LIGAND PHARMACEUTICALS INCORPORATED
DIRECTOR COMPENSATION AND STOCK OWNERSHIP POLICY
(Amended and Restated Effective March [ ], 2014)
I. DIRECTOR COMPENSATION
Non-employee members of the board of directors (the “Board”) of Ligand
Pharmaceuticals Incorporated (the “Company”) shall be eligible to receive cash
and equity compensation effective as of March [ ], 2014 (the “Restatement
Effective Date”), as set forth in this Director Compensation Policy. The cash
compensation and stock awards described in this Director Compensation Policy
shall be paid or be made, as applicable, automatically and without further
action of the Board, to each member of the Board who is not an employee of the
Company or any parent or subsidiary of the Company (each, an “Independent
Director”) who may be eligible to receive such cash compensation or stock
awards, unless such Independent Director declines the receipt of such cash
compensation or stock awards by written notice to the Chairman of the Board.
This Director Compensation Policy shall remain in effect until it is revised or
rescinded by further action of the Board. The terms and conditions of this
Director Compensation Policy shall supersede any prior cash or equity
compensation arrangements between the Company and its directors.
1.
Cash Compensation.

a.
Annual Retainer. Each Independent Director shall be eligible to receive an
annual retainer of $45,000 for service on the Board. In addition, an Independent
Director serving as:

i.
chairman of the Board shall be eligible to receive an additional annual retainer
of $30,000 for such service;

ii.
chairman of the Audit Committee shall be eligible to receive an additional
annual retainer of $20,000 for such service;

iii.
members (other than the chairman) of the Audit Committee shall be eligible to
receive an additional annual retainer of $10,000 for such service;

iv.
chairman of the Compensation Committee shall be eligible to receive an
additional annual retainer of $15,000 for such service;

v.
members (other than the chairman) of the Compensation Committee shall be
eligible to receive an additional annual retainer of $7,500 for such service;

vi.
chairman of the Nominating and Corporate Governance Committee shall be eligible
to receive an additional annual retainer of $10,000 for such service; and

vii.
members (other than the chairman) of the Nominating and Corporate Governance
Committee shall be eligible to receive an additional annual retainer of $5,000
for such service.

b.
Payment of Cash Compensation. Annual retainer fees shall be paid after each
annual meeting of the Company’s stockholders in advance for the upcoming year of
service and shall be prorated for the period of the year served for Independent
Directors who are elected or appointed to the Board at a time other than the
date of the annual meeting of the Company’s stockholders; provided, however,
that an Independent Director may elect in writing prior to the date of an annual
meeting to receive all or a portion of his annual retainer fee in the form of
such number of fully vested shares of the Company’s common stock as is equal to
(i) the amount of the annual retainer the Independent Director has elected to
receive in the form of shares of the Company’s common stock, divided by (ii) the
closing price per share of the Company’s common stock on the Nasdaq Global
Market (or such other established stock exchange or national quotation system on
which the stock is quoted) on the date of the annual meeting. Committee retainer
fees shall also be paid annually after each annual meeting of the Company’s
stockholders in advance for the upcoming year of service and shall be prorated
for any partial quarters served for Independent Directors who serve on a
committee for a partial year.

2.
Equity Compensation. The Independent Directors shall be granted the following
stock awards. The stock awards described below shall be granted under and shall
be subject to the terms and provisions of the Company’s 2002 Stock Incentive
Plan (the “2002 Plan”) and shall be granted subject to the execution and
delivery of award agreements, including attached exhibits, in substantially the
same forms previously approved by the Board.

a.
Initial Stock Awards. A person who is initially elected or appointed to the
Board on or after the Restatement Effective Date, and who was or is an
Independent Director at the time of such initial election or appointment, shall
be eligible to receive the following stock awards on the date of such initial
election or appointment (each, an “Initial Stock Award”):

i.
that number of restricted stock units determined by dividing (A) $[113,000], by
(B) the average closing price per share of the Company’s common stock on the
Nasdaq Global Market (or such other established stock exchange or national
quotation system on which the stock is quoted) for the 30-calendar day period
prior to the date of grant; and

ii.
that number of stock options having a value of $[205,000], calculated on the
grant date in accordance with the Black-Scholes option pricing model (utilizing
the same assumptions that the Company utilizes in preparation of its financial
statements).

b.
Subsequent Stock Awards. A person who is an Independent Director as of the date
of each annual meeting of the Company’s stockholders and who is re-elected for
another year of service as an Independent Director at such annual meeting
automatically shall be eligible to receive the following stock awards on the
date of each such annual meeting of the Company’s stockholders on or after the
Restatement Effective Date (each, a “Subsequent Stock Award”):

i.
that number of restricted stock units determined by dividing (A) $75,000, by (B)
the average closing price per share of the Company’s common stock on the Nasdaq
Global Market (or such other established stock exchange or national quotation
system on which the stock is quoted) for the 30-calendar day period prior to the
date of grant; and

ii.
that number of stock options having a value of $140,000, calculated on the grant
date in accordance with the Black-Scholes option pricing model (utilizing the
same assumptions that the Company utilizes in preparation of its financial
statements). .

An Independent Director elected for the first time to the Board at an annual
meeting of stockholders shall only receive an Initial Restricted Stock grant in
connection with such election, and shall not receive a Subsequent Restricted
Stock grant on the date of such meeting as well. The stock awards described in
this clause shall be referred to as “Subsequent Stock Awards.”
c.
Termination of Employment of Employee Directors. Members of the Board who are
employees of the Company or any parent or subsidiary of the Company who
subsequently terminate their employment with the Company and any parent or
subsidiary of the Company and remain on the Board will not receive any Initial
Stock Awards pursuant to clause 2(a) above, but to the extent that they are
otherwise eligible, will be eligible to receive, after termination from
employment with the Company and any parent or subsidiary of the Company,
Subsequent Stock Awards as described in clause 2(b) above.

d.
Vesting of Stock Awards Granted to Independent Directors.

i.
Initial Stock Awards granted hereunder shall vest in three (3) equal annual
installments on each of the first three (3) anniversaries following the date of
grant, subject to the Independent Director’s continuing service on the Board
through each such vesting date.

ii.
Subsequent Stock Awards granted hereunder shall vest in full on the earlier of
(A) the date of the annual meeting of the Company’s stockholders next following
the grant date (it being understood that the Subsequent Stock Awards shall vest
on the date of such annual meeting whether or not the Independent Director is
re-elected at such meeting, so long as the Independent Director serves through
such meeting) and (B) on the first anniversary of the date of grant, subject to
the Independent Director’s continuing service on the Board through each such
vesting date.

iii.
Any stock awards granted hereunder shall vest in full in the event of a Change
in Control or a Hostile Take-Over (each as defined in the 2002 Plan) to the
extent the Independent Director is serving on the Board at the time of such
transaction or in the event an Independent Director ceases to serve on the Board
by reason of death or Permanent Disability as defined in the 2002 Plan.

iv.
Any unvested stock awards will be forfeited to the Company in the event an
Independent Director ceases to serve on the Board prior to the vesting of such
awards.

e.
Effect of Termination of Board Service on Stock Options. An Independent Director
shall be able to exercise his or her stock options that were vested at the time
of his or her cessation of Board service until the first to occur of (i) the
third anniversary of the date of his or her cessation of Board service, or (ii)
the original expiration date of the term of such stock options.

f.
Term of Stock Options. Each stock option granted hereunder shall have a term of
ten (10) years measured from the date of grant.

g.
Exercise Price of Stock Options. The exercise price per share of any stock
options granted hereunder shall be equal to one hundred percent (100%) of the
Fair Market Value (as defined in the 2002 Plan) of the common stock on the date
of grant.

II. DIRECTOR STOCK OWNERSHIP GUIDELINES
Independent Directors are expected to own and hold shares of the Company’s
common stock with a value equal to three times the annual cash retainer for
service as an Independent Director (without regard to any retainers paid for
committee service or service as chairman of the Board). The stock ownership
level should be achieved by each Independent Director on or before April 30,
2014 or, if later, within three years after the Independent Director’s first
appointment to the Board.
Stock that counts toward satisfaction of these guidelines include: shares of
common stock owned outright by the Independent Director and his or her immediate
family members who share the same household, whether held individually or
jointly; restricted stock where the restrictions have lapsed; shares acquired
upon stock option exercise; shares purchased in the open market; and shares held
in trust for the benefit of the Independent Director or his or her family.
Restricted stock units, which represent the right to receive shares, do not
count towards satisfaction of these guidelines. Shares held in trust may be
included. Due to the complexities of trust accounts, requests to include shares
held in trust should be submitted to the Secretary of the Company and the
Chairman of the Board will make the final decision as to whether to include
those shares.
An Independent Director will be deemed to be in compliance with these guidelines
if the Fair Market Value (as defined in the 2002 Plan) of the shares of the
Company’s common stock held by such Independent Director on any date prior to
the deadline for his or her compliance equals or exceeds the required multiple
of his or her annual cash retainer. After meeting the requirements set forth in
these guidelines, any subsequent decreases in the market value of the Company’s
common stock shall not be considered, so long as the Independent Director
continues to hold at least the same number of shares of the Company’s common
stock as he or she did when the guidelines were first met or exceeded by such
Independent Director.
The guidelines may be waived for Independent Directors, at the discretion of the
Board, if compliance would create hardship or prevent an Independent Director
from complying with a court order, as in the case of a divorce settlement.

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