UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Ligand Pharmaceuticals Incorporated
-------------------------------------------
(Name of Issuer)
CLASS A COMMON STOCK
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(Title of Class of Securities)
53220K108
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(CUSIP Number)
LOUIS L. HOYNES, JR., ESQ.
Senior Vice President and General Counsel
American Home Products Corporation
5 Giralda Farms, Madison, N.J. 07940
(201) 660-5000
-------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
September 6, 1994
-------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement
[X].
(A fee is not required only if the reporting person: (1) has a
previous statement on file reporting beneficial ownership of more
than five percent of the class of securities described in Item 1;
and (2) has filed no amendment subsequent thereto reporting
beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in
a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. 53220K108
1. NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
American Home Products Corporation
Tax I.D. 13-2526821
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b) [X]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2 (E)
[ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7. SOLE VOTING POWER
431,965
8. SHARED VOTING POWER
9. SOLE DISPOSITIVE POWER
431,965
10. SHARED DISPOSITIVE POWER
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
431,965
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.9%
14. TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Item 1. Security and Issuer.
This statement relates to the Class A Common Stock (the
"Common Stock") of Ligand Pharmaceuticals Incorporated, a
Delaware corporation (the "Company"), which has its principal
executive offices at 9393 Towne Center Drive, San Diego,
California 92121.
Item 2. Identity and Background.
This statement is filed by American Home Products
Corporation, a Delaware corporation ("AHP"). AHP's the principal
executive offices are located at Five Giralda Farms, Madison, New
Jersey 07940.
AHP is one of the world leaders in prescription drugs,
packaged medicines, medical supplies and instrumentation, over
the counter medications and food products. Through its
subsidiaries and divisions, AHP is a major research-oriented
pharmaceutical company with leading products in the areas of
women's health care, cardiovascular and metabolic therapies,
central nervous system drugs, anti-inflammatory agents, vaccines
and infant nutritionals.
For information required by this Item 2 of Schedule 13D with
respect to the executive officers and directors of AHP, reference
is made to Attachment A to this Schedule 13D, which is
incorporated herein by reference.
Neither AHP, nor to its best knowledge, any of the persons
named on Attachment A attached hereto, has during the last five
years: (i) been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors); or (ii) been a party
to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or
is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The $5 million consideration paid to acquire the 431,965
shares of Common Stock was financed entirely from the working
capital of AHP.
Item 4. Purpose of Transaction.
AHP has purchased 431,965 shares of Common Stock (the
"Purchased Common Stock") pursuant to a Stock and Note Purchase
Agreement, dated as of September 2, 1994, by and between AHP and
the Company (the "Purchase Agreement"), a copy of which is
attached hereto as Exhibit I and which is hereby incorporated
herein by reference, for a total purchase price of $5 million.
In addition, under the Purchase Agreement, AHP has purchased at
100% of the principal amount thereof an Unsecured Convertible
Promissory Note in the principal amount of $10 million (the
"First Note"), a copy of which is attached hereto as Exhibit II
and which is hereby incorporated herein by reference, and has
agreed to purchase a $5 million Unsecured Convertible Promissory
Note (the "Second Note") contingent upon certain research
milestones being reached under the Research Agreement (as defined
below) and an additional $5 million Unsecured Convertible
Promissory Note (the "Third Note" and, together with the First
Note and the Second Note, the "Notes") contingent upon AHP
exercising its right to extend the Research Agreement.
The Purchase Agreement was entered into concurrently with
(i) a Research, Development and License Agreement (the "Research
Agreement") providing for, among other things, a collaborative
research program seeking to discover new pharmaceutical products
during an initial term of three years with an option to extend
the research for an additional two years, and (ii) a Second
Addendum to Amended Registration Rights Agreement (the "Second
Addendum") effective as of September 2, 1994, a copy of which is
attached hereto as Exhibit III and is hereby incorporated herein
by reference, each by and between AHP and the Company, pursuant
to which AHP is entitled to the rights granted under the Amended
Registration Rights Agreement made as of June 24, 1994 by and
between the Company and a group of investors listed on a Schedule
attached thereto (the "Registration Agreement") which is attached
hereto as Exhibit IV and is hereby incorporated herein by
reference. The descriptions of the documents incorporated by
reference herein are qualified in their entirety by the full text
of such documents. The acquisition of Common Stock pursuant to
the Purchase Agreement was made to induce the Company to enter
into the Research Agreement and is for long-term investment
purposes.
The First Note bears interest, and the Second and Third
Notes, if and when issued, will bear interest at 7.75% per annum,
with interest to be paid semi-annually. The Notes will mature on
September 2, 1999; however, the Company may extend the Notes for
an additional two year period. On or after the third anniversary
of the Purchase Agreement, AHP will have the option to convert
the entire principal amount and any unpaid interest of each the
Notes into Common Stock at a conversion price of $13.311 per
share of Common Stock for the First Note and Second Note and
$14.47 per share for the Third Note. Each of the Notes may be
prepaid, in whole or in part, at any time without premium or
penalty upon fifteen days' written notice to AHP provided that
the Company has not received written notice of AHP's intention to
convert any of the Notes into Common Stock.
Pursuant to the Purchase Agreement:
(i) Each share of Common Stock purchased under the
Purchase Agreement or upon conversion of any of the
Notes is or will be restricted securities which have
not been registered for sale in a public offering by
the Company and may be resold without registration
under the Securities Act of 1933, as amended (the
"Securities Act") only in certain circumstances. In
addition, AHP has agreed that, until the termination of
the Research Agreement (the "Restricted Period"),
without the prior written consent of the Company (which
may be withheld in its sole discretion), neither AHP
nor any affiliate shall directly or indirectly sell,
offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any of
the Purchased Common Stock, the Notes, any shares
issuable upon conversion of the Notes (collectively,
the "Note Shares"), securities purchased pursuant to
AHP's Participation Right (as defined below) or
securities issuable upon conversion of the Common Stock
into Class B Common Stock ("Restricted Securities")
other than to AHP affiliates or donees who agree to be
bound by these restrictions.
(ii) In addition, during the Restricted Period, AHP
(including all affiliates of AHP) shall not acquire
beneficial ownership of any shares of Common Stock of
the Company, any securities convertible into or
exchangeable for Common Stock, or any other right to
acquire Common Stock, except by way of stock dividends
or other distributions or offerings made available to
holders of Class A Common Stock (or Class B Common
Stock issued upon conversion thereof) generally, from
the Company or any other person or entity, without the
prior written consent of the Company, which consent may
be withheld in its sole discretion; provided, however,
that in no event shall (i) the original purchase of
securities pursuant to the Purchase Agreement, (ii) the
conversion of the Notes, or (iii) the acquisition by
AHP of another company that then owns securities of the
Company, cause a violation of this provision.
(iii) AHP has agreed that it shall not make any
disposition of all or any portion (or any interest) of
the Purchased Common Stock, the Notes, the Note Shares,
the securities purchased pursuant to AHP's
Participation Right or the shares issuable upon
conversion of the Class A Common Stock or any portion
thereof, without first giving the Company the right to
purchase such securities through the procedures set
forth in the Purchase Agreement. However, the right of
first offer shall not apply to (i) transfers to
controlled affiliates of AHP or donees, provided the
transferee agrees to be bound by the obligations of the
Purchase Agreement, (ii) transactions involving a
merger, reorganization, recapitalization, exchange
offer or sale of all or substantially all of the
business or capital stock of the Company approved by
the Company's board of directors or (iii) dispositions
in open market transactions in which the aggregate
number of such shares involved is less than 25,000
(subject to appropriate adjustment in the event of such
stock splits, stock dividends, recapitalization and the
like) during any 30 day period. The right of first
offer will terminate upon the earlier to occur of (x)
the tenth anniversary date of the Purchase Agreement or
(y) the consummation of an acquisition or merger of the
Company by or with a third party or the sale of all or
substantially all of the assets of the Company. With
respect to the Purchased Common Stock, shares issued
upon conversion of the Purchased Common Stock to Class
B Common Stock and shares purchased pursuant to AHP's
Participation Right which are attributable to those
shares (collectively, the "Equity Investment Shares"),
the right of first offer shall lapse and cease to have
any effect upon earlier to occur of (i) the time, if
any, when such Equity Investment Shares owned by AHP
represent less than two percent (2%) of the outstanding
Common Stock of the Company (as derived from public
reports filed by the Company with the Securities and
Exchange Commission), or (ii) the second anniversary of
the termination of the Research Agreement. With
respect to the Notes, the Note Shares, shares issuable
upon conversion of such Note Shares and shares
purchased pursuant to AHP's Participation Right which
are attributable to the Note Shares (collectively, the
"Debt Investment Shares"), the right of first offer
shall lapse and cease to have any effect upon the
earlier to occur of (i) at such time when such Debt
Investment Shares owned by AHP represent less than five
percent (5%) of the outstanding Common Stock of the
Company (as derived from public reports filed by the
Company with the Securities and Exchange Commission),
or (ii) the third anniversary of the conversion of the
Notes.
The Company's right of first offer shall be
assignable in whole or in part by the Company (but only
after the Company receives notice of a transfer which
is subject to a right of first offer and only with
respect to that individual transaction). The Company's
right of first offer shall be binding upon any
transferee of the Offered Securities acquired pursuant
to a disposition that is exempt from the right of first
offer pursuant to the Purchase Agreement (including the
Purchased Common Stocks, the Notes, the Note Shares,
shares purchased pursuant to AHP's Participation Right
and shares of Class B Common Stock issued or issuable
upon conversion of the Class A Common Stock). However,
the right of first offer shall not apply to any
transferee of the Offered Securities if those Offered
Securities were previously offered to the Company, the
Company elected not to purchase such Offered Securities
and AHP sold the Offered Shares to the transferee in
compliance with the Purchase Agreement.
(iv) The Company granted to AHP the right to purchase, based
upon its percentage ownership of the Company's outstanding
shares, additional shares in connection with the offering by
the Company of shares of any class of capital stock, but not
including the issuance of shares (i) under any plan,
agreement or arrangement, to employees, directors,
consultants, customers, vendors, suppliers or other persons
or organizations with which the Company has a commercial
relationship provided that such issuances are for other than
primarily equity financing purposes, (ii) pursuant to
Regulation S (or successor rule or regulation) promulgated
under the Securities Act so long as the Company in good
faith believes that such issuance or sale is in the best
interest of the Company, (iii) pursuant to the conversion or
exercise of convertible or exercisable securities, (iv) in
connection with a bona fide business acquisition of or by
the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise, (v) in
connection with a transaction that has a substantial non-
financing objective (for example, a research and development
partnership, a SWORD transaction, or a collaboration or
licensing arrangement), or (vi) to persons or entities with
which the Company has business relationships provided such
issuances are for other than primarily equity financing
purposes ("AHP's Participation Right").
AHP's Participation Right shall terminate upon the
earlier to occur of (i) the tenth anniversary date of the
Purchase Agreement or (ii) the consummation of an
acquisition or merger of the Company by or with a third
party or the sale of all or substantially all of the assets
of the Company.
(v) The Company agreed not consolidate with or merge with
or into, or transfer all or substantially all of its assets
to, any other person unless (i) such other person is a
corporation organized or existing under the laws of the
United States or a state thereof, (ii) if the surviving
person is not the Company, such person expressly assumes all
the obligations of the Company under the Notes, the Purchase
Agreement and the other agreements related thereto, (iii)
such surviving person (other than the Company) has a
consolidated net worth immediately after such transaction at
least equal to the consolidated net worth of the Company
immediately prior to such transaction, (iv) immediately
after such transaction no default or event of default under
any of the Notes exists, (v) the successor corporation (or
corporation controlling the successor corporation or the
Company, as the case may be) shall enter into an agreement
for the benefit of the holder of each Note which shall
provide (a) that the holder of a Note may convert it into
the kind and amount of securities and/or cash and/or other
assets which such holder would have owned immediately after
the consolidation, merger or transfer if he had converted
the Note immediately before the effective date of such
transaction and (b) for adjustments in the conversion price
and terms which shall be as nearly equivalent as may be
practical to the adjustments provided for in the Note; and
(vi) the Company has delivered to AHP an officers'
certificate and an opinion of counsel reasonably
satisfactory to AHP each stating that such consolidation,
merger or transfer comply with this section and that all
conditions precedent herein provided for have been complied
with.
Under the Registration Agreement and the Second Addendum:
(i) AHP and certain of the other shareholders of the Company
(AHP and each of such other shareholders being referred to as a
"Holder"), may make a written request that the Company effect a
registration on Form S-3 with respect to all or a part of the
Registrable Securities (as defined therein) owned by such Holder,
subject to certain limitations and the Company shall as soon as
practicable effect such registration as may be so requested and
as would permit the sale and distribution of all or such portion
of such Holder's Registrable Securities as are specified in such
request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such
request; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or
compliance: (i) if Form S-3 is not available for such offering by
the Holders (except under certain circumstances); (ii) if the
Holder proposes to sell Registrable Securities at an aggregate
price to the public (net of any underwriters' discounts or
commissions) of less than $500,000; (iii) if the Company shall
furnish to the Holder a certificate signed by the president of
the Company stating that in the good faith judgment of the Board
of Directors of the Company, it would be materially detrimental
to the Company and its stockholders for such Form S-3
Registration to be effected at such time (without taking into
account the costs to the Company), in which event the Company
shall have the right to defer the filing for a period of not more
than 60 days; provided, that the Company may not utilize this
right more than once in any twelve month period; (iv) if the
Company has, within the twelve month period preceding the date of
such request, already effected two registrations on Form S-3 upon
the demand of the Holders; or (v) in any particular jurisdiction
in which the Company would be required to qualify to do business
or execute a general consent to service of process in effecting
such registration, qualification or compliance. In addition the
Registration Agreement provides that the Company is obligated to
effect only one such registration statement for all Holders every
six months and provides other limitations on the Company's
obligations.
(ii) If the Company proposes to register any of its stock or
other securities under the Securities Act in connection with the
public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to
participants in an Company stock plan, or a registration on any
form which does not include substantially the same information as
would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company
shall at such time, promptly give each Holder written notice of
such registration. Upon the written request of a Holder, the
Company shall, subject to the provisions of the Registration
Agreement relating to underwriting requirements, cause to be
registered all of the Registrable Securities that such Holder has
requested to be registered.
(iii) Each of the Holders agrees that, during a period not to
exceed up to 180 days specified by the Company and an underwriter
of Common Stock or other securities of the Company following the
effective date of a registration statement of the Company, it
shall not, to the extent requested by the Company and such
underwriter (and provided the same restriction is agreed to by
the officers and directors of the Company), directly or
indirectly sell, offer to sell, contract to sell (including
without limitation, any short sale but excluding private
placements in reliance on the so-called "4(1-1/2)" exemption
under the Securities Act), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree
to be similarly bound) any securities of the Company held by it
at any time during such period except Common Stock included in
such registration.
AHP intends to continuously review its investment in the
Company. In reaching any decision with respect to such
investment, AHP will take into consideration various factors,
such as the Company's business and prospects, the success of the
research undertaken pursuant to the terms of the Research
Agreement, other developments concerning the Company, other
investment opportunities available to AHP, and general economic
and market conditions. Depending on the result of its review of
such factors, AHP may decide purchase additional equity
securities of the Company, or AHP may decide to dispose of all or
a portion of such securities (whether now or hereafter held), in
each case, subject to the terms and conditions of the Purchase
Agreement.
Except as set forth above or in any other item hereof, AHP
does not have any present plans or proposals that would relate to
or result in any of the actions required to be described in Item
4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
As of September 2, 1994, AHP became the registered owner of
431,965 shares of Common Stock and, as a result, AHP holds
approximately 5.9% of the outstanding Common Stock.
(a) Except as set forth herein, neither AHP nor, to its
best knowledge, any of the persons named on Attachment A attached
hereto, beneficially owns any Common Stock.
(b) AHP has the sole power to vote all of the Common Stock
it beneficially owns without restriction, except as described
above.
(c) Except as set forth herein, no transactions were
effected in Common Stock during the past sixty (60) days by AHP
nor, to the best of its knowledge, any person listed in
Attachment A attached hereto that would require disclosure
pursuant to Item 5(c).
(d) Neither AHP nor, to its best knowledge, any of the
persons named on Attachment A attached hereto, has or knows of
any other person who has the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the
sale of, any Common Shares beneficially owned by AHP.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
There are no contracts, arrangements, understandings or
relationships (legal or otherwise) among the persons named in
Item 2 or between any other person with respect to any securities
of the Company except as referred to or described herein.
Item 7. Material to be Filed as Exhibits.
Attachment A Information concerning Executive Officers and
Directors of American Home Products Corporation
Exhibit I Stock and Note Purchase Agreement, dated as of
September 2, 1994, by and between American Home
Products Corporation and Ligand Pharmaceuticals
Incorporated
Exhibit II Unsecured Convertible Promissory Note in the
amount of $10 million by and between American Home
Products Corporation and Ligand Pharmaceuticals
Incorporated
Exhibit III Second Addendum to Amended Registration Rights
Agreement by and between American Home Products
Corporation and Ligand Pharmaceuticals
Incorporated
Exhibit IV Amended Registration Rights Agreement made as of
June 24, 1994 by and between the Company and a
group of investors listed on a Schedule attached
thereto is incorporated by reference to Exhibit 2
of the Report on Schedule 13D by Abbott
Laboratories, dated July 14, 1994
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: September 12, 1994
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ Robert G. Blount
Robert G. Blount
Executive Vice President
Attachment A
Executive Officers and Directors of
American Home Products Corporation
- ----------------------------------
The names and titles of the executive officers and the names
of the directors of American Home Products Corporation and its
business addresses and principal occupations are set forth below.
If no address is given, the director's or executive officer's
business address is that of American Home Products Corporation.
Unless otherwise indicated, each occupation set forth opposite an
individuals name refers to American Home Products Corporation and
each individual is a United States citizen.
EXECUTIVE OFFICERS Position; Present Principal occupation
- ------------------ -------------------------------------
John R. Stafford Chairman, President and Chief
Executive Officer
Robert G. Blount Executive Vice President
Stanley F. Barshay Senior Vice President
Joseph J. Carr Senior Vice President
Fred Hassan Senior Vice President
Louis L. Hoynes, Jr. Senior Vice President and
General Counsel
John R. Considine Vice President - Finance
Rene R. Lewin Vice President - Human Resources
Thomas M. Nee Vice President - Taxes
DIRECTORS Position; Present Principal Occupation
- ----------- --------------------------------------
Clifford L. Alexander, Jr. President of Alexander &
400 C Street, NE Associates, Inc.(consulting firm
Washington, D.C. 20002 specializing in Workforce
Inclusiveness)
Frank A. Bennack, Jr. President and Chief Executive
The Hearst Corporation Officer of The Hearst Corporation
959 Eighth Avenue (owns and operates communications
New York, New York 10019 media)
K. Roald Bergethon Educational Consultant
Robert G. Blount Listed above
John W. Culligan Retired November 1988;
former Chairman of the Board
and Chief Executive Officer of AHP
(from 1981 to 1986)
Robin Chandler Duke National Chair, Population
Action International
John D. Feerick Dean, Fordham University
Fordam University School of Law since 1982
School of Law
140 West 62nd Street
New York, New York 10023
Edwin A. Gee Former Chairman and Chief
Executive Officer, International
Paper Company
Robert W. Sarnoff Director/Consultant
John R. Stafford Listed above
John R. Torell III Chairman, Torell Management Inc.
Torell Management Inc. (financial advisory company)
767 Fifth Avenue
46th Floor
New York, New York 10153
William Wrigley President, Chief Executive Officer
Wm. Wrigley, Jr. Company and member of the Board, Wm.
410 North Michigan Avenue Wrigley Jr. Company (international
Chicago, Illinois 60611 manufacturer of chewing gum
products)
Exhibit Index
- -------------
Exhibit I Stock and Note Purchase Agreement, dated as of
September 2, 1994, by and between American Home
Products Corporation and Ligand Pharmaceuticals
Incorporated
Exhibit II Unsecured Convertible Promissory Note in the
amount of $10 million by and between American Home
Products Corporation and Ligand Pharmaceuticals
Incorporated
Exhibit III Second Addendum to Amended Registration Rights
Agreement by and between American Home Products
Corporation and Ligand Pharmaceuticals
Incorporated
Exhibit IV Amended Registration Rights Agreement made as of
June 24, 1994 by and between the Company and a
group of investors listed on a Schedule attached
thereto is incorporated by reference to Exhibit 2
of the Report on Schedule 13D by Abbott
Laboratories, dated July 14, 1994
STOCK AND NOTE PURCHASE AGREEMENT
THIS STOCK AND NOTE PURCHASE AGREEMENT is made as of the 2nd
day of September, 1994, by and between Ligand Pharmaceuticals
Incorporated, a Delaware corporation (the "Company"), and
American Home Products Corporation, a Delaware corporation (the
"Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares and Notes.
1.1 Sale and Issuance of Shares and Notes.
(a) First Installment. Subject to the terms and
conditions of this Agreement, Investor agrees to (i) pay
$5,000,000 (the "Share Purchase Price") to the Company at the
Closing and the Company agrees to sell and issue to Investor at
the Closing the number of shares (the "Shares") of the Company's
Class A Common Stock equal to $5,000,000 divided by $11.575
(which is the average daily closing price of the Company's Class
A Common Stock reported by the National Association of Securities
Dealers ("NASD") on the ten (10) trading days preceding the fifth
day prior to the date hereof), and (ii) pay $10,000,000 (the
"First Note Installment Purchase Price"; collectively with the
Share Purchase Price, the "First Installment") to the Company at
the Closing and the Company agrees to sell and issue to Investor
at the Closing an unsecured convertible promissory note in the
principal amount of $10,000,000 in the form attached as Exhibit A
(the "First Note").
(b) Second Installment. Subject to the terms and
conditions of this Agreement, Investor agrees to pay $5,000,000
(the "Second Installment") to the Company and the Company agrees
to sell and issue to Investor an unsecured convertible promissory
note in the principal amount of $5,000,000 in the form attached
as Exhibit B (the "Second Note"). Investor shall pay the Second
Installment to the Company if and when both of the following
events have occurred: (i) the Company has completed
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXX, and (ii) the Company has completed XXX XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXX for purposes of this Agreement XXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX. The Company shall provide written notice to
Investor of its XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Investor shall deliver the
Second Installment to the Company in accordance with Section 1.2
within thirty (30) days of such notice unless prior to the end of
the thirty (30) day period it has given notice to Company that
the results thereof are not complete to Investor's reasonable
satisfaction which notice shall include a specification of all
facts upon which Investor bases its determination that the
results are not complete. Promptly after receipt of the
Investor's notice, the parties shall implement the provisions of
Section 4.2 of the Research and Development Agreement to resolve
differences between them concerning XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX and, upon
such resolution, Investor will promptly deliver the Second
Installment to the Company. Upon delivery of the Second
Installment to the Company by the Investor, the Company shall
deliver to Investor the original executed Second Note.
(c) Third Installment. Subject to the terms and
conditions of this Agreement, Investor agrees to pay $5,000,000
(the "Third Installment") to the Company and the Company agrees
to sell and issue to Investor an unsecured convertible promissory
note in the aggregate principal amount of $5,000,000 in the form
attached as Exhibit C (the "Third Note"; the First Note, Second
Note and Third Note shall collectively be referred to as the
"Notes"). Within ten (10) days after the delivery of the
Investor's written notice to the Company to extend the term of
the Research and Development Agreement beyond the third year in
accordance with Section 3.3 of the Research and Development
Agreement, Investor shall pay the Third Installment to the
Company. The Company shall deliver to Investor the original
executed Third Note upon its receipt of the Third Installment.
1.2 Closing. The closing for the purchase and sale of
the First Installment shall take place at the offices of Brobeck,
Phleger & Harrison, 550 West "C" Street, Suite 1200, San Diego,
California, on September 2, 1994, or at such other time and place
as the Company and Investor mutually agree upon orally or in
writing (which shall be designated as the "Closing"). At the
Closing the Company shall deliver to Investor a certificate
representing the Shares (free and clear of all liens, claims and
other encumbrances except as otherwise provided herein and in the
Registration Rights Agreement (as defined below)) and the
original executed First Note. In consideration of such delivery,
Investor shall make payment for the Shares by delivery to the
Company of the Share Purchase Price and Investor shall make
payment for the First Note by delivery to the Company of the
First Note Installment Purchase Price. All such payments by
Investor at the Closing and with respect to the Second
Installment and Third Installment shall be in immediately
available funds in the form of certified or cashier's check
payable to the Company's order or by wire transfer of funds to
the Company's designated bank account.
2. Representations and Warranties of the Company. The
Company hereby represents and warrants to Investor that:
2.1 Organization, Good Standing and Qualification.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify
would be reasonably expected to have a material adverse effect on
the business, operations, properties, assets, prospects or
condition (financial or otherwise) of the Company (a "Material
Adverse Effect"). Except as disclosed in the Form 10-K (as
defined herein), the Company has no subsidiaries.
2.2 Authorization. The Company has all requisite
corporate power and authority (i) to execute, deliver and perform
its obligations under this Agreement, the Registration Rights
Agreement (as defined below) and the Research and Development
Agreement; (ii) to issue the Securities (as defined herein) in
the manner and for the purpose contemplated by this Agreement,
and (iii) to execute, deliver and perform its obligations under
all other agreements and instruments executed and delivered by it
pursuant to or in connection with this Agreement, the
Registration Rights Agreement and the Research and Development
Agreement. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the
Notes, the Second Addendum to the Amended Registration Rights
Agreement of even date herewith, which makes Investor a party to
the Amended Registration Rights Agreement between the Company and
certain of its stockholders (collectively, the "Registration
Rights Agreement") and the Research and Development Agreement,
the performance of all obligations of the Company hereunder and
thereunder and the authorization, issuance (or reservation for
issuance) and delivery of the Shares and the Notes, being sold
and to be sold hereunder and pursuant to any conversion of the
Notes has been taken or will be taken prior to the Closing, and
this Agreement, the Notes (when issued and fully paid for), the
Registration Rights Agreement and the Research and Development
Agreement constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms,
except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
2.3 Valid Issuance of Shares. The Shares which are
being purchased hereunder and the shares which are to be
purchased by Investor pursuant to any conversion of the Notes,
when issued, sold and delivered in accordance with the terms
hereof and thereof for the consideration expressed herein and
therein, will be duly and validly issued, fully paid and
nonassessable and, based in part upon the representations of
Investor in this Agreement, the Shares and the Notes will be
issued in compliance with all applicable federal and state
securities laws.
2.4 SEC Reports. The Company has heretofore filed
with the Securities and Exchange Commission (the "SEC") pursuant
to the Securities Exchange Act of 1934, as amended, all reports
and other documents required to be filed, including an Annual
Report on Form 10-K for the year ended December 31, 1993 (the
"Form 10-K"). None of such reports, or any other reports,
documents, registration statements, definitive proxy materials
and other filings required to be filed with the SEC under the
rules and regulations of the SEC ("SEC Filings") contains any
untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make
the statements made, at the time and in light of the
circumstances under which they were made, not misleading. Since
December 31, 1993, the Company has timely filed with the SEC all
SEC Filings and all such SEC Filings complied with all applicable
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as
amended, as applicable and the rules thereunder. The audited
financial statements of the Company included or incorporated by
reference in the 1993 Annual Report and the unaudited financial
statements contained in the quarterly reports on Form 10-Q each
have been prepared in accordance with such acts and rules and
with United States generally accepted accounting principles
applied on a consistent basis throughout the periods indicated
therein and with each other, except as may be indicated therein
or in the notes thereto and except that the unaudited interim
financial statements may not contain all footnotes and
adjustments required by United States generally accepted
accounting principles, and fairly present the financial condition
of the Company as at the dates thereof and the results of its
operations and statements of cash flows for the periods then
ended, subject, in the case of unaudited interim financial
statements, to normal year-end adjustments. Except as reflected
in such financial statements, the Company has no material
liabilities, absolute or contingent, other than ordinary course
liabilities incurred since the date of the last such financial
statements in connection with the conduct of the business of the
Company. Since December 31, 1993, and except for: (1) the
Company's corporate partner transaction with Abbott Laboratories
as documented by that certain Research, Development and License
Agreement dated July 6, 1994, that certain Stock Purchase
Agreement dated July 6, 1994 and that certain First Addendum to
Amended Registration Rights Agreement dated July 6, 1994 which
modified the Amended Registration Rights Agreement dated June 24,
1994, and (2) that certain Lease dated July 6, 1994 between
Chevron/Nexus Partnership, as landlord, and the Company, as
tenant, relating to the construction and lease of a facility in
Torrey Science Center in San Diego, California, that certain
Security Agreement (and Fixture Filing) between Chevron/Nexus
Partnership and the Company dated July 6, 1994 and related UCC
Financing Statements that created and perfected securities
interests in favor of Chevron/Nexus Partnership in certain
property of the Company that may be located in the new facility,
there has been no:
(a) change in the assets, liabilities, financial
condition or operating results of the Company from that reflected
in the 1993 Annual Report, except changes in the ordinary course
of business that have not, individually or in the aggregate,
resulted in and are not reasonably expected to result in a
Material Adverse Effect (and except that the Company expects to
continue to incur substantial operating losses, which may be
material);
(b) damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
business, properties or financial condition of the Company (and
except that the Company expects to continue to incur substantial
operating losses, which may be material);
(c) waiver or compromise by the Company of a
material right or of a material debt owed to it;
(d) satisfaction or discharge of any lien, claim
or encumbrance by the Company, except in the ordinary course of
business and which is not material to the business, properties or
financial condition of the Company (as such business is presently
conducted);
(e) material change to a material contract or
arrangement by which the Company or any of its assets is bound or
subject;
(f) sale, assignment or transfer to a third party
that is not an Affiliate (as hereafter defined) of any material
patents, trademarks, copyrights, trade secrets or other
intangible assets for compensation which is less than fair value;
(g) mortgage, pledge, transfer of a security
interest in, or lien, created by the Company, with respect to any
of its material properties or assets, except liens for taxes not
yet due or payable;
(h) declaration, setting aside or payment or
other distribution in respect of any of the Company's capital
stock, except any direct or indirect redemption, purchase or
other acquisition of any such stock by the Company; or
(i) event or condition of any type that has had
or is reasonably expected to have a Material Adverse Effect.
For purposes of this Section 2.4 of this Agreement, the
term "Affiliate" means any individual or entity directly or
indirectly controlling, controlled by or under common control
with, a party to this Agreement. Without limiting the foregoing,
the direct or indirect ownership of 30% or more of the
outstanding voting securities of any entity, or the right to
receive 30% or more of the profits or earnings of an entity,
shall be deemed to constitute control.
2.5 Contracts. With respect to each of the material
contracts, commitments and agreements of the Company, the Company
is not, and has no actual knowledge that any other party is, in
default under or in respect of any such material contract,
commitment or agreement, the result of which default would have a
Material Adverse Effect. No party to any such material contract,
commitment or agreement, would be authorized or permitted to
terminate its obligations thereunder by reason of the execution
and delivery of this Agreement or any of the transactions
contemplated herein.
2.6 Compliance. The Company has complied with, and is
not in default under or in violation of its Certificate of
Incorporation, Bylaws or any and all laws, ordinances and
regulations or other governmental restrictions, orders, judgments
or decrees, applicable to the Company's business as presently
conducted and as proposed to be conducted, including individual
products marketed by it, where any such default or violation
would have a Material Adverse Effect. The Company has not
received notice of any possible or actual violation of any
applicable law, ordinance, regulation, or order, the result of
which violation would be reasonably expected to have a Material
Adverse Effect. The Company is not a party to any agreement or
instrument, or subject to any charter or other corporate
restriction, or any judgment, order, decree, law, ordinance,
regulation or other governmental restriction which would prevent
or impede, or be breached or violated by, or would result in the
creation of any lien or encumbrance upon any assets of the
Company by, the transactions contemplated in this Agreement, the
execution, delivery or performance of the Registration Rights
Agreement or the Research and Development Agreement, except that
no representation or warranty is made with respect to filings
required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976 as amended.
2.7 Compliance with Other Instruments. The execution,
delivery and performance of this Agreement and of the
transactions contemplated hereby will not result in any violation
of or constitute, with or without the passage of time and the
giving of notice, either a default under any provision of its
Certificate of Incorporation or Bylaws.
2.8 Governmental Consents. No consent, approval,
order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or
local governmental authority is required on the part of the
Company in connection with the Company's valid execution,
delivery and performance of this Agreement, the Registration
Rights Agreement and the Research and Development Agreement,
except for any filings under any applicable state securities laws
and except for any filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 as amended. The filings under state
securities laws, if any, will be effected by the Company at its
cost within the applicable stipulated statutory period.
2.9 Litigation. There is no action, suit, proceeding
or investigation pending or currently threatened against the
Company which questions the validity of this Agreement, the
Registration Rights Agreement or the Research and Development
Agreement, or the right of the Company to enter into such
instruments or to consummate the transactions contemplated hereby
or thereby. Other than the lawsuit filed by the Company titled
Ligand Pharmaceuticals Incorporated and Allergan Ligand vs. La
Jolla Cancer Research Foundation, et al., there is no action,
suit, proceeding or investigation pending or currently threatened
against the Company, which singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would
materially adversely affect the business, properties, operations,
financial condition, income or business prospects of the Company
as presently being conducted.
2.10 Permits. Except as disclosed in SEC Filings
(including, inter alia, the lack of FDA approvals for the
commercial sale of the Company's product candidates), the Company
has all governmental franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as
now being conducted by it or as proposed to be conducted by it,
the lack of which could have a Material Adverse Effect. The
Company is not in default in any material respect under any of
such franchises, permits, licenses or other similar authority.
2.11 Taxes. The Company has filed all federal, state
and other tax returns which are required to be filed and has
heretofore paid all taxes which have become due and payable,
except where the failure to file or pay would not be reasonably
expected to have a Material Adverse Effect. The provision for
taxes on the balance sheet as of December 31, 1993 is sufficient
for the payment of all accrued and unpaid taxes of the Company
with respect to the period then ended.
2.12 Title. The Company has good and marketable title
to all material property and assets reflected in the financial
statements to the 1993 Annual Report (or as described in the SEC
Filings). Except where the failure to do so would not have a
Material Adverse Effect, the Company occupies its leased
properties under valid and binding leases conforming to the
description thereof set forth in the SEC Filings.
2.13 Intellectual Property. Except as disclosed in the
SEC Filings, the Company owns, or possesses adequate rights to
use, all of their patents, patent rights, trade secrets, know-
how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names and copyrights described
or referred to in the SEC Filings or owned or used by it or which
is necessary for the conduct of its business as presently
conducted, except where the failure to own or possess such
patents, patent rights, trade secrets, know-how, proprietary
techniques, including processes and substances, trademarks,
service marks, trade names and copyrights would not have a
material adverse effect on the business properties, operations,
financial condition, income or business prospects of the Company.
Except as disclosed in the SEC Filings, the Company has not
received any notice of infringement of or conflict with asserted
rights of others with respect to any patents, patent rights,
trade secrets, know-how, proprietary techniques, including
processes and substances, trademarks, service marks, trade names
and copyrights which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would be
reasonably expected to have a Material Adverse Effect.
2.14 Capitalization; Options and Warrants. The
authorized capital stock of the Company consists of sixty-five
million (65,000,000) shares of which ten million (10,000,000)
shares are Class A Common Stock, par value $.001 per share, fifty
million (50,000,000) shares are Class B Common Stock, par value
$.001 per share, and five million (5,000,000) shares are
Preferred Stock, par value $.001 per share. Except as disclosed
in the SEC Filings, and except for the 429,553 shares of Class A
Common Stock issued to Abbott Laboratories pursuant to that
certain Stock Purchase Agreement dated July 6, 1994, and the
obligation of Abbott Laboratories to purchase additional shares
pursuant to Section 7.1 of such Stock Purchase Agreement and
Abbott Laboratories' right to purchase additional shares pursuant
to Section 9.11 of such Stock Purchase Agreement, and except for
the transactions contemplated hereby, since December 31, 1993,
the Company has not granted any option (except for stock options
granted under the Company's stock option plans), warrants, rights
(including conversion or preemptive rights, except for stock
purchased under the Company's stock purchase plans), or similar
rights to any person or entity to purchase or acquire any rights
with respect to any shares of capital stock of the Company.
2.15 Nasdaq National Market Designation. Other than
the automatic conversion of the Class A Common Stock into Class B
Common stock as described in the Company's Certificate of
Incorporation, the Class A Common Stock is currently included in
the Nasdaq National Market of the Nasdaq Stock Market and the
Company knows of no reason or set of facts which is likely to
result in the termination or inclusion of the Class A Common
Stock in the Nasdaq National Market or the inability of such
stock to continue to be included in the Nasdaq National Market.
The Company shall use all commercially reasonable efforts to
maintain the Non-Quantitative Designation Criteria contained in
Section 5 of Part III of Schedule D of the NASD's Bylaws to the
extent such criteria are within the control of the Company.
Nothing in this Section shall be interpreted to preclude the
Company from listing its Class A Common stock on a national
securities exchange in lieu of the Nasdaq National Market.
2.16 Accuracy of Representations and Warranties. No
representation or warranty by the Company contained in this
Agreement, and no statement contained in any exhibit, schedule,
disclosure, certificate, list or other instrument delivered or to
be delivered to the Investor pursuant hereto or in connection
with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact
necessary to make the statements contained herein or therein not
misleading.
3. Representations and Warranties of Investor. Investor
hereby represents and warrants that:
3.1 Organization, Good Standing and Qualification.
Investor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to carry on its business
as now conducted and as proposed to be conducted.
3.2 Authorization. All corporate action on the part
of Investor, its officers and directors necessary for the
authorization, execution and delivery of this Agreement, the
Registration Rights Agreement and the Research and Development
Agreement, the performance of all obligations of Investor
hereunder and thereunder has been taken or will be taken prior to
the Closing, and this Agreement, the Registration Rights
Agreement and the Research and Development Agreement, constitute
valid and legally binding obligations of Investor enforceable in
accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting the enforcement
of creditors' rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief,
or other equitable remedies.
3.3 Purchase Entirely for Own Account. This Agreement
is made with Investor in reliance upon Investor's representation
to the Company, which by Investor's execution of this Agreement
Investor hereby confirms, that the Shares and the Notes to be
received by Investor and the shares issuable upon conversion of
the Shares and any shares issuable upon conversion of the Notes
(collectively, the "Securities") will be acquired for investment
for Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof,
and that Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same in
violation of the Securities Act of 1933 or the California
Corporate Securities Law of 1968. By executing this Agreement,
Investor further represents that Investor does not have any
contract, undertaking, agreement or arrangement with any person
to sell, transfer or grant participations to such person or to
any third person, with respect to any of the Securities.
Investor represents that it has full power and authority to enter
into this Agreement.
3.4 Investment Experience. Investor acknowledges that
it is able to fend for itself, can bear the economic risk of its
investment and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and
risks of the investment in the Securities. Investor also
represents it has not been organized for the purpose of acquiring
the Securities.
3.5 Accredited Investor. Investor is an "accredited
investor" within the meaning of SEC Rule 501 of Regulation D, as
presently in effect.
3.6 Restricted Securities. It understands that the
Securities it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they
are being acquired from the Company in a transaction not
involving a public offering and that under such laws and
applicable regulations such Securities may be resold without
registration under the Securities Act, only in certain limited
circumstances. In this connection, Investor represents that it
is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the
Securities Act.
3.7 Further Limitations on Disposition. Without in
any way limiting the representations set forth above, Investor
further agrees not to make any disposition of all or any portion
of the Securities unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by
Sections 3.7, 7.1 and 8 (except that Sections 7.1 and 8 shall not
apply to a transferee in a registered public offering or a sale
under Rule 144 or as provided in Section 8) of this Agreement,
the Registration Rights Agreement and the Notes, if applicable,
and:
(a) There is then in effect a Registration
Statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such
Registration Statement; or
(b) (i) Investor shall have notified the Company
of the proposed disposition and shall have furnished the Company
with a reasonably detailed statement of the circumstances
surrounding the proposed disposition (for purposes of securities
law compliance), and (ii) if reasonably requested by the Company,
such Investor shall have furnished the Company with an opinion of
counsel (which may be Investor's inside counsel), in form and
substance reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under
the Securities Act. It is agreed that the Company will not
require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances.
3.8 Legends. It is understood that the certificates
evidencing the Securities may bear one or all of the following
legends:
(a) "These securities have not been registered
under the Securities Act of 1933. They may not be sold, offered
for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the securities
under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold
pursuant to Rule 144 of such Act."
(b) "These securities are subject to certain
transfer restrictions contained in a certain Stock and Note
Purchase Agreement dated September 2, 1994 as amended from time
to time, a copy of which may be obtained from the corporation
without charge."
(c) Any legend required by the laws of the State
of California, including any legend required by the California
Department of Corporations and Sections 417 and 418 of the Code.
To the extent that such legends are no longer
applicable, the Company shall cause its transfer agent to remove
the legends upon a permitted transfer by Investor.
3.9 Governmental Consents. No consent, approval,
order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or
local governmental authority is required on the part of Investor
in connection with Investor's valid execution, delivery and
performance of this Agreement, the Notes, the Registration Rights
Agreement, or the Research and Development Agreement or the
issuance of the Shares and the Notes, except for any filings
under any applicable state securities laws and except for any
filing under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 as amended.
4. California Commissioner of Corporations.
4.1 Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102
OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
5. Conditions of Investor's Obligations at Closing. The
obligations of Investor under subsection 1.1(a) of this Agreement
are subject to the fulfillment on or before the Closing of each
of the following conditions, the waiver of which shall not be
effective without the consent of Investor thereto:
5.1 Representations and Warranties. The
representations and warranties of the Company contained in
Section 2 shall be true on and as of the Closing with the same
effect as though such representations and warranties had been
made on and as of the date of such Closing.
5.2 Performance. The Company shall have performed and
complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it on or before the Closing, all corporate or
other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and in substance to
Investor.
5.3 Compliance Certificate. An officer of the Company
shall have delivered to Investor a certificate certifying that
(a) the conditions specified in Sections 5.1 and 5.2 have been
fulfilled; (b) the Company has not filed a petition in bankruptcy
or insolvency or for reorganization or for an arrangement or for
the appointment of a receiver or trustee of its assets, nor is
the Company aware of any events or action that would make any
such filing or arrangement imminent; and (c) no action or event
has occurred, nor is any action or event imminent, that would
impair the Company's ability to perform as contemplated under the
Research and Development Agreement.
5.4 Qualifications. The Commissioner of Corporations
of the State of California shall have issued a permit qualifying
the offer and sale of the Shares and the Notes to Investor
pursuant to this Agreement, or such offer and sale when made
shall be exempt from such qualification under the California
Corporate Securities Law of 1968, as amended.
5.5 Proceedings and Documents. All corporate and
other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to
Investor and they shall have received all such counterpart
original and certified or other copies of such documents as they
may reasonably request.
5.6 Shares and First Note. The Company shall have
delivered to Investor the Shares and issued to Investor the First
Note in the form attached as Exhibit A.
5.7 Research and Development Agreement. The Company
and Investor shall have entered into the Research and Development
Agreement of even date herewith.
5.8 Registration Rights Agreement. The Company and
Investor shall have entered into the Registration Rights
Agreement.
5.9 Opinion of Company Counsel. Investor shall have
received an opinion from the Company's Vice President and General
Counsel, dated as of the Closing, in form and substance
reasonably acceptable to Investor.
6. Conditions of the Company's Obligations at Closing.
The obligations of the Company to Investor under this Agreement
are subject to the fulfillment on or before the Closing of each
of the following conditions by Investor:
6.1 Representations and Warranties. The representa-
tions and warranties of Investor contained in Section 3 shall be
true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the
Closing.
6.2 Performance. Investor shall have performed and
complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it on or before the Closing, all corporate or
other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and in substance to the
Company.
6.3 Compliance Certificate. An officer of Investor
shall have delivered to the Company a certificate certifying that
the conditions specified in Sections 6.1 and 6.2 have been
fulfilled.
6.4 Payment of Purchase Price. Investor shall have
delivered the First Installment purchase price specified in
Section 1.1(a).
6.5 California Qualification. The Commissioner of
Corporations of the State of California shall have issued a
permit qualifying the offer and sale to Investor of the
Shares and the Notes or such offer and sale when made shall be
exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
6.6 Research and Development Agreement. The Company
and Investor shall have entered into the Research and Development
Agreement of even date herewith.
6.7 Registration Rights Agreement. The Company and
Investor shall have entered into the Registration Rights
Agreement.
7. Covenants of Investor.
7.1 Transfer Restriction. Notwithstanding any rights
under the Registration Rights Agreement, Investor hereby agrees
that during the time period commencing as of the Closing until
the termination of the Research and Development Agreement (with
the time period being referred to as the "Restricted Period"),
without the prior written consent of the Company (which may be
withheld in its sole discretion), neither it nor any affiliate
(as defined in Rule 144 of the Act promulgated by the SEC
("Affiliate")) shall, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of
(other than to donees who agree to be similarly bound) any of the
Shares, the Notes, any shares issuable upon conversion of the
Notes (collectively, the "Note Shares"), securities purchased
pursuant to Section 9 or securities issuable upon conversion of
the Class A Common Stock ("Restricted Securities").
Notwithstanding the foregoing, transfers solely among Investor
Affiliates shall not be subject to the transfer restrictions set
forth in this Section 7.1 provided the Affiliate transferee
agrees in writing to be bound by this Section 7.1. In order to
enforce the foregoing covenant, the Company may impose legends
and/or stop-transfer instructions with respect to the Restricted
Securities held by Investor or any Affiliate (and the Restricted
Securities of every other person subject to the foregoing
restriction) until the end of such period.
7.2 Standstill Provisions. Commencing as of the
Closing and for the period until the termination of the Research
and Development Agreement, Investor (including all Affiliates of
Investor) shall not acquire beneficial ownership of any shares of
Common Stock of the Company, any securities convertible into or
exchangeable for Common Stock, or any other right to acquire
Common Stock, except by way of stock dividends or other
distributions or offerings made available to holders of Class A
Common Stock (or Class B Common Stock issued upon conversion
thereof) generally, from the Company or any other person or
entity, without the prior written consent of the Company, which
consent may be withheld in its sole discretion; provided,
however, that in no event shall (i) the original purchase of
securities pursuant to this Agreement including Section 1.1 and
Section 9, (ii) the conversion of the Notes, or (iii) the
acquisition by Investor of another company that then owns
securities of the Company, cause a violation of this Section 7.2.
8. Right of First Offer.
8.1 Right of First Offer.
(a) The Investor shall not make any disposition of all
or any portion (or any interest) of the Shares, the Notes, the
Note Shares, securities purchased pursuant to Section 9 or shares
issuable upon conversion of the Class A Common Stock or any
portion thereof, without first giving the Company the right to
accept an offer to purchase such securities, except for any
dispositions that are exempt pursuant to the terms of Section
8.3. Subject to Section 7.1, at the time the Investor wishes to
make a disposition of any or all of the securities (except for
dispositions that are exempt pursuant to the terms of Section
8.3), it shall submit an offer to sell all, but not less than
all, of such securities which Investor wishes to dispose (the
"Offered Shares") to the Company (the "Offer") by telephonic
communication with the Company's President or Chief Operating
Officer (such telephonic communication to be confirmed in writing
by notice pursuant to Section 11.6) as follows:
(i) If the Investor wishes to sell the Offered
Shares in an open market disposition, the Offer shall disclose
the number of Offered Shares proposed to be sold. As soon as
practicable after receipt of the Offer, but in no event later
than three business days after the Investor makes the Offer, the
Company shall have the option to accept the Offer to purchase the
Offered Shares at the closing market price on the business day
next preceding the day of the Offer. In the event the Company
does not purchase the Offered Shares offered by the Investor
pursuant to the Offer, the Investor may sell the Offered Shares
at any time within 90 days after the expiration of the Offer.
Any such sale shall be made in the open market at the market
prices prevailing at the time of the sale.
(ii) If the Investor wishes to sell or otherwise
transfer the Offered Shares in a privately negotiated
transaction, whether through broker-dealers who may act as agent
or acquire the Offered Shares as principal, or otherwise, the
Offer shall disclose the number of Offered Shares proposed to be
sold or transferred and the price at which the Offered Shares are
offered to the Company. As soon as practicable after receipt of
the Offer, but in no event later than three business days after
the Investor makes the Offer, the Company shall have the option
to accept the Offer to purchase the Offered Shares at the price
per share set forth in the Offer. In the event the Company does
not purchase the Offered Shares offered by the Investor pursuant
to the Offer, and provided that the price specified in the Offer
is not greater than the closing market price on the business day
next preceding the day of the Offer, the Investor may sell or
transfer the Offered Shares at any time within 90 days after the
expiration of the Offer for any price.
(iii) If the Investor wishes to effect an
underwritten offering of the Offered Shares pursuant to
registration rights granted by the Company (if permitted
thereby), the Offer shall disclose the number of Offered Shares
proposed to be sold to the underwriters. The Company shall have
the option to purchase the Offered Shares at the closing market
price on the business day next preceding the day of the Offer.
As soon as practicable after receipt of the Offer, but in no
event later than three business days after the Investor makes the
Offer, the Company shall have the option to accept the Offer to
purchase the Offered Shares. In the event the Company does not
purchase the Offered Shares offered by the Investor pursuant to
the Offer, the Investor may sell the Offered Shares in an
underwritten offering commenced within ninety (90) days after the
expiration of the Offer.
(b) Any Offered Shares not sold in accordance with the
applicable terms and within the applicable time periods provided
in subsection (a) above shall continue to be subject to the
requirements of a first offer pursuant to this Section.
(c) The provisions of Subsections (a) and (b) above
shall not apply to any disposition of Shares, the Notes, the Note
Shares, securities purchased pursuant to Section 9 or shares
issuable upon conversion of the Class A Common Stock made in an
open market transaction (or series of related transactions) in
which the aggregate number of such shares involved in such
disposition is less than 25,000 (subject to appropriate
adjustment in the event of such stock splits, stock dividends,
recapitalizations and the like) during any 30-day period.
(d) If the Company accepts an Offer under this
Section, the Closing of such purchase shall occur within twenty
(20) business days after acceptance of the Offer by the Company.
Upon such acceptance, the Company and the Investor shall be
legally obligated to consummate the purchase contemplated
thereby.
(e) With respect to the Shares, shares issued upon
conversion of the Shares and shares purchased pursuant to
Section 9 which are attributable to the Shares (collectively, the
"Equity Investment Shares"), the provisions of this Section shall
lapse and cease to have any effect upon earlier to occur of
(i) the time, if any, when such Equity Investment Shares owned by
Investor represent less than two percent (2%) of the outstanding
Common Stock of the Company (as derived from public reports filed
by the Company with the Securities and Exchange Commission), or
(ii) the second anniversary of the termination of the Research
and Development Agreement. With respect to the Notes, the Note
Shares, shares issuable upon conversion of such Note Shares and
shares purchased pursuant to Section 9 which are attributable to
the Note Shares (collectively, the "Debt Investment Shares"), the
provisions of this Section shall lapse and cease to have any
effect upon the earlier to occur of (i) at such time when such
Debt Investment Shares owned by Investor represent less than five
percent (5%) of the outstanding Common Stock of the Company (as
derived from public reports filed by the Company with the
Securities and Exchange Commission), or (ii) the third
anniversary of the conversion of the Notes.
8.2 Binding Effect. The Company's right of first
offer shall be assignable in whole or in part by the Company,
(but only after the Company receives notice of a transfer which
is subject to a right of first offer and only with respect to
that individual transaction) shall inure to the benefit of its
successors and assigns. The Company's right of first offer shall
be binding upon any transferee of the Offered Securities acquired
pursuant to a disposition that is exempt from the right of first
offer pursuant to the terms of Section 8.3 (including the shares,
the Notes, the Note Shares, shares purchased pursuant to Section
9 and shares of Class B Common Stock issued or issuable upon
conversion of the Class A Common Stock). However, the Company's
right of first offer shall not apply to any transferee of the
Offered Securities if those Offered Securities were previously
offered to the Company pursuant to Section 8.1, the Company
elected not to purchase such Offered Securities and the Investor
sold the Offered Shares to the transferee in compliance with
Section 8.1.
8.3 Exempt Transfers. Subject to Section 8.2, the
right of first offer shall not apply to (i) transfers to
controlled Affiliates of Investor or donees, provided the
transferee agrees to be bound by the obligations of this
Agreement, or (ii) transactions involving a merger,
reorganization, recapitalization, exchange offer or sale of all
or substantially all of the business or capital stock of the
Company approved by the Company's board of directors.
8.4 Termination of Right of First Offer. The right of
first offer under this Section 8 shall terminate upon the earlier
to occur of (i) the tenth anniversary date of this Agreement or
(ii) the consummation of an acquisition or merger of the Company
by or with a third party or the sale of all or substantially all
of the assets of the Company.
9. Right of Participation in Equity Financings. Subject
to the terms and conditions specified in this Section 9, the
Company hereby grants to Investor a right to purchase up to the
number of Additional Shares (as defined below) in connection with
any Equity Financing (as defined below) undertaken by the
Company.
(a) Each time the Company proposes to offer shares of
any class of its capital stock in a registered public offering or
in a private placement of unregistered shares subject to the
exceptions set forth in paragraph (c) below ("Equity Financing"),
the Company shall deliver a notice in person, by air courier or
by facsimile ("Notice") to Investor stating (i) its bona fide
intention to undertake such Equity Financing, (ii) the number of
shares to be offered in the Equity Financing (the "Equity
Financing Shares"), (iii) the number of Additional Shares up to
which Investor may elect to purchase in such Equity Financing
which would be added to the Equity Financing Shares, and (iv) the
price and terms, if any, upon which it proposes to offer such
shares in the Equity Financing.
(b) Within ten (10) business days after giving of the
Notice, Investor may elect to purchase, at the price and on the
terms specified in the Notice, up to the number of Additional
Shares set forth in the Notice. The number of shares of capital
stock ("Additional Shares") that Investor may elect to purchase
and include in the Equity Financing shall be calculated as
follows:
Additional Equity Equity
Shares = Financing Shares - Financing Shares
1 - ___%
___% represents the percentage of the outstanding
shares of the Company held by Investor at the time of
the Notice assuming full exercise of all options and
warrants outstanding at the Closing (but excluding
shares issuable upon conversion of the Notes unless the
Notes have been converted into shares at the time
Investor exercises its right under this Section 9).
In the event the number of Equity Financing Shares changes for
any reason (other than including the Additional Shares) after the
Notice is delivered to Investor, the number of Additional Shares
shall be recalculated using the new number of Equity Financing
Shares and the Company shall promptly provide a revised Notice to
Investor reflecting such change.
(c) The right of Investor in this Section 9 shall not
be applicable (i) to the issuance or sale of shares under any
plan, agreement or arrangement, to employees, directors,
consultants, customers, vendors, suppliers or other persons or
organizations with which the Company has a commercial
relationship provided that such issuances are for other than
primarily equity financing purposes, (ii) to the issuance or sale
of stock pursuant to Regulation S (or successor rule or
regulation) promulgated under the Securities Act of 1933, as
amended, so long as the Company in good faith believes that such
issuance or sale is in the best interest of the Company, (iii) to
the issuance of shares pursuant to the conversion or exercise of
convertible or exercisable securities, (iv) to the issuance of
shares in connection with a bona fide business acquisition of or
by the Company, whether by merger, consolidation, sale of assets,
sale or exchange of stock or otherwise, (v) to the issuance or
sale of shares in connection with a transaction that has a
substantial non-financing objective (for example, a research and
development partnership, a SWORD transaction, or a collaboration
or licensing arrangement), or (vi) to the issuance of shares to
persons or entities with which the Company has business
relationships provided such issuances are for other than
primarily equity financing purposes.
(d) Investor's rights and obligations under this
Section 9 shall not be assignable. The Company shall have no
obligation to register the shares purchased pursuant to this
Section 9; provided, that in the event the Company shall grant
registration rights on the Equity Financing Shares, the same such
registration rights shall also be granted on the Additional
Shares being purchased by Investor under this Section 9.
(e) The rights of Investor under this Section 9 shall
terminate upon the earlier to occur of (i) the tenth anniversary
date of this Agreement or (ii) the consummation of an acquisition
or merger of the Company by or with a third party or the sale of
all or substantially all of the assets of the Company.
10. Covenants
As long as any of the Notes are outstanding, the
Company covenants as follows:
10.1 Furnishing of Information. The Company will
promptly furnish to the Investor all SEC filings (or comparable
information if the Company is not at the time required to file
reports pursuant to Section 13(a) of the Securities Exchange Act
of 1934) and all annual and quarterly reports furnished to
stockholders. The Company will promptly furnish such other
information respecting the business affairs, financial condition
and/or operations of the Company as the Investor may from time to
time reasonably request; provided, however, that as long as the
Company is subject to the reporting requirements of Section 13(a)
or 15(d) of the Exchange Act, the Company need only furnish such
other information to the extent it is publicly available.
10.2 Conduct of Business and Maintenance of Existence.
The Company will continue to engage in business of the same
general type as now conducted and as contemplated to be conducted
by it and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in
the normal conduct of its businesses.
10.3 When the Company May Merge, etc. The Company
shall not consolidate with or merge with or into, or transfer all
or substantially all of its assets to, any other person unless
(i) such other person is a corporation organized or existing
under the laws of the United States or a state thereof, (ii) if
the surviving person is not the Company, such person expressly
assumes all the obligations of the Company under the Notes, this
Agreement and the other agreements related thereto, (iii) such
surviving person (other than the Company) has a consolidated net
worth immediately after such transaction at least equal to the
consolidated net worth of the Company immediately prior to such
transaction, (iv) immediately after such transaction no default
or event of default under any of the Notes exists, (v) the
successor corporation (or corporation controlling the successor
corporation or the Company, as the case may be) shall enter into
an agreement for the benefit of the holder of each Note which
shall provide (a) that the holder of a Note may convert it into
the kind and amount of securities and/or cash and/or other assets
which such holder would have owned immediately after the
consolidation, merger or transfer if he had converted the Note
immediately before the effective date of such transaction and
(b) for adjustments in the conversion price and terms which shall
be as nearly equivalent as may be practical to the adjustments
provided for in the Note; and (vi) the Company has delivered to
the Investor an officers' certificate and an opinion of counsel
reasonably satisfactory to the Investor, each stating that such
consolidation, merger or transfer comply with this section and
that all conditions precedent herein provided for have been
complied with.
10.4 Actions Required to Issue Note Shares. The
Company will at all times prior to repayment of the Notes reserve
and keep available out of its authorized but unissued Common
Stock solely for the purpose of issue upon conversion of the
Notes, such number of shares of Common Stock as shall then be
issuable upon the conversion of the Notes. The Company will use
its reasonable efforts to comply with all applicable laws and
regulations in connection with the conversion of the Notes
including, without limitation, any filings required by the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 as amended.
11. Miscellaneous.
11.1 Survival of Warranties. The warranties,
representations and covenants of the Company and Investor
contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and
shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the
Company.
11.2 Successors and Assigns. Except as otherwise
provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of
any of the Shares or the Notes sold hereunder or any shares
issuable upon the conversion thereof). Nothing in this
Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
11.3 Governing Law. This Agreement shall be governed
by and construed under the laws of the State of California as
applied to agreements among California residents entered into and
to be performed entirely within California.
11.4 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
11.5 Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement.
11.6 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in
writing by personal delivery to the party to be notified or by
Federal Express or other overnight package delivery service or
registered or certified mail, postage prepaid and addressed to
the party to be notified at the following addresses, or at such
other address as such party may designate by five (5) days'
advance written notice to the other parties (with notice deemed
given upon receipt):
If to the Company:
Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive, Suite 100
San Diego, California 92121
Attn: William L. Respess, Esq.
If to Investor:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President
and General Counsel
11.7 Finder's Fee. Each party represents that it
neither is nor will be obligated for any finders' fee or
commission in connection with this transaction. Each party
agrees to indemnify and to hold harmless the other from any
liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the indemnifying
party or any of its officers, partners, employees, or
representatives is responsible.
11.8 Expenses. Irrespective of whether the Closing is
effected, each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and
performance of this Agreement. Notwithstanding the foregoing,
the Company shall pay any and all stamp, transfer and other
similar taxes payable or determined to be payable in connection
with the execution and delivery of this Agreement or the original
issuance of the Securities including shares issuable upon
conversion of the Notes, and shall save and hold the Investor
harmless from and against any and all liabilities with respect to
or resulting from any delay in paying, or omission to pay, such
taxes.
11.9 Amendments and Waivers. Any term of this
Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with
the written consent of the Company and Investor. Any amendment
or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this
Agreement at the time outstanding, each future holder of all such
securities, and the Company.
11.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance
of the Agreement shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its
terms.
11.11 Entire Agreement. This Agreement and the
documents referred to herein constitute the entire agreement
among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or
covenants except as specifically set forth herein or therein.
[Remainder of This Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
INVESTOR: THE COMPANY:
AMERICAN HOME PRODUCTS LIGAND PHARMACEUTICALS
CORPORATION INCORPORATED
By:/s/ John R. Considine By: /s/ William L. Respess
Title: Vice President-Finance Title:Senior Vice President
and General Counsel
[SIGNATURE PAGE TO STOCK AND NOTE PURCHASE AGREEMENT]
THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO RULE 144 OF SUCH ACT.
THESE SECURITIES ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS CONTAINED IN A CERTAIN
STOCK AND NOTE PURCHASE AGREEMENT DATED
SEPTEMBER 2, 1994, A COPY OF WHICH MAY BE
OBTAINED FROM THE COMPANY WITHOUT CHARGE.
UNSECURED CONVERTIBLE PROMISSORY NOTE
First Note
$10,000,000.00
September 2, 1994
San Diego,
California
Ligand Pharmaceuticals Incorporated, a Delaware corporation
(the "Company"), for value received, hereby promises to pay to
American Home Products Corporation, a Delaware corporation or its
registered assigns ("Payee"), in lawful money of the United
States at the address of Payee set forth below, the principal sum
of Ten Million Dollars ($10,000,000), together with all accrued
but unpaid interest thereon. This Note is one of a series of
three possible unsecured convertible promissory notes in the
aggregate principal amount of $20,000,000 that may be issued to
Payee pursuant to that certain Stock and Note Purchase Agreement
dated September 2, 1994 between the Company and Payee (the
"Agreement"), all three such Notes shall be collectively referred
to as the "Investor Notes."
Unpaid principal of this Note shall bear interest (computed
on the basis of a year of 360 days of actual days elapsed), from
the date hereof until such principal is due and payable, at a
rate per annum which shall be equal to 7.75%. All payments with
respect to this Note shall be credited first to the payment of
accrued but unpaid interest and then to the repayment of
principal. The rate of interest payable hereunder shall in no
event exceed the maximum rate permitted by law.
The Company shall pay accrued but unpaid interest on this
Note on a semi-annual basis on the fifteenth (15th) day of each
January and July during the term hereof, commencing January 15,
1995. Subject to the Company's right to extend this Note as set
forth below, the Company shall pay all outstanding principal and
accrued but unpaid interest on this Note on the fifth anniversary
date of this Note. In the event Payee does not exercise its
Conversion Right (as defined below) with respect to all of the
outstanding Investor Notes prior to the fifth anniversary date of
this Note, the Company may elect to extend the term of this Note
for an additional two-year period such that all outstanding
principal and accrued but unpaid interest on this Note shall be
due and payable on the seventh anniversary date of this Note.
The Company shall make such election by delivering written notice
to Payee at least six (6) months prior to the fifth anniversary
date of this Note. During such extension, the Company shall
continue to pay accrued but unpaid interest on the semi-annual
payment schedule set forth above. This Note may be prepaid, in
whole or in part, at any time without premium or penalty upon
fifteen (15) days' prior written notice by the Company to the
Payee provided the Company has not received notice from Payee of
its election to exercise its Conversion Right in accordance with
the terms of this Note.
Any time on or after the third anniversary date of this Note
up to the repayment of this Note Payee may elect to convert (the
"Conversion Right") all, but not less than all, of the
outstanding principal amount of this Note and accrued but unpaid
interest thereon into the number of shares of the class of stock
of the Company then publicly traded equal to the quotient of
(x) the principal amount of this Note to be repaid and all
accrued but unpaid interest on such principal amount as of the
date the Company receives the written notice from Payee
exercising its Conversion Right, divided by (y) $13.311 (which is
One Hundred Fifteen Percent (115%) of $11.575 which is the
average daily closing price of the Company's Class A Common Stock
reported by the National Association of Securities Dealers
("NASD") on the ten (10) trading days preceding the fifth day
prior to the date of this Note). Payee may exercise its
Conversion Right by delivering written notice to the Company
together with the original Note for cancellation and such other
documents and certificates as the Company may reasonably request
to comply with applicable securities and other laws and
contractual obligations and such conversion shall be subject to
the Company's compliance with applicable laws and regulations
including, without limitation, any filings required by the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 as amended. If
the Company: (1) pays a dividend in shares of its Common Stock or
makes a distribution in shares of its Common Stock; (2)
subdivides its outstanding shares of Common Stock into a greater
number of shares; (3) combines its outstanding shares of Common
Stock into a smaller number of shares; (4) pays a dividend on its
Common Stock in shares of its capital stock other than Common
Stock; or (5) issues by reclassification of its shares of Common
Stock any shares of its capital stock, then the conversion
privilege and the conversion price in effect immediately prior to
such action shall be adjusted so that the holder of this Note
thereafter converted may receive the number of shares of capital
stock of the Company which such holder would have owned
immediately following such action if such holder had converted
the Note immediately prior to such action. For a dividend or
distribution, the adjustment shall become effective immediately
after the record date for the dividend or distribution. For a
subdivision, combination or reclassification, the adjustment
shall become effective immediately after the effective date of
the subdivision, combination or reclassification.
By acceptance of this Note, Payee represents and
acknowledges to the Company that (i) by reason of its business
and financial experience it has the capacity to protect its own
interests in this transaction and is accepting this Note and any
shares issued under the terms of this Note for its own account
and not with a view to distribution, (ii) the issuance of this
Note and the stock issuable hereunder may only be effected in
compliance with applicable state and federal securities laws,
(iii) the holder of this Note is not entitled to any rights as a
stockholder of the Company with respect to any shares of stock
issuable hereunder until a certificate or certificates
representing such shares is issued and delivered to the holder of
this Note, and (iv) subject to Payee's rights under that certain
Amended Registration Rights Agreement dated June 24, 1994, as
amended from time to time, the Company is not required under the
terms hereof to register the shares of stock issuable hereunder
and the subsequent transfer of any such shares by the holder of
this Note may require registration under the Securities Act of
1933, as amended, or other federal statutes, as well as under
applicable state laws. Upon the request of the Company, Payee
agrees to make such further representations in connection with
the issuance of any stock as may be reasonably necessary in order
to comply with the requirements of applicable securities laws as
determined by counsel to the Company. The holder of this Note
acknowledges that any stock certificate evidencing such shares
shall contain a legend in substantially the same form as set
forth below (in addition to any legend required under applicable
state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO RULE 144 OF SUCH ACT.
THESE SECURITIES ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS CONTAINED IN A CERTAIN
STOCK AND NOTE PURCHASE AGREEMENT DATED
SEPTEMBER 2, 1994, A COPY OF WHICH MAY BE
OBTAINED FROM THE COMPANY WITHOUT CHARGE.
If any payment of principal or interest on this Note shall
become due on a Saturday, Sunday, or a public holiday under the
laws of the State of California, such payment shall be made on
the next succeeding business day and such extension of time shall
be included in computing interest in connection with such
payment.
Upon payment in full of all principal and interest payable
hereunder, this Note shall be surrendered to the Company for
cancellation.
The Company waives presentment, demand for performance,
notice of nonperformance, protest, notice of protest, and notice
of dishonor. No delay on the part of Payee in exercising any
right hereunder shall operate as a waiver of such right under
this Note. This Note is being delivered in and shall be
construed in accordance with the laws of the State of California.
In the case of the happening of any of the following events
(herein called Events of Default):
(a) any representation or warranty made or deemed made
in or in connection with this Note, the Agreement, or the
borrowings hereunder or in any report, certificate, financial
statement or other instrument or agreement furnished in
connection with this Note, the Agreement or the borrowings
hereunder shall prove to have been false or misleading in any
material respect when made or deemed to be made and such false or
misleading representation or warranty materially and adversely
affects the Company's financial condition such that it impairs
the Company's ability to meet its payment obligations under this
Note when due.
(b) default shall be made in the payment of any
principal or interest of this Note when and as the same shall
become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or by acceleration thereof or
otherwise and such default shall continue for fifteen (15) days
after written notice thereof;
(c) default shall be made in the due observance or
performance of any material covenant or agreement contained in
this Note or the agreement and such default shall continue for
thirty (30) days after written notice thereof; provided, that if
the Company is attempting in good faith to cure such default, but
is unable to effect such cure within the thirty day period due to
any reason or unforeseen circumstances beyond its reasonable
control, then the obligations of the Company shall be extended on
a day-to-day basis for the time period equal to the period of the
excusable delay.
(d) the Company shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of
the United States Code or any other federal, state or foreign
bankruptcy, insolvency, liquidation or similar law, (ii) consent
to the institution of, or fail to contravene in a timely and
appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator or similar official
for the Company or for a substantial part of its property or
assets, (iv) file an answer admitting the material allegations of
a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally, to pay
its debts as they become due or (vii) take corporate action for
the purpose of effecting any of the foregoing;
(e) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Company or of a
substantial part of its property or assets under Title 11 of the
United States Code or any other federal, state or foreign
bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or
similar official for the Company or for a substantial part of the
property of the Company, or (iii) the winding-up or liquidation
of the Company; and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall continue unstayed and in
effect for 30 days;
(f) this Note or the Agreement shall for any reason
cease to be, or be asserted by the Company not to be, a legal,
valid and binding obligation enforceable in accordance with its
terms;
then, and in any such event (other than an event described in
paragraph (d) or (e) above), and at any time thereafter during
the continuance of such event, the holder of this Note may, by
written or telegraphic notice to the Company, declare the Note to
be forthwith due and payable whereupon the principal of the Note,
together with accrued interest thereon and other liabilities of
the Company accrued hereunder, shall become due and payable both
as to principal and interest, without presentment, demand,
protest or any other notice of any kind, all of which are hereby
expressly waived by the Company, anything contained herein or in
the Note to the contrary notwithstanding; provided, however, that
with respect to a default described in paragraph (d) or (e)
above, this Note, and any other liabilities of the Company
accrued hereunder, shall automatically become due and payable,
both as to principal and interest, without presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived by the Company, anything contained herein or in
the Note to the contrary notwithstanding. Notwithstanding
anything to the contrary contained herein, if the Event of
Default results from a breach of Section 10.3(i) of the
Agreement, Payee's sole remedy shall be the acceleration of its
Conversion Right in this Note.
If the indebtedness represented by this Note or any part
thereof is collected at law or in equity or in bankruptcy,
receivership or other judicial proceedings, the Company agrees to
pay, in addition to the principal and interest payable hereon,
reasonable attorneys' fees and costs incurred by Payee as
determined by the court.
Unless otherwise provided, any notice required or permitted
under this Note shall be given in writing by personal delivery to
the party to be notified or by Federal Express or other overnight
package delivery service or registered or certified mail, postage
prepaid and addressed to the party to be notified at the
following addresses, or at such other address as such party may
designate by five (5) days' advance written notice to the other
parties (with notice deemed given upon receipt):
If to Payee: American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President
and General Counsel
If to Company: Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive, Suite 100
San Diego, California 92121
Attn: William L. Respess, Esq.
Any payment shall be deemed made upon receipt by Payee.
Payee or the Company may change their address for purposes of
this paragraph by giving to the other party notice in conformance
with this paragraph of such new address.
This Note may be modified or amended only by a writing
signed by the Company and the Payee.
The transfer of this Note (or any interest in it) is subject
to transfer restrictions set forth in the Stock and Note Purchase
Agreement of even date herewith. Subject to such restrictions,
this Note may be transferred only upon surrender of the original
Note for registration of transfer, duly endorsed, or accompanied
by a duly executed written instrument of transfer in form
satisfactory to the Company. Thereupon, a new Note for like
principal amount and interest will be issued to, and registered
in the name of, the transferee. Interest and principal are
payable only to the registered holder of the Note.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Unsecured
Convertible Promissory Note to be duly executed and delivered on
and as of the day and year first written above.
LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ William L. Respess
Its: Senior Vice President
and General Counsel
ACKNOWLEDGED AND AGREED TO:
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ John R. Considine
Its: Vice President-Finance
[SIGNATURE PAGE TO UNSECURED CONVERTIBLE PROMISSORY
NOTE]
SECOND ADDENDUM TO
AMENDED REGISTRATION RIGHTS AGREEMENT
This Second Addendum ("Second Addendum") to the Amended
Registration Rights Agreement dated June 24, 1994 ("Registration
Rights Agreement") is effective as of September 2, 1994.
RECITALS
A. The Company is issuing 431,965 shares of its Class A
Common Stock and three unsecured convertible promissory notes
(the "Notes") which are convertible into shares of Class A Common
Stock (or shares of such other class of stock into which the
Class A Common Stock is converted) to American Home Products
Corporation ("Investor") pursuant to a certain Stock and Note
Purchase Agreement of even date herewith (the "Purchase
Agreement").
B. This Second Addendum serves to formally include
Investor as a party to the Registration Rights Agreement and to
include the 431,965 shares of Class A Common Stock and the shares
of Class A Common Stock (or shares of such other class of stock
into which the Class A Common Stock is converted) issuable upon
conversion of the Notes within the definition of "Registrable
Securities" under the Registration Rights Agreement and to modify
Schedule A to the Registration Rights Agreement to include such
shares, all pursuant to Section 2.6(a) of the Registration Rights
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth in the Purchase Agreement and the
Registration Rights Agreement, the parties agree as follows:
1. Section 1.1, paragraph (f) of the Registration Rights
Agreement is hereby restated in its entirety as follows:
"(f) The term "Registrable Securities" means (i)
the 1,939,435 shares of Class A Common Stock and
5,818,362 shares of Class B Common Stock (or that
number of shares of such other class of stock into
which the Class A Common Stock and Class B Common Stock
are converted) issued upon conversion of the Company's
Preferred Stock to the holders thereof and in the
amounts set forth on Schedule A attached hereto,
(ii) the Common Stock issuable or issued upon exercise
of those warrants issued to certain Existing Investors
and pursuant to which such Existing Investors were
previously granted registration rights by the Company
(iii) the 429,553 shares of Class A Common Stock (or
that number of shares of such other class of stock into
which the Class A Common Stock is converted) issued to
Abbott Laboratories pursuant to a Stock Purchase
Agreement dated July 6, 1994 which shares are reflected
on Schedule A attached to the First Addendum to this
Agreement, (iv) the 431,965 shares of Class A Common
Stock (or that number of shares of such other class of
stock into which the Class A Common Stock is converted)
issued to American Home Products Corporation pursuant
to a Stock and Note Purchase Agreement dated
September 2, 1994 (the "Stock and Note Purchase
Agreement") which shares are reflected on Schedule A
attached to the Second Addendum to this Agreement, and
the shares of Class A Common Stock (or the shares of
such other class of stock into which the Class A Common
Stock is converted) issuable upon conversion of those
certain Unsecured Convertible Promissory Notes issued
to American Home Products Corporation pursuant to the
Stock and Note Purchase Agreement (and upon such
conversion of the Notes, Schedule A shall be updated to
include such shares) and (v) any Common Stock of the
Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which
is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of the
shares referenced in (i), (ii), (iii) and (iv) above,
excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which
rights under this Agreement are not assigned."
2. Investor shall be included within the definition of
"Restricted Investors" under Section 1.13 of the Registration
Rights Agreement and shall be subject to the restrictions of the
Restricted Investors contained in such Section 1.13.
3. Schedule A of the Registration Rights Agreement is
hereby restated in its entirety as attached to this Second
Addendum.
4. This Second Addendum shall serve as a counterpart
signature page to the Registration Rights Agreement, and by
executing this Second Addendum Investor hereby becomes a party to
the Registration Rights Agreement.
5. This Second Addendum shall be binding upon the Company,
Investor and each holder of Registrable Securities and each
future holder of Registrable Securities pursuant to Section
2.6(a) of the Registration Rights Agreement.
IN WITNESS WHEREOF, the parties have executed this Second
Addendum as of the date first above written.
INVESTOR: THE COMPANY:
AMERICAN HOME PRODUCTS LIGAND PHARMACEUTICALS
CORPORATION INCORPORATED
By:/s/ John R. Considine By: /s/ William L. Respess
Title: Vice President-Finance Title:Senior Vice President
and General Counsel
[SIGNATURE PAGE TO SECOND ADDENDUM TO
AMENDED REGISTRATION RIGHTS AGREEMENT]
