SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 31, 2005
LIGAND PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
000-20720
(Commission File Number)
10275 SCIENCE CENTER DRIVE,
SAN DIEGO, CALIFORNIA
(Address of principal executive offices)
(858) 550-7500
(Registrant's telephone number, including area code)
77-0160744
(I.R.S. Employer Identification No.)
92121-1117
(Zip Code)
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On January 31, 2005, Ligand Pharmaceuticals Incorporated accelerated the
vesting of certain unvested and "out-of-the-money" stock options previously
awarded to the executive officers and other employees under the Company's 1992
and 2002 stock option plans which have an exercise price greater than $10.41,
the closing price on that date. Options to purchase approximately 1.3 million
shares of common stock (of which approximately 450,000 shares are subject to
options held by the executive officers) are subject to this acceleration.
Options held by non-employee directors were not included in the acceleration.
Holders of incentive stock options ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended, were given the election to
decline the acceleration of their options if such acceleration would have the
effect of changing the status of such option for federal income tax purposes
from an ISO to a non-qualified stock option. In addition, the executive officers
plus other members of senior management have agreed that they will not sell any
shares acquired through the exercise of an accelerated option prior to the date
on which the exercise would have been permitted under the option's original
vesting terms. This agreement does not apply to a) shares sold in order pay
applicable taxes resulting from the exercise of an accelerated option or b) upon
the officers retirement or other termination of employment.
Because these options have exercise prices in excess of current market
value (are "out-of-the-money"), and are not fully achieving their original
objectives of incentive compensation and employee retention, the Company expects
that the acceleration may have a positive effect on employee morale, retention
and perception of option value. The acceleration would eliminate any future
compensation expense the Company would otherwise recognize in its income
statement with respect to these options with the implementation of the Financial
Accounting Standard Board (FASB) statement "Share-Based Payment" (FAS 123R) as
expected effective July 1, 2005. We estimate this compensation expense, before
tax, would total $10.5 million (approximately $2.5 million in 2005, $3.7 million
in 2006, $3.1 million in 2007, and $1.2 million in 2008) based on value
calculations using the Black-Scholes methodology.
EXHIBIT NUMBER DESCRIPTION
99.1 Press Release of the Company dated February 1, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned.
LIGAND PHARMACEUTICALS INCORPORATED
Date : February 1, 2005 By: /S/WARNER BROADDUS
Name: Warner Broaddus
Title: Vice President, General Counsel & Secretary