TERMINATION AND RETURN OF
RIGHTS AGREEMENT
This Termination
and Return of Rights Agreement (this “ Agreement
” or the “Termination and Return of Rights
Agreement”) is made effective as of January 1, 2006 (the
“ Effective Date ”) by and between Ligand
Pharmaceuticals Incorporated, a Delaware corporation (“
Ligand ”) and Organon USA Inc., a New Jersey
corporation (“ Co-Promotion Partner ”), with
respect to the matters governed hereby related to the Co-Promotion
Agreement dated as of January 1, 2003 by and between Ligand
and Organon Pharmaceuticals USA Inc., which assigned its rights and
obligations to Co-Promotion Partner effective as of January 1,
2006 (the “ Co-Promotion Agreement
”).
1.
Definitions . All terms used herein and not defined herein
will have the meaning assigned to such terms in the Co-Promotion
Agreement. Defined terms used in amendments to the Co-Promotion
Agreement set forth in this Agreement, if not defined in the
Co-Promotion Agreement, shall have the meaning assigned to such
terms in this Agreement. Unless the context requires otherwise
“Effective Date” as used in unamended terms of the
Co-Promotion Agreement remains as previously defined
therein.
2.
Termination of Co-Promotion Agreement .
(a)
Termination . The Co-Promotion Agreement is hereby
terminated effective as of September 30, 2006 (the “
Termination Date ”), by mutual agreement of Ligand and
Co-Promotion Partner.
(b)
Survival following the Effective Date . Except as set forth
in Section 2(c) below, following the Effective Date, the
Co-Promotion Agreement (as amended by this Agreement) shall remain
in full force and effect up to and including the Termination Date,
and thereafter as set forth in Section 2(d) below.
(c)
Amendment of Certain Sections of Co-Promotion Agreement as of
the Effective Date . As of the Effective Date, the following
Sections of the Co-Promotion Agreement will survive as amended, or
are deleted, as set forth below:
(i)
Section 1 “Net Sales” . The definition of
“Net Sales” in section 1 of the Co-Promotion Agreement
is hereby amended, as of the Effective Date, to read in its
entirety as follows:
“Net
Sales” shall mean, for the applicable period, in-market net
sales of Product in accordance with Ligand’s standard
accounting principles and GAAP, as reported in Ligand’s
financial statements for such period. For purposes of this
definition, “in-market net sales” shall mean the net
sales of the Product in the Territory by Ligand, a sublicensee or
any Person which succeeds to Ligand’s rights as of the
Effective Date in the Product and in the event such in-market net
sales are in whole or in part made by a Person other than Ligand
such in-market net sales shall be in accordance with Ligand’s
and/or such Person’s standard accounting principles and GAAP
and as reported in such Persons’ and/or Ligand’s
financial statement for such period.
(ii)
Section 2.1(b) . Section 2.1(b) of the
Co-Promotion Agreement is hereby amended, as of the Effective Date,
to read in its entirety as follows:
b. Other
Morphine Products . From the Effective Date and up to and
including September 30, 2009 (the “Other Morphine
Product Term”), neither Co-Promotion Partners nor its
Affiliates shall, without the prior written consent of Ligand,
market or sell any Other Morphine Product in the
Territory.
(iii)
Section 2.1(c) . Section 2.1(c) of the
Co-Promotion Agreement is hereby deleted in its
entirety.
(A) Section 3.1(a)
of the Co-Promotion Agreement is hereby amended as of the Effective
Date, by deleting the first and last sentences thereof.
(B) Section 3.1(b)
of the Co-Promotion Agreement is hereby amended as of the Effective
Date, to read in its entirety as follows (for clarity subsections
(i) and (ii) are deleted in their entirety):
b. From the
Effective Date to the Termination Date, Co-Promotion Partner shall
complete a minimum of 375,000 Product Calls (a minimum of 100,000
in each calendar quarter) in the manner set forth in
Exhibit 3.1 hereto.
(v)
Section 3.4 . Section 3.4 of the Co-Promotion
Agreement is hereby amended, to read in its entirety as
follows:
3.4
Transition Services . Co-Promotion Partner will provide such
other Product-related transition services from time to time during
the Term as are (i) expressly approved by the Transition
Operational Committee, and (ii) specified in Exhibit F as
amended and attached hereto.
(A) Section 4.1(a)
of the Co-Promotion Agreement is hereby amended as of the Effective
Date, by deleting the last sentence thereof.
(B) Section 4.1(b)
of the Co-Promotion Agreement is hereby amended as of the Effective
Date, to read in its entirety as follows (for clarity subsection
(a) is deleted in its entirety):
b. From the
Effective Date to the Termination Date, Ligand shall complete a
minimum of 90,000 Product Calls (a minimum of 30,000 in each
calendar quarter) in the manner set forth in
Exhibit 4.1 hereto.
(vii)
Sections 4.2(d) & 4.2(e) . Sections 4.2(d)
& 4.2(e) of the Co-Promotion Agreement are hereby deleted in
their entirety.
(viii)
Sections 5.1 & 5.2 . Section 5.1 (Training )
of the Co-Promotion Agreement is hereby deleted in its entirety.
Section 5.2 of the Co-Promotion Agreement is hereby amended,
to read in its entirety as follows:
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5.2 All sales,
promotion and advertising materials, regardless of form
(“Marketing Materials”), relating to the Product shall
be developed solely by Ligand. Ligand shall own all right, title
and interest in all Marketing Materials. In making Product Calls,
Co-Promotion Partner shall only use those Marketing Materials in
existence on the Effective Date or provided by Ligand. For the
avoidance of doubt, Ligand shall be responsible for the costs of
printing and providing any such Marketing Materials to be used by
either party following the Effective Date.
(ix)
Section 6.2 . Section 6.2 of the Co-Promotion
Agreement is hereby amended, to read in its entirety as
follows:
6.2
Regulatory Responsibility . As between the parties, all
regulatory matters regarding the Product, including without
limitation, all filings in connection therewith, shall be the
obligation and responsibility solely of Ligand. Co-Promotion
Partner shall not without the consent of Ligand or unless so
required by applicable law (and then only pursuant to the terms of
this Section 6.2), correspond or communicate with any
Governmental or Regulatory Authority, whether within the Territory
or otherwise, concerning the Products or otherwise take any action
concerning any authorization or permission under which the Products
are sold or any application for the same. Furthermore, Co-Promotion
Partner shall, immediately upon receipt of any communication from
any Governmental or Regulatory Authority relating to the Product,
forward a copy or description of the same to Ligand and respond to
all inquiries by Ligand relating thereto. If Co-Promotion Partner
is advised by its counsel that it must communicate with any
Governmental or Regulatory Authority, then Co-Promotion Partner
shall so advise Ligand immediately and, unless prohibited by
applicable law, provide Ligand in advance with a copy of any
proposed written communication with any Governmental or Regulatory
Authority and comply with any and all reasonable direction of
Ligand concerning any meeting or written or oral communication with
any Governmental or Regulatory Authority. Notwithstanding the
foregoing, Ligand shall promptly provide Co-Promotion Partner with
copies of all communications received from any Governmental or
Regulatory Authority concerning the Product or any Marketing
Materials and shall promptly submit to Co-Promotion Partner copies
of all communications and filings concerning the Product or any
Marketing Materials made to any Governmental or Regulatory
Authority during the Term.
(x)
Article 7 . Article 7 of the Co-Promotion
Agreement is hereby amended, to read in its entirety as
follows:
7.
Management Committee . The parties hereby abolish all
previous Management Committees and establish a single committee and
procedures described in this Article 7 to govern certain transition
operational matters under this Agreement.
7.1
Transition Operational Committee .
a.
Establishment . The parties hereby establish a Transition
Operational Committee (the “Committee”), which shall
have as its overall
3
purpose the
coordination of the relationship between the parties hereunder for
the nine months of transition and separation (the
“Transition”) beginning as of the January 1, 2006
and ending as of the end of the Term. The Committee shall consist
of two (2) senior-executive representatives of each party.
Members of the Committee shall be employees of the parties, and
shall not be outside consultants, independent contractors or
outside legal counsel, but such persons are permitted to attend
meetings of the committee upon the consent of both parties. Each
party shall be solely responsible for appointing, removing and
filling vacancies among its own representatives. Ligand shall
appoint one of its representatives on the Committee to serve as the
chair of the committee.
b.
Responsibilities . The Committee shall review and oversee
the activities under the Agreement during the Transition and
shall:
(i)
oversee and coordinate the promotion Plans and efforts of the
parties to provide for a smooth transfer of functions, contracts,
relationships and other co-promotion matters from Co-Promotion
Partner to Ligand, including without limitation, those matters
listed in Section 4 of this Agreement and Exhibit F, as
amended.
(ii)
to the extent necessary, after December 31, 2005 to coordinate
remaining matters previously delegated to the Commercial
Committee.
c.
Meetings . During the period between the Effective Date and
the Termination Date, the Committee shall meet: (i) at least
once every quarter on dates and at locations to be agreed to by the
parties, and (ii) upon written notice by either party to the
other that a meeting is required or requested, in which case a
meeting will be held within thirty (30) calendar days of such
notice on a date and at a location to be agreed to by the parties,
or sooner if warranted by circumstances. Notice requesting a
meeting shall include adequate information describing the purpose
of the meeting. Any meetings of the Committee shall be held in
person or, if an in-person meeting is impracticable, by
videoconference or teleconference. When meetings are held in
person, individual members of the Committee may nonetheless
participate by videoconference or teleconference. If unable to
attend in person or by videoconference or teleconference, an
individual member of the Committee may grant a proxy to another
individual member of the Committee in order to act on his or her
behalf on any matter to be acted upon at any meeting of the
Committee. Other representatives of the parties may attend
Committee meetings as non-voting participants. At least one week
prior to any meeting of the Committee, each of the parties shall
provide the other party with a proposed written agenda of the
matters to be discussed at such meeting. The parties shall agree,
at the first meeting of the Committee, upon procedures for
maintaining meeting minutes.
d.
Action of Committee . The Committee may take action on a
matter at a meeting only if a quorum exists with respect to that
matter. The attendance of all members of the Committee of each
party at a meeting, either in person or by proxy, shall constitute
a quorum for the transaction of business. Each member of the
Committee shall be entitled to cast one (1) vote on any matter
to be acted upon at any meeting of the Committee. All coordination
decisions made by the Committee shall require a majority vote by
the members of the Committee, either in person or by proxy. Any
action required or permitted to
4
be taken at any
meeting of the Committee may be taken without a meeting if the
action is taken by all members of the Committee. Such action must
be evidenced by one or more written consents describing the action
taken and signed by each member of the Committee. In the event the
Committee is unable to achieve a majority vote on any issue, then
the dispute resolution process set forth in Section 7.2 will
be followed with respect to such issue.
a.
The parties recognize that disputes as to certain matters delegated
to the Committee may from time to time arise during the Transition
that relate to either party’s rights and/or obligations
hereunder. It is the objective of the parties to establish
procedures to facilitate the resolution of disputes arising in such
Committee in an expedient manner by mutual cooperation and without
resort to litigation. To accomplish this objective, the parties
agree to follow the procedures set forth in this Section 7.2
if and when a dispute arises with respect to the actions or
decision-making authority delegated to such Committee under this
Agreement.
b.
If the Committee is unable to resolve such a dispute or issue
within ten (10) days after being requested to resolve such
dispute or issue, the dispute or issue shall be referred to the
Chief Executive Officers of Ligand and Co-Promotion Partner for
attempted good faith resolution by negotiations within thirty
(30) days after such referral.
c.
If the Chief Executive Officers of the parties are unable to
resolve such dispute or issue, then Ligand’s Chief Executive
Officer shall have the deciding vote, it being understood and
agreed that any such decision shall be commercially reasonable to
both parties, in the context of this Termination and Return of
Rights Agreement. Notwithstanding the foregoing, Co-Promotion
Partner shall not be obligated to accept any such decision that
(i) in any manner increases Co-Promotion Partner’s
obligations to supply a minimum level of Product Calls as set forth
in Section 3.1(b), or (ii) changes the Target Healthcare
Professional audience (which shall be agreed upon in writing prior
to execution of the Termination and Return of Rights Agreement),
P1/P2 mix, decile and detail positioning in the manner set forth in
Exhibit 3.1 , or (iii) changes Co-Promotion
Partner’s obligations to provide the services specified in
Exhibit F, or (iv) otherwise materially modifies
Co-Promotion Partner’s obligations under this
Agreement.
(xi)
Section 8.1 . Section 8.1 of the Co-Promotion
Agreement is hereby amended, with respect to co-promotion
activities after the Effective Date, to read in its entirety as
follows:
8.1
Co-Promotion Payments . Within forty five (45) days
after each of March 31, 2006 June 30, 2006 and
September 30, 2006 Ligand shall pay to Co-Promotion Partner
(by wire transfer of immediately available funds to an account
designated by Co-Promotion Partner to Ligand in writing) an amount
equal to twenty three percent (23%) of Net Sales in the applicable
calendar quarter.
(xii)
Section 8.2 . Section 8.2 of the Co-Promotion
Agreement is of no further force or effect following the Effective
Date; provided that Shared Costs incurred during
5
or allocable to
the calendar quarter ended December 31, 2005 are listed on
Schedule 4b (the “Q42005 Shared Costs”) and
such Q42005 Shared Costs shall be dealt with as set forth in
Section 4(b) of this Agreement. The parties acknowledge and agree
that the Q42005 Shared Costs are the sole Shared Costs incurred
during or allocable to such calendar quarter. From and after the
Effective Date, Ligand shall solely be responsible for all of its
Shared Costs and any Shared Costs incurred by Co-Promotion Partner
thereafter but only if approved in writing in advance by
Ligand.
(xiii)
Section 8.3 . Section 8.3 of the Co-Promotion
Agreement is of no further force or effect following the Effective
Date; provided that Shared Cost reports shall be provided as set
forth therein and in Section 4 of this Agreement for the
calendar quarter ended as of December 31, 2005.
(xiv)
Section 8.4 . Section 8.4 of the Co-Promotion
Agreement is hereby deleted in its entirety.
(xv)
Section 9 . Section 9 of the Co-Promotion
Agreement is hereby amended, as of the Effective Date, to read in
its entirety as follows:
9.
Recordkeeping and Audits . The parties recognize that audits
and reviews of records are in the best interests of both parties.
The parties shall have the audit rights specified in this section
provided such right is hereby terminated for periods ended
on or before December 31, 2005. For the purposes of
Sections 9.1, 9.2 and 9.3 below, each party shall only have
the right to audit the period from January 1 –
September 30, 2006, provided that Co-Promotion Partner
shall thereafter have the limited right under Section 9.2 to
audit only those books and records directly related to the
calculation of royalties under Section 3(d) of the Termination and
Return of Rights Agreement for periods for which such royalty
payments are due, which may be exercised up to 60 days after
the last such payment is due (the “Royalty Audit
Right”). Audited Party (as hereinafter defined) shall mean
(a) in reference to Ligand, Ligand, its Affiliates, permitted
sublicensees, subcontractors and contract manufacturers; and
(b) in reference to Co-Promotion Partner, Co-Promotion
Partner, its Affiliates and subcontractors.
(xvi)
Section 9.2 . The first sentence of Section 9.2 of
the Co-Promotion Agreement is hereby amended, as of the Effective
Date, to read as follows (for clarity, the text of subsections 9.1
and 9.3 remains unchanged):
Either Ligand
or Co-Promotion Partner (herein, the “Auditing Party”)
may demand, no more than once during the period January 1,
2006 through 60 days after the Term, an audit of the relevant
books and records of Co-Promotion Partner or Ligand, as the case
may be (herein, the “Audited Party”) in order to verify
the Audited Party’s reports on the matters addressed in this
Agreement, provided tha t Co-Promotion Partner shall also
have the Royalty Audit Right as described above.
(xvii)
Section 10.1 . Section 10.1 of the Co-Promotion
Agreement is hereby amended, as of the Effective Date, to read in
its entirety as follows:
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10.1 Term of
Agreement . The term of this Agreement (the “Term”)
shall commence as of the Effective Date hereof and shall continue
until the Termination Date unless terminated sooner as set forth
herein.
(xviii)
Section 10.2 . Section 10.2 of the Co-Promotion
Agreement is hereby amended, as of the Effective Date, to read in
its entirety
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