<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
- --------------------------------------------------------------------------------
(Name of the Issuer)
LIGAND PHARMACEUTICALS INCORPORATED
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Statement)
Callable Common Stock, par value $0.001 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
035 01849 P107
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(CUSIP Number of Class of Securities)
William L. Respess, 9393 Towne Centre Drive, San Diego, CA 92121, (619) 535-3900
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
[ ] a. The filing of solicitation materials or an information statement
subject to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1],
Regulation 14C [17 CFR 240.14c-1] or Rule 13e-3(c)
[Section240.13e-3(c)] under the Securities Exchange Act of 1934.
[ ] b. The filing of a registration statement under the Securities Act
of 1933.
[ ] c. A tender offer.
[X] d. None of the above. [Exercise of Stock Purchase Option]
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. [ ]
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee**
$71,402,500.00 $14,280.50
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* For purposes of calculating the filing fee only. The Transaction
Valuation is based upon the exercise price of the Stock Purchase Option
(as defined below) of $71,402,500.00 for all issued and outstanding
shares of Callable Common Stock of Allergan Ligand Retinoid
Therapeutics, Inc.
** The amount of the Filing Fee, calculated in accordance with Section 13
of the Securities Exchange Act of 1934, as amended,
<PAGE> 2
equals 1/50th of one percent of the exercise price to be paid by Ligand
Pharmaceuticals Incorporated pursuant to the Stock Purchase Option to
acquire all of the issued and outstanding shares of Callable Common
Stock.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount Previously Paid:_________________ Filing Party:__________________
Form or Registration No.:_______________ Date Filed:____________________
INTRODUCTION
This Rule 13e-3 Transaction Statement (the "Statement") relates
to the exercise by Ligand Pharmaceuticals Incorporated, a Delaware
corporation ("Ligand"), of the option (the "Stock Purchase Option")
granted to it under the Amended and Restated Certificate of
Incorporation (the "ALRT Certificate") of Allergan Ligand Retinoid
Therapeutics, Inc., a Delaware corporation ("ALRT" or the "Issuer"), to
purchase all of the issued and outstanding shares of Callable Common
Stock, par value $0.001 per share, of ALRT (the "Transaction").
Notwithstanding the filing of this Statement, Ligand disclaims
application of Rule 13e-3 of the Securities Exchange Act of 1934, as
amended, to the Transaction between Ligand and ALRT reported herein.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) ALRT is the issuer of the equity security which is the subject
of the Transaction. The address of ALRT's principal executive
offices is 2525 Dupont Drive, Irvine, California 92612.
(b) The exact title of the equity security which is the subject of
this filing is the Callable Common Stock, par value $0.001 per
share, of ALRT (the "Callable Common Stock"). The number of
shares of Callable Common Stock outstanding as of June 30, 1997,
the most recent practicable date, was 3,250,000 shares. The
approximate number of holders of record of the Callable Common
Stock was approximately 1120 as of that date.
(c) The principal market on which the Callable Common Stock is being
traded is the Nasdaq National Market. From its issuance on June
3, 1995 until June 3, 1997, the Callable Common Stock was not
traded separately, but was traded as part of units (the
"Units"), each Unit consisting of one share of Callable Common
Stock and two Warrants, each Warrant to purchase one share of
Ligand Common Stock. The Units traded under the symbol "ALRIZ."
The following chart sets forth the range of high and low sale
prices for the Units on the Nasdaq National Market for each
quarterly period from September 30, 1995 until March 31, 1997:
<TABLE>
<CAPTION>
Period Ending High Low
------------------- ---- ---
<S> <C> <C>
September 30, 1995 16 1/2 13 7/8
December 31, 1995 18 13 1/2
March 31, 1996 22 1/2 17
June 30, 1996 32 20 1/2
September 30, 1996 30 21 1/2
December 31, 1996 31 26 1/2
March 31, 1997 35 3/4 28
</TABLE>
After June 3, 1997, the Callable Common Stock traded separately
on the Nasdaq National Market under the symbol "ALRI". The
following chart sets forth the range of high and low sales
prices for the Callable Common Stock for each quarterly period
since June 3, 1997:
<PAGE> 3
<TABLE>
<CAPTION>
Period Ending High Low
------------------- ---- ---
<S> <C> <C>
June 30, 1997 19 17 1/4
September 30, 1997 23 1/2 17 5/8
</TABLE>
(d) To the best of Ligand's knowledge after making a reasonable
inquiry, ALRT has not paid any dividends on the Callable Common
Stock during the past two years. Section 4.4(c) of the ALRT
Certificate provides that ALRT cannot declare or pay dividends
to the holders of Callable Common Stock without the affirmative
vote of the holders of a majority of the issued and outstanding
shares of the Special Common Stock of ALRT.
(e) All outstanding shares of the Callable Common Stock were
initially issued on June 3 ,1995 in connection with a registered
offering under the Securities Act of 1933 (the "Offering"). Upon
completion of the Offering on June 3, 1995, 3,250,000 Units were
issued at an offering price of $10.00 per Unit. The Offering
raised net proceeds of $26.8 million for ALRT. Since the
Offering, there has been no underwritten public offerings of the
Callable Common Stock for cash registered under the Securities
Act of 1933 or exempt from registration thereunder pursuant to
Regulation A.
(f) None.
ITEM 2. IDENTITY AND BACKGROUND.
LIGAND
Ligand is the party filing this Statement. Ligand's principal
executive offices are located at 9393 Towne Centre Drive, San Diego CA
92121, and its principal business is the discovery and development of
small-molecule drugs which mimic or block the activities of various
hormones and cytokines to regulate gene activity and the genetic
processes affecting many diseases.
During the last five years, Ligand has not been convicted in a
criminal proceeding and has not been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which resulted
in a judgment, decree or final order enjoining further violations of, or
prohibiting activities, subject to, federal or state securities laws or
finding any violation of such laws.
LIGAND'S DIRECTORS AND EXECUTIVE OFFICERS
DAVID E. ROBINSON
9393 Towne Centre Drive
San Diego, CA 92121
Mr. Robinson has served as President and Chief Executive Officer
and a Director of Ligand since 1991. Mr. Robinson has also served as
Chairman of the Company since May 1996. Prior to joining Ligand, he was
Chief Operating Officer at Erbamont, a pharmaceutical company. Prior to
that, Mr. Robinson was President of Adria Laboratories, Erbamont's North
American Subsidiary. He also was employed in various executive positions
for more than 10 years by Abbott Laboratories, most recently as Regional
Director of Abbott Europe. Mr. Robinson received his B.A. in political
science and history from MacQuaire University and his M.B.A. from the
University of South Wales, Australia. Mr. Robinson is a Director of the
Cancer Center Foundation of the University of California at San Diego
and the California Healthcare Institute (CHI), as well as Neurocrine
Biosciences Inc. and several private health care companies.
During the past five years, Mr. Robinson has not been convicted
in a criminal proceeding and has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Mr. Robinson is a
citizen of the United States.
<PAGE> 4
HENRY F. BLISSENBACH
13911 Ridgedale Drive
Minnetonka, MN 55305
Mr. Blissenbach has served as a Director since May 1995 and
currently serves as a member of Ligand's Compensation Committee. Dr.
Blissenbach joined Diversified Pharmaceutical Services, a subsidiary
company of SmithKline Beecham, in August 1986 and served as President
until March 1997. Dr. Blissenbach was recently named Chief Pharmacy
Officer for SmithKline Beecham's Health Care Services. He earned his
Doctor of Pharmacy (Pharm.D.) degree at the University of Minnesota,
College of Pharmacy. He has held an academic appointment in the College
of Pharmacy, University of Minnesota, since 1981. He has vast experience
in managed health care, and has served in numerous advisory capacities
with pharmaceutical manufacturers and managed care entities over the
past many years. Dr. Blissenbach currently serves on the Board of
Directors for Chronimed, Inc., and is a member of Ligand's Compensation
Committee.
During the past five years, Mr. Blissenbach has not been
convicted in a criminal proceeding and has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree or final order
enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding any violation of such laws.
Mr. Blissenbach is a citizen of the United States.
ALEXANDER D. CROSS, PH.D.
149 Common Wealth
Menlo Park, CA 94025
Dr. Cross has served as a Director of Ligand since March 1991
and currently serves as a member of Ligand's Audit Committee. Dr. Cross
has been an independent consultant in the fields of pharmaceuticals and
biotechnology since January 1986. Dr. Cross was President and Chief
Executive Officer of Zoecon Corporation, a biotechnology company, from
April 1983 to December 1985, and Executive Vice President and Chief
Operating Officer from 1979 to 1983. Dr. Cross currently serves as
Chairman of the Board of Directors and Chief Executive Officer for
Cytopharm, Inc. He is a member of the Boards of Directors of Myelos
Neurosciences and Failure Group, Inc.
During the past five years, Dr. Cross has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Dr. Cross is a
citizen of the United States.
JOHN GROOM
Lincoln House
Lincoln Place
Dublin 2 Ireland
Mr. Groom has served as a Director since May 1995 and currently
serves as a member of Ligand's Audit Committee and Compensation
Committee. Mr. Groom has served as President and Chief Operating Officer
of Elan Corporation, plc ("Elan") since January 1997, having previously
served from July 1996 to January 1997 as Chief Operating Officer and a
director on the Board of Directors of Elan. Previously, he was
President, Chief Executive Officer, and a director on the Board of
Directors of Athena Neurosciences, Inc. from 1987 until its acquisition
by Elan in July 1996. From 1960 until 1985, Mr. Groom was employed by
Smith Kline & French Laboratories (SK&F), the pharmaceutical division of
the then SmithKline Beechman Corporation. He held a number of positions
at SK&F including President of SK&F International, Vice President,
Europe, and Managing Director, United Kingdom. Mr. Groom has also served
as Chairman of the International Section of the Pharmaceutical
Manufacturers Association. Mr. Groom also serves as a director on the
Board of Directors of IDEC Pharmaceuticals Corporation and the
California Healthcare Institute and is a public trustee on the Board of
Trustees of the American Academy of Neurology Education and Research
Foundation. Mr. Groom is Fellow of the Association of Certified
Accountants (UK).
During the past five years, Mr. Groom has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final
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order enjoining further violations of, or prohibiting activities,
subject to, federal or state securities laws or finding any violation of
such laws. Mr. Groom is a citizen of the United States.
IRVING S. JOHNSON, PH.D.
Indian Point Road
RR1, Box 35
Stonington, ME 04681
Dr. Johnson has served as a Director of Ligand since March 1989.
Dr. Johnson is currently an independent consultant in biomedical
research. From 1953 until his retirement in November 1988, Dr. Johnson
held various positions with Eli Lilly & Company, a pharmaceutical
company, including Vice President of Research from 1973 until 1988. He
has published almost 90 scientific articles, contributed to over 30
books and has served on numerous editorial boards, society committees
and advisory committees of the National Academy of Sciences and the
National Institutes of Health including the Recombinant DNA Advisory
Committee (RAC), and was the recipient of the First Annual Congressional
Award in Science and Technology. Dr. Johnson is a member of the Board of
Directors of Agouron Pharmaceuticals, Inc. and Allelix
Biopharmaceuticals. He served on the Board of Directors of Glycomed,
Inc. (1990 to 1991) until its merger with Ligand and on the Board of
Directors of Athena Neurosciences (1989 to 1996) until its merger with
Elan. He currently serves on the Scientific Advisory Boards of both
Ligand and Elan.
During the past five years, Dr. Johnson has not been convicted
in a criminal proceeding and has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Mr. Johnson is a
citizen of the United States.
CARL C. PECK, M.D.
3900 Reservoir Road NW
Room NE 405
Washington, DC 20007
Dr. Peck has served as a Directors of Ligand since March 1997.
Dr. Peck is currently Professor of Pharmacology and Medicine and
Director of the Center for Drug Development Science at Georgetown
University Medical Center. Dr. Peck was Boerhaave Professor of Clinical
Drug Research at Leiden University from November 1993 to July 1995. From
October 1987 to November 1993, Dr. Peck was Director, Center for Drug
Evaluation and Research of the Food and Drug Administration. He has held
many academic positions prior to October 1987, including Professor of
Medicine and Pharmacology, Uniformed Services University, from 1982 to
October 1987. He is author of more than 100 original research papers,
chapters and books with regard to his area of expertise.
During the past five years, Dr. Peck has not been convicted in a
criminal proceeding and has not been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which resulted
in a judgment, decree or final order enjoining further violations of, or
prohibiting activities, subject to, federal or state securities laws or
finding any violation of such laws. Dr. Peck is a citizen of the United
States.
WILLIAM C. SHEPHERD
2525 Dupont Drive
Irvine, CA 92715
Mr. Shepherd has served as a Director of Ligand since July 1992.
Mr. Shepherd has been President and Chief Executive of specialty health
care company Allergan, Inc. ("Allergan") since January 1992, before
assuming the additional title of Chairman in January 1996. He has held
many other executive positions at Allergan during the past 30 years,
including President of Allergan U.S., Senior Vice President, U.S.
Operations, and Chief Operating Officer. Mr. Shepherd has been a
Director of Allergan since 1984.
During the past five years, Mr. Shepherd has not been convicted
in a criminal proceeding and has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or
<PAGE> 6
final order enjoining further violations of, or prohibiting activities,
subject to, federal or state securities laws or finding any violation of
such laws. Mr. Shepherd is a citizen of the United States.
LLOYD E. FLANDERS, PH.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Flanders joined Ligand in September 1992 as Vice President,
R&D Planning, Administration, Project Management, became Vice President,
Pre-Clinical Development and R&D Administration in August 1993 and
became Senior Vice President, Pre-Clinical Development and R&D Project
Management in March 1995. Prior to joining Ligand, Dr. Flanders was Vice
President, New Product Development--Cardiovascular Projects at
Parke-Davis Research Division of the Warner-Lambert Company where he
also previously served as Director, Research Planning and Administrative
Services. From 1971 to 1985, he served in various positions with G.D.
Searle and Company, including Director, Department of Project
Management. Dr. Flanders received a Ph.D. in comparative biochemistry
and biophysics from University of California, Davis, an M.B.A. from Lake
Forest College and a B.S. in biology from DePauw University.
During the past five years, Dr. Flanders has not been convicted
in a criminal proceeding and has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Dr. Flanders is a
citizen of the United States.
WILLIAM L. RESPESS, PH.D., J.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Respess joined Ligand in December 1988 as Vice President and
General Counsel, became Senior Vice President and General Counsel in
August 1993 and assumed responsibility for Government Affairs in March
1995. Prior to joining Ligand, Dr. Respess was Vice President and
General Counsel at Gen-Probe, Inc., a biotechnology company, from 1987
to 1988. From 1983 to 1986, he served as Vice President and General
Counsel at Hybritech, Inc., a biotechnology company. From 1974 to 1983,
he was an attorney with the patent law firm of Lyon & Lyon of Los
Angeles, serving as Partner from 1980 to 1983. Dr. Respess received a
J.D. from George Washington University, a Ph.D. in organic chemistry
from the Massachusetts Institute of Technology and a B.S. in chemistry
from the Virginia Military Institute.
During the past five years, Dr. Respess has not been convicted
in a criminal proceeding and has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Dr. Respess is a
citizen of the United States.
STEVEN D. REICH, M.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Reich joined Ligand in December 1995 as the Senior Vice
President, Clinical Research. Prior to joining Ligand, Dr. Reich was at
the clinical contract research organization PAREXEL International
Corporation, from 1987 to 1995, where he served as Senior Vice
President, Medical Affairs responsible for worldwide medical and
clinical affairs services including clinical trials management, medical
consulting and medical writing. From 1986 to 1987, Dr. Reich served as
worldwide Medical Research Director of Biogen, Inc. ("Biogen"), and held
various positions at Biogen from 1983 to 1986. Earlier in his career Dr.
Reich served as Associate Director of Clinical Cancer Research for
Bristol Laboratories (1978-1979). He is a Board certified Medical
Oncologist and has held academic positions as a clinical pharmacologist
at Northwestern University, SUNY-Upstate Medical School, and University
of Massachusetts Medical Center. Dr. Reich received an M.D. from the New
Jersey College of Medicine and an A.B. from Princeton University.
During the past five years, Dr. Reich has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final
<PAGE> 7
order enjoining further violations of, or prohibiting activities,
subject to, federal or state securities laws or finding any violation of
such laws. Dr. Reich is a citizen of the United States.
PAUL V. MAIER
9393 Towne Centre Drive
San Diego, CA 92121
Mr. Maier joined Ligand in October 1992 as Vice President and
Chief Financial Officer and became Senior Vice President and Chief
Financial Officer in November 1996. Prior to joining Ligand, Mr. Maier
served as Vice President, Finance at DFS West, a division of DFS Group,
L.P., a private multinational retailer. From February 1990 to October
1990, Mr. Maier served as Vice President and Treasurer of ICN
Pharmaceuticals, Inc. Mr. Maier held various positions in finance and
administration at SPI Pharmaceuticals, Inc., a publicly held subsidiary
of ICN Pharmaceuticals Group, from 1984 to 1988, including Vice
President, Finance from February 1984 to February 1987. Mr. Maier
received an M.B.A. from Harvard Graduate School of Business and a B.S.
from Pennsylvania State University.
During the past five years, Mr. Maier has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Mr. Maier is a
citizen of the United States.
ANDRES NEGRO-VILAR, M.D., PH.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Negro-Vilar joined Ligand in September 1996 as Senior Vice
President, Research, and Chief Scientific Officer. Prior to joining
Ligand, Dr. Negro-Vilar was Vice President of Research and Head of the
Women's Health Research Institute for Wyeth-Ayerst Laboratories, a
division of American Home Products, from 1993 to 1996. From 1983 to
1993, Dr. Negro-Vilar served at the National Institute of Environmental
Health Sciences of the National Institutes of Health as the Director of
Clinical Programs and Chief of the Laboratory of Molecular and
Integrative Neurosciences. Dr. Negro-Vilar received a Ph.D. in
physiology from the University of Sao Paulo, Brazil, an M.D. from the
University of Buenos Aires, Argentina, and a B.S. in science from
Belgrano College.
During the past five years, Dr. Negro-Vilar has not been
convicted in a criminal proceeding and has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree or final order
enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding any violation of such laws.
Dr. Negro-Vilar is a citizen of the United States.
WILLIAM A. PETTIT
9393 Towne Centre Drive
San Diego, CA 92121
Mr. Pettit joined Ligand in November 1996 as Senior Vice
President, Human Resources and Administration. Prior to joining Ligand,
Mr. Pettit was Senior Vice President, Human Resources at Pharmacia and
Upjohn, Inc. where he was employed from 1986 to 1996. From 1984 to 1986,
Mr. Pettit served as Corporate Director, Human Resources at Browning
Ferris Industries. From 1975 to 1984, Mr. Pettit served in various
positions at Bristol-Myers Company (now Bristol-Myers Squibb Company)
including Director, Human Resources. Mr. Pettit received a B.A. in
English from Amherst College.
During the past five years, Dr. Negro-Vilar has not been
convicted in a criminal proceeding and has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree or final order
enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding any violation of such laws.
Dr. Negro-Vilar is a citizen of the United States.
<PAGE> 8
RUSSELL L. ALLEN
9393 Towne Centre Drive
San Diego, CA 92121
Mr. Allen joined Ligand in February 1997 as Vice President,
Corporate Development and Strategic Planning. Prior to joining Ligand,
Mr. Allen was General Manager, Central America, Sanofi Winthrop Inc. and
previously served as Vice President, Business Development Strategic
Analysis at Sterling Winthrop Inc. where he was employed from 1985 to
1996. From 1980 to 1985, Mr. Allen served in various positions at
Bristol-Myers Company (now Bristol-Myers Squibb Company) and from 1973
to 1980, held various positions at Procter & Gamble. Mr. Allen received
an M.B.A. from Harvard Graduate School of Business and a B.A. from
Amherst College.
During the past five years, Mr. Allen has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Mr. Allen is a
citizen of the United States.
SUSAN E. ATKINS
9393 Towne Centre Drive
San Diego, CA 92121
Ms. Atkins joined Ligand in June 1993 as Vice President,
Investor Relations and Corporate Communications. Prior to joining
Ligand, Ms. Atkins served as Vice President of Public Affairs at Rorer
Group Inc. (now Rhone-Poulenc Rorer), an international pharmaceutical
firm from 1986 to 1988. From 1985 to 1986, Ms. Atkins served as Director
of Corporate Communications at Genentech, Inc. ("Genentech"). Ms. Atkins
received an M.B.A. from Pepperdine University and received both an M.A.
in mass communications and B.A. in journalism from the University of
Oklahoma.
During the past five years, Ms. Atkins has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Ms. Atkins is a
citizen of the United States.
GEORGE M. GILL, M.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Gill joined Ligand in September 1992 as Vice President,
Clinical Research and became Vice President, Medical Affairs in January
1996. Prior to joining Ligand, Dr. Gill was Senior Director, Clinical
Research at ICI Pharmaceutical Research and Development where he also
served as Director of Clinical Research, Clinical and Medical Affairs
from 1990 to 1992. From 1984 to 1990, Dr. Gill served in various
positions at Bristol-Myers Company (now Bristol-Myers Squibb Company),
including Vice President, Worldwide Regulatory Affairs. Dr. Gill
received an M.D. from the University of Pennsylvania and a B.S. in
chemistry from Dickinson College and is board certified in pediatrics.
During the past five years, Dr. Gill has not been convicted in a
criminal proceeding and has not been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which resulted
in a judgment, decree or final order enjoining further violations of, or
prohibiting activities, subject to, federal or state securities laws or
finding any violation of such laws. Dr. Gill is a citizen of the United
States.
HOWARD T. HOLDEN, PH.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Holden joined Ligand in September 1992 as Vice President,
Regulatory Affairs and Compliance. Prior to joining Ligand, Dr. Holden
was Senior Director, Worldwide Regulatory Affairs at Parke-Davis
Pharmaceutical Research Division of the Warner-Lambert Company. From
1986 to 1988, Dr. Holden served as Director, Regulatory Affairs and
Compliance
<PAGE> 9
at Centocor Inc., a pharmaceutical company. Dr. Holden received a Ph.D.
in microbiology from the University of Miami and a B.A. in zoology from
Drew University.
During the past five years, Dr. Holden has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Dr. Holden is a
citizen of the United States.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The nature and approximate amount of any transactions occurring
between Ligand and ALRT since the commencement of ALRT's second
full fiscal year proceeding the date of this Statement are as
follows:
(i) Technology License Agreement. In connection with the
Offering, ALRT, Ligand and Allergan, Inc. ("Allergan")
entered into a Technology License Agreement under which
(i) Allergan granted ALRT a worldwide, exclusive (even
as to Allergan) right and license, terminable only as
set forth therein, to use the Core Technologies (as
defined therein) developed by Allergan in research,
development and commercialization of the Products (as
defined therein) and (ii) Ligand granted ALRT a
worldwide, exclusive (even as to Ligand) right and
license, terminable only as set forth therein, to use
the Core Technologies developed by Ligand in research,
development and commercialization of the Products. ALRT
then granted to Allergan and Ligand the licenses
required by them to perform their duties under the
Development Agreement and the Commercialization
Agreement. In addition, ALRT granted to Allergan and
Ligand a nonexclusive, royalty-free irrevocable license
(including the right to sublicense) to allow Allergan
and Ligand to perform the Permitted Activities (as
defined therein). No amounts have been paid by either
Ligand or ALRT to the other pursuant to the Technology
License Agreement.
(ii) Development Agreement. ALRT, Ligand and Allergan also
entered into the Development Agreement under which
Ligand and Allergan agreed to perform research and
development for ALRT on retinoid compounds and products
in accordance with annual budgets and development plans
jointly proposed by Ligand and Allergan. As of June 30,
1997, ALRT has paid approximately $44,064,000 to Ligand
pursuant to the Development Agreement.
(iii) Commercialization Agreement. ALRT, Ligand and Allergan
also entered into a Commercialization Agreement which
provides for the marketing, manufacture and sale by
Ligand and/or Allergan of the Products developed under
the Development Agreement which have received regulatory
approval for commercial sale. No payments have been made
by ALRT to Ligand pursuant to the Commercialization
Agreement.
(iv) Services Agreement. ALRT also entered into a Services
Agreement with Ligand and Allergan under which Ligand
and Allergan agreed to provide management and
administrative services to ALRT at 110% of direct and
indirect costs for any such services performed
internally by Ligand and Allergan, and on a cost
reimbursement basis for services performed by third
parties for Ligand and Allergan on ALRT's behalf. Such
costs include all expenses incurred by Ligand and
Allergan in connection with the Offering. As of June 30,
1997, ALRT has paid approximately $164,000 to Ligand
pursuant to the Services Agreement.
(v) Panretin (ALRT1057) Purchase Option. ALRT, Ligand and
Allergan also entered into the Panretin (ALRT1057)
Purchase Option Agreement pursuant to which ALRT granted
Ligand and Allergan an option to acquire the Panretin
(ALRT1057) Program Assets (as defined therein). Ligand
has not exercised this option.
(vi) Administrative Agreement. ALRT, Ligand and Allergan also
entered into an Administrative Agreement, under which
ALRT, at the written request of the party exercising the
Stock Purchase Option (the "Exercising Party") for the
purpose of enabling the Exercising Party to effect its
rights under the Stock
<PAGE> 10
Purchase Option or fulfill its obligations under the
Administrative Agreement, will prepare and deliver a
complete list of record holders of ALRT Common Stock.
The Exercising Party is required to give written notice
of its exercise of the Stock Purchase Option to the
other party and to ALRT and, upon the closing date for
the purchase of all of the shares of ALRT Common Stock,
ALRT is entitled to treat the Exercising Party as the
sole holder of all of such shares of ALRT Common Stock.
No payments by any party have been made pursuant to the
Administrative Agreement.
(vii) Asset Purchase Agreement. ALRT, Ligand and Allergan also
entered into an Asset Purchase Agreement whereby, if
Ligand exercises the Stock Purchase Option, Allergan has
the right to acquire certain assets from ALRT (the
"Asset Purchase Option"). Upon exercise of the Asset
Purchase Option, Allergan will acquire (i) a
co-exclusive (with ALRT) right to ALRT technology as of
the date of the acquisition, (ii) 50% of all tangible
assets related to ALRT's activities in the retinoid
program, (iii) 50% of any remaining available funds, and
(iv) the consideration, cash, Allergan Common Stock
and/or Ligand Common Stock, paid by Allergan to ALRT in
connection with the exercise, if any, by Ligand and
Allergan of the Panretin (ALRT1057) Purchase Option,
subject to Allergan's assumption of 50% of the
liabilities of ALRT. The Asset Purchase Option is
exercisable upon notice given prior to the record date
for the exercise of the Stock Purchase Option. Allergan
has exercised the Asset Purchase Option, which will
close concurrently with the Stock Purchase Option. No
payments by any party have been made pursuant to the
Asset Purchase Agreement.
(a)(2) None.
(b) None.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The material terms of the Transaction are as follows:
This Statement relates to Ligand's exercise of the Stock
Purchase Option granted to it under the ALRT Certificate to
purchase all of the outstanding shares of Callable Common Stock.
ALRT is an off balance sheet entity formed by Ligand and
Allergan to discover, develop and commercialize pharmaceutical
products based on retinoids.
In May 1995, ALRT and Ligand commenced a registered
offering under the Securities Act of 1933 (the "Offering"),
which was completed on June 3, 1995, of 3,250,000 units (the
"Units"). Each Unit consisted of one share of Callable Common
Stock and two Warrants (the "Warrants"), each such Warrant
exercisable for one share of Ligand Common Stock. The Units that
were issued in connection with the Offering traded on the Nasdaq
National Market until June 3, 1997, at which time the Callable
Common Stock and the Warrants were separately listed on the
Nasdaq National Market.
The Offering raised net proceeds for ALRT of $26.8
million. At the completion of the Offering, Ligand contributed
$17.5 million in cash and the Warrants in exchange for (i) the
Stock Purchase Option and (ii) a right to acquire all rights to
the Panretin(TM)(ALRT1057) product currently under development
by ALRT. At the same time, Allergan contributed $50.0 million in
cash to ALRT in exchange for (i) the right to acquire one-half
of all of ALRT's technologies and other assets in the event
Ligand exercises the Stock Purchase Option, (ii) an option,
similar to the Stock Purchase Option to acquire all of the
Callable Common Stock if Ligand decides not to exercise the
Stock Purchase Option and (iii) a right similar to Ligand's to
acquire all rights to the Panretin(TM)(ALRT1057) product under
development by ALRT.
Ligand exercised the Stock Purchase Option granted to it
under the ALRT Certificate on September 24, 1997 by providing
written notice of its exercise (the "Stock Purchase Option
Exercise Notice") to ALRT, the holders of the outstanding shares
of Special Common Stock of ALRT and the holders of outstanding
shares of Callable Common Stock. Pursuant to the terms of the
ALRT Certificate, the exercise price of the Stock Purchase
Option is
<PAGE> 11
$21.97 per share of outstanding Callable Common Stock, for an
aggregate exercise price of $71,402,500.00 (the "Stock Purchase
Option Exercise Price"). The Stock Purchase Option Exercise
Notice specifies that 35 percent of the Stock Purchase Option
Exercise Price shall be paid in cash and the remaining 65
percent of the Stock Purchase Option Exercise Price shall be
paid in shares of Ligand Common Stock. The shares of Ligand
Common Stock will be valued based on the average of the closing
prices for such stock for the 20 trading days immediately
preceding the day prior to the Stock Purchase Option Closing
Date. The date on which all of the issued and outstanding shares
of Callable Common Stock will be purchased (the "Stock Purchase
Option Closing Date") is set for November 3, 1997.
In accordance with the terms of the ALRT Certificate,
the holders of the Callable Common Stock are obligated to sell
such shares to Ligand. These stockholders have absolutely no
investment discretion in connection with Ligand's purchase of
such outstanding shares of Callable Common Stock. Title to the
Callable Common Stock will automatically vest in Ligand on the
Stock Purchase Option Closing Date. The holders of the Callable
Common Stock may obtain payment of their pro rata portion of the
Stock Purchase Option Exercise Price from ChaseMellon
Shareholder Services, L.L.C. (the "Payment Agent") on or within
5 days after the Stock Purchase Option Closing Date upon
surrender of their certificates representing their shares of the
Callable Common Stock. Upon receipt of certificates from the
holders of the Callable Common Stock, the Payment Agent shall
pay such holders by mail to their respective addresses set forth
in ALRT's records or at the addresses otherwise provided by such
record holders or, if no such addresses are set forth in ALRT's
records or not otherwise provided, to such record holders at the
address of ALRT.
(b) Not applicable.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
Following Ligand's purchase of all of the outstanding Callable
Common Stock, ALRT will be a wholly-owned subsidiary of Ligand. Ligand
anticipates de-listing ALRT from the Nasdaq National Market and
suspending its reporting requirements with the Securities and Exchange
Commission by filing a Form 15. Ligand also intends to replace ALRT's
officers and Board of Directors with Ligand employees.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The total consideration for the purchase by Ligand of all of the
issued and outstanding Callable Common Stock is $71,402,500.00.
The source of this consideration will be shares of Ligand Common
Stock (65%) and cash payments (35%) from Ligand.
(b) The following is an itemized statement of the expenses which are
expected to be incurred by Ligand in connection with the
Transaction:
Filing Fees: $30,000.00
Legal Fees: $100,000.00
Accounting Fees: $25,000.00
Printing Costs: $30,000.00
Miscellaneous: $35,000.00
Total: $220,000.00
ALRT will not be responsible for paying any of such expenses
associated with the Transaction.
<PAGE> 12
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The purpose of the Transaction is to acquire the rights to all
products and product candidates developed or under development
by ALRT pursuant to the Development Agreement dated June 3, 1995
between Ligand, ALRT and Allergan. Concurrently with the closing
of the Transaction, Allergan will acquire an undivided one-half
interest in the assets of ALRT. Ligand believes that it is in
the best interests of Ligand and Ligand's stockholders to
exercise the Stock Purchase Option at this time.
(b) As Ligand is exercising certain previously granted rights, no
other options were considered.
(c) The Transaction is structured pursuant to the terms of the
previously granted Stock Purchase Option as set forth in the
ALRT Certificate. This Transaction is being undertaken at this
time because based on the current levels of product development
expenditures, ALRT has announced that it could use substantially
all of the funds available for research and development in late
1997 or early 1998, which would require Ligand to exercise the
Stock Purchase Option within a certain period of time or provide
operating funds to ALRT, or Ligand would lose rights to products
being developed by ALRT.
(d) The Transaction will cause ALRT to become a wholly-owned
subsidiary of Ligand. ALRT will be de-listed from the Nasdaq
National Market and will have its public reporting obligations
suspended. The federal tax consequences to ALRT are that
utilization of ALRT's losses and other tax carryovers may be
limited under Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code").
Following the Transaction, Ligand will own 100% of the Callable
Common Stock. As a result, Ligand will indirectly own all of the
assets of ALRT. Accordingly, Ligand will report 100% of the net
book value and net earnings of ALRT. There will be no
significant federal tax consequences to Ligand as a result of
the exercise of the Stock Purchase Option. Concurrently with the
closing of the Transaction, Allergan will acquire an undivided
one-half interest in the assets of ALRT.
Under the Transaction, the holders of Callable Common Stock will
be required to dispose of all their outstanding shares of
Callable Common Stock for consideration equal to each holder's
pro rata share of the Stock Purchase Option Exercise Price
identified in Item 4(a) above.
The following is a discussion of the U.S. federal income tax
consequences to the holders of Callable Common Stock resulting
from the exercise of the Stock Purchase Option by Ligand and the
issuance of shares of Ligand Common Stock and cash for the
shares of Callable Common Stock pursuant to the Stock Purchase
Option. This discussion does not deal with all aspects of
federal taxation that may be relevant to a particular holder of
Callable Common Stock, or to certain types of holders
(including, for example, insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, foreign
corporations and persons who are not citizens or residents of
the United States) subject to special treatment under the U.S.
federal income tax laws. This discussion also does not deal with
the effects of state, local or foreign income taxation. The
statements in this discussion are based on current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"),
existing, temporary, and currently proposed Treasury
regulations, existing administrative interpretations and
judicial decisions. Future legislative, judicial, or
administrative changes could significantly change such
authorities either prospectively or retroactively. Neither
Ligand nor ALRT has requested a ruling from the Internal Revenue
Service (the "Service") in connection with the Transaction.
IN VIEW OF THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, HOLDERS OF
CALLABLE COMMON STOCK ARE URGED TO CONSULT WITH THEIR OWN TAX
ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
TRANSACTION, INCLUDING THE APPLICABILITY OF UNITED
<PAGE> 13
STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
Holders of Callable Common Stock will recognize a capital gain
or loss due to the Transaction equal to the difference between
(a) the amount realized on the Transaction, which will generally
be equal to the value of the Ligand Common Stock plus any cash
received and (b) their basis in the Callable Common Stock
surrendered.
The gain or loss recognized should be mid-term if the Callable
Common Stock has been held for more than one year at the time of
the Transaction and long-term if the Callable Common Stock has
been held for more than 18 months at the time of the
Transaction. The Internal Revenue Service ("IRS") may assert,
however, that the holding period of the Callable Common Stock
does not begin until such date as the Stock Purchase Option is
exercised and that capital gain or loss upon exercise of the
Stock Purchase Option is therefore short-term. Limitations may
apply to deduction of capital loss.
To the extent that holders of Callable Common Stock have not
provided appropriate taxpayer identification numbers on IRS Form
W-9 or a substitute therefore, such stockholders may be subject
to backup withholding by Ligand.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) Ligand reasonably believes that the Transaction is fair to the
holders of the Callable Common Stock. None of Ligand's directors
dissented to the Transaction. William C. Shepherd, a director of
Ligand and a director and executive officer of Allergan,
abstained from voting on the Transaction.
(b) The material factors upon which Ligand basis its belief stated
in Item 8(a) are as follows:
(1) Ligand's Stock Purchase Option was disclosed to the
holders of Callable Common Stock at the time the
Callable Common Stock was offered to the public pursuant
to the registered Offering, and was described in the
prospectus distributed in connection with the Offering.
Ligand's Stock Purchase Option also was set forth in the
ALRT Certificate which was publicly filed both with the
Delaware Secretary of State and the Commission prior to
the distribution of the Callable Common Stock. Further,
pursuant to the ALRT Certificate, the stock certificates
for the Callable Common Stock were legended to provide
notice to the holders thereof of the Stock Purchase
Option. Holders of the Callable Common Stock have also
been advised of the Stock Purchase Option in each Form
10-K and Form 10-Q filed since the Offering. As a
result, every holder of Callable Common Stock received
substantial notice as to the terms of the Stock Purchase
Option both prior to making any investment decision with
respect to the Callable Common Stock and subsequently.
(2) The ALRT Certificate sets forth the terms of the Stock
Purchase Option. Ligand's exercise of the Stock Purchase
Option is consistent with the terms set forth in the
ALRT Certificate.
(3) In accordance with the ALRT Certificate, all holders of
Callable Common Stock, regardless of whether affiliated
or not, will receive the same consideration per share of
Callable Common Stock from Ligand.
(4) Under the terms of the ALRT Certificate, the holders of
the outstanding shares of Callable Common Stock are
obligated to deliver their shares to Ligand once Ligand
notifies such holders of its intention to exercise the
Stock Purchase Option and complies with the procedural
requirements set forth in the ALRT Certificate.
(c) The ALRT Certificate does not require any approval of the
stockholders of ALRT for the exercise by Ligand of the Stock
Purchase Option.
(d) After making reasonable inquiry, Ligand believes that the
directors of ALRT have not retained an unaffiliated
representative to act solely on behalf of any unaffiliated
holder of Callable Common Stock.
(e) Under the ALRT Certificate, no action is required by either
ALRT's directors or the holders of the Callable Common Stock to
effect the Stock Purchase Option.
<PAGE> 14
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) Neither Ligand nor, to the best of Ligand's knowledge after
reasonable inquiry of management of ALRT, ALRT, has received any
report, opinion (other than opinion of counsel) or appraisal
from an outside party which is materially related to the
Transaction.
(b) Not applicable.
(c) Not applicable.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of September 22, 1997, no shares of Callable Common Stock
were beneficially owned by Ligand, by any pension, profit
sharing or similar plan of Ligand, by any executive officer or
director of Ligand, or by any associate or majority owned
subsidiary of Ligand or, to Ligand's knowledge after reasonable
inquiry of management of ALRT, by ALRT, by any pension, profit
sharing or similar plan of ALRT, by any executive officer or
director of ALRT or by any associate or majority owned
subsidiary of ALRT, except as set out in the following table:
<PAGE> 15
<TABLE>
<CAPTION>
Name of Holder Position Number of Shares Owned Percentage Ownership(1)
-------------- -------- ---------------------- -----------------------
<S> <C> <C> <C>
Alexander D. Cross Director of Ligand 746 *
Irving S. Johnson Director of Ligand 10 *
David E. Robinson Director, Chairman, President and 5,067 *
Chief Executive Officer of Ligand;
Director of ALRT
William C. Shepherd Director of Ligand; Director of 1,721(2) *
ALRT
Susan E. Atkins Vice President of Ligand, Investor 1,075 *
Relations and Corporate
Communications
George M. Gill Vice President of Ligand, Clinical 259(3) *
Research and Medical Affairs
Howard T. Holden Vice President of Ligand, 81 *
Regulatory Affairs and Compliance
Paul V. Maier Senior Vice President, Chief 3,263(4) *
Financial Officer and Treasurer of
Ligand
William L. Respess Senior Vice President and General 8,093 *
Counsel of Ligand; Secretary of
ALRT
Glenn F. Kiplinger Director of ALRT 300 *
Marvin E. Rosenthale President and Chief Executive 5,000 *
Officer of ALRT
Dwight J. Yoder Chief Financial Officer of ALRT 13 *
</TABLE>
* Less than one percent (1%)
(1) Based on 3,250,000 outstanding shares of Callable Common Stock.
(2) Included in this amount are 1,156 shares of Callable Common
Stock held in Tenancy-in-Common with Mr. Shepherd's wife.
(3) Included in this amount are 196 shares of Callable Common Stock
held as Community Property.
(4) Included in this amount are 1,535 shares of Callable Common
Stock held by Mr. Maier's wife and 153 shares of Callable Common
Stock held in Tenancy-in-Common with Mr. Maier's wife.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The ALRT Certificate sets forth the terms of the Transaction
involving Ligand and ALRT. The ALRT Certificate provides Ligand with the
Stock Purchase Option under which Ligand obtained the right to purchase
all, but not less than all, of the issued and outstanding shares of
Callable Common Stock. The basic terms of the Stock Purchase Option, as
set forth in the ALRT Certificate, have been described in Items 1, 4 and
6. See Items 1, 4 and 6 above.
As of the date of this filing, Ligand and Allergan each own 50
percent of the issued and outstanding shares of Special Common Stock of
ALRT. Section 4.4 of the ALRT Certificate provides that upon exercise of
the Stock Purchase Option, the rights of the holders of Special Common
Stock to, among other things, elect two directors of ALRT, approve
certain extraordinary corporate transactions involving ALRT, and approve
the transfer of any shares of Special Common Stock shall
<PAGE> 16
terminate. As the Stock Purchase Option has now been exercised by
Ligand, such rights of the holders of Special Common Stock described in
the foregoing sentence have accordingly terminated.
Section 4.5 of the ALRT Certificate provides that ALRT may, on
and after the exercise of the Stock Purchase Option, redeem all of the
outstanding shares of Special Common Stock by paying in cash $1.00 per
share for each redeemed share (the "Redemption Price"). At least 15 days
before the date of redemption, a written redemption notice shall be
given to each holder of Special Common Stock by first-class mail,
postage prepaid, at the holder's address as shown on ALRT's records,
stating: (i) all of the shares of Special Common Stock to be redeemed,
(ii) the date fixed for the redemption (the "Redemption Date"), (iii)
the Redemption Price, and (iv) the place of payment of the Redemption
Price. On or before the date fixed for redemption, each holder of shares
of Special Common Stock to be redeemed shall surrender the certificates
representing these shares to ALRT at the place designated for payment in
the redemption notice and shall then be entitled to receive payment of
the Redemption Price. If the redemption notice is given in the manner
provided in Article IV of the ALRT Certificate, and if on the Redemption
Date the Redemption Price is available for payment, whether or not the
certificates covering these shares are surrendered, all rights with
respect to the redeemable shares shall terminate except the right of the
holders to receive the Redemption Price without interest on the
surrender of the certificates. Ligand has agreed to cause ALRT to redeem
the shares of Special Common Stock held by Allergan immediately
following the closing of the Stock Purchase Option.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) Not applicable.
(b) Not applicable.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) Appraisal rights are not afforded to the holders of Callable
Common Stock under either applicable law or the ALRT Certificate
with respect to the exercise of the Stock Purchase Option, and
no appraisal rights will be afforded by either Ligand or ALRT.
Ligand is not aware of any rights available to objecting holders
of Callable Common Stock under applicable law.
(b) Ligand is unaware, after making reasonable inquiry of management
of ALRT, of any grant of access to unaffiliated security holders
to the corporate files of either ALRT or Ligand or the
appointment of counsel or appraisal services for unaffiliated
security holders at the expense of either ALRT or Ligand.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a)(1) The Annual Report on Form 10-K for the fiscal year ending
December 31, 1996 is the latest Annual Report filed by ALRT.
Financial information extracted from ALRT's Form 10-Ks for the
fiscal years ending December 31, 1995 and December 31, 1996 are
attached to this Statement as Exhibits 99.1 and 99.2,
respectively.
(a)(2) The Quarterly Report on Form 10-Q for the quarterly period
ending June 30, 1997 is the latest Quarterly Report filed by
ALRT. Financial information extracted from this Quarterly Report
is attached to this Statement as Exhibit 99.3.
(a)(3) Not applicable.
(a)(4) The book value per share of Callable Common Stock was $14.42 as
of December 31, 1996, the most recent fiscal year end, and $8.65
as of June 30, 1997, the end of the most recent quarterly
period.
(b) Not applicable.
<PAGE> 17
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) Not applicable.
(b) None.
ITEM 16. ADDITIONAL INFORMATION.
Ligand does not believe that any additional information is
necessary to make the required disclosures in this Statement, in light
of the circumstances under which they are made, not materially
misleading.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(c) Amended and Restated Certificate of Incorporation of ALRT as
filed with the Secretary of State of the State of Delaware on
June 2, 1995.
(d) Stock Purchase Option Notice of Exercise materials, including:
(1) a cover letter from Ligand to the holders of Callable Common
Stock; (2) the Notice of Exercise of Stock Purchase Option; and
(3) the Letter of Transmittal.
99.1 Financial information extracted from ALRT's Form 10-K for the
year ended December 31, 1995.
99.2 Financial information extracted from ALRT's Form 10-K for the
year ended December 31, 1996.
99.3 Financial information extracted from ALRT's Form 10-Q for the
quarterly period ended June 30, 1997.
<PAGE> 18
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ Paul V. Maier
--------------------------------
Paul V. Maier
Senior Vice President, Chief
Financial Officer and Treasurer
Date: September 24, 1997
The original Statement shall be signed by each person on whose behalf
the Statement is filed or his authorized representative. If the Statement is
signed on behalf of a person by his authorized representative (other than an
executive officer or general partner of the person filing this Statement),
evidence of the representative's authority to sign on behalf of such person
shall be filed with the Statement. The name and title of each person who signs
the Statement shall be typed or printed beneath his or her signature.
<PAGE> 1
Exhibit 17(c)
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC., a corporation duly
organized and existing under the laws of the State of Delaware (the
"Corporation"), hereby certifies as follows:
1. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on December 16, 1994.
2. This Restated Certificate of Incorporation restates and integrates
and amends the provisions of the Certificate of Incorporation of the
Corporation.
3. Pursuant to Section 245 of the General Corporation Law of the State
of Delaware, the text of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Allergan Ligand Retinoid Therapeutics,
Inc.
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is 1050 S. State Street, City of Dover, County of Kent 19901. The name
of the registered agent of the Corporation at such address is CorpAmerica, Inc.
ARTICLE III
CORPORATE PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
ARTICLE IV
CAPITAL STOCK
SECTION 4.1. AUTHORIZED SHARES. The Corporation is authorized to issue
two classes of stock, one of which shall be known as Callable Common Stock and
the other of which shall be known as Special Common Stock. The total number of
shares of all classes of stock that the Corporation shall have authority to
issue is 3,251,000. The total number of shares of Callable Common Stock which
the Corporation is authorized to issue is 3,250,000. The par value of each share
of Callable Common Stock shall be $.001. The total number of shares of Special
Common Stock which the Corporation is authorized to issue is 1,000. The par
value of each share of Special Common Stock shall be $1.00. The authorized and
outstanding shares of Common Stock of the Corporation as of the date of this
Amended and Restated Certificate of Incorporation are hereby renamed Special
Common Stock.
SECTION 4.2. DIVIDENDS. Subject to Section 4.4(c) hereof, the holders
of Callable Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors of the Corporation out of funds legally
available therefor. No dividends are payable on or with respect to the Special
Common Stock, and other than as set forth in Section 4.3, the holders of Special
Common Stock are not otherwise entitled to participate in any way in the profits
or assets of the Corporation.
SECTION 4.3. LIQUIDATION. In the event of the liquidation, dissolution
or winding up of the Corporation, holders of Callable Common Stock have a
priority over the holders of the Special Common Stock with respect to return of
capital.
SECTION 4.4. VOTING RIGHTS OF STOCKHOLDERS. (a) Each holder of Callable
Common Stock shall have one vote for each share standing in his or her name on
all matters submitted to a vote of holders of the common shares. The holders of
Special
<PAGE> 2
Common Stock shall only be entitled to vote as required by law or as set forth
in this Section 4.4. In such instances, each holder of Special Common Stock
shall have one vote for each share standing in his or her name. The
determination of a quorum shall be based upon the presence of shares
representing fifty percent (50%) of the voting power of each class of stock of
the Corporation entitled to vote on the matter being voted on.
(b) In any election of directors of the Corporation, the holders of the
Special Common Stock, voting as a separate class, shall be entitled to elect two
directors (each a "Special Common Stock Director"). The right of the holders of
Special Common Stock, voting separately as a class, to elect members of the
Board of Directors of the Corporation as aforesaid shall continue until the
earliest of (i) the exercise of the Stock Purchase Option (as defined in Article
V), (ii) the Stock Purchase Option Expiration Date (as defined in Article V) and
(iii) the date of termination of the Stock Purchase Option with respect to both
Ligand and Allergan pursuant to Section 5.10(a) hereof, at which time such right
shall terminate.
(c) The Corporation shall not, without the affirmative vote of the
holders of a majority of the issued and outstanding shares of Special Common
Stock, voting separately and as a class: (i) issue any additional shares of
capital stock through a stock split, sale, reorganization or otherwise; (ii)
alter or change the rights, powers, preferences and restrictions of the Special
Common Stock, (iii) alter, change or amend Articles IV or VI of this Certificate
of Incorporation, (iv) merge, consolidate or reorganize the Corporation with or
into any other corporation, (v) sell, liquidate or otherwise dispose of all or
substantially all of the assets of the Corporation, (vi) borrow an aggregate of
in excess of $1,000,000 outstanding at any one time; (vii) declare or pay
dividends or make any other distributions to stockholders; or (viii) adopt,
amend or repeal the Bylaws of the Corporation. The affirmative vote of a
majority of the issued and outstanding shares of Special Common Stock required
by this Section 4.4(c) shall continue until the earliest of (A) the exercise of
the Stock Purchase Option, (B) the Stock Purchase Option Expiration Date and (C)
the date of termination of the Stock Purchase Option with respect to both Ligand
and Allergan pursuant to Section 5.10(a) hereof, at which time such requirement
will terminate.
(d) Except in connection with a permitted assignment by Ligand or
Allergan of its respective rights and obligations under the Stock Purchase
Obligation pursuant to Sections 5.8(ii) and (iii) hereof, respectively, no
holder of shares of Special Common Stock may transfer or sell any or all of such
shares to any person or entity without the affirmative vote of the holders of a
majority of the issued and outstanding shares of Callable Common Stock and the
affirmative vote of the holders of a majority of the issued and outstanding
shares of Special Common Stock. The affirmative vote of a majority of the issued
and outstanding shares of Callable Common Stock and the affirmative vote of a
majority of the issued and outstanding shares of Special Common Stock required
by this Section 4.4(d) shall continue until the earliest of (i) the exercise of
the Stock Purchase Option, (ii) the Stock Purchase Option Expiration Date and
(iii) the date of termination of the Stock Purchase Option with respect to both
Ligand and Allergan pursuant to Section 5.10(a) hereof, at which time such
requirement will terminate.
SECTION 4.5. REDEMPTION OF SPECIAL COMMON STOCK. (a) The Corporation
may, from time to time on and after the earliest of (i) the exercise of the
Stock Purchase Option, (ii) the Stock Purchase Option Expiration Date and (iii)
the date of termination of the Stock Purchase Option with respect to both Ligand
and Allergan pursuant to Section 5.10(a) hereof, redeem all of the outstanding
shares of Special Common Stock by paying in cash $1.00 per share on each
redeemed share (the "Redemption Price"). At least 15 days before the date of
redemption, a written redemption notice shall be given to each holder of Special
Common Stock by first-class mail, postage prepaid, at the holder's address as
shown on the Corporation's records, stating: (i) all the shares of Special
Common Stock are to be redeemed, (ii) the date fixed for redemption (the
"Redemption Date"), (iii) the Redemption Price, and (iv) the place of payment of
the Redemption Price.
(b) On or before the date fixed for redemption, each holder of shares
of Special Common Stock to be redeemed shall surrender the certificates
representing these shares to the Corporation at the place designated for payment
in the redemption notice and shall then be entitled to receive payment of the
Redemption Price.
(c) If the redemption notice is given in the manner provided in this
Article IV, and if on the Redemption Date the Redemption Price is available for
payment, whether or not the certificates covering these shares are surrendered,
all rights with respect to the redeemable shares shall terminate except the
right of the holders to receive the Redemption Price without interest on the
surrender of the certificates.
ARTICLE V
STOCK PURCHASE OPTION
SECTION 5.1. GRANT OF OPTION. In connection with the offering of rights
(the "Rights") to acquire units (the "Units") pursuant to the Registration
Statement on Forms S-1/S-3 Nos. 33-87598 and 33-87600 (the "Registration
Statement") filed by the
<PAGE> 3
Corporation and Ligand Pharmaceuticals Incorporated, a Delaware corporation
("Ligand"), with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), each Unit
consisting of one share of Callable Common Stock of the Corporation and two
warrants, each to purchase one share of Common Stock, $.001 par value, of Ligand
(the "Ligand Common Stock"), Ligand and in the event not exercised by Ligand,
Allergan, Inc., a Delaware corporation ("Allergan"), will be granted by the
holders of shares of Callable Common Stock in consideration of those certain
cash contributions referred to below to be made by each of Ligand and Allergan
to the Corporation, an exclusive irrevocable option (the "Stock Purchase
Option") to purchase all, but not less than all, the issued and outstanding
shares of Callable Common Stock of the Corporation on the terms and conditions
set forth herein. In connection with the offering of the Rights, Ligand will
contribute $17,500,000 to the Corporation (for every one dollar under
$32,500,000, the maximum proceeds of the offering of the Rights, not realized by
the Corporation pursuant to subscriptions for Units by holders of Rights, Ligand
will increase its contribution by one dollar up to a maximum $18,500,000) (the
"Ligand Contribution") and Allergan will contribute $50,000,000 to the
Corporation (the "Allergan Contribution," and together with the Ligand
Contribution, the "Contributions"). Subject to Section 5.13 hereof, the Stock
Purchase Option may be exercised at any time during the period beginning on the
earlier of (a) June 3, 1997 and (b) the date (the "Statement Date") the
Corporation provides Ligand and Allergan with quarterly financial statements of
the Corporation showing Available Funds (as defined in this Section 5.1 below)
of less than $10,000,000, and ending at 11:59 p.m., San Diego time, on the date
(the "Stock Purchase Option Expiration Date") which is the earliest to occur of
(i) June 3, 2000, (ii) the 90th day after the Statement Date, and (iii) the date
of termination by the Corporation of the Technology License Agreement (the
"Technology License Agreement") pursuant to Section 9.5 thereof (subject to
Section 9.6 thereof), the Research and Development Agreement (the "Research and
Development Agreement") pursuant to Section 11.5 thereof (subject to Section
11.6 thereof) or the Commercialization Agreement (the "Commercialization
Agreement") pursuant to Section 12.5 thereof (subject to Section 12.6 thereof),
each such agreement being among the Corporation, Allergan and Ligand and dated
on or about June 3, 1995 (such period during which the Stock Purchase Option may
be exercised being referred to herein as the "Stock Purchase Exercise Period");
provided, that the Statement Date will be deemed not to have occurred with
respect to any one or more quarterly financial statement delivered pursuant to
clause (b) of this sentence if (x) with respect to any Statement Dates prior to
June 3, 1998, within 15 days thereafter, the Corporation receives a written
commitment from Allergan and Ligand, in form and substance satisfactory to a
majority of the directors of the Corporation that are elected by the holders of
the Callable Common Stock, to make a cash advance (the "Quarterly
Contributions") in an amount considered sufficient by the Board of Directors of
the Corporation, and consistent with the budget and workplans then in effect, to
allow the Corporation to continue research and development under the Research
and Development Agreement for the three months subsequent to such Statement
Date, or (y) with respect to a Statement Date after June 2, 1998 and prior to
June 3, 1999, within 15 days thereafter the Corporation receives a written
commitment from Allergan and Ligand, in form and substance satisfactory to a
majority of the directors of the Corporation that are elected by the holders of
the Callable Common Stock, to make a cash advance of not less than $10,000,000
(such amount, together with the Quarterly Contributions, the "Additional
Contributions") for use in research and development under the Research and
Development Agreement, and in each case Allergan and Ligand fund such cash
advance within 15 days after such written commitment is received by the
Corporation; provided, further, that in no event will the Stock Purchase Option
be exercisable, except with respect to the exercise of the Stock Purchase Option
pursuant to Section 5.13 hereof, prior to June 3, 1998 unless the Available
Funds of the Corporation are less than $60,000,000 on the date of exercise
thereof. If the Stock Purchase Option Expiration Date is not a Business Day (as
defined in this Section 5.1 below), then the Stock Purchase Option Expiration
Date shall be 11:59 p.m., San Diego time, on the next succeeding Business Day.
"Business Day" shall mean any day, other than a Saturday, Sunday or any other
day on which banking institutions in San Diego, California are authorized or
required by law, regulation or executive order to be closed. "Available Funds"
shall mean the sum of (i) the net proceeds to the Corporation from the sale of
the Units, plus (ii) the Contributions, plus (iii) the Additional Contributions,
plus (iv) if designated by ALRT, any licensing or marketing income earned by
ALRT, plus (v) interest and other income earned through temporary investment of
the amounts described in clauses (i), (ii), (iii) and (iv) of this sentence
pending their expenditure, less the sum of (a) all general and administrative
expenses of the Corporation, including those paid pursuant to the Services
Agreement dated on or about June 3, 1995 among the Corporation, Allergan and
Ligand (the "Services Agreement"), plus (b) any other amounts paid to Allergan
or Ligand or authorized Third Party contractors under the Research and
Development Agreement, the Technology License Agreement or the Commercialization
Agreement, plus (c) $1,000,000 to be retained by the Corporation as working
capital. Any proceeds received by ALRT from Allergan and Ligand upon exercise of
the 1057 Purchase Option pursuant to the 1057 Purchase Option Agreement (the
"1057 Purchase Option Agreement") shall be excluded from Available Funds.
SECTION 5.2. STOCK PURCHASE OPTION EXERCISE PRICE. Upon exercise of the
Stock Purchase Option, Ligand or Allergan, as the case may be, shall pay an
exercise price per share (the "Stock Purchase Option Exercise Price") in
accordance with the following schedule:
<PAGE> 4
<TABLE>
<CAPTION>
Stock Purchase Option
Exercise Price Per Share
of Callable Common
If the Stock Purchase Option Is Exercised Stock
- ---------------------------------------------------------------------------------------------- -----------------------
<S> <C>
Before June 3, 1998............................................................................ $21.97
On or after June 3, 1998 and before September 3, 1998.......................................... $23.62
On or after September 3, 1998 and before December 3, 1998...................................... $25.27
On or after December 3, 1998 and before March 3, 1999.......................................... $26.91
On or after March 3, 1999 and before June 3, 1999.............................................. $28.56
On or after June 3, 1999 and before September 3, 1999.......................................... $30.70
On or after September 3, 1999 and before December 3, 1999...................................... $32.85
On or after December 3, 1999 and before March 3, 2000.......................................... $34.99
On or after March 3, 2000 and before June 3, 2000.............................................. $37.13
</TABLE>
SECTION 5.3. FORM OF PAYMENT. (i) Payment by Ligand. If Ligand
exercises the Stock Purchase Option, subject to Section 5.6 hereof, the Stock
Purchase Option Exercise Price shall be paid in cash, in shares of Ligand Common
Stock, in shares of Allergan Common Stock, or in any combination of cash, shares
of Ligand Common Stock and shares of Allergan Common Stock at the sole
discretion of Ligand; provided, however, that the number of shares of Allergan
Common Stock to be used to pay all or any portion of the Stock Purchase Option
Exercise Price shall not exceed the greater of (a) the number of shares of
Allergan Common Stock then owned by the Corporation and which were received from
Allergan in payment of all or a portion of the 1057 Purchase Option Exercise
Price (as defined in the 1057 Purchase Option Agreement) and (b) the number of
shares of Allergan Common Stock received by the Corporation in connection with
the exercise by Allergan of the Asset Purchase Option as defined in the Asset
Purchase Option Agreement dated on or about June 3, 1995 among the Corporation,
Allergan and Ligand (the "Asset Purchase Option Agreement").
(ii) Payment by Allergan. If Allergan exercises the Stock Purchase
Option, subject to Section 5.6 hereof, the Stock Purchase Option Exercise Price
shall be paid in cash, in shares of Allergan Common Stock, in shares of Ligand
Common Stock, or in any combination of cash, shares of Allergan Common Stock and
shares of Ligand Common Stock, at the sole discretion of Allergan; provided,
however, that the number of shares of Ligand Common Stock to be used to pay all
or any portion of the Stock Purchase Option Exercise Price shall not exceed the
number of shares of Ligand Common Stock then owned by the Corporation and which
were received from Ligand in payment of all or a portion of the 1057 Purchase
Option Exercise Price.
(iii) Valuation of Ligand Common Stock and Allergan Common Stock. The
number of shares of Ligand Common Stock, if any, and the number of shares of
Allergan Common Stock, if any, to be delivered in payment of all or a portion of
the Stock Purchase Option Exercise Price shall be determined by dividing the
portion of the Stock Purchase Option Exercise Price to be paid in shares of
Ligand Common Stock or shares of Allergan Common Stock, as the case may be, by
the average of the closing prices of such stock on the principal national
securities exchange on which such stock is then traded or, if not traded on any
national securities exchange, the average of the closing prices of such stock on
the Nasdaq National Market or, if quoted in the Nasdaq over-the-counter system
and not listed on a national securities exchange or the Nasdaq National Market,
the average of the mean of the closing bid and asked prices quoted on the Nasdaq
over-the-counter system, in each case for the 20 trading days immediately
preceding the day prior to the Stock Purchase Closing Date (as defined in
Section 5.4(d) hereof). If Ligand Common Stock and/or Allergan Common Stock is
not listed on a national securities exchange or the Nasdaq National Market, or
quoted in the Nasdaq over-the-counter system, the number of shares of Ligand
Common Stock or shares of Allergan Common Stock, as the case may be, to be
delivered in payment of all or a portion of the Stock Purchase Option Exercise
Price shall be such number of shares of Ligand Common Stock or shares of
Allergan Common Stock, as the case may be, as represents the fair market value
equivalent of such portion of the Stock Purchase Option Exercise Price, as
determined in good faith by the Board of Directors of the party (Ligand or
Allergan) exercising the Stock Purchase Option (such party being hereinafter
referred to as the "Purchaser").
SECTION 5.4. MANNER OF EXERCISE. (a) Exercise by Ligand or Allergan.
Ligand, and only Ligand, shall exercise the Stock Purchase Option by delivery of
a Stock Purchase Exercise Notice (as defined in clause (c) of this Section 5.4)
to the Corporation and any other holder of shares of Special Common Stock on or
before 20 days prior to the Stock Purchase Expiration Date (the "Ligand
Expiration Date") and, if such notice is not given by Ligand on or before the
Ligand Expiration Date, thereafter Allergan, and only Allergan, shall exercise
the Stock Purchase Option by delivery of a Stock Purchase Exercise Notice to the
Corporation and any other holder of shares of Special Common Stock after the
Ligand Expiration Date and on or before the Stock Purchase Option Expiration
Date. In addition, a copy of any Stock Purchase Exercise Notice sent pursuant to
this Section 5.4
<PAGE> 5
shall also be sent via first class mail no later than the same date on which the
Stock Purchase Option Notice is delivered to the Corporation to each holder of
record of Callable Common Stock. If the Ligand Expiration Date is not a Business
Day, then the Ligand Expiration Date shall be on the next succeeding Business
Day. Notwithstanding the foregoing, if the Stock Purchase Option is terminated
with respect to Ligand pursuant to Section 5.10(b) hereof, Allergan shall give
the Stock Purchase Exercise Notice pursuant to this Section 5.4 at any time on
or prior to the Stock Purchase Option Expiration Date.
(b) Record Date. "Record Date" shall mean the record date fixed by the
Stock Purchase Exercise Notice which shall be a date no earlier than 10 days
after, and no later than 20 days after, the date of such notice.
(c) Stock Purchase Exercise Notice. The "Stock Purchase Exercise
Notice" shall be a written notice signed by the President of Ligand or Allergan,
as the case may be, given in accordance with the provisions of this Article V
and stating that such party intends to exercise the Stock Purchase Option and
setting forth: (i) the Stock Purchase Option Exercise Price as determined in
accordance with Section 5.2 hereof; (ii) the portion, if any, of the Stock
Purchase Option Exercise Price to be paid in cash, (iii) the portion, if any, of
the Stock Purchase Option Exercise Price to be paid in shares of Ligand Common
Stock; (iv) the portion if any, of the Stock Purchase Option Exercise Price to
be paid in shares of Allergan Common Stock; (v) the Record Date; (vi) the Stock
Purchase Closing Date (as defined in clause (d) of this Section 5.4); and (vii)
the place at which holders of shares of Callable Common Stock may obtain payment
of the Stock Purchase Option Exercise Price for their shares of Callable Common
Stock and any instructions for obtaining such payment; provided, however, that
at any time prior to the Stock Purchase Closing Date, Ligand or Allergan, as the
case may be, may determine to make payment of a greater amount of the Stock
Purchase Option Exercise Price in cash than was set forth in the Stock Purchase
Exercise Notice. The Stock Purchase Option is irrevocable upon delivery of the
Stock Purchase Exercise Notice.
(d) Stock Purchase Closing Date. The "Stock Purchase Closing Date"
shall be a date, not less than 20 days nor more than 40 days, after the date of
the Stock Purchase Exercise Notice on which all of the issued and outstanding
shares of Callable Common Stock will be purchased; provided, however, that the
Stock Purchase Closing Date will be such later date as provided by (i) the last
sentence of Section 5.6 hereof in the event that the conditions described
therein are satisfied, or (ii) Section 5.12 hereof in the event that the
conditions described therein are satisfied.
SECTION 5.5. CLOSING. On or before the Stock Purchase Closing Date, the
Purchaser shall deposit the full amount of the Stock Purchase Option Exercise
Price for all of the issued and outstanding shares of Callable Common Stock with
a bank, transfer agent or similar entity (the "Payment Agent") designated by the
Purchaser to pay, on the Purchaser's behalf, the Stock Purchase Option Exercise
Price. Cash, if any, and shares of Ligand Common Stock, if any, and shares of
Allergan Common Stock, if any, deposited with the Payment Agent shall be
delivered in trust for the benefit of the holders of record of the Callable
Common Stock on the Record Date. The Purchaser shall provide the Payment Agent
with irrevocable instructions to pay, on or within 5 days after the Stock
Purchase Closing Date, the Stock Purchase Option Exercise Price for the Callable
Common Stock to such record holders upon surrender of their certificates
representing shares of the Callable Common Stock. Payment for shares of Callable
Common Stock shall be mailed to each such record holder at the address set forth
in the Corporation's records or at the address provided by each such holder or,
if no address is set forth in the Corporation's records for any such holder or
provided by such holder, to such holder at the address of the Corporation, but
only upon receipt from such holder of certificates evidencing shares of Callable
Common Stock. Any cash or shares of Ligand Common Stock or shares of Allergan
Common Stock deposited with the Payment Agent pursuant to this Section 5.5
remaining unclaimed for two years following the Stock Purchase Closing Date
shall be returned to the Purchaser at its request. At the Purchaser's request,
the Corporation shall provide, or shall cause its transfer agent to provide, to
the Purchaser or to the Payment Agent, free of charge, a complete list of the
record holders of shares of Callable Common Stock, including the number of
shares of Callable Common Stock held of record and the address of each record
holder.
SECTION 5.6. REGISTRATION OF LIGAND COMMON STOCK AND ALLERGAN COMMON
STOCK. If by the Stock Purchase Closing Date set forth in the Stock Purchase
Exercise Notice: (a) with respect to any shares of Ligand Common Stock to be
delivered as payment of the Stock Purchase Option Exercise Price on such date
(i) a registration statement has not been declared effective under the
Securities Act, or (ii) such shares of Ligand Common Stock to be issued in
connection therewith are not (A) listed on the principal national securities
exchange on which Ligand Common Stock is then listed or (B) if Ligand Common
Stock is not then listed on a national securities exchange, listed on the Nasdaq
National Market if Ligand Common Stock is traded thereon or (C) if Ligand Common
Stock is neither listed as provided in either of (A) or (B) nor qualified for
inclusion on the Nasdaq over-the-counter system, then in either of such cases
the Purchaser shall be obligated to make such payment in cash on the Stock
Purchase Closing Date, or (b) with respect to any shares of Allergan Common
Stock to be delivered as payment of the Stock Purchase Option Exercise Price on
such date (i) a registration statement has not been declared effective under the
Securities
<PAGE> 6
Act, or (ii) such shares of Allergan Common Stock to be issued in connection
therewith are not (A) listed on the principal national securities exchange on
which Allergan Common Stock is then listed or (B) if Allergan Common Stock is
not then listed on a national securities exchange, listed in the Nasdaq National
Market if Allergan Common Stock is traded thereon or (C) if Allergan Common
Stock is neither traded as provided in either of (A) or (B) nor qualified for
inclusion in the Nasdaq over-the-counter system, then in either of such cases
the Purchaser shall be obligated to make such payment in cash on the Stock
Purchase Closing Date. Notwithstanding any other provision herein to the
contrary, the Purchaser shall not be in breach or violation of this Agreement
for any failure to timely pay any amount due hereunder in shares of Ligand
Common Stock or in shares of Allergan Common Stock (i) if such failure to timely
pay such amount arises from a delay in satisfying any of the provisions of this
Section 5.6, so long as the Purchaser shall continue to diligently seek the
satisfaction thereof, or (ii) if such failure to timely pay such amount arises
from a delay in the closing of the Asset Purchase Option as provided for in
Section 1.7 of the Asset Purchase Agreement; provided, however, that such delay
may not exceed sixty (60) days from the original due date of such payment (such
original due date being not less than 20 days, nor more than 40 days, after the
date of the Stock Purchase Exercise Notice).
SECTION 5.7. TRANSFER OF TITLE. Transfer of title to the Purchaser of
all of the Callable Common Stock shall be deemed to occur automatically on the
Stock Purchase Closing Date subject to the payment to the Payment Agent by the
Purchaser on or before such date of the amount owing to the record holders of
Callable Common Stock as determined in accordance with Section 5.2 hereof, and
thereafter the Corporation shall be entitled to treat the Purchaser as the sole
holder of all Callable Common Stock, notwithstanding the failure of any holder
of shares of Callable Common Stock to tender the certificates representing such
shares to the Payment Agent for payment therefor in accordance with Section 5.5
hereof. The Corporation shall instruct its transfer agent not to accept any
shares of Callable Common Stock for transfer on and after the Stock Purchase
Closing Date, except for the shares of Callable Common Stock transferred by the
Purchaser. The Corporation shall take all actions reasonably requested by the
Purchaser to assist in effectuating the transfer of shares of Callable Common
Stock in accordance with this Article V. After the Stock Purchase Closing Date,
the record holders of the Callable Common Stock as determined in accordance with
Section 5.6 above shall have no rights in connection with such Callable Common
Stock other than the right to receive the Stock Purchase Option Exercise Price.
SECTION 5.8. ASSIGNMENT. (i) Assignment by Record Holder. Upon the
assignment, delegation, transfer or sale by any record holder of Callable Common
Stock (a) the Stock Purchase Option shall automatically be assigned to, assumed
by and binding upon such record holder's assignee, purchaser or transferee and
all subsequent assignees, purchasers and transferees, and (b) such shares of
Callable Common Stock shall automatically be subject to the Stock Purchase
Option and the other terms and conditions of this Article V.
(ii) Assignment by Ligand. Ligand may not assign, delegate, transfer or
sell any or all of its rights or obligations under the Stock Purchase Option and
this Article V, in whole or in part, to any person or entity without the prior
approval of the holders of record of a majority of the shares of Callable Common
Stock and the holders of record of a majority of the shares of Special Common
Stock except that Ligand may, without the prior approval of any record holder of
shares of Callable Common Stock or any record holder of shares of Special Common
Stock, make such assignment, delegation, transfer or sale, by operation of law
or otherwise, to (a) any person or entity in connection with its acquisition of
all or substantially all of the assets of Ligand or any merger, consolidation or
similar transaction with Ligand; or (b) any Affiliate (as defined in paragraph
(v) of this Section 5.8) of Ligand; provided, however, that, with respect to
clause (a) above, Ligand shall not, without such approval, enter into such a
transaction unless such person or entity (i) shall, immediately after such
acquisition, merger, consolidation or similar transaction, be a solvent
corporation or other such entity, (ii) shall have, immediately after such
acquisition, merger, consolidation or similar transaction, a tangible net worth
(determined in accordance with generally accepted accounting principles then in
effect) at least equal to the tangible net worth (as so determined) of Ligand
immediately prior thereto, and (iii) shall have agreed in writing to be bound by
the terms of the Stock Purchase Option and this Article V, except that if such
entity is a corporation created or organized in or under the laws of the United
States, it shall have the right to offer its Common Stock (as defined in
paragraph (iv) of this Section 5.8), subject to such Common Stock complying with
the requirements set forth in Section 5.6 hereof, in substitution for Ligand
Common Stock; provided, however, that in the event of any assignment,
delegation, transfer or sale under clause (a) above, Ligand shall provide
written notice to the record holders of shares of Callable Common Stock, the
record holders of shares of Special Common Stock and the Corporation, and in the
event of any assignment, delegation, transfer or sale under clause (b) above,
Ligand shall provide written notice to the record holders of shares of Special
Common Stock and the Corporation, in each case, of any such assignment,
delegation, transfer or sale not later than thirty days after such assignment,
delegation, transfer or sale setting forth the identity and address of the
assignee and summarizing the terms of the assignment, delegation, transfer or
sale. Subject to the foregoing, the Stock Purchase Option and this Article V
shall be binding upon the successors and assigns of Ligand.
<PAGE> 7
(iii) Assignment by Allergan. Allergan may not assign, delegate,
transfer or sell any or all of its rights or obligations under the Stock
Purchase Option and this Article V, in whole or in part, to any person or entity
without the prior approval of the holders of record of a majority of the shares
of Callable Common Stock and the holders of record of a majority of the shares
of Special Common Stock, except that Allergan may, without the prior approval of
any record holder of shares of Callable Common Stock or any record holder of
shares of Special Common Stock, make such assignment, delegation, transfer or
sale, by operation of law or otherwise, to (a) any person or entity in
connection with its acquisition of all or substantially all of the assets of
Allergan or any merger, consolidation or similar transaction with Allergan; or
(b) any Affiliate (as defined in paragraph (v) of this Section 5.8) of Allergan;
provided, however, that, with respect to clause (a) above, Allergan shall not,
without such approval, enter into such a transaction unless such person or
entity (i) shall, immediately after such acquisition, merger, consolidation or
similar transaction, be a solvent corporation or other such entity, (ii) shall
have, immediately after such acquisition, merger, consolidation or similar
transaction, a tangible net worth (determined in accordance with generally
accepted accounting principles then in effect) at least equal to the tangible
net worth (as so determined) of Allergan immediately prior thereto, and (iii)
shall have agreed in writing to be bound by the terms of the Stock Purchase
Option and this Article V, except that if such entity is a corporation created
or organized in or under the laws of the United States, it shall have the right
to offer its Common Stock (as defined in paragraph (iv) of this Section 5.8),
subject to such Common Stock complying with the requirements set forth in
Section 5.6 hereof, in substitution for Allergan Common Stock; provided,
however, that in the event of any assignment, delegation, transfer or sale under
clause (a) above, Allergan shall provide written notice to the record holders of
shares of Callable Common Stock, the record holders of shares of Special Common
Stock and the Corporation, and in the event of any assignment, delegation,
transfer or sale under clause (b) above, Allergan shall provide written notice
to the record holders of shares of Special Common Stock and the Corporation, in
each case, of any such assignment, delegation, transfer or sale not later than
thirty days after such assignment, delegation, transfer or sale setting forth
the identity and address of the assignee and summarizing the terms of the
assignment, delegation, transfer or sale. Subject to the foregoing, the Stock
Purchase Option and this Article V shall be binding upon the successors and
assigns of Allergan.
(iv) Common Stock. "Common Stock" shall mean, with respect to any
corporation (the "Acquiror"), common stock having the right under ordinary
circumstances to elect a majority of directors of the Acquiror, and that is
registered under the Securities Act and (a) listed on the principal national
securities exchange on which such common stock of the Acquiror is then listed or
(b) if not listed on a national securities exchange, listed on the Nasdaq
National Market if such stock is traded thereon or, if such stock is neither
listed as provided in either (a) or (b), then qualified for inclusion on the
Nasdaq over-the-counter system.
(v) Affiliates. "Affiliates" shall mean any entity that directly or
indirectly Owns, is Owned by, or is under common Ownership with, a Party, where
"Owns" or "Ownership" means direct or indirect possession and/or control of at
least 50% of the outstanding voting securities of a corporation or a comparable
equity interest in any other type of entity.
SECTION 5.9. LEGEND. Any certificates evidencing shares of Callable
Common Stock issued by or on behalf of the Corporation shall bear a legend in
substantially the following form:
"The securities of Allergan Ligand Retinoid Therapeutics, Inc., a
Delaware corporation ("ALRT"), evidenced hereby are subject to an option of the
holders of the Special Common Stock of ALRT, as described in the Amended and
Restated Certificate of Incorporation of ALRT, to purchase such securities at a
purchase price determined in accordance with Article V thereof, exercisable by
written notice at any time during the period set forth therein. Copies of the
Certificate of Incorporation are available at the principal place of business of
ALRT at 9393 Towne Centre Drive, Suite 100, San Diego, California 92121 and will
be furnished to any stockholder on request and without cost."
SECTION 5.10. TERMINATION. (a) The Stock Purchase Option shall
terminate on the earliest of (i) the Stock Purchase Closing Date, (ii) if the
Stock Purchase Option is not exercised, the Stock Purchase Option Expiration
Date, (iii) subject to the provisions of Section 5.12 hereof, the occurrence of
a Ligand Type II Event of Default (as defined in Section 5.11 hereof), and (iv)
the occurrence of an Allergan Type II Event of Default (as defined in Section
5.11 hereof).
(b) The Stock Purchase Option shall terminate as to Ligand upon (i) the
occurrence of a Ligand Type I Event of Default (as defined in Section 5.11
hereof) and (ii) the Ligand Expiration Date, if Ligand has not given the Stock
Purchase Exercise Notice on or before such date, and (iii) the occurrence of a
Ligand Type II Event of Default.
(c) The Stock Purchase Option shall terminate as to Allergan upon the
occurrence of an Allergan Type I Event of Default (as defined in Section 5.11
hereof).
<PAGE> 8
SECTION 5.11. EVENTS OF DEFAULT. (a) Ligand Type I Events of Default.
The events set forth below shall constitute "Ligand Type I Events of Default":
(i) the termination by the Corporation, with respect to Ligand, of the
Technology License Agreement pursuant to Section 9.5 thereof, the Research and
Development Agreement pursuant to Section 11.5 thereof or the Commercialization
Agreement pursuant to Section 12.5 thereof; (ii) Ligand shall (A) seek the
liquidation, reorganization (other than a reorganization which is effected
primarily for tax purposes or to change domicile to any state in the United
States), dissolution or winding-up of itself or the composition or readjustment
of its debts, (B) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its assets, (C) make a general assignment for the
benefit of its creditors, (D) commence a voluntary case under the Bankruptcy
Code, (E) file a petition in court seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization (other than a reorganization
which is effected primarily for tax purposes), winding up or composition or
readjustment of debts, (F) adopt any resolution of its board of directors or
stockholders for the purpose of effecting any of the foregoing, or (G) make an
assignment, delegation, transfer or sale of any or all of its rights or
obligations under the Stock Purchase Option and this Article V otherwise than in
accordance with the requirements of Section 5.8 hereof; or (iii) a proceeding or
case shall be commenced without the application or consent of Ligand and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the following shall be entered and continue
unstayed and in effect, for a period of 45 days from and after the date service
of process is effected upon Ligand, seeking (A) Ligand's liquidation,
reorganization, dissolution or winding up, or the composition or readjustment of
its debts, (B) the appointment of a trustee, receiver, custodian, liquidator or
the like of Ligand or of all or any substantial part of its assets, or (C)
similar relief in respect of Ligand under any law relating to bankruptcy,
insolvency, reorganization, winding up or the composition or readjustment of
debt. Ligand shall promptly notify each holder of record of shares of Callable
Common Stock, each holder of record of shares of Special Common Stock and the
Corporation in writing upon the occurrence of any Ligand Type I Event of
Default.
(b) Ligand Type II Events of Default. The failure of Ligand, if the
Stock Purchase Exercise Notice has been given by Ligand, to make the payment
described in Section 5.2 hereof on the Stock Purchase Closing Date shall
constitute a "Ligand Type II Event of Default." Ligand shall promptly notify
each holder of record of shares of Callable Common Stock, each holder of record
of shares of Special Common Stock and the Corporation in writing upon the
occurrence of any Ligand Type II Event of Default.
(c) Allergan Type I Events of Default. The events set forth below shall
constitute "Allergan Type I Events of Default": (i) the termination by the
Corporation, with respect to Allergan, of the Technology License Agreement
pursuant to Section 9.5 thereof, the Research and Development Agreement pursuant
to Section 11.5 thereof or the Commercialization Agreement pursuant to Section
12.5 thereof; (ii) Allergan shall (A) seek the liquidation, reorganization
(other than a reorganization which is effected primarily for tax purposes or to
change domicile to any state in the United States), dissolution or winding up of
itself or the composition or readjustment of its debts, (B) apply for or consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its assets,
(C) make a general assignment for the benefit of its creditors, (D) commence a
voluntary case under the Bankruptcy Code, (E) file a petition in court seeking
to take advantage of any other law relating to bankruptcy, insolvency,
reorganization (other than a reorganization which is effected primarily for tax
purposes), winding-up or composition or readjustment of debts, (F) adopt any
resolution of its board of directors or stockholders for the purpose of
effecting any of the foregoing, or (G) make an assignment, delegation, transfer
or sale of any or all of its rights or obligations under the Stock Purchase
Option and this Article V otherwise than in accordance with the requirements of
Section 5.8 hereof; or (iii) a proceeding or case shall be commenced without the
application or consent of Allergan and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
following shall be entered and continue unstayed and in effect, for a period of
45 days from and after the date service of process is effected upon Allergan,
seeking (A) Allergan's liquidation, reorganization, dissolution or winding-up,
or the composition or readjustment of its debts, (B) the appointment of a
trustee, receiver, custodian, liquidator or the like of Allergan or of all or
any substantial part of its assets, or (C) similar relief in respect of Allergan
under any law relating to bankruptcy, insolvency, reorganization, winding up or
the composition or readjustment of debt. Allergan shall promptly notify each
holder of record of shares of Callable Common Stock, each holder of record of
shares of Special Common Stock and the Corporation in writing upon the
occurrence of any Allergan Type I Event of Default.
(d) Allergan Type II Events of Default. The failure of Allergan, if the
Stock Purchase Exercise Notice has been given by Allergan, to make the payment
described in Section 5.2 hereof on the Stock Purchase Closing Date shall
constitute an "Allergan Type II Event of Default." Allergan shall promptly
notify each holder of record of shares of Callable Common Stock, each holder of
record of shares of Special Common Stock and the Corporation in writing upon the
occurrence of any Allergan Type II Event of Default.
<PAGE> 9
SECTION 5.12. RIGHTS OF ALLERGAN AFTER A LIGAND TYPE II EVENT OF
DEFAULT. Allergan shall have 10 days after the receipt of the notice of a Ligand
Type II Event of Default, delivered pursuant to Section 5.11 hereof or by the
Corporation in the event such notice is not delivered by Ligand, to exercise the
Stock Purchase Option by delivery to the Corporation of a Stock Purchase
Exercise Notice; provided, that the Record Date and the Stock Purchase Option
Exercise Price in such Stock Purchase Exercise Notice shall be as set forth in
the Stock Purchase Exercise Notice previously delivered to the Corporation by
Ligand; provided, further, that, subject to Section 5.6 hereof, the Stock
Purchase Option Closing Date shall be a date not more than 40 days after the
date of the Stock Purchase Exercise Notice delivered pursuant to this Section
5.12.
SECTION 5.13. ACCELERATION OF THE STOCK PURCHASE OPTION. In the event
the Corporation delivers the Retinoid Program Infeasibility Notice (as defined
in Section 9.6.4 of the Technology License Agreement, Section 11.6.4 of the
Research and Development Agreement or Section 12.6.4 of the Commercialization
Agreement), the Stock Purchase Option shall become immediately exercisable by
the Non-Breaching Party (as defined in Section 9.6 of the Technology License
Agreement, Section 11.6 of the Research and Development Agreement or Section
12.6 of the Commercialization Agreement), on the terms provided herein by
delivery of a Stock Purchase Option Exercise Notice, for a period of 30 days
following its receipt of the Retinoid Program Infeasibility Notice.
SECTION 5.14. AMENDMENT. This Article may not be released, discharged,
amended or modified in any manner except by an instrument approved by the
holders of record of two-thirds (2/3) of the outstanding shares of Special
Common Stock and the holders of record of two-thirds (2/3) of the outstanding
shares of Callable Common Stock of the Corporation; provided, however, that
except as expressly provided herein, without the approval of Ligand and Allergan
and the consent of the holders of record of eighty-five percent of the Callable
Common Stock, this Article V may not be amended to change (a) the amounts of the
Stock Purchase Option Exercise Price, (b) the relevant periods during which and
the conditions under which the Stock Purchase Option may be exercised and the
Stock Purchase Option Exercise Price may be paid, (c) the type of securities or
method of calculating the number of securities to be issued upon the payment of
the Stock Purchase Option Exercise Price, or (d) the provisions of this Section
5.14.
SECTION 5.15. NO CONFLICTING ACTION. The Corporation shall not take, or
permit any other person or entity within its control to take, any action
inconsistent with Ligand's rights and Allergan's rights under this Article V.
The Corporation shall not enter into any arrangement, agreement or
understanding, either oral or in writing, that is inconsistent with the rights
of Ligand and the rights of Allergan and the obligations of the Corporation
hereunder.
ARTICLE VI
DIRECTORS
SECTION 6.1. SIZE AND VACANCIES. (a) The number of directors shall be
as specified in the Bylaws of the Corporation, except that until the earliest of
(i) the exercise of the Stock Purchase Option, (ii) the Stock Purchase Option
Expiration Date and (iii) the date of termination of the Stock Purchase Option
with respect to both Ligand and Allergan pursuant to Section 5.10(a) hereof,
there shall be five directors. In no event will the number of directors be less
than five. Directors need not be stockholders.
(b) Upon any termination of the right of the holders of Special Common
Stock as a class to vote for directors pursuant to Article IV, the term of
office of all Special Common Stock Directors then in office shall terminate
immediately.
(c) Elections of directors of the Corporation need not be by written
ballot, except and to the extent provided in the Bylaws of the Corporation.
<PAGE> 10
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 7.1. NO PERSONAL LIABILITY. To the fullest extent permitted by
the General Corporation Law as it now exists and as it may hereafter be amended,
no director of the Corporation shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director.
SECTION 7.2. INDEMNIFICATION. The Corporation shall provide
indemnification to its directors, officers, employees or agents to the extent
provided in the Bylaws of the Corporation.
ARTICLE VIII
AMENDMENT
Except as set forth in Sections 4.4 and 5.14, the Corporation reserves
the right to amend, alter, change or repeal any provision of this Certificate of
Incorporation, in the manner now or hereafter prescribed by law, and all rights
conferred on stockholders in this Certificate of Incorporation are subject to
this reservation.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by its President and Treasurer this 2nd day of June, 1995.
By: /s/ MARVIN E. ROSENTHALE
--------------------------------------
Marvin E. Rosenthale
President
ATTEST:
By: /s/ PAUL V. MAIER
-----------------------------------------
Paul V. Maier
Chief Financial Officer and Treasurer
<PAGE> 1
Exhibit 17(d)
STOCK PURCHASE OPTION NOTICE OF EXERCISE MATERIALS
<PAGE> 2
[LIGAND LETTERHEAD]
LIGAND PHARMACEUTICALS INCORPORATED
9393 TOWNE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
September 24, 1997
To the Holders of Callable Common Stock of
Allergan Ligand Retinoid Therapeutics, Inc.:
Ligand Pharmaceuticals Incorporated ("Ligand") has exercised its Stock
Purchase Option, granted to it under the Amended and Restated Certificate of
Incorporation of Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT"), to
purchase all of the issued and outstanding shares of Callable Common Stock,
$.001 par value per share, of ALRT (the "Callable Common Stock") at an exercise
price of $21.97 (the "Exercise Price") for each outstanding share of Callable
Common Stock. Upon surrender of your certificates representing shares of
Callable Common Stock in accordance with the instructions referred to herein,
payment shall be made with a combination of cash and shares of Ligand Common
Stock, or at Ligand's option, all cash.
Enclosed is a formal Notice of Exercise and a Letter of Transmittal to use
in surrendering the certificates representing your shares of Callable Common
Stock for payment in the form of cash and certificates representing shares of
Ligand Common Stock. The Letter of Transmittal contains instructions that you
should read and follow carefully. Please make sure it is properly completed,
signed and dated. Your shares of Callable Common Stock were issued as part of a
Unit comprised of one share of Callable Common Stock and a Warrant to purchase
two shares of Ligand Common Stock. Please separate the certificate(s)
representing the shares of Callable Common Stock from the certificate(s)
representing the Warrant(s) if this has not been previously done.
You may submit your certificates representing shares of Callable Common
Stock and your Letter of Transmittal either by mail or by hand at the addresses
set forth in the Letter of Transmittal. The method of delivery of stock
certificates is at your option and risk. If sent by mail, it is strongly
recommended that certificates be sent by registered mail, properly insured, with
return receipt requested.
If you have any questions regarding how to surrender your stock
certificates for payment, or if you need additional copies of the Letter of
Transmittal, please contact the Payment Agent, ChaseMellon Shareholder Services,
L.L.C., at 888-216-8061. Questions related to Notice of Exercise should be
directed to Ligand Investor Relations request line 619-550-7700.
Sincerely
/s/ DAVID E. ROBINSON
-----------------------------
David E. Robinson
President and Chief Executive
Officer
<PAGE> 3
NOTICE OF EXERCISE OF STOCK PURCHASE OPTION
This Notice of Exercise of Stock Purchase Option shall constitute notice of
the intent of Ligand Pharmaceuticals Incorporated ("Ligand") to exercise the
Stock Purchase Option (as defined in Article V of the Amended and Restated
Certificate of Incorporation of Allergan Ligand Retinoid Therapeutics, Inc. (the
"Certificate")). Defined terms not otherwise defined herein shall have the
meanings given them in the Certificate.
1. The Stock Purchase Option Exercise Price, as determined pursuant to
Section 5.2 of the Certificate, shall be $21.97 per share of
outstanding Callable Common Stock, for an aggregate Stock Purchase
Option Exercise Price of $71,402,500.
2. 35 percent, or $7.69 of the Stock Purchase Option Exercise Price, shall
be paid in cash.
3. 65 percent, or $14.28 of the Stock Purchase Option Exercise Price,
shall be paid in shares of Ligand Common Stock.
4. -0- percent, or $ -0- of the Stock Purchase Option Exercise Price,
shall be paid in shares of Allergan Common Stock.
5. Notwithstanding the foregoing, and in accordance with the terms of
Article V of the Certificate of Incorporation, Ligand reserves the
right to make payment of a greater amount of the Stock Purchase Option
Exercise Price in cash than set forth herein.
6. The Record Date shall be October 14, 1997.
7. The Stock Purchase Closing Date shall be November 3, 1997, or such
other date as permitted under the last sentence of Section 5.6 of the
Certificate.
8. Holders of shares of Callable Common Stock may obtain payment of the
Stock Purchase Option Exercise Price for their shares of Callable
Common Stock from the Payment Agent, as set forth on Exhibit A attached
to this Notice.
9. Questions related to this Notice of Exercise should be directed to
Ligand Investor Relations request line 619-550-7700. Payment Agent will
assist you regarding the completion of Letter of Transmittal, if
necessary.
A registration statement relating to the shares of Ligand Common Stock to
be issued on the Stock Purchase Closing Date will be filed with the Securities
and Exchange Commission but has not yet become effective. These securities may
not be sold nor may offers be accepted prior to the time the registration
statement becomes effective. This Notice of Exercise of Stock Purchase Option
shall not constitute an offer to sell nor the solicitation of an offer to buy
nor shall there be any sale of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
Dated: September 24, 1997
/s/ DAVID E. ROBINSON
--------------------------------------
David E. Robinson, President
Ligand Pharmaceuticals Incorporated
<PAGE> 4
LETTER OF TRANSMITTAL TO ACCOMPANY SHARES OF
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
CALLABLE COMMON STOCK, PAR VALUE $.001 PER SHARE
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES SURRENDERED
- -------------------------------------------------------------------------------------------------------------------
IF THERE IS ANY ERROR IN THIS NAME AND REGISTRATION ADDRESS
SHOWN BELOW, PLEASE MAKE THE NECESSARY CORRECTIONS CERTIFICATE NO(S) NUMBER OF SHARES
- -------------------------------------------------------------------------------------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
TOTAL
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: If your certificate(s) has been lost, stolen, misplaced or mutilated,
contact the Payment Agent at 1-888-216-8061. See Instruction 5.
Please issue my new certificate and/or check in the name shown above and
deliver such check to the address reflected above unless instructions are given
in the boxes below:
Mail or deliver this Letter of Transmittal, or a facsimile, together with
the certificate(s) representing your shares to ChaseMellon Shareholder Services,
L.L.C., the Payment Agent, at one of the following addresses. Your stock and/or
cash entitlement is described in the accompanying notice.
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
BY HAND BY MAIL BY OVERNIGHT DELIVERY
120 Broadway, 13th. Fl. Post Office Box 3305 85 Challenger Road -- Mail Drop-Reorg
New York, NY 10271 South Hackensack, NJ 07606 Ridgefield Park, NY 07660
ATTN: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
TELEPHONE
1-888-216-8061
</TABLE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTION 4 ON THE REVERSE HEREOF)
Complete only if new certificate and/or check is to be issued in a name which
differs from the name on the surrendered certificate(s).
Name_____________________________________
Address__________________________________
(Please also complete Substitute Form W-9 on the reverse AND see instructions
regarding signature guarantee.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 4 ON THE REVERSE HEREOF)
Complete only if new certificate and/or check is to be mailed to some address
other than the address reflected above.
Name____________________________________
Address_________________________________
SIGNATURE(S) REQUIRED
(SIGNATURE(S) OF REGISTERED HOLDER(S) OR AGENT)
Must be signed by the registered holder(s) EXACTLY as name(s) appear(s) on stock
certificate(s) or on a security position listing. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation
acting in a fiduciary or representative capacity, or other person please set
forth full title. See Instructions 2, 3 and 4.
- ---------------------------------------------------------
REGISTERED HOLDER
- ---------------------------------------------------------
REGISTERED HOLDER
---------------------------------------------------------
TITLE, IF ANY
---------------------------------------------------------
DATE:_____________ PHONE NO.: ________________
SIGNATURE(S) GUARANTEED
(IF REQUIRED)
Unless shares are surrendered by the registered holder(s) or for the account of
a member of a "Signature Guarantee Program ("STAMP"), Stock Exchange Medallion
Program ("SEMP") or New York Stock Exchange Medallion Signature Program ("MSP")
(an "Eligible Institution") signature(s) must be guaranteed by an Eligible
Institution. See Instruction 3.
- ---------------------------------------------------------
(AUTHORIZED SIGNATURE)
- ---------------------------------------------------------
(NAME OF FIRM)
- ---------------------------------------------------------
(ADDRESS OF FIRM -- PLEASE PRINT)
NOTE: YOU MUST COMPLETE THE SUBSTITUTE FORM W-9 ON THE REVERSE HEREOF.
<PAGE> 5
INSTRUCTIONS FOR SURRENDERING CERTIFICATES
1. Method of Delivery: Your old certificate(s) and the Letter of Transmittal
must be sent or delivered to the Payment Agent. The method of delivery of
Certificates to be surrendered to the Payment Agent at one of the addresses set
forth on the front of the Letter of Transmittal is at the option and risk of the
surrendering stockholder. Delivery will be deemed effective only when received.
If the certificate(s) are sent by mail, registered mail with return receipt
requested, properly insured, is suggested. A return envelope is enclosed.
2. New Certificate and/or check is issued to registered holder: If the new
certificate and/or check is issued in the same name as the surrendered
certificate is registered, the Letter of Transmittal should be completed and
signed exactly as the surrendered certificate is registered. Do not sign the
Certificate(s). If any Certificate surrendered hereby is owned by two or more
joint owners, all such owners must sign this Letter of Transmittal exactly as
written on the face of the certificate(s). If any shares are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate Letters of Transmittal as there are different
registrations.
3. New Certificate and/or check is issued to another person. Except as
otherwise provided below, signatures on this Letter of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents' Medallion Program (each an "Eligible Institution"). Signature
guarantees are not required if the certificate(s) surrendered herewith are
submitted by the registered owner of such shares who has not completed the
section entitled "Special Issuance Instructions" or for the account of an
Eligible Institution. If the surrendered certificates are registered in the name
of a person other than the signer of this Letter of Transmittal, or if issuance
is to be made to a person other than the signer of this Letter of Transmittal,
or if the issuance is to be made to a person other than the registered owner or
owners, then the surrendered certificates must be endorsed or accompanied by
duly executed stock powers, in either case signed exactly as the name or names
of the registered owner or owners appear on such certificates or stock powers,
with the signatures on the certificates or stock powers guaranteed by an
Eligible Institution as provided herein.
4. Special Issuance and Delivery Instructions: Indicate the name and address
to which the new certificate and/or check is to be sent if different from the
name and/or address of the person(s) signing this Letter of Transmittal.
5. Letter of Transmittal Required, Surrender of Certificate(s), Lost
Certificate(s): You will not receive your new certificate and/or check unless
and until you deliver this Letter of Transmittal, properly completed and duly
executed, to the Payment Agent, together with the certificate(s) evidencing your
shares and any required accompanying evidences of authority. If your
certificates have been lost, stolen, misplaced or mutilated, contact the Payment
Agent for instructions at 1-888-216-8061 prior to submitting your certificates
for exchange.
6. Substitute Form W-9: Each stockholder who surrenders one or more
certificates is required to provide the Payment Agent with such stockholder's
correct Taxpayer Identification Number ("TIN") on Substitute Form W-9, which is
attached. Failure to provide the information on the form may subject the
surrendering stockholder to 31% federal income tax withholding on the payment of
any cash consideration due for the former shares evidenced by the certificate(s)
surrendered. The words "Applied For" should be written in the space for the TIN
in Part III of the form if the surrendering stockholder has not been issued a
TIN and has applied for a number or intends to apply for a number in the near
future. If the words "Applied For" are written in Part III and the Payment Agent
is not provided with a TIN within 60 days, the Payment Agent will withhold 31%
on all payments to such surrendering stockholders of any cash consideration due
for their former shares until a TIN is provided to the Payment Agent.
- --------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION
- --------------------------------------------------------------------------------
WHAT TAXPAYER IDENTIFICATION NUMBER TO GIVE THE PAYMENT AGENT
The registered holder or transferee(s), if any, is required to give the
Payment Agent the social security number or employer identification number of
the registered holder of the certificate(s). If the certificate(s) are in more
than one name or are in the name of the actual owner, consult the enclosed Form
W-9 guidelines for additional guidance on which number to report.
- --------------------------------------------------------------------------------
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- --------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PART III -- Social Security
PROVIDE YOUR TIN IN Number OR Employer
FORM W-9 THE BOX AT RIGHT AND Identification Number
CERTIFY BY SIGNING
AND DATING BELOW ----------------------------
DEPARTMENT OF THE TREASURY (If awaiting TIN write
INTERNAL REVENUE SERVICE "Applied For")
PAYER'S REQUEST FOR TAXPAYER PART II -- For Payees exempt from backup
IDENTIFICATION NUMBER (TIN) withholding, see the enclosed Guidelines for
AND CERTIFICATION Certification of Taxpayer Identification Number
on Substitute Form W-9 and complete as
instructed therein.
- --------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The Number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends,
or the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do no not cross out item (2). (Also see instructions on
the enclosed Guidelines)
- --------------------------------------------------------------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me,
and either (1) I have mailed or delivered an application to receive a TIN to
the appropriate IRS Center or Social Security Administration Office or (2) I
intend to mail or deliver an application in the near future. I understand that
if I do not provide a TIN by the time of payment, 31% of all payments made to
me thereafter will be withheld until I provide a number.
<TABLE>
<S> <C>
- ---------------------------------------------------- ------------------------------------------------
Signature Date
</TABLE>
<PAGE> 1
Exhibit 99.1
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1995
Report of Independent Auditors
The Board of Directors and Shareholders
Allergan Ligand Retinoid Therapeutics, Inc.
We have audited the accompanying balance sheets of Allergan Ligand Retinoid
Therapeutics, Inc. as of December 31, 1995 and 1994, the related statement of
operations for the period June 3, 1995 (date operations commenced) through
December 31, 1995, and the statements of changes in stockholders' equity, and
cash flows for the period December 16, 1994 (date of incorporation) through
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Allergan Ligand Retinoid
Therapeutics, Inc. at December 31, 1995 and 1994, and the results of its
operations for the period June 3, 1995 (date operations commenced) through
December 31, 1995, and its cash flows for the period December 16, 1994 (date of
incorporation) through December 31, 1995, in conformity with generally accepted
accounting principles.
Orange County, California
March 19, 1996
<PAGE> 2
Allergan Ligand Retinoid Therapeutics, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 79,792,554 $ 200
Interest receivable and other current assets 335,001 --
------------ ------------
Total current assets $ 80,127,555 $ 200
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to Allergan, Inc. $ 1,038,409 $ --
Accounts payable to Ligand Pharmaceuticals
Incorporated 1,847,825 --
Accrued offering costs 434,759 --
Other accounts payable and accrued liabilities 330,611 --
------------ ------------
Total current liabilities 3,651,604 --
Stockholders' equity:
Callable Common Stock, $.001 par value,
3,250,000 shares authorized, issued
and outstanding 3,250 --
Special Common Stock, $1 par value,
1,000 shares authorized, 200 shares issued
and outstanding 200 200
Additional paid-in capital 94,256,046 --
Accumulated deficit (17,783,545) --
------------ ------------
Total stockholders' equity 76,475,951 200
------------ ------------
$ 80,127,555 $ 200
============ ============
</TABLE>
See accompanying notes.
<PAGE> 3
Allergan Ligand Retinoid Therapeutics, Inc.
Statement of Operations
June 3, 1995 (date operations commenced)
to December 31, 1995
<TABLE>
<S> <C>
Interest income $ 2,863,989
Costs and expenses:
Research and development expenses 19,495,346
General and administrative expenses 1,152,188
-------------
Total costs and expenses 20,647,534
-------------
Net loss $ (17,783,545)
=============
Net loss per callable common share $ (5.47)
=============
Weighted average callable common shares outstanding 3,250,000
=============
</TABLE>
See accompanying notes.
<PAGE> 4
Allergan Ligand Retinoid Therapeutics, Inc.
Statements of Stockholders' Equity
December 16, 1994 (date of incorporation) to December 31, 1995
<TABLE>
<CAPTION>
CALLABLE SPECIAL
COMMON STOCK COMMON STOCK
------------ ------------ ------------ ------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares issued upon incorporation -
December 16, 1994
(date of incorporation) -- $ -- 200 $ 200
------------ ------------ ------------ ------------
Balance at December 31, 1994 -- -- 200 200
Issuance of callable common
stock in initial public offering,
net of offering costs of $5,740,704 3,250,000 3,250 -- --
Contribution from Allergan, Inc. -- -- -- --
Contribution from Ligand
Pharmaceuticals Incorporated
-- -- -- --
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balance at December 31, 1995 3,250,000 $ 3,250 200 $ 200
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN ACCUMULATED STOCKHOLDERS'
CAPITAL DEFICIT EQUITY
------------ -------------- ---------------
<S> <C> <C> <C>
Shares issued upon incorporation -
December 16, 1994
(date of incorporation) $ -- $ -- $ 200
------------ -------------- ---------------
Balance at December 31, 1994 -- -- 200
Issuance of callable common
stock in initial public offering,
net of offering costs of $5,740,704 26,756,046 -- 26,759,296
Contribution from Allergan, Inc. 50,000,000 -- 50,000,000
Contribution from Ligand
Pharmaceuticals Incorporated
17,500,000 -- 17,500,000
Net loss -- (17,783,545) (17,783,545)
------------ -------------- ---------------
Balance at December 31, 1995 $ 94,256,046 $ (17,783,545) $ 76,475,951
============ ============== ===============
</TABLE>
See accompanying notes.
<PAGE> 5
Allergan Ligand Retinoid Therapeutics, Inc.
Statement of Cash Flows
December 16, 1994 (date of incorporation) to December 31, 1995
<TABLE>
<S> <C>
Operating activities:
Net loss $ (17,783,545)
Adjustments to reconcile net loss to net cash used in operating
activities:
Changes in operating assets and liabilities:
Interest receivable and other current assets (335,001)
Accounts payable to Allergan, Inc. 1,038,409
Accounts payable to Ligand Pharmaceuticals Incorporated 1,847,825
Accrued offering costs 434,759
Other accounts payable and accrued liabilities 330,611
--------------
Net cash used in operating activities (14,466,942)
Financing activities:
Proceeds from issuance of callable common stock in initial
public offering, net 26,759,296
Proceeds from issuance of special common stock 200
Contribution from Allergan, Inc. 50,000,000
Contribution from Ligand Pharmaceuticals Incorporated 17,500,000
--------------
Net cash provided by financing activities 94,259,496
--------------
Net increase in cash and cash equivalents 79,792,554
Cash and cash equivalents at beginning of period --
==============
Cash and cash equivalents at end of period $ 79,792,554
==============
</TABLE>
See accompanying notes.
<PAGE> 6
Allergan Ligand Retinoid Therpeutics, Inc.
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION AND BUSINESS OPERATIONS
BUSINESS
Allergan Ligand Retinoid Therapeutics, Inc. (the Company) was incorporated in
Delaware in 1994 and commenced operations on June 3, 1995 to continue the
efforts of the Allergan Ligand Joint Venture (Joint Venture), established by
Allergan, Inc. (Allergan) and Ligand Pharmaceuticals Incorporated (Ligand) in
June 1992, to discover, develop and commercialize drugs based on retinoids (the
Products).
On June 3, 1995, the Company and Ligand completed a public offering (the
Offering) of 3.25 million units, each unit consisting of one share of the
Company's callable common stock and two warrants, each to purchase one share of
Ligand common stock. The Offering raised net proceeds for the Company of $26.8
million. At the completion of the Offering, Ligand contributed $17.5 million in
cash, as well as warrants in exchange for (i) a right to acquire all of the
Callable Common Stock at specified future dates and amounts and (ii) a right to
acquire all rights to the 1057 product, jointly with Allergan, currently under
development by the Company. At the same time, Allergan contributed $50.0 million
in cash to the Company in exchange for (i) the right to acquire one-half of
technologies and other assets in the event Ligand exercises its right to acquire
all of the Callable Common Stock, (ii) a similar right to acquire all of the
Callable Common Stock if Ligand does not exercise its right and (iii) a right to
acquire rights to the 1057 product, jointly with Ligand.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the accompanying financial statements. Actual
results could differ from those estimates.
CONCENTRATIONS OF BUSINESS RISK
The Company conducts research and development for the purpose of identifying and
developing retinoid drugs for therapeutic uses and is subject to intense
competition and technological changes in the biotechnology industry. The Company
is also dependent upon Allergan and Ligand who are primarily responsible for
research, development, marketing and manufacturing on behalf of the Company.
<PAGE> 7
Allergan Ligand Retinoid Therpeutics, Inc.
Notes to Financial Statements
December 31, 1995
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid financial instruments. The
Company considers instruments purchased with a maturity of three months or less
to be cash equivalents.
CONCENTRATION OF CREDIT RISKS
The Company invests its excess cash in money market funds and debt instruments
of financial institutions and corporations with strong credit ratings. The
Company has established guidelines with respect to diversification and
maturities designed to maintain safety and liquidity. Included in cash and cash
equivalents at December 31, 1995 is $79.0 million invested in four money market
funds.
RESEARCH AND DEVELOPMENT EXPENSES
The Company contracts with Allergan and Ligand to conduct research, development
and initial clinical testing. The costs of such work are expensed as incurred.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes. Under
the liability method, deferred taxes are determined based on the differences
between the financial statement and tax bases of assets and liabilities using
enacted tax rates. There are no significant temporary differences at December
31, 1995.
NET LOSS PER CALLABLE COMMON SHARE
Net loss per callable common share is calculated by dividing the net loss by the
number of callable common shares outstanding, which was 3,250,000 at all times
during the period from commencement of operations following the closing of the
initial public offering on June 3, 1995 to December 31, 1995.
<PAGE> 8
Allergan Ligand Retinoid Therpeutics, Inc.
Notes to Financial Statements
December 31, 1995
3. RELATIONSHIP WITH ALLERGAN AND LIGAND
TECHNOLOGY LICENSE AGREEMENT
Under a technology license agreement (the License), the Company has an exclusive
license to use the retinoid technologies developed first by Allergan and Ligand
and subsequently by the Joint Venture. The License granted is subject to certain
exceptions that allow Allergan and Ligand to pursue limited research activities
and development and commercialization of certain products. In consideration for
the License, the Company will pay to Allergan and Ligand a royalty aggregating
3% of net sales of Products under the License during the life of applicable
patents or, in certain circumstances, for 10 years.
RESEARCH AND DEVELOPMENT AGREEMENT
The Company entered into a research and development agreement (the Development
Agreement) under which Allergan and Ligand perform research and development for
the Company on retinoid compounds and products in accordance with annual budgets
and development plans jointly proposed by Allergan and Ligand and approved by
the Company's Board of Directors. Under the Development Agreement, the Company
has agreed to reimburse Allergan and Ligand for their internal costs plus 10%
and the cost of services performed by third parties. Total amounts charged to
the Company during 1995 by Allergan and Ligand under the Development Agreement
were $6.6 million and $12.7 million, respectively.
If the Company discontinues development of compounds meeting certain criteria,
Allergan and Ligand are entitled to develop and commercialize such compounds
using their own funds. The Company is entitled to receive a royalty equal to 6%
of net sales of any such independently developed products. The Company also has
the right to reacquire any such product prior to the earlier of the commencement
of Phase III clinical trials for such product or the exercise or expiration of
the Stock Purchase Option, for an amount equal to costs incurred by Allergan
and/or Ligand plus interest at 25% per year. Additionally, with respect to any
reacquired product, the Company will pay a royalty equal to 4% of net sales to
the developing party.
COMMERCIALIZATION AGREEMENT
The Company also entered into a commercialization agreement (the
Commercialization Agreement) which provides for the marketing, manufacture and
sale by Allergan and/or Ligand of the Products developed under the Development
Agreement which have received regulatory approval for commercial sale.
<PAGE> 9
Allergan Ligand Retinoid Therpeutics, Inc.
Notes to Financial Statements
December 31, 1995
3. RELATIONSHIP WITH ALLERGAN AND LIGAND (CONTINUED)
SERVICES AGREEMENT
The Company also entered into a services agreement (the Services Agreement)
under which Allergan and Ligand provide management and administrative services
to the Company at 110% of direct and indirect costs for services performed
internally by Allergan and Ligand and on a cost reimbursement basis for services
performed by third parties. Total amounts charged to the Company during 1995 by
Allergan and Ligand for these services under the Services Agreement were $0.1
million and $0.1 million, respectively.
1057 PURCHASE OPTION
The Company has granted Allergan and Ligand an option (the 1057 Purchase Option)
to acquire the Company's 1057 Product. Unless the 1057 Purchase Option has been
terminated as to either Allergan or Ligand as a result of default under the
agreement (in which case the 1057 Purchase Option will only be exercisable by
the party for which such option has not been terminated), Allergan and Ligand,
jointly, may exercise the 1057 Purchase Option beginning on the earlier of (i)
June 3, 1997 or (ii) the receipt of regulatory approval for commercial sale of
any Compound 1057 Product in the United States or in certain other major
countries and ending on the earlier of (a) 90 days after receipt of such
regulatory approval or (b) June 3, 2000. Additionally, the 1057 Purchase Option
will terminate on the date the Stock Purchase Option is exercised or expires.
The 1057 Purchase Option exercise price is $21.4 million prior to June 3, 1998
and increases in equal amounts on a quarterly basis to $27.8 million on March 3,
1999 and to $36.2 million on March 3, 2000. The exercise price may be paid in
cash, shares of Allergan or Ligand, or any combination thereof.
The Company may not distribute or otherwise expend any proceeds received upon
the exercise of the 1057 Purchase Option until the earlier of the exercise or
expiration of the Stock Purchase Option.
<PAGE> 10
Allergan Ligand Retinoid Therpeutics, Inc.
Notes to Financial Statements
December 31, 1995
4. STOCKHOLDERS' EQUITY
STOCK PURCHASE OPTION
The Company's Callable Common Stock is subject to a Stock Purchase Option
agreement pursuant to which Ligand and, in the event not exercised by Ligand,
Allergan may purchase all, but not less than all, of the Callable Common Stock
outstanding at specified prices, subject to adjustment. The option becomes
exercisable on the earlier of (i) June 3, 1997 or (ii) the quarter in which the
Company's available funds, as defined, decline below $10 million and expires on
the earlier of (a) June 3, 2000 or (b) 90 days subsequent to such a decline in
cash. The option is not exercisable prior to June 3, 1998 unless the available
funds are less than $60 million at the date of exercise.
The Stock Purchase Option exercise price is $21.97 per share prior to June 3,
1998 and increases in equal amounts on a quarterly basis to $28.56 per share on
March 3, 1999 and to $37.13 per share on March 3, 2000. The exercise price may
be paid in cash, shares of Allergan or Ligand, or any combination thereof.
The Company may not, until the expiration of the Stock Purchase Option, pay any
dividends, issue additional shares of capital stock, borrow money in excess of
$1 million, merge, liquidate or sell all or substantially all of its assets.
<PAGE> 11
Allergan Ligand Retinoid Therpeutics, Inc.
Notes to Financial Statements
December 31, 1995
4. STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS
Each unit sold by the Company in its initial public offering includes two
warrants, each warrant giving the holder the right to purchase one share of
Ligand common stock at a price of $7.12 per share. The warrants are exercisable
at any time from June 3, 1997 through June 2, 2000, subject to certain
acceleration provisions including the exercise or expiration of the Stock
Purchase Option. The warrants will trade with the Company's Callable Common
Stock as units until they become exercisable on June 3, 1997. After such date,
the warrants will separate from the Company's common stock and become
independently tradable.
SPECIAL STOCK
The Company has issued 200 shares of Special Stock to Allergan and Ligand. The
Special Stock does not entitle Allergan and Ligand to vote, except in certain
circumstances, or have the right to any profits of the Company. The Special
Stock, however, entitles Allergan and Ligand to elect two directors to the
Company's Board.
5. INCOME TAXES
Significant components of the Company's deferred tax assets as of December 31,
1995 are shown below. A valuation allowance of $7.6 million has been recognized
at December 31, 1995 as an offset to the deferred tax assets as realization of
such assets is uncertain.
<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(In thousands)
<S> <C>
Deferred tax assets:
Net operating loss carry forwards $ 6,777
Research and development credits 327
Start-up costs and other 482
--------------
Total deferred tax assets 7,586
Valuation allowance for deferred tax assets (7,586)
--------------
Net deferred tax assets $ --
==============
</TABLE>
<PAGE> 12
Allergan Ligand Retinoid Therpeutics, Inc.
Notes to Financial Statements
December 31, 1995
5. INCOME TAXES (CONTINUED)
At December 31, 1995, the Company had federal and California net operating loss
carryforwards of approximately $16.6 million and $16.1 million, respectively.
The federal and California tax loss carryforwards will expire in 2010 and 2003,
respectively, unless previously utilized. The Company also has California
research and development tax credit carryforwards totaling $0.5 million which
will expire in 2010 unless previously utilized.
<PAGE> 1
Exhibit 99.2
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996
Report of Independent Auditors
The Board of Directors and Shareholders
Allergan Ligand Retinoid Therapeutics, Inc.
We have audited the accompanying balance sheets of Allergan Ligand Retinoid
Therapeutics, Inc. as of December 31, 1996 and 1995, the related statement of
operations for the period June 3, 1995 (date operations commenced) through
December 31, 1995 and the year ended December 31, 1996, and the statements of
stockholders' equity, and cash flows for the period December 16, 1994 (date of
incorporation) through December 31, 1995 and the year ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Allergan Ligand Retinoid
Therapeutics, Inc. at December 31, 1996 and 1995, and the results of its
operations for the period June 3, 1995 (date operations commenced) through
December 31, 1995 and the year ended December 31, 1996, and its cash flows for
the period December 16, 1994 (date of incorporation) through December 31, 1995
and the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
Orange County, California
March 26, 1997
<PAGE> 2
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,897,327 $ 79,792,554
Marketable securities 20,394,182 --
Interest receivable and other current assets 720,009 335,001
------------ ------------
Total current assets $ 51,011,518 $ 80,127,555
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to Allergan, Inc. $ 812,710 $ 1,038,409
Accounts payable to Ligand Pharmaceuticals
Incorporated 3,076,478 1,847,825
Accrued offering costs -- 434,759
Other accounts payable and accrued liabilities 260,733 330,611
------------ ------------
Total current liabilities 4,149,921 3,651,604
Stockholders' equity:
Callable Common Stock, $.001 par value, 3,250,000
shares authorized, issued and outstanding 3,250 3,250
Special Common Stock, $1 par value, 1,000 shares
authorized, 200 shares issued and outstanding 200 200
Additional paid-in capital 94,256,046 94,256,046
Unrealized holding loss on marketable securities (169,753) --
Accumulated deficit (47,228,146) (17,783,545)
------------ ------------
Total stockholders' equity 46,861,597 76,475,951
------------ ------------
$ 51,011,518 $ 80,127,555
============ ============
</TABLE>
See accompanying notes.
<PAGE> 3
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
June 3, 1995 (date
operations commenced)
1996 to December 31, 1995
------------ --------------------
<S> <C> <C>
Interest income $ 3,626,713 $ 2,863,989
Costs and expenses:
Research and development expenses 31,726,438 19,495,346
General and administrative expenses 1,344,876 1,152,188
------------ ----------------
Total costs and expenses 33,071,314 20,647,534
------------ ----------------
Net loss $(29,444,601) $ (17,783,545)
============ ================
Net loss per callable common share $ (9.06) $ (5.47)
============ ================
Weighted average callable common shares outstanding 3,250,000 3,250,000
============ ================
</TABLE>
See accompanying notes.
<PAGE> 4
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
DECEMBER 16, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
CALLABLE SPECIAL
COMMON STOCK COMMON STOCK
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares issued upon incorporation
- December 16, 1994 (date of
incorporation) -- $ -- 200 $ 200
------------ ------------ ------------ ------------
Balance at December 31, 1994 -- -- 200 200
Issuance of callable common
stock in initial public
offering, net of offering
costs of $5,740,704 3,250,000 3,250 -- --
Contribution from Allergan, Inc. -- -- -- --
Contribution from Ligand
Pharmaceuticals Incorporated -- -- -- --
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balance at December 31, 1995 3,250,000 3,250 200 200
Net loss -- -- -- --
Unrealized holding loss
on marketable securities -- -- -- --
------------ ------------ ------------ ------------
Balance at December 31, 1996 3,250,000 $ 3,250 200 $ 200
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
HOLDING LOSS
ADDITIONAL ON TOTAL
PAID-IN MARKETABLE ACCUMULATED STOCKHOLDERS'
CAPITAL SECURITIES DEFICIT EQUITY
------------ ------------ --------------- -----------------
<S> <C> <C> <C> <C>
Shares issued upon incorporation
- December 16, 1994 (date of
incorporation) $ -- $ -- $ -- $ 200
------------ ------------ --------------- -----------------
Balance at December 31, 1994 -- -- -- 200
Issuance of callable common
stock in initial public
offering, net of offering
costs of $5,740,704 26,756,046 -- -- 26,759,296
Contribution from Allergan, Inc. 50,000,000 -- -- 50,000,000
Contribution from Ligand
Pharmaceuticals Incorporated 17,500,000 -- -- 17,500,000
Net loss -- -- (17,783,545) (17,783,545)
------------ ------------ --------------- -----------------
Balance at December 31, 1995 94,256,046 -- (17,783,545) 76,475,951
Net loss -- -- (29,444,601) (29,444,601)
Unrealized holding loss
on marketable securities -- (169,753) -- (169,753)
------------ ------------ --------------- -----------------
Balance at December 31, 1996 $ 94,256,046 $ (169,753) $ (47,228,146) $ 46,861,597
============ ============ =============== =================
</TABLE>
See accompanying notes.
<PAGE> 5
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
DECEMBER 16, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Operating activities:
Net loss $(29,444,601) $(17,783,545)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Interest receivable and other current assets (385,008) (335,001)
Accounts payable to Allergan, Inc. (225,699) 1,038,409
Accounts payable to Ligand Pharmaceuticals
Incorporated 1,228,653 1,847,825
Accrued offering costs (434,759) 434,759
Other accounts payable and accrued
liabilities (69,878) 330,611
------------ ------------
Net cash used in operating activities (29,331,292) (14,466,942)
Investing activities:
Purchase of marketable securities (20,563,935) --
Financing activities:
Proceeds from issuance of callable common stock
in initial public offering, net -- 26,759,296
Proceeds from issuance of special common stock -- 200
Contribution from Allergan, Inc. -- 50,000,000
Contribution from Ligand Pharmaceuticals
Incorporated -- 17,500,000
------------ ------------
Net cash provided by financing activities -- 94,259,496
------------ ------------
Net increase (decrease) in cash and cash equivalents (49,895,227) 79,792,554
Cash and cash equivalents at beginning of period 79,792,554 --
------------ ------------
Cash and cash equivalents at end of period $ 29,897,327 $ 79,792,554
============ ============
</TABLE>
See accompanying notes.
<PAGE> 6
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND BUSINESS OPERATIONS
BUSINESS
Allergan Ligand Retinoid Therapeutics, Inc. (the Company) was incorporated in
Delaware in 1994 and commenced operations on June 3, 1995 to continue the
efforts of the Allergan Ligand Joint Venture (Joint Venture), established by
Allergan, Inc. (Allergan) and Ligand Pharmaceuticals Incorporated (Ligand) in
June 1992, to discover, develop and commercialize drugs based on retinoids (the
Products).
On June 3, 1995, the Company and Ligand completed a public offering (the
Offering) of 3.25 million units, each unit consisting of one share of the
Company's callable common stock and two warrants, each to purchase one share of
Ligand common stock. The Offering raised net proceeds for the Company of $26.8
million. At the completion of the Offering, Ligand contributed $17.5 million in
cash, as well as warrants in exchange for (i) a right to acquire all of the
Callable Common Stock at specified future dates and amounts and (ii) a right to
acquire all rights to the Panretin (ALRT1057) products, jointly with Allergan,
currently under development by the Company. At the same time, Allergan
contributed $50.0 million in cash to the Company in exchange for (i) the right
to acquire one-half of all technologies and other assets in the event Ligand
exercises its right to acquire all of the Callable Common Stock, (ii) a similar
right to acquire all of the Callable Common Stock if Ligand does not exercise
its right and (iii) a right to acquire all rights to the Panretin (ALRT1057)
products, jointly with Ligand.
ALRT's Board of Directors recently approved a research and development plan for
the year ending December 31, 1997 which represents an acceleration in spending
on ALRT's retinoid programs. The accelerated spending is the result of more
rapid discovery and development of a significantly larger library of viable
retinoid compounds than anticipated at the time of formation of ALRT. ALRT
anticipates the acceleration in spending could result in the use of
substantially all of the funds available for research and development remaining
in ALRT in late 1997 or early 1998. Ligand and Allergan have certain purchase
options over the Callable Common Stock and the assets of ALRT which could be
triggered by the use of substantially all of ALRT's funds. There can be no
assurance that Ligand or Allergan will exercise these options.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the accompanying financial statements. Actual
results could differ from those estimates.
<PAGE> 7
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF BUSINESS RISK
The Company conducts research and development for the purpose of identifying and
developing retinoid drugs for therapeutic uses and is subject to intense
competition and technological changes in the biotechnology industry. The Company
is also dependent upon Allergan and Ligand who are primarily responsible for
research, development, marketing and manufacturing on behalf of the Company.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of demand deposits and bank certificates of
deposit carried at cost which approximates fair value.
MARKETABLE SECURITIES
Marketable securities consist of United States Treasury Bills and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company determines the fair value of marketable securities based
upon quoted market values. At December 31, 1996, the fair value of marketable
securities was $169,753 less than cost. Such reduction in value was recorded as
a charge in stockholders' equity as the marketable securities are available for
sale.
CONCENTRATION OF CREDIT RISKS
The Company invests its excess cash in certificates of deposit and marketable
securities. The Company has established guidelines with respect to
diversification and maturities designed to maintain safety and liquidity.
RESEARCH AND DEVELOPMENT EXPENSES
The Company contracts with Allergan and Ligand to conduct research, development
and initial clinical testing. The costs of such work are expensed as incurred.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes. Under
the liability method, deferred taxes are determined based on the differences
between the financial statement and tax bases of assets and liabilities using
enacted tax rates.
<PAGE> 8
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER CALLABLE COMMON SHARE
Net loss per callable common share is calculated by dividing the net loss by the
number of callable common shares outstanding, which was 3,250,000 at all times
during the period from commencement of operations following the closing of the
initial public offering on June 3, 1995 to December 31, 1996.
3. RELATIONSHIP WITH ALLERGAN AND LIGAND
TECHNOLOGY LICENSE AGREEMENT
Under a technology license agreement (the License), the Company has an exclusive
license to use the retinoid technologies developed first by Allergan and Ligand
and subsequently by the Joint Venture. The License granted is subject to certain
exceptions that allow Allergan and Ligand to pursue limited research activities
and development and commercialization of certain products. In consideration for
the License, the Company will pay to Allergan and Ligand a royalty aggregating
3% of net sales of Products under the License during the life of applicable
patents or, in certain circumstances, for 10 years.
RESEARCH AND DEVELOPMENT AGREEMENT
The Company entered into a research and development agreement (the Development
Agreement) under which Allergan and Ligand perform research and development for
the Company on retinoid compounds and products in accordance with annual budgets
and development plans jointly proposed by Allergan and Ligand and approved by
the Company's Board of Directors. Under the Development Agreement, the Company
has agreed to reimburse Allergan and Ligand for their internal costs plus 10%
and the cost of services performed by third parties. Total amounts charged to
the Company during 1996 and 1995 by Allergan and Ligand under the Development
Agreement were (in millions):
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Allergan $10.6 $ 6.6
Ligand 21.8 12.7
</TABLE>
If the Company discontinues development of compounds meeting certain criteria,
Allergan and Ligand are entitled to develop and commercialize such compounds
using their own funds. The Company is entitled to receive a royalty equal to 6%
of net sales of any such independently developed products. The Company also has
the right to reacquire any such product prior to the earlier of the commencement
of Phase III clinical trials for such product or the exercise or expiration of
the Stock Purchase Option, for an amount equal to costs incurred by Allergan
and/or Ligand plus interest at 25% per year. Additionally, with respect to any
reacquired product, the Company will pay a royalty equal to 4% of net sales to
the developing party.
<PAGE> 9
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATIONSHIP WITH ALLERGAN AND LIGAND (CONTINUED)
COMMERCIALIZATION AGREEMENT
The Company also entered into a commercialization agreement (the
Commercialization Agreement) which provides for the marketing, manufacture and
sale by Allergan and/or Ligand of the Products developed under the Development
Agreement which have received regulatory approval for commercial sale.
SERVICES AGREEMENT
The Company also entered into a services agreement (the Services Agreement)
under which Allergan and Ligand provide management and administrative services
to the Company at 110% of direct and indirect costs for services performed
internally by Allergan and Ligand and on a cost reimbursement basis for services
performed by third parties. Total amounts charged to the Company during 1996 and
1995 by Allergan and Ligand for these services under the Services Agreement were
(in millions):
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Allergan $0.1 $0.1
Ligand 0.1 0.1
</TABLE>
PANRETIN (ALRT1057) PURCHASE OPTION
The Company has granted Allergan and Ligand an option (the Panretin (ALRT1057)
Purchase Option) to acquire the Company's Panretin (ALRT1057) Products. Unless
the Panretin (ALRT1057) Purchase Option has been terminated as to either
Allergan or Ligand as a result of default under the agreement (in which case the
Panretin (ALRT1057) Purchase Option will only be exercisable by the party for
which such option has not been terminated), Allergan and Ligand, jointly, may
exercise the Panretin (ALRT1057) Purchase Option beginning on the earlier of (i)
June 3, 1997 or (ii) the receipt of regulatory approval for commercial sale of
any Panretin (ALRT1057) Product in the United States or in certain other major
countries and ending on the earlier of (a) 90 days after receipt of such
regulatory approval or (b) June 3, 2000. Additionally, the Panretin (ALRT1057)
Purchase Option will terminate on the date the Stock Purchase Option is
exercised or expires.
The Panretin (ALRT1057) Purchase Option exercise price is $21.4 million prior to
June 3, 1998 and increases in equal amounts on a quarterly basis to $27.8
million on March 3, 1999 and to $36.2 million on March 3, 2000. The exercise
price may be paid in cash, shares of Allergan or Ligand, or any combination
thereof.
<PAGE> 10
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATIONSHIP WITH ALLERGAN AND LIGAND (CONTINUED)
The Company may not distribute or otherwise expend any proceeds received upon
the exercise of the Panretin (ALRT1057) Purchase Option until the earlier of the
exercise or expiration of the Stock Purchase Option.
4. STOCKHOLDERS' EQUITY
STOCK PURCHASE OPTION
The Company's Callable Common Stock is subject to a Stock Purchase Option
agreement pursuant to which Ligand and, in the event not exercised by Ligand,
Allergan may purchase all, but not less than all, of the Callable Common Stock
outstanding at specified prices, subject to adjustment. The option becomes
exercisable on the earlier of (i) June 3, 1997 or (ii) the quarter in which the
Company's available funds, as defined, decline below $10 million and expires on
the earlier of (a) June 3, 2000 or (b) 90 days subsequent to such a decline in
cash. The option is not exercisable prior to June 3, 1998 unless the available
funds are less than $60 million at the date of exercise.
The Stock Purchase Option exercise price is $21.97 per share prior to June 3,
1998 and increases in equal amounts on a quarterly basis to $28.56 per share on
March 3, 1999 and to $37.13 per share on March 3, 2000. The exercise price may
be paid in cash, shares of Allergan or Ligand, or any combination thereof.
The Company may not, until the expiration of the Stock Purchase Option, pay any
dividends, issue additional shares of capital stock, borrow money in excess of
$1 million, merge, liquidate or sell all or substantially all of its assets.
WARRANTS
Each unit sold by the Company in its initial public offering includes two
warrants, each warrant giving the holder the right to purchase one share of
Ligand common stock at a price of $7.12 per share. The warrants are exercisable
at any time from June 3, 1997 through June 2, 2000, subject to certain
acceleration provisions including the exercise or expiration of the Stock
Purchase Option. The warrants will trade with the Company's Callable Common
Stock as units until they become exerciseable on June 3, 1997. After such date,
the warrants will separate from the Company's common stock and become
independently tradable.
<PAGE> 11
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. STOCKHOLDERS' EQUITY (CONTINUED)
SPECIAL STOCK
The Company has issued 200 shares of Special Stock to Allergan and Ligand. The
Special Stock does not entitle Allergan and Ligand to vote, except in certain
circumstances, or have the right to any profits of the Company. The Special
Stock, however, entitles Allergan and Ligand to elect two directors to the
Company's Board.
5. INCOME TAXES
Valuation allowances of $21 million at December 31, 1996 and $7.6 million at
December 31, 1995 have been recognized as offsets to the deferred tax assets as
realization of such assets is uncertain. Significant components of the Company's
deferred tax assets as of December 31, 1996 and 1995 are (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 16,076 $ 6,777
Research and development credits 2,440 327
Capitalized costs and other 2,470 482
---------- ----------
Total deferred tax assets 20,986 7,586
Valuation allowance for deferred tax assets (20,986) (7,586)
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
</TABLE>
At December 31, 1996, the Company had federal and California net operating loss
carryforwards of approximately $45.5 million and $2.4 million, respectively. The
federal and California tax loss carryforwards will expire in 2010 and 2003,
respectively, unless previously utilized. The Company also has federal and
California research and development tax credit carryforwards totaling $1.5
million and $1.3 million, respectively, which will begin to expire in 2010
unless previously utilized.
<PAGE> 1
Exhibit 99.3
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
QUARTERLY REPORT FILED ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1997
FINANCIAL INFORMATION
Allergan Ligand Retinoid Therapeutics, Inc.
Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
--------------------------- ---------------------------
Revenues: 1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income $ 493 $ 1,133 $ 1,112 $ 2,088
Costs and expenses:
Research and development 9,579 6,832 19,095 12,710
General and administra-
tive expenses 466 435 770 788
---------- ---------- ---------- ----------
Total costs and expenses 10,045 7,267 19,865 13,498
---------- ---------- ---------- ----------
Net loss $ (9,552) $ (6,134) $ (18,753) $ (11,410)
========== ========== ========== ==========
Net loss per callable
common share $ (2.94) $ (1.89) $ (5.77) $ (3.51)
========== ========== ========== ==========
Weighted average callable
common shares
outstanding 3,250 3,250 3,250 3,250
</TABLE>
See accompanying notes.
<PAGE> 2
Allergan Ligand Retinoid Therapeutics, Inc.
Condensed Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 14,260 $ 29,897
Marketable securities 17,442 20,394
Other assets 616 $ 720
----------- -----------
$ 32,318 $ 51,011
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payable to Allergan, Inc. and Ligand
Pharmaceuticals Incorporated $ 3,859 $ 3,889
Accounts payable and accrued liabilities 361 261
----------- -----------
Total current liabilities 4,220 4,150
Stockholders' equity:
Callable Common Stock, $.001 par value;
3,250,000 shares authorized, issued
and outstanding 3 3
Additional paid-in capital 94,256 94,256
Accumulated deficit (65,981) (47,228)
Unrealized holding loss on
marketable securities (180) (170)
----------- -----------
Total stockholders' equity 28,098 46,861
----------- -----------
$ 32,318 $ 51,011
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 3
Allergan Ligand Retinoid Therapeutics, Inc.
Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------
June 30, June 30,
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (18,753) $ (11,410)
Changes in operating assets and liabilities:
Other assets 104 (770)
Payable to Allergan, Inc. and
Ligand Pharmaceuticals Incorporated (30) (416)
Accounts Payable and accrued liabilities 100 (533)
----------- -----------
Net cash used in operating activities (18,579) (13,129)
INVESTING ACTIVITIES:
Sale (purchase) of marketable securities 2,942 (24,064)
----------- -----------
Net decrease in cash and equivalents (15,637) (37,193)
Cash and equivalents at beginning of period 29,897 79,793
----------- -----------
Cash and equivalents at end of period $ 14,260 $ 42,600
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 4
Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements
1. Allergan Ligand Retinoid Therapeutics, Inc. (the Company)
was incorporated in Delaware in 1994 and commenced operations on June 3, 1995 to
continue the efforts of the Allergan Ligand Joint Venture (Joint Venture),
established by Allergan, Inc. (Allergan) and Ligand Pharmaceuticals Incorporated
(Ligand) in June 1992, to discover, develop and commercialize drugs based on
retinoids.
On June 3, 1995, the Company and Ligand completed a
public offering (the Offering) of 3.25 million units (the Units), each Unit
consisting of one share of the Company's callable common stock (Callable Common
Stock) and two warrants (the Warrants), each to purchase one share of Ligand
common stock. The Offering raised net proceeds for the Company of $26.8 million.
At the completion of the Offering, Ligand contributed $17.5 million in cash, as
well as warrants in exchange for (i) a right to acquire all of the Callable
Common Stock at specified future dates and amounts and (ii) a right to acquire
all rights to the Panretin (ALRT1057) product, jointly with Allergan, currently
under development by the Company. At the same time, Allergan contributed $50.0
million in cash to the Company in exchange for (i) the right to acquire one-half
of technologies and other assets in the event Ligand exercises its right to
acquire all of the Callable Common Stock, (ii) a similar right to acquire all of
the Callable Common Stock if Ligand does not exercise its right and (iii) a
right to acquire all rights to the Panretin (ALRT1057) product, jointly with
Ligand.
On June 3, 1997, the Units separated and the Callable
Common Stock and Warrants currently trade separately.
ALRT's Board of Directors approved a research and
development plan for the year ending December 31, 1997 which represents an
acceleration in spending on ALRT's retinoid programs. The accelerated spending
is the result of more rapid discovery and development of a significantly larger
library of viable retinoid compounds than anticipated at the time of formation
of ALRT. ALRT anticipates the acceleration in spending could result in the use
of substantially all of the funds available for research and development
remaining in ALRT in late 1997 or early 1998. Ligand and Allergan have certain
purchase options over the Callable Common Stock and the assets of ALRT, the
exercise of which could be triggered by the use of substantially all of ALRT's
funds. There can be no assurance that Ligand or Allergan will exercise these
options.
2. In the opinion of management, the accompanying unaudited
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial information
contained therein. These statements do not include all disclosures required by
generally accepted accounting principles. The results of operations for the
quarter and six months ended June 30, 1997 are not necessarily indicative of the
results to be expected for the year ending December 31, 1997. Net loss per
callable common share is computed by dividing the net loss by the number of
callable common shares outstanding, which was 3,250,000 at all times during the
periods reported.
3. The Company invests its excess cash in money market funds
and debt instruments of financial institutions and corporations with strong
credit ratings. The Company has established guidelines with respect to the
diversification and maturities in order to maintain safety and liquidity.
<PAGE> 5
Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements (continued)
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents. The Company's
investments are classified as available-for-sale and are carried at fair value,
with unrealized gains and losses reported as a separate component of
stockholders' equity. The investments are adjusted for amortization of premiums
and discounts to maturity and such amortization is included in interest income.
