<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1996
REGISTRATION NO. 333-12603
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
LIGAND PHARMACEUTICALS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 77-0160744
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
------------------------------
9393 TOWNE CENTRE DRIVE, SAN DIEGO, CALIFORNIA 92121 (619) 535-3900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
DAVID E. ROBINSON
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
LIGAND PHARMACEUTICALS INCORPORATED
9393 TOWNE CENTRE DRIVE, SAN DIEGO, CALIFORNIA 92121
(619) 535-3900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
CRAIG S. ANDREWS, ESQ. JEROME L. COBEN, ESQ.
FAYE H. RUSSELL, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM
JOHN R. COOK, ESQ. 300 SOUTH GRAND AVENUE
BROBECK, PHLEGER & HARRISON LLP LOS ANGELES, CALIFORNIA 90071
550 WEST C STREET, SUITE 1300
SAN DIEGO, CALIFORNIA 92101
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box: /
/
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / / ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This amendment No. 1 (this "Amendment") is being filed solely for the
purpose of filing exhibits to the Registration Statement on Form S-3
(Registration No. 333-12603) (the "Registration Statement") originally filed by
Ligand Pharmaceuticals Incorporated with the Securities and Exchange Commission
on September 25, 1996. This Amendment does not contain a copy of the prospectus
or financial statement schedule included in the Registration Statement, which
are unchanged from the prospectus and financial statement schedule included in
the Registration Statement.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates,
except for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.......................................................... $ 15,747
Listing fee............................................................... 17,500
NASD fee.................................................................. 5,164
Blue Sky fees and expenses................................................ 15,000
Printing and engraving expenses........................................... 90,000
Legal fees and expenses................................................... 150,000
Accounting fees and expenses.............................................. 50,000
Transfer Agent and Registrar fees......................................... 15,000
Miscellaneous expenses.................................................... 16,589
-------
Total........................................................... $375,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) Section 145 of the Delaware General Corporation Law permits
indemnification of officers and directors of Ligand under certain conditions and
subject to certain limitations. Section 145 of the Delaware General Corporation
Law also provides that a corporation has the power to purchase and maintain
insurance on behalf of its officers and directors against any liability asserted
against such person and incurred by him or her in such capacity, or arising out
of his or her status as such, whether or not the corporation would have the
power to indemnify him or her against such liability under the provisions of
Section 145 of the Delaware General Corporation Law.
(b) Article VII, Section 1 of the Bylaws of Ligand provides that Ligand
shall indemnify its officers, directors, employees and agents to the full extent
permitted by the General Corporation Law of Delaware. The rights to indemnity
thereunder continue as to a person who has ceased to be a director, officer,
employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding by reason of the fact that he or she is or was a
director or officer of Ligand (or was serving at Ligand's request as a director
or officer of another corporation) shall be paid by Ligand in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by Ligand as authorized by the relevant section of the Delaware
General Corporation Law.
(c) As permitted by Section 102(b)(7) of the Delaware General Corporation
Law, Article V, Section (A)2 of Ligand's Certificate of Incorporation provides
that a director of Ligand shall not be personally liable for monetary damages or
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to Ligand or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit.
(d) Article V, Section (A)1 of Ligand's Certificate of Incorporation
provides that the liability of the directors of Ligand for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Accordingly, to the extent California law applies, a director will not be liable
for monetary damages for breach of duty to Ligand or its stockholders in any
action brought by or in the right of Ligand. However, a director remains liable
to the extent required by law (i) for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (ii) for acts or
omissions that a director believes to be
II-1
<PAGE> 4
contrary to the best interests of Ligand or its stockholders or that involve the
absence of good faith on the part of the director, (iii) for any transaction
from which a director derived an improper personal benefit, (iv) for acts or
omissions that show a reckless disregard for the director's duty to Ligand or
its stockholders in circumstances in which the director was aware, or should
have been aware, in the ordinary course of performing a director's duties, of a
risk of serious injury to Ligand or its stockholders, (v) for acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to Ligand or its stockholders, (vi) for any
act or omission occurring prior to the date when the exculpation provision
became effective and (vii) for any act or omission as an officer,
notwithstanding that the officer is also a director or that his or her actions,
if negligent or improper, have been ratified by the directors. The effect of the
provisions in the Certificate of Incorporation is to eliminate the rights of
Ligand and its stockholders (through stockholders' derivative suits on behalf of
Ligand) to recover monetary damages against a director for breach of duty as a
director, including breaches resulting from negligent behavior in the context of
transactions involving a change of control of Ligand or otherwise, except in the
situations described in clauses (i) through (vii) above. These provisions will
not alter the liability of directors under federal securities laws.
(e) Pursuant to authorization provided under the Certificate of
Incorporation, Ligand has entered into indemnification agreements with each of
its present and certain of its former directors. Ligand has also entered into
similar agreements with certain of Ligand's executive officers who are not
directors. Generally, the indemnification agreements attempt to provide the
maximum protection permitted by Delaware and California law as it may be amended
from time to time. Moreover, the indemnification agreements provide for certain
additional indemnification. Under such additional indemnification provisions,
however, an individual will not receive indemnification for judgments,
settlements or expenses if he or she is found liable to Ligand (except to the
extent the court determines he or she is fairly and reasonably entitled to
indemnity for expenses), for settlements not approved by Ligand or for
settlements and expenses if the settlement is not approved by the court. The
indemnification agreements provide for Ligand to advance to the individual any
and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding. In order to
receive an advance of expenses, the individual must submit to Ligand copies of
invoices presented to him or her for such expenses. Also, the individual must
repay such advances upon a final judicial decision that he or she is not
entitled to indemnification. Ligand's Bylaws contain a provision of similar
effect relating to advancement of expenses to a director or officer, subject to
an undertaking to repay if it is ultimately determined that indemnification is
unavailable.
(f) There is directors and officers liability insurance now in effect which
insures directors and officers of the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
1.1 Underwriting Agreement.
3.1 Certificate of Designation of Rights, Preference and Privileges of Series A
Participating Preferred Stock of Ligand Pharmaceuticals Incorporated.
+5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the securities being
registered.
10.1 Preferred Shares Rights Agreement, dated as of September 13, 1996 by and between
Ligand Pharmaceuticals Incorporated and Wells Fargo Bank, N.A.
+23.1 Consent of Ernst & Young LLP, Independent Auditors.
+23.2 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as
Exhibit 5.1).
+24.1 Power of Attorney (see page II-4).
</TABLE>
- ---------------
+ Previously filed.
II-2
<PAGE> 5
(B) FINANCIAL STATEMENT SCHEDULES INCLUDED SEPARATELY IN THE REGISTRATION
STATEMENT.
None
All other schedules are omitted because they are not required, are not
applicable or the information is included in the Consolidated Financial
Statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described in Item 15, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on the 21st day of October 1996.
LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ DAVID E. ROBINSON
-------------------------------------------
David E. Robinson
Chairman, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-3 has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -----------------
<S> <C> <C>
/s/ David E. Robinson Chairman, President, and October 21, 1996
- ------------------------------------------ Chief Executive Officer
(David E. Robinson) (Principal Executive Officer)
/s/ Paul V. Maier Vice President, Chief October 21, 1996
- ------------------------------------------ Financial Officer and
(Paul V. Maier) Treasurer (Principal Financial
and Accounting Officer)
* Director October 21, 1996
- ------------------------------------------
(Henry F. Blissenbach)
* Director October 21, 1996
- ------------------------------------------
(Alexander D. Cross)
* Director October 21, 1996
- ------------------------------------------
(John Groom)
* Director October 21, 1996
- ------------------------------------------
(Irving S. Johnson)
* Director October 21, 1996
- ------------------------------------------
(William C. Shepherd)
* /s/ David E. Robinson October 21, 1996
- ------------------------------------------
(David E. Robinson)(Attorney-in-fact)
</TABLE>
II-4
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<C> <S>
1.1 Underwriting Agreement.
3.1 Certificate of Designation of Rights, Preferences and Privileges of Series A
Participating Preferred Stock of Ligand Pharmaceuticals Incorporated.
+5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the securities being
registered.
10.1 Preferred Shares Rights Agreement, dated as of September 13, 1996 by and between
Ligand Pharmaceuticals Incorporated and Wells Fargo Bank, N.A.
+23.1 Consent of Ernst & Young LLP, Independent Auditors.
+23.2 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as
Exhibit 5.1).
+24.1 Power of Attorney (see page II-4).
</TABLE>
- ---------------
+ Previously filed.
<PAGE> 1
EXHIBIT 1.1
2,750,000 Shares of Common Stock
LIGAND PHARMACEUTICALS INCORPORATED
UNDERWRITING AGREEMENT
[______], 1996
BEAR, STEARNS & CO. INC.
ROBERTSON, STEPHENS & COMPANY LLC
HAMBRECHT & QUIST LLC
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
Ligand Pharmaceuticals Incorporated, a corporation organized
and existing under the laws of Delaware (the "Company"), proposes, subject to
the terms and conditions stated herein, to issue and sell to the several
underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
2,750,000 shares (the "Firm Shares") of its common stock, par value $.001 per
share (the "Common Stock"), and, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, at the option of
the Underwriters, up to an additional 412,500 shares (the "Additional Shares")
of
<PAGE> 2
Common Stock. The Firm Shares and any Additional Shares purchased by the
Underwriters are referred to herein collectively as the "Shares". The Shares are
more fully described in the registration statement referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Secu-
rities and Exchange Commission (the "Commission") a registration statement, and
may have filed an amendment or amendments thereto, on Form S-3 (No. 333-12603),
for the registration of the Shares under the Securities Act of 1933, as amended
(the "Act"). Such registration statement, including the prospectus, financial
statements and schedules, exhibits and all other documents filed as a part
thereof, as amended at the time of effectiveness of the registration statement,
including any information deemed to be a part thereof as of the time of
effectiveness pursuant to paragraph (b) of Rule 430A or Rule 434 of the Rules
and Regulations of the Commission under the Act (the "Regulations"), is herein
called the "Registration Statement". Any registration statement filed pursuant
to Rule 462(b) of the Regulations is herein called the "462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. The prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) or Rule 434 filing is required, is herein called the "Prospectus".
The term "preliminary prospectus" as used herein means a preliminary prospectus
as described in Rule 430 of the Regulations. Any reference herein to the
Registration Statement, any preliminary prospectus or the Prospectus shall
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<PAGE> 3
be deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") on or before the effective
date of the Registration Statement, the date of such preliminary prospectus or
the date of the Prospectus, as the case may be, and any reference herein to the
terms "amend", "amendment" or "supplement" with respect to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to refer
to and include (i) the filing of any document under the Exchange Act after the
effective date of the Registration Statement, the date of such preliminary
prospectus or the date of the Prospectus, as the case may be, which is
incorporated therein by reference and (ii) any such document so filed.
(b) At the respective time of the effec-
tiveness of the Registration Statement or any 462(b) Registration Statement and
the effectiveness of any post-effective amendment to the Registration Statement,
when the Prospectus is first filed with the Commission pursuant to Rule 424(b)
or Rule 434 of the Regulations, when any supplement to or amendment of the
Prospectus is filed with the Commission, when any document filed under the
Exchange Act is filed and at the Closing Date and the Additional Closing Date,
if any (as hereinafter respectively defined), the Registration Statement, any
462(b) Registration Statement and the Prospectus and any amendments thereof and
supplements thereto complied or will comply in all material respects with the
applicable provisions of the Act and the Regulations and the Exchange Act and
the respective rules and regulations thereunder and does not or will not contain
an untrue statement of a material fact and does not or will not omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein (i), in the case of the Registration Statement,
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<PAGE> 4
not misleading and (ii), in the case of the Prospectus, in light of the
circumstances under which they were made, not misleading. When any related
preliminary prospectus was first filed with the Commission (whether filed as
part of the Registration Statement or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such preliminary prospectus and any
amendments thereof and supplements thereto complied in all material respects
with the applicable provisions of the Act and the Regulations and the Exchange
Act and the respective rules and regulations thereunder and did not contain an
untrue statement of a material fact and did not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not misleading.
No representation and warranty is made in this subsection (b), however, with
respect to any information contained in or omitted from the Registration
Statement or the Prospectus or any related preliminary prospectus or any
amendment thereof or supplement thereto in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Underwriter through you as herein stated expressly for use in connection with
the preparation thereof. If Rule 434 is used, the Company will comply with the
requirements of Rule 434.
(c) Ernst & Young LLP, who have certi-
fied the financial statements and supporting schedules included in the
Registration Statement, are independent public accountants as required by the
Act and the Regulations.
(d) Subsequent to the respective dates
as of which information is given in the Registration Statement and the
Prospectus, except as set forth in the
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<PAGE> 5
Registration Statement and the Prospectus, there has been no material adverse
change or any development which could reasonably be expected to involve a
prospective material adverse change in the business, prospects, properties,
operations, condition (financial or other) or results of operations of the
Company and its subsidiaries taken as a whole, whether or not arising from
transactions in the ordinary course of business, and since the date of the
latest balance sheet presented in the Registration Statement and the Prospectus,
neither the Company nor any of its subsidiaries has incurred or undertaken any
liabilities or obligations, direct or contingent, which are material to the
Company and its subsidiaries taken as a whole, except for liabilities or
obligations which are reflected in the Registration Statement and the
Prospectus.
(e) This Agreement and the transactions
contemplated hereby have been duly and validly authorized by the Company, and
this Agreement has been duly and validly executed and delivered by the Company.
(f) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (i) conflict with or result in a breach of any of the terms and
provisions of, or constitute a default (or an event which with notice or lapse
of time, or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, any material agreement,
instrument, franchise, license or permit to which the Company or any of its
subsidiaries is a party or by which any of such corporations or their respective
properties or assets may be bound or (ii) violate or conflict with any provision
of the certificate of incorporation or by-laws of the Company or any of its
subsidiaries or any judgment,
5
<PAGE> 6
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their respective properties or assets,
except for such rules and regulations the violation of which will not in the
aggregate have a material adverse effect on the Company and its subsidiaries
taken as a whole. No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their respective properties or assets is
required for the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, including the issuance,
sale and delivery of the Shares, except the registration under the Act of the
Shares and such consents, approvals, authorizations, orders, registrations,
filings, qualifications, licenses and permits as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters.
(g) All of the outstanding shares of Common Stock are
duly and validly authorized and issued, fully paid and nonassessable, and none
of such shares was issued in violation of or is now subject to any pre-emptive
or similar rights. The Shares, when issued, delivered and sold in accordance
with this Agreement, will be duly and validly issued and outstanding, fully paid
and nonassessable, and will not have been issued in violation of or be subject
to any preemptive or similar rights. The Company had, at June 30, 1996,
authorized and outstanding capital stock as set forth in the Registration
Statement and the Prospectus. The Common Stock, the Firm Shares and the
Additional Shares conform to the descriptions thereof contained in the
Registration Statement and the Prospectus. Except as disclosed
6
<PAGE> 7
in or specifically contemplated by the Registration Statement and the
Prospectus, there are no outstanding options, warrants or other rights calling
for the issuance of, and no commitments, obligations, plans or arrangements to
issue, any shares of capital stock of the Company or any security convertible
into or exchangeable for capital stock of the Company. The outstanding stock
options relating to the Common Stock have been duly authorized and validly
issued and conform to the descriptions thereof contained in the Registration
Statement and the Prospectus.
(h) The Company and each of its subsidiaries has been
duly organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation. The Company and each of its
subsidiaries is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its respective
properties (owned, leased or licensed) or the nature or conduct of its
respective business makes such qualification necessary, except for those
failures to be so qualified or in good standing which will not in the aggregate
have a material adverse effect on the Company and its subsidiaries taken as a
whole. The Company and each of its subsidiaries has all requisite power and
authority, and all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses and permits of and from all public,
regulatory or governmental agencies and bodies, to own, lease and operate its
respective properties and conduct its respective business as now being conducted
and as described in the Registration Statement and the Prospectus, and no such
consent, approval, authorization, order, registration, qualification, license or
permit contains a materially burdensome restriction not adequately disclosed in
the Registration Statement and the Prospectus.
7
<PAGE> 8
(i) Except as described in the Prospectus, there is
no litigation or governmental proceeding to which the Company or any of its
subsidiaries is a party or to which any property of the Company or any of its
subsidiaries is subject or which is pending or, to the knowledge of the Company,
contemplated against the Company or any of its subsidiaries which might result
in any material adverse change or any development which could reasonably be
expected to involve a material adverse change in the business, prospects,
properties, operations, condition (financial or other) or results of operations
of the Company and its subsidiaries taken as a whole or which is required to be
disclosed in the Registration Statement and the Prospectus.
(j) The Company has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or which
constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Shares as contemplated by this Agreement;
provided, however, that neither the conversion of any portion of the promissory
notes of the Company issued to American Home Products Corporation or the
election by the Company to receive milestone payments in the form of shares of
Common Stock from Pfizer Inc will be deemed to be an action designed to cause or
result in the stabilization or manipulation of the price of the Common Stock.
(k) The financial statements, including
the notes thereto, and supporting schedules included in the Registration
Statement and the Prospectus present fairly the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates indicated and
the results of their operations for the periods specified; except as otherwise
stated in the Registration Statement, said financial statements have
8
<PAGE> 9
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis; the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein; and the selected financial data and the summary financial information
included in the Registration Statement and the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent with that
of the financial statements included in the Registration Statement and the
Prospectus.
(l) The Company and its subsidiaries have filed all
federal, state, local and foreign tax returns that have been required to be
filed and have paid all taxes shown thereon and all assessments received by them
or any of them to the extent that such taxes have become due and are not being
contested in good faith. Except as disclosed in the Registration Statement and
the Prospectus, there is no material tax deficiency that has been or might
reasonably be expected to be asserted or threatened against the Company or any
of its subsidiaries.
(m) The Company and each of its subsidiaries has
good and marketable title in fee simple to all items of real property and good
and marketable title to all personal property owned by it, in each case free and
clear of all liens, encumbrances and defects except such as are described or
referred to in the Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made or proposed to be
made of such property by the Company or its subsidiary, as the case may be. Any
real property and buildings held under lease by the Company or any of its
subsidiaries are held under valid, existing and enforceable leases with such
exceptions as are not material and do not interfere with the use made or
proposed to be
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<PAGE> 10
made of such property and buildings by the Company or its subsidiary, as the
case may be.
(n) Except as disclosed in the Registration
Statement and the Prospectus, the Company and each of its subsidiaries owns or
possesses adequate patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures), trademarks, service marks,
trade names and other intellectual property (collectively, "Intellectual
Property") necessary to carry on the business it now operates, and neither the
Company nor any of its subsidiaries has received any notice or is otherwise
aware of (i) any claim, action or demand of any person in the United States or
elsewhere or any proceeding in the United States or elsewhere, pending or
threatened, that (A) challenges the ownership interests of the Company or any of
its subsidiaries in any of the Intellectual Property or (B) alleges that any
product or service of the Company or any of its subsidiaries infringes or
misappropriates the Intellectual Property rights of others, which claim, action,
demand or proceeding (including without limitation infringement,
misappropriation and unfair competition), if the subject of any unfavorable
decision, ruling or finding, or invalidity or inadequacy could reasonably be
expected to have, in the aggregate with all other such claims, actions, demands
and proceedings, a material adverse effect on the Company and its subsidiaries
taken as a whole or (ii) any facts or circumstances that would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries therein.
(o) No relationship, direct or indirect, exists
between or among the Company or any of its subsidiaries, on the one hand, and
the directors, officers,
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<PAGE> 11
stockholders, customers or suppliers of the Company or any of its subsidiaries,
on the other hand, that is required by the Act to be described in the
Registration Statement and the Prospectus which is not so described.
(p) The Common Stock currently outstanding is
listed, and application has been made to list the Shares, on the Nasdaq National
Market.
(q) Except as described in the Prospectus, no
holder of securities of the Company has any rights to the registration of
securities of the Company because of the filing of the Registration Statement or
otherwise in connection with the sale of the Shares contemplated hereby.
(r) The Company is not, and upon consummation of
the transactions contemplated hereby will not be, subject to registration as an
"investment company" under the Investment Company Act of 1940.
(s) There are no existing or, to the knowledge of the
Company, threatened labor disputes with any employees of the Company or any of
its subsidiaries that are likely in the aggregate to have a material adverse
effect on the Company and its subsidiaries taken as a whole.
(t) The Company and each of its subsidiaries (i) is
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), except where such noncompliance with an
Environmental Law will not in the aggregate have a material adverse effect on
the Company and its subsidiaries taken as a whole or otherwise would not require
disclosure in
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<PAGE> 12
the Registration Statement and the Prospectus, (ii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its respective business and (iii) is in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance, failure to receive required permits, licenses or other approvals
or failure to comply with the terms and conditions of such permits, licenses or
approvals will not in the aggregate have a material adverse effect on the
Company and its subsidiaries taken as a whole or otherwise would not require
disclosure in the Registration Statement and the Prospectus.
(u) Except for plans maintained, administered or
contributed to by Glycomed Incorporated, each employee benefit plan, within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is maintained, administered or contributed to by the
Company or any of its subsidiaries for employees or former employees of the
Company or any of its subsidiaries has been maintained in compliance with its
respective terms and the requirements of any applicable statutes, orders, rules
and regulations, including but not limited to ERISA and the Internal Revenue
Code of 1986, as amended, (the "Code"). To the knowledge of the Company, each
such plan maintained, administered or contributed to by Glycomed Incorporated
has been maintained in compliance with its respective terms and the requirements
of any applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Code. No prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to
any such plan, excluding transactions effected pursuant to a statutory or
administrative exemption. For each such plan which is subject to the funding
rules of Section 412 of the Code or Section 302 of ERISA, no "accu-
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<PAGE> 13
mulated funding deficiency", as defined in Section 412 of the Code, has been
incurred, whether or not waived, and the fair market value of the assets of each
such plan (excluding for these purposes accrued but unpaid contributions)
exceeded the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions.
(v) The Company and each of its subsidiaries
maintains insurance of the types and in the amounts generally deemed adequate
for its business, including, without limitation, insurance covering real and
personal property owned or leased by it against theft, damage, destruction, acts
of vandalism and all other material risks customarily insured against, all of
which insurance is in full force and effect. Neither the Company nor any of its
subsidiaries has any reason to believe that it will not be able to renew
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
respective business.
(w) The conditions for use of Form S-3, as set forth
in the General Instructions thereto, have been satisfied.
(x) The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they were or hereafter
are filed with the Commission, complied and will comply in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Commission under the Exchange Act, and, when read together with the other
information in the Prospectus, at the time the Registration Statement and any
amendments thereto become effective and at the Closing Date and the Additional
Closing Date, if any, will not contain an untrue statement of a material fact or
omit to state a material fact required
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<PAGE> 14
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company agrees to sell to the Underwriters,
and the Underwriters, severally and not jointly, agree to purchase from the
Company, at a purchase price per share of $_______, the number of Firm Shares
set forth opposite the respective names of the Underwriters in Schedule I hereto
plus any additional number of Shares which such Underwriter may become obligated
to purchase pursuant to the provisions of Section 9 hereof.
(b) Payment of the purchase price for the Shares
shall be made at the offices of Brobeck, Phleger & Harrison, 550 West C Street,
Suite 1200, San Diego, California, or at such other place as shall be agreed
upon by you and the Company, at 7:00 A.M., San Diego time, on the third or
fourth Business Day (as permitted under Rule 15c6-1 under the Exchange Act)
(unless postponed in accordance with the provisions of Section 9 hereof)
following the date of the effectiveness of the Registration Statement (or, if
the Company has elected to rely upon Rule 430A of the Regulations, the third or
fourth Business Day (as permitted under Rule 15c6-1 under the Exchange Act)
after the determination of the public offering price of the Shares), or such
other time not later than ten Business Days after such date as shall be agreed
upon by you and the Company (such time and date of payment and delivery being
herein called the "Closing Date"). As used herein, the term "Business Day" means
any day other than a day on which banks are permitted or required to be closed
in New York City.
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<PAGE> 15
Payment shall be made to the Company by wire transfer in same day funds against
delivery to you at the offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New
York, New York 10167 for the respective accounts of the Underwriters of
certificates for the Shares to be purchased by them. Certificates for the Shares
shall be registered in such name or names and in such authorized denominations
as you may request in writing at least two full Business Days prior to the
Closing Date. The Company shall permit you to examine and package such
certificates for delivery at least one full Business Day prior to the Closing
Date.
(c) In addition, the Company hereby grants to the
Underwriters the option to purchase up to 412,500 Additional Shares at the same
purchase price per share to be paid by the Underwriters to the Company for the
Firm Shares as set forth in this Section 2, for the sole purpose of covering
over-allotments in the sale of Firm Shares by the Underwriters. This option may
be exercised at any time, or from time to time, in whole or in part, on or
before the thirtieth day following the date of the Prospectus, by written notice
by you to the Company. Such notice shall set forth the aggregate number of
Additional Shares as to which the option is being exercised and the date and
time, as reasonably determined by you, when the Additional Shares are to be
delivered (such date and time being herein sometimes referred to as the
"Additional Closing Date"); provided, however, that the Additional Closing Date
shall not be earlier than the Closing Date or earlier than the second full
Business Day after the date on which the option shall have been exercised nor
later than the eighth full Business Day after the date on which the option shall
have been exercised (unless such time and date are postponed in accordance with
the provisions of Section 9 hereof). Certificates for the Additional Shares
shall be registered in such name or names and in such autho-
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<PAGE> 16
rized denominations as you may request in writing at least two full Business
Days prior to the Additional Closing Date. The Company shall permit you to
examine and package such certificates for delivery at least one full Business
Day prior to the Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter
shall be the number which bears the same ratio to the aggregate number of
Additional Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such number
increased as set forth in Section 9 hereof) bears to 2,750,000, subject,
however, to such adjustments to eliminate any fractional shares as you in your
sole discretion shall make.
Payment for the Additional Shares shall be made by wire
transfer in same day funds at the offices of Brobeck, Phleger & Harrison, 550
West C Street, Suite 1200, San Diego, California, or at such other place as
shall be agreed upon by you and the Company, against delivery to you at the
offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167
for the respective accounts of the Underwriters of certificates for the
Additional Shares to be purchased by them.
3. Offering. Upon your authorization of the release of the
Firm Shares, the Underwriters propose to offer the Shares for sale to the public
upon the terms set forth in the Prospectus.
4. Covenants of the Company. The Company covenants and agrees
with the Underwriters that:
(a) If the Registration Statement has not yet been
declared effective, the Company will use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly
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<PAGE> 17
as possible, and if Rule 430A is used or the filing of the Prospectus
is otherwise required under Rule 424(b) or Rule 434, the Company will file the
Prospectus (properly completed if Rule 430A has been used) pursuant to Rule
424(b) or Rule 434 within the prescribed time period and will provide evidence
satisfactory to you of such timely filing. If the Company elects to rely on Rule
434, the Company will prepare and file a term sheet that complies with the
requirements of Rule 434.
The Company will notify you immediately (and, if
requested by you, will confirm such notice in writing) (i) when the Registration
Statement and any amendments thereto become effective, (ii) of any request by
the Commission for any amendment of or supplement to the Registration Statement
or the Prospectus or for any additional information, (iii) of the mailing or the
delivery to the Commission for filing of any amendment of or supplement to the
Registration Statement or the Prospectus, (iv) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
any post-effective amendment thereto or of the initiation, or the threatening,
of any proceedings therefor, (v) of the receipt of any comments from the
Commission, and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose or enter a stop order at any time, the
Company will make every reasonable effort to prevent the issuance of any such
stop order and, if issued, to obtain the lifting of such order as soon as
possible. The Company will not file any amendment to the Registration Statement,
any filing under Rule 462(b) of the Regulations, or any amendment of or
supplement to the Prospectus (including the prospectus required to be filed
pursuant to Rule 424(b) or Rule 434 of the Regulations)
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<PAGE> 18
that differs from the prospectus on file at the time of the effectiveness of the
Registration Statement before or after the effective date of the Registration
Statement or file any document under the Exchange Act if such document would be
deemed to be incorporated by reference into the Prospectus to which you shall
reasonably object in writing after being timely furnished in advance a copy
thereof.
(b) If at any time when a prospectus relating to the
Shares is required to be delivered under the Act any event shall have occurred
as a result of which the Prospectus as then amended or supplemented would, in
the judgment of the Underwriters or the Company, include an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it shall be necessary at any
time to amend or supplement the Prospectus or Registration Statement to comply
with the Act or the Regulations, or to file under the Exchange Act so as to
comply therewith any document incorporated by reference in the Registration
Statement or the Prospectus or in any amendment thereof or supplement thereto,
the Company will notify you promptly and prepare and file with the Commission an
appropriate amendment or supplement (in form and substance satisfactory to you)
which will correct such statement or omission or which will effect such
compliance and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to you four
conformed copies of the Registration Statement, including exhibits and all
documents incorporated by reference therein and all amendments thereto, and the
Company will promptly deliver to each of the Underwrit-
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<PAGE> 19
ers such number of copies of any preliminary prospectus, the Prospectus, the
Registration Statement, all amendments of and supplements to such documents, if
any, and all documents incorporated by reference in the Registration Statement
and Prospectus or any amendment thereof or supplement thereto, without exhibits,
as you may reasonably request.
(d) The Company will endeavor in good faith, in
cooperation with you, at or prior to the time of effectiveness of the
Registration Statement, to qualify the Shares for offering and sale under the
securities laws relating to the offering or sale of the Shares of such
jurisdictions as you may designate and to maintain such qualification in effect
for so long as required for the distribution thereof; except that in no event
shall the Company be obligated in connection therewith to qualify as a foreign
corporation or to execute a general consent to service of process.
(e) The Company will make generally
available (within the meaning of Section 11(a) of the Act) to its security
holders and to you as soon as practicable, but not later than 45 days after the
end of its fiscal quarter in which the first anniversary date of the effective
date of the Registration Statement occurs, an earning statement (in form
complying with the provisions of Rule 158 of the Regulations) covering a period
of at least twelve consecutive months beginning after the effective date of the
Registration Statement.
(f) During the period of 90 days from the date of the
Prospectus, the Company will not, without your prior written consent, issue,
sell, offer or agree to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any Common Stock (or any securities
convertible into, exercisable for or exchangeable for Common Stock), except with
re-
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<PAGE> 20
spect to options or other rights outstanding on the date of the Prospectus or
pursuant to the Company's stock plans or in connection with transactions
involving the Company and other entities or individuals such as joint ventures,
acquisitions, mergers or similar transactions, and the Company will obtain the
undertaking of each of its officers and directors and such of its stockholders
as have been heretofore designated by you and listed in Schedule II attached
hereto not to engage in any of the aforementioned transactions on their own
behalf, other than the Company's sale of Shares hereunder and the Company's
issuance of Common Stock upon the exercise of presently outstanding stock
options.
(g) The Company will apply the proceeds from the sale
of the Shares as set forth under "Use of Proceeds" in the Prospectus.
(h) The Company will use its best efforts to cause
the Shares to be listed on the Nasdaq National Market.
(i) The Company, during the period when the
Prospectus is required to be delivered under the Act or the Exchange Act, will
file all documents required to be filed with the Commission pursuant to Section
13, 14 or 15 of the Exchange Act within the time periods required by the
Exchange Act and the rules and regulations thereunder.
5. Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company hereby agrees to pay all costs and expenses incident to the
performance of the obligations of the Company hereunder, including those in
connection with (i) preparing, printing, duplicating, filing and distributing
the Registration Statement, as originally filed and all amendments
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<PAGE> 21
thereof (including all exhibits thereto), any preliminary prospectus, the
Prospectus and any amendments or supplements thereto (including, without
limitation, fees and expenses of the Company's accountants and counsel), the
underwriting documents (including this Agreement, the Master Agreement among
Underwriters and the Master Selling Agreement) and all other documents related
to the public offering of the Shares (including those supplied to the
Underwriters in quantities as hereinabove stated), (ii) the issuance, transfer
and delivery of the Shares to the Underwriters, including any transfer or other
taxes payable thereon, (iii) the qualification of the Shares under state or
foreign securities or Blue Sky laws, including the costs of printing and mailing
a preliminary and final "Blue Sky Survey" and the fees of counsel for the
Underwriters and such counsel's disbursements in relation thereto, (iv) listing
of the Shares on the Nasdaq National Market, (v) filing fees of the Commission
and the National Association of Securities Dealers, Inc., (vi) the cost of
printing certificates representing the Shares and (vii) the cost and charges of
any transfer agent or registrar.
6. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for the Firm Shares and the Additional
Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company herein contained, as of the date
hereof and as of the Closing Date (for purposes of this Section 6, "Closing
Date" shall refer to the Closing Date for the Firm Shares and any Additional
Closing Date, if different, for the Additional Shares), to the absence from any
certificates, opinions, written statements or letters furnished to you or to
Skadden, Arps, Slate, Meagher & Flom ("Underwriters' Counsel") pursuant to this
Section 6 of any misstatement or omission, to the performance by the Company of
its obligations hereunder, and to the following additional conditions:
21
<PAGE> 22
(a) The Registration Statement, including any Rule 462(b)
Registration Statement, shall have become effective and all necessary approvals
of the Nasdaq National Market shall have been received not later than 5:30 P.M.,
New York City time, on the date of this Agreement, or at such later time and
date as shall have been consented to in writing by you; if the Company shall
have elected to rely upon Rule 430A or Rule 434 of the Regulations, the
Prospectus shall have been filed with the Commission in a timely fashion in
accordance with Section 4(a) hereof; and at or prior to the Closing Date, no
stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof shall have been issued and no proceedings
therefor shall have been initiated or threatened by the Commission.
(b) At the Closing Date you shall have received the opinion of
Brobeck, Phleger & Harrison LLP, counsel for the Company, dated the Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement
and Prospectus. The Company is qualified to do business as a foreign corporation
in California and, to such counsel's knowledge, in each other state or
jurisdiction of the United States where its failure to do so would have a
material adverse effect on its business or properties.
(ii) Glycomed Incorporated ("Glycomed") has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of California, with the corporate
22
<PAGE> 23
power and authority to own or lease its properties and conduct its business.
Glycomed is qualified to do business as a foreign corporation, to such counsel's
knowledge, in each state or jurisdiction of the United States where its failure
to do so would have a material adverse effect on its business or properties. The
outstanding shares of capital stock of Glycomed have been duly and validly
authorized and issued are nonassessable and, to such counsel's knowledge, fully
paid. All of such shares are owned of record by the Company free and clear of
any pledge, lien, security interest, charge, claim, equity or encumbrance, are
not subject to any preemptive rights and there are not any outstanding rights,
warrants or options to acquire any capital stock of Glycomed.
(iii) The authorized capital stock of the Company
conforms as to legal matters in all material respects to the description thereof
contained in the Registration Statement and Prospectus.
(iv) The outstanding shares of capital stock of the
Company have been duly and validly authorized and issued, are nonassessable and,
to such counsel's knowledge, are fully paid and are not subject to any
preemptive rights.
(v) The Shares have been duly and validly authorized,
will be validly issued, fully paid and nonassessable when issued and paid for as
contemplated by this Agreement, and are not subject to any preemptive rights.
(vi) The Shares have been duly authorized for
quotation on the Nasdaq National Market upon official notice of issuance.
(vii) This Agreement has been duly authorized,
executed and delivered by the Company.
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<PAGE> 24
(viii) To such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is or may become a party or to which any of the
properties of the Company or any of the properties of its subsidiaries is or may
become subject that is required to be described in the Registration Statement or
the Prospectus and is not so described, nor any statute, regulation, contract or
other document that is required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement that
is not described or filed as required.
(ix) The execution and delivery by the Company of,
and the performance by the Company of its obligations under, this
Agreement will not contravene any provision of applicable law or the
certificate of incorporation or bylaws of the Company or Glycomed, or, to such
counsel's knowledge, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any of its property or
Glycomed or any of its property, or, to such counsel's knowledge, constitute a
breach or default under, or to such counsel's knowledge, result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company or Glycomed pursuant to any document filed as an exhibit to the
Registration Statement or any of the documents incorporated by reference into
the Registration Statement and the Prospectus, and no consent, approval,
authorization, order, registration, filing of or qualification, license or
permit with any governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, except such as
may be required by the securities or blue sky laws of the various states (on
which we express no opinion) and the effectiveness of the Registration
Statement under the Act in connection with the purchase and distribution of the
Shares by the Underwriters.
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<PAGE> 25
(x) The Company is not, and upon consummation of the sale of
the Shares will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(xi) The Registration Statement has become effective under the
Act and, to such counsel's knowledge, no stop order proceedings suspending the
effectiveness of the Registration Statement have been instituted or threatened
or are pending under the Act, and all filings required by Rule 424(b) of the
Regulations under the Act have been made.
(xii) The statements in the Prospectus under the captions
"Business -- Strategic Alliances," "Business -- Litigation," "Description of
Capital Stock" and in Item 15 of Part II of the Registration Statement, to the
extent that such statements constitute a summary of documents referred to
therein or matters of law, have been prepared or reviewed by us and are correct
in all material respects.
(xiii) The form of certificate used to evidence the Shares
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the certificate of incorporation and
bylaws of the Company and the requirements of the Nasdaq National Market.
In addition, such opinion shall also contain a statement that
such counsel has participated in conferences with certain officers and other
representatives of the Company, representatives of the independent public
accountants for the Company and representatives of the Underwriters at which the
contents of the Registration Statement, the Prospectus (but not including the
documents incorporated therein by reference) and related matters were discussed
and has generally reviewed and discussed with such persons the content of such
incorporated documents and that (i) each of such incorporated documents (except
for financial statements, schedules and other
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<PAGE> 26
financial data, as to which such counsel need express no belief) complied as to
form when filed with the Commission in all material respects with the
requirements of the Act and the Exchange Act, as applicable, and the rules and
regulations thereunder, (ii) such counsel believes that the Registration
Statement and the Prospectus (except for financial statements, schedules and
other financial data, as to which such counsel need express no belief), as of
the effective date of the Registration Statement, complied as to form in all
material respects with the requirements of the Act and the Regulations, (iii)
that such counsel has no reason to believe that (except for financial
statements, schedules and other financial data, as to which such counsel need
express no belief) either the Registration Statement or the Prospectus, as of
such effective date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that (except for financial
statements, schedules and other financial data, as to which such counsel need
express no belief) the Prospectus, on the Closing Date, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (iv) that such counsel has no reason to
believe that any contract or agreement required to be described in the
Registration Statement or filed as an exhibit thereto is not so described or
filed.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters'
Counsel, familiar with the applicable laws; (B) as to matters of fact, to the
extent they deem
26
<PAGE> 27
proper, on certificates of responsible officers of the Company and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company and its subsidiaries, provided that copies of any such statements
or certificates shall be delivered to Underwriters' Counsel. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and, in their opinion, you and they are
justified in relying thereon.
(c) At the Closing Date you shall have received the opinion of
Lyon & Lyon, special patent counsel for the Company, dated the Closing Date, in
the form of Exhibit A hereto.
(d) All proceedings taken in connection with the sale of the
Firm Shares and the Additional Shares as hereby contemplated shall be reasonably
satisfactory in form and substance to you and to Underwriters' Counsel, and the
Underwriters shall have received from said Underwriters' Counsel a favorable
opinion, dated as of the Closing Date, with respect to the issuance and sale of
the Shares, the Registration Statement and the Prospectus and such other related
matters as you may reasonably require, and the Company shall have furnished to
Underwriters' Counsel such documents as they reasonably request for the purpose
of enabling them to pass upon such matters.
(e) At the Closing Date you shall have received a certificate
of the Chief Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date, to the effect that (i) the condition set forth in subsection
(a) of this Section 6 has been satisfied, (ii) as of the date hereof and as of
the Closing Date, the representations and warranties of the Company set forth in
Section 1 hereof are accurate, (iii) as of the Closing Date, the obligations of
the Company to be
27
<PAGE> 28
performed hereunder on or prior thereto have been duly performed and (iv)
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, the Company and its subsidiaries have
not sustained any material loss or interference with their respective businesses
or properties from fire, flood, hurricane, accident or other calamity, whether
or not covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any material adverse change, or
any develoent involving a material adverse change, in the business prospects,
properties, operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries taken as a whole, except in each
case as described in or contemplated by the Prospectus.
(f) At the time this Agreement is executed and at the Closing
Date, you shall have received a letter from Ernst & Young LLP, independent
public accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date addressed to the Underwriters and in form
and substance satisfactory to you, stating that: (i) they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the Regulations and that the answer to Item 10 of the Registration
Statement is correct insofar as it relates to them; (ii) in their opinion, the
financial statements and schedules of the Company included in and incorporated
by reference in the Registration Statement and the Prospectus and covered by
their opinion therein comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and the
applicable published rules and regulations of the Commission thereunder; (iii)
on the basis of procedures consisting of a reading of the latest available
unaudited interim consolidated financial statements of the Company and its
subsidiaries, a reading of the minutes of meetings and consents of the
stockholders and boards of
28
<PAGE> 29
directors of the Company and its subsidiaries and the committees of such boards
subsequent to December 31, 1995, inquiries of officers and other employees of
the Company and its subsidiaries who have responsibility for financial and
accounting matters of the Company and its subsidiaries with respect to
transactions and events subsequent to December 31, 1995 and other specified
procedures and inquiries to a date not more than five days prior to the date of
such letter, nothing has come to their attention that would cause them to
believe that: (A) the unaudited consolidated financial statements and schedules
of the Company presented in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and, if applicable, the Exchange Act and the applicable
published rules and regulations of the Commission thereunder or that any
material modification should be made to the unaudited consolidated financial
statements described above for them to be in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited consolidated financial statements incorporated by reference in the
Registration Statement and the Prospectus; (B) with respect to the period
subsequent to June 30, 1996, there were, as of the date of the most recent
available monthly consolidated financial statements of the Company and its
subsidiaries, if any, and as of a specified date not more than five days prior
to the date of such letter, any changes in the capital stock or long-term
indebtedness of the Company or any decrease in the net current assets or
stockholders' equity of the Company, in each case as compared with the amounts
shown in the most recent balance sheet presented in the Registration Statement
and the Prospectus, except for changes or decreases which the Registration
Statement and the Prospectus disclose have occurred or may occur or which are
set forth in such letter; or (C) during the period from July 1, 1996 to the
date of the most recent available monthly consolidated financial statements of
the Company and its subsidiaries, if any,
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<PAGE> 30
and to a specified date not more than five days prior to the date of such
letter, there was any decrease in net current assets and stockholders' equity
except for such decreases as were consistent with prior periods; and (iv) they
have compared specific dollar amounts, numbers of shares, percentages of
revenues and earnings, and other financial information pertaining to the Company
and its subsidiaries set forth in the Registration Statement and the Prospectus,
which have been specified by you prior to the date of this Agreement, to the
extent that such amounts, numbers, percentages and information may be derived
from the general accounting and financial records of the Company and its
subsidiaries or from schedules furnished by the Company, and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries, and other
appropriate procedures specified by you set forth in such letter, and found them
to be in agreement.
(g) Prior to the Closing Date, the Company shall have
furnished to you such further information, certificates and documents as you may
reasonably request.
(h) You shall have received from each person who is a director
or officer of the Company and such stockholders as have been heretofore
designated by you and listed in Schedule II hereto an agreement to the effect
that such person will not, directly or indirectly, without your prior written
consent, offer for sale, sell, distribute, contract to sell, pledge, grant any
option for the sale of or otherwise dispose of or transfer, whether directly or
synthetically, any Common Stock or any securities convertible into or
exchangeable for, or any options or rights to purchase or acquire, Common Stock
or any Common Stock issuable upon the exercise of options for a period of 90
days after the date of the Prospectus.
30
<PAGE> 31
(i) At the Closing Date, the Shares shall have been approved
for listing on the Nasdaq National Market.
(j) At the Closing Date, you shall have received the opinion
of McKercher, McKercher & Whitmore, counsel for Ligand Pharmaceuticals (Canada)
Incorporated ("Ligand Canada"), dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel,
to the effect that:
(i) Ligand Canada Incorporated
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the Canadian province of Saskatchewan, with the
corporate power and authority to own or lease its properties and conduct its
business. Ligand Canada is qualified to do business, to such counsel's
knowledge, in each province in Canada where its failure to do so would have a
material adverse effect on its business or properties. The outstanding shares
of capital stock of Ligand Canada have been duly and validly authorized and
issued, are nonassessable. All of such shares are owned of record by the
Company and, to such counsel's knowledge, are free and clear of any pledge,
lien, security interest, charge, claim, equity or encumbrance, such shares are
not subject to any preemptive rights and there are not any outstanding rights,
warrants or options to acquire any capital stock of Ligand Canada.
(ii) The execution and delivery by the
Company of, and the performance by the Company of its obligations under,
this Agreement will not contravene any provision of applicable law or
the certificate of incorporation or bylaws of Ligand Canada, or, to such
counsel's knowledge, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over Ligand Canada or any of its property,
or, to such counsel's knowledge, result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of Ligand Canada
pursuant to any of the agreements listed on Exhibit B hereto.
If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
cancelled by you on, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
cancelled by you on, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Company in writing or by
telephone, telex or telegraph, confirmed in writing.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against
any and all losses, liabilities, claims, damages and expenses whatsoever as
incurred (including but not limited to reasonable attorneys' fees and any and
all expenses incurred in investigating, preparing or defend-
31
<PAGE> 32
ing against any litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, as originally filed or any amendment thereof, or any
related preliminary prospectus or the Prospectus, or in any supplement thereto
or amendment thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such case to the extent but only to the
extent that any such loss, liability, claim, damage or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
you expressly for use therein. This indemnity agreement will be in addition to
any liability which the Company may otherwise have, including under this
Agreement.
(b) Each Underwriter severally, and not
jointly, agrees to indemnify and hold harmless the Company, each of the
directors of the Company, each of the officers of the Company who shall have
signed the Registration Statement, and each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act against any losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to reasonable attorneys' fees
and any and all expenses incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), joint or
several, to which
32
<PAGE> 33
they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter through you expressly for use therein; provided,
however, that in no case shall any Underwriter be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder. This indemnity will be in addition to any
liability which any Underwriter may otherwise have, including under this
Agreement. The Company acknowledges that the statements set forth in the last
paragraph of the cover page and in the first, third and eighth paragraphs under
the caption "Underwriting" in the Prospectus constitute the only information
furnished in writing by or on behalf of any Underwriter expressly for use in the
Registration Statement or in any amendment thereof, any related preliminary
prospectus or the Prospectus or in any amendment thereof or supplement thereto,
as the case may be.
(c) Promptly after receipt by an indemnified party
under subsection (a) or (b) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify each party against
whom indemnification is to be
33
<PAGE> 34
sought in writing of the commencement of such action (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent such failure prejudices the
rights of an indemnifying party). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel satisfactory to such indemnified
party. Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
or parties unless (i) the employment of such counsel shall have been authorized
in writing by one of the indemnifying parties in connection with the defense of
such action, (ii) the indemnifying parties shall not have employed counsel to
have charge of the defense of such action within a reasonable time after notice
of commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its prior written consent; provided,
however, that such consent was not unreasonably withheld.
8. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7 hereof is
for any reason held to be unavailable from any indemnifying party or is
34
<PAGE> 35
insufficient to hold harmless a party indemnified thereunder, the Company and
the Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting, in the case of losses,
claims, damages, liabilities and expenses suffered by the Company, any
contribution received by the Company from persons, other than the Underwriters,
who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration Statement and
directors of the Company) as incurred to which the Company and one or more of
the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company and the Underwriters from
the offering of the Shares or, if such allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Underwriters shall be deemed to be in the same proportion as (x) the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company and (y) the underwriting
discounts and commissions received by the Underwriters, respectively, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company and of the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowl-
35
<PAGE> 36
edge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above. Notwithstanding the
provisions of this Section 8, (i) in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discount applicable to
the Shares purchased by such Underwriter hereunder, and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section 8
and the preceding sentence, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. For purposes of this Section 8, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of this Section 8. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or
36
<PAGE> 37
parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 8 or
otherwise. No party shall be liable for contribution with respect to any action
or claim settled without its consent; provided, however, that such consent was
not unreasonably withheld.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its
or their obligation to purchase Firm Shares or Additional Shares hereunder, and
if the Firm Shares or Additional Shares to which such default relates do not
(after giving effect to arrangements, if any, made by you pursuant to subsection
(b) below) exceed in the aggregate 10% of the total number of Firm Shares or
Additional Shares, as the case may be, the Firm Shares or Additional Shares to
which such default relates shall be purchased by the non-defaulting Underwriters
in proportion to the respective proportions which the numbers of Firm Shares set
forth opposite their respective names in Schedule I hereto bear to the aggregate
number of Firm Shares set forth opposite the names of the non-defaulting
Underwriters.
(b) In the event that such default relates to more than
10% of the total number of Firm Shares or Additional Shares, as the case may be,
you may in your discretion arrange for yourself or for another party or parties
(including any non-defaulting Underwriter or Underwriters who so agree) to
purchase the Firm Shares or Additional Shares to which such default relates on
the terms contained herein. In the event that within five calendar days after
such default you do not arrange for the purchase of the Firm Shares or
Additional Shares to which such default relates as provided in this Section 9,
this Agreement or, in the case of a default with respect to Additional Shares,
the obligations of the Underwriters to purchase, and of the Company to sell, the
Additional Shares shall thereupon terminate without liability on the part of the
Company
37
<PAGE> 38
(except, in each case, as provided in Section 5, 7(a) and 8 hereof) or
the Underwriters with respect thereto, but nothing in this Agreement shall
relieve a defaulting Underwriter or Underwriters of its or their liability, if
any, to the other Underwriters and the Company for damages occasioned by its or
their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to
which such default relates are to be purchased by the non-defaulting
Underwriters or are to be purchased by another party or parties as aforesaid,
you or the Company shall have the right to postpone the Closing Date or
Additional Closing Date, as the case may be, for a period not exceeding five
Business Days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus which, in the opinion
of Underwriters' Counsel, may thereby be made necessary or advisable. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 9 with like effect as if it had originally been a party to
this Agreement with respect to such Firm Shares or Additional Shares, as the
case may be.
10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Underwriters and
the Company contained in this Agreement, including the agreements contained in
Section 5 hereof, the indemnity agreements contained in Section 7 hereof and the
contribution agreements contained in Section 8 hereof, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Underwriter or any controlling person thereof or by or on behalf
of the Company, any of its officers and directors or any controlling person
thereof, and shall survive delivery of and payment for the Shares to and by the
Underwriters. The representations contained in Section 1 hereof and the
agreements contained in Sections 5, 7, 8 and 11(d) hereof shall survive the
termination of this Agreement,
38
<PAGE> 39
including termination pursuant to Section 9 or 11 hereof.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the later of
(i) such time as you and the Company shall have received notification of the
effectiveness of the Registration Statement and (ii) the execution of this
Agreement. If either the public offering price or the purchase price per Share
has not been agreed upon prior to 5:00 P.M., New York City time, on the fifth
full Business Day after the Registration Statement shall have become effective,
this Agreement shall thereupon terminate without liability to the Company or the
Underwriters except as herein expressly provided. Until this Agreement becomes
effective as aforesaid, it may be terminated by the Company by notifying you or
by you notifying the Company. Notwithstanding the foregoing, the provisions of
this Section 11 and of Sections 1, 5, 7 and 8 hereof shall at all times be in
full force and effect.
(b) You shall have the right to terminate this Agreement at
any time prior to the Closing Date or the obligations of the Underwriters to
purchase the Additional Shares at any time prior to the Additional Closing Date,
as the case may be, if (i) any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, the market for the Company's securities or securities
in general, (ii) if trading on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market has been suspended, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for securities
have been required, on the New York Stock Exchange, the American Stock Exchange
or the Nasdaq National Market by the New York Stock Exchange, the American Stock
Exchange or The Nasdaq Stock Market or by order of the Commission or any other
governmental authority having jurisdiction, (iii) if a banking moratorium has
been declared by a state or federal authority or if any new restriction
materially
39
<PAGE> 40
adversely affecting the distribution of the Firm Shares or the Additional Shares
has become effective, (iv) if any downgrading in the rating of the Company's
debt securities or preferred stock by any "nationally recognized statistical
rating-organization" (as defined for purposes of Rule 436(g) under the Act) has
occurred or (v) (A) if the United States becomes engaged in hostilities or there
is an escalation of hostilities involving the United States or there is a
declaration of a national emergency or war by the United States or (B) if there
has been a change in political, financial or economic conditions and the effect
of any such event in (A) or (B), in your judgment, makes it impracticable or
inadvisable to proceed with the offering, sale and delivery of the Firm Shares
or the Additional Shares, as the case may be, on the terms contemplated by the
Prospectus.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone, facsimile, telex or telegraph, confirmed in writing by
letter.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 11(a) hereof or (ii) Section 9(b) or 11(b) hereof), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof, the
Company will, subject to demand by you, reimburse the Underwriters for all
out-of-pocket expenses (including the reasonable fees and expenses of their
counsel), incurred by the Underwriters in connection herewith.
12. Notice. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed or delivered, or sent by facsimile, telex or
telegraph and confirmed in writing by letter, to such Underwriter c/o Bear,
Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, Attention: Steven
R.
40
<PAGE> 41
Frank, Facsimile No. 212-272-9757; if sent to the Company, shall be mailed
or delivered, or sent by facsimile or telegraph and confirmed in writing by
letter, to the Company, 9393 Towne Centre Drive, San Diego, California 92121,
Attention: David E. Robinson, Facsimile No. 619-625-4521.
13. Parties. This Agreement shall inure solely to the benefit
of, and shall be binding upon, the Underwriters and the Company and the
controlling persons, directors, officers, employees and agents referred to in
Sections 7 and 8 hereof, and their respective successors and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision contained herein. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Shares from any of the Underwriters.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, but without
regard to principles of conflicts of law.
15. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
41
<PAGE> 42
If the foregoing correctly sets forth the understanding
between you and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
LIGAND PHARMACEUTICALS INCORPORATED
By: ________________________
Name:
Title:
Accepted as of the date first above written:
BEAR, STEARNS & CO. INC.
ROBERTSON, STEPHENS & COMPANY LLC
HAMBRECHT & QUIST LLC
By: Bear, Stearns & Co. Inc.
By: _______________
Name:
Title:
On behalf of themselves and the other
Underwriters named in Schedule I hereto.
42
<PAGE> 43
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm
Name of Underwriter Shares to Be Purchased
- ------------------- ----------------------
<S> <C>
Bear, Stearns & Co. Inc..................................................
Robertson, Stephens & Company LLC........................................
Hambrecht & Quist LLC....................................................
----------
Total 2,750,000
----------
</TABLE>
43
<PAGE> 44
SCHEDULE II
Abbott Laboratories
Allergan Pharmaceuticals (Ireland) Ltd., Inc.
American Home Products Corporation
Glaxo Wellcome Inc.
44
<PAGE> 45
EXHIBIT A
October [___], 1996
Bear, Stearns & Co. Inc.
Robertson, Stephens & Company LLC
Hambrecht & Quist LLC
As Representatives of the
several Underwriters
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Opinion of Patent Counsel
Dear Sirs:
This opinion is furnished to you in connection with the Form
S-3 Registration Statement (No. 333-12603) (the "Registration Statement"), which
became effective on _____, 1996, at the request of Ligand Pharmaceuticals
Incorporated ("Ligand") to which company we are and have acted as patent
counsel on certain matters.
We represent Ligand as patent counsel in connection with
certain intellectual property matters. In connection with our responsibilities
as patent counsel for Ligand, we have filed and are prosecuting, among other
things, certain patent applications in the United States and other countries for
Ligand's technology, including assays to screen for receptor agonists and
antagonists which act through particular regions of intracellular receptors,
assays to screen for cytakins modulators, novel human intracellular receptors, a
promotor of an obesity gene and assays to screen for drugs affecting metabolism
(collectively, the "Patent Applications"). (We are also involved in ongoing
prosecution or maintenance of other
45
<PAGE> 46
patent applications and patents filed by other law firms on behalf of Ligand. We
provide no opinion with regard to these patent applications and patents.)
Based solely upon our experience as patent counsel to Ligand
and a review of our records of the Patent Applications, we state as follows:
Prior to the filing of the Patent Applications, we conducted
limited investigations of the published prior art found by Ligand scientists (in
some cases with our assistance), relating to some of the inventions claimed in
the Patent Applications. No other searches for other prior art were conducted by
us. Based on the information provided us from those investigations, we believe
we have disclosed or will disclose in the Patent Applications all material prior
art references known to us during the prosecution of the Patent Applications to
the United States Patent and Trademark Office (the "PTO") in the relevant
applications. We believe that the information submitted to the PTO in the Patent
Applications, and in connection with the prosecution of the Patent Applications,
was accurate. We believe that neither this firm, nor Ligand, made any
misrepresentation or concealed any material fact from the PTO in any of the
Patent Applications, or in connection with the prosecution of the Patent
Applications.
We have reviewed only two sections (hereinafter "Two
Sections ") of the Registration Statement namely, Paragraphs 1 - 3 inclusive
under the caption "Risk Factors--Uncertainty of Patent Protection; Dependence on
Proprietary Technology," and Paragraphs 2 - 4 inclusive of "Business--Patents
and Proprietary Rights". We opine only with regard to the Two Sections and on no
other section of the Registration Statement or related prospectus (the
"Prospectus"). We give no opinion with regard to statements in the Two Sections
concerning business matters, including any reference to the Company's success,
agreements, competition, expectations, goals, policies, trade secrets, and
know-how. We opine only with regard to the Patent Applications, and with respect
to the information in the Two Sections relating thereto, nothing has come to our
attention that would lead us to believe that such information contains
46
<PAGE> 47
any untrue statement of a material fact or omits to state a material fact that
is required to be stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances under which they were made.
We provide no opinion with regard to trade secrets, know-how, and agreements
since we have not reviewed such matters of Ligand.
Subject to the above limitations, we are of the opinion that:
Based solely on communications with officials at the Company:
(1) we understand that Ligand is not subject to any current claim or action of
infringement or other violation of any other person's patent; (2) we are unaware
of any facts that would have a material adverse effect on the enforceability of
any of Ligand's patents issued on the Patent Applications; and (3) we have no
knowledge of any material facts which would preclude Ligand from having clear
title to the Patent Applications.
From our review of the Patent Applications, except as set
forth in the Prospectus, (1) to our knowledge and belief, there are no legal or
governmental proceedings or interference proceedings pending relating to the
Patent Applications, other than a standard review of the pending Patent
Applications; (2) to our knowledge and belief, each of the non-provisional
Patent Applications has been assigned or will be assigned to Ligand by the
inventors named therein, and has been filed by, or on behalf of, Ligand with the
PTO in accordance with the rules and regulations of the PTO; (3) to our
knowledge and belief, substantially all such Patent Applications have been
awarded a filing date by the PTO; and (4) we are unaware of any facts which form
a basis for a finding of unenforceability or invalidity of any of the Patent
Applications that are material to Ligand's business.
We have no reason to believe that the Patent Applications will
not eventuate in issued patents or that any patents issued in respect of the
Patent Applications will not be valid.
47
<PAGE> 48
We are delivering this opinion to you solely for your benefit
and the benefit of the several underwriters named in the Underwriting Agreement
relating to the Registration Statement, and no other person may rely upon it.
Very truly yours,
48
<PAGE> 49
EXHIBIT B
1. Distribution and Marketing Agreement, dated September 16, 1994, between
Ligand Pharmaceuticals Incorporated and Cetus Oncology Corporation, a
wholly-owned subsidiary of Chiron Corporation.
2. PHOTOFRIN(R) Distribution Agreement, dated March 8, 1995, between Ligand
Pharmaceuticals Incorporated and Quadra Logic Technologies Inc.
3. Distribution and Marketing Agreement, effective as of March 1, 1996,
between Ligand Pharmaceuticals Incorporated and Ligand Pharmaceuticals
(Canada) Incorporated.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF LIGAND PHARMACEUTICALS INCORPORATED
The undersigned, David E. Robinson and William L. Respess, do hereby
certify:
1. That they are the duly elected and acting President and
Secretary, respectively, of Ligand Pharmaceuticals Incorporated, a Delaware
corporation (the "Corporation").
2. That pursuant to the authority conferred upon the Board of
Directors by the Amended and Restated Certificate of Incorporation of the said
Corporation, the said Board of Directors adopted the following resolution
creating a series of 80,000 shares of Preferred Stock designated as Series A
Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Amended and Restated Certificate
of Incorporation, the Board of Directors does hereby provide for the
issue of a series of Preferred Stock, par value $.001 per share, of
the Corporation, to be designated "Series A Participating Preferred
Stock," initially consisting of 80,000 shares and to the extent that
the designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions of the
Series A Participating Preferred Stock are not stated and expressed in
the Amended and Restated Certificate of Incorporation, does hereby fix
and herein state and express such designations, powers, preferences
and relative and other special rights and the qualifications,
limitations and restrictions thereof, as follows (all terms used
herein which are defined in the Amended and Restated Certificate of
Incorporation shall be deemed to have the meanings provided therein):
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "Series A Participating Preferred Stock," par value
$.001 per share, and the number of shares constituting such series shall be
80,000.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior right of the
holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Participating Preferred Stock with respect
to dividends, the holders of shares of Series A Participating Preferred Stock
shall be entitled to receive when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on the last day of September, December, March and June in each year
1
<PAGE> 2
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to, subject
to the provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Participating
Preferred Stock. In the event the Corporation shall at any time after
September 13, 1996 (the "Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Series A Participating Preferred Stock were entitled immediately prior to
such event under the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Participating Preferred Stock as provided in
paragraph (A) above immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Participating Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Participating Preferred Stock entitled to receive
a quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Participating
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series A Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of Series A
Participating
2
<PAGE> 3
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Participating Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the
holders of shares of Series A Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) Except as required by law, holders of Series A
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) The Corporation shall not declare any dividend on,
make any distribution on, or redeem or purchase or otherwise acquire for
consideration any shares of Common Stock after the first issuance of a share or
fraction of a share of Series A Participating Preferred Stock unless
concurrently therewith it shall declare a dividend on the Series A
Participating Preferred Stock as required by Section 2 hereof.
(B) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock;
3
<PAGE> 4
(ii) declare or pay dividends on, make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with Series A
Participating Preferred Stock, except dividends paid ratably on the Series A
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;
(iv) purchase or otherwise acquire for
consideration any shares of Series A Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(C) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph (A)
of this Section 4, purchase or otherwise acquire such shares at such time and
in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series A
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Participating Preferred
Stock unless, prior thereto, the holders of shares of Series A Participating
Preferred Stock shall have received $1,000.00 per share, plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Following the payment
4
<PAGE> 5
of the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Participating
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by (ii)
1,000 (as appropriately adjusted as set forth in subparagraph (C) below to
reflect such events as stock splits, stock dividends and recapitalization with
respect to the Common Stock) (such number in clause (ii), the "Adjustment
Number"). Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series A Participating Preferred Stock and Common Stock, respectively, holders
of Series A Participating Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of the remaining assets to
be distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full to the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, which rank on a parity with the Series A Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the holders
of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Participating Preferred Stock shall be
5
<PAGE> 6
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION 8. NO REDEMPTION. The shares of Series A Participating
Preferred Stock shall not be redeemable.
SECTION 9. RANKING. The Series A Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
SECTION 10. AMENDMENT. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preference or special rights
of the Series A Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Participating Preferred Stock, voting separately
as a class.
SECTION 11. FRACTIONAL SHARES. Series A Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Designation
of Rights, Preferences and Privileges in accordance with the foregoing
resolution and the provisions of Delaware law and to take such actions as they
may deem necessary or appropriate to carry out the intent of the foregoing
resolution."
3. That the authorized number of shares of Preferred Stock of the
Corporation is 5,000,000 and that no such Preferred Stock has been issued.
[The remainder of this page is intentionally left blank.]
6
<PAGE> 7
We further declare under penalty of perjury that the matters set forth
in the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at San Diego, California on September 30, 1996.
/s/ David E. Robinson
----------------------------------------------
David E. Robinson, Chairman, President and CEO
/s/ William L. Respess
----------------------------------------------
William L. Respess, Secretary
7
<PAGE> 1
EXHIBIT 10.1
LIGAND PHARMACEUTICALS INCORPORATED
AND
WELLS FARGO BANK N.A.
RIGHTS AGENT
PREFERRED SHARES RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 13, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Appointment of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Issuance of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Form of Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5. Countersignature and Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8. Cancellation and Destruction of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9. Reservation and Availability of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 10. Preferred Shares Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights . . . . . . . . . . . . . . . . . . . . . . . 13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. . . . . . . . . . . . . . . . . . . . . . 21
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 15. Rights of Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 16. Agreement of Rights Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 17. Rights Certificate Holder Not Deemed a Stockholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 18. Concerning the Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 21. Change of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 22. Issuance of New Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 23. Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 24. Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 25. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 27. Supplements and Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 28. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 29. Determinations and Actions by the Board of Directors, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 30. Benefits of this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 31. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 32. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 33. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 34. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
</TABLE>
(ii)
<PAGE> 4
PREFERRED SHARES RIGHTS AGREEMENT
This Preferred Shares Rights Agreement (the "Agreement"), is dated as
of September 13, 1996, between LIGAND PHARMACEUTICALS INCORPORATED, a Delaware
corporation (the "Company"), and WELLS FARGO BANK N.A. (the "Rights Agent").
On September 13, 1996 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend of one
Preferred Share purchase right (a "Right") for each Common Share (as
hereinafter defined) of the Company outstanding as of the Close of Business (as
hereinafter defined) on September 30, 1996 (the "Record Date"), each Right
representing the right to purchase one one-thousandth of a share of Series A
Participating Preferred Stock (as such number may be adjusted pursuant to the
provisions of this Agreement), having the rights, preferences and privileges
set forth in the form of Certificate of Designation of Rights, Preferences and
Privileges of Series A Participating Preferred Stock attached hereto as Exhibit
A, upon the terms and subject to the conditions herein set forth, and further
authorized and directed the issuance of one Right (as such number may be
adjusted pursuant to the provisions of this Agreement) with respect to each
Common Share that shall become outstanding between the Record Date and the
earlier of the Distribution Date and the Expiration Date (as such terms are
hereinafter defined), and in certain circumstances after the Distribution Date.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the Common Shares then outstanding, but
shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan, or
Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT") holding Common Shares
pursuant to the exercise of that certain product purchase option set forth in
the 1057 Purchase Option Agreement dated June 3, 1995 among the Company, ALRT
and Allergan, Inc. Notwithstanding the foregoing, no Person shall be deemed to
be an Acquiring Person either (i) as the result of an acquisition of Common
Shares by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 20% or more of the Common Shares of the Company then outstanding; provided,
however, that if a Person shall become the Beneficial Owner of 20% or more of
the Common Shares of the Company then outstanding by reason of share purchases
by the Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an Acquiring Person. Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise
<PAGE> 5
be an "Acquiring Person", as defined pursuant to the foregoing provisions of
this paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of Common Shares so that such
Person would no longer be an "Acquiring Person", as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be
deemed to be an "Acquiring Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of
and shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly, for
purposes of Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or any
comparable or successor law or regulation);
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed pursuant to
this Section 1(c)(ii)(A) the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (2) securities
which a Person or any of such Person's Affiliates or Associates may be deemed
to have the right to acquire pursuant to any merger or other acquisition
agreement between the Company and such Person (or one or more of its Affiliates
or Associates) if such agreement has been approved by the Board of Directors of
the Company prior to there being an Acquiring Person; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any security under this Section 1(c)(ii)(B) if the agreement, arrangement
or understanding to vote such security (1) arises solely from a revocable proxy
or consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then reportable on Schedule
13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding, whether or not in writing (other than
customary agreements with and between underwriters and
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<PAGE> 6
selling group members with respect to a bona fide public offering of
securities) for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of any
securities of the Company; provided, however, that in no case shall an officer
or director of the Company be deemed (x) the Beneficial Owner of any securities
beneficially owned by another officer or director of the Company solely by
reason of actions undertaken by such persons in their capacity as officers or
directors of the Company or (y) the Beneficial Owner of securities held of
record by the trustee of any employee benefit plan of the Company or any
Subsidiary of the Company for the benefit of any employee of the Company or any
Subsidiary of the Company, other than the officer or director, by reason of any
influence that such officer or director may have over the voting of the
securities held in the plan.
(d) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in California are
authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00
P.M., California time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., California time, on the next
succeeding Business Day.
(f) "Common Shares" when used with reference to the
Company shall mean the shares of Common Stock of the Company, par value $0.001
per share. "Common Shares" when used with reference to any Person other than
the Company shall mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person.
(g) "Continuing Director" shall mean (i) any member of
the Board of Directors of the Company, while a member of the Board, who is not
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate,
and who was a member of the Board prior to the date of this Agreement, or (ii)
any Person who subsequently becomes a member of the Board, while a member of
the Board, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, if such Person's nomination for election or election to
the Board is recommended or approved by a majority of the Continuing Directors.
(h) "Distribution Date" shall mean the earlier of (i) the
Close of Business on the tenth day (or such later date as may be determined by
action of a majority of Continuing Directors then in office) after the Shares
Acquisition Date (or, if the tenth day after the Shares Acquisition Date occurs
before the Record Date, the Close of Business on the Record Date) or (ii) the
Close of Business on the tenth day (or such later date as may be determined by
action of a majority of Continuing Directors then in office) after the date
that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the
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<PAGE> 7
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if, assuming the successful consummation
thereof, such Person would be the Beneficial Owner of 20% or more of the shares
of Common Stock then outstanding.
(i) "Equivalent Shares" shall mean Preferred Shares and
any other class or series of capital stock of the Company which is entitled to
participate in dividends and other distributions, including distributions upon
the liquidation, dissolution or winding up of the Company, on a proportional
basis with the Common Shares. In calculating the number of any class or series
of Equivalent Shares for purposes of Section 11 of this Rights Agreement, the
number of shares, or fractions of a share, of such class or series of capital
stock that is entitled to the same dividend or distribution as a whole Common
Share shall be deemed to be one share.
(j) "Expiration Date" shall mean the earliest of (i) the
Close of Business on the Final Expiration Date, (ii) the Redemption Date, (iii)
the time at which the Board of Directors orders the exchange of the Rights as
provided in Section 24 hereof or (iv) the consummation of a transaction
contemplated by Section 13(d) hereof.
(k) "Final Expiration Date" shall mean September 13,
2006.
(l) "Permitted Offer" shall mean a tender offer for all
outstanding Common Shares made in the manner prescribed by Section 14(d) of the
Exchange Act and the rules and regulations promulgated thereunder; provided,
however, that such tender offer occurs at a time when Continuing Directors are
in office and a majority of the Continuing Directors then in office has
determined that the offer is both adequate and otherwise in the best interests
of the Company and its stockholders (taking into account all factors that such
Continuing Directors deem relevant).
(m) "Person" shall mean any individual, firm, corporation
or other entity, and shall include any successor (by merger or otherwise) of
such entity.
(n) "Preferred Shares" shall mean shares of Series A
Participating Preferred Stock of the Company.
(o) "Purchase Price" shall have the meaning set forth in
Section 4(a) hereof.
(p) "Record Date" shall have the meaning set forth in the
recitals at the beginning of this Agreement.
(q) "Redemption Date" shall mean the time at which the
Board of Directors of the Company orders redemption of the Rights as provided
in Section 23 hereof.
(r) "Redemption Price" shall have the meaning set forth
in Section 23(a) hereof.
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<PAGE> 8
(s) "Rights Dividend Declaration Date" shall have the
meaning set forth in the recitals at the beginning of this Agreement.
(t) "Section 13 Event" shall mean any event described in
clause (i), (ii) or (iii) of Section 13(a) hereof.
(u) "Shares Acquisition Date" shall mean the first date
of public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such; provided that, if such person is determined not to have become an
Acquiring Person pursuant to Section 1(a)(ii) hereof, then no Shares
Acquisition Date shall be deemed to have occurred.
(v) "Subsidiary" of any Person shall mean any corporation
or other entity of which an amount of voting securities sufficient to elect a
majority of the directors or Persons having similar authority of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or any corporation or other entity otherwise controlled by such
Person, including, without limitation, ALRT following the exercise of that
certain stock purchase option as set forth in ALRT's Amended and Restated
Certificate of Incorporation, as it may be further amended.
(w) "Total Exercise Price" shall have the meaning set
forth in Section 4(a) hereof.
(x) "Trading Day" shall have the meaning set forth in
Section 11(d) hereof.
(y) A "Triggering Event" shall be deemed to have occurred
upon any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company, or any
entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becoming an
Acquiring Person.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Shares) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents
as it may deem necessary or desirable.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (i) the Rights will be
evidenced (subject to the provisions of Sections 3(b) and 3(c) hereof) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates and (ii) the right to receive Rights Certificates
will be transferable only in connection with the transfer of Common
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<PAGE> 9
Shares. Until the earlier of the Distribution Date or the Expiration Date, the
surrender for transfer of such certificates for Common Shares shall also
constitute the surrender for transfer of the Rights associated with the Common
Shares represented thereby. As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and the Rights Agent will, if
requested, send) by first-class, postage-prepaid mail, to each record holder of
Common Shares as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Rights
Certificate, in substantially the form of Exhibit B hereto (a "Rights
Certificate"), evidencing one Right for each Common Share so held, subject to
adjustment as provided herein. In the event that an adjustment in the number
of Rights per Common Share has been made pursuant to Section 11(a)(i), Section
11(i) or Section 11(p) hereof, then at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates and may be
transferred by the transfer of the Rights Certificates as permitted hereby,
separately and apart from any transfer of one or more Common Shares, and the
holders of such Rights Certificates as listed in the records of the Company or
any transfer agent or registrar for the Rights shall be the record holders
thereof.
(b) On the Record Date or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the close of business on the Record Date, at the address of such holder shown
on the records of the Company.
(c) Unless the Board of Directors by resolution adopted
at or before the time of the issuance (including pursuant to the exercise of
rights under the Company's benefit plans) of any Common Shares specifies to the
contrary, Rights shall be issued in respect of all Common Shares that are
issued after the Record Date but prior to the earlier of the Distribution Date
or the Expiration Date or, in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates representing such Common
Shares shall also be deemed to be certificates for Rights, and shall bear the
following legend:
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<PAGE> 10
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Rights Agreement between
LIGAND PHARMACEUTICALS INCORPORATED and WELLS FARGO BANK N.A.
as the Rights Agent, dated as of September 13, 1996 (the
"Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal executive offices of Ligand
Pharmaceuticals Incorporated. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be
evidenced by this certificate. Ligand Pharmaceuticals
Incorporated will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a
written request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement), whether currently held by or on behalf
of such Person or by any subsequent holder, may become null
and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any
such certificate shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby. In the event that the Company
purchases or acquires any Common Shares after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Shares shall be
deemed canceled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares which are no longer
outstanding.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to
purchase Common Shares and of assignment to be printed on the reverse thereof)
shall be substantially in the form of Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section
11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall
be dated as of the Record Date (or in the case of Rights issued with respect to
Common Shares issued by the Company after the Record Date, as of the date of
issuance of such Common Shares) and on their face shall entitle the holders
thereof to purchase such number of one-thousandths of a Preferred Share as
shall be set forth therein at the price set forth therein (such exercise price
per one one-thousandth of a Preferred Share being hereinafter referred to as
the "Purchase Price" and the aggregate exercise price of all Preferred Shares
issuable upon exercise of one Right being hereinafter referred to as the "Total
Exercise Price"), but the number and type of
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<PAGE> 11
securities purchasable upon the exercise of each Right and the Purchase Price
shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section
3(a) or Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of Section 7(e) hereof, and
any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section
7(e) of the Rights Agreement.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf
of the Company by its Chairman of the Board, its Chief Executive Officer, its
President or any Vice President, either manually or by facsimile signature, and
by the Secretary or an Assistant Secretary of the Company, either manually or
by facsimile signature, and shall have affixed thereto the Company's seal (if
any) or a facsimile thereof. The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent and issued and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent
will keep or cause
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<PAGE> 12
to be kept, at its office designated for such purposes, books for registration
and transfer of the Rights Certificates issued hereunder. Such books shall
show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF
RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Sections 7(e), 14 and 24
hereof, at any time after the Close of Business on the Distribution Date, and
at or prior to the Close of Business on the Expiration Date, any Rights
Certificate or Rights Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Rights Certificates, entitling the
registered holder to purchase a like number of one-thousandths of a Preferred
Share (or, following a Triggering Event, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Rights Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Rights Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any
such surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and 24 hereof,
countersign and deliver to the person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will make and
deliver a new Rights Certificate of like tenor to the Rights Agent for delivery
to the registered holder in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE
OF RIGHTS.
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date upon surrender of the Rights Certificate, with the
form of election to purchase on the reverse side thereof
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<PAGE> 13
duly executed, to the Rights Agent at the office of the Rights Agent designated
for such purpose, together with payment of the Purchase Price for each
one-thousandth of a Preferred Share as to which the Rights are exercised, at or
prior to the Expiration Date.
(b) The Purchase Price for each one-thousandth of a
Preferred Share issuable pursuant to the exercise of a Right shall initially be
One Hundred Dollars ($100.00), shall be subject to adjustment from time to time
as provided in Sections 11 and 13 hereof and shall be payable in lawful money
of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the number of one-thousandths
of a Preferred Share (or other securities or property, as the case may be) to
be purchased and an amount equal to any applicable transfer tax required to be
paid by the holder of such Rights Certificate in accordance with Section 9
hereof in cash, or by certified check or cashier's check payable to the order
of the Company, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer agent for the
Preferred Shares) a certificate or certificates for the number of one-
thousandths of a Preferred Share to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests or
(B) if the Company shall have elected to deposit the total number of
one-thousandths of a Preferred Share issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent of
depositary receipts representing such number of one- thousandths of a Preferred
Share as are to be purchased (in which case certificates for the Preferred
Shares represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company hereby directs the depositary agent
to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such certificates
or depositary receipts, cause the same to be delivered to or upon the order of
the registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder and (iv) when appropriate, after
receipt thereof, deliver such cash to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase Price (as such
amount may be reduced (including to zero) pursuant to Section 11(a)(iv) hereof)
may be made in cash or by certified bank check or bank draft payable to the
order of the Company. In the event that the Company is obligated to issue
other securities of the Company, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Rights Certificate or to his or her duly authorized assigns, subject to
the
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<PAGE> 14
provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Triggering Event or a
Section 13 Event, any Rights beneficially owned by (i) an Acquiring Person or
an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such (a "Post Transferee"), (iii)
a transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e) (a
"Prior Transferee") or (iv) any subsequent transferee receiving transferred
Rights from a Post Transferee or a Prior Transferee, either directly or through
one or more intermediate transferees, shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or to any other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or any of such Acquiring Person's Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or to
any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled by it,
and no Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Rights Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
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<PAGE> 15
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES.
(a) The Company covenants and agrees that it will use its
best efforts to cause to be reserved and kept available out of and to the
extent of its authorized and unissued shares of Preferred Stock not reserved
for another purpose (and, following the occurrence of a Triggering Event, out
of its authorized and unissued shares of Common Stock and/or other securities),
the number of Preferred Shares (and, following the occurrence of the Triggering
Event, Common Stock and/or other securities) that will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) If the Company shall hereafter list any of its
Preferred Shares on a national securities exchange, then so long as the
Preferred Shares (and, following the occurrence of a Triggering Event, Common
Shares and/or other securities) issuable and deliverable upon exercise of the
Rights may be listed on such exchange, the Company shall use its best efforts
to cause, from and after such time as the Rights become exercisable (but only
to the extent that it is reasonably likely that the Rights will be exercised),
all shares reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file,
as soon as practicable following the earliest date after the first occurrence
of a Triggering Event in which the consideration to be delivered by the Company
upon exercise of the Rights has been determined in accordance with Section
11(a)(iv) hereof, or as soon as is required by law following the Distribution
Date, as the case may be, a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the earlier of (A) the date as of which the Rights are no longer exercisable
for such securities and (B) the date of expiration of the Rights. The Company
may temporarily suspend, for a period not to exceed ninety (90) days after the
date set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating, and notify the Rights Agent,
that the exercisability of the Rights has been temporarily suspended, as well
as a public announcement and notification to the Rights Agent at such time as
the suspension is no longer in effect. The Company will also take such action
as may be appropriate under, or to ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. Notwithstanding any provision of this Agreement to the contrary,
the Rights shall not be exercisable in any jurisdiction, unless the requisite
qualification in such jurisdiction shall have been obtained, or an exemption
therefrom shall be available, and until a registration statement has been
declared effective.
(d) The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all Preferred Shares
delivered upon exercise of Rights shall,
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<PAGE> 16
at the time of delivery of the certificates for such Preferred Shares (subject
to payment of the Purchase Price), be duly and validly authorized and issued
and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the original issuance or delivery of
the Rights Certificates or of any Preferred Shares upon the exercise of Rights.
The Company shall not, however, be required to pay any transfer tax which may
be payable in respect of any transfer or delivery of Rights Certificates to a
person other than, or the issuance or delivery of certificates or depositary
receipts for the Preferred Shares in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depositary receipts for Preferred
Shares upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
SECTION 10. PREFERRED SHARES RECORD DATE. Each person in whose
name any certificate for a number of one-thousandths of a Preferred Share is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of Preferred Shares represented thereby on, and
such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
multiplied by the number of one-thousandths of a Preferred Share with respect
to which the Rights have been exercised (and any applicable transfer taxes) was
made; provided, however, that if the date of such surrender and payment is a
date upon which the Preferred Shares transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the Preferred Shares transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a holder of Preferred Shares for which
the Rights shall be exercisable, including, without limitation, the right to
vote, to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares or other
property covered by each Right and the number of Rights outstanding are subject
to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the Common Shares
payable in Common Shares, (B) subdivide the outstanding Common Shares, (C)
combine the outstanding Common Shares (by reverse stock split or otherwise)
into a smaller number of Common Shares, or (D) issue any shares of its capital
stock in a reclassification of the Common Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such event,
except as otherwise provided
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<PAGE> 17
in this Section 11(a) and Section 7(e) hereof: (1) each of the Rights
outstanding at the time of the record date for such dividend or the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to the nearest
one ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
Ratio"), the numerator of which shall be the total number of Common Shares or
shares of capital stock issued in such reclassification of the Common Shares
outstanding immediately following such time and the denominator of which shall
be the total number of Common Shares outstanding immediately prior to such
time, and the number of Rights that shall thereafter be issued with respect to
each Common Share or share of such other capital stock that shall become
outstanding thereafter prior to the Distribution Date shall be equal to the
total number of outstanding Rights immediately after such event (as adjusted
pursuant to this clause (1)) divided by the total number of outstanding Common
Shares or shares of such other capital stock immediately after such event
(subject to further adjustment pursuant to the provisions of this Agreement);
(2) the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that the Purchase Price thereafter shall
equal the result obtained by dividing the Purchase Price in effect immediately
prior to such time by the Exchange Ratio; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of Preferred Shares or shares
of such other capital stock issuable upon the exercise of each Right shall
remain unchanged immediately after such event, but, in the event of a
reclassification, the kind of shares issuable upon the exercise of each Right
immediately after such reclassification shall be appropriately adjusted. If an
event occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement, in
the event a Triggering Event shall have occurred, then promptly following such
Triggering Event, proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive for each Right, upon exercise thereof in accordance with the
terms of this Agreement and payment of the then-current Total Exercise Price,
in lieu of a number of one-thousandths of a Preferred Share, such number of
Common Shares of the Company as shall equal the result obtained by multiplying
the then-current Purchase Price by the then number of one-thousandths of a
Preferred Share for which a Right was exercisable (or would have been
exercisable if the Distribution Date had occurred) immediately prior to the
first occurrence of a Triggering Event, and dividing that product by 50% of the
current per share market price (determined pursuant to Section 11(d) hereof)
for Common Shares on the date of occurrence of the Triggering Event (such
number of shares being hereinafter referred to as the "Adjustment Shares").
(iii) The right to buy Common Shares of the Company
pursuant to Section 11(a)(ii) hereof shall not arise as a result of any Person
becoming an Acquiring Person through an acquisition of Common Shares pursuant
to a Permitted Offer.
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<PAGE> 18
(iv) In lieu of issuing Common Shares in
accordance with Section 11(a)(ii) hereof, the Company may, if the Board of
Directors determines that such action is necessary or appropriate and not
contrary to the interest of holders of Rights (and, in the event that the
number of Common Shares which are authorized by the Company's Articles of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit the exercise in
full of the Rights, or if any necessary regulatory approval for such issuance
has not been obtained by the Company, the Company shall): (A) determine the
excess of (1) the value of the Common Shares issuable upon the exercise of a
Right (the "Current Value") over (2) the Purchase Price (such excess, the
"Spread") and (B) with respect to each Right, make adequate provision to
substitute for such Common Shares, upon exercise of the Rights, (1) cash, (2) a
reduction in the Purchase Price, (3) other equity securities of the Company
(including, without limitation, shares or units of shares of any series of
preferred stock which the Board of Directors of the Company has deemed to have
the same value as Common Shares (such shares or units of shares of preferred
stock are herein called "common stock equivalents")), except to the extent that
the Company has not obtained any necessary stockholder or regulatory approval
for such issuance, (4) debt securities of the Company, except to the extent
that the Company has not obtained any necessary stockholder or regulatory
approval for such issuance, (5) other assets or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the Company
based upon the advice of a nationally recognized investment banking firm
selected by the Board of Directors of the Company; provided, however, if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the first
occurrence of a Triggering Event and (y) the date on which the Company's right
of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company
shall be obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, Common Shares (to the extent
available), except to the extent that the Company has not obtained any
necessary stockholder or regulatory approval for such issuance, and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to the
Spread. If the Board of Directors of the Company shall determine in good faith
that it is likely that sufficient additional Common Shares could be authorized
for issuance upon exercise in full of the Rights or that any necessary
regulatory approval for such issuance will be obtained, the thirty (30) day
period set forth above may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek stockholder approval for the authorization of such
additional shares or take action to obtain such regulatory approval (such
period, as it may be extended, the "Substitution Period"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iv), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares, to take any action to obtain any required
regulatory approval and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public announcement
stating that the exercisability
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<PAGE> 19
of the Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iv), the value of the Common Shares shall be the current per
share market price (as determined pursuant to Section 11(d) hereof) of the
Common Shares on the Section 11(a)(ii) Trigger Date and the value of any
"common stock equivalent" shall be deemed to have the same value as the Common
Shares on such date.
(b) In case the Company shall, at any time after the date
of this Agreement, fix a record date for the issuance of rights, options or
warrants to all holders of Common Shares or of any class or series of
Equivalent Shares entitling such holders (for a period expiring within
forty-five (45) calendar days after such record date) to subscribe for or
purchase Common Shares or Equivalent Shares or securities convertible into
Common Shares or Equivalent Shares at a price per share (or having a conversion
price per share, if a security convertible into Common Shares or Equivalent
Shares) less than the then current per share market price of the Common Shares
or Equivalent Shares (as defined in Section 11(d)) on such record date, then,
in each such case, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Common Shares and Equivalent Shares (if any) outstanding on such
record date, plus the number of Common Shares or Equivalent Shares, as the case
may be, which the aggregate offering price of the total number of Common Shares
or Equivalent Shares, as the case may be, so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the denominator of
which shall be the number of Common Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional Common Shares or
Equivalent Shares, as the case may be, to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Common Shares and Equivalent Shares owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights,
options or warrants are not so issued, the Purchase Price shall be adjusted to
be the Purchase Price which would then be in effect if such record date had not
been fixed.
(c) In case the Company shall, at any time after the date
of this Agreement, fix a record date for the making of a distribution to all
holders of the Common Shares or of any class or series of Equivalent Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash
dividend, if any, or a dividend payable in Common Shares) or subscription
rights, options or warrants (excluding those referred to in Section 11(b)),
then, in each such case, the Purchase Price to be in effect after such record
date shall be determined by multiplying
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<PAGE> 20
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current market price (as
determined pursuant to Section 11(d) hereof) of a Common Share or an Equivalent
Share on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a Common Share or Equivalent
Share, as the case may be, and the denominator of which shall be such current
market price (as determined pursuant to Section 11(d) hereof) of a Common Share
or Equivalent Share on such record date. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iv) hereof, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iv)
hereof, the "current per share market price" of any Security on any date shall
be deemed to be the average of the daily closing prices per share of such
Security for the ten (10) consecutive Trading Days immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Security is determined during a period following the announcement
by the issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares or (ii) any subdivision, combination or reclassification of such
Security, and prior to the expiration of the requisite thirty (30) Trading Day
or ten (10) Trading Day period, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Security is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last sale price or, if such last sale price is not reported, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("Nasdaq") or such other system then in use, or, if on any
such date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors of the
Company. If on any such date no market maker is making a market in the Common
Shares, the fair value of such shares on such date as determined in
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<PAGE> 21
good faith by the Board of Directors of the Company shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to
trading on any national securities exchange, a Business Day. If the Common
Shares are not publicly held or so listed or traded, "current per share market
price" shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a Common Share or other
share or one hundred-thousandth of a Preferred Share, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which requires such adjustment
or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a) or 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right and if required, the Purchase Price thereof, shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in Sections 11(a), (b), (c), (e), (h), (i), (j), (k), (l) and (m),
and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
one-thousandths of a Preferred Share purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Section 11(b), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of Preferred
Shares (calculated to the nearest one hundred-thousandth of a share) obtained
by (i) multiplying (x) the number of Preferred Shares covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
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<PAGE> 22
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price as a result of the calculations made in
Section 11(b) to adjust the number of Rights, in substitution for any
adjustment in the number of Preferred Shares purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one-thousandths of a Preferred
Share for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the nearest one
hundred-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders
of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of Preferred Shares issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per one one- thousandth of a Preferred
Share and the number of one-thousandths of a Preferred Share which were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the par or stated value, if any,
of the number of one-thousandths of a Preferred Share issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue as fully paid and nonassessable shares such number of
one-thousandths of a Preferred Share at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date of the number of one-thousandths of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such
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<PAGE> 23
exercise over and above the number of one-thousandths of a Preferred Share and
other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, prior to the Distribution Date, the Company shall be entitled
to make such reductions in the Purchase Price, in addition to those adjustments
expressly required by this Section 11, as and to the extent that it in its sole
discretion shall determine to be advisable in order that any (i) consolidation
or subdivision of the Preferred or Common Shares, (ii) issuance wholly for cash
of any Preferred or Common Shares at less than the current market price, (iii)
issuance wholly for cash of Preferred or Common Shares or securities which by
their terms are convertible into or exchangeable for Preferred or Common
Shares, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred or Common Shares shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not,
at any time after the Distribution Date, effect or permit to occur any
Triggering Event or Section 13 Event, if (i) at the time or immediately after
such Triggering Event or Section 13 Event there are any rights, warrants or
other instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (ii) prior to, simultaneously with or immediately
after such Section 13 Event, the stockholders of the Person who constitutes, or
would constitute, the "Principal Party" for purposes of Section 13(b) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Sections 23, 24 or 27
hereof, take (or permit to be taken) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares (by reverse stock split or otherwise) into a
smaller number of Preferred Shares, or (D) issue any shares of its capital
stock in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such event,
except as otherwise provided in this Section 11 and Section 7(e) hereof: (1)
each of the Rights outstanding at the time of the record date for such dividend
or the effective date of such subdivision, combination or reclassification
shall be proportionately adjusted to that number of Rights (calculated to the
nearest one
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<PAGE> 24
ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
Fraction"), the numerator of which shall be the total number of Preferred
Shares or shares of capital stock issued in such reclassification of the
Preferred Shares outstanding immediately following such time and the
denominator of which shall be the total number of Preferred Shares outstanding
immediately prior to such time, and the number of Rights that shall thereafter
be issued with respect to each Common Share or share of other capital stock
that shall be issued in a reclassification of the Common Shares prior to the
Distribution Date shall be equal to the total number of outstanding Rights
immediately after such event (as adjusted pursuant to this clause (1)) divided
by the total number of outstanding Common Shares or shares of such other
capital stock immediately after such event (subject to further adjustment
pursuant to the provisions of this Agreement); (2) the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification shall be adjusted so that the
Purchase Price thereafter shall equal the result obtained by dividing the
Purchase Price in effect immediately prior to such time by the Exchange
Fraction; provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of such Right;
and (3) the number of one-thousandths of a Preferred Share or share of such
other capital stock issuable upon the exercise of each Right shall remain
unchanged immediately after such event, but, in the event of a
reclassification, the kind of shares issuable upon the exercise of each Right
immediately after such reclassification shall be adjusted to be the kind of
shares of such other capital stock issued in such reclassification, rather than
Preferred Shares.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Sections 11 and 13
hereof, the Company shall promptly (a) prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Preferred
Shares a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Rights Certificate in accordance with Section 26 hereof.
Notwithstanding the foregoing sentence, the failure of the Company to make such
certification or give such notice shall not affect the validity of such
adjustment or the force or effect of the requirement for such adjustment. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment contained therein and shall not be deemed to have knowledge of
such adjustment unless and until it shall have received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS
OR EARNING POWER.
(a) In the event that, following the Shares Acquisition
Date, directly or indirectly:
(i) the Company shall consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the Company in a
transaction the principal purpose of which is to change the state of
incorporation of the Company or which complies with Section 11(o) hereof);
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<PAGE> 25
(ii) any Person (other than a Subsidiary of the
Company in a transaction that complies with Section 11(o) hereof) shall
consolidate with the Company, or merge with and into the Company and the
Company shall be the continuing or surviving corporation of such consolidation
or merger; or
(iii) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer), in one
or more transactions, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company or one or more of its
wholly owned Subsidiaries in one or more transactions, each of which complies
with Section 11(o) hereof), then, and in each such case, proper provision shall
be made so that
(A) each holder of a Right (except as
otherwise provided herein) shall thereafter have the right to receive, upon the
exercise thereof in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid and nonassessable Common Shares of
the Principal Party (as hereinafter defined), free of any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the
result obtained by (1) multiplying the then current Purchase Price by the
number of one-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Section 13 Event
(or, if a Triggering Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one-thousandths of a Preferred
Share for which a Right was exercisable immediately prior to the first
occurrence of a Triggering Event by the Purchase Price in effect immediately
prior to such first occurrence) and (2) dividing that product (which, following
the first occurrence of a Section 13 Event, shall be referred to as the "Total
Exercise Price" for each Right and for all purposes of this Agreement) by 50%
of the current per share market price (determined pursuant to Section 11(d)
hereof) of the Common Shares of such Principal Party on the date of
consummation of such Section 13 Event;
(B) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter
be deemed to refer to such Principal Party, it being specifically intended that
the provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event;
(D) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
its Common Shares) in connection with the consummation of any such transaction
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean, in the case of any
transaction described in clause (i), (ii) or (iii) of Section 13(a), the Person
or Acquiring Person referred to therein
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<PAGE> 26
(or such Person's or Acquiring Person's successor, including, if applicable,
the Company, if it is the surviving corporation), provided, however, that in
any such case, (i) if such Person is a direct or indirect Subsidiary of another
Person, "Principal Party" shall refer to such other Person and (ii) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate value, and provided, further, that
for purposes of transactions described in clause (iii) hereof, "Principal
Party" shall refer to that Person receiving the greatest portion of the assets
or earning power transferred pursuant to such transaction or transactions.
(c) If, for any reason, the Rights cannot be exercised
for Common Shares of such Principal Party as provided in Section 13(a), then
each holder of Rights shall have the right to exchange its Rights for cash from
such Principal Party in an amount equal to the number of Common Shares that it
would otherwise be entitled to purchase times 50% of the current per share
market price, as determined pursuant to Section 11(d) hereof, of such Common
Shares of such Principal Party. If, for any reason, the foregoing formulation
cannot be applied to determine the cash amount into which the Rights are
exchangeable, then the Board of Directors, based upon the advice of one or more
nationally recognized investment banking firms, and based upon the total value
of the Company, shall determine such amount reasonably and with good faith to
the holders of Rights. Any such determination shall be final and binding on
the Rights Agent.
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
clauses (i) and (ii) of Section 13(a) if: (i) such transaction is consummated
with a Person or Persons who acquired Common Shares pursuant to a Permitted
Offer (or a wholly-owned Subsidiary of any such Person or Persons); (ii) the
price per share of Common Shares offered in such transaction is not less than
the price per share of Common Shares paid to all holders of Common Shares whose
shares were purchased pursuant to such Permitted Offer; and (iii) the form of
consideration being offered to the remaining holders of Common Shares pursuant
to such transaction is the same form as the form of consideration paid pursuant
to such Permitted Offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
(e) The Company shall not consummate any Section 13 Event
unless the Principal Party shall have a sufficient number of authorized Common
Shares that have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such issuer shall have executed and delivered to
the Rights Agent a supplemental agreement confirming that such Principal Party
shall, upon consummation of such Section 13 Event, assume this Agreement in
accordance with Sections 13(a) and (b) hereof, that all rights of first refusal
or preemptive rights in respect of the issuance of Common Shares of such
Principal Party upon exercise of outstanding Rights have been waived, that
there are no rights, warrants, instruments or securities outstanding or any
agreements or arrangements which, as a result of the consummation of such
transaction, would eliminate or substantially diminish the benefits intended to
be afforded by the Rights and that such transaction shall not result in
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<PAGE> 27
a default by such Principal Party under this Agreement, and further providing
that, as soon as practicable after the date of such Section 13 Event, such
Principal Party will:
(i) prepare and file a registration statement
under the Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, use its best
efforts to cause such registration statement to become effective as soon as
practicable after such filing and use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the Expiration Date, and
similarly comply with applicable state securities laws;
(ii) use its best efforts to list (or continue the
listing of) the Rights and the securities purchasable upon exercise of the
Rights on a national securities exchange or to meet the eligibility
requirements for quotation on Nasdaq; and
(iii) deliver to holders of the Rights historical
financial statements for such Principal Party which comply in all respects with
the requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
In the event that at any time after the occurrence of a
Triggering Event some or all of the Rights shall not have been exercised at the
time of a transaction described in this Section 13, the Rights which have not
theretofore been exercised shall thereafter be exercisable in the manner
described in Section 13(a) (without taking into account any prior adjustment
required by Section 11(a)(ii)).
(f) The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or other transfers.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions
of Rights or to distribute Rights Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For the purposes
of this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date
on which such fractional Rights would have been otherwise issuable, as
determined pursuant to the second sentence of Section 11(d) hereof.
(b) The Company shall not be required to issue fractions
of Preferred Shares (other than fractions that are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions that are integral multiples of one one-thousandth of a Preferred
Share). In lieu of fractional Preferred Shares that are not integral multiples
of one one-thousandth of a Preferred Share, the Company shall pay to the
registered holders
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<PAGE> 28
of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of a
Common Share. For purposes of this Section 14(b), the current market value of
a Common Share shall be the closing price of a Common Share (as determined
pursuant to the second sentence of Section 11(d) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives his or her right to receive any fractional Rights or any
fractional shares upon exercise of a Right.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Shares), without
the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common Shares), may, in
his or her own behalf and for his or her own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his or her right to exercise the
Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or
any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at
law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed; and
(c) subject to Sections 6(a) and 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary.
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<PAGE> 29
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER.
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or any other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from
time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent,
for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises. Anything
in this Agreement to the contrary notwithstanding, in no event shall the Rights
Agent be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of the action.
(b) The Rights Agent shall be protected and shall incur
no liability for, or in respect of any action taken, suffered or omitted by it
in connection with, its administration of this Agreement in reliance upon any
Rights Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this
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<PAGE> 30
Agreement without the execution or filing of any paper or any further act on
the part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates shall have
been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any Acquiring Person
and the determination of "current per share market price") be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own negligence, bad faith or willful
misconduct.
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<PAGE> 31
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this Agreement or in
the Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections 3,
11, 13, 23 or 24, or the ascertaining of the existence of facts that would
require any such change or adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after receipt by the Rights Agent of a
certificate furnished pursuant to Section 12 describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer, the Secretary or
any Assistant Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in acting while waiting for
those instructions. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken or omitted by the Rights Agent under
this Rights Agreement and the date on and/or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not be
liable for any action taken by, or omission of, the Rights Agent in accordance
with a proposal included in any such application on or after the date specified
in such application (which date shall not be less than five (5) Business Days
after the date any officer of the Company actually receives such application,
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of
an omission), the Rights Agent shall have received written instructions in
response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director,
officer or employee
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<PAGE> 32
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to purchase, as the case
may be, has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first consulting
with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company and to
each transfer agent of the Preferred Shares and the Common Shares by registered
or certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Preferred Shares and the Common Shares by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company
shall fail to make such appointment within a period of thirty (30) days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his or
her Rights Certificate for inspection by the Company), then the registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, which is authorized
under such laws to exercise
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<PAGE> 33
corporate trust or stockholder services powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50 million. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Preferred Shares and the Common Shares, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common Shares following
the Distribution Date and prior to the redemption or expiration of the Rights,
the Company (a) shall, with respect to Common Shares so issued or sold pursuant
to the exercise of stock options or under any employee plan or arrangement or
upon the exercise, conversion or exchange of the American Home Products
Unsecured Convertible Promissory Notes or the Glycomed convertible subordinated
debentures outstanding at the date hereof or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) no
such Rights Certificate shall be issued and this sentence shall be null and
void ab initio if, and to the extent that, such issuance or this sentence would
create a significant risk of or result in material adverse tax consequences to
the Company or the Person to whom such Rights Certificate would be issued or
would create a significant risk of or result in such options' or employee
plans' or arrangements' failing to qualify for otherwise available special tax
treatment and (ii) no such Rights Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
SECTION 23. REDEMPTION.
(a) The Company may, at its option and with the approval
of the Board of Directors, at any time prior to the Close of Business on the
earlier of (i) the tenth day following the Shares Acquisition Date or such
later date as may be determined by action of a majority of Continuing Directors
then in office and publicly announced by the Company or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding
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<PAGE> 34
Rights at a redemption price of $0.01 per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being herein referred to as the
"Redemption Price") and the Company may, at its option, pay the Redemption
Price either in Common Shares (based on the current per share market price
thereof (as determined pursuant to Section 11(d) hereof) at the time of
redemption) or cash. Such redemption of the Rights by the Company may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish; provided, however, if the Board
of Directors of the Company authorizes redemption of the Rights on or after the
time a Person becomes an Acquiring Person, then there must be Continuing
Directors then in office and such authorization shall require the concurrence
of a majority of such Continuing Directors.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the redemption of the Rights, evidence of which shall
have been filed with the Rights Agent, and without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public notice of any such
redemption; provided, however, that the failure to give or any defect in, any
such notice shall not effect the validity of such redemption. Within ten (10)
days after the action of the Board of Directors ordering the redemption of the
Rights, the Company shall give notice of such redemption to the Rights Agent
and the holders of the then outstanding Rights by mailing such notice to all
such holders at their last addresses as they appear upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof, and other than in connection
with the purchase of Common Shares prior to the Distribution Date.
SECTION 24. EXCHANGE.
(a) Subject to applicable laws, rules and regulations,
and subject to subsection (c) below, the Company may, at its option, by
majority vote of the Board of Directors and a majority vote of the Continuing
Directors, at any time after the occurrence of a Triggering Event, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Ratio of Exchange"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial
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<PAGE> 35
Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Ratio of Exchange. The
Company shall give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by
which the exchange of the Common Shares for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient
Common Shares issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with Section 24(a), the
Company shall either take such action as may be necessary to authorize
additional Common Shares for issuance upon exchange of the Rights or
alternatively, at the option of a majority of the Board of Directors, with
respect to each Right (i) pay cash in an amount equal to the Current Value (as
hereinafter defined), in lieu of issuing Common Shares in exchange therefor, or
(ii) issue debt or equity securities or a combination thereof, having a value
equal to the Current Value, in lieu of issuing Common Shares in exchange for
each such Right, where the value of such securities shall be determined by a
nationally recognized investment banking firm selected by the Board of
Directors by majority vote of the Board of Directors, or (iii) deliver any
combination of cash, property, Common Shares and/or other securities having a
value equal to the Current Value in exchange for each Right. For purposes of
this Section 24(c) only, the Current Value shall mean the product of the
current per share market price of Common Shares (determined pursuant to Section
11(d) on the date of the occurrence of the event described above in
subparagraph (a)) multiplied by the number of Common Shares for which the Right
otherwise would be exchangeable if there were sufficient shares available. To
the extent that the Company determines that some action need be taken pursuant
to clauses (i), (ii) or (iii) of this Section 24(c), the Board of Directors may
temporarily suspend the exercisability of the Rights for a period of up to
sixty (60) days following the date on which the event described in Section
24(a) shall have occurred, in order to seek any authorization of additional
Common Shares and/or to decide the appropriate form of distribution to be made
pursuant to the above provision and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions
of Common
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<PAGE> 36
Shares or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable, an amount in cash equal to the same
fraction of the current per share market value of a whole Common Share (as
determined pursuant to the second sentence of Section 11(d) hereof).
(e) The Company may, at its option, by majority vote of
the Board of Directors, at any time before any Person has become an Acquiring
Person, exchange all or part of the then outstanding Rights for rights of
substantially equivalent value, as determined reasonably and with good faith by
the Board of Directors, based upon the advice of one or more nationally
recognized investment banking firms.
(f) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection (e) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of rights in exchange therefor as has
been determined by the Board of Directors in accordance with subsection (e)
above. The Company shall give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall mail a notice of any
such exchange to all of the holders of such Rights at their last addresses as
they appear upon the registry books of the transfer agent for the Common Shares
of the Company. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Rights
will be effected.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose to effect or permit
to occur any Triggering Event described in Section 11(a)(ii)(A) or 11(a)(ii)(B)
or a Section 13 Event, the Company shall give notice thereof to each holder of
Rights in accordance with Section 26 hereof at least twenty (20) days prior to
occurrence of such Triggering Event or such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event
shall occur, then, in any such case, the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate, in accordance with
Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Sections 11(a)(ii) and 13 hereof.
SECTION 26. NOTICES. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Rights Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
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<PAGE> 37
LIGAND PHARMACEUTICALS INCORPORATED
9393 Towne Centre Drive
San Diego, CA 92121
Attn: President
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
WELLS FARGO BANK N.A.
707 Wilshire Boulevard, W11-2
Los Angeles, CA 90017
Attention: Stock Transfer Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the
Distribution Date, the Company may supplement or amend this Agreement in any
respect without the approval of any holders of Rights and the Rights Agent
shall, if the Company so directs, execute such supplement or amendment. From
and after the Distribution Date, the Company and the Rights Agent may from time
to time supplement or amend this Agreement without the approval of any holders
of Rights in order to (i) cure any ambiguity, (ii) correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) shorten or lengthen any time period hereunder
(which lengthening or shortening, following the first occurrence of an event
set forth in the proviso to Section 23(a) hereof, shall be effective only if
there are Continuing Directors and shall require the concurrence of a majority
of such Continuing Directors) or (iv) to change or supplement the provisions
hereunder in any manner that the Company may deem necessary or desirable and
that shall not adversely affect the interests of the holders of Rights (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable
or (B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate from an appropriate
officer of the Company that states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of Common Shares.
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<PAGE> 38
SECTION 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
ETC. For all purposes of this Agreement, any calculation of the number of
Common Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of
which any Person is the Beneficial Owner, shall be made in accordance with the
last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under
the Exchange Act. The Board of Directors of the Company (and, where
specifically provided for herein, the Continuing Directors) shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board, or the Company (or, where
specifically provided for herein, the Continuing Directors), or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or
not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board (or, where specifically provided for herein, by the
Continuing Directors) in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights Certificates and
all other parties and (y) not subject the Board or the Continuing Directors to
any liability to the holders of the Rights.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
Common Shares).
SECTION 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and shall not expire until the close of business on
the tenth day following the date of such determination by the Board of
Directors.
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<PAGE> 39
SECTION 32. GOVERNING LAW. This Agreement and each Right and
each Rights Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State.
SECTION 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
[Remainder of This Page Intentionally Left Blank]
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
"COMPANY" LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ DAVID E. ROBINSON
-----------------------------------
Name: David E. Robinson
Title: Chairman, President and CEO
"RIGHTS AGENT" WELLS FARGO BANK N.A.
By: /s/ ROSA M. BAUTISTA
-----------------------------------
Name: Rosa M. Bautista
Title: Assistant Vice President
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<PAGE> 41
EXHIBIT A
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF LIGAND PHARMACEUTICALS INCORPORATED
The undersigned, David E. Robinson and William L. Respess, do hereby
certify:
1. That they are the duly elected and acting President and
Secretary, respectively, of Ligand Pharmaceuticals Incorporated, a Delaware
corporation (the "Corporation").
2. That pursuant to the authority conferred upon the Board of
Directors by the Amended and Restated Certificate of Incorporation of the said
Corporation, the said Board of Directors adopted the following resolution
creating a series of 80,000 shares of Preferred Stock designated as Series A
Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Amended and Restated Certificate
of Incorporation, the Board of Directors does hereby provide for the
issue of a series of Preferred Stock, par value $.001 per share, of
the Corporation, to be designated "Series A Participating Preferred
Stock," initially consisting of 80,000 shares and to the extent that
the designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions of the
Series A Participating Preferred Stock are not stated and expressed in
the Amended and Restated Certificate of Incorporation, does hereby fix
and herein state and express such designations, powers, preferences
and relative and other special rights and the qualifications,
limitations and restrictions thereof, as follows (all terms used
herein which are defined in the Amended and Restated Certificate of
Incorporation shall be deemed to have the meanings provided therein):
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "Series A Participating Preferred Stock," par value
$.001 per share, and the number of shares constituting such series shall be
80,000.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior right of the
holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Participating Preferred Stock with respect
to dividends, the holders of shares of Series A Participating Preferred Stock
shall be entitled to receive when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on the last day of September, December, March and June in each year
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<PAGE> 42
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to, subject
to the provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Participating
Preferred Stock. In the event the Corporation shall at any time after
September 13, 1996 (the "Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Series A Participating Preferred Stock were entitled immediately prior to
such event under the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Participating Preferred Stock as provided in
paragraph (A) above immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Participating Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Participating Preferred Stock entitled to receive
a quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Participating
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series A Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of Series A
Participating
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<PAGE> 43
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Participating Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the
holders of shares of Series A Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) Except as required by law, holders of Series A
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) The Corporation shall not declare any dividend on,
make any distribution on, or redeem or purchase or otherwise acquire for
consideration any shares of Common Stock after the first issuance of a share or
fraction of a share of Series A Participating Preferred Stock unless
concurrently therewith it shall declare a dividend on the Series A
Participating Preferred Stock as required by Section 2 hereof.
(B) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock;
A-3
<PAGE> 44
(ii) declare or pay dividends on, make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with Series A
Participating Preferred Stock, except dividends paid ratably on the Series A
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;
(iv) purchase or otherwise acquire for
consideration any shares of Series A Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(C) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph (A)
of this Section 4, purchase or otherwise acquire such shares at such time and
in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series A
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Participating Preferred
Stock unless, prior thereto, the holders of shares of Series A Participating
Preferred Stock shall have received $1,000.00 per share, plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Following the payment
A-4
<PAGE> 45
of the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Participating
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by (ii)
1,000 (as appropriately adjusted as set forth in subparagraph (C) below to
reflect such events as stock splits, stock dividends and recapitalization with
respect to the Common Stock) (such number in clause (ii), the "Adjustment
Number"). Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series A Participating Preferred Stock and Common Stock, respectively, holders
of Series A Participating Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of the remaining assets to
be distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full to the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, which rank on a parity with the Series A Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the holders
of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Participating Preferred Stock shall be
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<PAGE> 46
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION 8. NO REDEMPTION. The shares of Series A Participating
Preferred Stock shall not be redeemable.
SECTION 9. RANKING. The Series A Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
SECTION 10. AMENDMENT. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preference or special rights
of the Series A Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Participating Preferred Stock, voting separately
as a class.
SECTION 11. FRACTIONAL SHARES. Series A Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Designation
of Rights, Preferences and Privileges in accordance with the foregoing
resolution and the provisions of Delaware law and to take such actions as they
may deem necessary or appropriate to carry out the intent of the foregoing
resolution."
3. That the authorized number of shares of Preferred Stock of the
Corporation is 5,000,000 and that no such Preferred Stock has been issued.
[The remainder of this page is intentionally left blank.]
A-6
<PAGE> 47
We further declare under penalty of perjury that the matters set forth
in the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at San Diego, California on ______________, 1996.
______________________________________________
David E. Robinson, Chairman, President and CEO
______________________________________________
William L. Respess, Secretary
A-7
<PAGE> 48
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER SEPTEMBER 13, 2006 OR EARLIER IF TERMINATED BY
THE COMPANY OR IF THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE
RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION
OF THE COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON
OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID
IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(E) OF SUCH RIGHTS
AGREEMENT.]*
RIGHTS CERTIFICATE
LIGAND PHARMACEUTICALS INCORPORATED
This certifies that ______________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of September 13, 1996 (the "Rights Agreement"),
between Ligand Pharmaceuticals Incorporated, a Delaware corporation (the
"Company"), and WELLS FARGO BANK N.A. (the "Rights Agent"), to purchase from
the Company at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M., California time, on September 13,
2006 at the office of the Rights Agent designated for such purpose, or at
__________________________
* The portion of the legend in bracket shall be inserted only if
applicable and shall replace the preceding sentence.
B-1
<PAGE> 49
the office of its successor as Rights Agent, one one-thousandth of a fully paid
non-assessable share of Series A Participating Preferred Stock, par value $.001
per share, (the "Preferred Shares"), of the Company, at a purchase price of
$0.01 per one-thousandth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of one-thousandths of a
Preferred Share which may be purchased upon exercise hereof) set forth above
are the number and Purchase Price as of September 13, 1996, based on the
Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number and kind of Common Shares or other
securities which may be purchased upon the exercise of the Rights evidenced by
this Rights Certificate are subject to modification and adjustment upon the
happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices
of the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed by the Company, at its
option, at a redemption price of $0.01 per Right or (ii) may be exchanged by
the Company in whole or in part for Common Shares, substantially equivalent
rights or other consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate amount of securities as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate
or Rights Certificates for the number of whole Rights not exercised.
No fractional portion of less than one one-thousandth of a Preferred
Share will be issued upon the exercise of any Right or Rights evidenced hereby
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement. No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the
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<PAGE> 50
holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ___________, 19__.
ATTEST: LIGAND PHARMACEUTICALS INCORPORATED
_____________________________ By:_____________________________________________
William L. Respess, Secretary David E. Robinson, Chairman, President and CEO
Countersigned:
WELLS FARGO BANK N.A.
as Rights Agent
By: _________________________
Authorized Signature
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<PAGE> 51
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED __________________ hereby sells, assigns and transfers unto
____________________________________________________________________________
(Please print name and address of transferee)
____________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _______________, 19__
______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
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<PAGE> 52
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(i) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);
(ii) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of any such Person.
Dated: _______________, 19__
_______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
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<PAGE> 53
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate)
To: __________________________________
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the number of
one-thousandths of a Preferred Share issuable upon the exercise of such Rights
and requests that certificates for such number of one-thousandths of a
Preferred Share issued in the name of:
Please insert social security or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ___________________, 19__
________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
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<PAGE> 54
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of any such Person.
Dated: __________ 19__
________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
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<PAGE> 55
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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<PAGE> 56
EXHIBIT C
LIGAND PHARMACEUTICALS INCORPORATED
SHAREHOLDER RIGHTS PLAN
Summary of Rights
Distribution Transfer of Rights; The Board of Directors has declared a
Rights Certificate dividend of one Right for each share of
Ligand Pharmaceuticals Incorporated Common
Stock outstanding. Prior to the Distribution
Date referred to below, the Rights will be
evidenced by, and trade with, the certificates
for the Common Stock. After the Distribution
Date, Ligand Pharmaceuticals Incorporated
(the "Company") will mail Rights certificates
to the Company's stockholders and the Rights
will become transferable apart from the Common
Stock.
Distribution Date: Rights will separate from the Common Stock
and become exercisable on the tenth day (or
such later date as may be determined by a
majority of the Directors not affiliated with
the acquiring person or group (the "Continuing
Directors")) after a person or group (a)
acquires beneficial ownership of 20% or more
of the Company's Common Stock or (b) announces
a tender or exchange offer, the consummation
of which would result in ownership by a
person or group of 20% or more of the
Company's Common Stock.
Preferred Stock Purchasable After the Distribution Date, each Right will
Upon Exercise of Rights: entitle the holder to purchase, for $100.00 a
fraction of a share of the Company's Preferred
Stock with economic terms similar to that of
one share of the Company's Common Stock.
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<PAGE> 57
Flip-In: If an acquiror (an "Acquiring Person") obtains
20% or more of the Company's Common Stock
(other than pursuant to a tender offer deemed
adequate and in the best interests of the
Company and its stockholders by the Board of
Directors (a "Permitted Offer")), then each
Right (other than Rights owned by an Acquiring
Person or its affiliates) will entitle the
holder thereof to purchase, for the exercise
price, a number of shares of the Company's
Common Stock having a then current market
value of twice the exercise price.
Flip-Over: If, after the Shares Acquisition Date (defined
below), (a) the Company merges into another
entity, (b) an acquiring entity merges into
the Company or (c) the Company sells more than
50% of the Company's assets or earning power,
then each Right (other than Rights owned by an
Acquiring Person or its affiliates) will
entitle the holder thereof to purchase, for
the exercise price, a number of shares of
Common Stock of the person engaging in the
transaction having a then current market value
of twice the exercise price (unless the
transaction satisfies certain conditions and
is consummated with a person who acquired
shares pursuant to a Permitted Offer, in which
case the Rights will expire).
Exchange Provision: At any time after an event triggering the
flip-in or flip-over rights and prior to the
acquisition by the Acquiring Person of 50% or
more of the outstanding Common Stock, the
Board of Directors of the Company may exchange
the Rights (other than Rights owned by the
Acquiring Person or its affiliates), in whole
or in part, at an exchange ratio of one Common
Share per Right (subject to adjustment).
Redemption of the Rights: Rights will be redeemable at the Company's
option for $0.01 per Right at any time on or
prior to the tenth day (or such later date
as may be determined by a majority of the
Continuing Directors) after public
announcement that a person has acquired
beneficial ownership of 20% or more of the
Company's Common Stock (the "Shares
Acquisition Date").
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<PAGE> 58
Expiration of the Rights: The Rights expire on the earliest of (a)
September 13, 2006, (b) exchange or redemption
of the Rights as described above, or (c)
consummation of a merger or consolidation
resulting in expiration of the Rights as
described above.
Amendment of Terms of Rights: The terms of the Rights and the Rights
Agreement may be amended in any respect
without the consent of the Rights holders on
or prior to the Distribution Date; thereafter,
the terms of the Rights and the Rights
Agreement may be amended without the consent
of the Rights holders in order to cure any
ambiguities or to make changes which do not
adversely affect the interests of Rights
holders (other than the Acquiring Person).
Voting Rights: Rights will not have any voting rights.
Anti-Dilution Provisions: Rights will have the benefit of certain
customary anti-dilution provisions.
Taxes: The Rights distribution should not be taxable
for federal income tax purposes. However,
following an event which renders the Rights
exercisable or upon redemption of the Rights,
stockholders may recognize taxable income.
The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms
of the Rights Agreement dated as of September 13, 1996, between the Company and
the Rights Agent. Further details of the Rights are contained in a letter that
will be mailed to all the Company's stockholders.
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