities are convertible. Neither Original Issue Discount nor
interest will accrue on cash.
(ix) Whenever the Conversion Price is adjusted, the Company shall
promptly mail to each Holder, by first-class mail, postage prepaid, at its
address appearing on the register maintained by the Company, a notice of
the adjustment.
(x) In case:
<PAGE>
-27-
(A) the Company shall take any action that would require an
adjustment in the Conversion Price pursuant to paragraph 6(i)(i),
(ii), (iii), (iv) or (v) hereof;
(B) of any event described in paragraph 6(i)(xi) hereof; or
(C) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall cause to be mailed to each Holder, by first-class
mail, postage prepaid, at its address appearing on the register maintained
by the Company, as promptly as possible but in any event at least 15 days
prior to the applicable date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of any dividend
or distribution or (y) the date on which any reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
winding-up is expected to become effective or occur. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up.
(xi) In the event of: (a) any reclassification or change of
outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (b) any consolidation or
amalgamation with, or merger with or into, another Person as a result of
which holders of Common Stock shall be entitled to receive cash, securities
or other property with respect to or in exchange for such Common Stock or
(c) any sale, transfer, assignment, lease, conveyance or other disposition
of all or substantially all of the assets of the Company (in one
transaction or series of related transactions) to any other Person as a
result of which holders of Common Stock shall be entitled to receive cash,
securities or other property with respect to or in exchange for such Common
Stock, then the Company or the Person (if other than the Company) formed by
such consolidation or amalgamation or into which the Company is merged or
to which the properties and assets are sold, assigned, transferred, leased,
conveyed or otherwise disposed of, as the case may be, shall expressly
agree in writing, in form and substance satisfactory to a majority of
Holders of Securities
<PAGE>
-28-
then outstanding (excluding Securities then held by the Company or any
of its Affiliates), that each Security shall be convertible into the kind
and amount of securities, cash or other assets which the Holder of such
Security would have owned immediately after such reclassification, change,
consolidation, amalgamation, merger, sale, transfer, assignment, lease,
conveyance or other disposition if such Holder had exercised such Security
immediately before the record date or effective date, as the case may be,
of the transaction. Such written agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this paragraph 6(i).
The Company shall cause notice of the execution of such written
agreement to be mailed to each Holder, by first-class mail, postage
prepaid, at its address appearing on the register maintained by the
Company, within 20 days after execution thereof. Failure to deliver such
notice shall not affect the legality or validity of such agreement.
The above provisions of this paragraph 7(i)(xi) shall similarly apply
to successive reclassifications, changes, consolidations, amalgamations,
mergers, sales, transfers, assignments, leases, conveyances or other
dispositions.
If this paragraph 6(i)(ix) applies to any event or occurrence,
paragraph 6(i)(i), (ii), (iii), (iv) and (v) hereof shall not apply.
(xii) Rights or warrants distributed by the Company to all holders of
Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's Capital Stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events (each, a "Trigger Event"): (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable and
(iii) are also issued in respect of future issuances of Common Stock, shall
be deemed not to have been distributed for purposes of this paragraph 6(i)
(and no adjustment to the Conversion Price under this paragraph 6(i) will
be required) until the occurrence of the earliest Trigger Event, whereupon
such rights and warrants shall be deemed to have been distributed and an
appropriate adjustment (if any is required) to the Conversion Price shall
be made under this paragraph 6(i). If any such right or warrant, including
<PAGE>
-29-
any such existing rights or warrants distributed prior to the Issue Date,
are subject to events, upon the occurrence of which such rights or warrants
become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and
each such event shall be deemed to be the date of distribution with respect
to new rights or warrants with such rights (and a termination or expiration
of the existing rights or warrants without exercise by any of the holders
thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event
(of the type described in the preceding sentence) with respect thereto that
was counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Price under this paragraph 6(i) was made, (A)
in the case of any such rights or warrants which shall have been redeemed
or repurchased without exercise by any holders thereof, the Conversion
Price shall be readjusted upon such final redemption or repurchase to give
effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of Common Stock with
respect to such rights or warrants (assuming such holder had retained such
rights or warrants), made to all holders of Common Stock as of the date of
such redemption or repurchase and (B) in the case of such rights or
warrants which shall have expired or been terminated without exercise by
any holders thereof, the Conversion Price shall be readjusted as if such
rights and warrants had not been issued. Notwithstanding the foregoing, no
Holder shall be entitled to any adjustment in the Conversion Price of the
Notes held by such Holder pursuant to this paragraph 6(i) if the applicable
Trigger Event shall have been caused by the acquisition of securities of
the Company by such Holder or any of its Affiliates.
(j) After an adjustment to the Conversion Price under paragraph 6(i), (ii),
(iii), (iv) or (v) hereof, any subsequent event requiring an adjustment shall
cause an adjustment to the Conversion Price as so adjusted.
(k) No adjustment shall be made pursuant to paragraph 6(i)(i), (ii), (iii),
(iv) or (v) hereof if, as a result thereof, the Conversion Price would be
increased.
<PAGE>
-30-
7. COVENANTS
(a) PAYMENT OF SECURITIES. The Company shall promptly make all
payments in respect of the Securities on the dates and in the manner provided
herein.
The Company shall, to the extent permitted by law, pay interest on
overdue amounts at the rate set forth in paragraph 1 of the Securities, which
interest on overdue amounts (to the extent that the payment of such interest
shall be legally enforceable) shall accrue from the date such amounts became
overdue.
(b) SEC REPORTS. The Company shall deliver to each Holder, by
first-class mail, postage prepaid, at its address appearing on the register
maintained by the Company, at the time the Company distributes them to the
holders of its Common Stock, copies of its annual reports to shareholders and
its proxy statements. In addition, the Company shall deliver to Elan, by
first-class mail, postage prepaid, at its address appearing on the register
maintained by the Company, within 30 days after the Company files them with the
SEC, copies of all other information, documents and reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act (or any successor provision thereof). In
the event that the Company is at any time no longer subject to the reporting
requirements of the Exchange Act (or any such successor provision), it shall
deliver to each Holder, by first-class mail, postage prepaid, at its address
appearing on the register maintained by the Company, reports containing
substantially the same information as would have been required to be filed with
the SEC had the Company continued to have been subject to such reporting
requirements, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such would
be required in such reports to the SEC and, in each case, together with a
management's discussion and analysis of financial condition and results of
operations as such would be so required. In such event, such reports shall be so
delivered at the time the Company would have been required to provide such
reports had it continued to have been subject to such reporting requirements.
(c) COMPLIANCE CERTIFICATES; NOTICE OF DEFAULTS.
(i) The Company shall deliver to each Holder, within 90 days after the
end of each fiscal year, an Officers'
<PAGE>
-31-
Certificate stating that a review of the activities of the Company and
its Subsidiaries during such fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under
the Securities, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge, the Company has
kept, observed, performed and fulfilled each and every covenant contained
in the Securities and is not in default in the performance or observance of
any of the terms, provisions and conditions contained in the Securities
(or, if a Default or Event of Default shall have occurred, describing all
such Defaults or Events of Default of which he or she may have knowledge
and what action the Company is taking or proposes to take with respect
thereto).
(ii) The Company shall, so long as any of the Securities are
outstanding, deliver to each Holder, forthwith upon any Officer becoming
aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
(d) FURTHER INSTRUMENTS AND ACTS. Upon request of the Holders of at
least a majority in the aggregate Principal Amount of the outstanding Securities
(excluding Securities at the time owed by the Company and its Affiliates), the
Company will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
provisions of the Securities.
(e) TAXES. The Company shall, and shall cause each of its Subsidiaries
to, pay prior to delinquency all material taxes, assessments and governmental
levies, except as contested in good faith and by appropriate proceedings.
(f) LEGAL EXISTENCE. Subject to paragraph 8 hereof, the Company shall
do or cause to be done all things necessary to preserve and keep in full force
and effect its legal existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with their respective
organizational documents (as the same may be amended from time to time) and the
rights (charter and statutory), licenses and franchises of the Company and its
Subsidiaries; PROVIDED that the Company shall not be required to preserve any
such right, license or franchise, or the corporate, partnership or other
existence of any of its Subsidiaries if the board of directors
<PAGE>
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of the Company shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole.
(g) WITHHOLDING TAXES. All transfers of Securities by the Holders
thereof and all payments made by the Company under or with respect to the
Securities (including the issuance of securities upon the conversion of the
Securities) shall be made free and clear of and without withholding or deduction
for or on account of any present or future Taxes, unless the Company is required
to withhold or deduct Taxes by law or by the interpretation or administration
thereof. If the Company is required by law or by the interpretation or
administration thereof to withhold or deduct any amount of Taxes in connection
with the Securities, such amount shall be withheld and deducted by the Company
without alteration of or increase in its obligations under the Securities;
PROVIDED, HOWEVER, that, if the Holder thereof has delivered to the Company a
complete, manually-signed copy of Internal Revenue Service Form 1001 (or any
successor form) or Internal Revenue Service Form 4224 (or any successor form)
properly certifying to such Holder's entitlement to a complete exemption from
U.S. withholding Tax with respect to such payment under applicable United States
Treasury Regulations, such payment shall be made free and clear of and without
withholding or deduction for or on account of any Taxes. In connection with any
payment made by the Company under any Security which is made in whole or in part
through the delivery of shares of Common Stock of the Company (including upon
the conversion of the Securities), the amount required to be withheld or
deducted shall first be withheld or deducted from the amount of cash (up to the
total amount thereof) which would otherwise be paid at such time. Any additional
amount required to be withheld or deducted, unless otherwise agreed by the
Company and the Holder of a Security, shall be withheld and deducted by reducing
the number of shares of Common Stock to be delivered by that number of shares of
Common Stock equal to the remaining amount required to be withheld or deducted
divided by the Conversion Price in effect on the date of such payment.
(h) LINE OF BUSINESS. The Company and its Subsidiaries will not engage
in any businesses other than the business of researching, developing, marketing,
selling, manufacturing, distributing or licensing pharmaceutical, medical,
biologic, genetic or related products and services and financing activities
related solely thereto, including the businesses in which the Company and its
Subsidiaries are engaged on the Issue Date.
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(i) USE OF PROCEEDS. The Company will use the gross proceeds from the
issuance of any Additional Notes in accordance with Section 1(b) of the Purchase
Agreement and otherwise in accordance with the Purchase Request related thereto.
(j) MAINTENANCE OF PROPERTIES; INSURANCE; BOOKS AND RECORDS;
COMPLIANCE WITH LAW.
(i) The Company shall, and shall cause each of its Subsidiaries to, at
all times cause all material properties used or useful in the conduct of
its business to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereto; PROVIDED
that, subject to the other provisions of the Securities, nothing in this
paragraph -------- 7(j)(i) shall prevent the Company or any of its
Subsidiaries from selling, abandoning or otherwise disposing of any
property (including any lease of property) if in the judgment of the
Company the same is no longer useful in the business of the Company or such
Subsidiary, as the case may be.
(ii) The Company shall maintain, and shall cause to be maintained for
each of its Subsidiaries, insurance covering such risks as are usually and
customarily insured against by corporations similarly situated, in such
amounts as shall be customary for corporations similarly situated and with
such deductibles and by such methods as shall be customary and reasonably
consistent with past practice.
(iii) The Company shall, and shall cause each of its Subsidiaries to,
keep proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of
the Company and each Subsidiary of the Company, in accordance with U.S.
generally accepted accounting principles consistently applied to the
Company and its Subsidiaries, taken as a whole.
(iv) The Company shall, and shall cause each of its Subsidiaries to,
comply with all statutes, laws, ordinances or government rules and
regulations to which they are subject, non-compliance with which would
materially adversely affect the business, prospects, earnings, prop-
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erties, assets or financial condition of the Company and its
Subsidiaries, taken as a whole.
8. SUCCESSOR CORPORATION
(a) The Company shall not consolidate with, amalgamate with, merge
with or into, or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its assets (as an entirety or substantially as an
entirety in one transaction or a series of related transactions), to any Person
unless:
(i) (x) the Company shall be the continuing Person, or (y) the Person
(if other than the Company) formed by such consolidation or amalgamation or
into which the Company is merged or to which the properties and assets of
the Company are sold, assigned, transferred, leased, conveyed or otherwise
disposed of (in any case, the "Successor Company") shall be a corporation
organized and existing under the laws of the United States or any State
thereof or the District of Columbia and the Successor Company shall
expressly affirm, in writing, the due and punctual performance of all of
the terms, covenants, agreements and conditions of the Securities to be
performed or observed by the Company, and such obligations shall remain in
full force and effect; and
(ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.
(b) In connection with any consolidation, amalgamation, merger or
sale, assignment, transfer, lease, conveyance or other disposition of assets
contemplated by this paragraph 8, prior to the consummation of such transaction
or transactions the Company shall deliver, or cause to be delivered, to each
Holder, by first-class mail, postage prepaid, at its address appearing in the
register maintained by the Company, an Opinion of Counsel stating that (i) such
consolidation, amalgamation, merger or sale, assignment, transfer, lease,
conveyance or other disposition of assets complies with this paragraph 8, (ii)
all conditions precedent herein provided for relating to such transaction or
transactions have been complied with and (iii) the affirmation provided for in
this paragraph 8 has been duly authorized, executed and delivered by the
Successor Company and the Securities are valid and legally binding obligations
of the Successor Company enforceable against it in accordance with their terms
(subject to bankruptcy, insolvency, re-
<PAGE>
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organization and similar laws affecting the rights and remedies of creditors
generally and general equitable principles).
(c) For purposes of paragraph 8(a) and (b) hereof, the transfer (by
sale, assignment, lease, conveyance or other disposition, in a single
transaction or series of related transactions) of all or substantially all of
the properties or assets of one or more Subsidiaries of the Company, the Capital
Stock of which constitutes all or substantially all of the properties and assets
of the Company, shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Company.
(d) Upon any consolidation, amalgamation or merger, or any sale,
assignment, transfer, lease, conveyance or other disposition of all or
substantially all of the assets of the Company in accordance with this paragraph
8, the Successor Company shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Securities with the
same effect as if such Successor Company had been named as the Company in the
Securities, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under the Securities.
9. DEFAULTS AND REMEDIES
(a) An "Event of Default" occurs if:
(i) after exercise of its option pursuant to paragraph 12 hereof
following a Tax Event, the Company defaults in the payment of interest upon
any Security or delivery of any Tax Event Option related thereto, when such
interest becomes due and payable, and such default continues for a period
of 30 days;
(ii) the Company defaults in the payment of the Principal Amount,
Issue Price, accrued Original Issue Discount, Redemption Price, Purchase
Price, Company Change of Control Purchase Price or Elan Change of Control
Purchase Price on any Security when the same becomes due and payable at its
Stated Maturity, upon redemption, upon declaration, when due for purchase
by the Company or otherwise;
(iii) the Company defaults in the observance or performance of any
agreement, covenant, term or condition contained in any Security (other
than those referred to in clause (i) and (ii) above) and such failure
continues for 30 days after receipt by the Company of notice thereof
<PAGE>
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(except in the case of a failure or default with respect to paragraph 8
hereof, which shall constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(iv) the Company defaults in any payment of principal of or interest
on any other obligation for money borrowed or the Company fails to perform
or observe any other agreement, covenant, term or condition contained in
any agreement under which any such obligation is created and the effect of
such default or failure is to cause, or the holder or holders of such
obligation (or a trustee on behalf of such holder or holders), as a
consequence of such default or failure shall take action to cause, such
obligation to become due prior to any stated maturity thereof; PROVIDED
that the aggregate amount of all obligations as to which such acceleration
shall occur is equal to or greater than $4.0 million;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $4.0 million (in excess of amounts
covered by insurance and as to which the insurer has acknowledged coverage)
shall be rendered against the Company or any Subsidiary thereof, and shall
not be discharged for any period of 60 consecutive days during which a stay
of enforcement shall not be in effect;
(vi) the Company or any Subsidiary thereof pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) generally is not paying its debts as they become due;
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
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(A) is for relief against either of the Company or any Subsidiary
thereof in an involuntary case,
(B) appoints a Custodian of either of the Company or any
Subsidiary thereof or for all or substantially all of the property of
either of the Company or any Subsidiary thereof, or
(C) orders the liquidation of either of the Company or any
Subsidiary thereof,
and the order or decree remains unstayed and in effect for 60 days; or
(viii) the Company fails to deliver shares of Common Stock (or cash in
lieu of fractional shares) when such Common Stock (or cash in lieu of
fractional shares) is required to be delivered, upon conversion of a
Security and such failure is not remedied for a period of 10 days.
(b) If an Event of Default (other than an Event of Default specified
in paragraph 9(a)(vi) or (vii) hereof occurs and is continuing, the Holders of
at least 25% in aggregate Principal Amount of the Securities at the time
outstanding (excluding Securities at the time owned by the Company and its
Affiliates) by notice to the Company, may declare the Issue Price and accrued
Original Issue Discount (or, if the Securities have been converted to a
semiannual coupon note following a Tax Event, the Restated Principal Amount and
accrued and unpaid interest) through the date of declaration on all the
Securities to be immediately due and payable. Upon such a declaration, such
Issue Price and accrued Original Issue Discount (or, if the Securities have been
converted to a semiannual coupon note following a Tax Event, the Restated
Principal Amount and accrued and unpaid interest) shall become and be due and
payable immediately. If an Event of Default specified in paragraph 9(a)(vi) or
(vii) hereof occurs and is continuing, the Issue Price and accrued Original
Issue Discount (or, if the Securities have been converted to a semiannual coupon
note following a Tax Event, the Restated Principal Amount and accrued and unpaid
interest) on all the Securities shall become and be immediately due and payable
without any declaration or other act on the part of any Holders. The Holders of
a majority in aggregate Principal Amount of the Securities at the time
outstanding (excluding Securities at the time owned by the Company and its
Affiliates), by notice to the Company (and without notice to any other Holder),
may rescind an acceleration and its consequences if the rescission would not
conflict with any
<PAGE>
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judgment or decree and if all existing Events of Default have been
cured or waived except nonpayment of the Issue Price and accrued Original Issue
Discount (or accrued and unpaid interest) that have become due solely as a
result of acceleration. No such rescission shall affect any subsequent or other
Default or Event of Default or impair any consequent right.
(c) If an Event of Default occurs and is continuing, any Holder may
pursue any available remedy to collect the payment of the Issue Price and
accrued Original Issue Discount (or, if the Securities have been converted to a
semiannual coupon note following a Tax Event, the Restated Principal Amount and
accrued and unpaid interest) on the Securities or to enforce the performance of
any provision of the Securities.
A delay or omission by any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of, or acquiescence in, the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
(d) The Holders of a majority in aggregate Principal Amount of the
Securities at the time outstanding (excluding Securities at the time owned by
the Company and its Affiliates), by notice to the Company (and without notice to
any other Holder), may waive an existing Default or Event of Default and its
consequences except (i) an Event of Default described in paragraph 9(a)(i), (ii)
or (viii) hereof or (ii) a Default in respect of a provision that under
paragraph 11 hereof cannot be amended without the consent of each Holder
affected. When a Default or Event of Default is waived, it is deemed cured, but
no such waiver shall extend to any subsequent or other Default or Event of
Default or impair any consequent right.
(e) Notwithstanding any other provision of the Securities, the right
of any Holder to receive payment of the Principal Amount, Issue Price, accrued
Original Issue Discount, Redemption Price, Purchase Price, Company Change of
Control Purchase Price, Elan Change of Control Purchase Price or interest, if
any, in respect of the Securities held by such Holder, on or after the
respective due dates expressed in the Securities and to convert the Securities
in accordance with paragraph 6 hereof, or to bring suit for the enforcement of
any such payment on or after such respective dates or the right to convert the
Securities, shall not be impaired or affected adversely without the consent of
each such Holder.
<PAGE>
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(f) The Company covenants (to the extent it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive the Company from paying all or any portion of the Principal
Amount, Issue Price plus accrued Original Issue Discount, Redemption Price,
Purchase Price, Company Change of Control Purchase Price or Elan Change of
Control Purchase Price, in each case, in respect of Securities, or any interest
on such amounts, as contemplated herein, or which may affect the covenants or
the performance of the Securities; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Holders, but will suffer and permit the execution of
every power as though no such law had been enacted.
10. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
(a) The Company shall cause to be kept at its offices a register in
which the Company shall provide for the registration of Securities and of
transfers of Securities. Upon surrender for registration of transfer of any
Security, the Company shall execute, in the name of the designated transferee or
transferees, one or more Securities of a like aggregate Principal Amount and
bearing such restrictive legends as may be required by the terms of the
Securities.
At the option of the Holder, and subject to the other provisions of
the Securities, Securities may be exchanged for other Securities of a like
aggregate Principal Amount, upon surrender of the Securities to be exchanged to
the Company. Whenever any Securities are so surrendered for exchange, and
subject to the other provisions of the Securities, the Company shall execute and
deliver the Securities which the Holder making the exchange is entitled to
receive. Every Security presented for registration of transfer or exchange shall
be accompanied by the written instrument of transfer in the form attached hereto
as Annex C, duly executed by the Holder thereof.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and subject to the same provisions as the Securities surrendered upon such
registration of transfer or exchange.
<PAGE>
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Subject to paragraph 7(g) hereof and notwithstanding any other
provision of this Section 10(a), no transfer of any Security shall be permitted,
and no registration of transfer shall be effected unless, prior to the time of
such transfer or registration of transfer, the Holder has made arrangements
reasonably satisfactory to the Company for payment or reimbursement of any and
all Taxes which would, in the absence of payment by the transferor, be required
to be paid by the Company as a result of such transfer. No service charge shall
be made for any registration of transfer or exchange. The Company acknowledges
that Treasury Regulation Section 1.441-2(b)(3) (effective January 1, 1999) is
not applicable to any Security issued prior to January 1, 1999.
In the event of a redemption of the Securities, the Company will not
be required (i) to register the transfer of or exchange Securities for a period
of 5 days immediately preceding the date notice of any redemption is given
pursuant to paragraph 3(e) hereof or (ii) to register the transfer of or
exchange any Security, or portion thereof, called for redemption.
(b) Except as permitted by this paragraph (b), each Security (and all
Securities issued in exchange therefor or substitution thereof) shall, so long
as appropriate, bear a legend (the "Legend") to substantially the following
effect (each, a "Transferred Restricted Security"):
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT
TO A VALID EXEMPTION THEREFROM.
THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS SUBJECT TO
THE CONDITIONS SPECIFIED IN A SECURITIES PURCHASE AGREEMENT,
DATED AS OF NOVEMBER 6, 1998, BY AND AMONG THE COMPANY, ELAN
INTERNATIONAL SERVICES, LTD. AND ELAN CORPORATION, PLC, AND
THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS WILL
<PAGE>
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BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT
CHARGE.
At such time as any Transfer Restricted Security may be freely
transferred without registration under the Securities Act and without being
subject to transfer restrictions pursuant to the Securities Act, the Company
shall permit the Holder of such Transfer Restricted Security to exchange such
Transfer Restricted Security for a new Security which does not bear the
applicable portion of the Legend upon receipt of certification from such Holder
substantially in the form attached hereto as Annex D and, at the request of the
Company, upon receipt of an opinion of counsel addressed to the Company that the
transfer restrictions contained in the Legend are no longer applicable. In
addition, at such time as such Security is no longer subject to the transfer
conditions set forth in the Purchase Agreement, the Company shall permit the
Holder of such Security to exchange such Security for a new Security which does
not bear the portion of the Legend referring to such transfer conditions.
In addition to the Legend, until the expiration of the "one-year
distribution compliance period" within the meaning of Rule 903 of Regulation S
under the Securities Act, each Security (and all Securities issued in exchange
therefor or substitution thereof) shall bear a legend (the "Reg. S Legend") to
substantially the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF REGULATION S (SS.230.901 THROUGH SS.230.905,
AND PRELIMINARY NOTES). HEDGING TRANSACTIONS INVOLVING THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE ACT.
At the expiration of such "one-year distribution compliance period,"
the Company shall permit the Holder of such Security to exchange such Security
for a new Security which does not bear the Reg. S Legend.
(c) If any mutilated Security is surrendered to the Company, the
Company shall execute and deliver a new Security of like aggregate Principal
Amount.
<PAGE>
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If there is delivered to the Company:
(i) evidence to its reasonable satisfaction of the destruction, loss
or theft of any Security; and
(ii) such security or indemnity as may be reasonably satisfactory to
the Company to save it harmless,
then, in the absence of actual notice to the Company that such Security has been
acquired by a bona fide purchaser, the Company shall execute and deliver, in
lieu of any such destroyed, lost or stolen Security, a new Security of like
aggregate Principal Amount.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company, in its discretion,
but subject to conversion rights, may, instead of issuing a new Security, pay
such Security, upon satisfaction of the conditions set forth in the preceding
paragraph.
11. AMENDMENTS AND WAIVERS
(a) Any term, covenant, agreement or condition of the Securities may,
with the consent of the Company, be amended, or compliance therewith may be
waived (either generally or in a particular instance and either retroactively or
prospectively), by one or more substantially concurrent written instruments
signed by the Holders of at least a majority in aggregate Principal Amount of
the Securities at the time outstanding (excluding Securities at the time owned
by the Company and its Affiliates); PROVIDED that, without the consent of each
Holder affected, no such amendment or waiver, including a waiver pursuant to
paragraph 9(d) hereof, shall:
(i) make any change in the Principal Amount of Securities whose
Holders must consent to an amendment or waiver;
(ii) make any change to the manner or rate of accrual in connection
with Original Issue Discount, reduce the interest rate referred to in
paragraph 1 of the Securities, reduce the rate of interest referred to in
paragraph 12 of the Securities upon the occurrence of a Tax Event or extend
the time for payment of accrued Original Issue Discount or interest, if
any, on any Security;
<PAGE>
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(iii) reduce the Principal Amount or the Issue Price of or extend the
Stated Maturity of any Security;
(iv) reduce the Redemption Price, Purchase Price, Company Change of
Control Purchase Price or Elan Change of Control Purchase Price or extend
the date on which the Redemption Price, Purchase Price, Company Change of
Control Purchase Price or Elan Change of Control Purchase Price of any
Security is payable;
(v) make any Security payable in money or securities other than that
stated in the Securities;
(vi) make any change in paragraph 9(d) hereof or this paragraph 11(a),
except to increase any percentage referred to, or make any change in
paragraph 9(e) hereof;
(vii) make any change that adversely affects the right to convert any
Security (including the right to receive cash in lieu of fractional
shares);
(viii) make any change that adversely affects the right to require the
Company to purchase Securities in accordance with their terms; or
(ix) impair the right to institute suit for the enforcement of any
payment with respect to, or conversion of, the Securities.
(b) No waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereto.
(c) The Company will not solicit, request or negotiate for or with
respect to any proposed amendment or waiver of any provisions of any Security
unless each Holder of Securities (irrespective of the amount of Securities then
owned by it) shall be informed thereof by the Company and shall be afforded the
opportunity of considering the same and shall be supplied by the Company with
sufficient information to enable it to make an informed decision with respect
thereto; PROVIDED, HOWEVER, that preliminary discussions with one or more
Holders regarding any such proposed amendment shall not constitute any such
solicitation, request or negotiation. Executed or true copies of any amendment
or waiver effected pursuant to this paragraph 11 shall be delivered by the
Company to each Holder of Securities, by first class mail, postage prepaid, at
its address appearing on the register maintained by the Company, forthwith
following
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the date on which the same shall have been executed and delivered by
the Holder or Holders of the requisite amount of outstanding Securities. The
Company will not, directly or indirectly, pay or cause to be paid, remuneration,
whether by way of fees or otherwise, to any Holder of Securities as
consideration for or as an inducement to the entering into by such Holder of any
amendment or waiver unless such remuneration is concurrently paid, on the same
terms, ratably to the Holders of all Securities then outstanding.
(d) Any amendment or waiver pursuant to this paragraph 11 shall
(except as provided in paragraph 11(a)(i) through (ix) above) apply equally to
all Holders and shall be binding upon them, upon each future Holder and upon the
Company.
(e) In determining whether the Holders of the requisite amount of
outstanding Securities have given any authorization, consent or waiver under
this paragraph 11, Securities owned by the Company or any of its Affiliates
shall be disregarded and deemed not to be outstanding.
12. TAX EVENT CONVERSION
(a) From and after the date (the "Tax Event Date") of the occurrence
of a Tax Event, at the option of the Company, interest in lieu of future
Original Issue Discount shall accrue at 8.0% per annum on a principal amount per
Security (the "Restated Principal Amount") equal to the Issue Price plus accrued
Original Issue Discount to the date immediately prior to the Tax Event Date or
the date on which the Company exercises the option described in this paragraph
12(a), whichever is later (such date, the "Option Exercise Date"). Such interest
shall accrue from the Option Exercise Date and shall be payable on November 9
and May 9 of each year (the "Interest Payment Date") to the Holders of record at
the close of business on October 25 and April 24 (each, a "Regular Record Date")
immediately preceding such Interest Payment Date. Interest will be computed on
the basis of a 360-day year consisting of twelve 30-day months and will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from the Option Exercise Date. Within 15 days of the occurrence of a
Tax Event, the Company shall mail a written notice of such Tax Event to each
Holder, by first-class mail, postage prepaid, at its address appearing on the
register maintained by the Company.
<PAGE>
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(b) On each Interest Payment Date, concurrently with the payment of
the interest due and payable on such date, the Company shall issue and deliver
to each Holder of a Security to whom such interest is paid, an option (which
option shall be in the form of a written instrument duly executed by the Company
(a "Tax Event Option") to purchase a number of shares of Common Stock equal to
the quotient obtained by dividing (x) the aggregate amount of such interest due
and payable to such Holder on such Interest Payment Date in respect of such
Security by (y) the Conversion Price of such Security in effect on the Business
Day immediately prior to such Interest Payment Date. Such Tax Event Option shall
be exercisable, in whole at any time or in part from time to time, on or prior
to November 9, 2008. Each Tax Event Option shall include provisions
substantially similar to those set forth in paragraph 6(c), (d), (e), (f), (g),
(h) and (i) hereof. Each Tax Event Option shall be transferable by the holder
thereof only together with the Security in respect of which such Tax Event
Option was issued, subject to compliance with all applicable transfer
restrictions of federal and state securities laws.
(c) Interest on any Security that is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the person
in whose name that Security is registered at the close of business on the
Regular Record Date for such interest. Each installment of interest on any
Security shall be paid by wire transfer in immediately - available funds to an
account designated in writing by the payee at least 2 Business Days prior to the
Interest Payment Date applicable thereto.
(d) Subject to the foregoing provisions of this paragraph 12, each
Security upon registration of transfer, or in exchange for or in lieu of any
other Security, shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
13. MISCELLANEOUS
(a) Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally, sent by
nationally recognized overnight delivery service or facsimile (receipt
confirmed) or mailed by first-class mail, postage prepaid, addressed as follows:
(i) if to the Company, to:
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Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attn: General Counsel
Fax No.: (619) 550-1825
with a copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, California 92101-3532
Attn: Faye H. Russell, Esq.
Fax No.: (619) 234-3848
(ii) if to any Holder, at its address appearing in the register
maintained by the Company pursuant to paragraph 10(a) hereof
(iii) (x) on the date delivered, if delivered by facsimile or
personally, (y) on the day after the notice is delivered into the
possession and control of a nationally recognized overnight delivery
service, duly marked for delivery to the receiving party or (z) three
Business Days after being mailed by first-class mail, postage prepaid. The
Company, by written notice to each of the Holders, may designate a
different address for subsequent notices or communications.
(b) All agreements of the Company in this Security shall bind its
successor.
(c) Each provision of this Security shall be considered separable and
if for any reason any provision which is not essential to the effectuation of
the basic purpose of this Security shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
(d) THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
(e) Upon conversion of this Security in accordance with the terms
hereof, the Holder will be entitled to the benefits of the Registration Rights
Agreement or the New Registra-
<PAGE>
-47-
tion Rights Agreement, as the case may be, with respect to the shares of Common
Stock issuable to such Holder upon such conversion.
14. DEFINITIONS
"Accrual Increase" has the meaning specified in paragraph 1(c) hereof.
"Additional Amounts" has the meaning specified in paragraph 7(g)
hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of Voting Stock, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Business Day" means each day of the year on which banking
institutions are not required or authorized to close in The City of New York.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership interests or any other
participation, right or other interest in the nature of an equity interest in
such Person including, without limitation, common stock and preferred stock of
such Person, or any option, warrant or other security convertible into any of
the foregoing.
A "Change of Control" of any Person shall be deemed to have occurred
at such time as (i) any other Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act ("Group") becomes the beneficial owner (as
defined under Rule 13d-3 under the Exchange Act), directly or indirectly, of
50.0% or more of the total Voting Stock of such specified Person, (ii) there
shall be consummated any consolidation or merger of such specified Person in
which such specified Person is not the continuing or surviving corporation or
<PAGE>
-48-
pursuant to which the Voting Stock of such specified Person would be converted
into cash, securities or other property, other than a merger or consolidation of
such specified Person in which the holders of the Voting Stock of such specified
Person outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of all Voting Stock of the
continuing or surviving corporation immediately after such consolidation or
merger or (iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the board of directors of such
specified Person (together with any new directors whose election by such board
of directors or whose nomination for election by the shareholders of such
specified Person has been approved by a majority of the directors then still in
office who either were directors at the beginning of such period or whose
election or recommendation for election was previously so approved) cease to
constitute a majority of the board of directors of such specified Person.
"close of business" means, with respect to any date, 5:00 PM, San
Diego time, on such date, or such other city in which the Company's principal
place of business may then be located.
"Closing Price" means, with respect to the Common Stock on any trading
day, the last reported per share sales price of the Common Stock on such trading
day, as reported by the Nasdaq National Market or, if the Common Stock is listed
on a United States securities exchange, the closing per share sales price,
regular way, on such trading day on the principal United States securities
exchange on which the Common Stock is traded or, if no such sale takes place on
such trading day, the average of the closing bid and asked prices on such day.
"Common Stock" means the common stock, par value $0.001 per share, of
the Company, as such class exists on the date of this Security as originally
executed or any other shares of Capital Stock into which such common stock shall
be reclassified or changed.
"Company" means Ligand Pharmaceuticals Incorporated, a Delaware
corporation.
"Company Change of Control Offer" has the meaning specified in
paragraph 4(b) hereof.
"Company Change of Control Offer Notice" has the meaning specified in
paragraph 4(b)(i) hereof.
<PAGE>
-49-
"Company Change of Control Payment Date" has the meaning specified in
paragraph 4(b)(i)(C) hereof.
"Company Change of Control Purchase Price" has the meaning specified
in paragraph 4(b) hereof.
"Company Notice" has the meaning specified in paragraph 4(a)(v)
hereof.
"Company Notice Date" has the meaning referred to in paragraph 4(a)(v)
hereof.
"Conversion Date" has the meaning specified in paragraph 6(d) hereof.
"Conversion Notice" has the meaning specified in paragraph 6(d)
hereof.
"Conversion Price" has the meaning specified in paragraph 6(b) hereof.
"Conversion Shares" has the meaning specified in the Purchase
Agreement.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Distributed Securities" has the meaning specified in paragraph
6(i)(iv) hereof.
"Elan" means Elan Corporation, plc, a public limited company organized
and existing under the laws of Ireland.
"Elan Change of Control Notice" has the meaning specified in the
Purchase Agreement.
"Elan Change of Control Payment Date" has the meaning specified in
paragraph 5(b)(ii) hereof.
"Elan Change of Control Purchase" has the meaning specified in
paragraph 5(a) hereof.
"Elan Change of Control Purchase Notice" has the meaning specified in
paragraph 5(b) hereof.
<PAGE>
-50-
"Elan Change of Control Purchase Price" has the meaning specified in
paragraph 5(a) hereof.
"Event of Default" has the meaning specified in paragraph 10(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Extraordinary Cash Dividend" means cash dividends with respect to the
Common Stock the aggregate amount of which in any fiscal year exceeds the
greater of (i) 10% of the consolidated net income of the Company for the fiscal
year immediately preceding the payment of such dividend and (ii) $200,000.
"Holder" means a Person in whose name this Security is registered on
the books of the Company.
"Initial Shares" has the meaning specified in the Purchase Agreement.
"Interest Payment Date" has the meaning specified in paragraph 12(a)
hereof.
"Issue Date" of this Security means the date on which this Security
was originally issued or deemed issued as set forth on the face of this
Security.
"Issue Price" of this Security means, in connection with the original
issuance of this Security, the initial issue price at which this Security is
issued as set forth on the face of this Security.
"Legend" has the meaning specified in paragraph 10(b) hereof.
"License Agreement" has the meaning specified in the Purchase
Agreement.
"License Shares" has the meaning specified in the Purchase Agreement.
"Nasdaq National Market" means the electronic interdealer quotation
system operated by Nasdaq Stock Market, Inc., a subsidiary of the National
Association of Securities Dealers, Inc.
<PAGE>
-51-
"New Registration Rights Agreement" has the meaning specified in the
Purchase Agreement.
"Officer" means the Chief Executive Officer, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a written certificate, signed in the
name of the Company by (i) its Chief Executive Officer, its President or any
Vice President and (ii) its Treasurer or its Secretary.
"Opinion of Counsel" means a written opinion from legal counsel. The
counsel may be an employee of, or counsel to, the Company or any Successor
Company.
"Option Exercise Date" has the meaning specified in paragraph 12(a)
hereof.
"Original Issue Discount" of this Security means the difference
between the Issue Price and the Principal Amount of this Security as set forth
on the face of this Security. For purposes of this Security, accrual of Original
Issue Discount shall be calculated on a semi-annual bond equivalent basis using
a 360 day year consisting of twelve 30-day months.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
"Principal" or "Principal Amount" of this Security means the Principal
Amount as set forth on the face of this Security.
"Purchase Agreement" has the meaning specified on the face of this
Security.
"Purchase Date" has the meaning specified in paragraph 4(a) hereof.
"Purchase Notice" has the meaning specified in paragraph 4(a)(i)
hereof.
"Purchase Price" has the meaning specified in paragraph 4(a) hereof.
<PAGE>
-52-
"Purchase Request" has the meaning specified in the Purchase
Agreement.
"Redemption Date" means a date specified for redemption of this
Security in accordance with the terms hereof.
"Redemption Price" has the meaning specified in paragraph 3(a) hereof.
"Registration Rights Agreement" has the meaning specified in the
Purchase Agreement.
"Registration Rights Default" has the meaning specified in paragraph
1(c) hereof.
"Regular Record Date" has the meaning specified in paragraph 12(a)
hereof.
"Restated Principal Amount" has the meaning specified in paragraph
12(a) hereof.
"SEC" means the Securities and Exchange Commission.
"Securities" means any of the Company's Zero Coupon Convertible Senior
Notes due 2008, as amended and supplemented from time to time in accordance with
the terms hereof, issued pursuant to the Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Shares" has the meaning specified in the Purchase Agreement.
"Stated Maturity" means November 9, 2008.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or hereafter organized or acquired, (i) in
the case of a corporation, of which more than 50% of the total voting power of
the Capital Stock entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, officers or trustees thereof is held by
such specified Person or any of its Subsidiaries or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which such specified Person or any of
<PAGE>
-53-
its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise.
"Successor Company" has the meaning specified in paragraph 8(a)(1)
hereof.
"Tax Event" means that the Company shall have received an opinion from
independent tax counsel experienced in such matters to the effect that, on or
after the date of this Security, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United Sates or any political subdivision or taxing authority
thereof or therein or (b) any amendment to, or change in, an interpretation or
application of such laws or regulations by any legislative body, court,
governmental agency or regulatory authority, in each case, which amendment or
change is enacted, promulgated, issued or announced or which interpretation is
issued or announced or which action is taken, on or after the date of this
Security, there is more than an insubstantial risk that interest (including
Original Issue Discount) payable on the Securities either (i) would not be
deductible on a current accrual basis or (ii) would not be deductible under any
other method, in either case, in whole or in part, by the Company, by reason of
deferral, disallowance or otherwise) for United States federal income tax
purposes.
"Tax Event Date" has the meaning specified in paragraph 12(a) hereof.
"Tax Event Option" has the meaning specified in paragraph 12(b)
hereof.
"Taxes" means any present or future tax, duty, levy, impost,
assessment or other government charge (including penalties, interest and any
other liabilities related thereto) imposed or levied by or on behalf of a any
government or any political subdivision or territory or possession of any
government or any authority or agency therein or thereof having power to tax.
"Transfer Restricted Security" has the meaning specified in paragraph
10(b) hereof.
"Voting Stock" means stock of any class or classes, however
designated, having general voting power under ordinary circumstances to elect a
majority of the board of directors,
<PAGE>
-54-
managers or trustees of a Person, other than stock having such power only by
reason of the occurrence of a contingency.
<PAGE>
ANNEX A
FORM OF PURCHASE NOTICE
OF
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
1. Pursuant to the terms of the Zero Coupon Convertible Senior Note
due 2008 (certificate no. [ ] in the Principal Amount of $[ ] (the "Security"),
the undersigned hereby elects to cause Ligand Pharmaceuticals Incorporated (the
"Company") to purchase $[________] Principal Amount of the Security at the
Purchase Price set forth in the Security on [November 9, 2002] [November 9,
2005], subject to the right of the undersigned to convert the Security at any
time prior to the close of business on the Purchase Date. Capitalized terms used
herein and not otherwise defined have the meanings specified in the Security.
2. In the event that the Security is purchased in part, please execute
and deliver to the undersigned a new Security in a denomination equal in
Principal Amount to the unpurchased portion of the Security.
3. In the event that the Company has elected to pay the Purchase Price
with Common Stock (the "Shares") pursuant to paragraph 4(a)(iv) of the Security,
the undersigned confirms that:
(a) We understand that the Shares have not been registered under the
Securities Act and may not be offered or sold except as permitted in the
following sentence. We agree that if we should sell or otherwise transfer
the Shares, we will do so only (i) to the Company or its Subsidiaries, (ii)
inside the United States to an institutional "accredited investor" (as
defined below), (iii) outside the United States in accordance with
Regulation S under the Securities Act, (iv) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available)
or (v) pursuant to an effective registration statement under the Securities
Act.
A-1
<PAGE>
(b) We understand that the certificates representing the Shares will,
so long as appropriate, bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR PURSUANT TO A VALID EXEMPTION THEREFROM. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S (SS.230.901 THROUGH SS.230.905, AND
PRELIMINARY NOTES). HEDGING TRANSACTIONS INVOLVING THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS SUBJECT TO
THE CONDITIONS SPECIFIED IN A SECURITIES PURCHASE AGREEMENT,
DATED AS OF NOVEMBER 6, 1998, BY AND AMONG THE COMPANY, ELAN
INTERNATIONAL SERVICES, LTD. AND ELAN CORPORATION, PLC, AND
THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS WILL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.
(c) We are acquiring the Shares for our own account and are either (i)
an institutional "accredited investor" (as defined in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act) or (ii) a foreign
purchaser that is outside the United States (as such terms are used under
Regulations S under the Securities Act). We have such knowledge and
experience in financial and business matters to be capable of evaluating
the merits and risks of our investment in the Shares and we are able to
bear the economic risk of our investment for an indefinite period of time.
A-2
<PAGE>
This certificate and the statements contained herein are made for the
benefit of the Company.
_______________________
Signature of Holder
Date: _____________
A-3
<PAGE>
ANNEX B
CONVERSION NOTICE
OF
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
1. Pursuant to the terms of the Zero Coupon Convertible Senior Note
due 2008 (certificate no. [ ] in the Principal Amount of $[ ] attached hereto
(the "Security"), the undersigned hereby elects to cause Ligand Pharmaceuticals
Incorporated (the "Company") to convert $[________] Principal Amount of the
Security pursuant to paragraph 6 of the Security at the Conversion Price.
Capitalized terms used herein and not otherwise defined have the meanings
specified in the Security.
2. In the event that the undersigned has elected to convert the
Security in part, please execute and deliver to the undersigned a new Security
in a denomination equal in Principal Amount to the unconverted portion of the
Security.
3. In connection with the conversion of the Security, the undersigned
confirms that:
(a) We understand that the securities to be issued upon such
conversion have not been registered under the Securities Act and may not be
offered or sold except as permitted in the following sentence. We agree
that if we should sell or otherwise transfer such securities, we will do so
only (i) to the Company or its Subsidiaries, (ii) inside the United States
to an institutional "accredited investor" (as defined below), (iii) outside
the United States in accordance with Regulation S under the Securities Act,
(iv) pursuant to the exemption from registration provided by Rule 144 under
the Securities Act (if available) or (v) pursuant to an effective
registration statement under the Securities Act.
(b) We understand that the certificates representing such securities
will, so long as appropriate, bear the following legends:
B-1
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR PURSUANT TO A VALID EXEMPTION THEREFROM. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S (SS.230.901 THROUGH SS.230.905, AND
PRELIMINARY NOTES). HEDGING TRANSACTIONS INVOLVING THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS SUBJECT TO
THE CONDITIONS SPECIFIED IN A SECURITIES PURCHASE AGREEMENT,
DATED AS OF NOVEMBER 6, 1998, BY AND AMONG THE COMPANY, ELAN
INTERNATIONAL SERVICES, LTD. AND ELAN CORPORATION, PLC, AND
THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS WILL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.
(c) We are acquiring the securities to be issued upon conversion of
the Security for our own account and are either (i) an institutional
"accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act) or (ii) a foreign purchaser that is
outside the United States. We have such knowledge and experience in
financial and business matters to be capable of evaluating the merits and
risks of our investment in the securities and we are able to bear the
economic risk of our investment for an indefinite period of time.
This certificate and the statements contained herein are made for the
benefit of the Company.
___________________________
Signature of Holder
Date: _____________
B-2
<PAGE>
ANNEX C
FORM OF CERTIFICATE FOR
REGISTRATION OF TRANSFER OR EXCHANGE
OF
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
1. Reference is hereby made to the Zero Coupon Convertible Senior Note
due 2008 (certificate no. [ ] in the Principal Amount of $[ ] attached hereto
(the "Security"). Capitalized terms used herein and not otherwise defined have
the meanings specified in the Security.
2. In connection with the registration of transfer or exchange of such
Security, the undersigned hereby certifies that:
CHECK ONE
________ The Security is being acquired for the undersigned's own account,
without transfer; or
________ The Security is being transferred to the Company; or
________ The Security is being transferred in a transaction permitted by
Rule 144 under the Securities Act; or
________ The Security is being transferred pursuant to an effective
registration statement; or
________ The Security is being transferred in a transaction permitted by
Rule 904 under the Securities Act; or
________ the Security is being transferred pursuant to an exemption from
the registration requirements of the Securities Act other than Rule
144 or Rule 904, and the undersigned hereby further certifies that the
Security is being transferred in compliance with the exemption
claimed, which certification is supported by an opinion of
C-1
<PAGE>
counsel, if required by the Company, provided by the undersigned or
the transferee (a copy of which the undersigned has attached to this
certification) in form reasonably satisfactory to the Company, to the
effect that such transfer is in compliance with the Securities Act;
and the Security is being transferred in compliance with any applicable state
securities or "Blue Sky" laws of any state of the United States.
3. This certificate and the statements contained herein are made for
the benefit of the Company.
__________________________
Signature of Holder
Date: _____________
C-2
<PAGE>
ANNEX D
FORM OF UNRESTRICTED SECURITIES CERTIFICATE
OF
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
1. Reference is hereby made to the Zero Coupon Convertible Senior Note
due 2008 (certificate no. [ ] in the Principal Amount of $[ ] attached hereto
(the "Security"). Capitalized terms used herein and not otherwise defined have
the meanings specified in the Security.
2. The undersigned, the registered owner of the Security, has
requested that the Security be exchanged for a new Security bearing no portion
of the Legend (excluding that portion of the Legend relating to transfer
conditions set forth in the Purchase Agreement). In connection with such
exchange, the undersigned hereby certifies that the exchange is occurring after
a period of at least two years has elapsed since the date the Security was
acquired from the Company or any affiliate (as such term is defined under Rule
144 under the Securities Act) of the Company, whichever is later, and the
undersigned is not, and during the preceding three months has not been, an
affiliate of the Company. The undersigned also acknowledges that future
transfers of the Security must comply with all applicable state securities or
"Blue Sky" laws.
3. This certificate and the statements contained herein are made for
the benefit of the Company.
_________________________
Signature of Holder
Date: _____________
D-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-Q for the three months ended March 31, 2000 and is qualified in its
entirety by reference to such financial statements. (in thousands except
earnings per share)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 23,877
<SECURITIES> 25,529<F4>
<RECEIVABLES> 2,823
<ALLOWANCES> (362)
<INVENTORY> 5,908
<CURRENT-ASSETS> 58,411
<PP&E> 36,506
<DEPRECIATION> 23,461
<TOTAL-ASSETS> 129,558
<CURRENT-LIABILITIES> 22,391
<BONDS> 119,809<F1>
0
0
<COMMON> 55
<OTHER-SE> (12,697)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 129,558
<SALES> 4,863
<TOTAL-REVENUES> 11,669
<CGS> 2,080
<TOTAL-COSTS> 2,080<F3>
<OTHER-EXPENSES> 12,498
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,461
<INCOME-PRETAX> (14,955)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,955)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,955)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)
<FN>
<F1> INCLUDES CONVERTIBLE NOTES AND DEBENTURES AND OTHER LONG-TERM DEBT,
INCLUDING EQUIPMENT FINANCING ARRANGEMENTS.
<F2> INCLUDES ADDITIONAL PAID IN CAPITAL, OTHER ADDITIONAL CAPITAL AND RETAINED
EARNINGS, APPROPRIATED AND UNAPPROPRIATED.
<F3> PER CHIEF ACCOUNTANT AT THE SEC, THIS AMOUNT EXCLUDES SALES AND G&A
EXPENSES, INCLUDES COSTS AND EXPENSES APPLICABLE TO SALES AND REVENUES, AND
TANGIBLE COSTS OF GOODS SOLD.
<F4> INCLUDES RESTRICTED INVESTMENTS.
</FN>
</TABLE>
