-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WfJ2TE66wOJD9BdrRhvcvYKVTdBbXccHqQBZXaMATnBE2fF1ZyhScWxEQIGFElmC o+X3p8mAP2eLvKMtCjeo6w== 0000936392-97-001246.txt : 19970926 0000936392-97-001246.hdr.sgml : 19970926 ACCESSION NUMBER: 0000936392-97-001246 CONFORMED SUBMISSION TYPE: SC 13E3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19970925 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ALLERGAN LIGAND RETINOID THERAPEUTICS INC CENTRAL INDEX KEY: 0000934592 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 330642614 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3 SEC ACT: SEC FILE NUMBER: 005-45829 FILM NUMBER: 97685647 BUSINESS ADDRESS: STREET 1: 9393 TOWNE CENTER DR CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195353900 MAIL ADDRESS: STREET 1: 2525 DUPONT DR CITY: IRVINE STATE: CA ZIP: 92715 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LIGAND PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000886163 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 770160744 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3 BUSINESS ADDRESS: STREET 1: 9393 TOWNE CENTRE DR STE 100 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195353900 MAIL ADDRESS: STREET 1: 9393 TOWNE CENTRE DRIVE CITY: SAN DIEGO STATE: CA ZIP: 92121 SC 13E3 1 SCHEDULE 13E3 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 - -------------------------------------------------------------------------------- (CUSIP Number of Class of Securities) William L. Respess, 9393 Towne Centre Drive, San Diego, CA 92121, (619) 535-3900 - -------------------------------------------------------------------------------- (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 - -------------------------------------------------------------------------------- * 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, 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:
Period Ending High Low ------------------- ---- --- 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
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: 3
Period Ending High Low ------------------- ---- --- June 30, 1997 19 17 1/4 September 30, 1997 23 1/2 17 5/8
(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. 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 5 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 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 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. 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 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 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 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. 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 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. 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: 15
Name of Holder Position Number of Shares Owned Percentage Ownership(1) -------------- -------- ---------------------- ----------------------- 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 *
* 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 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. 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. 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. EX-17.C 2 EXHIBIT 17(C) 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 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 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: 4
Stock Purchase Option Exercise Price Per Share of Callable Common If the Stock Purchase Option Is Exercised Stock - ---------------------------------------------------------------------------------------------- ----------------------- 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
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 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 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. 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). 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. 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. 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 EX-17.D 3 EXHIBIT 17(D) 1 Exhibit 17(d) STOCK PURCHASE OPTION NOTICE OF EXERCISE MATERIALS 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 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 4 LETTER OF TRANSMITTAL TO ACCOMPANY SHARES OF ALLERGAN LIGAND RETINOID THERAPEUTICS, INC. CALLABLE COMMON STOCK, PAR VALUE $.001 PER SHARE - ------------------------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------------------------
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. 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
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. 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. - ---------------------------------------------------- ------------------------------------------------ Signature Date
EX-99.1 4 EXHIBIT 99.1 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 2 Allergan Ligand Retinoid Therapeutics, Inc. Balance Sheets
DECEMBER 31, ----------------------------- 1995 1994 ------------ ------------ 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 ============ ============
See accompanying notes. 3 Allergan Ligand Retinoid Therapeutics, Inc. Statement of Operations June 3, 1995 (date operations commenced) to December 31, 1995 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 =============
See accompanying notes. 4 Allergan Ligand Retinoid Therapeutics, Inc. Statements of Stockholders' Equity December 16, 1994 (date of incorporation) to December 31, 1995
CALLABLE SPECIAL COMMON STOCK COMMON STOCK ------------ ------------ ------------ ------------ SHARES AMOUNT SHARES AMOUNT ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============
ADDITIONAL TOTAL PAID-IN ACCUMULATED STOCKHOLDERS' CAPITAL DEFICIT EQUITY ------------ -------------- --------------- 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 ============ ============== ===============
See accompanying notes. 5 Allergan Ligand Retinoid Therapeutics, Inc. Statement of Cash Flows December 16, 1994 (date of incorporation) to December 31, 1995 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 ==============
See accompanying notes. 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. 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. 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. 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. 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. 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.
DECEMBER 31, 1995 -------------- (In thousands) 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 $ -- ==============
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. EX-99.2 5 EXHIBIT 99.2 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 2 ALLERGAN LIGAND RETINOID THERAPEUTICS, INC. BALANCE SHEETS
December 31, ------------------------------- 1996 1995 ------------ ------------ 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 ============ ============
See accompanying notes. 3 ALLERGAN LIGAND RETINOID THERAPEUTICS, INC. STATEMENTS OF OPERATIONS
June 3, 1995 (date operations commenced) 1996 to December 31, 1995 ------------ -------------------- 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 ============ ================
See accompanying notes. 4 ALLERGAN LIGAND RETINOID THERAPEUTICS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY DECEMBER 16, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1996
CALLABLE SPECIAL COMMON STOCK COMMON STOCK ------------------------------ ------------------------------ SHARES AMOUNT SHARES AMOUNT ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============
UNREALIZED HOLDING LOSS ADDITIONAL ON TOTAL PAID-IN MARKETABLE ACCUMULATED STOCKHOLDERS' CAPITAL SECURITIES DEFICIT EQUITY ------------ ------------ --------------- ----------------- 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 ============ ============ =============== =================
See accompanying notes. 5 ALLERGAN LIGAND RETINOID THERAPEUTICS, INC. STATEMENTS OF CASH FLOWS DECEMBER 16, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1996
1996 1995 ------------ ------------ 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 ============ ============
See accompanying notes. 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. 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. 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):
1996 1995 ------------ ------------- Allergan $10.6 $ 6.6 Ligand 21.8 12.7
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. 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):
1996 1995 ------------ ------------- Allergan $0.1 $0.1 Ligand 0.1 0.1
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. 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. 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):
DECEMBER 31, 1996 DECEMBER 31, 1995 ----------------- ----------------- 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 $ -- $ -- ========== ==========
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. EX-99.3 6 EXHIBIT 99.3 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)
Three Months Six Months Ended Ended June 30, June 30, --------------------------- --------------------------- Revenues: 1997 1996 1997 1996 ---------- ---------- ---------- ---------- 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
See accompanying notes. 2 Allergan Ligand Retinoid Therapeutics, Inc. Condensed Balance Sheets (In thousands, except share data)
June 30, December 31, 1997 1996 ----------- ----------- 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 =========== ===========
See accompanying notes. 3 Allergan Ligand Retinoid Therapeutics, Inc. Statements of Cash Flows (In thousands)
Six Months Ended ----------------------------- June 30, June 30, 1997 1996 ----------- ----------- 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 =========== ===========
See accompanying notes. 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. 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. -----END PRIVACY-ENHANCED MESSAGE-----