EXHIBIT 10.1
PETER W. CARTER
(612) 340-5635
FAX (612) 340-2868
CARTER.PETER@DORSEY.COM
February 26, 2007
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, CA 92121
Attn: Warner Broaddus, Esq., General Counsel
Re: INDEMNITY FUND AGREEMENT WITH LIGAND PHARMACEUTICALS INCORPORATED(THE
"COMPANY")
Dear Warner:
This letter will constitute the agreement between the Company and
Dorsey as authorized by the Board of Directors of the Company (the "Board") on
December 7, 2006.
For purposes of this agreement, "Legacy Directors" means, collectively,
Henry F. Blissenbach, Alexander D. Cross, John Groom, Irving S. Johnson, John W.
Kozarich, Carl Peck and Michael A. Rocca; "Restatement" means the Company's
restatement of its consolidated financial statements as of December 31, 2003 and
for the years ended December 31, 2003 and 2002, and as of and for the first
three quarters of 2004, and for the quarters of 2003; "SEC Investigation" means
the SEC's pending investigation regarding certain matters in connection with the
Restatement; "Legacy Matters" means, collectively, any matters in connection
with the SEC Investigation or other matters relating to the periods covered by
the Restatement; and "Legacy Matter Liabilities and Defense Costs" means,
collectively, any liabilities and/or defense costs of the Legacy Directors which
are a) incurred in connection with the SEC Investigation or other Legacy Matters
and b) which the Company is obligated to pay or advance on behalf of the Legacy
Directors or other directors named herein under the existing indemnification
agreements between the Company and each such director (the "Indemnification
Agreements").
Pursuant to the Board's authorization, Ligand will fund an indemnity
fund account to be maintained by Dorsey in an interest-bearing Dorsey trust
account in the amount of $10,000,000 (the "Indemnity Fund"). Subject to
fulfillment of the prerequisites of the Indemnification Agreements, the
Indemnity Fund will be disbursed by Dorsey, on behalf of the Legacy Directors,
against any Legacy Matter Liabilities and Defense Costs incurred by the Legacy
Directors, including Dorsey's legal fees and disbursements and the fees and
disbursements of any other advisor or counsel retained by the Legacy Directors
with the consent of the Company or in accordance with the Indemnification
Agreements. All disbursements must be made in accordance with the
Indemnification Agreements, documented by appropriate invoices which shall be
provided to the Company and approved by 1) Dorsey, 2) a representative of the
Legacy Directors and 3) a duly authorized officer of the Company; provided,
however, that as to any Legacy Matter Liabilities and Defense Costs in
connection with the SEC Investigation, the
Company acknowledges the following: (i) the prerequisites of the Indemnification
Agreements have been fulfilled; (ii) the Company has determined that the Legacy
Directors are entitled to indemnification and advancement under the
Indemnification Agreements; (iii) Dorsey has been approved by the Company to
represent the Legacy Directors in connection with the SEC Investigation; and
(iv) that Dorsey is authorized to disburse from the Indemnity Fund in connection
therewith without receipt of prior approval from the Company.
In the event that any of the following additional directors of the
Company, Daniel S. Loeb, Jeffrey R. Perry, Brigitte Roberts or Jason Aryeh,
should incur any Legacy Matter Liabilities or Defense Costs, the Indemnity Fund
will also be available, on the terms and conditions outlined in the foregoing
paragraph, to be disbursed by Dorsey on behalf of such directors against any
Legacy Matter Liabilities or Defense Costs incurred by them.
The Indemnity Fund will be maintained by Dorsey in an interest-bearing
trust account in accordance with Dorsey's customary trust account procedures and
Dorsey will provide the Company with a monthly trust account statement which
will reflect applications of the Indemnity Fund and the balances remaining from
time to time. Dorsey shall pay out interest that accrues in the Indemnity Fund
to Ligand on a quarterly basis. Ligand agrees to supplement the Indemnity Fund
upon Dorsey's request should it become insufficient to cover Legacy Matter
Liabilities and Defense Costs due and required by the Indemnification Agreements
to be paid by the Company.
Upon the earlier of (i) the satisfaction of all Legacy Matter
Liabilities and Defense Costs and the resolution of all matters or potential
matters involving any Legacy Directors or other Ligand directors named above
relating to the SEC Investigation or any other Legacy Matter or (ii) the
expiration of twenty-four (24) months after receipt of any written or oral
communication initiated by the SEC regarding the SEC Investigation (iii) written
communication from the SEC that the SEC Investigation has been discontinued
without any unsatisfied Legacy Matter Liabilities or (iv) otherwise by the
mutual agreement of the parties to terminate this Agreement, Dorsey will
promptly remit the remaining balance of this Indemnity Fund plus accrued
interest to Ligand.
This Agreement is in furtherance of, and not intended to alter, add to
or waive any provision of the Indemnification Agreements, except to the extent
specifically provided herein. Disbursements from the Indemnity Fund shall in all
events be subject to the terms and conditions of the Indemnification Agreements,
except to the extent otherwise specifically provided herein. The form of
undertaking to be signed by each director as a condition of advancement, as set
forth in the Company's bylaws, is attached hereto as EXHIBIT A.
We greatly appreciate the opportunity to be of service. If you have any
questions about these escrow arrangements, please call me. If not, please sign
the enclosed copy of this letter and return it in the enclosed envelope and make
arrangements to transfer the Indemnity Fund amount to our trust account for
which the wire instructions appear below. Please keep the original of this
letter for your file.
Very truly yours,
/s/ Peter W. Carter
Peter W. Carter
PWC/skb
Accepted and agreed to:
Ligand Pharmaceuticals Incorporated
By: /s/ John L. Higgins
Name: John L. Higgins
Title: Cheif Executive Office and President
Dorsey Trust Account Wire Instructions:
U.S. Bank National Association
800 Nicollet Mall
Minneapolis, MN 55402
ABA Routing Number: 091000022
Account Number: 1602-3010-8765
Account Name: Dorsey & Whitney Trust Account
Message: 3819/476635-2
EXHIBIT A
Dated: ___________, 200_
General Counsel
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, CA 92121
Dear Sir/Madam:
As a director of Ligand Pharmaceuticals, Incorporated I am entitled to
indemnification for liabilities and advancement of expenses incurred in
connection with the pending SEC investigation and otherwise for matters relating
to the periods covered by the restatement (any such matters, collectively, the
"Legacy Matters") of the Company's consolidated financial statements as of
December 31, 2003 and for the years ended December 31, 2003 and 2002, and as of
and for the first three quarters of 2004 and for the quarters of 2003.
By this letter, I request that the Company advance any expenses I incur
in connection with the Legacy Matters. My signature below confirms that I agree
that any advancement by the Company of expenses reasonably incurred on my behalf
will be subject to the undertakings and conditions set forth herein. I represent
in good faith that I meet the standard of conduct necessary for indemnification
under Section 145 of the Delaware General Corporation Law ("Section 145"): (1)
to the extent of my involvement in any civil matters that are the subject of the
Legacy Matters, that I acted in good faith and in a manner I reasonably believed
to be in or not opposed to the best interests of the Company; and (2) to the
extent of my involvement in any criminal matters that are the subject of the
Legacy Matters, that I had no reasonable cause to believe my conduct was
unlawful. Article VII, section 4 of the Company's Bylaws, Section 145 and the
Indemnification Agreement between me and the Company ( "Indemnification
Agreement") require that, should it ultimately be determined that I am not
entitled to be indemnified by the Company as authorized under those provisions,
all advance payments made by the Company on my behalf must be repaid to the
Company.
Accordingly, I undertake to repay all amounts advanced by the Company
hereunder in connection with the Legacy Matters if, and to the extent, it should
ultimately be determined that, with respect to the subject matter of the Legacy
Matters, I am not entitled to be indemnified under Article VII of the Company's
Bylaws, under the Indemnification Agreement, or otherwise. I further agree that,
by advancing defense expenses on my behalf, the Company does not waive or limit
any right to recoupment of such expenses from any insurance policies which may
be available.
Very truly yours,
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