After bitter battle with Ligand, shareholder Third Point agrees not to put up proxy in exchange for three board seats

By E. Janene Geiss

Philadelphia - Ligand Pharmaceuticals Inc. and Third Point LLC announced Monday that they have reached an agreement under which Ligand will expand its board of directors to 11 members from eight at its Dec. 8 board meeting.

The new board will consist of the existing board members plus Daniel S. Loeb, Jeffrey R. Perry and Brigette Roberts, according to a company news release.

While its representatives are on the board for a minimum of six months from the date of the agreement, Third Point said it will not sell its Ligand shares, solicit proxies or take certain other stockholder actions.

"Now that the financial reporting normalization process is nearing completion and we have reached agreement with Third Point on an expanded board of directors, we look forward to increasing our focus on the acceleration of our process to explore strategic alternatives," said David E. Robinson, chairman, president and chief executive officer, in the release.

"We are excited by the opportunity to work closely with the expanded board and with the assistance of our financial advisors, UBS, to fully explore alternatives to better translate the strength of our business and diverse product assets to shareholder value," Robinson said.

Under terms of the agreement, Third Point and its affiliates have agreed to vote their shares in favor of these director nominees at Ligand's annual meeting and against other stockholder proposals at least until June 2, 2006, officials said.

The company said it has agreed to recommend the Third Point directors for election to the board and solicit proxies in their favor at annual meetings through 2007, provided the Third Point directors remain on the board and Third Point does not take certain stockholder actions, including soliciting proxies, submitting proposals for stockholders' meetings, buying or selling Ligand stock and engaging in or proposing activities such as extraordinary corporate transactions, sale of material company assets, changes in management or the board, material changes in the company's structure or business or changes to its charter or bylaws, officials said.

The agreement also restricts these activities by Third Point in any event through June 2, 2006, and later if Third Point chooses to keep its members on the Ligand board of directors, officials said.

The company also said it agreed to reimburse certain out-of-pocket expenses incurred by Third Point, up to $475,000 with some conditions. Half of these expenses will be reimbursed immediately, and the other half may be reimbursed on June 2, 2006 if Third Point's designees have remained on the board and no definitive document has been signed as a result of the company's recently announced strategic process, officials said.

This deal comes after several months of a bitter back-and-forth between Ligand and shareholder Third Point over the investor's view that the stock price is undervalued, the lack of an annual meeting and the late filing of current and restated financial reports.

Loeb, Third Point's chief executive officer, had lambasted Ligand management, demanded the formation of a special committee and called for a sale of the company to the highest bidder.

Third Point also sued Ligand in October in the Delaware Chancery Court for not having held an annual stockholders' meeting since June 11, 2004. Third Point and Ligand reached a settlement Nov. 11 and the annual stockholders' meeting to elect directors is scheduled for Jan. 31, 2006, according to Securities and Exchange Commission filings.

Ligand is a San Diego pharmaceutical company that develops and markets new drugs based on gene transcription technology, primarily related to intracellular receptors. It has research and development collaborations with Abbott Laboratories, Allergan, Bristol-Myers Squibb, Eli Lilly & Co., GlaxoSmithKline plc, Organon (Akzo Nobel), Pfizer Inc., TAP Pharmaceutical Products and Wyeth and a strategic alliance with Elan Corp. plc.

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