<PAGE> 1
OMD APPROVAL
OMD Number: 3235-0145
Expires: October 31, 1997
Estimated average burden
hours per response...14.90
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No.____4____)
Bio-Technology General Corp
- -----------------------------------------
(Name of Issuer)
Common Stock
- -----------------------------------------
(Title of Class Securities)
090578105
- -----------------------------------------
(CUSIP Number)
David J. Allen, Esquire, 290 South County Farm Rd., Third
Floor, Wheaton, IL 60187-4526 (630) 588-7200
- -----------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications)
January 22, 1997
- -----------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject
of this Schedule 13D, and is filing this schedule because of
Rule 13-1(b) (3) or (4), check the following box / /.
Check the following box if a fee is being paid with the
statement / /. (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting
beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no
amendment subsequent thereto reporting beneficial ownership
of five percent or less of such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect
to the subject class of securities, and for any subsequent
amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section
18 of the Securities Exchange Act of 1934 ("Act") or
otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act
(however, see the Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 090578105 PAGE 2 OF 5 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GRACE BROTHERS, LTD.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)/ /
(b)/ /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2 (d) OR 2 (e)/ /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
ILLINOIS LIMITED PARTNERSHIP
7 SOLE VOTING POWER
NUMBER OF 1,530,614 SHARES
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,339,086
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 1,530,614 SHARES
WITH 10 SHARED DISPOSITIVE POWER
1,339,086
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,869,700 SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*/ /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.4%
14 TYPE OF REPORTING PERSON*
BD
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE
ATTESTATION.
<PAGE 3>
SCHEDULE 13D
CUSIP NO. 090578105 PAGE 3 OF 5 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BRADFORD T. WHITMORE
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)/ /
(b)/ /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
PF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2 (d) OR 2 (e)/ /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES
7 SOLE VOTING POWER
NUMBER OF 19,429 SHARES (4,429 SHARES AND OPTIONS TO
SHARES PURCHASE 15,000 SHARES)
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 19,429 SHARES (4,429 SHARES AND OPTIONS TO
WITH PURCHASE 15,000 SHARES)
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
19,429 SHARES (4,429 SHARES AND OPTIONS TO PURCHASE 15,000
SHARES)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*/ /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
<0.1%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE
ATTESTATION.
<PAGE> 4
Page 4 of 5 Pages
Item 1. Security and Issuer
This statement relates to the common stock, par value $.01
per share (the "Common Stock"), issued by Bio-Technology
General Corp, a Delaware corporation (the "Company"), whose
principal executive offices are located at 70 Wood Avenue
South, Iselin, New Jersey 08830.
Item 4. Purpose of Transaction
On January 29, 1997, Bradford T. Whitmore, a general partner
of Grace Brothers, Ltd., resigned as a member of the Board of
Directors of the Company. Whitmore resigned in order to
devote additional time to other business
matters and his resignation was not as a result of any
concerns or disagreements with the Company's operations,
policies or practices. His letter of resignation is attached
as Exhibit A to this Amendment No. 4. As a result of this
resignation, future filings by the reporting person will be
on form 13(G).
On January 22, 1997, Grace Brothers, Ltd. ("GBL") entered
into an equity swap with a financial institution covering
400,000 shares of common stock owned by GBL; the details of
such transaction are more fully described in Item 6, below.
Except as set forth herein, Grace has no plans or
proposals which relate to or would result in any of
the actions set forth in subparagraphs (a) through (j) of
Item 4 of Schedule 13D under the Act.
Item 5. Interest in Securities of the Issuer.
(a) As of the date of this filing, Grace beneficially owns
2,869,700 shares of Common Stock, representing approximately
6.4% of the outstanding shares of Common Stock.
Additionally, Bradford T. Whitmore, a general partner of Grace Brothers
Ltd. owns 4,429 shares and options to purchase 15,000
additional shares.
(b) Grace is the direct beneficial owner of 1,530,614 shares
of the Common Stock and has the sole power to vote and
dispose of such position. Grace may also be deemed to be the
beneficial owner of securities held by its substantially
wholly owned affiliates, and in such case, may be deemed to
have shared power to vote and dispose of the positions of
Grace Holdings, LP, an Illinois limited partnership (which is
the owner of 930,400 shares of Common Stock) and Grace
Brothers International, Ltd,. a Bermuda corporation (which is
the beneficial owner of 408,686 shares of Common Stock).
<PAGE 5>
Page 5 of Pages
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
On January 22, 1997, GBL entered into an equity swap with a
financial institution covering 400,000 shares of common stock
owned by GBL. Subject to early termination rights, the swap
will remain outstanding until February 28, 2000. The
relevant price for purposes of determining the
counterparties' benefits under the swap is $14.1122 per
share, such that if the price of the common stock is above
$14.1122 at the end of the swap term, GBL will pay such
difference to its counterparty, and if the price of the
common stock is below $14.1122 at the end of the swap term,
the counterparty will pay such difference to GBL. Additional
details regarding the swap transaction are described in
Exhibit B to this Amendment No. 4.
Item 7. Items to be filed as Exhibits.
Exhibit A - Letter of Resignation
Exhibit B - Form of swap transaction confirmation, dated as
of January 22, 1997, by Lehman Brothers to the counterparties
described therein.
SIGNATURE
Grace Brothers, Ltd., after reasonable inquiry and to the
best of its knowledge and belief certifies that the
information set forth in this statement is true, complete and
correct.
Grace Brothers, Ltd.
By:____________________
Bradford T. Whitmore
General Partner
Grace Brothers, Ltd.
Dated: January 29, 1997
<PAGE 6>
EXHIBIT A
January 29, 1997
Dr. Sim Fass
President and CEO
Bio-Technology General Corporation
70 Wood Avenue South
Iselin, NJ 08830
Dear Sim:
After serious consideration, I have determined to resign as a
director of Bio-Technology General Corporation, effective
immediately. This decision did not come easily, as I have a
tremendous amount of respect and admiration for you and your
management team. You have all accomplished a great deal in
the past several years. In addition, I enjoyed being
a part of a very talented and professional Board of
Directors, and I feel that this group will continue to ably
advise and direct the Company's activities. However, time
constraints have dictated that I resign. This resignation is
for personal reasons and is in no way related to any concerns
or disagreements with the Company's operation, policy, or
practices. I wish everyone on the Bio-Technology General team
continued success in the future.
Best Regards,
Bradford T. Whitmore
EXHIBIT B
January 24, 1997
Swap Transaction
Grace Brothers, Ltd.
1560 Sherman Avenue
Suite 900
Evanston, IL 60201-4818
Attention: Brad Whitmore
Telephone Number: 847-733-1230
Facsimile Number: 847-733-0339
Master Number: GRBR0122
LBF Reference Number: N97010050
Dear Sir/Madam:
The purpose of this letter agreement (this "Confirmation") is
to confirm the terms and conditions of the Swap Transaction
entered into between you and us on the Trade Date specified
below (the "Swap Transaction"). This letter agreement
constitutes a "Confirmation" as referred to in the ISDA
Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swap Dealers
Association, Inc.) are incorporated into this Confirmation.
In the event of any inconsistency between those definitions
and provisions and the Confirmation, this Confirmation will
govern.
1. This Confirmation evidences a complete binding agreement
between Lehman Brothers Finance S.A. ("Party A") and Grace
Brothers Ltd. ("Party B") as to the terms of the Transaction
to which this Confirmation relates. In addition, you and we
agree to use all reasonable efforts promptly to negotiate,
execute and deliver an agreement (the "Master Agreement") in
the form of the ISDA Master Agreement (Multicurrency-Cross
Border) (the "ISDA Form"), with such modifications as you and
we will in good faith agree. Upon the execution by you and
us of such an agreement, this Confirmation will supplement,
form a part of, and be subject to that agreement. All
provisions contained or incorporated by reference in that
agreement upon its execution will govern this Confirmation
except as expressly modified below. Until we execute and
deliver that agreement, this Confirmation, together with all
other documents (each a "Confirmation") confirming
transactions entered into between us and referring to ISDA
Form, shall supplement, form a part of, and be subject to an
agreement in the form of the ISDA Form as if we had executed
an agreement in such form (but without any Schedule) on the
Trade Date of the first such transaction between us. In the
event of any inconsistency between the provisions of that
agreement, or the Master Agreement when executed, and this
Confirmation, this Confirmation will prevail for the purpose
of this Transaction.
In addition, this Confirmation shall itself evidence a
complete and binding agreement between you and us as to the
terms and conditions of the Swap Transaction to which this
Confirmation relates.
2. The terms of the particular Swap Transaction to which
this Confirmation relates are as follows:
Agent: Lehman Brothers Inc. ("LBI") is confirming this Swap
Transaction for both Party A and Party B. LBI has no
obligations, by guarantee, endorsement or otherwise, with
respect to the performance of this Transaction by either
party hereto.
Notional Amount: USD5,644,880. In addition, in the event of
any partial termination of this Swap Transaction, the
Notional Amount shall be reduced by multiplying it by a
fraction the numerator of which is equal to the Number of
Selected Securities immediately after such partial
termination and the denominator of which is equal to the
Number of Selected Securities immediately prior to such
partial termination.
<PAGE 7>
Trade Date: January 22, 1997
Effective Date: January 27, 1997
Termination Date: March 2, 2000
Early Termination: a) If, on any date on or prior to the
Termination Date, a Merger Event occurs with respect to (i)
any of the Selected Securities or (ii) equity shares of the
same class as the Selected Securities (in each case, the
"Affected Shares"), and such Merger Event results in a
taxable event for the holder of the Affected Shares, then the
Merger Date will be deemed to be the Final Equity Valuation
Date with respect to this Swap Transaction. If a Merger
Event other offer or exchange made generally available to
holders of the Selected Securities or equity shares of the
same class as the Selected Securities, results for Party B in
a non-taxable disposition of all or some of the Selected
Securities (the "Non-Affected Shares"), and provided further
that, with respect to the Non-Affected Shares, such event
results in Party B's ownership of non-restricted,
registered common equity shares, publicly traded on a
national exchange or Nasdaq NMS (the "New Shares"), then this
Swap Transaction shall continue (subject to paragraph (e)
below) and the New Shares shall become (or be included among,
in the case of a partial exchange) the Selected Securities,
and the Number of Selected Securities shall be equal to the
aggregate of the number of New Shares and the number of
Selected Securities unaffected by such offer or exchange.
b) If such Merger Event results for Party B in a disposition
of the Selected Securities that is partially taxable under
the United states Internal Revenue Code, then this Swap
Transaction shall be partially terminated to the extent that
the disposition is taxable, with the Merger Date deemed to be
the Final Equity Valuation Date for that portion of this Swap
Transaction which is being terminated. This Swap Transaction
shall continue to the extent that the disposition is
nontaxable and results in Party B's continued ownership of
the New Shares, which New Shares shall become the Selected
Securities, and the Number of Selected Securities shall be
equal to the Number of New Shares acquired in connection with
the Merger Event.
c) A tax-free spinoff of new equity securities that are non-
restricted shares, freely and publicly traded on a national
exchange of NASDAQ NMS, shall result in Price(t) being
adjusted by multiplying it by a fraction, the numerator of
which is the Share Closing Value of the Selected Securities
on the ex-distribution date and the denominator of which is
the Share Closing Value of the Selected Securities on the ex-
distribution date plus the Share Closing Value of the new
equity securities on the ex-distribution date. The Swap
Transaction shall apply to the new securities so distributed,
with Price(t) for the new securities set equal to their Share
Closing Value on the ex-distribution date.
d) If in connection with any hedge of this Swap Transaction,
Party A is unable to obtain the Selected Securities, either
directly or through any of its affiliates, through the
securities lending market at a competitive level and on a
basis consistent with the economic assumptions of the parties
as of the Trade Date, then Party A may terminate this Swap
Transaction. In the event that Party A elects to terminate
this Swap Transaction pursuant to this paragraph, Party A
shall notify Party B of such election (such date of
notification being the "Party A Early Termination
Notification Date"), and five (5) Business Days following the
Party A Early Termination Notification Date shall be deemed
to be the Final Equity Valuation Date.
e) Party B may terminate this Swap Transaction, in whole or
in part, on any Business Day from and including the Trade
Date to and including the Termination Date by providing five
(5) Business Days' notice to Party A (such date of
notification being the "Party B Early Termination
Notification Date"), without any penalty, and five (5)
Business Days following the Party B Early Termination
Notification Date shall be deemed to be the Final Equity
Valuation Date.
f) The parties agree that all amounts payable pursuant to
this Early Termination section shall be in addition to, and
not in lieu of, the settlement of all obligations arising
from a termination of the Swap Transaction.
<PAGE 8>
Final Adjustments: For the final Calculation Period, the sum
of the following, calculated daily, from and including the
date on which Party A begins to unwind its hedge (the "Hedge
Unwind Initiation Date") to and including the Final Equity
Valuation Date, shall be subtracted from Party A's Floating
Amount:
[N*H*(FR-0.75%)*D3/360]
Where:
"N"= the Notional Amount
"H"= the total number of shares executed on any day for the
purpose of Party A's unwind of its hedge divided by the
Number of Selected Securities
"FR"= Floating Rate Option
"D3"= the actual number of days from and including the third
Exchange Business Day from that Date to but excluding the
Termination Date.
If any date from and including the Hedge Unwind Initiation
Date to and including the Final Equity Valuation date is an
ex-dividend date with respect to the selected Securities,
then the Equity Dividend Amount for the corresponding
Calculation Period shall be deemed to exclude all dividends
attributable to the number of shares of the Selected
Securities for which Party A has unwound its hedge as of the
close of trading on the Exchange Business Day immediately
preceding the ex-dividend date.
Selected Securities: Freely tradeable common shares of Bio-
Technology General (the "Issuer")/Ticker: BTGC.
Number of Selected Securities: 400,000 as adjusted
appropriately to take into account stock dividends and stock
splits. In addition, in the event of any partial termination
of this Swap Transaction, the Number of Selected Securities
shall be reduced by that number of Selected Securities
attributable to such partial termination.
Net Payments: Applicable
Settlement: USD
Business Days: New York
Business Day Convention: Modified Following
Period End Date: The Final Equity Valuation Date
Final Equity Valuation Period: Five (5) Business Days up to
and including the Final Equity Valuation Date, provided that
each such day is an Exchange Business Day and subject further
to modification as provided in Section 4.
Final Equity Valuation Date: February 28, 2000
Payment Date: Three (3) Business Days following the Period
End Date, which date must be an Exchange Business Day.
Calculation Period: Each Calculation Period shall extend
from, and including, one Payment Date to, but excluding,
except that the initial Calculation Period shall commence on,
and include, the Effective Date and the final Calculation
Period shall end on, but exclude, the Termination Date.
<PAGE 9>
Party A Floating Amounts:
Calculation Amount: The Notional Amount
Floating Rate for initial Calculation Period:
5.5625% (exclusive of the Floating Rate Spread)
Floating Rate Option: USD-LIBOR-BBA (as currently set forth
on Telerate p. 3750)
Designated Maturity: Three months
Floating Rate Spread: Minus 0.75%
Floating Rate Day Count Fraction: Actual/360
Reset Date: The first day of each Calculation Period
Compounding: Inapplicable
Upfront Payment: On the Effective Date, Party A shall pay to
Party B USD5,362,636 (which amount shall not exceed 95% of
the Notional Amount).
Party A Capital Depreciation Amount: If, on the Final Equity
Valuation Date, the result of the Formula to determine the
Capital Appreciation amount is a negative amount, then Party
A shall pay the absolute value of such amount to Party B on
the final Payment Date, provided that the maximum Capital
Depreciation Amount payable by Party A shall be USD4,644,880.
Party B Floating Amounts:
Calculation Amount: Up to 95% of the Notional Amount
Floating Rate for initial Calculation Period: 5.5625%
(exclusive of the Floating Rate Spread)
Floating Rate Option: USD-LIBOR-BBA (as currently set forth
on Telerate p. 3750)
Designated Maturity: Three months
Floating Rate Spread: Plus 0.75%
Floating Rate Day Count Fraction: Actual/360
Reset Date: The first day of each Calculation Period
Compounding: Inapplicable
Final Payment: Party B shall pay to Party A the Upfront
Payment on the Termination Date.
Party B Capital Appreciation Amount: If the result of the
Formula to determine the Capital Appreciation amount is a
positive amount on the Final Equity Valuation Date, then
Party B shall pay such amount to Party A on the Termination
Date.
Dividends: Party B shall pay to Party A, the Equity Dividend
Amount, if any, when such amount is paid by the Issuer to
holders of record of the Selected Securities.
<PAGE 10>
Collateral: As security for the payment of all amounts and
delivery of all securities due or that may become due from
Party B to Party A under this Swap Transaction, Party B, on
the Effective Date, hereby pledges, assigns, transfers and
grants to Party A a first lien on, and a security interest
in, the Selected Securities in an amount equal to the total
Number of Selected Securities (the "Collateral"). Party B
hereby agrees and acknowledges that Party A shall have all
the rights under the Pledge Agreement dated as the Trade
Date. Party A agrees to return the total Number of Selected
Securities to Party B immediately upon settlement of all
payment obligations hereunder or, in the case of a partial
termination as specified in Section 2, that fraction of the
Number of Selected Securities attributable to such partial
termination, and the Number of Selected Securities shall be
reduced by that number of Selected Securities returned to
Party B in connection with such partial termination.
Party B has the right to substitute Equivalent Collateral (as
such term is defined in the Pledge Agreement.)
Party B hereby agrees that Party A shall have the right,
during any period in which this Transaction remains in
effect, (a) to pledge, repledge, hypothecate, or
rehypothecate the Collateral, (b) to lend the Collateral and
all attendant rights of ownership (including voting rights)
to parties affiliated with Party A or others, or (c) to enter
into repurchase transactions with respect to the Collateral
with parties affiliated with Party A or others, in each case
directly or through agents (including agents affiliated with
Party A), separately or in common with other securities or
property, and without retaining in Party A's possession or
control for delivery a like amount of similar securities or
other property. Party B acknowledges that Party A and it
affiliates may realize profits or other benefits in
connection with transactions involving the Collateral
authorized under this section and agrees that Party A shall
not be accountable to Party B therefor.
Right of Set-off: Party B shall have the right to set-off
against the Upfront Payment due on the Termination Date the
amount of the Party A Capital Depreciation Amount or any
other amounts payable by Party A to Party B as of the
Termination Date. Simultaneous with Party B's payment of all
amounts payable by Party B on the Termination Date (giving
effect to any set-off pursuant to the preceding sentence),
Party A shall return the Collateral to Party B. If Party A
breaches its obligation to return the Collateral to Party B,
then Party B shall have the further right to set-off the
value of the Collateral against the Upfront Payment, in
addition to all of Party B's other rights and remedies as a
result of the breach.
<PAGE 11>
Other Provision: Party A and Party B agree that, for
Federal, state and local income and franchise tax purposes,
the Swap Transaction contemplated hereby is properly
characterized as a loan together with an equity swap, as
described in this paragraph, and agree reasonably not to take
any position to the contrary. The loan is as follows: (1)
Party A loans to Party B the Upfront Payment on the Hedge
Completion Date in the amount of USD5,362,636 (which amount
shall be subject to adjustments and partial terminations, if
any); (2) interest on the loan is payable by Party B on the
specified Payment Dates at a rate of three month USD-LIBOR-
BBA plus 0.75%; and (3) the loan will be repaid by Party B to
Party A on the Termination Date by payment of the Upfront
Payment to Party A (which amount shall be subject to
adjustments and partial terminations, if any). The equity
swap is as follows: (1) Party A pays to Party B, on all
specified Payment Dates, three month USD-LIBOR-BBA minus
0.75% multiplied by the Notional Amount multiplied by the
Floating Rate Day Count Fraction; (2) Party B shall pay to
Party A the Equity Dividend Amount on the date(s) specified
herein; and (3) on the Termination Date, either (x) Party A
shall pay the Capital Depreciation amount to Party B or (y)
Party B shall pay the Capital Appreciation amount to Party A.
With the exception of the payment of the Equity Dividend
Amount, which shall be paid by Party B to Party A when such
amount is paid by the Issuer to holders of record of the
Selected Securities, there shall be one net payment due on
each Payment Date under the Swap Transaction.
Party B Representations: Party B represents that (i) it is
not entering into this Transaction on behalf of or for the
accounts of any other person or entity, and will not transfer
or assign its obligations under this Transaction or any
portion of such obligations to any other person or entity
except in compliance with applicable laws and the terms of
this Transaction; (ii) it has provided to LBI, as agent for
LBF, financial and other information concerning its
investment objectives and risk tolerance, which information
is contained in its LBI account documentation, and has not
been rendered misleading or obsolete; (iii) it understands
that this Transaction is subject to complex risks which may
arise without warning, may at times be volatile, and that
losses may occur quickly and in unanticipated magnitude;
(iv) it is authorized to enter into this Transaction and such
action does not violate any laws of its jurisdiction of
organization or residence or the terms of any agreement to
which it is a party; (v) it has consulted with its legal
advisor(s) and has reached it own conclusions about this
Transaction, and any legal, regulatory, tax, accounting or
economic consequences arising from this Transaction; and (vi)
it has concluded that this Transaction is suitable in light
of its own investment objectives, financial capabilities and
expertise.
Neither Party A nor any of its affiliates has advised Party B
with respect to any legal, regulatory, tax, accounting or
economic consequences arising from this Transaction, and
neither Party A nor any of its affiliates is acting as agent
or advisor for Party B in connection with this Transaction.
<PAGE 12>
Party B further represents that it is not entering into this
Transaction while in possession of material non-public
information concerning the business, operations or prospects
of the Issuer(s).
"Material" information for these purposes is any information
to which an investor would reasonably attach importance in
reaching a decision to buy, sell or hold securities of the
Issuer(s).
Party B represents that:
(a) it acknowledges that this Swap Transaction is a privately
negotiated contract and is not registered under the
Securities Act of 1933 (the "Act");
(b) it has held the Selected Securities since August 1994;
(c) it acquired the Selected Securities in the open market;
and
(d) as of the Trade Date, it owns a total of 1,530,614
common shares of the Company (zero shares held in escrow),
and hereby expressly disclaims beneficial ownership
(including any economic interest) of common shares of the
Company other than the number of shares stated above.
Calculation Agent: Lehman Brothers Inc.
Governing Law: New York
3. Certain Definitions. For purposes of this Swap
Transaction, the following terms shall have the indicated
meanings:
"Capital Appreciation" means an amount equal to the greater
of (i) zero and (ii) an amount determined in accordance with
the Formula set forth below:
Formula: [Price(t+1)*N(t+1)]-[Price(t)*N(t)]
Where:
Price(t+1)= the average execution price at which Party A
unwinds its hedge hereunder, net of any withholding tax,
stamp tax, or any other tax, duties, fees or commissions
payable in respect of such unwind.
Price(t)= USD14.1122.
N(t+1)= the Number of Selected Securities on the Final Equity
Valuation Date.
N(t)= the Number of Selected Securities on the Effective
Date, as adjusted for any partial termination.
"Capital Depreciation" means the absolute value of the result
of the Formula to determine the Capital Appreciation amount
if such result is a negative amount.
<PAGE 13>
"Equity Dividend amount" means an amount equal to (i) the
cash dividends or other cash distributions and (ii) the cash
equivalent market value, as determined at the close of
trading on the distribution date, of any other property
(other than property received in a ax-free spinoff, stock
dividend or stock split) to which holders of record of the
Selected Securities during the period from, and including the
Effective Date to, but excluding the Termination Date would
be entitled.
"Exchange" means Nasdaq NMS.
"Exchange Business Day" means a day that is (or, but for the
occurrence of a Market Disruption Event, would have been) a
trading day on each of the Exchange and each Related
Exchange(s) other than a day on which trading on any such
exchange is scheduled to close prior to its regular weekday
closing time.
"Related Exchange(s)" shall not be applicable to this Swap
Transaction.
"Merger Event" means any (i) reclassification or change of
any of the Selected Securities that results in a transfer of
or an irrevocable commitment to transfer all outstanding
shares, (ii) consolidation, amalgamation or merger of the
issuer with or into another entity (other than a
consolidation, amalgamation or merger in which the issuer is
the continuing entity and which does not result in any such
reclassification or change of all outstanding shares) or
(iii) other takeover offer for the shares that results in a
transfer of or an irrevocable commitment to transfer all the
Shares (other than the shares owned or controlled by the
offeror), in each case if the Merger Date is on or before the
Termination Date.
"Merger Date" means the date upon which all holders of the
Selected Securities (other than, in the case of a takeover
offer, shares owned or controlled by the offeror) have agreed
or have irrevocably become obliged to transfer their shares.
"Share Closing Value" means the closing price of the Selected
Securities, as quoted by the Exchange on the relevant date.
"Valuation Time" means at the close of trading on the
Exchange on the relevant date.
4. Market Disruption Event. If there is a Market Disruption
Event on any day during the Final Valuation Period, then that
day will be replaced in the Final Equity valuation Period by
the first succeeding Exchange Business Day, immediately
following the Final Equity valuation Period, on which there
is no Market Disruption Event. Each Exchange Business day
which replaces a day in the original Final Equity Valuation
Period shall replace only one day in the original Final
Equity Valuation Period except if such Exchange Business Day
is the tenth Exchange Business Day immediately following the
Final Equity Valuation Date. If the Market Disruption Event
persists for more than ten (10) Exchange Business Days
immediately following the Final Equity Valuation Period,
however, then, (i) that tenth day shall be deemed to be
within the Final Equity Valuation Period, (ii) the
Calculation Agent shall determine the value of the Selected
Securities as of the Valuation Time on that tenth day
using its good faith estimate of the market value o
fthe Selected Securities as of the Valuation Time on
that tenth Exchange Business Day, and (iii) the value of the
Selected Securities as determined on that tenth day shall be
assigned to all remaining days within the Final Equity
Valuation Period that are affected by the Market Disruption
Event.
<PAGE 14>
The value of the Selected Security on each Exchange Business
Day that replaces one or more day(s) in the Final Equity
Valuation Period shall receive a weighting in the
determination of Price(t+1) equal to that number of days in
the original Final Equity Valuation Period that it replaces.
"Market Disruption Event" means the occurrence or existence
on any Exchange Business Day during the one-half hour period
immediately before the Valuation Time of any suspension of or
limitation imposed on trading (by reason of movements in
price exceeding limits permitted by the relevant Exchange or
otherwise) in (a) the Share on the Exchange, or (b) any
options contracts or futures contracts relating to the Share
on any Related Exchange if, in any such case, that suspension
or limitation is material, in the determination of the
Calculation Agent.
The Calculation Agent shall as soon as reasonably practicable
under the circumstances notify the parties or other party, as
the case may be, of the existence of a Market Disruption
Event on any day that but for the occurrence or existence of
a Market Disruption Event would have been the Final Equity
Valuation Date.
5. Account Details
Account Details for Party A in USD:
First Chicago International, New York
Swift Code: FNBC US 33
For the account of Lehman Brothers Holdings
PLC favour Lehman Brothers Finance S.A.
Account Number: 1031753/5001
Account Details for Party B in USD:
Grace Brothers Ltd.
Please confirm that the foregoing correctly sets forth the
terms of our agreement by executing the copy of this
Confirmation enclosed for that purpose and returning it to us
or by sending to us a letter or telex substantially similar
to this letter, which letter telex sets forth the material
terms of the Swap Transaction to which this Confirmation
relates and indicates agreement to those terms.
Yours sincerely,
LEHMAN BROTHERS FINANCE S.A.
By:_______________ By:______________
Name: Name:
Title: Title:
Confirmed as of the
date first above written:
GRACE BROTHERS LTD.
By:_______________
Name:
Title:
