EXHIBIT 10.6
SCHEDULE I
7.4 Stock Purchase Option. Each share of the Common Stock of X-Ceptor
Therapeutics, Inc. (the "Company") and all shares of Common Stock into which any
of the Company's securities are convertible (including shares issuable upon
exercise or conversion of options, warrants and other exercisable or convertible
securities) ("X-Ceptor Capital Stock") is subject ot an exclusive irrevocable
option (the "Ligand Option") held by Ligand Pharmaceuticals Incorporated, a
Delaware corporation ("Ligand") to purchase all of the shares of X-Ceptor
Capital Stock. The Ligand Option may be exercised only as to all, but not less
than all, of the issued and outstanding shares of X-Ceptor Capital Stock. The
Ligand Option is exercisable at any one time during the fifteen (15) day period
immediately preceding the earliest to occur of (a) ninety (90) days prior to the
third anniversary of the date of the closing (the "Closing Date") of the
transactions contemplated by the Series B Preferred Stock Purchase Agreement,
dated June 30, 1999 (the "Third Anniversary"), (b) sixty (60) days following the
delivery of notice by the Company to Ligand that its cash and cash equivalents
as of the end of the month immediately preceding the notice are less than
$5,000,000 (the "Cash Balance Notice"), or (c) such earlier date upon which the
Ligand Option terminates; provided that Ligand may extend the period within
which it can exercise the Option until the fourth anniversary of the Closing
Date (the "Extension Anniversary") by providing notice no later than the earlier
of ninety (90) days prior to the Third Anniversary or fifteen (15) days
following the Cash Balance Notice and providing additional funding of $5,000,000
in cash to the Company no later than fifteen (15) days following the earlier of
the Third Anniversary or receipt of the Cash Balance Notice (the "Option
Expiration Date"), in which case Ligand may exercise the Ligand Option at any
one time during the fifteen (15) day period immediately preceding the date which
is 90 days prior to the Extension Anniversary.
(a) Exercise Price. Upon exercise of the Ligand Option, Ligand shall pay
for the outstanding X-Ceptor Capital Stock (other than shares held by Ligand,
its affiliates (in excess of an aggregate of 200,000 shares of Common Stock) or
any of their transferees) (the "Option Exercise Price") as follows:
(i) The fair market value of a share of Common Stock (the "Fair Market
Value") shall be determined in accordance with the following formula:
A = B/C
Where: A = Fair Market Value per share of Common Stock
B = $61,400,000 less an amount equal to product of (i)
$2.07432, multiplied by (ii) the excess, if any, of (A)
18,900,000, over (B) the aggregate number of shares of
Series B Preferred sold by the Company on the Closing Date
and within 120 days of the Closing Date (such amount being
the "Series B Shortfall") if the Exercise Date occurs at any
time on or before the Third Anniversary, or $79,800,000 less
an amount equal to the
product of (i) $2.6959, multiplied by
(ii) the Series B Shortfall if the Exercise Date occurs
after the Third Anniversary
C = Number of shares of Common Stock outstanding on the Option
Closing Date taking into account the automatic conversion of
any shares of Preferred Stock pursuant to the Company's
Certificate of Incorporation immediately prior to the Option
Closing Date (excluding any shares held by Ligand, its
affiliates (in excess of an aggregate of 200,000 shares of
Common Stock) or any of their transferees) and including all
shares issuable upon conversion or exercise of options,
warrants, convertible notes or other convertible or
exercisable securities (collectively, "Convertible
Securities")
(ii) Ligand shall first make a payment for each outstanding Convertible
Security in accordance with the following formula (collectively, the
"Convertible Securities Payment"), which shall be calculated separately for each
Convertible Security:
X = (A - B) * C
Where: X = Payment for each outstanding Convertible Security
A = Fair Market Value per share of Common Stock into which the
Convertible Security is exercisable or convertible (as
determined in accordance with Section 7.4(a)(i) above)
B = Per share Exercise or conversion price for the Convertible
Security
C = Number of shares of Common Stock into which the
Convertible Security is exercisable or convertible
If A is less than B, no payment shall be required for such Convertible
Security.
(iii) Ligand shall then make a payment for each outstanding share of
X-Ceptor Common Stock in accordance with the following formula:
Y = (B - C)/D
Where: Y = Payment for each outstanding share of Common Stock
B = $61,400,000 less an amount equal to product of (i)
$2.07432, multiplied by (ii) the Series B Shortfall if
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the Exercise Date occurs at any time on or before the Third
Anniversary, or $79,800,000 less an amount equal to the
product of (i) $2.6959, multiplied by (ii) the Series B
Shortfall if the Exercise Date occurs after the Third
Anniversary
C = Convertible Securities Payment
D = Number of shares of X-Ceptor Common Stock outstanding on
the Option Closing Date taking into account the automatic
conversion of any shares of Preferred Stock pursuant to the
Company's Certificate of Incorporation immediately prior to
the Option Closing Date (excluding any shares held by
Ligand, its affiliates (in excess of an aggregate of 200,000
shares of Common Stock) or any of their transferees) but
excluding all Convertible Securities and shares of X-Ceptor
Common Stock issuable upon exercise or conversion thereof.
(b) Form of Payment. Subject to Sections 7.4(e) and (f) hereof, the Option
Exercise Price calculated in accordance with Section 7.4(a) may be paid in cash,
in shares of Ligand Common Stock or in any combination thereof, at the sole
discretion of Ligand. The number of shares of Ligand Common Stock to be
delivered in payment of all or a portion of the Option Exercise Price shall be
determined by dividing the portion of the Option Exercise Price to be paid in
shares of Ligand Common Stock by the lower of (a) the average of the last sale
price of Ligand Common Stock quoted on the Nasdaq National Market or, if then
traded on a national securities exchange, the average of the closing prices of
Ligand Common Stock on the principal national securities exchange on which
listed or, if quoted on the Nasdaq over-the-counter system, the average of the
mean of the closing bid and asked prices of Ligand Common Stock quoted on such
system (in each event, the "Ligand Closing Price"), on each of the twenty (20)
trading days immediately preceding the date Ligand gives written notice of the
exercise of the Ligand Option as provided in Section 7.4(c) hereof (such date of
delivering the notice being the "Exercise Date") and (b) the closing price on
the Exercise Date. No fractional shares of Ligand Common Stock shall be issued
in payment of all or a portion of the Option Exercise Price. Instead of any
fractional shares of Ligand Common Stock that would otherwise be issuable in
payment of all or a portion of the Option Exercise Price, Ligand shall pay a
cash adjustment in respect of such fractional interest in an amount equal to
that fractional interest multiplied by the lower of (a) the average of the
Ligand Closing Price on each of the twenty (20) trading days immediately
preceding the Exercise Date and (b) the closing price on the Exercise Date.
(c) Manner of Exercise. To exercise the Ligand Option, Ligand shall give
written notice on or before the Option Expiration Date in accordance with the
first paragraph of Section 7.4 to each holder of record of X-Ceptor Capital
Stock and to the Company, which notice shall state that the Ligand Option is
being exercised and shall set forth: (i) the Option Exercise Price determined in
accordance with Section 7.4(a) hereof; (ii) the portion, if any, of the Option
Exercise Price to be paid in cash and the portion, if any, of the Option
Exercise Price to be paid in shares of Ligand Common Stock; (iii) the date on
which all of X-Ceptor Capital Stock shall be purchased in accordance with the
terms hereof, which date shall be (x) the earlier to
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occur of (1) the Third Anniversary, (2) the date which is sixty (60) days
following the date on which X-Ceptor delivers the Cash Balance Notice, or (y) if
Ligand shall have extended the term of the Ligand Option, the Extension
Anniversary; provided, however, that such date shall be extended at the option
of the holders of 66 2/3% of X-Ceptor Common Stock (other than Ligand, its
affiliates (in excess of an aggregate of 200,000 shares of Common Stock) and
transferees) until such time as the registration statement referred to in
Section 7.4(f) shall become effective (such date being the "Option Closing
Date"); and (iv) any instructions that such holders will need to obtain payment
of the Option Exercise Price. The Ligand Option shall be deemed to be exercised
on the Exercise Date, at which time the decision to exercise the Ligand Option
shall be deemed irrevocable. If Ligand elects to exercise the Ligand Option by
delivering solely shares of Ligand Common Stock, such exercise may occur by
means of a merger of either a subsidiary of Ligand with and into the Company or
the Company with and into a subsidiary of Ligand (the "Merger") pursuant to
which X-Ceptor Capital Stock shall be cancelled in exchange for the shares of
Ligand Common Stock delivered; provided, however, that in no event shall any of
the holders of X-Ceptor Capital Stock be required to make any representations or
warranties, incur any liabilities or assume any obligations in connection with
such Merger.
(d) [Intentionally Omitted].
(e) Payment Agent. Subject to the provisions of Section 7.4(f) hereof on or
before the Option Closing Date, Ligand shall deposit the full amount of the
Option Exercise Price for all of the X-Ceptor Capital Stock with a bank,
transfer agent or similar entity designated by Ligand (the "Payment Agent") to
pay, on Ligand's behalf, the Option Exercise Price. All cash, if any, and Ligand
Common Stock, if any, deposited with the Payment Agent shall be delivered in
trust for the benefit of the holders of record of X-Ceptor Capital Stock or any
Preferred Stock not yet converted on the Exercise Date. Ligand shall provide the
Payment Agent with irrevocable instructions to pay, on or after the Option
Closing Date, the Option Exercise Price for X-Ceptor Capital Stock to such
record holders upon surrender of their certificates representing shares of
X-Ceptor Capital Stock. Payment for shares of X-Ceptor Capital Stock shall be
mailed to each such record holder at the address set forth in Company's records
or at the address provided by each such record holder or, if no address is set
forth in Company's records for any such record holder or provided by any such
record holder, to such record holder at the address of the Company, but only
upon receipt from each such record holder of certificates evidencing shares of
X-Ceptor Capital Stock or a lost stock affidavit and indemnity in lieu thereof;
provided that payment for shares of the Series A Preferred Stock or Series B
Preferred Stock of the Company (or any shares of Common Stock issued upon
conversion thereof) shall be made on the Option Closing Date by wire transfer of
immediately available funds to each record holder thereof in accordance with the
wire transfer instructions provided by such record holders in writing no less
than five (5) business days prior to the Option Closing Date. Any cash or Ligand
Common Stock deposited with the Payment Agent pursuant to this Section 7.4(e)
that remains unclaimed for two (2) years following the Option Closing Date and
all interest and/or dividends earned thereon shall be automatically returned to
Ligand.
(f) Registration and Listing. If Ligand fails by the Option Closing Date to
have both (a) a registration statement declared effective under the Securities
Act with respect to the shares of Ligand Common Stock, if any, to be delivered
as payment pursuant to the exercise of the Ligand Option which registration
statement covers the public resale by the holders of such
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shares for a period of two (2) years after its effectiveness and (ii) the
shares of Ligand Common Stock to be issued in connection therewith (1) listed on
the Nasdaq National Market, or (2) if Ligand Common Stock is traded on a
national securities exchange, listed on such exchange, or (3) if Ligand Common
Stock is listed on neither the Nasdaq National Market, nor a national securities
exchange, qualified for inclusion in the Nasdaq over-the-counter system, then
Ligand shall be obligated to make such payment all in cash on the Option Closing
Date. Notwithstanding any other provision herein to the contrary, Ligand shall
not be in breach or violation of this Section 7.4 for any failure to timely pay
any amount due and payable to record holders of X-Ceptor Capital Stock hereunder
in shares of Ligand Common Stock if such failure to timely pay such amount
arises from delay in satisfying any of the provisions of this Section 7.4(f) so
long as Ligand shall have taken all reasonable actions and shall have acted
diligently in attempting to timely satisfy such provisions and shall continue to
diligently seek the satisfaction thereof; provided, however, that such delay may
not exceed thirty (30) days from the originally scheduled Option Closing Date.
(g) Transfer of Title. Transfer of title to Ligand of all of the issued and
outstanding shares of X-Ceptor Capital Stock shall be deemed to occur
automatically on the Option Closing Date subject to the payment by Ligand on
such date of the amount owing to the record holders of X-Ceptor Capital Stock as
determined in accordance with Section 7.4(a) hereof, and thereafter the Company
shall be entitled to treat Ligand as the sole holder of record of all issued and
outstanding shares of X-Ceptor Capital Stock, notwithstanding the failure of any
holder of shares of X-Ceptor Capital Stock to tender certificates representing
such shares to the Payment Agent for payment therefor in accordance with Section
7.4(e) hereof. After the Option Closing Date, the record holders of X-Ceptor
Capital Stock as determined in connection with Section 7.4(c) hereof shall have
no rights in connection with such X-Ceptor Capital Stock other than the right to
receive the Option Exercise Price.
(h) Legend.
(i) Any certificates evidencing shares of X-Ceptor Capital Stock shall
bear a legend in substantially the following form:
THE SHARES OF X-CEPTOR THERAPEUTICS, INC. ("X-CEPTOR") EVIDENCED HEREBY ARE
SUBJECT TO AN OPTION HELD BY LIGAND PHARMACEUTICALS INCORPORATED AS DESCRIBED IN
X-CEPTOR'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED FROM
TIME TO TIME, AND IN A PURCHASE AGREEMENT AMONG X-CEPTOR, LIGAND PHARMACEUTICALS
INCORPORATED AND THE OTHER PARTIES THERETO, AS AMENDED FROM TIME TO TIME (THE
"PURCHASE AGREEMENT"), TO PURCHASE SUCH SHARES AT A PURCHASE PRICE DETERMINED
PURSUANT TO ARTICLE IV, SECTION H OF X-CEPTOR'S AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION AND SECTION 7.4 OF THE PURCHASE AGREEMENT, EXERCISABLE BY
WRITTEN NOTICE AT ANY TIME DURING THE PERIOD AS SET FORTH THEREIN. COPIES OF
X-CEPTOR'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND THE PURCHASE
AGREEMENT ARE AVAILABLE AT THE PRINCIPAL PLACE OF BUSINESS OF X-CEPTOR, AND
SHALL BE FURNISHED TO ANY X-CEPTOR STOCKHOLDER UPON WRITTEN REQUEST WITHOUT
COST.
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(ii) Upon the termination or expiration (other than by exercise) of the
Ligand Option, the Company shall, at the request of any holder of shares of
X-Ceptor Capital Stock bearing the legend described in this Section 7.4(h), take
such steps as are necessary to remove such legend from such shares of X-Ceptor
Capital Stock.
(i) Assignment.
(i) Ligand may assign, delegate, transfer or sell any or all of its
rights or obligations under this Section 7.4, in whole or in part, to any
person or entity without the prior approval of the holders of record of the
outstanding shares of X-Ceptor Capital Stock; provided, however, that, Ligand
shall not, without the prior approval of the holders of record of a majority of
the outstanding shares of X-Ceptor Capital Stock (except for Ligand, affiliated
companies and their transferees) not prohibited from approving such matter by
contract or otherwise, make such an assignment, delegation, transfer or sale
unless such person or entity (A) shall be a solvent corporation or other such
entity, (B) 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 (C) shall have agreed in writing to be bound by the terms of
this Section 7.4, (a "Qualified Person or Entity"), except that such Qualified
Person or Entity shall only be entitled to pay the Option Exercise Price in
cash; provided further, that in the event of any assignment, delegation,
transfer or sale, Ligand shall provide written notice to such record holders of
any such assignment, delegation, transfer or sale not later than thirty (30)
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.
(ii) Upon the assignment, delegation, transfer or sale by any record
holder of X-Ceptor Capital Stock, (A) this Agreement shall automatically be
assigned to, assumed by and binding upon such record holder's assignee,
purchaser or transferee and (B) such shares of X-Ceptor Capital Stock shall
continue to be subject to the Ligand Option and the other terms and conditions
of this Agreement.
(iii) A change in control of a party hereto (except as set forth in
Section 7.4(j)) shall not be deemed to be an assignment or transfer by such
party.
(iv) Subject to the foregoing, this Section 7.4 shall be binding upon
the successors and assigns of the parties.
(j) Automatic Assignment. Notwithstanding the provisions of Section 7.4
(i) hereof, in the event of: (i) a consolidation or merger of Ligand
with or into any Qualified Person or Entity, other than a wholly-owned
subsidiary, in which the stockholders of Ligand own less than a majority of the
voting stock of the surviving corporation immediately following such
consolidation or merger, or
(ii) a sale of all or substantially all of the assets of Ligand to any
Qualified Person or Entity, or
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(iii) any transaction approved by Ligand in which more than 50% of the
then outstanding Ligand Common Stock is transferred to any Qualified Person or
Entity, then all of Ligand's rights and obligations under this Section 7.4 shall
automatically be assigned, delegated and transferred to such Qualified Person or
Entity, and such Qualified Person or Entity may exercise the Option in Ligand's
stead; provided, however, that such person or entity may only pay the Option
Exercise Price in cash.
(k) Termination. Ligand's right to exercise the Ligand Option shall
terminate on the earliest to occur of: (i) the Option Closing Date; (ii) if the
Ligand Option is not exercised, the earliest to occur of (A) ninety (90) days
prior to the Third Anniversary or (B) sixty (60) days following delivery of the
Cash Balance Notice, unless Ligand has extended the period within which it can
exercise the Ligand Option as contemplated by Section 7.4(a) hereof, in which
case Ligand's rights to exercise the Ligand Option shall terminate ninety (90)
days prior to the Extension Anniversary; or (iii) at the sole option of the
Company following occurrence of any of the following events: (A) Ligand fails to
make the payment described in Section 7.4(b) hereof on the Option Closing Date
in accordance with Section 7.4(e) hereof; (B) Ligand (1) seeks the liquidation,
reorganization, dissolution or winding-up of itself or the composition or
readjustment of all or substantially all of its debts, (2) applies for or
consents to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or substantially all of its
assets, (3) makes a general assignment for the benefit of its creditors, (4)
commences a voluntary case under Title 11 of the United States Code, (5) files a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or readjustment of debt or
(6) adopts any resolution of its Board of Directors or stockholders for the
purpose of effecting any of the foregoing; (C) a proceeding or case is commenced
without the application or consent of Ligand and such proceeding or case
continues undismissed, or an order, judgment or decree approving or ordering any
of the following is entered and continues unstayed and in effect for a period of
sixty (60) days from and after the date service of process is effected upon
Ligand, seeking (1) Ligand's liquidation, reorganization, dissolution or winding
up, or the composition or readjustment of all or substantially all of its debts,
(2) the appointment of a trustee, receiver, custodian, liquidator or the like of
Ligand or of all or substantially all of its assets or (3) similar relief in
respect of Ligand under any law relating to bankruptcy, insolvency,
reorganization, winding up or the composition or readjustment of debt; or (D)
material default by Ligand on any material loan agreement which default is not
cured in accordance with such loan agreement. Company shall promptly notify each
holder of record of X-Ceptor Capital Stock in writing upon the occurrence of an
event specified in Section 7.4(k)(iii) herein.
(l) Amendments. Any term of this Section 7.4 may be amended and the
observance of any term of this Section 7.4 may be waived (either generally or in
a particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely) only with the written consent of the
Company, Ligand and sixty-six and two-thirds percent (66-2/3%) of the shares of
then outstanding Series B Preferred (other than Ligand, its affiliates (in
excess of an aggregate of 200,000 shares of Common Stock) or transferees).
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(m) Preservation of Ligand's Rights. Company shall not take, or permit any
other person or entity within its control to take, any action inconsistent with
Ligand's rights under this Section 7.4. Company shall not enter into any
arrangement, agreement or understanding, either oral or written, that is
inconsistent with the rights of Ligand and the obligations of Company under this
Section 7.4.
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