Exhibit 10.5
Form of Real Estate CVR
Agreement
CONTINGENT VALUE RIGHTS
AGREEMENT
THIS CONTINGENT VALUE RIGHTS
AGREEMENT , dated as of
[ —
], 2009 (this “
Agreement ”, is entered into by and among
Ligand Pharmaceuticals Incorporated, a Delaware corporation
(“ Buyer ”), Neurogen Corporation, a
Delaware corporation (“ Target ”), and
[ —
], a [
—
], as Rights Agent (the
“ Rights Agent ”) and as initial Real
Estate CVR Registrar (as defined herein).
Preamble
Buyer, Neon Signal, LLC, a Delaware
limited liability company and wholly-owned subsidiary of Buyer
(“ Sub ”), and Target have entered into
an Agreement and Plan of Merger dated as of August 23, 2009
(the “ Merger Agreement ”), pursuant to
which Sub will merge with and into Target (the “
Merger ”), with Target (or a successor entity)
surviving the Merger as a subsidiary of Buyer.
Pursuant to the Merger Agreement,
Buyer agreed to create and issue to Target’s stockholders of
record immediately before the effective time of the Merger,
contingent value rights as hereinafter described.
The parties have done all things
necessary to make the contingent value rights, when issued pursuant
to the Merger Agreement and hereunder, the valid obligations of
Buyer and to make this Agreement a valid and binding agreement of
Buyer, in accordance with its terms.
NOW, THEREFORE, for and in
consideration of the premises and the consummation of the
transactions referred to above, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders (as
hereinafter defined), as follows:
ARTICLE I
DEFINITIONS
Section 1.1.
Definitions .
(a) For all purposes of this
Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
(i) the terms defined in this
Article have the meanings assigned to them in this Article, and
include the plural as well as the singular;
(ii) all accounting terms used
herein and not expressly defined herein shall have the meanings
assigned to such terms in accordance with United States generally
accepted accounting principles, as in effect on the date
hereof;
(iii) the words
“herein,” “hereof’ and
“hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Article,
Section or other subdivision;
(iv) unless the context otherwise
requires, words describing the singular number shall include the
plural and vice versa, words denoting any gender shall include all
genders and words denoting natural Persons shall include
corporations, partnerships and other Persons and vice versa;
and
(v) all references to
“including” shall be deemed to mean including without
limitation.
(b) Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed thereto
in the Merger Agreement. The following terms shall have the
meanings ascribed to them as follows:
“ Achievement
Certificate ” has the meaning set forth in
Section 2.4(a).
“ Board of Directors
” means the board of directors of Buyer.
“ Board Resolution
” means a copy of a resolution certified by the secretary or
an assistant secretary of Buyer to have been duly adopted by the
Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Rights
Agent.
“ Business Day ”
means any day other than a Saturday, Sunday or a day on which
banking institutions in New York, New York are authorized or
obligated by law or executive order to remain closed.
“ CVR Outside Date
” means [insert date that is six months from the Effective
Date].
“ Holder ” means
a Person in whose name a Real Estate CVR is registered in the Real
Estate CVR Register.
“ Non-Achievement
Certificate ” has the meaning set forth in
Section 2.4(b).
“ Notice of Objection
” has the meaning set forth in
Section 2.4(d).
“ Objection Period
” has the meaning set forth in
Section 2.4(d).
“ Officer’s
Certificate ” means a certificate signed by the chief
executive officer, president, chief financial officer, any vice
president, the controller, the treasurer or the secretary, in each
case, of Buyer, in his or her capacity as such an officer, and
delivered to the Rights Agent.
“ Permitted Transfer
” means: (i) the transfer of any or all of the Real
Estate CVRs (upon the death of the Holder) by will or intestacy;
(ii) transfer by instrument to an inter vivos or testamentary
trust in which the Real Estate CVRs are to be passed to
beneficiaries upon the death of the trustee; (iii) transfers
made pursuant to a court order of a court of competent jurisdiction
(such as in connection with divorce, bankruptcy or liquidation);
(iv) if the Holder is a partnership or limited liability
company, a distribution by the transferring partnership or limited
liability company to its partners or members, as applicable;
(v) a transfer made by operation of law (including a
consolidation or merger) or in connection with the dissolution,
liquidation or termination of any corporation, limited liability
company, partnership or other entity; (vi) a transfer from a
participant’s account in a tax-qualified employee benefit
plan to the participant or to such participant’s account in a
different tax-qualified employee benefit plan or to a
tax-qualified
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individual retirement account for the benefit of
such participant; or (vii) a transfer from a participant in a
tax-qualified employee benefit plan, who received the Real Estate
CVRs from such participant’s account in such tax-qualified
employee benefit plan, to such participant’s account in a
different tax-qualified employee benefit plan or to a tax-qualified
individual retirement account for the benefit of such
participant.
“ Person ” means
any natural person, corporation, partnership, limited liability
company, trust, estate, other firm or entity, or governmental body
.
“ Real Estate CVR Payment
Amount ” means an amount equal to the aggregate cash
proceeds received by Buyer, or any of its subsidiaries, after the
Effective Time and before the CVR Outside Date, from any purchaser
(other than Buyer) of the Real Estate, less (i) any
out-of-pocket costs and expenses reasonably incurred by the Buyer
(taking into account any lease payments received by Buyer after the
Effective Time), or any of its subsidiaries, in connection with the
holding or the sale of the Real Estate (including the payment of
the principal of and interest on any debt secured by the Real
Estate at the Effective Time, commissions and amounts paid to the
Consulting Committee in accordance with an arrangement entered into
pursuant to Section 5.15(b) of the Merger Agreement, and
incremental costs and expenses related to management of the risk of
environmental liability pertaining to the Real Estate and/or
assurance of potential buyers regarding the same, such as preparing
an addendum to the environmental assessments which may include
sampling, and revisions to Buyer’s environmental insurance
policy), and (ii) any amounts previously paid to the Holders
pursuant to the Real Estate CVRs. For the avoidance of doubt, any
amounts deducted from Net Cash Amount as accounts payable relating
to the Real Estate shall not be considered “costs and
expenses” incurred by Buyer hereunder.
“ Real Estate CVR Payment
Date ” means the date or dates (if any and if ever) that
a Real Estate CVR Payment Amount is payable by Buyer to the
Holders, which date shall be established pursuant to
Section 2.4.
“ Real Estate CVR Payment
Event ” means the receipt by Buyer of cash proceeds from
any purchaser (other than Buyer) of all, or any parcel, of the Real
Estate.
“ Real Estate CVR
Register ” has the meaning set forth in
Section 2.3(b).
“ Real Estate CVR
Registrar ” has the meaning set forth in
Section 2.3(b).
“ Real Estate CVRs
” means the Real Estate Contingent Value Rights issued by
Buyer pursuant to the Merger Agreement and this
Agreement.
“ Real Estate Sale
” means the sale of all, or any parcel, of the Real Estate to
a Person other than Buyer.
“ Rights Agent ”
means the Rights Agent named in the first paragraph of this
Agreement, until a successor Rights Agent shall have become such
pursuant to the applicable provisions of this Agreement, and
thereafter “Rights Agent” shall mean such successor
Rights Agent.
“ Rights Agent Fee
” means the agreed-upon fee of the Rights Agent to act in
such capacity pursuant to the terms of this Agreement.
“ Surviving Person
” has the meaning set forth in
Section 6.1(a)(i).
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ARTICLE II
CONTINGENT VALUE
RIGHTS
Section 2.1. Issuance of
Real Estate CVRs; Appointment of Rights Agent
.
(a) The Real Estate CVRs shall be
issued pursuant to the Merger Agreement at the time and in the
manner set forth in the Merger Agreement.
(b) Buyer hereby appoints
[ —
] as the Rights Agent to act
as rights agent for Buyer in accordance with the instructions
hereinafter set forth in this Agreement, and the Rights Agent
hereby accepts such appointment.
Section 2.2.
Nontransferable .
The Real Estate CVRs shall not be
sold, assigned, transferred, pledged, encumbered or in any other
manner transferred or disposed of, in whole or in part, other than
through a Permitted Transfer.
Section 2.3. No Certificate;
Registration; Registration of Transfer; Change of
Address .
(a) The Real Estate CVRs shall not
be evidenced by a certificate or other instrument.
(b) The Rights Agent shall keep a
register (the “ Real Estate CVR Register
”) for the registration of Real Estate CVRs. The Rights Agent
is hereby initially appointed “ Real Estate CVR
Registrar ” for the purpose of registering Real
Estate CVRs and transfers of Real Estate CVRs as herein provided.
Upon any change to the identity of the Rights Agent, the successor
Rights Agent shall automatically also become the successor Real
Estate CVR Registrar.
(c) Subject to the restriction on
transferability set forth in Section 2.2, every request made
to transfer a Real Estate CVR must be in writing and accompanied by
a written instrument or instruments of transfer and any other
requested documentation in a form reasonably satisfactory to Buyer
and the Real Estate CVR Registrar, duly executed by the registered
Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney, such
signature to be guaranteed by a participant in a recognized
Signature Guarantee Medallion Program. A request for a transfer of
a Real Estate CVR shall be accompanied by such documentation
establishing that the transfer is a Permitted Transfer as may be
reasonably requested by Buyer and/or the Real Estate CVR Registrar
(including opinions of counsel), if appropriate. Upon receipt of
such written request and materials, the Real Estate CVR Registrar
shall, subject to its reasonable determination that the transfer
instrument is in proper form and the transfer otherwise complies
with the other terms and conditions herein, register the transfer
of the Real Estate CVRs in the Real Estate CVR Register. All duly
transferred Real Estate CVRs registered in the Real Estate CVR
Register shall be the valid obligations of Buyer, evidencing the
same right and shall entitle the transferee to the same benefits
and rights under this Agreement, as those previously held by the
transferor. No transfer of a Real Estate CVR shall be valid until
registered in the Real Estate CVR Register, and any transfer not
duly registered in the Real Estate CVR Register will be void ab
initio. Any transfer or assignment of the Real Estate CVRs shall be
without charge (other than the cost of any transfer tax which shall
be the responsibility of the transferor) to the Holder.
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(d) A Holder may make a written
request to the Real Estate CVR Registrar to change such
Holder’s address of record in the Real Estate CVR Register.
The written request must be duly executed by the Holder. Upon
receipt of such written notice, the Real Estate CVR Registrar shall
promptly record the change of address in the Real Estate CVR
Register.
Section 2.4. Payment
Procedures .
(a) Promptly following the
occurrence of any Real Estate CVR Payment Event, but in no event
later than five Business Days after the occurrence of such Real
Estate CVR Payment Event, Buyer shall deliver to the Rights Agent a
certificate (the “ Achievement Certificate
”), certifying that the Holders are entitled to receive such
Real Estate CVR Payment Amount. No transaction described in
Section 6.1(a) hereof shall give the Holders the right to
receive the Real Estate CVR Payment Amount.
(b) If a Real Estate Sale has not
occurred on or before the CVR Outside Date, then, within five
Business Days after the CVR Outside Date, Buyer shall deliver to
the Rights Agent a certificate (the “ Non-Achievement
Certificate ”), stating that a Real Estate Sale has
not occurred on or before the CVR Outside Date and no Real Estate
CVR Payment Event can occur.
(c) Except as otherwise requested by
any Holder, the Rights Agent shall promptly (and in no event later
than five Business Days after receipt thereof) send each Holder a
copy of any Achievement Certificate or Non-Achievement Certificate
at its registered address.
(d) Upon demand by any Holder or
Holders of at least 20% in the aggregate of the outstanding Real
Estate CVRs within 45 calendar days after distribution by the
Rights Agent of a Non-Achievement Certificate (the “
Objection Period ”), the Rights Agent shall
deliver a written notice to Buyer prepared by such Holder or
Holders specifying that such Holder or Holders object to the
determination of Buyer that a Real Estate Sale did not timely occur
(a “ Notice of Objection ”) and stating
the reason upon which such Holder or Holders have determined that a
Real Estate Sale has occurred on or before the CVR Outside Date.
Any dispute arising from a Notice of Objection shall be resolved in
accordance with the procedure set forth in Section 7.12, which
decision shall be binding on the parties hereto and every Holder
(including Holders not participating therein).
(e) If a Notice of Objection has not
been delivered to Buyer within the Objection Period, then the
Holders shall have no right to receive the Real Estate CVR Payment
Amount, and Buyer and the Rights Agent shall have no further
obligations with respect to the Real Estate CVR Payment
Amount.
(f) If Buyer delivers an Achievement
Certificate to the Rights Agent or if the Real Estate CVR Payment
Amount is determined to be payable pursuant to Section 2.4(d)
above, Buyer shall establish a Real Estate CVR Payment Date that is
within 15 calendar days of the date of the Achievement Certificate
or the date of final determination pursuant to Section 2.4(d)
above, as applicable. At least five Business Days before such Real
Estate CVR Payment Date, Buyer shall cause the Real Estate CVR
Payment Amount to be delivered to the Rights Agent, who will in
turn, on the Real Estate CVR Payment Date, distribute the Real
Estate CVR Payment Amount to the Holders (each Holder being
entitled to receive its pro rata share of the Real Estate
CVR Payment Amount based on the number of Real Estate CVRs held (as
of the date of the Achievement Certificate or the date of final
determination pursuant to Section 2.4(d) above, as applicable)
by such Holder as reflected on the Real Estate CVR Register)
(i) by check mailed to
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the address of each such respective Holder as
reflected in the Real Estate CVR Register as of the close of
business on the last Business Day before such Real Estate CVR
Payment Date, or, (ii) with respect to any Holder that is due
payment pursuant to this Agreement in excess of $1,000,000 who has
provided the Rights Agent with wire transfer instructions, by wire
transfer of immediately available funds to such account.
(g) Buyer shall be entitled to
deduct and withhold, or cause to be deducted or withheld, from each
Real Estate CVR Payment Amount otherwise payable pursuant to this
Agreement, such amounts as Buyer or the applicable subsidiary of
Buyer is required to deduct and withhold with respect to the making
of such payment under the Internal Revenue Code, or any provision
of state, local or foreign tax law. To the extent that amounts are
so withheld or paid over to or deposited with the relevant
governmental entity, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the Holder in
respect of which such deduction and withholding was
made.
(h) Subject to prior execution and
delivery by the Rights Agent of a reasonable and customary
confidentiality/nonuse agreement, Buyer shall promptly furnish to
the Rights Agent all information and documentation in connection
with this Agreement and the Real Estate CVRs that the Rights Agent
or any Holder or Holders of at least 5% in the aggregate of the
outstanding Real Estate CVRs may reasonably request in connection
with the determination of whether the Real Estate CVR
Payment
