Sample Business Contracts


Settlement Agreement and Mutual General Release - La Jolla Cancer Research Foundation, SelectRA Pharmaceuticals Inc. and SRI International, Ligand Pharmaceuticals Inc., Allergan Ligand and Allergan Ligand Retinoid Therapeutics Inc.


                       SETTLEMENT AGREEMENT, LICENSE AND
                             MUTUAL GENERAL RELEASE

        This Settlement Agreement and Mutual General Release (the "Agreement"),
having an effective date for all purposes of August 23, 1995, is made and
entered into by and between La Jolla Cancer Research Foundation (hereinafter
"FOUNDATION"), a California non-profit and public benefit corporation, having a
place of business at 10901 North Torrey Pines Road, La Jolla, CA 92037, SelectRA
Pharmaceuticals, Inc. (hereinafter "SELECTRA"), a California corporation, having
a place of business at 10901 North Torrey Pines Road, La Jolla, CA 92037, SRI
International (hereinafter "SRI"), a California non-profit and public benefit
corporation, having a place of business at 333 Ravenswood Ave., Menlo Park, CA
94025, (hereinafter collectively referred to as "DEFENDANTS"), and Ligand
Pharmaceuticals Incorporated (hereinafter "LIGAND"), a Delaware corporation,
having its principal place of business at 9393 Towne Centre Drive, Suite 100,
San Diego, California, 92121 and Allergan Ligand, a California partnership
(hereinafter "JV"), having a principal office and place of business at 9393
Towne Centre Drive, Suite 100, San Diego, California, 92121, (hereinafter
collectively referred to as "PLAINTIFFS") and Allergan Ligand Retinoid
Therapeutics, Inc. (hereinafter "ALRT"), a Delaware corporation, having a
principal office at 9393 Towne Centre Drive, Suite 100, San Diego, California
92121.

       WITNESSETH, That:

       WHEREAS, there is now pending in the United States District Court for
the Southern District of California (the "Court") an action entitled
ALLERGAN/LIGAND JOINT VENTURE V. LA JOLLA CANCER RESEARCH FOUNDATION, ET AL.
Federal District Court Case No. 931895 IEG (CM) (hereinafter referred to as the
"Action");


[*] Certain confidential portions of this Exhibit were omitted by means of
    blackout of the text (the "Mark").  This Exhibit has been filed separately
    with the Secretary of the Commission without the Mark pursuant to the
    Company's Application Requesting Confidential Treatment under Rule 406
    under the Act.

<PAGE>
       WHEREAS, the Complaint in the Action alleges that the DEFENDANTS have
infringed certain patents exclusively licensed to LIGAND which LIGAND has in
turn sublicensed in whole or in part to the JV and which have subsequently been
sublicensed to ALRT;

       WHEREAS, the DEFENDANTS have, in answer to the Complaint in the Action,
denied infringement and asserted, inter alia, that the patents-in-suit are
invalid and/or unenforceable;

       WHEREAS, SRI has demanded arbitration (hereinafter the "Arbitration") of
certain issues in the Action arising between SRI and LIGAND, and the Court has
ordered a stay of all claims in the Action against SRI pending the Arbitration;

       WHEREAS, LIGAND, the JV and ALRT, as part of the settlement of the
Action, are willing to grant to each of FOUNDATION and SRI non-exclusive,
non-assignable sublicenses to use the technology covered by the patents on
which the Action is based for basic research purposes, including the limited
right to grant sublicenses under Section 5.02;

       WHEREAS, FOUNDATION and SRI, as part of the settlement of the Action,
are willing to grant to LIGAND an option to acquire an exclusive, worldwide
license, including the right to grant sublicenses, to any inventions,
discoveries and developments that are enabled by, reduced to practice or
otherwise derived from or facilitated by acts within the scope of the claims of
the patents on which the Action is based, the license to include patent
applications and patents on said inventions, discoveries and developments;

       WHEREAS, SRI, as part of the settlement of the Action, to the extent it
has not already done so, will make available to LIGAND samples of all retinoid
compounds synthesized in the laboratory of [*] through [*] pursuant to the
Compound Evaluation Agreement between LIGAND and SRI

[*] CONFIDENTIAL TREATMENT REQUESTED

                                       -2-


<PAGE>
bearing an effective date of May 17, 1990, for evaluation and potential
commercialization of said compounds by LIGAND, and FOUNDATION and SELECTRA
acknowledge the rights of LIGAND arising under this Agreement and/or the
Compound Evaluation Agreement;

       WHEREAS, the Parties have agreed that settlement of the Action is
contingent upon entry by the Court of a consent judgment in a form satisfactory
to all the Parties and dismissal of the Arbitration; and

       WHEREAS, LIGAND, the JV, ALRT, SELECTRA, SRI and FOUNDATION desire to
take all further actions required to settle the Action.

       NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Parties agree as follows:

                                   ARTICLE 1
                                  Definitions

         For purposes of this Agreement, the terms defined in this Article
shall have the meaning specified and shall be applicable both to the singular
and plural forms:

         1.01    "Party" shall mean either LIGAND, the JV, ALRT, FOUNDATION,
SRI or SELECTRA, and the term "Parties" shall mean LIGAND, the JV, ALRT,
FOUNDATION, SRI and SELECTRA.  The terms "LIGAND", "the JV", "ALRT",
"FOUNDATION", "SRI" and "SELECTRA" include "Affiliates".

         1.02    "Affiliate" means (i) any corporation, firm, partnership,
individual or other form of business organization which is now or hereafter
owned or controlled by or under common control with a Party, (ii) any
corporation in which a Party owns at least fifty percent (50%) of the stock
entitled to vote for





                                      -3-

<PAGE>
directors, and (iii) any corporation, firm, partnership, individual or other
form of business organization in which a Party has the maximum ownership
interest it is permitted to have in the country where such business
organization exists.

         1.03    "Ligand Patented Technology" means and is limited to United
States Patents Nos. 4,981,784, 5,071,773, 5,091,518 and 5,171,671 and any
foreign counterparts thereof.  Upon expiration, disclaimer or a holding from
which no appeal is or can be taken of invalidity of any patent included in the
Ligand Patented Technology or any claim or claims thereof, then Ligand Patented
Technology shall mean and be limited to the unexpired patents included in the
Ligand Patented Technology and the patents or claims thereof not affected by
such disclaimer or holding of invalidity.

         1.04    "Option Technology" means any invention, discovery or
development by employees, consultants or agents of one or more of DEFENDANTS,
including without limitation, technical data, specifications, information,
know-how, processes, compounds, formulations and materials, which invention,
discovery or development was enabled by, reduced to practice, or otherwise
derived from or facilitated by an act or acts within the scope of the claims of
any patent within the Ligand Patented Technology. Option Technology also
includes inventions, discoveries or developments made by employees, consultants
or agents of DEFENDANTS with persons who are not employees, consultants or
agents of DEFENDANTS including Research Collaborators with DEFENDANTS pursuant
to Section 5.02 hereof.

         1.05    "Option Patent" means any United States or foreign patent or
patent application (including any abandoned patent application) which covers
or, if an abandoned patent application, covered Option Technology.  Exhibit "A"
hereto is a list of all such patents and patent applications which, after a
good faith inquiry, are known to FOUNDATION and SRI as of the effective date





                                      -4-

<PAGE>
of this Agreement; provided, however, that failure to list a patent or patent
application on Exhibit "A" does not create a presumption such patent or patent
application does not or did not cover Option Technology.  The term Option
Patent when applied to a specific issued patent includes all reissues,
renewals, extensions and additions thereof and the patent applications from
which they issue.  The term "Option Patent" when applied to a specific patent
application includes continuations, continuations-in-part, divisions and
substitutes thereof and the patents which issue therefrom.  A patent or patent
application covers Option Technology if it contains a claim which reads upon
Option Technology.

         1.06    "Licensed Patent" means an Option Patent for which LIGAND has
exercised its option to acquire an exclusive, worldwide license covering the
same under Article 6 of this Agreement.

         1.07    "Licensed Product" means a drug or other product whose
importation, making, using or selling is read upon by any claim in a Licensed
Patent or the discovery or development of which was enabled by, reduced to
practice, or otherwise derived from or facilitated by an act or acts within the
scope of a claim in a Licensed Patent.

         1.08    Licensed Process" shall mean any process the practice of which
is read upon by a claim in a Licensed Patent or the discovery or development of
which was enabled by, reduced to practice or otherwise derived from or
facilitated by an act or acts within the scope of a claim in a Licensed Patent,
including any processes used to screen compounds on behalf of a third party.

         1.09    "Net Sales" shall mean, in the case of sales to
non-Affiliates, the invoiced price by LIGAND, JV, ALRT, or their Affiliates or
sublicensees, less (a) customary trade quantity and cash discounts actually
allowed and taken; (b) allowances actually given for returned, rejected or
recalled products; (c) actual





                                      -5-

<PAGE>
charges for bad debts; (d) freight and insurance if included in the invoice
price; (e) government mandated rebates; and (f) value added tax, sales, use or
turnover taxes, excise taxes, and custom duties included in the invoiced price.

         1.10    "Field" means and is limited to use of the Ligand Patented
Technology by FOUNDATION and/or SRI for basic research, and specifically does
not include research funded by a for-profit entity, unless the results of the
research funded by such forprofit entity are subject to the LIGAND option of
Section 6.01.

         1.11    "Territory" means and is limited to FOUNDATION'S premises at
10901 North Torrey Pines Road, La Jolla, California, 92037, or any expansion
and/or replacement premises thereof with respect to the license granted
hereunder to FOUNDATION and SRI's premises at 333 Ravenswood Avenue, Menlo
Park, California 94205 or any expansion and/or replacement premises thereof and
the premises of any research collaborators sublicensed under Section 5.02 with
respect to the license granted hereunder to SRI.

                                   ARTICLE 2
                              Settlement of Action

         2.01    Consent Judgment.  The Parties shall forthwith jointly present
to the Court a stipulated Consent Judgment and Injunction in the Action, in
form and substance as set forth in Exhibit "B" attached hereto, and shall use
their best efforts to have the Court enter and file such Consent Judgment and
Injunction.  If the Court refuses to, or does not within one hundred twenty
(120) days after such presentation, (i) enter and file the Consent Judgment and
Injunction, or (ii) enter and file it with changes agreed to by all the
Parties, then any Party aggrieved by a refusal or failure of the Court to enter
and file such Consent Judgment and Injunction may terminate this Agreement by
written notice to all of the other Parties within fifteen (15) days of the
refusal or





                                      -6-

<PAGE>
within fifteen (15) days after the 120th day from such presentation, whichever
is earlier.

         2.02    Restrictions on Rights to Use Ligand Patented Technology.
Pursuant to the sublicenses granted FOUNDATION and SRI pursuant to Article 5
hereof, FOUNDATION and SRI are granted specified rights to use Ligand Patented
Technology.  Except as provided in this Agreement, and in addition to the
provisions of the Consent Judgment and Injunction as it may be finally entered
and filed, DEFENDANTS hereby covenant and agree, for themselves and their
agents, employees, privies, successors and assigns, not to make, have made,
import, use, sell, market or distribute in the United States any products or
carry out any processes which would infringe claims in the Ligand Patented
Technology or to induce or contribute to the infringement of the Ligand
Patented Technology by others.

         2.03    Expenses.  Each Party shall bear its own costs and expenses,
including all attorneys fees, in connection with the Action and this Agreement.

         2.04    Windup of SELECTRA.  SELECTRA will be promptly and permanently
wound up.  FOUNDATION represents and warrants that the windup of SELECTRA will
not leave or result in any rights to Option Technology and Option Patents in a
third party, other than rights of the United States Government arising by
statute or regulation. In addition to any remedies to which it is entitled at
law or in equity, LIGAND may terminate the license granted FOUNDATION for
breach of this warranty.

         2.05    Dismissal of Arbitration.  LIGAND and SRI will stipulate to
the dismissal of the Arbitration with respect to their Compound Evaluation
Agreement bearing an effective date of May 17, 1990, with each Party to bear
its own costs, including attorney fees, in connection with the Arbitration.





                                      -7-

<PAGE>
         2.06    Waiver By Third Parties.  DEFENDANTS will secure the waiver of
any third party rights to Option Technology and Option Patents known to exist,
after reasonable inquiry, as of the effective date of this Agreement, including
those held by Telios Pharmaceuticals, Inc. (but excluding those of the United
States Government arising by statute or regulation as a result of the funding
by the United States of research that results in Option Technology or Option
Patents), that conflict with the rights granted LIGAND hereunder.

         2.07    Covenant Not to Contest Patents.  DEFENDANTS and each of them
will not after the effective date of this Agreement seek in any proceeding, or
assist any other party except under judicial compulsion, to have any patent or
any claim thereof in the Ligand Patented Technology declared, determined or
adjudicated invalid or unenforceable.  As used in this Section 2.07,
"proceeding" includes a reexamination proceeding in the United States Patent and
Trademark Office.

         2.08    Press Release.  The Parties shall jointly issue a press
release in the form attached hereto as Exhibit "C" on or promptly after the
effective date of this Agreement.  No Party shall thereafter make any further
written or oral public release or written or oral public statement regarding
this Agreement and the underlying Action or Arbitration (including, without
limitation, press releases and disclosures in Securities and Exchange
Commission filings) unless such written or oral public release or written or
oral public statement has previously been reviewed and approved by all Parties;
provided, however, that a Party shall not be required to secure the approval of
any other Party to make a disclosure which, upon advice of independent counsel,
it is required to make by law or regulation, and further provided that where
approval is required that no Party shall unreasonably withhold its approval.
Once approved, such written or oral public release or written or oral public
statement (including the press release attached hereto as Exhibit "C") may be
freely reissued or





                                      -8-

<PAGE>
repeated without additional approval.  Nothing in this Section 2.08 shall
affect the Parties' respective rights to communicate privately, orally or in
writing with employees, vendors, researchers, distributors, licensees,
prospective licensees and other commercially affected persons and entities as
may be necessary to effectuate this Agreement.  Each Party shall have the
obligation to use reasonable efforts to prevent its agents and employees from
violating the foregoing.

         2.09    Authorized Comments.  Notwithstanding the provision of Section
2.08, a Party shall have the right to comment upon the unauthorized statements
of the employees of any other Party about this Agreement or the Action or the
Arbitration or the motives of any Party in bringing or settling the Action or
Arbitration.  FOUNDATION acknowledges the truth thereof and authorizes the
publication by PLAINTIFFS of the following facts:

         1.      That FOUNDATION did not seek a license to the Ligand Patented
                 Technology at any time before the Action was brought;

         2.      That SELECTRA intended to develop compounds that are highly
                 specific for individual retinoid receptors - a technology that
                 would compete directly with LIGAND;

         3.      That the FOUNDATION intended to hold a substantial equity
                 interest in SELECTRA;

         4.      That Magnus Pfahl, Ph.D., formerly a senior staff scientist at
                 FOUNDATION, would have held a substantial equity interest in
                 SELECTRA; and

         5.      That both the FOUNDATION and Dr. Pfahl and each of them would
                 have obtained a financial benefit from the success of
                 SELECTRA.

SRI acknowledges the truth thereof and authorizes publication by PLAINTIFFS of
the following facts:

         1.      That SRI did not seek a license to the Ligand Patented
                 Technology before the Action was brought; and





                                      -9-

<PAGE>
         2.      That SRI expected to obtain a financial benefit if SELECTRA
                 were successful and Dr. Marcia Dawson, as an employee of SRI,
                 would have been entitled to a share of such benefit.

         2.10    Restriction on Seeking Governmental License.  During the term
of its sublicense granted under Section 5.01, each of DEFENDANTS agree to
terminate any current effort and not hereafter seek from any agency of the
United States Government an express license to any patent included in the Ligand
Patented Technology.  Neither this Section 2.10 nor any other provision of this
Agreement shall preclude DEFENDANTS from seeking to influence any agency of the
United States or legislative body thereof concerning matters of general public
policy, laws or regulations relating to the impact of patents on basic research
or any other matter other than to seek an express license from the National
Institutes of Health or any other agency of the United States to any patent
included in the Ligand Patented Technology.

                                   ARTICLE 3
                                    Release

         3.01    Release by Plaintiffs.  Except as otherwise expressly provided
for and set forth in this Agreement, PLAINTIFFS, for themselves and their
agents, successors, assigns, representatives and attorneys, and each of them, do
hereby release and forever discharge DEFENDANTS, and their directors, officers,
trustees, employees, agents and consultants acting in such capacity on behalf of
or in the course of their duties for DEFENDANTS, and each of them, from any and
all manner of action or actions, cause or causes of action, in law or in equity,
suits, debts, liens, contracts, agreements, promises, liabilities, claims,
demands, losses, costs, or expenses of any nature whatsoever, whether known or
unknown, fixed or contingent, which PLAINTIFFS have or may hereafter have
against DEFENDANTS, or any of them, by reason of any matter, cause or thing
whatsoever from the beginning of time to the date hereof; provided, however,
that this release shall have no effect with respect to the License Agreement of
June 23,





                                      -10-

<PAGE>
1989 between LIGAND and FOUNDATION, and this release, while applicable to
claims for breach of, and to all events relating to, the Compound Evaluation
Agreement occurring before the effective date, does not affect the rights and
obligations of SRI and LIGAND under the Compound Evaluation Agreement to the
extent provided under Article 4 of this Agreement.  The matters released
pursuant to this Section 3.01 are herein referred to as "Plaintiff's Released
Claims."

         3.02    Release by Defendants.  Except as otherwise expressly provided
for and set forth in this Agreement, DEFENDANTS, for themselves and their
agents, successors, assigns, representatives and attorneys, and each of them, do
hereby release and forever discharge PLAINTIFFS, and their directors, trustees,
officers, employees, agents and consultants acting in such capacity on behalf of
or in the course of their duties for PLAINTIFFS, and each of them, from any and
all manner of action or actions, cause or causes of action, in law or in equity,
suits, debts, liens, contracts, agreements, promises, liabilities, claims,
demands, losses, costs, or expenses of any nature whatsoever, whether known or
unknown, fixed or contingent, which DEFENDANTS have or may hereafter have
against PLAINTIFFS, or any of them, by reason of any matter, cause or thing
whatsoever from the beginning of time to the date hereof; provided, however,
that this release shall have no effect with respect to the License Agreement of
June 23, 1989 between LIGAND and FOUNDATION, and this release, while applicable
to claims for breach of, and to all events relating to, the Compound Evaluation
Agreement occurring before the effective date, does not affect the rights and
obligations of SRI and LIGAND under the Compound Evaluation Agreement to the
extent provided under Article 4 of this Agreement.  The matters released
pursuant to this Section 3.02 are herein referred to as "Defendant's Released
Claims." Nothing herein will release LIGAND from its obligations to make royalty
payments on Improvement Compounds arising under the Compound Evaluation
Agreement.





                                      -11-

<PAGE>
         3.03    Unknown Claims.  The Parties specifically understand,
acknowledge and agree that this is a full and final release, applying to all of
the Plaintiff's Released Claims and Defendant's Released Claims, whether known
or unknown.  The Parties, having been fully advised by their respective
counsel, hereby expressly and voluntarily waive all rights or benefits that
they, and each of them, might otherwise have under the provisions of Section
1542 of the Civil Code of the State of California, which provides as follows,
and under all federal, state and/or common-law statutes or principles of
similar effect:

         A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
         NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
         RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
         SETTLEMENT WITH THE DEBTOR.

         3.04    Full Release.  This Agreement is a full accord, satisfaction
and discharge of all of the Plaintiff's Released Claims and Defendant's
Released Claims.  This Agreement has been executed with the express intention
of effectuating the full and final extinguishment of all such claims.

         3.05    Use in Pleadings.  It is specifically understood and agreed
that this Agreement may be pleaded as a full and complete defense to, and may
be used as the basis for, an injunction against any action, suit, or other
proceeding which may be instituted, prosecuted or attempted in breach of this
Agreement.

         3.06    Attorneys' Fees.  In the event that legal action is necessary
to enforce or remedy a breach of a provision or provisions of this Agreement,
all costs and attorneys' fees shall be paid by the non-prevailing Party or
Parties to the prevailing Party or Parties.

         3.07    No Assignment of Claims.  The Parties hereby represent and
warrant to each other that they have not sold, assigned,





                                      -12-

<PAGE>
transferred, conveyed or otherwise disposed of any claim which, but for such
sale, assignment, transfer, conveyance or other disposal, would be covered by
this Agreement.
                                   ARTICLE 4
                              Compound Evaluation

         4.01    SRI Compounds.  SRI shall make available to LIGAND, for
evaluation and potential commercialization in accordance with the terms of the
Compound Evaluation Agreement between LIGAND and SRI bearing an effective date
of May 17, 1990, samples of all of the retinoid compounds synthesized in the
laboratory of [*] through [*] not previously provided to LIGAND pursuant to the
Compound Evaluation Agreement, which compounds are listed in Exhibit "D" hereto,
for which SRI has a current supply.  For those compounds synthesized before [*]
for which no quantities are available, SRI will, at LIGAND's request,
resynthesize the compounds for LIGAND at SRI's then standard commercial rate for
research done for outside entities.  SRI will provide to LIGAND a summary of any
chemical and biological properties actually determined by SRI for the compounds
synthesized through [*] and which were not previously made available to LIGAND;
LIGAND shall provide SRI with the results of its evaluation of the samples of
said compounds as required by the Compound Evaluation Agreement. Performance of
the obligations of SRI under Section 2.04 of the Compound Evaluation Agreement
will be optional on the part of SRI with respect to the compounds of Exhibit
"D".  Nothing in the Compound Evaluation Agreement or this Agreement shall be
construed to obligate SRI to pursue patent protection for or protect
patentability prior to publication or disclosure of the compounds of Exhibit
"D", and SRI provides no warranty as to the patentability of any compound of
Exhibit "D".  The terms of the Addendum attached hereto shall govern the patent
expenses associated with the patent applications specified therein.  SRI shall
have no obligation to provide to LIGAND samples of compounds synthesized by [*]

[*] CONFIDENTIAL TREATMENT REQUESTED



                                      -13-

<PAGE>


after [ * ] but if such subsequently synthesized compounds constitute Option
Technology, LIGAND shall have an Option to acquire rights to Option Patents
covering or related thereto as provided in Article 6 hereof.

        4.02      Acknowledgement of LIGAND's Rights by FOUNDATION and SELECTRA.
FOUNDATION and SELECTRA hereby acknowledge LIGAND's rights as set forth in
Section 4.01 to the compounds synthesized in the laboratory of [ * ] through
[ * ] and not previously provided to LIGAND pursuant to the Compound Evaluation
Agreement between LIGAND and SRI bearing an effective date of May 17, 1990 and
agree that they will not assert any rights in such compounds inconsistent with
or in derogation of LIGAND's rights set forth in Section 4.01 hereof and in the
Compound Evaluation Agreement.  LIGAND hereby agrees to reimburse FOUNDATION for
any patent application costs incurred with respect to said compounds pursuant to
the terms and conditions set forth in Section 6.03(c) below if it exercises its
option under Article 6 to acquire rights beyond those available to it under the
Compound Evaluation Agreement.

         4.03    Exhausted Rights.  Nothing in this Agreement shall be deemed
to restore to LIGAND any rights exhausted under the Compound Evaluation
Agreement with respect to any compound actually provided to LIGAND under the
Compound Evaluation Agreement prior to the date of this Agreement; provided,
however, that any discovery or development made with respect to such previously
provided compounds which constitute option Technology shall be subject to
LIGAND's rights thereto under Article 6. Nothing herein shall affect LIGAND's
obligation to pay royalties for Improvement Compounds arising under the
Compound Evaluation Agreement.


[*] CONFIDENTIAL TREATMENT REQUESTED


                                      -14-

<PAGE>
                                   ARTICLE 5

                           BASIC RESEARCH SUBLICENSE

         5.01    Sublicense.  LIGAND, the JV and ALRT hereby grant to each of
FOUNDATION and SRI, subject to the terms herein recited, a royalty-free,
non-exclusive sublicense to make and use, but not to sell, the Ligand  Patented
Technology solely within the Field and the Territory. Except as provided in
Section 5.02 herein, these sublicenses do not include the right of FOUNDATION
or SRI to further sublicense the Ligand Patented Technology without LIGAND's
prior written approval.  Further, FOUNDATION or SRI may not assign, convey or
otherwise transfer any rights in or to use Ligand Patented Technology that are
created by this Agreement to any other party except as provided in Sections
5.02 and 10.06 hereof.

         5.02    Research Collaborations.  Each of FOUNDATION or SRI, as the
case may be, may sublicense the performance of its rights under the license for
Ligand Patented Technology granted under Section 5.01 in bona fide research
collaborations between either or both of them and not-for-profit entities
("Research Collaborators") which entities shall perform the sublicensed
activities subject to the following conditions:

                 (a)      The FOUNDATION or SRI, and their respective Research
         Collaborators, as the case may be, may not assign or otherwise convey
         prospectively or after the fact any rights, or permit its employees,
         consultants or agents to convey any rights in the Option Technology
         except in the circumstance where LIGAND has failed to exercise its
         option rights under Section 6.01;

                 (b)      A Research Collaborator will be advised of LIGAND's
         rights under this Agreement and acknowledge them to LIGAND in writing;




                                      -15-

<PAGE>
                 (c)      FOUNDATION or SRI, as the case may be, will use its
         reasonable best efforts to assure that its employees, consultants,
         agents, and its Research Collaborator(s) use the Ligand Patented
         Technology solely in the course and scope of activities licensed under
         Section 5.01; and

                 (d)      In any collaboration initiated within five (5) years
         of the effective date of this Agreement between FOUNDATION or SRI, as
         the case may be, and FOUNDATIONS's former employee, Magnus Pfahl,
         Ph.D., or with his employer, in which he is an investigator and under
         which the right to sublicense is exercised by FOUNDATION or SRI, as
         the case may be, provision must be made for LIGAND to secure the same
         rights to inventions, discoveries and developments made by Dr. Pfahl
         or persons under his direction as would be the case if Dr. Pfahl were
         a FOUNDATION employee.

         FOUNDATION and/or SRI shall not permit, and they shall take reasonable
steps, including bringing suit, to prevent any use of Ligand Patented
Technology by a Research Collaborator of FOUNDATION and/or SRI in connection
with their collaboration in violation of these conditions and outside the scope
of the sublicenses permitted under this Section 5.02, and any breach by
FOUNDATION and/or SRI of the foregoing shall constitute a material breach of
this Agreement by that Research Collaborator's sublicensor, FOUNDATION or SRI,
as the case may be.  A Research Collaborator shall not have the right to grant
any further sublicense of its rights obtained under this Section 5.02.

                                   ARTICLE 6

                          OPTION FOR EXCLUSIVE LICENSE

         6.01    Option Grant to LIGAND.  FOUNDATION and SRI hereby grant to
LIGAND an option to acquire an exclusive worldwide right and license, with the
right to grant sublicenses, under option Patents, which Option Patents upon
exercise of the option will




                                      -16-

<PAGE>
become Licensed Patents, to conduct research using technology covered thereby
and to develop, import, make, have made, use and sell Licensed Products and
Licensed Processes, including the right to use Licensed Patents in its
collaborative research efforts with and in the provision of services to third
parties.  This option right shall be freely assignable by LIGAND, effective
upon receipt of written notice of the name of the assignee from LIGAND to SRI
and FOUNDATION.  Neither FOUNDATION nor SRI shall have the right to grant to a
third party any rights which would operate to deprive LIGAND of its rights to
Option Technology or Option Patents prior to expiration of the option exercise
time period specified in Section 6.02 hereof.  To secure LIGAND's rights under
this Article 6, each of FOUNDATION and SRI represent that it has entered with
its present employees, consultants and agents and hereafter will enter into
with new employees, consultants and agents, agreements which will have the
effect of requiring assignment to FOUNDATION or SRI of any rights such
employees, consultants and agents may have to Option Technology and Option
Patents.  The rights to Licensed Patents acquired by LIGAND pursuant to this
Agreement shall be subject to (i) the rights of the United States as the
financial sponsor of the research from which the Licensed Patents were derived
which arise by statute or regulation, or by requirement of a grant or contract,
when such a requirement is a standard, government imposed part of the grant or
contract and of similar grants or contracts between the United States and other
not-for-profit entities like SRI and FOUNDATION, and (ii) the rights of
FOUNDATION and SRI and their licensed Research Collaborators to use said
Licensed Patents for conducting basic research pursuant to Article 5 hereof.

         6.02    Disclosure to LIGAND of Option Technology.  FOUNDATION and/or
SRI will promptly disclose Option Patents to LIGAND, after which LIGAND shall
have [*] from said disclosure by FOUNDATION and/or SRI to review said disclosed
information, patent applications or patents, and to exercise its option to
license

[*] CONFIDENTIAL TREATMENT REQUESTED



                                      -17-

<PAGE>
         such Option Patents.  The patents and patent applications in Exhibit
"A" (except the applications specified in the Addendum attached hereto) are
deemed to be disclosed as of the effective date of this Agreement.  At their
election FOUNDATION and SRI may disclose Option Technology to LIGAND before any
Option Patents are created therefor.  If such disclosure is made, LIGAND's
option to subsequently created Option Patents will expire the later of [*] from
the disclosure of the Option Technology or [*] from the first disclosure of such
related Option Patents.  FOUNDATION and/or SRI shall have the right to [*].
Nothing in this Agreement shall be construed to obligate SRI or FOUNDATION to
protect patentability prior to publication or disclosure of Option Technology,
and SRI and FOUNDATION provide no warranty as to the patentability of any Option
Technology; provided, however, that SRI and FOUNDATION will provide LIGAND with
a copy of any notice given an agency of the federal government pursuant to 35
U.S.C. 202(c)(1) concerning inventions which are Option Technology.

         6.03    Exercise of Option.  If LIGAND elects to exercise its option
to acquire, and does acquire, an exclusive license to an Option Patent pursuant
to this Article 6, LIGAND shall perform and complete each of the following
acts:

                 (a)     Deliver within the time period specified in Section
6.02 above written notice of exercise to whichever of FOUNDATION and/or SRI is
an owner of the Option Patent;

                 (b)     Pay to FOUNDATION and/or SRI, whichever is the owner of
the Option Patent, a non-refundable option exercise fee in the aggregate of [*]
Dollars ($[*]) for each Licensed Patent licensed hereunder upon said exercise.
The payment of the [*] Dollar ($[*]) license fee upon exercise of an option with
respect to a Licensed Patent shall constitute a discharge of the obligation to
pay the license fee for any other Option Patent which concurrently or
subsequently is

[*] CONFIDENTIAL TREATMENT REQUESTED



                                      -18-

<PAGE>
the subject of option exercise under this Article 6 if the concurrent or
subsequent Licensed Patent is "related" to the Licensed Patent for which the
license fee is paid.  As used herein, a Licensed Patent is "related" to another
Licensed Patent if, in whole or in part, the subject matter patented (or sought
to be patented in the case of an application for patent) in the Licensed Patent
is entitled to the benefit of the same filing date as or priority date as the
other Licensed Patent.  Related patents include, by way of example, an
application for patent in the United States and its continuations,
continuations-in-part, and divisions and foreign filed applications claiming
the benefit of the filing date of the application as filed in the United
States; and

                 (c)      Pay and/or reimburse FOUNDATION and/or SRI pursuant
to Section 6.07 herein for all of their subsequent and/or past expenses
reasonably incurred incident to the preparation, filing, prosecution, and/or
maintenance of the issued or subsequently issuing Licensed Patent within forty
five (45) days of receipt of a written statement of such expenses.  If LIGAND
reasonably disputes any expenses set forth in the written statement, it shall
disclose in writing its objection and FOUNDATION and/or SRI will first attempt
to negotiate in good faith with LIGAND or mediate their differences for a
period of not less than forty five (45) days. At the end of the forty five (45)
day period, if such negotiations and/or mediation are unsuccessful, any Party
may submit the dispute to binding arbitration pursuant to Article 8 herein.  In
the arbitration, the arbitrator may require LIGAND to pay some or all of the
disputed expenses, or the arbitrator may require FOUNDATION and/or SRI to
refund to LIGAND some or all of the payments made pursuant hereto.

         6.04    License Fee and Royalties. To the extent that LIGAND exercises
its option and acquires Licensed Patents pursuant to this Article 6, LIGAND
shall pay to FOUNDATION and/or SRI:





                                      -19-

<PAGE>
                 (a)     minimum annual royalty payments of [ * ] Dollars
($[ * ]) per calendar year per Licensed Patent which is a United States patent
commencing twelve (12) months after the issuance of such United States patent,
which minimum royalty payments shall be payable by January 31 of the calendar
year in which due (the first payment being prorated for the portion of the
calendar year remaining when the payment comes due). The payment of the minimum
annual royalty for a Licensed Patent shall constitute the discharge of the
obligation to pay the minimum annual royalty applicable to any other Licensed
Patent to which it is "related" in the manner as described in Section 6.03(b).
The minimum royalty payments shall be creditable by LIGAND against royalties
paid by LIGAND, or its sublicensees, for Licensed Products or Licensed Processes
covered by the Licensed Patent pursuant to Section 6.04(b) below accrued in the
year for which the minimum royalty payment is owed;

                 (b)     a royalty on Net Sales of Licensed Products.  The
royalty shall be (i) [ * ] percent ([*]%) on the Net Sales of a Licensed Product
when its making, use or sale is covered by a claim in a Licensed Patent and (ii)
[ * ] percent ([*]%) on the Net Sales of a Licensed Product when the making, use
or sale thereof is not covered by a claim in a Licensed Patent but a Licensed
Patent is used in the discovery or development of the Licensed Product.  The
royalty shall be paid on a country by country basis, from the first commercial
sale thereof until the later of (a) expiration of the Licensed Patent having a
claim which reads on making, using or selling the Licensed Product or (b) [ * ]
years in the case where the Licensed Patent was used in the discovery or
development of the Licensed Product. Only one royalty will be owed on a Licensed
Product in the circumstance where the Licensed Product is covered by multiple
claims in one or more Licensed Patents and where a royalty would be owed under
(i) and (ii) above, the royalty shall be [ * ] percent ([*]%) of Net Sales; and

         (c) LIGAND shall also have the right to perform Licensed Processes as
a service to a third party for a fee,


[ * ] CONFIDENTIAL TREATMENT REQUESTED


                                      -20-

<PAGE>
including the right to perform Licensed Processes for a fee in connection with
the development of a product whose making, using or selling is not within the
scope of any claim of the Licensed Patents in lieu of charging a royalty on the
sales thereof.  LIGAND will pay to the FOUNDATION or SRI, as the case may be,
the greater of: (i) [*] percent ([*]%) of its "Net Revenues" or (ii) [*] percent
([*]%) of its "Gross Revenues" from performance of the services in the case
where LIGAND is not entitled to a royalty on the sales of any product because of
its performance of a Licensed Process.  LIGAND will pay FOUNDATION and/or SRI
[*] percent ([*]%) of its Net Revenue from the performance of services where
LIGAND is entitled to a royalty on sales of a product because of its performance
of a Licensed Process.  Net Revenues for the purpose of this Section 6.04(c) are
the Gross Revenues received for performance of the service less the fully
burdened costs incurred in rendering the service.

         6.05    Co-Ownership.  When License Patents are owned jointly by SRI
and FOUNDATION, the option exercise and royalty payments required by this
Agreement will be split equally between them unless LIGAND is otherwise
instructed by both FOUNDATION and SRI in writing.  In the case where Licensed
Patents are the result of joint inventions by employees of SRI and/or FOUNDATION
and a third party or by employees of SRI, FOUNDATION and a third party and the
third party refuses to license LIGAND to its rights subject to the payments
required by this Agreement, then the payments for exercise of the option and
royalties, including minimum annual royalty payments, will be reduced by [*]
percent ([*]%).

         6.06    Net Compensation Sharing.  If LIGAND fails, within the time
limits specified in this Article 6, to exercise its option rights, FOUNDATION
and/or SRI shall be free to license such Option Patents to any other party.  If
and where FOUNDATION and/or SRI license such Option Patents to another party,
then LIGAND will be entitled to receive a percentage of the net compensation
received by FOUNDATION and/or SRI, in whatever form such compensation is

[*] CONFIDENTIAL TREATMENT REQUESTED



                                      -21-

<PAGE>
rendered, including, but not limited to, royalties, milestone payments,
technology transfer fees, bonuses, and license acquisition fees, and in
whatever form paid, including, but not limited to, cash, stock, stock options,
stock warrants, (but excluding any payments for research work actually
performed to the extent not in excess of SRI standard commercial rates or
FOUNDATION's fully burdened cost therefor, whichever is applicable) as
follows:

                 (a)     if the licensee of a FOUNDATION and/or SRI Option
        Patent sells a product or service within the scope of a claim in the
        Option Patent, LIGAND shall receive [*] percent ([*]%) of the net
        compensation received by FOUNDATION and/or SRI; or

                 (b)     if the licensee of a FOUNDATION and/or SRI Option
        Patent exploits the Option Patent in the discovery, development,
        investigation, characterization or evaluation of a product or service
        which is not within the scope of a claim in the Option Patent, LIGAND
        shall receive [*] percent ([*]%) of the net compensation received by
        FOUNDATION and/or SRI.
                
In determining "net compensation" received, FOUNDATION and/or SRI shall be
entitled to deduct from cash consideration received any unreimbursed expenses
directly incurred (i) to obtain and maintain any Option Patent or Option
Technology licensed to the third party, including filing fees, maintenance
fees, attorneys' fees, consulting fees and the like, and (ii) to locate the
third party and to negotiate and enter into the agreement with the third party.
Past research costs are not considered direct expenses.

The right of the FOUNDATION or SRI to license Option Patents for which LIGAND
fails to exercise its option does not carry with it the right to sublicense the
Ligand Patented Technology directly or


[*] CONFIDENTIAL TREATMENT REQUESTED



                                      -22-

<PAGE>
by implication as part of the license nor does it affect the rights of SRI or
Foundation provided in Section 5.02.

         6.07    Patent Prosecution and Expenses.  Subject to its rights and
obligations elsewhere set forth in this Section 6.07 and consistent with the
timing requirements set forth in Section 6.03(c) hereof, LIGAND shall
reimburse FOUNDATION and/or SRI for such reasonable patent filing, prosecution,
and maintenance costs, including costs on a per hour basis for time spent by
inventors and staff who cooperate in such activities at the request of the
responsible attorney acting for FOUNDATION and/or SRI, as shall be incurred on
each Licensed Patent during the term of such license.  In this regard,
FOUNDATION and/or SRI may continue to use the patent attorneys or agents being
used by them at the time LIGAND exercises its option or such other qualified
independent patent attorneys or agents reasonably satisfactory to FOUNDATION
and or SRI and LIGAND to file, prosecute and maintain Licensed Patents;
provided, however, that in the case where a LIGAND or JV or ALRT owned patent
or patent application or that of a LIGAND or JV or ALRT licensor other than
FOUNDATION and/or SRI ("the Ligand Application") claims the same or
substantially the same invention as that covered by the application within the
Licensed Patents (the "Foundation/SRI Application"), and the Foundation/SRI
Application has a later effective filing date in the United States, then LIGAND
shall have no obligation to reimburse costs incurred in the prosecution of the
Foundation/SRI Application, unless and until it is finally determined that the
Foundation/SRI Application has priority over the Ligand Application in an inter
partes proceeding as provided in Title 35 of the United States Code or in an
informal proceeding as provided in this Section 6.07. After LIGAND has
exercised its option: (i) FOUNDATION and/or SRI may elect to have such attorney
bill LIGAND directly for such expenses; (ii) at LIGAND's request and expense,
such attorneys or agents shall regularly meet and/or consult with LIGAND and/or
its designated officers and counsel to keep them advised of the status of
patent matters in the normal course;





                                      -23-

<PAGE>
(iii) so long as a delay will not adversely affect the rights of FOUNDATION
and/or SRI, their patent attorneys or agents, when requested by LIGAND, shall
be instructed not to file any papers without giving LIGAND reasonable time and
opportunity to review and comment; (iv) LIGAND's requests for the filing in a
single application of related inventions, discoveries and developments
constituting Option Technology to reduce Sections 6.03(b) and 6.04(a) payments
will be deemed presumptively correct and it will be the burden of FOUNDATION
and/or SRI to establish that joinder of subject matter in a single application
is contrary to standard practice in the United States.  The practices of
FOUNDATION, SRI and LIGAND exhibited by patent applications filed on their
behalf before the effective date of this Agreement shall be considered evidence
of such standard practice.  The standards used in the United States Patent and
Trademark Office in restriction practice and in foreign patent offices under
the concept of "unity of invention" are not relevant to the appropriateness of a
LIGAND request; and (v) LIGAND shall be entitled to determine the countries in
which it wishes to obtain and maintain patent protection under this Agreement
and shall be free, at any time and at its sole option, to abandon patent
prosecution or maintenance in any country; provided, however, that sixty (60)
days notice is given FOUNDATION and/or SRI concerning such abandonment.
Abandonment of an application in favor of a continuation or
continuation-in-part or surrender of a patent in a reissue proceeding shall not
be deemed abandonment of a Licensed Patent.  A Licensed Patent abandoned by
LIGAND shall thereafter be deemed on a country-by-country basis to be an Option
Patent on which LIGAND's option under Section 6.01 has expired.  In any
situation in which a Ligand Application and a Foundation/SRI Application
claims the same or substantially the same subject matter, at the request of an
affected Party, the Parties shall in good faith attempt to determine relative
priority of invention.  Each Party will bear its own costs in such a procedure.





                                      -24-

<PAGE>
         6.08    Enforcement of Licensed Patents by LIGAND.  LIGAND and any
Affiliate or sublicensee authorized by LIGAND shall, at its option, have the
right to enforce any of the Licensed Patents against infringement by an
unlicensed third party or parties and to bring such suit in its own name.  In
the event LIGAND, its Affiliates or its sublicensees shall prosecute any legal
action, it shall be at their own expense.  FOUNDATION and/or SRI shall cooperate
with LIGAND and render reasonable assistance in enforcing the Licensed Patents.
If requested, FOUNDATION and/or SRI shall join LIGAND, its authorized Affiliate
or sublicensee as a party in any such action and in such event FOUNDATION and/or
SRI shall be entitled to be represented by their own counsel at their own
expense in any such action.  During the period wherein LIGAND, its Affiliates or
its sublicensees is or are prosecuting any such action, LIGAND shall have the
right to credit the legal expenses incurred against the royalties (including
minimums if the country is the United States) payable under this Agreement in
such country by [*] percent ([*]%).  In the event that LIGAND obtains a recovery
in such an action, it shall reimburse FOUNDATION and/or SRI the reduced
royalties, after first applying any recovery amount to repay the expenses in
excess of the reduced royalties involved in prosecuting the action to
completion.  Any and all recovery amounts remaining thereafter shall be
allocated [*] percent ([*]%) to LIGAND and [*] percent ([*]%) to FOUNDATION
and/or SRI.

         6.09    Cooperation.  As used in Sections 6.07 and 6.08, "cooperate"
means with respect to FOUNDATION and SRI that they and their respective
employees will, at LIGAND's request, take actions, including but not limited
to, executing documents, providing declarations and affidavits, supplying
documents and giving depositions and in-court testimony, and otherwise
affirmatively assisting in the matters and proceedings which are the subject of
those sections without subpoena. If an employee of FOUNDATION and/or SRI is
requested by LIGAND to give a deposition or in-Court testimony or attend any
proceeding in the


[*]  CONFIDENTIAL TREATMENT REQUESTED


                                      -25-

<PAGE>
         United States Patent or Trademark Office or any proceeding in a foreign
patent office, LIGAND will reimburse FOUNDATION and/or SRI for the reasonable
travel costs incurred.  Travel costs incurred under this Section will be deemed
reasonable if such type of costs are reimbursable to LIGAND's own employees
under LIGAND's travel policy.  LIGAND will reimburse FOUNDATION and/or SRI for
time spent by any SRI or FOUNDATION professional staff member cooperating with
LIGAND, at a rate equivalent to the commercial rate charged for such employee's
time, or the fully burdened payroll cost of such employee's time if no
commercial rate exists, for up to a maximum of [*] Dollars $ [*]) per employee
per day.  LIGAND will reimburse SRI and/or FOUNDATION for any other costs
incurred cooperating with LIGAND to the extent such other costs are incurred
with the knowledge and consent of LIGAND.

         6.10    Lack of Enforcement.  In the event that LIGAND does not
undertake any legal action against an unlicensed third party or parties pursuant
to Section 6.08 of this Agreement, FOUNDATION and/or SRI shall have the right to
attempt to enforce any of the Licensed Patents against the third party or
parties.  If, at the end of six (6) months after LIGAND gives FOUNDATION and/or
SRI written notice of LIGAND's decision not to undertake legal action against
said third party or parties, FOUNDATION and/or SRI have not terminated the
unlicensed competition of said third party or parties or commenced legal action
for that purpose, LIGAND shall have the right at its election, by written notice
to FOUNDATION and/or SRI, to reduce the royalty thereafter payable to FOUNDATION
and/or SRI with respect to LIGAND's or its sublicensees or LIGAND Affiliates
sales of Licensed Products or practice of Licensed Processes adversely affected
by such unlicensed competition, to the extent such Licensed Products or Licensed
Processes are covered by a claim in the Licensed Patent, by fifty percent (50%)
thereof until such unlicensed competition shall be terminated.  If the Licensed
Patent which is the subject of unlicensed infringement covers a product or
process used in the discovery,

[*] CONFIDENTIAL TREATMENT REQUESTED



                                      -26-

<PAGE>
development, characterization or evaluation of a Licensed Product or Licensed
Process, failure to abate the infringement after notice from LIGAND shall
relieve LIGAND of the obligation to pay any royalty arising in the future under
Section 6.04(b)(ii).

         6.11    Third Party Action For Infringement.  In the event that any
third party shall bring an action against LIGAND, its sublicensees or LIGAND
Affiliates for alleged infringement of any patent or rights thereunder of such
third party, by reason of the practice of the Licensed Patents, LIGAND shall
promptly give written notice to FOUNDATION and/or SRI of the bringing of such
action.  To the extent that such action is attributable to LIGAND's use of
Licensed Patents, LIGAND, its sublicensees and LIGAND Affiliates shall have the
right to withhold payment to FOUNDATION and/or SRI of [*] percent ([*]%) of the
royalties thereafter being payable with respect to Licensed Products sold and
Licensed Processes practiced in the country where such action is brought, until
such time as the liability of LIGAND, its sublicensees or Affiliates shall be
determined; and they shall also be entitled to offset against any future
royalties payable with respect to that country to FOUNDATION and/or SRI under
this Article 6 of this Agreement after such determination, all unreimbursed
expenses, costs and/or damages incurred or paid by LIGAND, its sublicensees or
Affiliates in the defense of or by reason of such action.  In the event LIGAND,
its sublicensees or Affiliates is or are obligated to pay royalties or make
further payments to such third party in excess of the withheld payments or to
any third party in order for LIGAND, its sublicensees or Affiliates to
manufacture, use and sell Licensed Products or practice Licensed Processes, such
payments, to the extent attributable to LIGAND's use of Licensed Patents shall
be offset against royalties thereafter payable to FOUNDATION and/or SRI with
respect to that country under this Agreement to the extent of [*] percent ([*]%)
of the royalties payable to FOUNDATION and/or SRI with respect to that country
under this Agreement; provided, however, in no event shall the credits, offsets
or reductions set

[*] CONFIDENTIAL TREATMENT REQUESTED


                                         -27-



<PAGE>
forth in this Agreement cause the royalties payable to be reduced below [*]
percent ([*]%).  SRI and FOUNDATION shall have no obligation to pay for the cost
of LIGAND's defense and LIGAND shall be solely responsible for its costs. In
the event that LIGAND, its Affiliates or sublicensees are enjoined from selling
any Licensed Product or practicing Licensed Processes, and the royalties
withheld under this Section 6.11 of this Agreement are in excess of their said
expenses, costs and/or damages, LIGAND shall have the right to retain such
excess and shall not be obligated to pay said excess to FOUNDATION and/or SRI.

        6.12      Voluntary Disclosure of Technology Deemed Outside Option
Technology.  With respect to any invention, discovery or development made by
FOUNDATION and/or SRI during the term of this option, including any inventions
or discoveries made by FOUNDATION and/or SRI in collaboration with third
parties, FOUNDATION and/or SRI may at their sole discretion disclose said
inventions or discoveries to LIGAND and notify LIGAND that the invention or
discovery is outside the scope of the option granted in Section 6.01 herein.
Thereafter, LIGAND shall have ninety (90) days in which to notify FOUNDATION
and/or SRI that it disagrees with such a contention. In the event of such a
disagreement, LIGAND and FOUNDATION and/or SRI will first use good faith efforts
to negotiate or mediate their differences for a period of not less than ninety
(90) days.  However, if such negotiations and/or mediation is unsuccessful, any
Party may submit the dispute to binding arbitration pursuant to Article 8
herein.

         6.13    Contesting Disputes Concerning Option Technology. If LIGAND
believes that any particular invention, discovery, or development made by
FOUNDATION and/or SRI, including any inventions or discoveries made by
FOUNDATION and/or SRI in collaboration with third parties, that is not
disclosed to LIGAND by the FOUNDATION and/or SRI pursuant to Section 6.02, is
within the scope of the option granted LIGAND in Section 6.01 herein, then
LIGAND shall have the right to contest and contend that such

[*] CONFIDENTIAL TREATMENT REQUESTED


                                   -28-


<PAGE>
invention, discovery or development is within the scope of the option granted in
Section 6.01 herein by giving written notice of its contention to SRI and/or
FOUNDATION.  In the event FOUNDATION and/or SRI disagree with such a contention,
LIGAND and FOUNDATION and/or SRI will first use good faith efforts to negotiate
or mediate their differences for a period of not less than ninety (90) days.
However, if such negotiations and/or mediation is unsuccessful, any Party may
submit the dispute to binding arbitration pursuant to Article 8 herein.

        6.14      Dispute Regarding Existence of Licensed Product or Process.
In the event of any dispute between LIGAND and FOUNDATION and/or SRI as to
whether or not a product sold or process performed by LIGAND, its Affiliates, or
sublicensees is a Licensed Product or Licensed Process for which a royalty or
share of a service fee is due FOUNDATION and/or SRI, any Party, at its option,
shall have the right to submit the dispute to binding arbitration under Article
8. LIGAND shall not be deemed to be in default of this Article 6 of this
Agreement for nonpayment of royalties during the period in which its payment
obligation is disputed and for one (1) month after the conclusion of the
arbitration if it is required to pay royalties by reason of an arbitration award
to FOUNDATION and/or SRI.  At the conclusion of the arbitration, all reasonable
expenses of the arbitration, including attorney fees, will be borne by the
losing Party to the arbitration proceeding.

        6.15    Commercialization Efforts.  LIGAND shall, using reasonable
efforts, as determined in its good faith business judgment, diligently seek to
commercially exploit Licensed Patents.  LIGAND shall be deemed to have met this
obligation if within [*] year from exercise of its option under Section 6.01 it
has incorporated the technology subject to the option into a program that is
spending alone or in collaboration with another party or through an Affiliate or
sublicensee at least [*] per year for said program provided that the Licensed
Patents are

[*] CONFIDENTIAL TREATMENT REQUESTED

                                      -29-

<PAGE>
used in the program in a manner which generates a current payment obligation
under Section 6.04(c) or are being used in the development of a Product for
which a royalty would be incurred under Section 6.04(b); provided, however, that
the failure to meet the standards of this sentence shall not, in and of itself,
be deemed a failure, or create a presumption thereof of failure, by LIGAND to
meet its obligation of diligence under this Section.

        6.16    Reporting Payment Obligations and Payments.  In the circumstance
where a Party has a royalty or other payment obligation to the other arising
from this Agreement, it shall provide biannual reports to the Party entitled to
receive the royalty or other payment within sixty (60) days of each June 30 and
December 31 during the period when such royalties or other payments are due.  In
the case of reports of royalty obligations, such reports shall state the
quantity and description of products subject to royalty sold the preceding
royalty period, the Net Sales thereof and the calculation of the royalty due.
All royalties or other payments due hereunder shall be paid simultaneously with
the submission of such reports.  If any taxes are imposed on the payment of
royalties or other payments due the Party and/or are required to be withheld
therefrom, such taxes shall be for the account of the Party and shall reduce the
royalty payments required to be made hereunder.  All payments shall be made in
U.S. Dollars.

        6.17    Records and Audits.  A Party shall keep true and accurate
records and/or books of account containing information reasonably required for
the computation and verification of royalty and other payments to be made
hereunder to the other Party, which records and/or books shall at all reasonable
and mutually convenient times during ordinary business hours be open for
periodic inspection, not more than once each calendar year and for inspection of
no more than the three (3) prior years records and/or books, by an independent
certified public accountant selected by the party having the right to receive a
royalty or





                                      -30-

<PAGE>
other payment and who is reasonably acceptable to the other Party, for the sole
purpose of and only to the extent reasonably necessary for verification of the
amount of royalties or other payments due and payable under this Agreement. The
expense of the audit shall be borne by the auditing Party and the results
thereof shall be binding on both Parties; provided, however, if the audit
discloses an aggregate error of more than [*] percent ([*]%) for any audited
period, the expenses for said audit shall be reimbursed by the Party in error.
Any underage in a royalty or other payment revealed by the audit shall be due
and payable within thirty (30) days of the audit results being disclosed to the
audited Party unless contested during the thirty (30) day period by the audited
Party which may at its expense retain a second independent certified public
accountant to audit the payment obligation.  The payment obligation calculated
by the second accountant will be disclosed to the other Party and averaged with
the results disclosed by the first auditor and any underage resulting from such
averaging will be payable within thirty (30) days of the second audit.

         6.18    Governmental Approvals and Marketing of Licensed Products or
Process.  LIGAND or its licensee or assignee shall be responsible for obtaining
all necessary governmental approvals for the development, product,
distribution, sale and use of any Licensed Product or Process at its expense.
LIGAND or its licensee or assignee shall have sole responsibility for any
warning labels, packaging and instructions as to the use of any Licensed
Product or Process and for the quality control for any Licensed Product or
Process.

         6.19    Indemnity.  LIGAND hereby agrees to indemnify, defend and hold
harmless FOUNDATION and/or SRI (hereinafter "Indemnitees") from and against
any liability or expense arising from any product liability claim asserted by
any party as the result of the use of any Licensed Product or Process or any
product liability claim arising from the use of any Licensed

[*] CONFIDENTIAL TREATMENT REQUESTED

                                      -31-

<PAGE>
Patent by LIGAND, its assignee or licensee pursuant to this Agreement.  Such
indemnity and defense obligation shall apply to any product liability claim,
including without limitation, personal injury, death or property damage, made by
employees, subcontractors, sublicensees, or agents of licensees, as well as any
member of the general public.  Notwithstanding the above, LIGAND shall have no
obligation to indemnify, defend or hold harmless the Indemnitees for claims
arising from the negligence or willful misconduct of the Indemnitees, their
officers, agents, employees or permitted licensees and is conditioned on the
prompt notice of and reasonable assistance in the defense of such claims.

         6.20    Patent Marking.  To the extent required by applicable law,
LIGAND, its licensee or assignee shall mark all Licensed Products or their
containers in accordance with the applicable patent marking laws.

         6.21    No Use of Name.  The use of the name of FOUNDATION and/or SRI
in connection with the advertising or sale of any Licensed Product or Process is
expressly prohibited.

         6.22    DISCLAIMER OF WARRANTIES.  NOTHING IN THE AGREEMENT SHALL BE
CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY SRI OR FOUNDATION THAT
ANY PATENT WILL ISSUE BASED UPON ANY OPTION TECHNOLOGY, THAT ANY PATENT WHICH
ISSUES COVERING OPTION TECHNOLOGY WILL BE VALID, OR THAT THE USE OF ANY
LICENSED PATENT WILL NOT INFRINGE THE PATENT OR PROPRIETARY RIGHTS OF ANY OTHER
PERSON.  FURTHERMORE, SRI AND FOUNDATION MAKE NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THE LICENSED PATENTS INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.

         6.23    Governmental Interests.  In the situation where FOUNDATION
and/or SRI have received funding from the United States Government in support of
research activities which have resulted



                                      -32-

<PAGE>
in Licensed Patents, LIGAND acknowledges that LIGAND's rights pursuant to this
Agreement shall be subject to the rights of the United States Government which
arise or result from the receipt of research support from the United States
Government by FOUNDATION and/or SRI, including, without limitation, (i) the
grant to the United States of a nonexclusive, irrevocable, royalty-free license
to Licensed Patents for governmental purposes, (ii) the right of the United
States to exercise "march-in" rights to force certain non-exclusive licensing
if LIGAND is not diligently commercializing certain Licensed Products or
Processes, and (iii) the obligation of LIGAND to manufacture substantially in
the United States those Licensed Products and Processes which are sold in the
United States, unless a waiver is obtained from the appropriate agency of the
United States.

                                   ARTICLE 7
                                CONFIDENTIALITY

       7.01 Confidentiality. Except for purposes of this Agreement, including
the basic research sublicense and option rights granted hereunder, each Party
shall exercise all reasonable care to not disclose or use any confidential or
proprietary information which may be supplied by another Party (i.e., the
Disclosing Party) in the course of their relationship hereunder. The foregoing
obligations shall not apply when and to the extent such information (1) was
lawfully available to the public prior to receipt of such information by the
Receiving Party, (2) through no act on the part of the Receiving Party,
thereafter becomes lawfully available to the public, (3) is required to be
disclosed by the Receiving Party to a third party by law or legal process,
provided that, should the Receiving Party be required to make such disclosure,
they will take all reasonable steps to inform the Disclosing Party of such
disclosure in sufficient time for the Disclosing Party to oppose such
disclosure before it takes place, (4) is independently developed by the
Receiving Party, or (5) is approved by the Disclosing Party for disclosure by
the Receiving





                                      -33-

<PAGE>
Party.  The obligations imposed in this Section 7.01 will continue until five
(5) years after the date of the last disclosure of confidential and proprietary
information under this Agreement.

                                   ARTICLE 8
                                  Arbitration

         8.01    Arbitration of Section 6.12 and 6.13 Disputes.  LIGAND, the
JV, and ALRT on the one hand and FOUNDATION and/or SRI on the other agree upon
request of any party to arbitrate any dispute arising under Sections 6.12 and
6.13 concerning the scope of LIGAND's option arising under Section 6.01 as it
relates to the subject matter of any invention, discovery or development made
during the Option Term as defined in Section 9.01. The arbitrator of such a
dispute will have no right to consider the validity of any patent included in
the Ligand Patented Technology or any other factor affecting the scope of the
option except whether the disputed invention, discovery or development was
enabled by, reduced to practice or otherwise derived from or facilitated by an
act or acts within the claims of the Ligand Patented Technology.  FOUNDATION
and/or SRI will not be permitted any discovery in the arbitration.  LIGAND
and/or the JV and/or ALRT will be permitted to discover, absent a showing of
good cause, only the laboratory notebooks and other records of FOUNDATION
and/or SRI and take the deposition of FOUNDATION and/or SRI scientists
concerning conception and reduction to practice of the invention, discovery or
development and use of Ligand Patented Technology and to depose custodians of
records or other persons necessary to authenticate or corroborate FOUNDATION
and/or SRI records concerning such conception and reduction to practice and use
of Ligand Patented Technology and to take the testimony of any witness for
impeachment purposes.  The burden of proof in any such arbitration will be on
FOUNDATION and/or SRI and by a preponderance of the evidence.  The arbitration
shall be binding, except that a Party may contend in any dispute concerning the
result thereof that the arbitrator acted outside of the scope authorized by
this Section 8.01, and unless another procedure is agreed upon by the parties





                                      -34-

<PAGE>
thereto shall be conducted before a single impartial arbitrator selected by the
Parties or, if they are unable to agree within fifteen (15) days of a demand,
selected under the Commercial Arbitration Rules of the American Arbitration
Association and conducted under those rules except as modified or limited by
this Section 8.01. The award in the arbitration may be enforced in any court
having jurisdiction over the parties.  Any arbitration under this Section 8.01
shall be conducted in San Diego, California.  A demand for arbitration under
this section will not be enforceable against another Party when a dispute
otherwise subject to arbitration is combined with any other justiciable claim
which (i) is not subject to a demand for arbitration under this Agreement and
(ii) which is brought in any court having appropriate subject matter
jurisdiction and jurisdiction over the parties.  All expenses of the
arbitration including the reasonable attorney's fees of all parties, shall be
borne by the losing party.

         8.02  Arbitration of Disputes Under Sections 6.03(c) and 6.14. Any
controversy or claim of the kind specified in Sections 6.03(c) and 6.14 of the
Agreement, including the determination of the interpretation of scope of this
Agreement to arbitrate those Sections, shall be resolved by the following
procedures: Any Party may submit a dispute to final and binding arbitration
administered by the American Arbitration Association ("AAA") pursuant to the
Commercial Arbitration Rules of the AAA at the time of submission.  Unless the
Parties have agreed upon the selection of the Arbitrator before then, the AAA
shall appoint the Arbitrator pursuant to its rules as soon as practicable, but
in any event within thirty (30) days after the submission to the AAA.  The
arbitration hearings shall commence within forty-five (45) days after the
selection of the Arbitrator.  Unless the Arbitrator otherwise directs, each
Party shall be limited to two pre-hearing depositions lasting no longer than six
(6) hours each.  The parties shall exchange the documents to be used at the
hearing no later than seven (7) days prior to the hearing date.  Unless the
Arbitrator otherwise directs, each Party shall have no longer than





                                      -35-

<PAGE>
 ten (10) hours in total to present its position at the hearing, and the
 hearing shall be completed within a two-week period.  A demand for
 arbitration under this section will not be enforceable against another Party
 when a dispute otherwise subject to arbitration is combined with any other
 justiciable claim which (i) is not subject to a demand for arbitration under
 this Agreement and (ii) which is brought in any court having appropriate
 subject matter jurisdiction and jurisdiction over the parties.  The award in
 any arbitration may be enforced in any court having jurisdiction over the
 Parties.  All expenses of the arbitration including the reasonable attorney's
 fees of all parties, shall be borne by the losing Party as determined by the
 arbitration.

                                   ARTICLE 9
                              TERM AND TERMINATION

         9.01    Option Term.  Except as provided in the last sentence of this
Section 9.01, LIGAND's option rights pursuant to Article 6 of this Agreement
shall run from the effective date of this Agreement until the termination of
the sublicense granted in Section 5.01 hereof; provided however, with respect
to any Option Technology discovered by FOUNDATION and/or SRI prior to the
termination of said sublicense, LIGAND's option under Article 6 shall continue
to be exercisable for the time periods as set forth in Sections 6.02, 6.12, and
6.13 (but not beyond two years following the termination of said sublicense),
whichever time period expires earlier.  This period is hereinafter the "Option
Term".  The consideration for LIGAND's option under Section 6.01 is LIGAND's,
the JV's and ALRT's concurrence in dismissal of the Action and the Arbitration
and grant of the licenses under Article 5 to FOUNDATION and/or  SRI.
Therefore, LIGAND's option shall remain in full force and effect even in the
subsequent event that (a) a court or government agency or arbitration or
legislative enactment establishes that (i) acts by DEFENDANTS which would be
infringing by an unlicensed party are not infringing by DEFENDANTS because of
their status as non-profit institutions; (ii) acts by DEFENDANTS which would





                                      -36-

<PAGE>
otherwise be infringing constitute an unactionable experimental or de minimis
use; or (iii) acts by DEFENDANTS which would be infringing are done in the
course of work done on behalf of the United States Government; or (b)
DEFENDANTS secure a license to any or all of the Ligand Patented Technology by
a subsequent act of an agency of the United States Government; or (c) it is
determined by a court or in an arbitration that DEFENDANTS have such a license
by operation of law.  It is further provided that the establishment of any such
defense to infringement or any such license under (a)-(c) above cannot be
asserted by DEFENDANTS as a failure of consideration under this Agreement or the
basis for recision of this Agreement based on mutual or unilateral mistake or as
the basis for any other legal or equitable remedy or defense intended to limit,
reduce or eliminate LIGAND's rights during the Option Term or under any Licensed
Patents. The above notwithstanding, LIGAND's option rights under Article 6
shall not extend for more than [*] years beyond the effective date of this
Agreement in the case of establishment of any license or defense arising under
(a)-(c) of this Section 9.01 with respect to any claim within the Ligand
Patented Technology but LIGAND's option rights under Article 6 based on a claim
within the Ligand Patented Technology not subject to such license or defense
shall not be affected.

         9.02    License Term for LIGAND.  After the exercise of any option to
Option Patents, the resulting rights of LIGAND arising from such exercise to
Licensed Patents will expire [*].  Any license obtained by LIGAND under Section
6.01 will terminate automatically in the event of default by LIGAND under any of
its obligations under this Article 6 relating to that license, if said default,
including but not limited to failure to pay royalties or reimburse costs, is not
cured within thirty (30) days after written notice of default is received by
LIGAND.  Provided however, if LIGAND disputes the existence of said default or
maintains that the default has been cured within the time limits,

                                     -37-

[*] CONFIDENTIAL TREATMENT REQUESTED


                                    

<PAGE>
and LIGAND submits the dispute to arbitration under Article 8 within said
thirty (30) days, then the termination shall not occur unless and until the
completion or termination of said arbitration, and the failure of LIGAND to
effect a cure of any default determined by said arbitration within thirty (30)
days following the completion or termination of said arbitration.

         9.03    Agreement Term.  This Agreement will expire on the later of
(i) expiration of the Option Term or (ii) expiration of the obligation of
LIGAND to pay any royalty on Licensed Patents.

         9.04    Sublicense Term For FOUNDATION and SRI. The term of the
sublicenses granted FOUNDATION and SRI under Section 5.01, unless terminated
for material breach, shall be for the life of the patents included in the
Ligand Patented Technology unless terminated earlier at the election of SRI or
FOUNDATION.  The sublicense under Section 5.01 may be terminated by LIGAND or
its assignee as to FOUNDATION if a material breach of the license by
FOUNDATION occurs and as to SRI if a material breach of the license by SRI
occurs, if said material breach is not cured within 30 days after written
notice of the breach is received by the breaching party.  Termination of the
sublicense by either SRI or FOUNDATION shall not be construed to be termination
by the other.  If the sublicense granted to FOUNDATION or SRI is terminated
under this Agreement but not as to both of them, the Party who is the surviving
sublicensee may not grant rights under Section 5.02 to the Party whose
sublicense is terminated.

                                   ARTICLE 10
                                 MISCELLANEOUS

         10.01 Applicable Law.  This Agreement shall be construed in accordance
with the laws of the State of California without reference to its conflict of
laws provisions.





                                      -38-

<PAGE>
         10.02 Impossibility and Waiver. In the event that any further
lawful performance of this Agreement or any part thereof by any Party hereto
shall be rendered impossible by or as a consequence of any law or
administrative ruling of any government, or political subdivision thereof,
having jurisdiction over such Party, such Party shall not be considered in
default hereunder by reason of any failure to perform occasioned thereby.

         10.03 Force Majeure. Any delays in or failure by a Party in performance
of any obligations hereunder shall be excused if and to the extent caused by
such occurrences beyond such Party's reasonable control, including but not
limited to acts of God, strikes, or other labor disturbances, war, whether
declared or not, sabotage, and other causes, whether similar or dissimilar to
those specified which cannot reasonably be controlled by the Party who failed
to perform.

         10.04 Severability.  The provisions of this Agreement shall be deemed
severable.  Therefore, if any part of this Agreement is rendered void, invalid
or unenforceable, such rendering shall not affect the validity and
enforceability of the remainder of this Agreement unless the part or parts
which are void, invalid or unenforceable as aforesaid shall substantially
impair the value of the whole agreement to either Party.

         10.05   Integration and Amendment.  This Agreement, including the
Addendum and Exhibits, sets forth the entire agreement between the Parties
relating to the subject matter contained herein and may not be modified,
amended or discharged except as expressly stated in this Agreement or by a
written agreement signed by the Parties hereto.

         10.06   Assignment and Succession.  This Agreement and the rights and
obligations hereunder granted to and undertaken by LIGAND shall not be assigned
by LIGAND without prior written approval of FOUNDATION and SRI except to a
successor in interest



                                      -39-

<PAGE>
of substantially all of the assets to which this Agreement pertains or to an
Affiliate of LIGAND or to a successor entity in the case of a merger,
acquisition or other combination in which LIGAND is not a surviving entity, in
which case written notice (but not approval) is required.  This Agreement and
the rights and obligations granted to and undertaken by FOUNDATION and/or SRI
shall not be assignable without prior written consent of LIGAND except to a
non-profit entity which acquires substantially all of the assets of FOUNDATION
and/or SRI.  This Agreement shall be binding upon and inure to the benefit of
the Parties hereto, LIGAND'S assigns, successors, trustee(s) or receiver(s) in
bankruptcy, and legal representatives, including any successor or assignee of
the interest of LIGAND, or any LIGAND Affiliate, of the business to which this
Agreement pertains by way of merger or purchase of assets or otherwise, and
FOUNDATION'S and/or SRI'S permitted assigns, personal representatives,
successors and trustee(s), or receiver(s) in bankruptcy.

         10.07   Notices.  Any and all communications required as provided for
in this Agreement shall be in writing and sent by any means to the last known
address of the Parties to be served therewith.  Notices shall be effective when
received at the address of the Party to whom notice is given so long as the
notice is properly addressed as set forth below.  Any notice to be given to
LIGAND, the JV and ALRT shall be addressed and sent to:

                                    William L. Respess, Esq.
                                    Senior Vice President and General Counsel
                                    LIGAND PHARMACEUTICALS INCORPORATED
                                    9393 Towne Centre Drive, Suite 100
                                    San Diego, California 92121





                                      -40-

<PAGE>
Any notice to be given to FOUNDATION shall be addressed and sent to:

             Louis R. Coffman,
             Vice President and Chief Administrative officer
             LA JOLLA CANCER RESEARCH FOUNDATION
             10901 North Torrey Pines Road
             La Jolla, CA 92037

Any notice to be given to SRI shall be addressed to:

             Daniel W. Morris
             Director, Licensing and Business Development
             Science and Technology Group
             SRI INTERNATIONAL
             333 Ravenswood Ave.
             Menlo Park, CA 94025

         10.08   Authority.  The signature of a duly authorized representative
of a Party shall bind that Party and its Affiliates.

         10.09   Headings.  Headings are used in this Agreement for convenience
only and shall not affect any construction or interpretation of this Agreement.

         10.10   WARRANTY.  FOUNDATION AND SRI WARRANT THAT TO THE BEST OF
THEIR RESPECTIVE KNOWLEDGE, AFTER REASONABLE INQUIRY, NO PERSON OR ENTITY OTHER
THAN THE GOVERNMENT OF THE UNITED STATES HAS ANY RIGHTS TO OPTION TECHNOLOGY
WHICH ARE IN DEROGATION OF OR WOULD LIMIT OR IMPAIR THE RIGHTS THERETO GRANTED
LIGAND UNDER THIS AGREEMENT.

         10.11   Separate Liability.  The Parties agree that the obligations
and duties of each Party arising under this Agreement regardless whether
shared, identical, or otherwise similar, are separate and distinct from the
obligations and duties of any other Party.  Actions or failures to act by one
Party shall not confer joint and several liability to the other Parties.




                                      -41-

<PAGE>
         IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in multiple counterparts, each of which shall be deemed an original, as
of the date and year first above written.

       LA JOLLA CANCER                        LIGAND PHARMACEUTICALS
       RESEARCH FOUNDATION                    INCORPORATED

       By:    [SIG]                           By:  /s/ WILLIAM L. RESPESS
          --------------------------------       ------------------------------
                                                       William L. Respess

       Title:  V.P.                           Title: Senior Vice President
             -----------------------------           General Counsel,
                                                     Government Affairs
                                                     --------------------------

       Date:      August 22, 1995             Date:       August 22, 1995
          --------------------------------       ------------------------------

       SRI INTERNATIONAL                      ALLERGAN LIGAND

                                              By: LIGAND JVR, INC.
                                                  General Partner

      By:/s/ WILLIAM P. SOMMERS               By: /s/ WILLIAM L. RESPESS
          --------------------------------       ------------------------------
             William P. Sommers                       William L. Respess

       Title: President and CEO               Title:     Secretary
          --------------------------------       ------------------------------
       Date:   August 22, 1995                Date:  August 22, 1995
          --------------------------------       ------------------------------

       SELECTRA PHARMACEUTICALS, INC.         ALLERGAN LIGAND RETINOID
                                              THERAPEUTICS, INC.

       By: [SIG]                              By: /s/ WILLIAM L. RESPESS   
          --------------------------------       ------------------------------
                                                      William L. Respess

       Title:       V.P.                      Title: Secretary
          --------------------------------       ------------------------------
       Date:    August 22, 1995               Date:      August 22, 1995
          --------------------------------       ------------------------------





                                      -42-

<PAGE>
                                    ADDENDUM
                                       to
                       SETTLEMENT AGREEMENT, LICENSE AND
                             MUTUAL GENERAL RELEASE

         In addition to the rights and obligations set forth in the Settlement
Agreement, License and Mutual General Release, the Parties agree to the
following: LIGAND will reimburse SRI and/or FOUNDATION and/or pay for such
reasonable patent filing, prosecution, and maintenance costs, including costs on
a per hour basis for time spent by inventors and staff, incurred at Ligand's
request and with its prior approval and subject to the terms and conditions for
reimbursement set forth in Section 6.09 hereof after May 3, 1995 for the
following United States patent applications and their corresponding foreign
counterparts: U.S. Serial No. [*] ("[*]" to M.I. Dawson et al., filed [*]) and
U.S. Serial No. [*], the divisional application filed therefrom on [*]; U.S.
Serial No. [*] ("[*]", to M. Pfahl et al., filed [*]) and U.S. Serial No. [*]
("[*]" to M. Pfahl et al., filed [*]) and U.S. Serial No. [*] ("[*]"), the
continuation-in-part application filed therefrom on [*]. LIGAND shall determine,
in its sole discretion, the countries in which it wishes to obtain and maintain
patent protection with regard to the inventions disclosed in the above
referenced applications, and shall be free to abandon prosecution and
maintenance, provided that written notice is provided to SRI and/or FOUNDATION
sixty (60) days prior to such abandonment.  LIGAND shall exercise its option
under Section 6.01 with respect to the applications identified in this ADDENDUM
on or before three (3) months from the effective date of this Agreement.

[*] CONFIDENTIAL TREATMENT REQUESTED



                                      -43-

<PAGE>
                                  EXHIBIT "A"


                                 Option Patents

<PAGE>
                      La Jolla Cancer Research Foundation
                                 Pfahl Patents


Pfahl 1
"Methods of Using Estrogen Receptor as a Constitutive Transcriptional Activator
and a Respressor"
Serial No. 07/502,325
Filed: 3/30/90

Patent No. 5,183,736
Issued 2/2/93

Pfahl 2
"[*]"
Serial No. [*]
Filed: [*]
Continuation of
Serial No. [*]
Filed [*]
Continuation of
Serial No. [*]
Filed [*]

Pfahl 3
"[*]"
Serial No. [*]
Filed: [*]

Pfahl 4
"[*]"
Serial No. [*]
Filed: [*]
Serial No. [*]
Filed: [*]

Pfahl 5
"[*]"
Serial No. [*]
Filed: [*]
Continuation-in-Part of
Serial No. [*]
Filed: [*]

Pfahl 6
"[*]"
Serial No. [*]
Filed: [*]


[*] CONFIDENTIAL TREATMENT REQUESTED

                                     A - 1

<PAGE>
Pfahl Patents
Page 2


Pfahl 7
"[*]"
Serial No. [*]
Filed: [*]
Divisional of [*]

Pfahl 8
"[*]"
Serial No. [*]
Filed: [*]

Pfahl 9
"[*]"
Serial No. [*]
Date Filed: [*]
Continuation-in-Part of
Serial No. [*]
Filed: [*]

Pfahl 11
"[*]"
Serial No. [*]
Filed: [*]

Pfahl 12
"[*]"
Serial No. [*]
Filed: [*]


[*] CONFIDENTIAL TREATMENT REQUESTED

                                     A - 2

<PAGE>
                                  EXHIBIT "B"


                            Form of Consent Judgment


<PAGE>
LYON & LYON                                         Case No. 93-1895 IEG (CM)
A Partnership including
DOUGLAS E. OLSON (State Bar No. 38649)
J. DONALD McCARTHY (State Bar No. 69864)
A Professional Corporation
HOPE & MELVILLE (State Bar No. 145100)
First Interstate World Center
633 West Fifth Street, Suite 4700
Los Angeles, California 90071-2066
(213) 489-1600

Attorneys for Plaintiffs
LIGAND PHARMACEUTICALS INCORPORATED
and ALLERGAN LIGAND


                          UNITED STATES DISTRICT COURT

                        SOUTHERN DISTRICT OF CALIFORNIA



LIGAND PHARMACEUTICALS                    
INCORPORATED, a Delaware corporation;   
and ALLERGAN LIGAND, a California       
partnership,                            
                                         
                 Plaintiffs,              
                                          
   v.                                   
                                        
LA JOLLA CANCER RESEARCH                
FOUNDATION, a California corporation;   
SELECTRA PHARMACEUTICALS, INC., a       
California corporation; and SRI         
INTERNATIONAL, a California corporation,
                                        
                 Defendants.            

                                CONSENT JUDGMENT
                                ----------------
  
      Plaintiffs Ligand Pharmaceutical Incorporated and Allergan Ligand and
Defendants La Jolla Cancer Research Foundation, SelectRA Pharmaceutical, Inc.,
and SRI International have agreed, as part of a settlement, to the entry of the
following Consent Judgment, subject to the approval of the Court:

      IT IS HEREBY ORDERED ADJUDGED, AND DECREED that:

      1.  This Court has jurisdiction over the subject matter of the Complaint
and over the parties to this Consent Judgment.

LYON & LYON
First Interstate World Center
633 West Fifth Street, Suite 4700
Los Angeles, CA 90071-2066
(213) 489-1600

                                     B - 1

  
  




                       

<PAGE>
        2.      Plaintiffs, under an exclusive license from the owner, have
the right to sue for infringement of U.S. Patent Nos. 4,981,784; 5,071,773;
5,091,518; and 5,171,671 (hereafter collectively referred to as the "Evans
Patents"). Each of the Evans Patents is lawfully issued, valid and enforceable.
Defendant SelectRA Pharmaceuticals, Inc. has infringed the Evans Patents by its
plans to make, use or sell the inventions claimed therein and has induced
others to make, use or sell the inventions claimed therein. Defendant La Jolla
Cancer Research Foundation has infringed the Evans Patents in its efforts to
commercialize the technology claimed therein. Defendant SRI International has
induced infringement of the Evans Patents by providing retinoid compounds for
biological evaluations to Defendant La Jolla Cancer Research Foundation.

        3.      The parties have entered into a Settlement Agreement, License
and Mutual General Release, dated as of August __, 1995 (the "Settlement
Agreement"). Pursuant to the Settlement Agreement, the Plaintiffs have granted
to Defendant La Jolla Cancer Research Foundation and to Defendant SRI
International certain license rights to use the Evans Patents (the
"Defendants' License Rights").

        4.      Defendants, and each of them, their respective agents,
servants, employees, any business entity effectively owned or controlled by
them, and all persons, including successors and assigns, in active concert or
participation with them, or any of them, who receive actual notice of this
consent Judgment, except to the extent licensed under the Settlement Agreement,
are hereby enjoined:

                a.      from making, using or selling any product, method or
compound or thing which infringes any claim of the Evans Patents;

                b.      from contributing to anyone's infringement of any claim
of the Evans Patents; or

                c.      from inducing anyone to infringe any claim of the Evans
Patents.

LYON & LYON
First Interstate World Center
633 West Fifth Street, Suite 4700
Los Angeles, CA 90071-2066
(213) 489-1600

                                     B - 2


<PAGE>
        5.      The parties have settled their monetary claims, there shall be
no damages or accounting for damages or profits hereunder, and each party shall
bear its own costs, including attorneys' fees.

        6.      Except to the extent that relief is granted above, every
remaining claim in the Complaint is hereby dismissed with prejudice.

        7.      The Court shall retain jurisdiction over the subject matter
hereof and over Defendants to ensure compliance with this Consent Judgment.

       
Dated:                                 
      ------------------------- -----------------------------------------
                                United States District Judge

Approved as to form and content:

                                LYON & LYON
                                A Partnership including
                                DOUGLAS E. OLSON
                                J. DONALD McCARTHY
                                Professional Corporations
                                HOPE E. MELVILLE
                                First Interstate World Center
                                633 West Fifth Street, Suite 4700
                                Los Angeles, California 90071-2066
                                Telephone: (213) 489-1600

Dated:                          By:                                 
      -------------------------    --------------------------------------
                                        Attorneys for Plaintiffs
                                        LIGAND PHARMACEUTICALS
                                        INCORPORATED AND ALLERGAN LIGAND

                                CAMPBELL AND FLORES
                                MAURICIO A. FLORES
                                LYNNE M. BRENNAN
                                4370 La Jolla Village Drive, Suite 700
                                San Diego, CA 92122
                                Telephone: (619) 535-9001

Dated:                          By:                                 
      -------------------------    --------------------------------------
                                        Attorneys for Defendants
                                        LA JOLLA CANCER RESEARCH FOUNDATION
                                        and SELECTRA PHARMACEUTICALS, INC.


LYON & LYON
First Interstate World Center
633 West Fifth Street, Suite 4700
Los Angeles, CA 90071-2066
(213) 489-1600

                                     B - 3



<PAGE>
                                PILLSBURY MADISON & SUTRO
                                ROBERT P. TAYLOR
                                RODERICK M. THOMPSON
                                JEAN I. LIU
                                225 Bush Street
                                P.O. Box 7880
                                San Francisco, CA 94120-7880
                                Telephone: (415) 983-1000



Dated:                          By:                                 
      -------------------------    --------------------------------------
                                        Attorneys for Defendant
                                        SRI INTERNATIONAL

LYON & LYON
First Interstate World Center
633 West Fifth Street, Suite 4700
Los Angeles, CA 90071-2066
(213) 489-1600

                                     B - 4



<PAGE>
                                  EXHIBIT "C"


                             Form of Press Release

<PAGE>
                           DRAFT     DRAFT     DRAFT

Ligand and ALRT Contact:                   La Jolla Cancer Research Foundation:
Susan E. Atkins                            Louis Coffman
(619) 550-7687                             (619) 455-6480  ext. 202


FOR IMMEDIATE RELEASE
---------------------

                             LIGAND and ALRT SETTLE
                            PATENT INFRINGEMENT SUIT
                            AGAINST LA JOLLA CANCER
                              RESEARCH FOUNDATION,
                                SelectRA AND SRI


SAN DIEGO, CA, AUG. XX, 1995 -- Ligand Pharmaceuticals Incorporated
(Nasdaq:LGND), Allergan Ligand Retinoid Therapeutics, Inc. (Nasdaq:ALRIZ) and
the La Jolla Cancer Research Foundation (LJCRF), today announced that they have
reached a mutual settlement agreement in the patent infringement litigation
commenced by Ligand and the Allergan-Ligand joint venture against LJCRF and
SelectRA Pharmaceuticals, Inc., an affiliate of LJCRF, and SRI International.

        The settlement includes a consent judgment which confirms the validity
of four patents (U.S. 4,981,784; U.S. 5,071,773; U.S. 5,091,518; and U.S.
5,171,671) covering aspects of retinoid technology utilized in the discovery
and characterization of retinoid compounds which are potentially valuable
pharmaceutical products. The patents, which are owned by The Salk Institute for
Biological Studies, are licensed exclusively to Ligand and exclusively
sublicensed to Allergan Ligand Retinoid Therapeutics, Inc. (ALRT) for retinoid
applications. Pursuant to the settlement, the consent judgment also
acknowledges an infringement of the patent rights principally by reason of
activities surrounding SelectRA's proposed commercialization of retinoid
technology. As part of the settlement, SelectRA is being dissolved.

        The settlement also includes a cross-licensing arrangement, with no
party paying any damages. LJCRF and SRI have been granted a royalty-free,
limited license to use the technology covered by the patents-in-suit for basic
research purposes. LJCRF and SRI have in turn granted options to Ligand to
acquire exclusive, worldwide, royalty-bearing license rights to inventions and
patent rights which result from the use by the LJCRF and SRI of the licensed
patent rights. ALRT acquires rights to such inventions and patent rights having
retinoid applications as a result of Ligand's blanket sublicense to ALRT of its
rights to retinoid technology. Under the settlement, Ligand and ALRT will have
the opportunity to evaluate certain retinoid compounds prepared at SRI and, at
ALRT's option, develop for commercial purposes those of interest to it.



                                      C-1

<PAGE>
LJCRF INFRINGEMENT
PAGE TWO


        "ALRT has a broad and strong patent position in the field of retinoid
technology and we will continue to aggressively protect these important
intellectual property assets while proceeding equally aggressively to
commercialize this technology," according to Dr. Marvin Rosenthale, ALRT
President.

        "Ligand is pleased with this settlement which achieves our original
goals for initiating this litigation. We are also pleased that the settlement
provides that certain retinoid technology invented by the La Jolla Cancer
Research Foundation and SRI International can be commercially exploited by
ALRT," according to David E. Robinson, Ligand President and Chief Executive
Officer.

        "The Foundation is pleased to enter into this settlement with Ligand so
as to secure the Foundation's right to use the patented technology for
conducting the Foundation's basic scientific research programs," according to
Erkki Ruoslahti, M.D., President of LJCRF. "The Foundation's discoveries can
now be commercialized through Ligand or ALRT, and the Foundation is optimistic
that they will be successful in developing and marketing products arising from
this technology, which may result in royalty payments to support the
Foundation's further basic scientific research efforts."

        Allergan Ligand Retinoid Therapeutics, Inc. is a newly formed company
whose primary purpose is to discover and develop drugs based on retinoids.
Retinoids have a broad range of biological actions, and evidence suggests that
retinoids may be useful in the treatment of skin diseases, a variety of
cancers, including kidney cancer, certain forms of leukemia and other cancers,
as well as eye diseases.

        Ligand Pharmaceuticals Incorporated, founded in 1987, is a leader in
gene transcription technology, particularly intracellular receptor (IR)
technology and Signal Transducers and Activators of Transcription (STATs).
Ligand applies IR and STATs technology to the discovery and development of
small molecule drugs to enhance therapeutic and safety profiles and to address
major unmet patient needs in cancer, women's health and skin diseases, as well
as osteoporosis, cardiovascular and inflammatory disease.

        The La Jolla Cancer Research Foundation, located in La Jolla,
California, was established in 1976 as a non-profit biomedical research
institute to investigate the biological roots of cancer with the goal of
finding complete and noninvasive cures for the disease.



                                      C-2

<PAGE>
                                  EXHIBIT "D"


                       Retinoid Compounds Synthesized in
                       [*] Laboratory During Term of the
                         Compound Evaluation Agreement


[*] CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
                                    Table 1A
                       Retinoids available from inventory

Retinoid                            Retinoid
   No.            Structure            No.            Structure
--------          ---------         --------          ---------
    1                [*]                8                [*]

    2                [*]                9                [*]

    3                [*]               10                [*]

    4                [*]               11                [*]

    5                [*]               12                [*]

    6                [*]               13                [*]

    7                [*]               14                [*]


[*] CONFIDENTIAL TREATMENT REQUESTED

                                     D - 1

<PAGE>
                               Table 1A continued

Retinoid                            Retinoid
   No.            Structure            No.            Structure
--------          ---------         --------          ---------
  15(2)              [*]              23                 [*]

  16(2)              [*]              24                 [*]

  17                 [*]              25                 [*]

  18                 [*]              25(2)              [*]

  19                 [*]              27                 [*]

  20                 [*]              28                 [*]

  21                 [*]              29                 [*]

  22                 [*]              30                 [*]



[*] CONFIDENTIAL TREATMENT REQUESTED

                                     D - 2

<PAGE>
                               Table 1A continued

Retinoid                            Retinoid
   No.            Structure            No.            Structure
--------          ---------         --------          ---------
  31(2)              [*]              39                 [*]

  32                 [*]              40                 [*]

  33                 [*]              41                 [*]

  34                 [*]              42                 [*]

  35                 [*]             

  36                 [*]             

  37                 [*]            

  38                 [*]            



[*] CONFIDENTIAL TREATMENT REQUESTED

                                     D - 3

<PAGE>
                                    Table 1B
                     Retinoids not available from inventory

Retinoid                            Retinoid
   No.            Structure            No.            Structure
--------          ---------         --------          ---------
  43                 [*]              51                 [*]

  44                 [*]              52                 [*]

  45                 [*]              53                 [*]

  46                 [*]              54(2)              [*]

  47(2)              [*]              55                 [*]

  48                 [*]              56                 [*]

  49(1)              [*]              57                 [*]

  50                 [*]              58                 [*]



[*] CONFIDENTIAL TREATMENT REQUESTED

                                     D - 4

<PAGE>
                               Table 1B continued

Retinoid                            Retinoid
   No.            Structure            No.            Structure
--------          ---------         --------          ---------
  59                 [*]              67(1)              [*]

  60                 [*]              68                 [*]

  61                 [*]              69                 [*]

  62                 [*]              70(1)              [*]

  63                 [*]              71                 [*]

  64                 [*]              72                 [*]

  65                 [*]              73                 [*]

  66                 [*]              74                 [*]



[*] CONFIDENTIAL TREATMENT REQUESTED

                                     D - 5

<PAGE>
                               Table 1B continued

Retinoid                            Retinoid
   No.            Structure            No.            Structure
--------          ---------         --------          ---------
  75                 [*]  

----------

(1) None remaining.

(2) Known to have been claimed by others ([*]).


[*] CONFIDENTIAL TREATMENT REQUESTED

                                     D - 6


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