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CONTINGENT VALUE RIGHTS AGREEMENT
This CONTINGENT VALUE RIGHTS AGREEMENT (this Agreement ), dated September 30, 2020, is by and between Ligand
Pharmaceuticals Incorporated, a Delaware corporation ( Parent ) and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company, as rights agent (the Rights Agent ).
a Delaware corporation (the Company ), Parent and Pelican Acquisition Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ( Acquisition Sub ) have entered into an Agreement and Plan of Merger,
dated as of August 10, 2020 (as it may be amended or supplemented from time to time pursuant to the terms thereof, the Merger Agreement ). Capitalized terms used but not otherwise defined in this Agreement shall have the
meanings ascribed to them in the Merger Agreement.
B. Pursuant to the Merger Agreement, Acquisition Sub (a) has agreed to commence a
tender offer (the Offer ) to acquire all of the outstanding shares of Company Common Stock and (b) will, following consummation of the Offer, merge with and into the Company (the Merger ), with the Company
surviving the Merger as a wholly owned subsidiary of Parent.
C. Pursuant to the Merger Agreement, and in accordance with the terms and
conditions thereof, Parent has agreed to provide the Holders (as defined below) certain contingent value rights upon the achievement of a certain milestone as hereinafter described in accordance with the terms of this Agreement and of the Merger
D. The Rights Agent is willing to act in connection with the issuance, transfer, exchange and payment of such contingent value
rights as provided herein.
The parties to this Agreement therefore agree as follows:
1.1 Holders of CVRs; Appointment of Rights Agent.
(a) Pursuant to the terms of the Merger Agreement, as of the Effective Time (i) each holder of any shares of
Company Common Stock that is converted into the right to receive the Merger Consideration shall, as part of such Merger Consideration, be entitled to one CVR for each such share of Company Common Stock, and (ii) each holder of any In-the-Money Company Option that is cancelled in exchange for the right to receive the excess of the Merger Consideration over the per share exercise price of each such In-the-Money Company Option shall, as part of such Merger Consideration, be entitled to receive one CVR for each share of Company Common Stock underlying each such In-the-Money Company Option. For the avoidance of doubt, no CVR shall be issued with respect to any Out-of-the-Money Company Options or any portion of In-the-Money Company Options that vest based on performance that do
not vest in accordance with Section 2.8(d) of the Merger Agreement. The initial Holders shall be determined pursuant to the terms of the Merger Agreement and this Agreement, and a list of the initial Holders shall be furnished to the Rights
Agent by or on behalf of Parent in accordance with Section 3.1 hereof.
(b) Parent hereby appoints the Rights Agent to act as rights agent
for Parent in accordance with the express terms and conditions set forth in this Agreement, and the Rights Agent hereby accepts such appointment.
1.2 Nontransferable. CVRs may not be sold, assigned, transferred, pledged, encumbered or disposed of in any
other manner, in whole or in part, other than pursuant to a Permitted Transfer, and, in the case of a Permitted Transfer, only in accordance with Section 1.3(c) hereof. Any attempted sale, assignment, transfer, pledge, encumbrance or
disposition of CVRs, in whole or in part, in violation of this Section 1.2 shall be void ab initio and of no effect.
1.3 No Certificate; Registration; Registration of Transfer; Change of Address.
(a) CVRs shall not be evidenced by a certificate or other instrument.
(b) The Rights Agent shall keep a register (the CVR Register ) for the purposes of
(i) identifying the Holders of CVRs and (ii) documenting CVRs and Permitted Transfers thereof, which CVR Register may be amended from time to time by the Rights Agent to reflect any changes to Holders or applicable number of CVRs as
permitted hereunder, including to reflect any repurchases by Parent of CVRs. The CVR Register will initially show one position for Cede & Co. representing all of the CVRs that are issued to the former holders of shares of Company Common
Stock held by DTC on behalf of the former street holders of the shares of Company Common Stock. With respect to any payments to be made under Section 1.4 below, the Rights Agent will accomplish such payment to any former street name holders of
the shares of Common Stock by sending such payments to DTC. The Rights Agent will have no responsibilities whatsoever with regard to the distribution of payments by DTC to such street name holders.
(c) Without limiting the restriction on transferability set forth in Section 1.2, every
request made to transfer a CVR must be in writing and accompanied by a written instrument of transfer and other requested documentation in form reasonably satisfactory to the Rights Agent, duly executed by the registered Holder or Holders thereof,
or by the duly appointed legal representative, personal representative or survivor of such Holder or Holders, setting forth in reasonable detail the circumstances relating to the transfer demonstrating that such proposed transfer is a Permitted
Transfer. Upon receipt of such written notice, the Rights Agent shall promptly notify Parent in writing that it has received such written notice. Upon receipt of such notice from the Rights Agent, Parent shall in good faith reasonably determine
whether the transfer is a Permitted Transfer and otherwise complies with the other terms and conditions of this Agreement, and if Parent so reasonably determines that such transfer does so comply, Parent shall instruct the Rights Agent in writing to
register the transfer of the applicable CVRs in the CVR Register. All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent, evidencing the same right, and entitling the transferee to the same benefits and
rights under this Agreement, as those held by the transferor. No transfer of a CVR shall be valid until registered in the CVR Register in accordance with this Agreement. The CVR Register shall be conclusive absent manifest error. Any transfer or
assignment of CVRs shall be without charge (other than the cost of any transfer Tax or similar Tax or charge) to the applicable Holder. Parent and the Rights Agent may require payment from the applicable Holder or recipient of the applicable CVR of
a sum sufficient to cover any stamp or other Tax or charge that is imposed in connection with any such registration of transfer and/or may require the applicable Holder or recipient of the applicable CVR to establish to the satisfaction of Parent
and the Rights Agent that such stamp or other Tax or charge has been paid or is otherwise not payable.
Holder may make a written request to the Rights Agent to change such Holder s address of record in the CVR Register. Such written request must be duly executed by such Holder. Upon receipt of such written request, the Rights Agent shall
promptly record the change of address in the CVR Register.
1.4 Payment Procedures.
(a) If the CVR Payment Milestone has been achieved on or prior to December 31, 2021 (the Expiration
Date ), then the Milestone Payments shall become due and payable. In such event, Parent or its designee shall provide prompt (and in no event later than ten Business Days after receipt of the FDA TE Achievement Notice) notice to the Rights
Agent of the occurrence of the CVR Payment Milestone (the Milestone Occurrence Notice ), which notice shall (i) indicate that the FDA TE Achievement Notice has been received and (ii) specify a payment date for the
Milestone Payment, no later than 60 days after the date of the FDA TE Achievement Notice (the Payment Date ). For the avoidance of doubt, the Milestone Payment shall only be paid, if at all, one time under this Agreement.
(b) On or before the Payment Date, Parent shall deliver to the Rights Agent an amount in cash equal to the aggregate
Milestone Payment with respect to the CVRs held by all Holders, other than that portion payable to the Equity Award Holders, which aggregate amount shall be retained by Parent for payment pursuant to Section 1.4(d) below. The Rights Agent shall
promptly (and in no event later than five Business Days after receipt thereof by the Rights Agent) send to each Holder at its address set forth in the CVR Register a copy of the Milestone Occurrence Notice and any letter of instruction reasonably
required by the Rights Agent, and, other than with respect to Equity Award Holders, an amount in cash equal to the Milestone Payment with respect to each CVR held by such Holder. If the CVR Payment Milestone does not occur by 5:00 p.m. Eastern time
on the Expiration Date, then the Holders shall have no right to receive the Milestone Payment with respect to their CVRs
(c) Parent or its designee shall provide prompt (and in no event later than ten Business Days after receipt of the FDA
TE Non-Achievement Notice) notice to the Rights Agent a certificate ( Non-Occurrence Notice ) which notice shall (i) indicate that the FDA TE Non-Achievement Notice has been received and (ii) indicate that the Milestone Payment will not be paid. The Rights Agent shall promptly (and in no event later than five Business Days after receipt thereof by
the Rights Agent) send to each Holder at its address set forth in the CVR Register a copy of the Non-Occurrence Notice.
(d) With respect to the Milestone Payment that is payable pursuant to this Agreement to Holders other than Equity Award
Holders, the Rights Agent shall pay the applicable amount to each of the Holders (the amount to which each Holder is entitled to receive will be based on the number of CVRs held by such Holder as reflected on the CVR Register) by check mailed to the
address of each Holder as reflected on the CVR Register as of the close of business on the last Business Day prior to such payment date. With respect to any Milestone Payment that is payable to Equity Award Holders, Parent shall, within 10 days
following the Payment Date, pay, or cause the Company to pay, each such Holder the applicable amount (the amount to which each Equity Award Holder is entitled to receive will be based on the number of CVRs held by such Holder as reflected on the CVR
Register) through the Company s payroll system (subject to any applicable Tax withholding).
Rights Agent, Parent, Acquisition Sub, any Affiliate of Parent and the Surviving Corporation shall be entitled to deduct and withhold from any amounts payable pursuant to this Agreement and pay to the applicable Taxing Authority, such amounts that
each of the Rights Agent, Parent, Acquisition Sub, any Affiliate of Parent and the Surviving Corporation is required to deduct or withhold with respect to the making of such payment under the Code or any other provision of applicable Tax Laws. To
the extent that such amounts are so deducted and withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of in respect of whom such deduction and withholding was made.
(f) The Rights Agent shall hold, as agent for Parent, any cash held by it for payment to the Holders in a non-interest bearing account at such commercial bank as Parent instructs the Rights Agent. Notwithstanding anything to the contrary herein, Parent shall be responsible for providing the Rights Agent with sufficient
funds to satisfy its payment obligations to Holders.
(g) Any cash that remains undistributed to the Holders of CVRs 12
months after such payment is due (including by means of uncashed checks or invalid addresses on the CVR Register) in accordance with the terms of this Agreement, shall be delivered to Parent or its designee, within five Business Days following the
expiration of such 12 month period and shall be held in trust by Parent for the benefit of the Holders. Any Holders of CVRs who have not theretofore received cash with respect to such CVRs shall thereafter look only to Parent for payment of their
claim therefor (subject to abandoned property, escheat or similar Laws). Notwithstanding any other provisions of this Agreement, any portion of the cash provided by Parent to the Rights Agent that remains unclaimed after termination of this
Agreement in accordance with Section 5.13 (or such earlier date immediately prior to such time as such amounts would otherwise escheat to, or become property of, any Governmental Authority) shall, to the extent permitted by
Law, become the property of Parent free and clear of any claims or interest of any Person previously entitled thereto. Neither Parent, the Rights Agent nor any of their Affiliates shall be liable to any Holder for any payments delivered to a public
official pursuant to any abandoned property, escheat or other similar Law.
(h) The Rights Agent shall keep copies
of this Agreement available for inspection by the Holders during normal business hours at its office.
Voting, Dividends or Interest; No Equity or Ownership Interest.
(a) CVRs shall not have any voting or dividend
or consent rights, and, shall not entitle the Holders to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of Parent or any or any other matter, or any other rights of any kind or nature
whatsoever as a stockholder of Parent, either at Law or in equity. Except as set forth in this Agreement, interest shall not accrue on any amounts payable in respect of CVRs.
(b) CVRs shall not represent any equity or ownership interest in Parent, any constituent company to the Merger or any
of their respective Affiliates. The rights of a Holder in respect of the CVRs are limited to those expressed in this Agreement and the Merger Agreement.
1.6 Ability to Abandon CVRs. A Holder may at any time, at such Holder s option, abandon all of such
Holder s remaining rights in a CVR by transferring such CVR to Parent or its Affiliates without consideration therefor. Nothing in this Agreement shall prohibit Parent or any of its Affiliates from offering to acquire or acquiring any CVRs for
consideration from the Holders, in private transactions or otherwise, in its sole discretion. Any CVRs acquired by Parent or any of its Affiliates shall be automatically deemed extinguished and no longer outstanding for purposes of the definition of
2.1 Certain Duties and Responsibilities of the Rights Agent.
(a) The Rights Agent shall not have any liability for any actions taken or not taken in connection with this Agreement,
except to the extent such liability arises as a result of the willful misconduct, bad faith, gross negligence or fraud of the Rights Agent.
(b) The Acting Holders may direct the Rights Agent to act on behalf
of the Holders in enforcing any of their rights hereunder. All rights of action of any or all Holders under this Agreement may be enforced by the Rights Agent, and any action, suit or proceeding instituted by the Rights Agent shall be brought in its
name as the Rights Agent and any recovery in connection therewith shall be for the proportionate benefit of all the Holders, as their respective rights or interests may appear.
2.2 Certain Rights of the Rights Agent.
(a) The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this
Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent.
(b) The Rights Agent may rely and shall be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.
(c) The Rights Agent may engage and consult with counsel of its reasonable selection and the written advice or opinion
of such outside counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(d) Any permissive rights of the Rights Agent hereunder shall not be construed as a duty.
(e) The Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or
otherwise in respect of such powers.