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EXHIBIT 10.195
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR PURSUANT TO A VALID EXEMPTION THEREFROM AND HAS BEEN SOLD IN RELIANCE ON THE
EXEMPTION FROM REGISTRATION PROVIDED BY REGULATION S UNDER THE ACT ("REGULATION
S"). THE SECURITY EVIDENCED HEREBY MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S (SECTION
230.901 THROUGH SECTION 230.905, AND PRELIMINARY NOTES).
THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS SUBJECT TO THE CONDITIONS
SPECIFIED IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF NOVEMBER 6, 1998, BY
AND AMONG THE COMPANY, ELAN INTERNATIONAL SERVICES, LTD. AND ELAN CORPORATION,
PLC, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY
OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT
CHARGE.
LIGAND PHARMACEUTICALS INCORPORATED
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
No. R-1
Issue Date: November 9, 1998
Issue Price: $30,000,000
($456.39 for each $1,000 Principal Amount)
Original Issue Discount at Maturity: $35,733,694
($543.61 for each $1,000 Principal Amount)
Ligand Pharmaceuticals Incorporated, a Delaware corporation,
promises to pay to Elan International Services, Ltd. or registered assigns, on
November 9, 2008, the Principal Amount of SIXTY FIVE MILLION SEVEN HUNDRED AND
THIRTY THREE THOUSAND SIX HUNDRED AND NINETY FOUR DOLLARS ($65,733,694) or such
Principal Amount as may result from an Accrual Increase as specified on the
other side of this Security.
This Security shall not bear interest except as specified on the
other side of this Security. Original Issue Discount will accrue as specified on
the other side of this Se-
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curity. This Security is convertible into Common Stock as specified on the other
side of this Security.
Additional provisions of this Security are set forth on the other
side of this Security.
This Security is one of the Zero Coupon Convertible Senior Notes
due 2008 issued pursuant to the Securities Purchase Agreement, dated as of
November 6, 1998, by and among Ligand Pharmaceuticals Incorporated, Elan
International Services, Ltd. and Elan Corporation, plc (the "Purchase
Agreement").
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IN WITNESS WHEREOF, Ligand Pharmaceuticals Incorporated has caused
this instrument to be duly executed.
LIGAND PHARMACEUTICALS
INCORPORATED
By: /s/ WILLIAM L. RESPESS
-------------------------------------
Name: William L. Respess
Title: Senior Vice President, General
Counsel, Government Affairs
Attest
By: /s/ DAVID E. ROBINSON
--------------------------------------
Name: David E. Robinson
Title: President and Chief Executive
Officer
Dated:
------------------
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FORM OF REVERSE SIDE OF SECURITY
LIGAND PHARMACEUTICALS INCORPORATED
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
1. INTEREST
(a) This Security shall not bear interest, except as specified in this
paragraph or in paragraph 12 hereof. If the Principal Amount hereof or any
portion of such Principal Amount is not paid when due (whether upon acceleration
pursuant to paragraph 9 hereof, upon the date set for payment of the Redemption
Price pursuant to paragraph 3 hereof, upon the date set for payment of a
Purchase Price or a Company Change of Control Purchase Price pursuant to
paragraph 4 hereof, upon the date set for payment of the Elan Change of Control
Purchase Price pursuant to paragraph 5 hereof or upon the Stated Maturity of
this Security) or if shares of Common Stock (and cash in lieu of fractional
shares) in respect of a conversion of this Security in accordance with paragraph
6 hereof are not delivered when due, then, in each such case, the overdue amount
shall bear interest at the rate of 10.0% per annum, compounded semiannually (to
the extent that the payment of such interest shall be legally enforceable),
which interest shall accrue from the date such overdue amount was due to the
date payment of such amount, including interest thereon, has been made. All such
interest shall be payable on demand. The accrual of such interest on overdue
amounts shall be in lieu of, and not in addition to, the continued accrual of
Original Issue Discount.
(b) Original Issue Discount (the difference between the Issue Price and
the Principal Amount of a Security) in the period during which a Security
remains outstanding shall accrue at 8.0% per annum, on a semiannual bond
equivalent basis using a 360-day year consisting of twelve 30-day months,
commencing on the Issue Date of this Security, and shall cease to accrue on the
earlier of (i) the date on which the Principal Amount hereof or any portion of
such Principal Amount becomes due and payable and (ii) any Redemption Date,
Purchase Date, Company Change of Control Payment Date, Elan Change of Control
Payment Date or Conversion Date.
(c) In the event that the Company defaults in the performance or
observance of any agreement, covenant, term or condition contained in the
Registration Rights Agreement or the New Registration Rights Agreement, as the
case may be, and such
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default continues for a period of 30 days after receipt by the Company of notice
thereof (provided that, if such default is not cured on or prior to the last day
of such 30 day period and such breach is then capable of being cured and the
Company is then working in good faith to cure such default, such 30 day period
shall be extended by an additional 20 days from the last day of such 30 day
period) (a "Registration Rights Default"), the Company acknowledges that the
Holders of the Securities will suffer damages and that it would not be feasible
to ascertain the extent of such damages with precision. Accordingly, the Company
agrees that, as liquidated damages, the rate at which Original Issue Discount or
interest pursuant to paragraph 1(a) or 12 hereof, if any, accrues shall be
increased over and above the rate stated in paragraph 1(b), 1(a) and 12(a),
respectively (an "Accrual Increase"), by an additional 50 basis points for each
90-day period in which a Registration Rights Default continues; provided that
the aggregate of such Accrual Increase shall not exceed 200 basis points over
and above the rate set forth in paragraph 1(b), 1(a) and 12(a) hereof, as the
case may be; provided, further, that any Accrual Increase shall immediately
cease upon the cure of any such Registration Rights Default. Whenever, in this
Security, there is mentioned, in any context, Principal Amount, Original Issue
Discount or interest, or any other amount payable under or with respect to this
Security, including the Redemption Price, the Purchase Price, the Company Change
of Control Purchase Price and the Elan Change of Control Purchase Price, such
mention shall be deemed to include mention of an Accrual Increase to the extent
that, in such context, such Accrual Increase is, was or would be in effect.
2. METHOD OF PAYMENT
Holders must surrender Securities to the Company to collect payments in
respect of the Securities. The Company will pay cash amounts in money of the
United States that at the time of payment is legal tender for payment of public
and private debts (and all references in the Securities to "$" or "dollars"
shall refer to such currency) by wire transfer in immediately available funds,
to an account or accounts designated in writing by each Holder not less than 5
Business Days prior to the date of the applicable payment.
3. REDEMPTION AT THE OPTION OF THE COMPANY
(a) No sinking fund is provided for the Securities. The Securities are
redeemable as a whole at any time, or in part from time to time, at the option
of the Company, at the redemp-
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tion prices (each, a "Redemption Price") set forth in paragraph 3(b) hereof;
provided that the Securities are not redeemable prior to November 9, 2001.
(b) The table below shows the Redemption Prices of a Security per $1,000
Principal Amount on the dates shown below and at Stated maturity, which prices
reflect accrued Original Issue Discount calculated to each such date. The
Redemption Price of a Security redeemed between such dates would include an
additional amount reflecting the additional Original Issue Discount accrued
since the next preceding date in the table to the actual Redemption Date.
(2)
Accrued
(1) Original (3)
Security Issue Redemption
Issue Discount Price
Redemption date Price At 8.0% (1) + (2)
--------------- -------- ------- ---------
November 9, 2001................... $456.39 $121.09 $577.48
November 9, 2002.................... 456.39 168.21 624.60
November 9, 2003.................... 456.39 219.17 675.56
November 9, 2004.................... 456.39 274.30 730.69
November 9, 2005.................... 456.39 333.92 790.31
November 9, 2006.................... 456.39 398.41 854.80
November 9, 2007.................... 456.39 468.17 924.56
At maturity.......................... 456.39 543.61 1,000.00
If converted to a semiannual coupon note following the occurrence of a
Tax Event, the Securities will be redeemable at the Restated Principal Amount
plus interest accrued and unpaid from, and including, the date of such
conversion to, but excluding, the Redemption Date.
(c) If less than all of the Securities are to be redeemed, the Company
shall select the Securities to be redeemed pro rata. If any Security selected
for redemption is thereafter surrendered for conversion in part, the converted
portion of such Security shall be deemed (so far as may be), solely for purposes
of determining the aggregate Principal Amount of Securities to be redeemed by
the Company, the portion selected for redemption. Nothing in this paragraph 3
shall affect the right of any Holder to convert any Security pursuant to
paragraph 6 hereof.
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(d) Provisions of this Security that apply to the redemption of all of a
Security also apply to the redemption of any portion of such Security.
(e) At least 30 days but not more than 60 days before a Redemption Date,
the Company shall cause notice of redemption to be mailed, by first-class mail,
postage prepaid, to each Holder of Securities at such Holder's address appearing
on the register maintained by the Company. Such notice shall identify the
Securities to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the Conversion Price in effect on the date of such notice;
(iv) that Securities called for redemption may be converted at
any time prior to the close of business on the Redemption Date;
(v) that Securities called for redemption must be surrendered to
the Company to collect the Redemption Price and the procedures to be
followed to so surrender such Securities;
(vi) if fewer than all the outstanding Securities are to be
redeemed, the identification and Principal Amounts of the particular
Securities to be redeemed;
(vii) that, unless the Company defaults in payment of the
Redemption Price, Original Issue Discount on the Securities called for
redemption and interest, if any, will cease to accrue on and after the
Redemption Date;
(viii) that Holders whose Securities are being redeemed only in
part will, without charge, be issued a new Security equal in Principal
Amount to the unredeemed portion of the Securities; and
(ix) that the Redemption Price for any Security called for
redemption will be paid one Business Day following the later of (x) the
Redemption Date and (y) the date such Security is surrendered to the
Company.
(f) Once notice of redemption is given, Securities called for redemption
shall become due and payable on the Redemption
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Date and at the Redemption Price stated in such notice, except for Securities
that are converted. The Redemption Price for the Securities called for
redemption shall be paid one Business Day following the later of (x) the
Redemption Date and (y) the date such Securities are surrendered to the Company.
(g) Receipt by the Company of the Securities called for redemption prior
to, on or after the Redemption Date shall be a condition to the receipt by the
Holder of the Redemption Price therefor.
(h) Upon surrender of a Security that is redeemed in part, the Company
shall, without charge, execute and deliver to the Holder a new Security equal in
Principal Amount to the unredeemed portion of such Security.
4. PURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER
(a) Purchase at the Option of the Holder. The Company shall be obligated
to purchase, at the option of the Holder, the Securities held by such Holder on
the following purchase dates (each, a "Purchase Date") and at the following
purchase prices per $1,000 Principal Amount (each, a "Purchase Price"), which
Purchase Prices reflect accrued Original Issue Discount to each such date. Such
Purchase Prices may be paid, at the option of the Company, in cash or by the
issuance and delivery of shares of Common Stock, subject to the conditions set
forth in paragraph 4(a)(iv) hereof.
(2)
Accrued
(1) Original (3)
Security Issue Purchase
Issue Discount Price
Purchase Date Price At 8.0% (1) + (2)
------------- -------- -------- ---------
November 9, 2002.......... 456.39 168.21 624.60
November 9, 2005.......... 456.39 333.92 790.31
If, prior to the Purchase Date, the Securities have been converted to a
semiannual coupon note following the occurrence of a Tax Event, the Purchase
Price will be equal to the Restated Principal Amount plus interest accrued and
unpaid from, and including, the date of such conversion to, but excluding, the
Purchase Date.
(i) in order to have Securities purchased pursuant to this
paragraph 4(a), the Holder shall (x) deliver to the Company (for each
Security or portion thereof to be
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purchased) a written notice of purchase in the form attached to this
Security as Annex A (a "Purchase Notice") at any time on or prior to the
close of business on such Purchase Date and (y) surrender such
Securities to the Company prior to, on or after the Purchase Date, such
surrender being a condition to receipt by the Holder of the Purchase
Price therefor.
Provisions of this Security that apply to the purchase of all of
a Security also apply to the purchase of any portion of such Security.
Subject to the right of a Holder to convert Securities as to
which a Purchase Notice has been delivered into Common Stock at any time
prior to the close of business on the Purchase Date, such Holder may not
withdraw such Purchase Notice.
Any purchase of Securities contemplated pursuant to this
paragraph 4(a) shall be consummated by the delivery of the Purchase
Price to be received by the Holder (in cash or Common Stock, as the case
may be) one Business Day following the later of (x) the Purchase Date
and (y) the date such Securities are surrendered to the Company.
(ii) The Securities to be purchased pursuant to this paragraph
4(a) may be paid for, at the option of the Company, in cash or Common
Stock, subject to the conditions set forth in paragraph 4(a)(iv) hereof.
The Company shall designate, in the Company Notice (as defined below)
delivered pursuant to paragraph 4(a)(v) hereof, whether the Company will
purchase the Securities for cash or Common Stock; provided that the
Company will pay cash for fractional shares of Common Stock pursuant to
paragraph 4(a)(iv)(A) hereof. The Company may not change its election
with respect to the consideration to be paid once the Company has given
the Company Notice, except pursuant to paragraph 4(a)(iv)(B) hereof.
(iii) On each Purchase Date, if the Company Notice shall state
that the Company will purchase Securities for cash, the Securities in
respect of which a Purchase Notice has been given shall be purchased by
the Company with cash in an amount equal to the aggregate Purchase Price
of such Securities.
(iv) On each Purchase Date, if the Company Notice shall state
that the Company will purchase Securities for
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Common Stock, the Securities in respect of which a Purchase Notice has
been given shall be purchased by the Company by the issuance of a number
of whole shares of Common Stock equal to the quotient obtained by
dividing (x) the amount of cash to which the Holder would have been
entitled had the Company elected to pay the Purchase Price of such
Securities in cash by (y) the average of the Closing Prices of the
Common Stock for the 20 consecutive trading days ending on and including
the second trading day immediately preceding the Purchase Date, subject
to paragraph 4(a)(iv)(A) hereof.
(A) The Company will not issue a fractional share of Common Stock
in payment of the Purchase Price. Instead, the Company will pay cash in
an amount equal to the current market value of the fractional share. The
current market value of a fraction of a share of Common Stock shall be
determined by multiplying the average of the Closing Prices of the
Common Stock for the 20 consecutive trading days ending on and including
the second trading day immediately preceding the Purchase Date by such
fraction and rounding to the nearest whole cent, with one-half cent
being rounded upward. It is understood that if a Holder elects to have
more than one Security purchased, the number of whole shares of Common
Stock shall be based on the aggregate amount of Securities to be
purchased.
(B) The Company's right to elect to purchase the Securities of
any Holder through the issuance of shares of Common Stock shall be
conditioned upon the following: (x) assuming compliance with all
applicable state securities or "Blue Sky" laws, and assuming the
accuracy of the statements of such Holder set forth in the Purchase
Notice, the issuance of such shares of Common Stock shall be exempt from
the registration requirements of Section 5 of the Securities Act, (y) no
consent, approval, authorization or order of any court or governmental
agency or body or third party shall be required for the issuance by the
Company of such shares of Common Stock and (z) such Holder shall have
received an Opinion of Counsel (which shall be included with the Company
Notice) stating that the terms of the issuance of such Common Stock are
in conformity with this paragraph 4(a), that such Common Stock has been
duly authorized and, upon issuance, will be validly issued,
nonassessable
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and fully paid, will not be issued in violation of any preemptive or
similar rights and will be free of any liens, encumbrances or
restrictions on transfer imposed by the Company other than those imposed
by the Securities Act and applicable state securities or "Blue Sky" laws
(provided that such Opinion of Counsel may state that, insofar as it
relates to the absence of preemptive or similar rights, it is given upon
the best knowledge of such counsel) and that clause (x) of this
paragraph 4(a)(iv)(B) has been satisfied.
(C) if the conditions set forth in paragraph 4(a)(iv)(B) hereof
are not satisfied as of the Purchase Date, and the Company shall have
elected to purchase the Securities through the issuance of shares of
Common Stock, the Company shall, without further notice, pay the
Purchase Price in cash.
(v) The Company shall cause a notice of its election to pay the Purchase
Price with cash or Common Stock (the "Company Notice") to be sent by first-class
mail, postage prepaid, to the Holders at their addresses appearing in the
register maintained by the Company. The Company Notice shall be sent to Holders
on a date not less than 20 Business Days prior to the Purchase Date (such date
being herein referred to as the "Company Notice Date"); provided that, in the
event that the Company shall not have delivered the Company Notice on or prior
to the Company Notice Date, the Company shall be deemed to have irrevocably
elected to pay the Purchase Price in cash. The Company Notice shall state the
manner of payment elected and shall contain the following information:
In the event that the Company has elected to pay the Purchase Price with
Common Stock, the Company Notice shall state that each Holder will receive
Common Stock (except for any cash amount to be paid in lieu of fractional
shares) in accordance with this paragraph 4(a) and shall be accompanied by the
Opinion of Counsel described in paragraph 4(a)(iv)(B) hereof.
In any case, each Company Notice will include the Purchase Notice to be
completed by the Holder and shall state:
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(A) the Purchase Price on such Purchase Date and the
Conversion Price in effect on the date of the Company Notice;
(B) that Securities must be surrendered to the Company
to collect payment and any procedures to be followed in so
surrendering the Securities;
(C) that Securities as to which a Purchase Notice has
been given may be converted at any time prior to the close of
business on the applicable Purchase Date;
(D) that, unless the Company defaults in the payment of
the Purchase Price, Original Issue Discount on all Securities in
respect of which a Purchase Notice has been delivered or
interest, if any, will cease to accrue on and after the Purchase
Date;
(E) that Holders whose Securities are being purchased
only in part will, without charge, be issued a new Security
equal in Principal Amount to the unpurchased portion of the
Securities; and
(F) that the Purchase Price for any Security as to which
a Purchase Notice has been given will be paid one Business Day
following the later of (x) the Purchase Date and (y) the date
such Security is surrendered to the Company.
(vi) All shares of Common Stock delivered upon purchase of the
Securities shall be newly issued shares or treasury shares, shall be
duly and validly issued, fully paid and nonassessable, shall not be
issued in violation of any preemptive or similar rights and shall be
free of any liens, encumbrances or restrictions on transfer other than
those imposed by the Securities Act and applicable state securities or
"Blue Sky" laws.
(vii) Receipt of such Security by the Company prior to, on or
after the Purchase Date shall be a condition to the receipt by the
Holder of the Purchase Price therefor.
(viii) on the Business Date immediately following the later of
(x) the Purchase Date and (y) the date on which such Securities are
surrendered to the Company, the Company shall deliver to each Holder
entitled to receive Common Stock a certificate for the number of full
shares of
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Common Stock issuable in payment of the Purchase Price and cash in lieu
of any fractional shares.
(ix) If a Holder is paid in Common Stock, the Company shall pay
any documentary, stamp or similar issue or transfer tax due on such
issuance of Common Stock.
(x) Upon surrender of a Security that is to be purchased only in
part, the Company shall, without charge, execute and deliver to the
Holder a new Security equal in Principal Amount to the unpurchased
portion of such Security.
(b) Purchase at the Option of the Holder upon Company Change of Control.
Upon a Change of Control of the Company, the Company shall be obligated to make
an offer to purchase all outstanding Securities (the "Company Change of Control
Offer") at a purchase price per $1,000 Principal Amount (the "Company Change of
Control Purchase Price") equal to the sum of (x) the Issue Price plus (y)
accrued Original Issue Discount to the Company Change of Control Payment Date.
If, prior to the Company Change of Control Payment Date, the Securities have
been converted to a semiannual coupon note following the occurrence of a Tax
Event, the Company Change of Control Purchase Price will be equal to the
Restated Principal Amount plus interest accrued and unpaid from, and including,
the date of such conversion to, but excluding, the Company Change of Control
Payment Date.
(i) within 10 days after the occurrence of a Change of Control of
the Company, the Company shall cause a notice of the Company Change of
Control Offer (the "Company Change of Control Offer Notice") to be sent
by first-class mail, postage prepaid, to the Holders at their addresses
appearing in the register maintained by the Company, stating:
(A) the event or events causing such Change of Control
of the Company and the date such Change of Control occurred;
(B) that the Company Change of Control Offer is being
made pursuant to this paragraph 4(b);
(C) the Company Change of Control Purchase Price and the
purchase date (which shall be a Business Day no earlier than 10
days nor later than 30
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days from the date such notice is mailed (the "Company Change of
Control Payment Date"));
(D) that a Company Change of Control Purchase Notice (as
defined below) must be delivered to the Company on or prior to
the close of business on the Company Change of Control Payment
Date and that Securities must be surrendered to the Company
prior to, on or after the Company Change of Control Payment Date
to collect payment, including any procedures to be followed in
so surrendering the Securities;
(E) that any Security as to which a Company Change of
Control Purchase Notice has not been delivered will continue to
accrue Original Issue Discount or interest, if any;
(F) the Conversion Price in effect on the date of the
Company Change of Control Offer Notice and any adjustments
thereto resulting from such Change of Control;
(G) that the Securities as to which a Company Change of
Control Purchase Notice has been given may be converted into
Common Stock at any time prior to the close of business on the
Company Change of Control Payment Date;
(H) that, unless the Company defaults in the payment of
the Company Change of Control Payment, Original Issue Discount
on all Securities as to which a Company Change of Control
Purchase Notice has been delivered or interest, if any, will
cease to accrue on and after the Company Change of Control
Payment Date;
(I) that Holders whose Securities are being purchased
only in part will, without charge, be issued a new Security
equal in Principal Amount to the unpurchased portion of the
Securities; and
(J) that the Company Change of Control Purchase Price
for any Security as to which a Company Change of Control
Purchase Notice has been given will be paid one Business Day
following the later of (x) the Company Change of Control Payment
Date and (y) the date such Security is surrendered to the
Company.
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(ii) A Holder may elect to have its Securities purchased pursuant
to a Company Change of Control Offer upon delivery of a written notice
of purchase (the "Company Change of Control Purchase Notice") to the
Company at any time prior to the close of business on the Company Change
of Control Payment Date, stating:
(A) the certificate number of each Security which the
Holder will deliver to be purchased; and
(B) the portion of the Principal Amount of such Security
which the Holder has elected to have purchased.
(iii) Receipt of such Security by the Company prior to, on or
after the Company Change of Control Payment Date shall be a condition to
the receipt by the Holder of the Company Change of Control Purchase
Price therefor.
(iv) Provisions of this Security that apply to the purchase of
all of a Security also apply to the purchase of any portion of such
Security.
(v) Any purchase of Securities contemplated pursuant to this
paragraph 4(b) shall be consummated by the delivery of the Company
Change of Control Purchase Price to be received by the Holder one
Business Day following the later of (x) the Company Change of Control
Payment Date and (y) the date such Securities are surrendered to the
Company.
(vi) If any Security is to be purchased only in part, the Company
shall, without charge, issue to the Holder a new Security equal in
Principal Amount to the unpurchased portion of such Security.
(vii) The Company will comply with the requirements of Section
14(e) under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Securities pursuant
to a Company Change of Control Offer. To the extent that the provisions
of any securities laws or regulations conflict with the provisions of
this paragraph 4(b), the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached
its obligations under this paragraph 4(b) by virtue thereof.
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5. PURCHASE AT THE OPTION OF THE COMPANY UPON ELAN CHANGE OF CONTROL
(a) Upon a Change of Control of Elan occurring prior to November 9,
2001, the Company may, at its option, repurchase (the "Elan Change of Control
Purchase") the Securities held by Elan or any of its Affiliates on the date of
such Change of Control, in whole but not in part, at a cash purchase price per
$1,000 Principal Amount (the "Elan Change of Control Purchase Price") equal to
the greater of (i) the sum of (A) the Issue Price plus (B) accrued Original
Issue Discount to the Elan Change of Control Payment Date (provided that if,
prior to the Elan Change of Control Payment Date, the Securities have been
converted to a semiannual coupon note following the occurrence of a Tax Event,
the sum set forth in this clause (i) shall be the Restated Principal Amount plus
interest accrued and unpaid from, and including, the date of such conversion to,
but excluding, the Elan Change of Control Payment Date) and (ii) the product of
(a) the number of shares of Common Stock into which the Securities to be
redeemed may be converted pursuant to paragraph 6 hereof on the day immediately
preceding the Elan Change of Control Payment Date and (b) the average of the
Closing Prices of the Common Stock for the 20 consecutive trading days ending on
and including the second trading day immediately prior to the Elan Change of
Control Payment Date (as defined below); provided that, as a condition to any
such repurchase, the Company shall repurchase all, but not less than all, of the
Initial Shares, the Shares, the Conversion Shares and the License Shares, in
each case, held by Elan and its Affiliates on the date of such Change of
Control, pursuant to and in accordance with the terms of the Purchase Agreement.
(b) If an Elan Change of Control Purchase is to be made by the Company,
the Company shall, on or prior to the 10th day following receipt of an Elan
Change of Control Notice, cause an irrevocable notice of the Elan Change of
Control Purchase (the "Elan Change of Control Purchase Notice") to be sent by
first-class mail, postage prepaid, to Elan stating:
(i) that the Elan Change of Control Purchase is being made
pursuant to this paragraph 5;
(ii) the Elan Change of Control Purchase Price and the purchase
date (which shall be a Business Day no earlier than 10 days nor later
than 20 days from the date of the Elan Change of Control Purchase Notice
(the "Elan Change of Control Payment Date"));
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(iii) that the Elan Change of Control Purchase Price for any
Security as to which the Elan Change of Control Purchase Notice relates
will be paid on the Business Day following the later of (x) the Elan
Change of Control Payment Date and (y) the date such Security is
surrendered to the Company;
(iv) that Elan shall, and shall cause its Affiliates to,
surrender to the Company on or prior to the Elan Change of Control
Payment Date all Securities owned by any of them on the date of the
Change of Control of Elan and the procedures to be followed in so
surrendering such Securities; and
(v) that, unless the Company defaults in the payment of the Elan
Change of Control Purchase Price, original Issue Discount on all such
Securities or interest, if any, will cease to accrue on and after the
Elan Change of Control Payment Date and, effective upon the date of the
Change of Control of Elan, such Securities shall cease to be
convertible.
(c) In the event that the Company fails to deliver the Elan Change of
Control Purchase Notice on or prior to the 10th day following receipt of an Elan
Change of Control Notice pursuant to paragraph 5(b) hereof, such failure shall
be deemed to be a waiver by the Company of its right to repurchase the
Securities pursuant to this paragraph 5.
(d) Upon the giving of the Elan Change of Control Purchase Notice
pursuant to this paragraph 5, such notice may not be revoked by the Company and
all Securities as to which such Elan Change of Control Purchase Notice relates
shall become due and payable in accordance with this paragraph 5 at the Elan
Change of Control Purchase Price.
(e) Receipt of such Securities by the Company prior to, on or after the
Elan Change of Control Payment Date shall be a condition to the receipt by the
Holder of the Elan Change of Control Purchase Price therefor.
6. CONVERSION
(a) A Holder of a Security may, on or prior to November 9, 2008, convert
in whole at any time or in part from time to time such Security into Common
Stock; provided, however, that if a Security is called for redemption, the
Holder may convert it at any time before the Redemption Date. A Security
18
-15-
in respect of which the Holder has delivered a Purchase Notice or a Company
Change of Control Purchase Notice exercising the option of such Holder to
require the Company to purchase such Security may, notwithstanding such notice,
convert the Security in accordance with this paragraph 6 until the close of
business on the Payment Date or the Company Change of Control Payment Date, as
the case may be. Upon the occurrence of a Change of Control of Elan, the
Securities then held by Elan and its Affiliates may not be converted on or prior
to the 10th day following the giving of an Elan Change of Control Notice;
provided that, if an Elan Change of Control Purchase Notice is given by the
Company pursuant to paragraph 5(b) hereof, the Securities may not be converted
unless the Company defaults in the payment of the Elan Change of Control
Purchase Price for all Securities as to which such Elan Change of Control
Purchase Notice relates. Notwithstanding the foregoing, neither Elan nor any of
its Affiliates may convert any Security held by it if, at the time of such
conversion, Elan is in violation of Section 14(c) of the Purchase Agreement.
(b) This Security shall be convertible into a number shares of Common
Stock equal to (x) the Issue Price plus all accrued Original Issue Discount to
the applicable Conversion Date (as defined below) (provided that if, prior to
the applicable Conversion Date, the Securities have been converted to a
semiannual coupon note following the occurrence of a Tax Event, this clause (x)
shall be the Restated Principal Amount plus interest accrued and unpaid from,
and including, the date of such conversion to, but excluding, such Conversion
Date) provided by (y) $14.00, as adjusted to the Conversion Date (the
"Conversion Price"). Provisions of this Security that apply to conversion of all
of a Security also apply to conversion of a portion of such Security.
(c) The shares of Common Stock issuable upon conversion of this Security
shall, to the extent required, bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR PURSUANT TO A VALID EXEMPTION THEREFROM. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE
19
-16-
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S (SECTION 230.901 THROUGH SECTION 230.905, AND
PRELIMINARY NOTES). HEDGING TRANSACTIONS INVOLVING THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN A SECURITIES PURCHASE
AGREEMENT, DATED AS OF NOVEMBER 6, 1998, BY AND AMONG THE
COMPANY, ELAN INTERNATIONAL SERVICES, LTD. AND ELAN CORPORATION,
PLC, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER
OF SUCH SHARES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS WILL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.
(d) To convert this Security a Holder must (i) complete and duly sign a
conversion notice in the form attached hereto as Annex B (the "Conversion
Notice") and deliver such notice to the Company and (ii) surrender this Security
to the Company. The date on which a Holder of Securities satisfies all the
foregoing requirements is the conversion date (the "Conversion Date"). Not more
than three Business Days after the Conversion Date, the Company shall deliver to
the Holder a certificate for the number of full shares of Common Stock issuable
upon such conversion and cash in lieu of any fractional share. The Person in
whose name the certificate is registered shall be treated as a stockholder of
record on and after the Conversion Date; provided, however, that no surrender of
a Security on any date when the stock transfer books of the Company shall be
closed shall be effective to constitute the Person or Persons entitled to
receive the shares of Common Stock upon such conversion as the record holder or
holders of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the Person or Persons entitled to receive such shares of
Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; such conversion shall be at the Conversion Price in effect on the date
that such Security shall have been surrendered for conversion, as if the stock
transfer books of the Company had not been closed. Upon conversion of a
Security, such Person shall no
20
-17-
longer be a Holder of such Security. Any Security for which a Conversion Notice
is delivered on any Business Day shall be deemed to be converted simultaneously
with all other Securities for which a Conversion Notice is delivered on such
Business Day, subject to the surrender of such Securities to the Company
pursuant to this paragraph 6.
(e) if a Holder converts more than one Security at the same time, the
number of shares of Common Stock issuable upon such conversion shall be based on
the sum of (x) the aggregate Issue Price plus (y) the aggregate accrued Original
Issue Discount, in each case, of the Securities converted; provided that if,
prior to the applicable Conversion Date, the Securities have been converted to a
semiannual coupon note following the occurrence of a Tax Event, such conversion
shall be based on the sum of (x) the aggregate Restated Principal Amount plus
(y) the aggregate interest accrued and unpaid from, and including, the date of
such conversion to, but excluding, such Conversion Date. Upon surrender of a
Security that is converted in part, the Company shall execute and deliver to the
Holder a new Security in a denomination equal in Principal Amount to the
unconverted portion of the Security surrendered. If the last day on which a
Security may be converted is not a Business Day, such Security may be
surrendered to the Company on the next succeeding Business Day.
(f) The Company shall not issue a fractional share of Common Stock upon
conversion of a Security. Instead, the Company shall deliver cash in an amount
equal to the current market value of the fractional share. The current market
value of a fraction of a share shall be determined to the nearest 1/10,000th of
a share by multiplying the average of the Closing Prices of the Common Stock for
the 20 consecutive trading days immediately prior to the applicable Conversion
Date by such fraction and rounding to the nearest whole cent, with one-half cent
being rounded upward.
(g) If a Holder converts a Security, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon such conversion.
(h) The Company shall reserve out of its authorized but unissued Common
Stock a sufficient number of shares of Common Stock to permit the conversion of
the Securities. All shares of Common Stock delivered upon conversion of the
Securities shall be newly issued shares or treasury shares, shall be validly
issued, nonassessable and fully paid, shall not be issued in violation of any
preemptive or similar rights and shall be
21
-18-
free of any liens, encumbrances or restrictions on transfer imposed by the
Company other than those imposed by the Securities Act and applicable state
securities or "Blue Sky" laws. The Company shall cause all such reserved shares
of Common Stock to be listed on the Nasdaq National Market or any other United
States securities exchange or market where the Common Stock is principally
traded.
(i) The Conversion Price shall be adjusted from time to time by the
Company as follows:
(i) In case the Company shall, at any time or from time to time
on or after the Issue Date, (A) pay a dividend or make a distribution on
its Common Stock in shares of Common Stock, (B) subdivide its
outstanding Common Stock into a greater number of shares, (B) combine
its outstanding Common Stock into a smaller number of shares or (D)
issue by reclassification of its Common Stock any other shares of its
Capital Stock, then, in each such case, the Conversion Price in effect
immediately prior to such action shall be adjusted so that the Holder of
any Security thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock or other Capital Stock of
the Company which such Holder would have owned or have been entitled to
receive after the happening of any of the events described above had
such Security been converted immediately prior to the happening of such
event. If any dividend or distribution of the type described in clause
(A) above is not so paid or made, the Conversion Price shall again be
adjusted to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. An adjustment made
pursuant to this paragraph 6(i)(i) shall become effective immediately
after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case
of subdivision, combination or reclassification. If, after an adjustment
made pursuant to this paragraph 6(i)(i), the Holder of any Security
thereafter converted shall become entitled to receive shares of two or
more classes of Capital Stock of the Company, the board of directors of
the Company shall determine the allocation of the adjusted Conversion
Price between or among such classes of Capital Stock, which
determination shall be final and binding on all Holders. After such
allocation, the Conversion Price of each class of Capital Stock of the
Company shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this paragraph 6(i).
22
-19-
(ii) If, at any time or from time to time on or after the Issue
Date, the Company issues or sells any Common Stock for consideration in
an amount per share less than the average of the Closing Prices of the
Common Stock for the 20 consecutive trading days ending on and including
the second trading day immediately prior to such issuance or sale, the
Conversion Price shall be adjusted in accordance with the following
formula:
P
-
E' = E x O + M
-----
A
where:
E' = the adjusted Conversion Price.
E = the then current Conversion Price.
O = the number of shares of Common stock outstanding
immediately prior to the issuance or sale of such
additional shares of Common Stock.
P = the aggregate consideration received for the issuance
or sale of such additional shares of Common Stock.
M = the average Closing Prices of the Common Stock for the
20 consecutive trading days ending on and including the
second trading day immediately prior to the date of the
issuance or sale of such additional shares of Common
Stock.
A = the number of shares of Common Stock outstanding
immediately after the issuance or sale of such
additional shares of Common Stock.
The adjustments shall be made successively whenever any such
issuance or sale is made, and shall become effective immediately after
such issuance or sale.
This paragraph 6(i)(ii) does not apply to:
(A) the issuance of the License Shares pursuant to and
in accordance with the License Agreement and the Purchase
Agreement;
23
-20-
(B) the conversion of the Securities or the conversion,
exercise or exchange of any other securities convertible into, or
exercisable or exchangeable for, Common Stock;
(C) the issuance of Common Stock pursuant to a valid and
binding written agreement with any Person, the terms of which
provide that such Common Stock is to be issued on a date after
the execution of such agreement and upon the occurrence of
specified events (other than solely the passage of time);
(D) the issuance Common Stock to the shareholders of any
Person which mergers into the Company or any Subsidiary of the
Company in proportion to such shareholders' ownership of the
securities of such Person, upon such merger; or
(E) Common Stock issued in a bona fide public offering
pursuant to a firm commitment or "best efforts" underwriting.
(iii) If, at any time or from time to time on or after the Issue
Date, the Company shall issue rights, options or warrants to all holders
of its Common Stock entitling them (for a period expiring within 60 days
after the record date mentioned below) to subscribe for or purchase
shares of Common Stock at a Price per share less than the greater of (x)
the average of the Closing Prices of the Common Stock for the 20
consecutive trading days ending on and including the second trading day
immediately prior to the record date and (y) the then current Conversion
Price, the Conversion Price shall be adjusted in accordance with the
following formula:
N x P
-----
E' = E x O + M
-----
O + N
where:
E' = the adjusted Conversion Price.
E = the then current Conversion Price.
O = the number of shares of Common Stock outstanding on
the record date fixed for determination of
24
-21-
stockholders entitled to participate in such issuance.
N = the number of additional shares of Common Stock
offered pursuant to such issuance.
P = the offering price per share of such additional shares
of Common Stock.
M = the greater of (x) the average of the Closing Prices
of the Common Stock for the 20 consecutive trading days
ending on and including the second trading day
immediately prior to the record date and (y) the then
current Conversion Price.
The adjustment shall be made successively whenever any such
issuance is made and shall become effective immediately after the record
date fixed for the determination of stockholders entitled to participate
in such issuance.
To the extent that shares of Common Stock are not delivered after
the expiration of such rights, options or warrants, the Conversion Price
shall be readjusted to the Conversion Price which would then be in
effect had the adjustments made upon the issuance of such rights,
options or warrants been made on the basis of delivery of only the
number of shares of Common Stock actually delivered. If such rights,
options or warrants are not so issued, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect if
the record date for the determination of stockholders entitled to
participate in such distribution had not been fixed. In determining
whether any rights, options or warrants entitle the Holders to subscribe
for or purchase shares of Common Stock at a price per share less than
the average of the Closing Prices of the Common Stock for the 20
consecutive trading days ending on and including the second trading day
immediately preceding the record date, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received by the Company for such rights,
options or warrants, the value of such consideration, if other than
cash, to be determined in good faith by the board of directors of the
Company (irrespective of the accounting treatment thereof), which
determination shall be final and binding on all Holders. Such
determination shall be described in a board resolution. Notwithstanding
the foregoing provisions of this paragraph 6(i)(iii), an
25
-22-
event which would otherwise give rise to an adjustment under this
paragraph 6(i)(iii) shall not give rise to such an adjustment if the
Company includes the Holders in such distribution on a pro rata basis as
if each such Holder held the number of shares of Common Stock into which
such Holder's Securities are convertible on the record date fixed for
determination of the stockholders entitled to participate in such
distribution and with the same notice as is provided to such
stockholders.
This paragraph 6(i)(iii) does not apply to transactions described
in paragraph 6(i)(iv).
(iv) If, at any time or from time to time on or after the Issue
Date, the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock any class of Capital Stock of the Company
(other than Common Stock) or evidences of its indebtedness or assets
(excluding cash dividends or other cash distributions from current or
retained earnings other than any Extraordinary Cash Dividend) or rights,
options or warrants to subscribe for or purchase any of the foregoing,
the Conversion Price shall be adjusted in accordance with the following
formula:
E' = E x M - F
-----
M
where
E' = the adjusted Conversion Price.
E = the then current Conversion Price.
M = the greater of (x) the average of the Closing Prices
of the Common Stock for the 20 consecutive trading days
ending on and including the second trading day
immediately prior to the record date mentioned below and
(y) the then current Conversion Price.
F = the fair market value on the record date fixed for
determination of the stockholders entitled to
participate in such distribution of the assets,
securities, rights, options or warrants applicable to
one share of Common stock. The board of directors shall
determine such fair market value in good faith
(irrespective of the
26
-23-
accounting treatment thereof), which determination shall
be final and binding on the Holders. Such determination
shall be described in a board resolution.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date fixed for the determination of stockholders entitled to
receive such distribution. To the extent that shares of Common Stock are
not so delivered after the expiration of such rights, options, or
warrants, the Conversion Price shall be readjusted to the Conversion
Price which would then be in effect had the adjustment made upon the
issuance of such rights, options or warrants been made on the basis of
the delivery of only the number of shares of Common Stock actually
delivered. Notwithstanding the foregoing provisions of this paragraph
6(i)(iv), an event which would otherwise give rise to an adjustment
under this paragraph 6(i)(iv) shall not give rise to such an adjustment
if the Company includes the Holders in such distribution on a pro rata
basis as if each such Holder held the number of shares of Common Stock
into which such Holder's Securities are convertible on the record date
fixed for determination of the stockholders entitled to participate in
such distribution and with the same notice as is provided to such
stockholders.
This paragraph 6(i)(iv) does not apply to any transaction
described in paragraph 6(i)(iii) hereof.
(v) If, at any time or from time to time on or after the Issue
Date, the Company shall (x) enter into any valid and binding written
agreement with any Person to issue or sell Common Stock on a date after
the execution of such agreement and upon the occurrence of specified
events (other than solely the passage of time) or (y) issue or sell any
securities convertible into, or exercisable or exchangeable for, Common
Stock, in each case, for consideration per share of Common Stock less
than the average of the Closing Prices of the Common Stock for the 20
consecutive trading days ending on and including the second trading day
immediately prior to, in the case of clause (x), the date of execution
of such agreement, and, in the case of clause (y), the date of such
issuance or sale, the Conversion Price shall be adjusted in accordance
with the following formula:
27
-24-
P
-
E' = E x O + M
-----
O + D
where:
E' = the adjusted Conversion Price.
E = the then current Conversion Price.
O = the number of shares of Common Stock outstanding
immediately prior to, in the case of clause (x) above,
the date of execution of such agreement, and, in the
case of clause (y) above, the issuance or sale of such
securities.
P = (a) in the case of clause (x) above, the minimum
aggregate amount of consideration payable to the Company
upon the issuance or sale of such Common Stock
(including the minimum aggregate amount of cash payments
to be made by the Company to the other Person or Persons
party to such agreement in lieu of which such Common
Stock may be issued) and (b) in the case of clause (y)
above, the aggregate consideration received for the
issuance or sale of such securities plus the minimum
aggregate amount of additional consideration, other than
the surrender of such securities, payable to the Company
upon conversion, exercise or exchange of such
securities.
M = the Closing Prices of the Common stock for the 20
consecutive trading days ending on and including the
second trading day immediately prior to, in the case of
clause (x) above, the date of execution of such
agreement, and, in the case of clause (y) above, the
date of such issuance or sale.
D = the maximum stated number of shares deliverable
pursuant to such agreement or upon conversion, exercise
or exchange of such securities, as the case may be.
The adjustment shall be made successively whenever any such
agreement is executed or such issuance or sale is made, and shall become
effective immediately after the execution of such agreement or such
issuance or sale.
28
-25-
If all of the Common Stock deliverable pursuant to any such
agreement or upon conversion, exercise or exchange of such securities
have not been issued upon the expiration or termination of such
agreement or when such securities are no longer outstanding, as the case
may be, then the Conversion Price shall be readjusted to the Conversion
Price which would then be in effect had the adjustment made upon the
execution of such agreement or the issuance or sale of such securities
been made on the basis of the actual number of shares of Common Stock
issued pursuant to such agreement or upon conversion, exercise or
exchange of such securities.
This paragraph 6(i)(v) does not apply to:
(A) any stock options issued to employees and
consultants (other than officers or directors) of the Company
pursuant to any employee stock option or purchase plan or
program approved by the board of directors of the Company;
(B) the issuance of the Securities; or
(C) any transaction described in paragraph 6 (i) (iii)
or (iv).
In the event of any change in the number of shares of Common
Stock deliverable, or in the consideration payable to the Company,
pursuant to any such agreement or upon the conversion, exercise or
exchange of such securities, including, but not limited to, a change
resulting from any anti-dilution provisions thereof, the Conversion
Price shall, on the date of such change, be recomputed to reflect such
change.
(vi) For purposes of any computation respecting consideration
received pursuant to paragraph 6(i)(ii) and (v) hereof, the following
shall apply:
(A) in the case of the issuance or sale of shares of
Common Stock for cash, the consideration shall be the amount of
such cash; provided that in no event shall any deduction be made
for any commissions, discounts or other expenses incurred by the
Company in connection therewith;
29
-26-
(B) in the case of the issuance or sale of shares of
Common Stock for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed to be
the fair market value thereof as determined in good faith by the
board of directors of the Company (irrespective of the
accounting treatment thereof), which determination shall be
final and binding on the Holders. Such determination shall be
described in a board resolution; and
(C) in the case of any agreement referred to in clause
(x) of paragraph 6(i)(v) hereof or the issuance or sale of
securities referred to in clause (y) of paragraph 6(i)(v)
hereof, the consideration, if any, to be received by the Company
for the issuance or sale of Common Stock pursuant to such
agreement or upon the conversion, exercise or exchange of such
securities shall determined in the same manner as provided in
clauses (A) and (B) of this paragraph 6(i)(vi).
(vii) No adjustment in the Conversion Price need be made unless
the adjustment would require a decrease of at least 1% in the Conversion
Price then in effect; provided that any adjustment that would otherwise
be required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this paragraph 6(i)
shall be made to the nearest cent or to the nearest 1/10,000th of a
share, as the case may be.
(viii) No adjustment need be made for rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or
interest. No adjustment need be made for a change in the par value or no
par value of the Common Stock. To the extent that the Securities become
convertible into cash, no adjustment need be made thereafter as to the
amount of cash into which such Securities are convertible. Neither
Original Issue Discount nor interest will accrue on cash.
(ix) Whenever the Conversion Price is adjusted, the Company shall
promptly mail to each Holder, by first-class mail, postage prepaid, at
its address appearing on the register maintained by the Company, a
notice of the adjustment.
(x) In case:
30
-27-
(A) the Company shall take any action that would require
an adjustment in the Conversion Price pursuant to paragraph
6(i)(i), (ii), (iii), (iv) or (v) hereof;
(B) of any event described in paragraph 6(i)(xi) hereof;
or
(C) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
the Company shall cause to be mailed to each Holder, by first-class
mail, postage prepaid, at its address appearing on the register
maintained by the Company, as promptly as possible but in any event at
least 15 days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the
purpose of any dividend or distribution or (y) the date on which any
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
winding-up.
(xi) In the event of: (a) any reclassification or change of
outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as
a result of a subdivision or combination), (b) any consolidation or
amalgamation with, or merger with or into, another Person as a result of
which holders of Common Stock shall be entitled to receive cash,
securities or other property with respect to or in exchange for such
Common Stock or (c) any sale, transfer, assignment, lease, conveyance or
other disposition of all or substantially all of the assets of the
Company (in one transaction or series of related transactions) to any
other Person as a result of which holders of Common Stock shall be
entitled to receive cash, securities or other property with respect to
or in exchange for such Common Stock, then the Company or the Person (if
other than the Company) formed by such consolidation or amalgamation or
into which the Company is merged or to which the properties and assets
are sold, assigned, transferred, leased, conveyed or otherwise disposed
of, as the case may be, shall expressly agree in writing, in form and
substance satisfactory to a majority of Holders of Securities
31
-28-
then outstanding (excluding Securities then held by the Company or any
of its Affiliates), that each Security shall be convertible into the
kind and amount of securities, cash or other assets which the Holder of
such Security would have owned immediately after such reclassification,
change, consolidation, amalgamation, merger, sale, transfer, assignment,
lease, conveyance or other disposition if such Holder had exercised such
Security immediately before the record date or effective date, as the
case may be, of the transaction. Such written agreement shall provide
for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this paragraph 6(i).
The Company shall cause notice of the execution of such written
agreement to be mailed to each Holder, by first-class mail, postage
prepaid, at its address appearing on the register maintained by the
Company, within 20 days after execution thereof. Failure to deliver such
notice shall not affect the legality or validity of such agreement.
The above provisions of this paragraph 7(i)(xi) shall similarly
apply to successive reclassifications, changes, consolidations,
amalgamations, mergers, sales, transfers, assignments, leases,
conveyances or other dispositions.
If this paragraph 6(i)(ix) applies to any event or occurrence,
paragraph 6(i)(i), (ii), (iii), (iv) and (v) hereof shall not apply.
(xii) Rights or warrants distributed by the Company to all
holders of Common Stock entitling the holders thereof to subscribe for
or purchase shares of the Company's Capital Stock (either initially or
under certain circumstances), which rights or warrants, until the
occurrence of a specified event or events (each, a "Trigger Event"): (i)
are deemed to be transferred with such shares of Common Stock, (ii) are
not exercisable and (iii) are also issued in respect of future issuances
of Common Stock, shall be deemed not to have been distributed for
purposes of this paragraph 6(i) (and no adjustment to the Conversion
Price under this paragraph 6(i) will be required) until the occurrence
of the earliest Trigger Event, whereupon such rights and warrants shall
be deemed to have been distributed and an appropriate adjustment (if any
is required) to the Conversion Price shall be made under this paragraph
6(i). If any such right or warrant, including
32
-29-
any such existing rights or warrants distributed prior to the Issue
Date, are subject to events, upon the occurrence of which such rights or
warrants become exercisable to purchase different securities, evidences
of indebtedness or other assets, then the date of the occurrence of any
and each such event shall be deemed to be the date of distribution with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of
the holders thereof). In addition, in the event of any distribution (or
deemed distribution) of rights or warrants, or any Trigger Event or
other event (of the type described in the preceding sentence) with
respect thereto that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Price
under this paragraph 6(i) was made, (A) in the case of any such rights
or warrants which shall have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be
readjusted upon such final redemption or repurchase to give effect to
such distribution or Trigger Event, as the case may be, as though it
were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of Common Stock with
respect to such rights or warrants (assuming such holder had retained
such rights or warrants), made to all holders of Common Stock as of the
date of such redemption or repurchase and (B) in the case of such rights
or warrants which shall have expired or been terminated without exercise
by any holders thereof, the Conversion Price shall be readjusted as if
such rights and warrants had not been issued. Notwithstanding the
foregoing, no Holder shall be entitled to any adjustment in the
Conversion Price of the Notes held by such Holder pursuant to this
paragraph 6(i) if the applicable Trigger Event shall have been caused by
the acquisition of securities of the Company by such Holder or any of
its Affiliates.
(j) After an adjustment to the Conversion Price under paragraph 6(i),
(ii), (iii), (iv) or (v) hereof, any subsequent event requiring an adjustment
shall cause an adjustment to the Conversion Price as so adjusted.
(k) No adjustment shall be made pursuant to paragraph 6(i)(i), (ii),
(iii), (iv) or (v) hereof if, as a result thereof, the Conversion Price would be
increased.
33
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7. COVENANTS
(a) Payment of Securities. The Company shall promptly make all payments in
respect of the Securities on the dates and in the manner provided herein.
The Company shall, to the extent permitted by law, pay interest on overdue
amounts at the rate set forth in paragraph 1 of the Securities, which interest
on overdue amounts (to the extent that the payment of such interest shall be
legally enforceable) shall accrue from the date such amounts became overdue.
(b) SEC Reports. The Company shall deliver to each Holder, by first-class
mail, postage prepaid, at its address appearing on the register maintained by
the Company, at the time the Company distributes them to the holders of its
Common Stock, copies of its annual reports to shareholders and its proxy
statements. In addition, the Company shall deliver to Elan, by first-class mail,
postage prepaid, at its address appearing on the register maintained by the
Company, within 30 days after the Company files them with the SEC, copies of all
other information, documents and reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act (or any successor provision thereof). In the event that the Company
is at any time no longer subject to the reporting requirements of the Exchange
Act (or any such successor provision), it shall deliver to each Holder, by
first-class mail, postage prepaid, at its address appearing on the register
maintained by the Company, reports containing substantially the same information
as would have been required to be filed with the SEC had the Company continued
to have been subject to such reporting requirements, including, with respect to
annual information only, a report thereon by the Company's certified independent
public accountants as such would be required in such reports to the SEC and, in
each case, together with a management's discussion and analysis of financial
condition and results of operations as such would be so required. In such event,
such reports shall be so delivered at the time the Company would have been
required to provide such reports had it continued to have been subject to such
reporting requirements.
(c) Compliance Certificates; Notice of defaults.
(i) The Company shall deliver to each Holder, within 90 days after
the end of each fiscal year, an Officers'
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Certificate stating that a review of the activities of the Company and its
Subsidiaries during such fiscal year has been made under the supervision
of the signing Officers with a view to determining whether the Company has
kept, observed, performed and fulfilled its obligations under the
Securities, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge, the Company has
kept, observed, performed and fulfilled each and every covenant contained
in the Securities and is not in default in the performance or observance
of any of the terms, provisions and conditions contained in the Securities
(or, if a Default or Event of Default shall have occurred, describing all
such Defaults or Events of Default of which he or she may have knowledge
and what action the Company is taking or proposes to take with respect
thereto).
(ii) The Company shall, so long as any of the Securities are
outstanding, deliver to each Holder, forthwith upon any officer becoming
aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
(d) Further Instruments and Acts. Upon request of the Holders of at least
a majority in the aggregate Principal Amount of the outstanding Securities
(excluding Securities at the time owed by the Company and its Affiliates), the
Company will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
provisions of the Securities.
(e) Taxes. The Company shall, and shall cause each of its Subsidiaries to,
pay prior to delinquency all material taxes, assessments and governmental
levies, except as contested in good faith and by appropriate proceedings.
(f) Legal Existence. Subject to paragraph 8 hereof, the Company shall do
or cause to be done all things necessary to preserve and keep in full force and
effect its legal existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with their respective organizational
documents (as the same may be amended from time to time) and the rights (charter
and statutory), licenses and franchises of the Company and its Subsidiaries;
provided that the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its Subsidiaries if the board of directors of the Com-
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pany shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries, taken as a whole.
(g) Withholding Taxes. All transfers of Securities by the Holders thereof
and all payments made by the Company under or with respect to the Securities
(including the issuance of securities upon the conversion of the Securities)
shall be made free and clear of and without withholding or deduction for or on
account of any present or future Taxes, unless the Company is required to
withhold or deduct Taxes by law or by the interpretation or administration
thereof. If the Company is required by law or by the interpretation or
administration thereof to withhold or deduct any amount of Taxes in connection
with the Securities, such amount shall be withheld and deducted by the Company
without alteration of or increase in its obligations under the Securities;
provided, however, that, if the Holder thereof has delivered to the Company a
complete, manually-signed copy of Internal Revenue Service Form 1001 (or any
successor form) or Internal Revenue Service Form 4224 (or any successor form)
properly certifying to such Holder's entitlement to a complete exemption from
U.S. withholding Tax with respect to such payment under applicable United States
Treasury Regulations, such payment shall be made free and clear of and without
withholding or deduction for or on account of any Taxes. In connection with any
payment made by the Company under any Security which is made in whole or in part
through the delivery of shares of Common Stock of the Company (including upon
the conversion of the Securities), the amount required to be withheld or
deducted shall first be withheld or deducted from the amount of cash (up to the
total amount thereof) which would otherwise be paid at such time. Any additional
amount required to be withheld or deducted, unless otherwise agreed by the
Company and the Holder of a Security, shall be withheld and deducted by reducing
the number of shares of Common Stock to be delivered by that number of shares of
Common Stock equal to the remaining amount required to be withheld or deducted
divided by the Conversion Price in effect on the date of such payment.
(h) Line of Business. The Company and its Subsidiaries will not engage in
any businesses other than the business of researching, developing, marketing,
selling, manufacturing, distributing or licensing pharmaceutical, medical,
biologic, genetic or related products and services and financing activities
related solely thereto, including the businesses in which the Company and its
Subsidiaries are engaged on the Issue Date.
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(i) Use of Proceeds. The Company will use the gross proceeds from the
issuance of any Additional Notes in accordance with Section 1(b) of the Purchase
Agreement and otherwise in accordance with the Purchase Request related thereto.
(j) Maintenance of Properties; Insurance; Books and Records; Compliance
with Law.
(i) The Company shall, and shall cause each of its Subsidiaries to,
at all times cause all material properties used or useful in the conduct
of its business to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereto; provided
that, subject to the other provisions of the Securities, nothing in this
paragraph 7(j)(i) shall prevent the Company or any of its Subsidiaries
from selling, abandoning or otherwise disposing of any property (including
any lease of property) if in the judgment of the Company the same is no
longer useful in the business of the Company or such Subsidiary, as the
case may be.
(ii) The Company shall maintain, and shall cause to be maintained
for each of its Subsidiaries, insurance covering such risks as are usually
and customarily insured against by corporations similarly situated, in
such amounts as shall be customary for corporations similarly situated and
with such deductibles and by such methods as shall be customary and
reasonably consistent with past practice.
(iii) The Company shall, and shall cause each of its Subsidiaries
to, keep proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Company and each Subsidiary of the Company, in accordance
with U.S. generally accepted accounting principles consistently applied to
the Company and its Subsidiaries, taken as a whole.
(iv) The Company shall, and shall cause each of its Subsidiaries to,
comply with all statutes, laws, ordinances or government rules and
regulations to which they are subject, non-compliance with which would
materially adversely affect the business, prospects, earnings, prop-
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erties, assets or financial condition of the Company and its Subsidiaries,
taken as a whole.
8. SUCCESSOR CORPORATION
(a) The Company shall not consolidate with, amalgamate with, merge with or
into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets (as an entirety or substantially as an entirety
in one transaction or a series of related transactions), to any Person unless:
(i)(x) the Company shall be the continuing Person, or (y) the Person
(if other than the Company) formed by such consolidation or amalgamation
or into which the Company is merged or to which the properties and assets
of the Company are sold, assigned, transferred, leased, conveyed or
otherwise disposed of (in any case, the "Successor Company") shall be a
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and the Successor Company
shall expressly affirm, in writing, the due and punctual performance of
all of the terms, covenants, agreements and conditions of the Securities
to be performed or observed by the Company, and such obligations shall
remain in full force and effect; and
(i) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.
(b) In connection with any consolidation, amalgamation, merger or sale,
assignment, transfer, lease, conveyance or other disposition of assets
contemplated by this paragraph 8, prior to the consummation of such transaction
or transactions the Company shall deliver, or cause to be delivered, to each
Holder, by first-class mail, postage prepaid, at its address appearing in the
register maintained by the Company, an Opinion of Counsel stating that (i) such
consolidation, amalgamation, merger or sale, assignment, transfer, lease,
conveyance or other disposition of assets complies with this paragraph 8, (ii)
all conditions precedent herein provided for relating to such transaction or
transactions have been complied with and (iii) the affirmation provided for in
this paragraph 8 has been duly authorized, executed and delivered by the
Successor Company and the Securities are valid and legally binding obligations
of the Successor Company enforceable against it in accordance with their terms
(subject to bankruptcy, insolvency, re-
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organization and similar laws affecting the rights and remedies of creditors
generally and general equitable principles).
(c) For purposes of paragraph 8(a) and (b) hereof, the transfer (by sale,
assignment, lease, conveyance or other disposition, in a single transaction or
series of related transactions) of all or substantially all of the properties or
assets of one or more Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
(d) Upon any consolidation, amalgamation or merger, or any sale,
assignment, transfer, lease, conveyance or other disposition of all or
substantially all of the assets of the Company in accordance with this paragraph
8, the Successor Company shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Securities with the
same effect as if such Successor Company had been named as the Company in the
Securities, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under the Securities.
9. DEFAULTS AND REMEDIES
(a) An "Event of Default" occurs if:
(i) after exercise of its option pursuant to paragraph 12 hereof
following a Tax Event, the Company defaults in the payment of interest
upon any Security or delivery of any Tax Event Option related thereto,
when such interest becomes due and payable, and such default continues for
a period of 30 days;
(ii) the Company defaults in the payment of the Principal Amount,
Issue Price, accrued Original Issue Discount, Redemption Price, Purchase
Price, Company Change of Control Purchase Price or Elan Change of Control
Purchase Price on any Security when the same becomes due and payable at
its Stated Maturity, upon redemption, upon declaration, when due for
purchase by the Company or otherwise;
(iii) the Company defaults in the observance or performance of any
agreement, covenant, term or condition contained in any Security (other
than those referred to in clause (i) and (ii) above) and such failure
continues for 30 days after receipt by the Company of notice thereof
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(except in the case of a failure or default with respect to paragraph 8
hereof, which shall constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(iv) the Company defaults in any payment of principal of or
interest on any other obligation for money borrowed or the Company fails
to perform or observe any other agreement, covenant, term or condition
contained in any agreement under which any such obligation is created and
the effect of such default or failure is to cause, or the holder or
holders of such obligation (or a trustee on behalf of such holder or
holders), as a consequence of such default or failure shall take action to
cause, such obligation to become due prior to any stated maturity thereof;
provided that the aggregate amount of all obligations as to which such
acceleration shall occur is equal to or greater than $4.0 million;
(v) any final judgment or judgments which can no longer be
appealed for the payment of money in excess of $4.0 million (in excess of
amounts covered by insurance and as to which the insurer has acknowledged
coverage) shall be rendered against the Company or any Subsidiary thereof,
and shall not be discharged for any period of 60 consecutive days during
which a stay of enforcement shall not be in effect;
(vi) the Company or any Subsidiary thereof pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as they become due;
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
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(A) is for relief against either of the Company or any
Subsidiary thereof in an involuntary case,
(B) appoints a Custodian of either of the Company or any
Subsidiary thereof or for all or substantially all of the property
of either of the Company or any Subsidiary thereof, or
(C) orders the liquidation of either of the Company or any
Subsidiary thereof,
and the order or decree remains unstayed and in effect for 60 days; or
(viii) the Company fails to deliver shares of Common Stock (or cash
in lieu of fractional shares) when such Common Stock (or cash in lieu of
fractional shares) is required to be delivered, upon conversion of a
Security and such failure is not remedied for a period of 10 days.
(b) If an Event of Default (other than an Event of Default specified in
paragraph 9(a)(vi) or (vii) hereof occurs and is continuing, the Holders of at
least 25% in aggregate Principal Amount of the Securities at the time
outstanding (excluding Securities at the time owned by the Company and its
Affiliates) by notice to the Company, may declare the Issue Price and accrued
Original Issue Discount (or, if the Securities have been converted to a
semiannual coupon note following a Tax Event, the Restated Principal Amount and
accrued and unpaid interest) through the date of declaration on all the
Securities to be immediately due and payable. Upon such a declaration, such
Issue Price and accrued Original Issue Discount (or, if the Securities have been
converted to a semiannual coupon note following a Tax Event, the Restated
Principal Amount and accrued and unpaid interest) shall become and be due and
payable immediately. If an Event of Default specified in paragraph 9(a)(vi) or
(vii) hereof occurs and is continuing, the Issue Price and accrued Original
Issue Discount (or, if the Securities have been converted to a semiannual coupon
note following a Tax Event, the Restated Principal Amount and accrued and unpaid
interest) on all the Securities shall become and be immediately due and payable
without any declaration or other act on the part of any Holders. The Holders of
a majority in aggregate Principal Amount of the Securities at the time
outstanding (excluding Securities at the time owned by the Company (and its
Affiliates), by notice to the Company (and without notice to any other Holder),
may rescind an acceleration and its consequences if the rescission would not
conflict with any
41
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judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of the Issue Price and accrued Original Issue Discount
(or accrued and unpaid interest) that have become due solely as a result of
acceleration. No such rescission shall affect any subsequent or other Default or
Event of Default or impair any consequent right.
(c) If an Event of Default occurs and is continuing, any Holder may pursue
any available remedy to collect the payment of the Issue Price and accrued
Original Issue Discount (or, if the Securities have been converted to a
semiannual coupon note following a Tax Event, the Restated Principal Amount and
accrued and unpaid interest) on the Securities or to enforce the performance of
any provision of the Securities.
A delay or omission by any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of, or acquiescence in, the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
(d) The Holders of a majority in aggregate Principal Amount of the
Securities at the time outstanding (excluding Securities at the time owned by
the Company and its Affiliates), by notice to the Company (and without notice to
any other Holder), may waive an existing Default or Event of Default and its
consequences except (i) an Event of Default described in paragraph 9(a)(i), (ii)
or (viii) hereof or (ii) a Default in respect of a provision that under
paragraph 11 hereof cannot be amended without the consent of each Holder
affected. When a Default or Event of Default is waived, it is deemed cured, but
no such waiver shall extend to any subsequent or other Default or Event of
Default or impair any consequent right.
(e) Notwithstanding any other provision of the Securities, the right of
any Holder to receive payment of the Principal Amount, Issue Price, accrued
Original Issue Discount, Redemption Price, Purchase Price, Company Change of
Control Purchase Price, Elan Change of Control Purchase Price or interest, if
any, in respect of the Securities held by such Holder, on or after the
respective due dates expressed in the Securities and to convert the Securities
in accordance with paragraph 6 hereof, or to bring suit for the enforcement of
any such payment on or after such respective dates or the right to convert the
Securities, shall not be impaired or affected adversely without the consent of
each such Holder.
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(f) The Company covenants (to the extent it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive the Company from paying all or any portion of the Principal
Amount, Issue Price plus accrued Original Issue Discount, Redemption Price,
Purchase Price, Company Change of Control Purchase Price or Elan Change of
Control Purchase Price, in each case, in respect of Securities, or any interest
on such amounts, as contemplated herein, or which may affect the covenants or
the performance of the Securities; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Holders, but will suffer and permit the execution of
every power as though no such law had been enacted.
10. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
(a) The Company shall cause to be kept at its offices a register in which
the Company shall provide for the registration of Securities and of transfers of
Securities. Upon surrender for registration of transfer of any Security, the
Company shall execute, in the name of the designated transferee or transferees,
one or more Securities of a like aggregate Principal Amount and bearing such
restrictive legends as may be required by the terms of the Securities.
At the option of the Holder, and subject to the other provisions of the
Securities, Securities may be exchanged for other Securities of a like aggregate
Principal Amount, upon surrender of the Securities to be exchanged to the
Company. Whenever any Securities are so surrendered for exchange, and subject to
the other provisions of the Securities, the Company shall execute and deliver
the Securities which the Holder making the exchange is entitled to receive.
Every Security presented for registration of transfer or exchange shall be
accompanied by the written instrument of transfer in the form attached hereto as
Annex C, duly executed by the Holder thereof.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and subject to the same provisions as the Securities surrendered upon such
registration of transfer or exchange.
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Subject to paragraph 7(g) hereof and notwithstanding any other provision of
this Section 10(a), no transfer of any Security shall be permitted, and no
registration of transfer shall be effected unless, prior to the time of such
transfer or registration of transfer, the Holder has made arrangements
reasonably satisfactory to the Company for payment or reimbursement of any and
all Taxes which would, in the absence of payment by the transferor, be required
to be paid by the Company as a result of such transfer. No service charge shall
be made for any registration of transfer or exchange. The Company acknowledges
that Treasury Regulation Section 1.441-2(b)(3) (effective January 1, 1999) is
not applicable to any Security issued prior to January 1, 1999.
In the event of a redemption of the Securities, the Company will not be
required (i) to register the transfer of or exchange Securities for a period of
5 days immediately preceding the date notice of any redemption is given pursuant
to paragraph 3(e) hereof or (ii) to register the transfer of or exchange any
Security, or portion thereof, called for redemption.
(b) Except as permitted by this paragraph (b), each Security (and all
Securities issued in exchange therefor or substitution thereof) shall, so long
as appropriate, bear a legend (the "Legend") to substantially the following
effect (each, a "Transferred Restricted Security"):
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO A VALID EXEMPTION
THEREFROM.
THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS SUBJECT TO THE
CONDITIONS SPECIFIED IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF
NOVEMBER 6, 1998, BY AND AMONG THE COMPANY, ELAN INTERNATIONAL
SERVICES, LTD. AND ELAN CORPORATION, PLC, AND THE COMPANY RESERVES THE
RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF
WITHOUT CHARGE.
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At such time as any Transfer Restricted Security may be freely transferred
without registration under the Securities Act and without being subject to
transfer restrictions pursuant to the Securities Act, the Company shall permit
the Holder of such Transfer Restricted Security to exchange such Transfer
Restricted Security for a new Security which does not bear the applicable
portion of the Legend upon receipt of certification from such Holder
substantially in the form attached hereto as Annex D and, at the request of the
Company, upon receipt of an opinion of counsel addressed to the Company that the
transfer restrictions contained in the Legend are no longer applicable. In
addition, at such time as such Security is no longer subject to the transfer
conditions set forth in the Purchase Agreement, the Company shall permit the
Holder of such Security to exchange such Security for a new Security which does
not bear the portion of the Legend referring to such transfer conditions.
In addition to the Legend, until the expiration of the "one-year
distribution compliance period" within the meaning of Rule 903 of Regulation S
under the Securities Act, each Security (and all Securities issued in exchange
therefor or substitution thereof) shall bear a legend (the "Reg. S Legend") to
substantially the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S (SECTION 230.901 THROUGH SECTION 230.905,
AND PRELIMINARY NOTES). HEDGING TRANSACTIONS INVOLVING THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
At the expiration of such "one-year distribution compliance period," the
Company shall permit the Holder of such Security to exchange such Security for a
new Security which does not bear the Reg. S Legend.
(c) If any mutilated Security is surrendered to the Company, the Company
shall execute and deliver a new Security of like aggregate Principal Amount.
If there is delivered to the Company:
(i) evidence to its reasonable satisfaction of the destruction, loss
or theft of any Security; and
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(ii) such security or indemnity as may be reasonably satisfactory to
the Company to save it harmless,
then, in the absence of actual notice to the Company that such Security has
been acquired by a bona fide purchaser, the Company shall execute and deliver,
in lieu of any such destroyed, lost or stolen Security, a new Security of like
aggregate Principal Amount.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company, in its discretion, but
subject to conversion rights, may, instead of issuing a new Security, pay such
Security, upon satisfaction of the conditions set forth in the preceding
paragraph.
11. AMENDMENTS AND WAIVERS
(a) Any term, covenant, agreement or condition of the Securities may, with
the consent of the Company, be amended, or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by one or more substantially concurrent written instruments
signed by the Holders of at least a majority in aggregate Principal Amount of
the Securities at the time outstanding (excluding Securities at the time owned
by the Company and its Affiliates); provided that, without the consent of each
Holder affected, no such amendment or waiver, including a waiver pursuant to
paragraph 9(d) hereof, shall:
(i) make any change in the Principal Amount of Securities whose
Holders must consent to an amendment or waiver;
(ii) make any change to the manner or rate of accrual in connection
with original Issue Discount, reduce the interest rate referred to in
paragraph 1 of the Securities, reduce the rate of interest referred to in
paragraph 12 of the Securities upon the occurrence of a Tax Event or extend
the time for payment of accrued original Issue Discount or interest, if
any, on any Security;
(iii) reduce the Principal Amount or the Issue Price of or extend the
Stated Maturity of any Security;
(iv) reduce the Redemption Price, Purchase Price, Company Change of
Control Purchase Price or Elan Change of Control Purchase Price or extend
the date on which the Re-
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demption Price, Purchase Price, Company Change of Control Purchase Price or
Elan Change of Control Purchase Price of any Security is payable;
(v) make any Security payable in money or securities other than
that stated in the Securities;
(vi) make any change in paragraph 9(d) hereof or this paragraph
11(a), except to increase any percentage referred to, or make any change in
paragraph 9(e) hereof;
(vii) make any change that adversely affects the right to convert any
Security (including the right to receive cash in lieu of fractional
shares);
(viii) make any change that adversely affects the right to require the
Company to purchase Securities in accordance with their terms; or
(ix) impair the right to institute suit for the enforcement of any
payment with respect to, or conversion of, the Securities.
(b) No waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereto.
(c) The Company will not solicit, request or negotiate for or with respect
to any proposed amendment or waiver of any provisions of any Security unless
each Holder of Securities (irrespective of the amount of Securities then owned
by it) shall be informed thereof by the Company and shall be afforded the
opportunity of considering the same and shall be supplied by the Company with
sufficient information to enable it to make an informed decision with respect
thereto; provided, however, that preliminary discussions with one or more
Holders regarding any such proposed amendment shall not constitute any such
solicitation, request or negotiation. Executed or true copies of any amendment
or waiver effected pursuant to this paragraph 11 shall be delivered by the
Company to each Holder of Securities, by first class mail, postage prepaid, at
its address appearing on the register maintained by the Company, forthwith
following the date on which the same shall have been executed and delivered by
the Holder or Holders of the requisite amount of outstanding Securities. The
Company will not, directly or indirectly, pay or cause to be paid, remuneration,
whether by way of fees or otherwise, to any Holder of Securities as
consideration for or as an inducement to the entering into by such Holder of any
amendment or waiver unless such remuneration is
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concurrently paid, on the same terms, ratably to the Holders of all Securities
then outstanding.
(d) Any amendment or waiver pursuant to this paragraph 11 shall (except as
provided in paragraph 11(a)(i) through (ix) above) apply equally to all Holders
and shall be binding upon them, upon each future Holder and upon the Company.
(e) In determining whether the Holders of the requisite amount of
outstanding Securities have given any authorization, consent or waiver under
this paragraph 11, Securities owned by the Company or any of its Affiliates
shall be disregarded and deemed not to be outstanding.
12. TAX EVENT CONVERSION
(a) From and after the date (the "Tax Event Date") of the occurrence of a
Tax Event, at the option of the Company, interest in lieu of future Original
Issue Discount shall accrue at 8.0% per annum on a principal amount per Security
(the "Restated Principal Amount") equal to the Issue Price plus accrued Original
Issue Discount to the date immediately prior to the Tax Event Date or the date
on which the Company exercises the option described in this paragraph 12(a),
whichever is later (such date, the "Option Exercise Date"). Such interest shall
accrue from the Option Exercise Date and shall be payable on November 9 and May
9 of each year (the "Interest Payment Date") to the Holders of record at the
close of business on October 25 and April 24 (each, a "Regular Record Date")
immediately preceding such Interest Payment Date. Interest will be computed on
the basis of a 360-day year consisting of twelve 30-day months and will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from the Option Exercise Date. Within 15 days of the occurrence of a
Tax Event, the Company shall mail a written notice of such Tax Event to each
Holder, by first-class mail, postage prepaid, at its address appearing on the
register maintained by the Company.
(b) On each Interest Payment Date, concurrently with the payment of the
interest due and payable on such date, the Company shall issue and deliver to
each Holder of a Security to whom such interest is paid, an option (which option
shall be in the form of a written instrument duly executed by the Company (a
"Tax Event Option") to purchase a number of shares of Common Stock equal to the
quotient obtained by dividing (x) the aggregate amount of such interest due and
payable to such Holder on
48
-45-
such Interest Payment Date in respect of such Security by (y) the Conversion
Price of such Security in effect on the Business Day immediately prior to such
Interest Payment Date. Such Tax Event Option shall be exercisable, in whole at
any time or in part from time to time, on or prior to November 9, 2008. Each Tax
Event Option shall include provisions substantially similar to those set forth
in paragraph 6(c), (d), (e), (f), (g), (h) and (i) hereof. Each Tax Event Option
shall be transferable by the holder thereof only together with the Security in
respect of which such Tax Event option was issued, subject to compliance with
all applicable transfer restrictions of federal and state securities laws.
(c) Interest on any Security that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name that Security is registered at the close of business on the Regular
Record Date for such interest. Each installment of interest on any Security
shall be paid by wire transfer in immediately - available funds to an account
designated in writing by the payee at least 2 Business Days prior to the
Interest Payment Date applicable thereto.
(d) Subject to the foregoing provisions of this paragraph 12, each Security
upon registration of transfer, or in exchange for or in lieu of any other
Security, shall carry the rights to interest accrued and unpaid, and to accrue,
which were carried by such other Security.
13. MISCELLANEOUS
(a) Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally, sent by nationally
recognized overnight delivery service or facsimile (receipt confirmed) or mailed
by first-class mail, postage prepaid, addressed as follows:
(i) if to the Company, to:
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attn: General Counsel
Fax No.: (619) 550-1825
with a copy to:
Brobeck, Phleger & Harrison LLP
49
-46-
550 West C Street, Suite 1300
San Diego, California 92101-3532
Attn: Faye H. Russell, Esq.
Fax No.: (619) 234-3848
(ii) if to any Holder, at its address appearing in the register
maintained by the Company pursuant to paragraph 10(a) hereof
(iii) (x) on the date delivered, if delivered by facsimile or
personally, (y) on the day after the notice is delivered into the
possession and control of a nationally recognized overnight delivery
service, duly marked for delivery to the receiving party or (z) three
Business Days after being mailed by first-class mail, postage prepaid. The
Company, by written notice to each of the Holders, may designate a
different address for subsequent notices or communications.
(b) All agreements of the Company in this Security shall bind its
successor.
(c) Each provision of this Security shall be considered separable and if
for any reason any provision which is not essential to the effectuation of the
basic purpose of this Security shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
(d) THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF
LAW TO THE EXTENT THAT THE APPLICATION OF LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
(e) Upon conversion of this Security in accordance with the terms hereof,
the Holder will be entitled to the benefits of the Registration Rights Agreement
or the New Registration Rights Agreement, as the case may be, with respect to
the shares of Common Stock issuable to such Holder upon such conversion.
14. DEFINITIONS
"Accrual Increase" has the meaning specified in paragraph 1(c) hereof.
50
-47-
"Additional Amounts" has the meaning specified in paragraph 7(g) hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of Voting Stock, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Business Day" means each day of the year on which banking institutions are
not required or authorized to close in The City of New York.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership interests or any other
participation, right or other interest in the nature of an equity interest in
such Person including, without limitation, common stock and preferred stock of
such Person, or any option, warrant or other security convertible into any of
the foregoing.
A "Change of Control" of any Person shall be deemed to have occurred at
such time as (i) any other Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act ("Group") becomes the beneficial owner (as
defined under Rule l3d-3 under the Exchange Act), directly or indirectly, of
50.0% or more of the total Voting Stock of such specified Person, (ii) there
shall be consummated any consolidation or merger of such specified Person in
which such specified Person is not the continuing or surviving corporation or
pursuant to which the Voting Stock of such specified Person would be converted
into cash, securities or other property, other than a merger or consolidation of
such specified Person in which the holders of the Voting Stock of such specified
Person outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of all Voting Stock of the
continuing or surviving corporation immediately after such consolidation or
merger or (iii) during any period of two consecutive years, individuals who at
the beginning of such pe-
51
-48-
riod constituted the board of directors of such specified Person (together with
any new directors whose election by such board of directors or whose nomination
for election by the shareholders of such specified Person has been approved by a
majority of the directors then still in office who either were directors at the
beginning of such period or whose election or recommendation for election was
previously so approved) cease to constitute a majority of the board of directors
of such specified Person.
"close of business" means, with respect to any date, 5:00 PM, San Diego
time, on such date, or such other city in which the Company's principal place of
business may then be located.
"Closing Price" means, with respect to the Common Stock on any trading day,
the last reported per share sales price of the Common Stock on such trading day,
as reported by the Nasdaq National Market or, if the Common Stock is listed on a
United States securities exchange, the closing per share sales price, regular
way, on such trading day on the principal United States securities exchange on
which the Common Stock is traded or, if no such sale takes place on such trading
day, the average of the closing bid and asked prices on such day.
"Common Stock" means the common stock, par value $0.001 per share, of the
Company, as such class exists on the date of this Security as originally
executed or any other shares of Capital Stock into which such common stock shall
be reclassified or changed.
"Company" means Ligand Pharmaceuticals Incorporated, a Delaware
corporation.
"Company Change of Control Offer" has the meaning specified in paragraph
4(b) hereof.
"Company Change of Control Offer Notice" has the meaning specified in
paragraph 4(b)(i) hereof.
"Company Change of Control Payment Date" has the meaning specified in
paragraph 4(b)(i)(C) hereof.
"Company Change of Control Purchase Price" has the meaning specified in
paragraph 4(b) hereof.
"Company Notice" has the meaning specified in paragraph 4(a)(v) hereof.
52
-49-
"Company Notice Date" has the meaning referred to in paragraph 4(a)(v)
hereof.
"Conversion Date" has the meaning specified in paragraph 6(d) hereof.
"Conversion Notice" has the meaning specified in paragraph 6(d) hereof.
"Conversion Price" has the meaning specified in paragraph 6(b) hereof.
"Conversion Shares" has the meaning specified in the Purchase Agreement.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Distributed Securities" has the meaning specified in paragraph 6(i)(iv)
hereof.
"Elan" means Elan Corporation, plc, a public limited company organized and
existing under the laws of Ireland.
"Elan Change of Control Notice" has the meaning specified in the Purchase
Agreement.
"Elan Change of Control Payment Date" has the meaning specified in
paragraph 5(b)(ii) hereof.
"Elan Change of Control Purchase" has the meaning specified in paragraph
5(a) hereof.
"Elan Change of Control Purchase Notice" has the meaning specified in
paragraph 5(b) hereof.
"Elan Change of Control Purchase Price" has the meaning specified in
paragraph 5(a) hereof.
"Event of Default" has the meaning specified in paragraph 10(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
53
-50-
"Extraordinary Cash Dividend" means cash dividends with respect to the
Common Stock the aggregate amount of which in any fiscal year exceeds the
greater of (i) 10% of the consolidated net income of the Company for the fiscal
year immediately preceding the payment of such dividend and (ii) $200,000.
"Holder" means a Person in whose name this Security is registered on the
books of the Company.
"Initial Shares" has the meaning specified in the Purchase Agreement.
"Interest Payment Date" has the meaning specified in paragraph 12(a)
hereof.
"Issue Date" of this Security means the date on which this Security was
originally issued or deemed issued as set forth on the face of this Security.
"Issue Price" of this Security means, in connection with the original
issuance of this Security, the initial issue price at which this Security is
issued as set forth on the face of this Security.
"Legend" has the meaning specified in paragraph 10(b) hereof.
"License Agreement" has the meaning specified in the Purchase Agreement.
"License Shares" has the meaning specified in the Purchase Agreement.
"Nasdaq National Market" means the electronic interdealer quotation system
operated by Nasdaq Stock Market, Inc., a subsidiary of the National Association
of Securities Dealers, Inc.
"New Registration Rights Agreement" has the meaning specified in the
Purchase Agreement.
"Officer" means the Chief Executive Officer, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a written certificate, signed in the name of
the Company by (i) its Chief Executive
54
-51 -
Officer, its President or any Vice President and (ii) its Treasurer or its
Secretary.
"Opinion of Counsel" means a written opinion from legal counsel. The
counsel may be an employee of, or counsel to, the Company or any Successor
Company.
"Option Exercise Date" has the meaning specified in paragraph 12(a) hereof.
"Original Issue Discount" of this Security means the difference between the
Issue Price and the Principal Amount of this Security as set forth on the face
of this Security. For purposes of this Security, accrual of Original Issue
Discount shall be calculated on a semi-annual bond equivalent basis using a 360
day year consisting of twelve 30-day months.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government, or any agency or political subdivision thereof.
"Principal" or "Principal Amount" of this Security means the Principal
Amount as set forth on the face of this Security.
"Purchase Agreement" has the meaning specified on the face of this
Security.
"Purchase Date" has the meaning specified in paragraph 4(a) hereof.
"Purchase Notice" has the meaning specified in paragraph 4(a)(i) hereof.
"Purchase Price" has the meaning specified in paragraph 4(a) hereof.
"Purchase Request" has the meaning specified in the Purchase Agreement.
"Redemption Date" means a date specified for redemption of this Security in
accordance with the terms hereof.
"Redemption Price" has the meaning specified in paragraph 3(a) hereof.
"Registration Rights Agreement" has the meaning specified in the Purchase
Agreement.
55
-52-
"Registration Rights Default" has the meaning specified in paragraph 1(c)
hereof.
"Regular Record Date" has the meaning specified in paragraph 12(a) hereof.
"Restated Principal Amount" has the meaning specified in paragraph 12(a)
hereof.
"SEC" means the Securities and Exchange Commission.
"Securities" means any of the Company's Zero Coupon Convertible Senior
Notes due 2008, as amended and supplemented from time to time in accordance with
the terms hereof, issued pursuant to the Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Shares" has the meaning specified in the Purchase Agreement.
"Stated Maturity" means November 9, 2008.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity,
whether now existing or hereafter organized or acquired, (i) in the case of a
corporation, of which more than 50% of the total voting power of the Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, officers or trustees thereof is held by such
specified Person or any of its Subsidiaries or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which such specified Person or any of its
Subsidiaries has the power to direct or cause the direction of the management
and policies of such entity by contract or otherwise.
"Successor Company" has the meaning specified in paragraph 8(a)(1) hereof.
"Tax Event" means that the Company shall have received an opinion from
independent tax counsel experienced in such matters to the effect that, on or
after the date of this Security, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
56
-53-
thereunder) of the United Sates or any political subdivision or taxing authority
thereof or therein or (b) any amendment to, or change in, an interpretation or
application of such laws or regulations by any legislative body, court,
governmental agency or regulatory authority, in each case, which amendment or
change is enacted, promulgated, issued or announced or which interpretation is
issued or announced or which action is taken, on or after the date of this
Security, there is more than an insubstantial risk that interest (including
Original Issue Discount) payable on the Securities either (i) would not be
deductible on a current accrual basis or (ii) would not be deductible under any
other method, in either case, in whole or in part, by the Company, by reason of
deferral, disallowance or otherwise) for United States federal income tax
purposes.
"Tax Event Date" has the meaning specified in paragraph 12(a) hereof.
"Tax Event Option" has the meaning specified in paragraph 12(b) hereof.
"Taxes" means any present or future tax, duty, levy, impost, assessment or
other government charge (including penalties, interest and any other liabilities
related thereto) imposed or levied by or on behalf of a any government or any
political subdivision or territory or possession of any government or any
authority or agency therein or thereof having power to tax.
"Transfer Restricted Security" has the meaning specified in paragraph 10(b)
hereof.
"Voting Stock" means stock of any class or classes, however designated,
having general voting power under ordinary circumstances to elect a majority of
the board of directors, managers or trustees of a Person, other than stock
having such power only by reason of the occurrence of a contingency.
57
ANNEX A
FORM OF PURCHASE NOTICE
OF
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
1. Pursuant to the terms of the Zero Coupon Convertible Senior Note due
2008 (certificate no. [ ] in the Principal Amount of $[ ]
(the "Security"), the undersigned hereby elects to cause Ligand Pharmaceuticals
incorporated (the "Company") to purchase $[ ] Principal Amount of the
Security at the Purchase Price set forth in the Security on [November 9, 2002]
[November 9, 2005], subject to the right of the undersigned to convert the
Security at any time prior to the close of business on the Purchase Date.
Capitalized terms used herein and not otherwise defined have the meanings
specified in the Security.
2. In the event that the Security is purchased in part, please execute and
deliver to the undersigned a new Security in a denomination equal in Principal
Amount to the unpurchased portion of the Security.
3. In the event that the Company has elected to pay the Purchase Price with
Common Stock (the "Shares") Pursuant to paragraph 4(a)(iv) of the Security, the
undersigned confirms that:
(a) We understand that the Shares have not been registered under the
Securities Act and may not be offered or sold except as permitted in the
following sentence. We agree that if we should sell or otherwise transfer
the Shares, we will do so only (i) to the Company or its Subsidiaries,
(ii) inside the United States to an institutional "accredited investor" (as
defined below), (iii) outside the United States in accordance with
Regulation S under the Securities Act, (iv) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available)
or (v) pursuant to an effective registration statement under the Securities
Act.
A-1
58
(b) We understand that the certificates representing the Shares will,
so long as appropriate, bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR PURSUANT TO A VALID EXEMPTION THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
WITH THE PROVISIONS OF REGULATION S (SECTION 230.901 THROUGH
SECTION 230.905, AND PRELIMINARY NOTES). HEDGING
TRANSACTIONS INVOLVING THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE ACT.
THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS SUBJECT TO
THE CONDITIONS SPECIFIED IN A SECURITIES PURCHASE AGREEMENT,
DATED AS OF NOVEMBER 6, 1998, BY AND AMONG THE COMPANY, ELAN
INTERNATIONAL SERVICES, LTD. AND ELAN CORPORATION, PLC, AND
THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF
SUCH SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS WILL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT
CHARGE.
(c) We are acquiring the Shares for our own account and are either (i)
an institutional "accredited investor" (as defined in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act) or (ii) a foreign
purchaser that is outside the United States (as such terms are used under
Regulations S under the Securities Act). We have such knowledge and
experience in financial and business matters to be capable of evaluating
the merits and risks of our investment in the Shares and we are able to
bear the economic risk of our investment for an indefinite period of time.
A-2
59
This certificate and the statements contained herein are made for the
benefit of the Company.
----------------------------------------
Signature of Holder
Date:
----------------
A-3
60
ANNEX B
CONVERSION NOTICE
OF
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
1. Pursuant to the terms of the Zero Coupon Convertible Senior Note due
2008 (certificate no. [ ] in the Principal Amount of $[ ] attached
hereto (the "Security"), the undersigned hereby elects to cause Ligand
Pharmaceuticals Incorporated (the "Company") to convert $[ ] Principal
Amount of the Security pursuant to paragraph 6 of the Security at the Conversion
Price. Capitalized terms used herein and not otherwise defined have the meanings
specified in the Security.
2. In the event that the undersigned has elected to convert the Security in
part, please execute and deliver to the undersigned a new Security in a
denomination equal in Principal Amount to the unconverted portion of the
Security.
3. In connection with the conversion of the Security, the undersigned
confirms that:
(a) We understand that the securities to be issued upon such
conversion have not been registered under the Securities Act and may not be
offered or sold except as permitted in the following sentence. We agree
that if we should sell or otherwise transfer such securities, we will do so
only (i) to the Company or its Subsidiaries, (ii) inside the United States
to an institutional "accredited investor" (as defined below), (iii) outside
the United States in accordance with Regulation S under the Securities Act,
(iv) pursuant to the exemption from registration provided by Rule 144 under
the Securities Act (if available) or (v) pursuant to an effective
registration statement under the Securities Act.
(b) We understand that the certificates representing such securities
will, so long as appropriate, bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES
B-1
61
ACT OF 1933, AS AMENDED (THE "ACT"), MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT
TO A VALID EXEMPTION THEREFROM. THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S (SECTION 230.901 THROUGH SECTION 230.905, AND
PRELIMINARY NOTES). HEDGING TRANSACTIONS INVOLVING THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE ACT.
THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS SUBJECT TO
THE CONDITIONS SPECIFIED IN A SECURITIES PURCHASE AGREEMENT,
DATED AS OF NOVEMBER 6, 1998, BY AND AMONG THE COMPANY, ELAN
INTERNATIONAL SERVICES, LTD. AND ELAN CORPORATION, PLC, AND
THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF
SUCH SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS WILL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT
CHARGE.
(c) We are acquiring the securities to be issued upon conversion of
the Security for our own account and are either (i) an institutional
"accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act) or (ii) a foreign purchaser that is
outside the United States. We have such knowledge and experience in
financial and business matters to be capable of evaluating the merits and
risks of our investment in the securities and we are able to bear the
economic risk of our investment for an indefinite period of time.
This certificate and the statements contained herein are made for the
benefit of the Company.
----------------------------------------
Signature of Holder
Date:
----------------
B-2
62
ANNEX C
FORM OF CERTIFICATE FOR
REGISTRATION OF TRANSFER
OR EXCHANGE
OF
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
1. Reference is hereby made to the Zero Coupon Convertible Senior Note due
2008 (certificate no. [ ] in the Principal Amount of $[ ] attached
hereto (the "Security"). Capitalized terms used herein and not otherwise defined
have the meanings specified in the Security.
2. In connection with the registration of transfer or exchange of such
Security, the undersigned hereby certifies that:
CHECK ONE
_____ The Security is being acquired for the undersigned's own
account, without transfer; or
_____ The Security is being transferred to the Company; or
_____ The Security is being transferred in a transaction permitted by
Rule 144 under the Securities Act; or
_____ The Security is being transferred pursuant to an effective
registration statement; or
_____ The Security is being transferred in a transaction permitted by
Rule 904 under the Securities Act; or
_____ The Security is being transferred pursuant to an exemption from
the registration requirements of the Securities Act other than Rule 144 or
Rule 904, and the undersigned hereby further certifies that the Security is
being transferred in compliance with the exemption claimed, which
certification is supported by an opinion of
C-1
63
counsel, if required by the Company, provided by the undersigned or the
transferee (a copy of which the undersigned has attached to this
certification) in form reasonably satisfactory to the Company, to the
effect that such transfer is in compliance with the Securities Act;
and the Security is being transferred in compliance with any applicable state
securities or "Blue Sky" laws of any state of the United States.
(3) This certificate and the statements contained herein are made for the
benefit of the Company.
----------------------------------------
Signature of Holder
Date:
----------------
C-2
64
ANNEX D
FORM OF UNRESTRICTED SECURITIES CERTIFICATE
OF
ZERO COUPON CONVERTIBLE SENIOR NOTE DUE 2008
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
1. Reference is hereby made to the Zero Coupon Convertible Senior Note due
2008 (certificate no. [ ] in the Principal Amount of $[ ]
attached hereto (the "Security"). Capitalized terms used herein and not
otherwise defined have the meanings specified in the Security.
2. The undersigned, the registered owner of the Security, has requested
that the Security be exchanged for a new Security bearing no portion of the
Legend (excluding that portion of the Legend relating to transfer conditions set
forth in the Purchase Agreement). In connection with such exchange, the
undersigned hereby certifies that the exchange is occurring after a period of at
least two years has elapsed since the date the Security was acquired from the
Company or any affiliate (as such term is defined under Rule 144 under the
Securities Act) of the Company, whichever is later, and the undersigned is not,
and during the preceding three months has not been, an affiliate of the Company.
The undersigned also acknowledges that future transfers of the Security must
comply with all applicable state securities or "Blue Sky" laws.
3. This certificate and the statements contained herein are made for the
benefit of the Company.
----------------------------------------
Signature of Holder
Date:
----------------
D-1