Exhibit 10.301
HULETT HARPER STEWART LLP
KIRK B. HULETT, SBN: 110726
550 West C Street, Suite 1600
San Diego, CA 92101
Telephone: (619) 338-1133
Facsimile: (619) 338-1139
Plaintiffs’ Liaison Counsel
SCHIFFRIN & BARROWAY, LLP
ANDREW L. ZIVITZ
KAY E. SICKLES
280 King of Prussia Road
Radnor, PA 19087
Telephone: (610) 667-7706
Facsimile: (610) 667-7056
Plaintiffs’ Lead Counsel
UNITED STATES DISTRICT COURT
SOUTHER DISTRICT OF CALIFORNIA

          IN RE LIGAND PHARMACEUTICALS, INC.   : Master File No. 04-CV-1620-DMS
(CAB)
SECURITIES LITIGATION
  :    
 
  :    
 
        This Document Relates To   : STIPULATION OF SETTLEMENT
ALL ACTIONS
  :    
 
  :    
 
   DATE:   n/a
 
  TIME:   n/a
 
  JUDGE:   Hon. Dana M. Sabraw

 

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STIPULATION OF SETTLEMENT
     This Stipulation of Settlement (the “Stipulation”), dated as of June 28,
2006, is made and entered into by and among the following parties (as defined
further in Section V herein) to the above-entitled action: (i) Lead Plaintiffs
(as defined below), individually and on behalf of each of the Settlement
Class Members (as defined below), by and through their counsel of record in the
action; and (ii) the Defendants (as defined below), by and through their counsel
of record in the Action (collectively the “Parties”). The Stipulation is
intended by the Parties to fully, finally and forever resolve, discharge and
settle the Released Claims (as defined below), upon and subject to the terms and
conditions hereof, including, but not limited to, Court approval.
I. THE ACTION
     A. The Filed Actions
     On and after August 9, 2004, eight federal securities class action
complaints were filed against Ligand Pharmaceuticals, Incorporated (“Ligand” or
the “Company”), David E. Robinson and Paul V. Maier (“Individual Defendants”),
(collectively the “Defendants”), in the United States District Court for the
Southern District of California.1 By an order of the Honorable Dana M. Sabraw
dated December 10, 2004, the complaints were consolidated under the caption In
re Ligand Pharmaceuticals, Inc. Securities Litigation, No. 04-CV-1620-DMS. On
December 17, 2004, the Court appointed Gary Apostolov, William Davidson, Richard
Fisher and Simon Del Rosario (the “Apostolov Group”) as lead plaintiffs (“Lead
Plaintiffs”) and appointed Schiffrin & Barroway, LLP
 

1   The eight federal securities class action complaints filed were: Nguyen v.
Ligand Pharmaceuticals, Inc., et al., No. 04-CIV-1620-DMS; Fuechtman v. Ligand
Pharmaceuticals, Inc., et al., No. 04-CIV-1637-DMS; Panah v. Ligand
Pharmaceuticals, Inc., et al., No. 04-CIV-1658-DMS; Jain v. Ligand
Pharmaceuticals, Inc., et al., No. 04-CV-1668-DMS; Cirasuolo v. Ligand
Pharmaceuticals, Inc., et al., No. 04-CV-1682-DMS; Wang v. Ligand
Pharmaceuticals, Inc., et al., No. 04-CV-1691-DMS; Metzger v. Ligand
Pharmaceuticals, Inc., et al., No. 04-CV-1715-JTM; and Ericksop v. Ligand
Pharmaceuticals, Inc., et al., No. 04-CV-1962-DMS.

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as Lead Counsel (“Lead Counsel”) for the Class and Hulett Harper & Stewart LLP
as Liaison Counsel for the Class.
     B. Procedural History
     On March 2, 2005, Lead Plaintiffs filed the Consolidated Class Action
Complaint for violations of the Federal Securities Laws (the “Consolidated
Complaint”). The Consolidated Complaint asserted claims against Ligand and the
Individual Defendants for alleged violations of Section 10(b) of the Securities
Exchange Act of 1934 (the “Exchange Act”), and Rule10(b)(5) promulgated
thereunder, on behalf of Lead Plaintiffs and all persons and entities who
purchased securities of Ligand between March 3, 2004 and August 2, 2004,
inclusive.
     On May 6, 2005, Defendants filed a motion to dismiss the Consolidated
Complaint, contending, inter alia, that the statements Lead Plaintiffs alleged
were actionable were not false and misleading, were protected by the statutory
safe harbor, and were not made with the requisite knowing or reckless state of
mind. By an Order dated September 27, 2005, the Court granted Defendants’ motion
without prejudice, finding that Lead Plaintiffs did not specifically plead (1)
the falsity of Defendants’ statements and omissions, or (2) Defendants’
scienter. By the same Order, the Court granted Lead Plaintiffs leave to amend.
     On November 18, 2005, the Company restated its financials for the years
2000 through 2004, and shortly thereafter, on December 23, 2005, Lead Plaintiffs
filed their Second Amended Consolidated Class Action Complaint (the “Complaint”)
on behalf of themselves and all other persons and entities who purchased
securities of Ligand between March 19, 2001 and May 20, 2005, inclusive,
alleging violations of Section 10(b) of the Exchange Act, and Rule 10(b)(5)
promulgated thereunder.
     On January 23, 2006, Defendants moved to dismiss the Complaint Lead
Plaintiffs opposed Defendants’ motion to dismiss by Memorandum dated
February 23, 2006. On March 7, 2006,

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Defendants filed a reply to Lead Plaintiffs’ opposition to the motion to
dismiss. During the pendency of Defendants’ motion to dismiss, the Parties
participated in intense arms-length settlement negotiations, which included two
days of mediation. The Parties tentatively reached the proposed Settlement on
April 22, 2006.
II. PRE-TRIAL PROCEEDINGS, INVESTIGATION, AND DISCOVERY
     A. Informal Discovery, Investigation and Research Conducted by Lead
Plaintiffs
     Lead Counsel has conducted informal discovery and investigation during the
prosecution of the Action. This informal discovery and investigation has
included, inter alia, (i) review of Ligand’s public filings, annual reports, and
other public statements; (ii) consultations with experts; (iii) interviews with
confidential witnesses; (iv) research of the applicable law with respect to the
claims asserted in the Action and the potential defenses thereto; and (v) review
of informal discovery produced by Defendants.
     B. Settlement Negotiations and Mediation
     On February 9, 2006, the Parties appeared for their first mediation with
the Honorable Howard B. Wiener and began their settlement discussions. In
advance of this mediation, the Parties prepared detailed settlement statements.
In their settlement statements and at the mediation, the Parties presented their
respective views regarding the merits of the Action as well as their views
concerning available defenses, the evidence, and damages analyses. Following
ongoing negotiations conducted by Justice Wiener between February 9, 2006 and
March 26, 2006, including two formal mediation sessions, a tentative agreement
in principle was reached between the Lead Plaintiffs and the Defendants on
April 22, 2006.
III. CLAIMS OF LEAD PLAINTIFFS AND BENEFITS OF SETTLEMENT
     In agreeing to this Settlement, Lead Plaintiffs do not concede that any
infirmities exist in their claims. Lead Plaintiffs assert that the evidence
developed to date in the Action supports the claims asserted and assert that
they would present supporting evidence at trial that Defendants

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issued materially false and misleading statements and omissions of material
information concerning Ligand, causing the price of Ligand securities to be
artificially inflated during the Settlement Class Period and causing injury to
Lead Plaintiffs and the Settlement Class Members. Lead Counsel recognizes and
acknowledges the expense and length of continued proceedings necessary to
prosecute the Action through trial and through appeals. Lead Counsel has also
taken into account the uncertain outcome and the risk of any litigation,
especially in complex actions such as the Action, as well as the difficulties
and delays inherent in such litigation. Lead Counsel is also mindful of the
inherent problems of proof and possible defenses to the violations asserted in
the Action.
     In light of the foregoing, Lead Counsel and Lead Plaintiffs believe that
the Settlement set forth in the Stipulation confers a substantial benefit upon
the Settlement Class (as defined below) and Settlement Class Members. Based on
their evaluation, Lead Counsel and Lead Plaintiffs have determined that the
Settlement set forth in the Stipulation is in the best interests of the Lead
Plaintiffs and the Settlement Class.
IV. DEFENDANTS’ DENIALS OF WRONGDOING AND LIABILITY
     In agreeing to this Settlement, Defendants do not concede any infirmities
in their defenses to the claims asserted, or that the claims are valid or have
merit. Defendants have denied and continue to deny each and all of the claims
and contentions alleged by the Plaintiffs in the Action. Defendants expressly
have denied and continue to deny all charges of wrongdoing or liability against
them arising out of any of the conduct, statements, acts or omissions alleged,
or that could have been alleged, in the Action. Defendants have also denied and
continue to deny, inter alia, the allegations that the Plaintiffs or the
Settlement Class have suffered damage, that the price of Ligand stock was
artificially inflated by reasons of alleged misrepresentations or otherwise, and
that Plaintiffs or the Settlement Class were harmed by the conduct alleged in
the Complaint.

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     Notwithstanding those denials, the Defendants have concluded that further
conduct of the litigation would be protracted and expensive, and that it is
desirable that the Action and any Released Claims, including Unknown Claims (as
defined herein), be fully and finally settled on the terms and conditions set
forth herein. In determining to enter into the Stipulation, the Defendants have
considered the uncertainty and risk inherent in any litigation, especially
complex litigation such as this securities lawsuit.
V. TERMS OF STIPULATION OF SETTLEMENT
     NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among Lead
Plaintiffs (individually and on behalf of each of the Settlement Class Members),
and the Defendants, by and through their respective counsel of record, that,
subject to the approval of the Court, the Action and the Released Claims shall
be finally and fully compromised, settled and released, and the Action shall be
dismissed with prejudice, upon and subject to the terms and conditions of the
Stipulation, as follows:
     A. Definitions
          As used in the Stipulation, the following terms have the meanings
specified below:
          1.1 “Authorized Claimant” means any Settlement Class Member whose
Claim for recovery has been allowed pursuant to the terms of the Stipulation.
          1.2 “Claimant” means any Settlement Class Member who files a Proof of
Claim and Release (“Proof of Claim”) in such form and manner, and within such
time, as the Court shall prescribe.
          1.3 “Claims Administrator” means The Garden City Group, Inc. (“GCG”).
          1.4 “Company” or “Ligand” means Defendant Ligand Pharmaceuticals,
Incorporated, a Delaware corporation.
          1.5 “Defendants” means Ligand and the Individual Defendants, defined
below.
          1.6 “Effective Date” means the first date by which all of the events
and conditions specified in Section V, ¶ 9.1(a)-(e) of the Stipulation have been
met and have occurred.

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          1.7 “Escrow Agent” means GCG.
          1.8 “Final” means: (i) the date of final affirmance on an appeal from
the Final Order and Judgment, the expiration of the time for a petition for a
writ of certiorari to review the Final Order and Judgment and, if certiorari is
granted, the date of final affirmance of the Final Order and Judgment following
review pursuant to that grant; or (ii) the date of final dismissal of any appeal
from the Final Order and Judgment or the final dismissal of any proceeding on
certiorari to review the Final Order and Judgment; or (iii) if no appeal is
filed, the expiration date of the time for the filing or noticing of any appeal
from the Final Order and Judgment, i.e., thirty (30) calendar days after entry
of the Final Order and Judgment (or, if the date for taking an appeal or seeking
review shall be extended beyond this time by order of the Court, by operation of
law or otherwise, or if such extension is requested, the date of expiration of
any extension if any appeal or review is not sought); or (iv) if the Court
enters a Final Order and Judgment in a form other than that provided above
(“Alternative Judgment”) and none of the Parties hereto elect to terminate this
Settlement, the date that such Alternative Judgment becomes final as defined in
parts (i) to (iii) above and no longer subject to appeal or review. Any
proceeding or order, or any appeal or petition for a writ of certiorari
pertaining solely to any plan of allocation and/or application for attorneys’
fees, costs or expenses, or incentive award to Lead Plaintiffs, shall not in any
way delay or preclude the Final Order and Judgment from becoming Final.
          1.9 “Final Order and Judgment” means the judgment to be rendered by
the Court dismissing the Action with prejudice, substantially in the form and
content attached hereto as Exhibit B.
          1.10 “Individual Defendants” means David E. Robinson and Paul V.
Maier.
          1.11 “Lead Plaintiffs” means Gary Apostolov, William Davidson, Richard
Fisher and Simon Del Rosario.
          1.12 “Lead Counsel” means Schiffrin & Barroway, LLP.
          1.13 “Liaison Counsel” means Hulett Harper Stewart LLP.
          1.14 “Parties” means each of the Defendants and Lead Plaintiffs on
behalf of themselves and the members of the Settlement Class.
          1.15 “Person” means an individual, corporation (including all
divisions and

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subsidiaries), partnership, limited partnership, association, joint stock
company, estate, legal representative, trust, unincorporated association,
government or any political subdivision or agency thereof, and any business or
legal entity and their spouses, heirs, predecessors, successors,
representatives, or assigns.
          1.16 “Plaintiffs” means each of the plaintiffs who filed a complaint
in the Action, including, but not limited to the Lead Plaintiffs.
          1.17 “Plaintiffs’ Counsel” means each counsel who has appeared as
counsel for any of the Plaintiffs in the Action, including, but not limited to
Lead Counsel and Liaison Counsel.
          1.18 “Plan of Allocation” means a plan or formula of allocation of the
Settlement Fund to be prepared by Lead Counsel which shall be described in the
“Notice of Pendency and Proposed Settlement of Class Action” (“Notice”) to be
sent to Settlement Class Members in connection with the Settlement whereby the
Settlement Fund shall be distributed to Authorized Claimants after payment of
expenses of notice and administration of the Settlement, any taxes, penalties or
interest or tax preparation fees owed by the Settlement Fund, and such
attorneys’ fees, costs, expenses and interest and incentive award to Lead
Plaintiffs, as may be awarded by the Court. Any Plan of Allocation is not part
of the Stipulation.
          1.19 “Released Claims” means any and all claims, debts, demands,
rights or causes of action or liabilities, whether based on federal, state,
local, statutory or common law or any other law, rule or regulation, whether
fixed or contingent, accrued or un-accrued, liquidated or un-liquidated, at law
or in equity, matured or un-matured, whether class or individual in nature,
including both known claims and Unknown Claims, (i) that have been asserted in
this Action by the Lead Plaintiffs and Settlement Class Members or any of them
against any of the Released Persons, or (ii) that could have been asserted in
the Action by the Lead Plaintiffs and Settlement Class Members or any of them
against any of the Released Persons which arise out of, are based upon, or
relate to the allegations, transactions, facts, matters or occurrences,
representations or omissions set forth, or referred to in the Action and are
based upon the purchase of Ligand securities during the Settlement Class Period.
          1.20 “Released Defendants’ Claims” means any and all claims, rights or
causes of action or liabilities whatsoever, whether based on federal, state,
local, statutory or common law or

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any other law, rule or regulation, including both known claims and Unknown
Claims, that have been or could have been asserted in the Action or any forum by
the Defendants or any of them or the successors and assigns of any of them
against any of the Lead Plaintiffs, Settlement Class Members or their attorneys,
which arise out of or relate in any way to the institution, prosecution, or
settlement of the Action (except for claims to enforce the Settlement).
          1.21 “Released Persons” means each and all of the Defendants and their
respective past or present directors, officers, employees, partners, principals,
agents, controlling shareholders, any entity in which the Defendant and/or any
member(s) of any Defendant’s immediate family has or have a controlling
interest, attorneys, accountants, banks, advisors, personal or legal
representatives, insurers, reinsurers, predecessors, successors, parents,
subsidiaries, divisions, joint ventures, agents, assigns, spouses, heirs,
executors, administrators, associates, related or affiliated entities, any
members of their immediate families, or any trust of which any Defendant is the
trustee or settlor or which is for the benefit of any Defendant and/or member(s)
of his family.
          1.22 “Settlement Class” means all Persons who purchased securities of
Ligand between March 19, 2001 and May 20, 2005, inclusive. Excluded from the
Settlement Class are Defendants, officers and directors of the Company, at all
relevant times, members of their immediate families and their legal
representatives, heirs, successors or assigns and any entity in which Defendants
have or had a controlling interest. Also excluded are those Persons who timely
and validly request exclusion from the Settlement Class.
          1.23 “Settlement Class Member” or “Member of the Settlement Class”
means a Person who falls within the definition of the Settlement Class as set
forth in ¶ 1.22, above.
          1.24 “Settlement Class Period” means the period from March 19, 2001
through May 20, 2005, inclusive.
          1.25 “Settlement Fund” means the principal amount of Eight Million
Dollars ($8,000,000) in cash (the “Principal Amount”), plus interest earned or
accrued thereon.
          1.26 “Unknown Claims” means any Released Claims which the Lead
Plaintiffs or any Settlement Class Member does not know or suspect to exist in
his, her or its favor at the time of the release of the Released Persons, and
any Released Defendants’ Claims that any Defendant does not know or suspect to
exist in his, her or its favor, which, if known by him, her or it, might have

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affected his, her or its decision(s) with respect to this Settlement. With
respect to any and all Released Claims and Released Defendants’ Claims, the
Parties stipulate and agree that, upon the Effective Date, the Lead Plaintiffs
and the Defendants expressly waive and relinquish, and the Settlement
Class Members and Released Persons shall be deemed to have, and by operation of
the Final Order and Judgment shall have expressly waived and relinquished, to
the fullest extent permitted by law, the provisions, rights, and benefits of
Section 1542 of the California Civil Code, which provides:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.
The Plaintiffs and Defendants expressly waive and the Settlement Class Members
and the Released Persons shall be deemed to, and upon the Effective Date and by
operation of the Final Order and Judgment shall, have waived any and all
provisions, rights and benefits conferred by any law of the United States or of
any state or territory of the United States, or principle of common law, which
is similar, comparable or equivalent to Section 1542 of the California Civil
Code. The Parties acknowledge that the foregoing waiver was bargained for and a
key element of the Settlement of which this release is a part.
     2. The Settlement Consideration
          2.1 Within fifteen (15) calendar days following the Courts’ execution
of the Preliminary Approval Order, Defendants shall cause the sum of Eight
Million Dollars ($8,000,000) to be transferred to the Escrow Agent.
     3. Certification of the Settlement Class
          3.1 For the sole purpose of implementation, approval and consummation
of the Settlement, the Parties stipulate and agree that the Court may enter an
order certifying the Settlement Class, appointing the Lead Plaintiffs as the
representatives of the Settlement Class, and appointing Lead Counsel as counsel
for the Settlement Class under Rule 23 of the Federal Rules of Civil Procedure.

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          3.2 Certification of the Settlement Class and appointment of Lead
Counsel as counsel for the Settlement Class, as set forth herein, shall be
binding only with respect to the Settlement set forth in the Stipulation. In the
event that this Stipulation is terminated or cancelled or that the Effective
Date does not occur for any reason, the stipulated certification of the
Settlement Class shall be vacated and the Action shall proceed as though the
Settlement Class had never been certified. Except to effectuate the Settlement,
neither the Parties, their respective counsel, nor any Member of the Settlement
Class shall cite, present as evidence or legal precedent, rely upon, make
reference to or otherwise make any use whatsoever of this stipulated
certification of the Settlement Class, in this Action or in any other
proceeding.
     4. Administration of the Settlement Fund
          (a). The Escrow Agent
          4.1 The Escrow Agent shall invest the Settlement Fund in instruments
backed by the full faith and credit of the United States Government or fully
insured by the United States Government or an agency thereof and shall reinvest
the proceeds of these instruments as they mature in similar instruments at the
current market rates. The Escrow Agent, Lead Counsel, and Plaintiffs shall bear
all risk related to the investment of the Settlement Fund.
          4.2 The Escrow Agent shall not disburse the Settlement Fund except as
provided in the Stipulation, or by an order of the Court (consistent with the
terms of the Stipulation), or with the written agreement of Lead Counsel and
counsel for the Defendants.
          4.3 Subject to such further order and direction by the Court as may be
necessary, the Escrow Agent is authorized to execute such transactions on behalf
of the Settlement Class Members as are consistent with the terms of the
Stipulation. In no event shall the Released Persons have any responsibility for
or liability with respect to the Escrow Agent or its actions, or with respect to
the administration of the Settlement Fund, including, but not limited to,
payment made from the Settlement Fund referenced herein.
          4.4 All funds held by the Escrow Agent shall be deemed and considered
to be in the custody of the Court, and shall remain subject to the jurisdiction
of the Court, until such time as such funds shall be distributed pursuant to the
Stipulation and/or further order(s) of the Court consistent with the terms of
the Stipulation.

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          4.5 The Escrow Agent may pay from the Settlement Fund the costs and
expenses reasonably and actually incurred in connection with providing notice to
the Settlement Class, locating Settlement Class Members, soliciting Settlement
Class claims, assisting with the filing of claims, administering and
distributing the Settlement Fund to Members of the Settlement Class, including
the payment of taxes or tax expenses, as defined below, and processing Proofs of
Claim, including without limitation, the actual costs of publication, printing
and mailing the Notice, reimbursements to nominee owners for forwarding notice
to their beneficial owners, and the administrative expenses incurred and fees
charged by the Claims Administrator in connection with providing notice and
processing the submitted claims. Prior to the Effective Date, the Escrow Agent
may not pay more than $150,000 for these costs and expenses without further
approval from the Court.
          (b). Taxes
          4.6 (a) The Parties and the Escrow Agent agree to treat the Settlement
Fund as being at all times a “qualified settlement fund” within the meaning of
Treas. Reg. Section 1.468B-1. In addition, the Escrow Agent and, as required,
the Defendants, shall jointly and timely make the “relation-back election” (as
defined in Treas. Reg. Section 1.468B-1) back to the earliest permitted date.
Such election shall be made in compliance with the procedures and requirements
contained in such regulations. It shall be the responsibility of the Escrow
Agent to timely and properly prepare, and deliver the necessary documentation
for signature by all necessary parties, and thereafter to cause the appropriate
filing to occur.
               (b) For the purposes of Section 468B of the Internal Revenue Code
of 1986, and Treas. Reg. Section 1.468B, the “administrator” shall be the Escrow
Agent. The Escrow Agent shall timely and properly file all informational and
other tax returns necessary or advisable with respect to the Settlement Fund
(including, without limitation, the returns described in Treas. Reg. Section
1.468B-2(l)). Such returns (as well as the election described in ¶ 4.6(a)) shall
be consistent with this ¶ 4.6 and in all events shall reflect that all taxes
(including any estimated taxes, interest or penalties) on the income earned by
the Settlement Fund shall be paid out of the Settlement Fund as provided in ¶
4.6(c) hereof. In no event shall the Released Persons have any responsibility
for or liability with respect to the Taxes or the Tax Expenses (as defined in ¶
4.6(c)).

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The Lead Counsel and Plaintiffs shall indemnify and hold each of the Released
Persons harmless for Taxes and Tax Expenses (including, without limitation,
Taxes payable by reason of any such indemnification).
               (c) All (i) taxes (including any estimated taxes, interest or
penalties) arising with respect to the income earned by the Settlement Fund
(“Taxes”), and (ii) expenses and costs incurred in connection with the operation
and implementation of this ¶ 4.6 (including, without limitation, expenses of tax
attorneys and/or accountants and mailing and distribution costs and expenses
relating to filing (or failing to file) the returns described in this ¶ 4.6)
(“Tax Expenses”), shall be paid out of the Settlement Fund; in all events the
Released Persons shall not have any liability or responsibility for the Taxes,
the Tax Expenses, or the filing of any tax returns or other documents with the
Internal Revenue Service or any other state or local taxing authority. The
Escrow Agent shall indemnify and hold the Released Persons harmless for Taxes
and Tax Expenses (including, without limitation, Taxes payable by reason of any
such indemnification). Further, Taxes and Tax Expenses shall be treated as, and
considered to be, a cost of administration of the Settlement and shall be timely
paid by the Escrow Agent out of the Settlement Fund without prior order from the
Court, and the Escrow Agent shall be obligated (notwithstanding anything herein
to the contrary) to withhold from distribution to Authorized Claimants any funds
necessary to pay such amounts (as well as any amounts that may be required to be
withheld under Treas. Reg. Section 1.468B-2(1)(2)); the Released Persons are not
responsible and shall have no liability therefore, or for any reporting
requirements that may relate thereto. The Parties hereto agree to cooperate with
the Escrow Agent, each other, and their tax attorneys and accountants to the
extent reasonably necessary to carry out the provisions of this ¶ 4.6.
          (c). Termination
          4.7 In the event that the Stipulation is not approved, or is
terminated, canceled, or fails to become effective for any reason, the
Settlement Fund (including accrued interest), less expenses and any costs which
have been incurred by the Claims Administrator for notice and administration of
the proposed Settlement pursuant to ¶ 4.5 herein, and less any Taxes or Tax
Expenses paid or incurred pursuant to ¶ 4.6 herein, shall be refunded to
Defendants. In such event, any tax refund owing to the Settlement Fund shall
also be refunded.

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     5. Preliminary Approval Order and Settlement Hearing
          5.1 Promptly after execution of the Stipulation, but in no event later
than five (5) calendar days after the Stipulation is signed (unless such time is
extended by the written agreement of Lead Counsel and counsel for the
Defendants), Lead Counsel on behalf of the Parties shall submit the Stipulation
together with its Exhibits to the Court and shall apply for entry of an order
(the “Preliminary Approval Order”), substantially in the form and content of
Exhibit A hereto, requesting that the Settlement Class be certified, the Court
grant preliminary approval of the Settlement set forth in the Stipulation, and
that the Court approve the mailing and publication of a full and summary Notice
of Pendency of Class Action and Proposed Settlement, the Notice and “Summary
Notice” substantially in the form and content of Exhibits A(1) and A(3),
respectively, which shall include the general terms of the Settlement set forth
in the Stipulation, the proposed Plan of Allocation, the general terms of the
Fee and Expense Application (as defined in ¶ 8.1) and the date of the Settlement
Hearing (as defined below in ¶ 5.2). Ligand shall provide contact information of
its transfer agent to the Claims Administrator within three (3) business days of
the Court’s execution of the Preliminary Approval Order so that the Claims
Administrator may contact the transfer agent to receive the information from the
Company’s transfer records required by the Claims Administrator to send Notice
to the Settlement Class Members who can be identified through those same
records.
          5.2 Lead Counsel, on behalf of the Parties shall request that, after
notice is given, the Court hold a hearing (the “Settlement Hearing”) and finally
approve this Settlement as set forth herein. At or after the Settlement Hearing,
Lead Counsel also will request that the Court approve the proposed Plan of
Allocation and the Fee and Expense Application.
     6. Releases
          6.1 Upon the Effective Date, the Lead Plaintiffs and each of the
Settlement Class Members shall be deemed to have, and by operation of the Final
Order and Judgment shall have, fully, finally and forever released, relinquished
and discharged all Released Claims, including “Unknown Claims,” against each and
all of the Released Persons, whether or not such Plaintiff or Settlement
Class Member executes and delivers the Proof of Claim.
          6.2 Upon the Effective Date, each of the Defendants shall be deemed to
have,

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and by operation of the Final Order and Judgment shall have, fully, finally and
forever released, relinquished and discharged the Lead Plaintiffs, the
Settlement Class Members, and Plaintiffs’ Counsel from all claims, including
“Unknown Claims”, arising out of, relating to, or in connection with the
institution, prosecution, assertion or resolution of the Action or the Released
Claims.
          6.3 Upon the Effective Date, the Lead Plaintiffs, the Settlement
Class Members and Plaintiffs’ Counsel shall be deemed to have, and by operation
of the Final Order and Judgment shall have, fully, finally and forever released,
relinquished and discharged the Released Persons from all claims (including
“Unknown Claims”), arising out of, relating to, or in connection with the
defense, or resolution of the Action or the Released Claims.
          6.4 Except as otherwise expressly provided for in this Stipulation,
the Parties shall each bear their own respective attorneys’ fees, expenses and
costs incurred in connection with the conduct and settlement of the Action, and
the preparation, implementation and performance of the terms of this
Stipulation.
          6.5 Only those Settlement Class Members filing valid and timely Proofs
of Claim shall be entitled to participate in the Settlement and receive any
distributions from the Settlement Fund. The Proofs of Claim to be executed by
the Settlement Class Members shall release all Released Claims against the
Released Persons, and shall be substantially in the form and content of Exhibit
2 to Exhibit A hereto. Plaintiffs and all Settlement Class Members shall be
bound by the releases set forth in this Stipulation whether or not they submit a
valid and timely Proof of Claim.
          6.6 Nothing in this ¶ 6, nor in the Stipulation, shall release any
obligations owed by any of the Parties pursuant to the terms of this
Stipulation, unless the release of any such obligation is agreed to in writing
by the Parties.
     7. Administration of the Settlement Fund
          7.1 Lead Counsel, or its authorized agents, acting on behalf of the
Settlement Class, and subject to the supervision, direction and approval of the
Court, shall administer and calculate the claims submitted by Settlement
Class Members and shall oversee distribution of that portion of the Settlement
Fund that is finally awarded by the Court to Authorized Claimants.
          7.2 The Settlement Fund shall be applied as follows:
               (a) to pay all unpaid costs and expenses reasonably and actually
incurred

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in connection with providing notice to the Settlement Class Members including,
locating Settlement Class Members, soliciting Settlement Class claims, assisting
with the filing of claims, administering and distributing the Settlement Fund to
the Settlement Class, processing Proofs of Claim and paying escrow fees and
costs, if any;
               (b) to pay Taxes and Tax Expenses;
               (c) to pay Lead Counsel’s attorneys’ fees, expenses and costs,
with interest thereon (the “Fee and Expense Award”), if and to the extent
allowed by the Court;
               (d) to pay incentive awards, if and to the extent allowed by the
Court to Lead Plaintiffs; and
               (e) to distribute the balance of the Settlement Fund (the “Net
Settlement Fund”) to Authorized Claimants as allowed by the Stipulation, the
Plan of Allocation or the Court.
          7.3 After the Effective Date and subject to such further approval and
further order(s) of the Court as may be required, the Net Settlement Fund shall
be distributed to Authorized Claimants, subject to and in accordance with the
following:
                (a) Within ninety (90) calendar days after the mailing of the
Notice or such other time as may be set by the Court, each Person claiming to be
an Authorized Claimant shall be required to submit to the Claims Administrator a
separate completed Proof of Claim as attached to the Notice and substantially in
the form and content of Exhibit 2 to Exhibit A hereto, signed under penalty of
perjury and supported by such documents as specified in the Proof of Claim and
as are reasonably available to the Authorized Claimant.
               (b) Except as otherwise ordered by the Court, all Settlement
Class Members who fail to timely submit a valid Proof of Claim within such
period, or such other period as may be ordered by the Court, or who have not
already done so, shall be forever barred from receiving any payments of money
pursuant to the Stipulation and the Settlement set forth herein, but will in all
other respects be subject to and bound by the provisions of the Stipulation, the
Settlement and Releases contained herein, and the Final Order and Judgment.
               (c) The Net Settlement Fund shall be distributed to the
Authorized Claimants in accordance with and subject to the Plan of Allocation to
be described in the Notice mailed to Settlement Class Members. The proposed Plan
of Allocation shall not be a part of the

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Stipulation.
          7.4 The Released Persons or their counsel shall have no responsibility
for, interest in, or liability whatsoever with respect to: (i) the investment or
distribution of the Settlement Fund; (ii) the Plan of Allocation; (iii) the
determination or administration, or calculation of Claims; (iv) the payment or
withholding of Taxes or Tax Expenses; or (iv) any losses incurred in connection
with (i), (ii) or (iii). No Person shall have any claim of any kind against the
Released Persons or their counsel with respect to the matters set forth in this
¶ 7 or any of its subparts.
          7.5 No Person shall have any claim against the Plaintiffs or their
counsel (including Lead Counsel), or any claims administrator, or other agent
designated by Lead Counsel based on the distributions made substantially in
accordance with the Stipulation and the Settlement contained herein, the Plan of
Allocation or further orders of the Court.
          7.6 It is understood and agreed by the Parties that any proposed Plan
of Allocation of the Net Settlement Fund, including, without limitation, any
adjustments to an Authorized Claimant’s claim set forth therein, is not a
material part of the Stipulation and is to be considered by the Court separately
from the Court’s consideration of the fairness, reasonableness and adequacy of
the Settlement set forth in the Stipulation, and any order or proceedings
relating to the Plan of Allocation shall not operate to terminate or cancel the
Stipulation or affect the finality of the Court’s Final Order and Judgment
approving the Stipulation and the Settlement set forth herein, including, but
not limited to, the release, discharge, and relinquishment of the Released
Claims against the Released Persons, or any other orders entered pursuant to the
Stipulation.
     8. Plaintiffs’ Counsel’s Attorneys’ Fees and Reimbursement of Expenses and
Incentive Awards to Lead Plaintiffs
          8.1 Lead Counsel will submit an application or applications for an
order (the “Fee and Expense Application”) for distributions to them from the
Settlement Fund for: (i) an award of attorneys’ fees plus (ii) reimbursement of
actual expenses and costs, including the fees of any experts or consultants,
incurred in connection with prosecuting the Action plus (iii) interest on such
attorneys’ fees, costs and expenses at the same rate and for the same periods as
earned by the Settlement Fund (until paid), as may be awarded by the Court. Lead
Counsel shall also submit an application for incentive awards to Lead
Plaintiffs.

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          8.2 The attorneys’ fees, expenses and costs, including the fees of
experts and consultants, as awarded by the Court (the “Fee and Expense Award”),
shall be transferred to Lead Counsel from the Settlement Fund immediately after
the Court either enters the Final Order and Judgment or approves the Fee and
Expense Award, whichever is later. Lead Counsel shall thereafter allocate the
Fee and Expense Award among Plaintiffs’ Counsel in a manner that Lead Counsel in
good faith believes reflects the contributions of such counsel to the
prosecution and settlement of the Action; provided, however, that in the event
that the Final Order and Judgment or the Order making the Fee and Expense Award
is reversed or modified on appeal, and in the event that the Fee and Expense
Award has been paid to any extent, then Plaintiffs’ Counsel shall within ten
(10) business days from any such reversal or modification, refund to the
Settlement Fund the fees, expenses, costs and interest previously paid to them
from the Settlement Fund, including accrued interest on any such amount at the
average rate earned on the Settlement Fund from the time of withdrawal until the
date of refund. Each such Plaintiffs’ Counsel’s law firm, as a condition of
receiving any portion of such fees and expenses, on behalf of itself and each
partner and/or shareholder of it, agrees that the law firm and each of its
partners and/or shareholders are subject to the jurisdiction of the Court for
the purpose of enforcing this ¶ 8.2 of the Stipulation.
          8.3 The Released Persons shall have no responsibility for, and no
liability whatsoever with respect to, any payment to Lead Counsel or any
Plaintiffs’ Counsel, or the Lead Plaintiffs from the Settlement Fund that may
occur before the Effective Date.
          8.4 The Released Persons shall have no responsibility for, and no
liability whatsoever with respect to, the allocation of the Fee and Expense
Award among Plaintiffs’ Counsel, or any other Person who may assert some claim
thereto, or any Fee and Expense Awards that the Court may make in the Action.
          8.5 The procedure for and the allowance or disallowance by the Court
of the Fee and Expense Application and the application for incentive awards to
Lead Plaintiffs are not part of the Settlement set forth in the Stipulation, and
are to be considered by the Court separately from the Court’s consideration of
the fairness, reasonableness and adequacy of the Settlement set forth in the
Stipulation. Any order or proceedings relating to the Fee and Expense
Application, or any appeal from any order relating thereto, shall not operate to
terminate or cancel the Stipulation, or affect or

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delay the finality of the Final Order and Judgment approving the Stipulation and
the Settlement of the Action set forth herein.
     9. Conditions of Settlement, Effect of Disapproval or Termination
          9.1 The Effective Date of the Stipulation shall be conditioned on the
occurrence of all of the following events:
               (a). the Principal Amount shall have been timely transferred to
the Settlement Fund as required in ¶ 2, above;
               (b). the Court has entered the Preliminary Approval Order and
certified the Settlement Class, as required by ¶¶ 3.1 and 5.1, above;
               (c). the Court has entered the Final Order and Judgment, or a
judgment substantially in the form and content of Exhibit B;
               (d). the Final Order and Judgment has become Final, as defined in
¶ 1.8, above;
               (e). Counsel for the Defendants has not given notice of intent to
exercise the option to terminate the Stipulation and Settlement in accordance
with the terms of the Supplemental Agreement described in ¶ 9.8.
          9.2 Upon the occurrence of all of the events referenced in ¶ 9.1
above, any and all remaining interest or right of the Defendants and their
insurers to the Settlement Fund shall be absolutely and forever extinguished.
          9.3 Neither a modification nor a reversal on appeal of any Plan of
Allocation or of any amount of attorneys’ fees, costs, expenses and interest
awarded by the Court to any of the Plaintiffs’ Counsel shall constitute a
condition to the Effective Date or grounds for cancellation and termination of
the Stipulation.
          9.4 If any of the conditions specified in ¶ 9.1, above are not met,
then Defendants’ Counsel or Lead Counsel shall have the right to terminate the
Settlement and this Stipulation by providing written notice of their election to
do so to all other parties hereto within thirty (30) calendar days of: (i) the
Court’s declining to enter the Preliminary Approval Order in any material
respect; (ii) the Court’s refusal to approve this Stipulation or any material
part of it; (iii) the Court’s declining to enter the Final Order and Judgment in
any material respect; (iv) the

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date upon which the Final Order and Judgment is modified or reversed in any
material respect by the Court of Appeals or the Supreme Court; or (v) the date
upon which an Alternative Judgment is modified or reversed in any material
respect by the Court of Appeals or the Supreme Court.
          9.5 Unless otherwise ordered by the Court, in the event the
Stipulation shall terminate, or be canceled, or shall not become effective for
any reason, within five (5) business days after written notification of such
event is sent by Lead Counsel or counsel for Defendants, with verification from
Lead Counsel, to the Escrow Agent, the Settlement Fund (including accrued
interest), less expenses and any costs which have actually been incurred for
notice and administration of the proposed Settlement, and less any Taxes and Tax
Expenses paid or incurred pursuant to ¶ 4.6 herein, shall be refunded by the
Escrow Agent to Defendants. In such event, any tax refund owing to the
Settlement Fund shall also be refunded and paid to the Defendants.
          9.6 In the event that the Stipulation is not approved by the Court or
the Settlement set forth in the Stipulation is terminated or fails to become
effective in accordance with its terms, this Stipulation and all negotiations
and proceedings relating hereto shall be without prejudice to any or all Parties
who shall be restored to their respective positions in the Action as of
February 17, 2006. In such event, the terms and provisions of the Stipulation,
with the exception of ¶¶ 1.1-1.25, 3.2, 4.2, 4.4-4.7, 7.4-7.5, 8.2-8.4, 9.1-9.9
herein, shall have no further force and effect with respect to the Parties and
shall not be used in the Action or in any other proceeding for any purpose and
any final order and judgment entered by the Court in accordance with the terms
of the Stipulation shall be treated as vacated, nunc pro tunc. No order of the
Court or modification or reversal on appeal of any order of the Court concerning
the Plan of Allocation or the amount of any attorneys’ fees, costs, expenses and
interest awarded by the Court to the Plaintiffs or any of their counsel shall
constitute grounds for cancellation or termination of the Stipulation.
          9.7 If a case is commenced in respect to any Defendant contributing to
the Settlement Fund (or any insurer contributing funds to the Settlement Fund on
behalf of any Defendant) under Title 11 of the United States Code (Bankruptcy),
or a trustee, receiver or conservator is appointed under any similar law, and in
the event of the entry of a final order of a court of competent jurisdiction
determining the transfer of the Settlement Fund, or any portion thereof, by or
on behalf of such Defendant to be a preference, voidable transfer, fraudulent

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conveyance or similar transaction and any portion thereof is required to be
returned, and such amount is not promptly deposited to the Settlement Fund by
other Defendants, then, at the election of Lead Counsel, the Parties shall
jointly move the Court to vacate and set aside the releases given and Final
Order and Judgment entered in favor of the Defendants pursuant to this
Stipulation, which releases and Final Order and Judgment shall be null and void,
and the Parties shall be restored to their respective positions in the Action as
of the date a day prior to the date of this Stipulation and any cash amounts in
the Settlement Fund shall be returned as provided in ¶ 9.5 above.
          9.8 If prior to the Settlement Hearing, Persons who otherwise would be
Members of the Settlement Class have filed with the Court valid and timely
requests for exclusion (“Requests for Exclusion”) from the Settlement Class in
accordance with the provisions of the Preliminary Approval Order and the Notice
given pursuant thereto, and such Persons in the aggregate purchased a number of
shares during the Settlement Class Period in an amount greater than the sum
specified in a separate Supplemental Agreement between the Parties (the
“Supplemental Agreement”), Defendants shall have the option, in their sole and
absolute discretion, to terminate this Stipulation in accordance with the
procedures set forth in the Supplemental Agreement. The Supplemental Agreement
will not be filed with the Court unless and until a dispute among the Parties
concerning its interpretation or application arises. Copies of all Requests for
Exclusion received, together with copies of all written revocations of Requests
for Exclusion, shall be delivered to counsel for Defendants within two
(2) calendar days of receipt thereof.
          9.9 In the event this Stipulation shall be cancelled as set forth in ¶
9.6 above, the Parties shall, within two weeks of such cancellation, jointly
request a status conference with the Court to be held on the Court’s first
available date. At such status conference, the Parties shall ask the Court’s
assistance in scheduling continued proceedings in the Action. Pending such
status conference or the expiration of sixty (60) calendar days from the
Parties’ joint request for a status conference, whichever occurs first, none of
the Parties shall file or serve any further motions on any of the other Parties
in connection with this Action nor shall any response be due by any Party to any
outstanding pleading or motion by any other Party.
          10. Miscellaneous Provisions
          10.1 The Parties (i) acknowledge that it is their intent to consummate
this

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Settlement and Stipulation; and (ii) agree to cooperate to the extent necessary
to effectuate and implement all terms and conditions of the Stipulation and to
exercise their best efforts to accomplish the foregoing terms and conditions of
the Stipulation.
          10.2 Each Defendant warrants as to himself or itself that, at the time
any of the payments provided for herein are made on behalf of himself or itself,
he or it is not insolvent and the payment will not render him or it insolvent.
This representation is made by each Defendant as to himself or itself and is not
made by counsel for the Defendants.
          10.3 The Parties agree that the amount of the Settlement Fund, as well
as the other terms of the Settlement, were negotiated in good faith by the
Parties and reflect a settlement that was reached voluntarily after consultation
with experienced legal counsel. Neither the Stipulation nor the Settlement
contained therein, nor any act performed or document executed pursuant to or in
furtherance of the Stipulation or the Settlement: (i) is or may be deemed to be
or may be used as an admission of, or evidence of, the validity of any Released
Claim, or of any wrongdoing or liability of the Released Persons; or (ii) is or
may be deemed to be or may be used as an admission of, or evidence of, any fault
or omission of any of the Released Persons in any civil, criminal or
administrative proceeding in any court, administrative agency or other tribunal.
Released Persons may file the Stipulation and/or the Final Order and Judgment
from this action in any other action that may be brought against them in order
to support a defense or counterclaim based on principles of res judicata,
collateral estoppel, release, good faith settlement, judgment bar or reduction
or any theory of claim preclusion or issue preclusion or similar defense or
counterclaim. Defendants have denied and continue to deny each and every claim
alleged against them in the Action.
          10.4 The Parties intend for this Settlement to be a final and complete
resolution of all disputes asserted or which could be asserted by the Settlement
Class Members against the Released Persons with respect to the Released Claims.
Accordingly, the Parties agree not to assert in the Action or in any other
judicial forum that the Action was brought or defended in bad faith or without a
reasonable basis. Defendants agree not to assert any claim under Rule 11 of the
Federal Rules of Civil Procedure or any similar law, rule or regulation that the
Action was brought in bad faith or without a reasonable basis. Lead Plaintiffs
and the Settlement Class agree not to assert any claim under Rule 11 of the
Federal Rules of Civil Procedure or any similar law, rule or regulation

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that any pleading filed, motion made or position taken by Defendants, or their
counsel, in the Action was filed, made or taken in bad faith or without a
reasonable basis. The Parties agree that the amount paid and the other terms of
the Settlement were negotiated at arm’s length and in good faith by the Parties,
and reflect a settlement that was reached voluntarily based upon adequate
information and after consultation with experienced legal counsel, with the
assistance of court-supervised mediation.
          10.5 To the extent permitted by law, all agreements made and orders
entered during the course of the Action relating to the confidentiality of
information shall survive this Stipulation. In addition, all information
obtained from Ligand by Lead Counsel shall be destroyed no later than the
Effective Date.
          10.6 The waiver by one party of any breach of this Stipulation by any
other party shall not be deemed a waiver of any other prior or subsequent breach
of this Stipulation.
          10.7 All of the Exhibits to the Stipulation are material and integral
parts hereof and are fully incorporated herein by this reference.
          10.8 Nothing in this Stipulation, or the negotiations relating
thereto, is intended to or shall be deemed to constitute a waiver of any
applicable privilege or immunity, including, without limitation, attorney/client
privilege, joint defense privilege, or work product immunity.
          10.9 The Stipulation may be amended or modified only by a written
instrument signed by or on behalf of all Parties or their
successors-in-interest. After the Effective Date, any amendments or
modifications must also be approved by the Court.
          10.10 The Stipulation, the Exhibits attached hereto, and the
Supplemental Agreement constitute the entire agreement among the Parties hereto
and no representations, warranties or inducements have been made to any party
concerning the Stipulation, its Exhibits or the Supplemental Agreement other
than the representations, warranties and covenants contained and memorialized in
such documents. Except as otherwise provided herein, each party shall bear its
own costs.
          10.11 Lead Counsel, on behalf of the Settlement Class, is expressly
authorized by the Lead Plaintiffs to take all appropriate action required or
permitted by the Settlement Class to effectuate this Stipulation’s terms and
also is expressly authorized to enter into any modifications or

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amendments to the Stipulation on behalf of the Settlement Class which it deems
appropriate.
          10.12 Each counsel or other Person executing the Stipulation or any of
its Exhibits on behalf of any party hereto hereby warrants that such person has
the full authority to do so.
          10.13 The Stipulation may be executed by facsimile and in
counterparts. All executed counterparts and each of them shall be deemed to be
one and the same instrument. Counsel for the Parties to the Stipulation shall
exchange among themselves original signed counterparts and a complete set of
original executed counterparts shall be filed with the Court.
          10.14 The Stipulation shall be binding upon, and inure to the benefit
of, the successors and assigns of the Parties hereto.
          10.15 The Court shall retain jurisdiction with respect to
implementation and enforcement of the terms of the Stipulation, and all Parties
and their respective counsel hereto and their counsel submit to the exclusive
jurisdiction of the Court for purposes of implementing and enforcing the
Settlement embodied in the Stipulation.
          10.16 Each of the Parties warrants and represents that he, she or it
has not assigned or transferred, and will not assign or transfer, to any Person
any Released Claims or any other claims related to the matters alleged in the
Action.
          10.17 The Stipulation and the Exhibits hereto shall be considered to
have been negotiated, executed and delivered, and to be wholly performed, in the
State of California and the rights and obligations of the Parties to the
Stipulation shall be construed and enforced in accordance with, and governed by,
the laws of the State of California without giving effect to that State’s choice
of law principles.
     IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be
executed, by their duly authorized attorneys, as of June 28, 2006.
SCHIFFRIN & BARROWAY, LLP
/s/ Andrew Zivitz
      Andrew Zivitz
      Kay E. Sickles
280 King of Prussia Road
Radnor, Pennsylvania 19087

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Telephone: (610) 667-7706
Facsimile: (610) 667-7056
Plaintiffs’ Lead Counsel
PAUL, HASTINGS, JANOFSKY &
WALKER LLP
   /s/ Christopher H. McGrath
      William F. Sullivan
      Christopher H. McGrath
      Colleen E. Huschke
      Morgan J. Miller
3579 Valley Centre Drive
San Diego, CA 92130
Telephone: (858) 720-2500
Facsimile: (858) 720-2555
Attorneys for Defendants
Ligand Pharmaceuticals, Incorporated,
David E. Robinson and Paul V. Maier

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