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EXHIBIT 10.5
ELAN CORPORATION, PLC
LINCOLN HOUSE
LINCOLN PLACE
DUBLIN 2, IRELAND
ELAN INTERNATIONAL SERVICES, LTD.
102 ST. JAMES COURT
FLATTS, SMITHS PARISH
BERMUDA FL 04
September 28, 1998
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: David E. Robinson
Re: License and Financing Transaction
Ladies and Gentlemen:
This letter of intent (the "Letter of Intent") confirms the agreement
reached by ELAN CORPORATION, PLC, a public limited company organized under the
laws of Ireland ("Elan"), ELAN INTERNATIONAL SERVICES, LTD., a Bermuda
corporation and a wholly-owned subsidiary of Elan ("EIS"), and LIGAND
PHARMACEUTICALS INCORPORATED, a Delaware corporation ("Ligand"), with respect to
(i) the purchase by EIS of an aggregate of 1,716,738 shares of common stock, par
value $0.001 per share, of Ligand (the "Common Stock") at a purchase price of
$11.65 per share, (ii) the purchase by EIS of Zero Coupon Convertible Senior
Notes due 2008 (the "Notes") at an aggregate issue price of up to $110.0 million
and (iii) the licensing by Elan of certain intellectual property to Ligand. This
Letter of Intent shall be binding on the parties hereto and sets forth the basic
terms upon which the parties have agreed. The full terms of the transactions
contemplated hereby shall be set forth in definitive agreements to be prepared
as described below.
The parties agree as follows:
1. License. Elan and Ligand shall enter into a license on terms and
conditions substantially in accordance with those set forth in the term sheet
attached hereto as Exhibit A. The parties acknowledge that Exhibit A sets forth
only the basic terms of the understanding between the parties and is subject to
the further negotiation and preparation of a definitive license agreement (the
"License Agreement") which shall contain additional terms and conditions
customary for transactions of this type. The parties agree to act in good faith
to negotiate,
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execute and deliver the License Agreement on or before October 31, 1998, or such
other date as the parties shall mutually agree (the "Closing Date").
2. Purchase of Common Stock and Notes. EIS shall purchase from Ligand
and Ligand shall sell to EIS the Common Stock and the Notes on terms and
conditions substantially in accordance with those set forth in the term sheets
attached hereto as Exhibits B and C, respectively. The parties acknowledge that
each of Exhibit B and C sets forth only the basic terms of the understanding
between the parties and is subject to the further negotiation and preparation of
definitive securities purchase and related agreements relating to the Initial
Shares (as defined in Exhibit B hereto) (the "Initial Purchase Agreement") and
the Additional Shares (as defined in Exhibit B hereto) and the Notes (the
"Additional Purchase Agreement" and, together with Initial Purchase Agreement,
the "Purchase Agreements"), which shall contain additional terms and conditions
customary for transactions of this type. The parties agree to act in good faith
to negotiate, execute and deliver the Initial Purchase Agreement on or before
September 30, 1998 and the Additional Purchase Agreement on or before the
Closing Date. The Purchase Agreements and the License Agreement are collectively
referred to herein as the "Definitive Agreements."
3. Certain Conditions. (a) The obligation of Elan and EIS to consummate
the transaction contemplated by the Definitive Agreements shall be subject to
conditions precedent customary for transactions of such type, including, but not
limited to, the following: (1)(a) Ligand shall have executed and delivered and
issued to EIS, the applicable Purchase Agreement, and such other reasonable and
customary documents and instruments as provided therein or as EIS may otherwise
reasonably request with respect to the transactions contemplated by Exhibits B
and C hereto, (b) Ligand shall have executed and delivered the Tenth Addendum to
the Amended Registration Rights Agreement, dated as of June 24, 1994, among
Ligand and the persons party thereto (the "Registration Rights Agreement"),
providing for the registration rights set forth in Exhibit B hereto and (c) with
respect to the transactions contemplated by the Additional Purchase Agreement
and the License Agreement, Ligand shall have executed and delivered the License
Agreement, and such other reasonable and customary documents and instruments as
provided therein or as Elan may otherwise reasonably request in respect of the
transactions contemplated by Exhibit A hereto, which, in the case of each of
clauses (a), (b) and (c), when duly executed and delivered by Ligand shall be
valid, binding and enforceable and in full force and effect, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and to general
principles of equity, and there shall be no breach or default by Ligand
thereunder; (2) there shall not have occurred from the date hereof through and
including the Initial Closing Date (as defined in Exhibit B) or the Closing
Date, as the case may be, any material adverse change or event that could
reasonably be expected to result in a material adverse change in the business,
assets, liabilities (contingent or otherwise), operations, condition (financial
or otherwise), solvency, properties, prospects or material agreements of Ligand
and its subsidiaries, taken as a whole (a "Material Adverse Change"); (3) Ligand
shall not have breached or defaulted in any of its
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material obligations hereunder and thereunder and its representations herein and
therein shall be true and correct in all material respects, as if made on and as
of the Initial Closing Date or the Closing Date, as the case may be; (4) no
consent, approval or filing (with any governmental authority or otherwise) on
the part of Ligand shall be required for the execution, delivery or performance
of the Definitive Agreements or the Registration Rights Agreement, or, if
required, such approval shall have been obtained and any applicable waiting
periods in respect thereof shall have elapsed; and (5) with respect to the
transactions contemplated by the Additional Purchase Agreement and the License
Agreement, that certain Preferred Share Rights Agreement, dated as of September
13, 1996, between Ligand and Wells Fargo Bank, N.A., as amended from time to
time (the "Rights Agreement"), shall have been amended in form and substance
reasonably satisfactory to Elan, so that the transactions contemplated by the
Definitive Agreements will not require the issuance of any Rights (as defined in
the Rights Agreement) thereunder.
(b) The obligation of Ligand to consummate the transaction contemplated
by the Definitive Agreements shall be subject to conditions precedent customary
for transactions of such type, including, but not limited to, the following:
(1)(a) EIS shall have executed and delivered to Ligand the applicable Purchase
Agreement, and such other reasonable and customary documents and instruments as
provided therein or as Ligand may otherwise reasonably request with respect to
the transactions contemplated by Exhibits B and C hereto, (b) EIS shall have
executed and delivered the Registration Rights Agreement and (c) with respect to
the transactions contemplated by the Additional Purchase Agreement and the
License Agreement, Elan shall have executed and delivered the License Agreement,
and such other reasonable and customary documents and instruments as provided
therein or as Ligand may otherwise reasonably request in respect of the
transactions contemplated by Exhibit A hereto, which, in the case of each of
clauses (a), (b) and (c), when duly executed and delivered by Elan or EIS, as
the case may be, shall be valid, binding and enforceable and in full force and
effect, subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and to general principles of equity, and there shall be no breach or default by
Elan or EIS, as the case may be, thereunder; (2) neither Elan nor EIS shall have
breached or defaulted in any of its material obligations hereunder and
thereunder and its representations herein and therein shall be true and correct
in all material respects, as if made on and as of the Initial Closing Date or
the Closing Date, as the case may be; and (3) no consent, approval or filing
(with any governmental authority or otherwise) on the part of Elan or EIS shall
be required for the execution, delivery or performance of the Definitive
Agreements, or, if required, such approval shall have been obtained and any
applicable waiting periods in respect thereof shall have elapsed.
(c) In the event that the Definitive Agreements shall not have been
executed and delivered on or prior to the later of (i) October 31, 1998 and (ii)
the expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (including as a result of the material
breach or default hereunder by either EIS or Elan, on the one hand, or
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Ligand, on the other hand), the non-defaulting party or parties shall have the
right to terminate this Letter of Intent by written notice to the other(s),
whereupon the transactions contemplated hereby shall be canceled and of no
further force and effect; provided that, notwithstanding the termination of this
Letter of Intent, each party shall remain liable to the other for or in respect
of any breach or default which shall have occurred prior to such date.
4. Representations and Certain Covenants. (a) Ligand represents to Elan
and EIS the following: (i) Ligand has full corporate power and authority to
execute, deliver and perform its obligations under this Letter of Intent, the
Definitive Agreements and the Registration Rights Agreement and to consummate
the transactions contemplated hereby and thereby, and this Letter of Intent has
been duly executed and delivered and constitutes the legal and valid obligation
of Ligand and is enforceable against Ligand in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and to
general principles of equity; (ii) the Common Stock and the Notes contemplated
to be issued by Exhibits B and C hereto have been or will be duly and validly
authorized and when issued will be fully paid and non-assessable and free from
any and all options, warrants and preemptive and other rights (except as
otherwise provided herein); (iii) Ligand is not in default in any material
respect of its charter or by-laws, any applicable laws or regulations or any
contract or agreement binding upon or affecting it or its properties or assets
and the execution, delivery and performance of this Letter of Intent and the
transactions contemplated hereby will not result in any such violation; and (iv)
since December 31, 1996, the Company has timely filed with the Securities and
Exchange Commission (the "Commission") all forms, reports, schedules, statements
and other documents required to be filed by it (such documents, as supplemented
and amended since the time of filing, collectively, the "SEC Documents"); the
SEC Documents, including any financial statements or schedules included therein,
at the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) (x) did not contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading, and (y) complied in all material respects with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be; the financial statements of Ligand included
in the SEC Documents at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and dates of
mailing, respectively) complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods indicated (except as indicated in the notes thereto), and fairly
present (subject, in the case of unaudited interim financial statements, to
normal, recurring year-end audit adjustments consistent with past practice), in
all material respects, the consolidated financial position of Ligand and its
subsidiaries as at the dates thereof and the consolidated results of operations
and
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cash flows for the periods then ended; since the date of the last SEC Document
prior to the date hereof, there has been no Material Adverse Change.
(b) Elan and EIS, jointly and severally, represent to Ligand the
following: (i) each of Elan and EIS has full corporate power and authority to
execute, deliver and perform its obligations under this Letter of Intent, the
Definitive Agreements and the Registration Rights Agreement, as the case may be,
and to consummate the transactions contemplated hereby and thereby, and this
Letter of Intent has been duly executed and delivered and constitutes the legal
and valid obligation of Elan and EIS and is enforceable against Elan and EIS in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity; (ii) neither
Elan nor EIS is in default in any material respect of its charter or by-laws,
any applicable laws or regulations or any contract or agreement binding upon or
affecting it or its properties or assets and the execution, delivery and
performance of this Letter of Intent and the transactions contemplated hereby
will not result in any such violation and (iii) neither Elan nor EIS is a "U.S.
person," as defined in Regulation S under the Securities Act.
(c) Ligand shall not, prior to the earlier of (x) the Closing
Date and (y) the abandonment or termination of the transactions contemplated
hereby, as provided in Section 3 above, without the prior written consent of
Elan, (i) make, pay or declare any dividend or distribution to any equity holder
(in such capacity) or redeem any of its capital stock; provided that the payment
by Ligand of cash to holders of Ligand warrants outstanding on the date hereof
in connection with and upon the exercise of such warrants shall, under no
circumstances, be prohibited by this clause (i); (ii) vary its business
practices, in any material respect, from past practices; (iii) enter into any
financing, joint venture, license or similar arrangement; provided that Ligand
may enter into joint venture, licensing or similar arrangements in any country
other than the United States, the United Kingdom, Germany, Japan or France; or
(iv) suffer or permit to be incurred any material liability, obligation, lien or
encumbrance against any of its properties or assets, except in the ordinary
course of business and consistent with past practice.
(d) Ligand shall, prior to the earlier of (x) the Closing Date
and (y) the abandonment or termination of the transactions contemplated hereby,
as provided in Section 3 above, afford to the employees, agents and authorized
representatives of Elan and EIS reasonable access at reasonable times, upon
reasonable prior notice, to Ligand 's properties, offices, files, agreements,
books and records as may be necessary in order that Elan and EIS may have a full
opportunity to conduct such investigations and due diligence reviews as they
shall deem necessary in connection with the transactions contemplated herein.
(e) Elan shall, prior to the earlier of (x) the Closing Date and
(y) the abandonment or termination of the transactions contemplated hereby, as
provided in Section 3 above, afford to the employees, agents and authorized
representatives of Ligand reasonable access at reasonable times, upon reasonable
prior notice, to Elan's files, agreements, books and records relating to Elan's
intellectual property to be licensed to Ligand, as may be necessary in order
that Ligand
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may have a full opportunity to conduct such investigations and due diligence
reviews as it shall deem necessary in connection with the transactions
contemplated by Exhibit A hereto.
(f) Each of Ligand, Elan and EIS shall use their respective
commercially reasonable efforts to complete the Definitive Agreements and close
the transactions contemplated hereby and thereby as soon as practicable, and in
any event not later than October 31, 1998.
5. Confidentiality and Non-disclosure. From and after the date of this
Letter of Intent, none of EIS, Elan or Ligand shall, except as required by
applicable law or judicial or administrative process, disclose to any person or
entity, publicly or privately, this Letter of Intent or the substance of the
transactions contemplated hereby or the involvement of the parties with each
other as contemplated hereby, without the prior written consent of the other
party.
6. Miscellaneous. This Letter of Intent (a) shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to principles of conflicts of laws and, in connection therewith, each
party consents to the non-exclusive jurisdiction of any Federal or state court
sitting in the County, City and State of New York over any dispute arising from
this Letter of Intent; (b) shall not be assigned or delegated by Elan or EIS, on
the one hand, or Ligand, on the other hand, without the consent of the other
party, except that each of Elan and EIS shall have the right to assign or
delegate such rights and/or obligations to any affiliate that is not a "U.S.
person," as defined in Regulation S under the Securities Act, and, subject to
the foregoing, shall be binding upon the parties' respective successors and
assigns; (c) may be executed in counterparts and delivered by facsimile
transmission; and (d) together with the Definitive Agreements and the
Registration Rights Agreement, constitutes the entire agreement among the
parties and supersedes all prior agreements or understandings among the parties.
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Please indicate your approval to the foregoing by signing a copy of this
Letter of Intent where indicated below.
Very truly yours,
ELAN CORPORATION, PLC
By: /s/ illegible
-----------------------------
Name:
Title:
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Kevin Insley
-----------------------------
Name: Kevin Insley
Title: President and Chief
Financial Officer
Agreed to:
LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ David E. Robinson
-------------------------------------
Name: David E. Robinson
Title: Chairman, President & CEO
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EXHIBIT A
TERM SHEET(1)
LIGAND LICENSE
LICENSE An exclusive license (the "License") from Elan
Pharmaceutical Technologies, a division of Elan
Corporation, plc ("Elan"), to Ligand Pharmaceuticals
Incorporated (collectively "Ligand") of Elan's patent
rights and know-how ("Intellectual Property") required
to package, use, promote, distribute, offer for sale and
sell Elan's once-daily solid oral dosage form of
morphine (the "Product").
For the avoidance of doubt, Elan's Intellectual Property
shall exclude patent rights and know-how owned and
licensed by ***
***
***
PRODUCT PRESENTATIONS *** capsules.
*** Ligand and its affiliates undertake ***
***
***
*** in the Territory
during the Term and for *** thereafter.
TRADEMARK Elan shall grant to Ligand a non-exclusive royalty free
license in the Territory (as defined below) for the Term
to use Elan's Morphelan(TM) trademark (the "Trademark")
solely for the purposes of exercising its rights and
performing its obligations under this License.
COMMERCIALIZATION Ligand will diligently pursue the commercialization of
the Product and shall use all *** efforts to market and
promote the Product in the Territory and in doing so,
shall use the same level of effort as with other similar
products of similar sales potential which it markets.
Within *** of the submission of the New Drug Application
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(1) Capitalized terms used in this Term Sheet and not otherwise defined herein
shall have the meanings set forth in Letter of Intent to which this Term
Sheet is attached.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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or its foreign equivalent (the "NDA") in each country of
the Territory, Elan and Ligand shall agree upon
appropriate due diligence obligations on Ligand for
marketing the Product including a promotional support
budget and minimum sales figures for the Product for the
*** following commercial launch of the Product having
regard to standard industry practices.
In the event that the parties are unable to agree upon
such due diligence obligations for the Product within
the time period as set out above, the parties shall
appoint an arbitrator who is technically knowledgeable
in the pharmaceutical industry to choose either Elan's
proposed terms or Ligand's proposed terms on the basis
of which terms he determines to be closer to standard
industry practice.
Ligand shall make a full scale commercial launch of the
Product in each country of the Territory within *** of
NDA approval, including marketing approvals, where
applicable, being granted in such country. Elan shall
not unreasonably withhold its agreement to a request by
Ligand for an extension of the said *** period if there
are legitimate commercial reasons for such an extension
or Elan is unable to timely supply Product for launch.
CO-PROMOTION ELAN
For the period from the date of execution of the
Definitive Agreements up until *** of the Product in
each country of the Territory, Elan shall have a *** to
co-promote the Product in such country of the Territory
for *** *** and on other terms to be agreed in good
faith between the parties and having regard to standard
industry practices in such country of the Territory.
LIGAND
For the period from the date of execution of the
Definitive Agreements up until *** *** for the Product
in each Member State of the European Union (excluding
Ireland and the United Kingdom), whether on an
individual approval basis or through the European
centralized procedure, Ligand shall have a *** to
co-promote the Product in such Member State of the
European Union for ***
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*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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*** on terms to be agreed in good faith between the
parties and having regard to standard industry practices
in such Member State of the European Union; provided
that Ligand has established an appropriate sales force
in such Member State.
In the event that the parties are unable to agree upon
the terms for co-promotion of the Product by either
party as set out above, the parties shall appoint an
arbitrator who is technically knowledgeable in the
pharmaceutical industry to choose either Elan's proposed
terms or Ligand's proposed terms for the co-promotion on
the basis of which terms he determines to be closer to
standard industry practice.
PROJECT TEAM Elan and Ligand shall establish a project team (on which
they shall have equal representation) to supervise the
day-to-day activities related to the co-operative
aspects of the research, development and
commercialization of the Product. Disputes within the
project team that cannot be resolved by consensus will
be resolved by a management committee team (on which
they shall have equal representation) from Ligand and
Elan. If such management committee team cannot resolve
the matter, the dispute will be referred to a designated
senior officer of each of Elan and Ligand.
LICENSED TERRITORY United States of America and its territories and Canada
(the "Territory").
TERM The greater of (a) the life of the patent rights in the
relevant country or countries within the Territory and
(b) ***
Not later than *** prior to the expiration of the Term
for a given country, Elan and Ligand shall enter into a
long-term supply agreement upon terms and conditions to
be mutually agreed between the parties. If the parties
fail to enter into such a long-term supply agreement,
Elan shall grant Ligand a license to the know-how to
manufacture the Product upon terms and conditions to be
mutually agreed between the parties.
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*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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SUBLICENSE AND
ASSIGNMENT RIGHTS *** shall ***
***
Neither party shall be entitled to assign this agreement
without the prior written consent of the other party,
save that either party may assign the License to their
respective affiliates provided that there is not an
adverse tax consequence for the other party.
CERTAIN CHANGES OF
CONTROL In the event that (a) a technological competitor to Elan
or its affiliates *** shall, directly or indirectly,
acquire ***% or more of the capital stock of Ligand, or
otherwise control or influence in any material respect
their management or business, or (b) any other person or
entity shall acquire ***% or more of the voting stock of
Ligand, or otherwise merge, consolidate or enter into
any similar transaction (or binding agreement in respect
thereof) with any of such entities, the License, at ***
*** provided, however, that the foregoing shall not
apply in relation to any exercise of any options by Elan
as contemplated by the definitive documents.
LICENSE ROYALTIES
PAYABLE BY LIGAND
TO ELAN In consideration of the rights and license of the Elan
patent rights for the Product, Ligand shall pay the
following amounts to Elan:
$5,000,000 in cash or in Common Stock (valued at $11.65
per share), at Ligand's option, upon signing of the
License;
$10,000,000 payable through an increase in the Notes, as
described in Exhibit C to the Letter of Intent, upon
signing of the License;
$*** in cash or in Common Stock (valued at a price per
share equal to the ***
***
***
***
*** and
$*** in cash or in Common Stock (valued at a price per
share equal to the ***
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*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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***
***
*** at Ligand's option, upon
***
PATENTS The substantive documents shall contain mutually-
agreeable provisions on filing, prosecution,
enforcement and maintenance.
REGULATORY APPROVALS Regulatory approvals for the Product in the Territory
shall be prosecuted and owned by Elan.
SUPPLY OF PRODUCT Ligand shall purchase the Product exclusively from Elan.
Product shall be supplied to Ligand in finished market
packs Ex Works the manufacturing facility designated by
Elan.
Elan shall advise Ligand of a minimum batch size for the
manufacture and supply of each dosage strength of
Product.
Ligand shall provide quarterly forecast updates on a
rolling *** basis to Elan. The *** of such forecast will
be binding.
In the event of a failure to supply (to be defined) by
Elan, Elan shall grant to Ligand a production license to
manufacture the Product.
PRICE OF PRODUCT The price to be charged by Elan to Ligand for the supply
of Product for commercial sale in the Territory shall
be:
- ***% of NSP for the *** *** for Product in the
Territory;
- ***% of NSP for the *** *** for Product in the
Territory; and
- ***% of NSP for *** during the Term of the Agreement.
Product for distribution as *** promotional samples
shall be supplied by Elan to Ligand at *** ***
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*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
13
In no event shall Elan be required to supply Product for
commercial sale to Ligand *** ***
NSP shall mean in the case of Product sold by Ligand or
an affiliate, that sum determined by ***
***
*** for the Product by Ligand or, its affiliate, as the
case may be, in accordance with standard accounting
principles, a maximum deduction of ***% to cover the
following:-
(a) customs duties or other taxes (excluding income or
corporation tax), directly related to the sale of the
Product which are paid by Ligand or its affiliates as
the case may be;
(b) a discount from the gross sales proceeds to cover
such normal costs as are incurred by Ligand or its
affiliates, as the case may be, in respect of transport,
shipping insurance, returns, discounts directly related
to the sale of the Product.
In Market shall mean the sale of the Product in the
Territory by Ligand or its Affiliates, to an
unaffiliated third party, including but not limited to a
wholesaler, chain store, distributor, managed care
organization, hospital or pharmacy.
Fully Allocated Cost shall include direct labour, direct
materials and supplies, variable labor, overhead and
attributable administration, quality control, quality
assurance and other costs; such costs to be calculated
in accordance with ***
PRODUCT SUPPORT Elan shall be responsible, ***, for the completion
of the clinical studies for the Product listed in
Schedule I, which are currently in progress. For the
avoidance of doubt, Ligand shall be responsible for the
cost of all development work and/or clinical trials on
the Product in addition to such ongoing clinical
studies. ***
Ligand shall commit to undertake additional clinical
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*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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expenditure, including ***
***
***
*** which shall include direct
labor, overhead and attributable administration, quality
control, quality assurance and other costs, calculated
in accordance with *** during the *** following
submission of the NDA in the United States.
CUSTOMARY TERMS The License will contain customary terms, including
terms and conditions relating to payments; patent rights
and related protection and prosecutions; auditing and
review rights, confidentiality; representations and
warranties; indemnities; and other customary provisions.
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*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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SCHEDULE I
MORPHLEAN CLINICAL DEVELOPMENT PROGRAM
STUDY I.D. TRIAL NAME LOCATION COMPARATOR STUDY VOLUNTEERS/ CRO ESTIMATED ESTIMATED STATUS/
DESIGN PATIENTS START COMPLETE COMMENTS
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***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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EXHIBIT B
TERM SHEET(1)
COMMON STOCK
INITIAL CLOSING On September 30, 1998 (the "Initial Closing Date"),
Ligand will sell to EIS and EIS will purchase from Ligand
1,278,970 shares of Common Stock (the "Initial Shares")
at a purchase price of $11.65 per share, subject to
customary anti-dilution adjustments for, among other
things, stock splits, stock dividends and similar
transactions that occur between the date of the Letter of
Intent and the Initial Closing Date.
ADDITIONAL CLOSING On the Closing Date, Ligand will sell to EIS and EIS will
purchase from Ligand, 437,768 shares of Common Stock,
(the "Additional Shares" and, together with the Initial
Shares, the "Shares") at a purchase price of $11.65 per
share, subject to customary anti-dilution adjustment for,
among other things, stock splits, stock dividends and
similar transactions that occur between the date of the
Letter of Intent and the Closing Date.
REGISTRATION RIGHTS Elan, EIS and Ligand shall enter into the Registration
Rights Agreement, providing to Elan and EIS the
registration rights set forth therein with respect to the
Shares and all shares of Common Stock issued or issuable
by Ligand under the License Agreement and upon the
conversion of the Notes. Notwithstanding the foregoing,
Elan, EIS and Ligand shall, prior to the termination of
the Registration Rights Agreement in accordance with
Section 1.17 thereof, enter into a new registration
rights agreement (the "New Registration Rights
Agreement"), to be effective upon such termination,
having terms and conditions identical to those in the
Registration Rights Agreement and providing registration
rights for the Shares and the Common Stock issued or
issuable by Ligand under the License Agreement and upon
conversion of the Notes. The New Registration Rights
Agreement shall expire on the later of (i) December 31,
2003 and (ii) the date on which no Notes are outstanding.
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(1) Capitalized terms used in this Term Sheet and not otherwise defined herein
shall have the meaning set forth in Letter of Intent to which this Term
Sheet is attached.
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STANDSTILL For a period of *** after the Closing Date, neither Elan
nor any of its affiliates shall, without the consent of
Ligand, acquire beneficial ownership of any Common Stock
or any securities of Ligand convertible into or
exchangeable for Common Stock, or any other rights to
acquire Common Stock, if, after giving effect to such
acquisition, Elan and its affiliates would own or
otherwise have the right to acquire more than 25.0% of
the outstanding Common Stock, on a fully diluted basis;
provided that this provision shall terminate and be of no
further force and effect upon the acquisition of, or
public announcement of an intent to acquire, beneficial
ownership (as defined under Rule 13d-3 of the Exchange
Act) by any person or Group (as defined in Exhibit C to
the Letter of Intent), of more than ***% of the
outstanding Common Stock; provided that, at any time on
or after the second anniversary of the Closing Date, Elan
and its affiliates may communicate with a committee of
Ligand's then-independent directors regarding a
negotiated acquisition of all, but not less than all, of
the Common Stock then outstanding.
RESTRICTIONS ON
TRANSFER From the date hereof until the *** of the Closing Date,
Elan shall not, and shall not permit any of its
affiliates to, without the consent of Ligand, directly or
indirectly, sell, offer to sell, contract to sell, grant
any option to purchase or otherwise transfer or dispose
of any of the Additional Shares, except for the sale or
transfer of Additional Shares among Elan and its
affiliates; provided that this provision shall terminate
and be of no further force and effect with respect to the
Initial Shares in the event that the Letter of Intent is
abandoned or terminated in accordance with Section 3
thereof.
PREEMPTIVE RIGHTS The Shares, together with the shares of Common Stock
issued to EIS under the License Agreement and upon
conversion of the Notes, shall possess preemptive
rights.
2
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BOARD REPRESENTATION So long as Elan and its affiliates own not less than
15.0% of the outstanding Common Stock (assuming the
conversion of all Notes owned by Elan and its
affiliates), Elan shall be entitled to designate one
director (the "Elan Designee") to Ligand's board of
directors. Ligand shall use its best efforts to cause
and maintain the election of the Elan Designee to the
Ligand board of directors.
CONDITIONS The purchase of the Shares shall be subject to
conditions precedent customary for transactions
of this type, including, but not limited to,
those set forth in the Letter of Intent.
3
19
EXHIBIT C
TERM SHEET(1)
ZERO COUPON CONVERTIBLE SENIOR NOTES
DUE 2008
THE NOTES Zero Coupon Convertible Senior Notes due 2008 (the
"Notes").
ISSUE PRICE The Notes will have an issue price (the "Issue
Price") representing a yield to maturity of 8.0% per
annum (computed on a semi-annual bond equivalent basis).
INITIAL FUNDING On the Closing Date, Ligand will issue to EIS
and EIS will purchase from Ligand, Notes at the Issue
Price of $30,000,000 (the "Initial Notes").
SUBSEQUENT FUNDING Ligand may, upon *** on or prior to December 31, 1999,
upon not less than 60 days' prior written notice to
Elan, cause EIS to purchase additional Notes at the
Issue Price of up to an aggregate of $80,000,000 (the
"Additional Notes"); provided that, the proceeds to
Ligand resulting from any such purchase shall be used by
Ligand solely to (i) make a $10,000,000 payment to Elan
in connection with the execution and delivery of the
License Agreement, (ii) make the remaining milestone
payments, if any, due to the stockholders, creditors and
other obligees of Seragen, Inc. ("Seragen"), in
accordance with that certain Agreement and Plan of
Reorganization, dated as of May 11, 1998, among Seragen,
Ligand and Knight Acquisition Corp., (iii) pay the
purchase price for the assets of Marathon
Biopharmaceuticals, LLC ("Marathon"), in accordance with
that certain Option and Asset Purchase Agreement, date
as of May 11, 1998, among Ligand, Marathon, 520
Commonwealth Avenue Real Estate Corp. and 660
Corporation and (iv) otherwise finance the development
of Ligand's business principally through product,
technology and other acquisitions. The purchase by EIS
of any Additional Note shall be conditioned upon the
receipt by Elan of written notice stating in reasonable
detail the proposed use by Ligand of the proceeds to be
received from such purchase and, in the event that
Ligand proposes to use such proceeds (a) for the
purposes set forth in
- ------------
(1) Capitalized terms used in this Term Sheet and not otherwise defined herein
shall have the meaning set forth in Letter of Intent to which this Term
Sheet is attached.
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clauses (ii) or (iii) of the immediately preceding
sentence, Elan shall have completed, to its reasonable
satisfaction, a confirmatory due diligence investigation
relating thereto or (b) for the purposes set forth in
clause (iv) of the immediately preceding sentence, Elan,
in its sole discretion, shall have consented in writing
to such use. Notwithstanding the foregoing, in no event
shall EIS be obligated to purchase Notes, the aggregate
Issue Price of which exceeds $110,000,000.
DENOMINATIONS; FORM The Notes will be issued in minimum denominations of
$1,000 principal amount at maturity and integral
multiples thereof. The Initial Note will be represented
by one physical note and each Additional Note, if any,
issued to EIS will be represented by one physical note.
INTEREST No periodic interest payments will be made on the Notes.
CONVERSION-INITIAL
NOTES The Issue Price of the Initial Note, together with all
accrued original issue discount thereon, will be
convertible into Common Stock, at the option of EIS, at
any time on or prior to maturity, unless previously
redeemed or otherwise purchased by Ligand, at a
conversion rate equal to $14.00 per share. The
conversion rate for the Initial Note will be subject to
customary adjustments upon the occurrence of certain
events.
CONVERSION-ADDITIONAL
NOTES The Issue Price of any Additional Note, together with
all accrued original issue discount thereon, will be
convertible into Common Stock, at the option of EIS, at
any time on or prior to maturity, unless previously
redeemed or otherwise purchased by Ligand, at a per
share conversion rate equal to (i)
***
***
***
the date of issuance of such Additional Note plus (ii) a
premium equal to the ***
***
***
***
***
provided that such conversion rate shall in no event be
less than $14.00 per share or greater than $20.00 per
share. The conversion rate for such Additional Note will
be subject to customary adjustments upon the occurrence
of certain events.
2
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RANKING The Notes will be general unsecured obligations of
Ligand, ranking pari passu in right of payment with all
existing and future unsubordinated indebtedness of
Ligand and senior in right of payment to all existing
and future subordinated indebtedness of Ligand.
SINKING FUND None.
OPTIONAL REDEMPTION The Notes will not be redeemable by Ligand prior to the
third anniversary of the Closing Date. On and after such
date, the Notes will be redeemable for cash at any time
at the option of Ligand, in whole or in part, at a
redemption price equal to the Issue Price thereof plus
accrued original issue discount thereon through the
date of redemption.
In addition, upon a Change of Control (as defined below)
of Elan occurring prior to the third anniversary of the
Closing Date, Ligand may, at its option, within 30 days
following such Change of Control, upon not less than 10
days' prior written notice, (i) purchase all, but not
less than all, of the Initial Shares (provided that the
Letter of Intent shall not have been abandoned or
terminated in accordance with Section 3 thereof), the
Additional Shares and the shares of Common Stock
received by Elan or its affiliates upon conversion of
the Notes and in lieu of cash payments under the License
Agreement, in each case, then owned by Elan and its
affiliates and (ii) redeem the Notes, in whole but not
in part, in each case, for a cash purchase price
determined in accordance with this paragraph; provided
that, Ligand shall be required to both purchase such
Common Stock and redeem all of the Notes if any are so
purchased or redeemed. The purchase price per share for
the Common Stock shall be the greater of
***
***
***
3
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***
***
***
The Notes shall not be convertible during the period
from the date of such Change of Control until the
earlier of (i) notice by Ligand that it does not intend
to repurchase the Notes and (ii) the date of redemption;
provided that the failure by Ligand to deliver a notice
of repurchase to Elan on or before the 20th calendar day
following such Change of Control shall constitute a
notice that Ligand does not intend to repurchase the
Notes.
For purposes of this Term Sheet, a "Change of Control"
with respect to Elan or Ligand (in each case, the
"company") will be deemed to have occurred at such time
as (i) any 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 power of the common
stock of the company, (ii) there shall be consummated
any consolidation or merger of the company in which the
company is not the continuing or surviving corporation
or pursuant to which the common stock of the company
would be converted into cash, securities or other
property, other than a merger or consolidation of the
company in which the holders of the common stock of the
company outstanding immediately prior to the
consolidation or merger hold, directly or indirectly, at
least a majority of the common stock of the 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 the company
(together with any new directors whose election by such
board of directors or whose nomination for election by
the shareholders of the company 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 the company.
4
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PURCHASE AT THE OPTION
OF THE EIS The Notes will be purchased by Ligand, at the option of
EIS, on each of the fourth and seventh anniversaries of
the Closing Date, for a purchase price in cash equal to
the Issue Price thereof plus accrued original issue
discount thereon through the date of purchase; provided
that Ligand, at its option, may elect to pay such
purchase price in shares of Common Stock (based upon a
quotient obtained by dividing (i) the amount of cash to
which EIS would have been entitled had Ligand elected to
pay the purchase price in cash by (ii) the ***
***
***
***
***
In addition, upon a Change of Control of Ligand, the
Notes will be purchased for cash by Ligand, at the
option of EIS, for a change of control purchase price
equal to the Issue Price plus accrued original issue
discount thereon through the date of purchase.
CONDITIONS The conditions to the purchase of the Initial Note and
the Additional Note, if any, by EIS shall be subject to
conditions precedent customary for transactions of this
type including, but not limited to, those set forth in
the Letter of Intent.
5
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