As filed with the Securities and Exchange Commission on May 24, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ImClone Systems Incorporated
(Exact name of registrant as specified in its charter)
Delaware 04-2834797
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 Varick Street
New York, NY 10014
Phone: (212) 645-1405
Facsimile: (212) 645-2054
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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John B. Landes, Esq.
Vice President, Legal and General Counsel
180 Varick Street
New York, NY 10014
Phone: (212) 645-1405
Facsimile: (212) 645-2054
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Richard A. Drucker, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Phone: (212) 450-4745
Facsimile: (212) 450-3475
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Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(c) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_|________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|__________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<TABLE>
CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered(1)(2) Per Note Offering Price(1) Fee
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5 1/2% Convertible Subordinated Notes due 2005... $240,000,000 100% $240,000,000 $63,360
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per share(2)....... 2,178,253 shares - - -
=================================================================================================================================
</TABLE>
(1) Equals the aggregate principal amount of the securities being registered.
(2) Such number represents the number of shares of common stock that are
currently issuable upon conversion of the notes; pursuant to Rule 416
under the Securities Act, the registrant is also registering such
indeterminate number of shares of common stock as may be issued from time
to time upon conversion of the notes as a result of the antidilution
protection of the notes. Pursuant to Rule 457(i), no registration fee is
required for these shares.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING HOLDERS MAY NOT MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS (SUBJECT TO COMPLETION)
DATED MAY 24, 2000
$240,000,000
IMCLONE SYSTEMS INCORPORATED
5 1/2% Convertible Subordinated Notes Due 2005
-----------------------
Certain securityholders of ImClone Systems Incorporated may offer for sale 5
1/2% Convertible Subordinated Notes due 2005 of ImClone, and the shares of
common stock of ImClone into which the notes are convertible, at various times
at market prices prevailing at the time of sale or at privately negotiated
prices. The selling holders may sell the notes or the common stock to or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions. Interest is payable in
arrears on March 1 and September 1 of each year, beginning on September 1,
2000. The notes will mature on March 1, 2005 unless earlier converted or
redeemed. The notes are unsecured and rank below all existing and future senior
indebtedness of ImClone.
The holders of the notes may convert any portion of a note (in multiples of
$1,000) into common stock, at a conversion price of $110.18 per share, subject
to adjustment in certain events. On May 23, 2000, the closing price of the
common stock on the Nasdaq National Market (symbol "IMCL") was $77 5/16 per
share.
We may redeem some or all of the notes at any time prior to March 6, 2003, at a
redemption price equal to $1,000 per note plus accrued and unpaid interest to
the redemption date, if (1) the closing price of the common stock has exceeded
150% of the conversion price for at least 20 trading days in any period of 30
consecutive trading days and (2) if the redemption would occur before March 1,
2002, the shelf registration statement covering resales of the notes and the
common stock is effective and expected to remain effective and available for
use for the 30 days following the redemption date. If we redeem the notes under
these circumstances, we will make an additional payment on the redeemed notes
equal to $152.54 per $1,000 note, minus any interest actually paid prior to the
date the notice was mailed. We must make these payments on all notes called for
redemption, including notes converted after the date the notice was mailed. At
any time on and after March 6, 2003, we may redeem some or all of the notes at
the redemption prices, plus accrued and unpaid interest to but excluding the
redemption date, detailed in this prospectus.
We do not intend to apply for listing of the notes on any securities exchange
or for quotation through any automated quotation system. The notes are eligible
for trading in the Private Offerings, Resale and Trading through Automated
Linkages ("Portal") market for the National Association of Securities Dealers,
Inc. The notes are not expected to remain eligible for trading on the Portal
system and a trading market may not develop for the notes.
We will not receive any proceeds from the sale of the notes and the common
stock into which the notes are convertible by the selling holders. We will pay
all expenses (other than selling commissions and fees and stock transfer taxes)
of the registration and sale of the notes and the common stock.
INVESTING IN THE NOTES OR THE COMMON STOCK INTO WHICH THE NOTES ARE CONVERTIBLE
INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
-----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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May ___, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Summary............................................................1
Risk Factors..................................................................4
Special Note Regarding Forward-looking Statements............................15
Ratio of Earnings to Fixed Charges...........................................15
Use of Proceeds..............................................................15
Description of Notes.........................................................16
Certain United States Federal Income Tax Considerations......................29
Description of Capital Stock.................................................35
Selling Holders..............................................................40
Plan of Distribution.........................................................41
Legal Matters................................................................42
Experts......................................................................42
Where You Can Find More Information..........................................43
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In this prospectus, "ImClone," "we," "us" and "our" refer to ImClone
Systems Incorporated, "common stock" refers to ImClone's common stock, par
value $0.001 per share.
-----------------------
i
<PAGE>
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more
detailed financial and other information appearing elsewhere in this prospectus
and in the documents incorporated by reference herein.
THE COMPANY
ImClone Systems Incorporated is a biopharmaceutical company engaged in the
research and development of novel cancer treatments. We focus on what we
believe are three promising strategies for treating cancer: growth factor
inhibitors, therapeutic cancer vaccines and angiogenesis inhibitors.
Our lead product candidate, IMC-C225, is a therapeutic monoclonal antibody
that inhibits stimulation of a receptor for growth factors upon which certain
solid tumors depend in order to grow. IMC-C225 has been shown in several Phase
I/II trials to have an acceptable safety profile, to be well tolerated and,
when administered with either radiation therapy or chemotherapy, to enhance
tumor reduction. IMC-C225 is currently in pivotal trials for treating head and
neck cancer and Phase II trials in colorectal and pancreatic cancer. Upon the
receipt of regulatory approval, we intend to market IMC-C225 in the United
States and Canada. We will rely on our development and marketing partner, Merck
KGaA, to market IMC-C225 outside the United States and Canada and to pay us a
royalty on all such sales. We are responsible for the manufacture and supply of
IMC-C225 for all clinical trials and eventual commercial sales.
Our next most advanced product candidate, BEC2, is a cancer vaccine. In
partnership with Merck KGaA, we are testing BEC2 for preventing recurrence or
progression of small-cell lung cancer in a Phase III pivotal trial. Upon the
receipt of regulatory approval, we intend to co-promote BEC2 with Merck KGaA in
North America. Merck KGaA will be responsible for developing and marketing BEC2
outside North America and will be obligated to pay us royalties on all such
sales. In addition, we intend to be the worldwide manufacturer of BEC2.
We are also developing inhibitors of angiogenesis, which could be used to
treat various kinds of cancer and other diseases. We have identified IMC-1C11
as our lead clinical candidate for angiogenesis inhibition. IMC-1C11 is an
antibody that binds selectively and with high affinity to KDR, a principal VEGF
receptor, thereby inhibiting angiogenesis. We filed an application with the FDA
in December 1999 in order to commence clinical trials of IMC- 1C11, which we
initiated in March 2000.
In addition to the development of our lead product candidates, we continue
to conduct research, both independently and in collaboration with academic and
corporate partners, in a number of areas related to our core focus of growth
factor inhibitors, cancer vaccines and angiogenesis inhibitors. We have also
developed diagnostic products and vaccines for certain infectious diseases, and
we have licensed the right to these products and vaccines to corporate
partners.
1
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THE NOTES
Notes.......................... $240,000,000 aggregate principal amount of
5 1/2% Convertible Subordinated Notes due 2005.
Interest....................... 5 1/2% per annum on the principal amount,
payable semi-annually in arrears in cash on
March 1 and September 1 of each year, beginning
September 1, 2000.
Conversion..................... Holders may convert all or any portion of a note
into common stock at any time on or before
March 1, 2005 at a conversion price of $110.18
per share, subject to adjustment if certain
events affecting our common stock occur. See
"Description of Notes--Conversion of Notes."
Subordination.................. The notes will be subordinated to all of our
existing and future senior indebtedness. As of
May 1, 2000, we had approximately $3.9 million
of senior indebtedness outstanding. We are not
prohibited from incurring debt, including
senior indebtedness, under the indenture.
Fundamental Change............. If a fundamental change (as described under
"Description of Notes--Redemption at Option of
the Holder") occurs on or before March 1, 2005,
a holder of notes may require us to purchase
all or part of such holder's notes at a
redemption price equal to 100% of the
outstanding principal amount of the notes being
redeemed, plus accrued and unpaid interest.
Provisional Redemption......... We may redeem some or all of the notes at any
time prior to March 6, 2003, at a redemption
price equal to $1,000 per $1,000 aggregate
principal amount of notes plus accrued and
unpaid interest to the redemption date if:
o the closing price of the common stock
has exceeded 150% of the conversion price
for at least 20 trading days in any
consecutive 30- trading day period; and
o if the redemption would occur before
March 1, 2002, the shelf registration
statement covering resales of the notes
and the common stock is effective and
expected to remain effective and available
for use for the 30 days following the
redemption date.
2
<PAGE>
If we redeem the notes under these
circumstances, we will make an additional
payment on the redeemed notes equal to $152.54
per $1,000 aggregate principal amount of notes,
minus the amount of any interest we actually
paid on the note prior to the date the notice
was mailed. We must make these payments on all
notes called for redemption, including notes
converted after the date the notice was mailed.
See "Description of the Notes -- Optional
Redemption by ImClone -- Provisional
Redemption."
Non-Provisional Redemption..... On or after March 6, 2003, we may redeem some or
all of the notes at the redemption prices, plus
accrued and unpaid interest to but excluding
the non-provisional redemption date, set forth
under "Description of the Notes-- Optional
Redemption by ImClone-- Non- Provisional
Redemption."
Use of Proceeds................ We will not receive any proceeds from the sale
by the selling holders of the notes and the
underlying common stock
Registration Rights............ We commit to use our reasonable efforts to have
the registration statement, of which this
prospectus is a part, declared effective and
use reasonable efforts to keep the shelf
registration statement effective until either
of the following has occurred:
o all securities covered by the
registration statement have been sold
o the expiration of the holding period
applicable to the notes and the underlying
common stock under Rule 144(k) under the
Securities Act, or any successor provision
Sinking Fund................... None
Nasdaq National Market Symbol.. IMCL
3
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing our
company. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations.
Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. The trading price of the
notes and our common stock could decline due to any of these risks, and you may
lose all or part of your investment.
This prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
Our lead product candidates are in development, and we cannot be certain
that any of our products will be commercialized
Our lead product candidates are in clinical trials. Before we can
commercialize any of our product candidates and begin to sell them to generate
revenues, we will need to demonstrate in pivotal clinical trials that they are
safe and effective and obtain the necessary approvals from the United States
Food and Drug Administration and similar foreign regulatory agencies. It is not
certain that clinical trials will demonstrate that our products are safe and
effective, or that we can obtain the required regulatory approvals to
commercialize them. With respect to IMC-C225, there can be no assurance that,
even if we were to ultimately receive regulatory approval, we would be able to
receive such approval based on the results of our ongoing refractory Phase II
clinical trials. Further, even if we successfully develop a product, there is
no assurance that we will be able to successfully manufacture or market that
product. If we are unable to successfully commercialize our lead products, our
liquidity and financial condition could be materially negatively affected.
We have been operating at a loss and expect to incur significant future
losses
We have had significant operating losses in each year and have not earned
a profit in any year since we formed ImClone. These operating losses and
failure to be profitable have been due mainly to the significant amount of
money that we have had to spend on research and development. As of March 31,
2000, we had an accumulated deficit of approximately $186 million. We expect to
continue to have significant additional operating losses as we continue to
expand our product development and clinical trials and initiate marketing
efforts. We may never commercialize any of our products or achieve
profitability.
We may not be able to obtain the extensive government approvals required
to bring our products to market
The research, pre-clinical development, clinical trials, manufacturing and
marketing of our products are all subject to extensive regulation by U.S. and
foreign governmental authorities. Although we intend to seek expedited approval
for certain of our products, including IMC-C225, there can be no assurance that
the FDA will grant us expedited review status for any of our potential filings.
Failure to receive regulatory approvals for our product candidates and
operations in our expected timeframes could have a material negative effect on
our liquidity and financial condition. The FDA and similar foreign regulatory
authorities regulate our clinical trials as well as our manufacturing and
marketing operations. They require us to comply with product-specific testing
and approval processes. It may take many years and cost a significant amount of
money to obtain the required regulatory approvals for our products. Once we
begin clinical trials for a new biologic therapeutic or vaccine product, it may
take five or more years to receive the required FDA approval to commercialize
that product and begin to sell and market it to the public. It may also take
several years to develop a new in vitro diagnostic product, depending upon the
clinical data requirements or approval process specified by the FDA for the
approval of the product. The FDA may also request additional data, which could
substantially extend these approval processes. We cannot be certain that any of
our products will be shown to be safe and effective or that we will ultimately
receive FDA approval at the end of these approval processes. In addition, even
if granted, product approvals may be withdrawn or limited at a
4
<PAGE>
later time if products do not comply with regulatory standards or if unexpected
problems occur following initial marketing.
Since our product candidates are still in clinical trials, we have not yet
sought or received regulatory approval for the commercial sale of any of our
products or for any manufacturing techniques or facilities. We and our
licensees may experience long delays or excessive costs when we do attempt to
get necessary approvals or licenses. Future federal, state, local or foreign
legislative or administrative acts could also prevent or delay regulatory
approval of our products or the products of our licensees. We cannot be certain
that we or our corporate partners will be able to get the necessary approvals
for clinical testing, manufacturing or marketing of our products, or that we
will meet our expected timeframes for any such approvals. If any of the
following events occurred, it could delay or preclude us from further
developing, marketing or realizing full commercial use of our products, which
in turn would have a material adverse effect on our business, financial
condition and results of operations:
o failure to obtain or maintain requisite governmental approvals
o failure to obtain approvals of clinically intended use of our
products under development
o identification of serious and unanticipated adverse side effects from
our products under development
Manufacturers of drugs also must comply with the applicable FDA good
manufacturing practice regulations, which include quality control and quality
assurance requirements as well as the corresponding maintenance of records and
documentation. Manufacturing facilities are subject to ongoing periodic
inspection by the FDA and corresponding state agencies, including unannounced
inspections, and must be licensed as part of the product approval process
before they can be used in commercial manufacturing. We or our present or
future suppliers may be unable to comply with the applicable good manufacturing
practice regulations and other FDA regulatory requirements.
Our success depends upon our ability to protect our intellectual property and
our proprietary technology
The patent position of ImClone, like that of other biopharmaceutical
companies, is generally very uncertain and involves complex legal and factual
questions. Our success will depend, in part, on whether we can:
o obtain patents to protect our own products
o obtain licences to use certain technologies of third parties, which
may be protected by patents
o protect our trade secrets and know-how
o operate without infringing the intellectual property and proprietary
rights of others
We may not be able to obtain patents that adequately protect our own
products. Also, our proprietary technologies could conflict with the rights of
others. Our ability to commercialize and market our products using any such
technologies could be materially and negatively affected.
We have exclusive licenses or assignments to 67 issued patents worldwide.
Forty-one of those are issued U.S. patents. We have exclusive licenses or
assignments to approximately 44 families of patent applications that relate to
our proprietary technology in the U.S. and in foreign countries. We cannot be
certain that patents will be issued as a result of any of these pending
applications. Nor can we be certain that any issued patents would protect or
benefit us or give us adequate protection from competing products. For example,
issued patents may be circumvented or challenged and declared invalid. In
addition, under many of the agreements under which we have licenses to the
patents or patent applications of others, we are required to meet specified
milestone or diligence requirements in order to keep our licenses. We cannot be
certain that we will satisfy any of these requirements.
5
<PAGE>
We know that others have filed patent applications in various countries
that relate to several areas in which we are developing products. Some of these
patent applications have already been issued as patents and some are still
pending. The pending patent applications may issue as patents. Issued patents
are entitled to a rebuttable presumption of validity under the laws of the U.S.
and certain other countries. These issued patents may therefore limit our
ability to develop commercial products. If we need licenses to such patents to
permit us to develop or market our products, we cannot be certain that we would
be able to get such licenses on acceptable terms.
Proprietary trade secrets and unpatented know-how are important to our
research and development activities. We cannot be certain that others will not
develop the same or similar technologies on their own. Although we have taken
steps, including entering into confidentiality agreements with our employees
and third parties, to protect our trade secrets and unpatented know-how and
keep them secret, third parties may still obtain such information.
The following are some of the specific areas in which we may be negatively
affected by the patents and patent applications of others:
We have an exclusive license to an issued U.S. patent for the murine form
of IMC-C225, our EGF receptor antibody product. We believe that this patent
covers IMC-C225 under the patent law doctrine of equivalents. Under this
doctrine, the subject matter of a claim is deemed to cover variations that do
substantially the same thing, in substantially the same way, to achieve the
same result, especially if the variation is known and routine. We believe, in
this instance, the doctrine of equivalents would extend protection to IMC-C225.
Our licensor of this patent did not obtain patent protection outside the U.S.
for this antibody. While this patent covers only our antibody and would not
block third parties from obtaining patents covering other antibodies to the EGF
receptor, we are pursuing additional patent protection for the use of any
antibody that inhibits the EGF receptor in combination with chemotherapy or
radiation therapy, or when used to treat refractory patients. We have
exclusively licensed from Aventis, formerly Rhone-Poulenc Rorer, a family of
patent applications seeking to cover the use of antibodies to the EGF receptor
in conjunction with chemotherapeutic agents. A Canadian patent was issued in
this family, the patent examiner in Europe has indicated an intent to issue a
European patent and a Notice of Allowability has been issued in the U.S. We are
also currently prosecuting additional patent applications in the U.S. and
elsewhere. We cannot be certain that patents will ever be issued in respect of
these patent applications or that we will have sufficient protection for
IMC-C225.
We are aware of a U.S. patent issued to a third party that includes claims
covering the use, subject to certain restrictions, of antibodies to the EGF
receptor and cytotoxic factors to inhibit tumor growth. Our patent counsel,
Kenyon & Kenyon, has advised us that in its opinion, subject to the assumptions
and qualifications set forth in such opinion, no valid claim of this third
party patent is infringed by reason of our manufacture or sale, or medical
professionals' use, of IMC-C225 alone or in combination with chemotherapy or
radiation therapy and, therefore, in the event of litigation for infringement
of this third party patent, a court should find that no valid claim of this
third party patent is infringed. We have also received an opinion from our
special patent counsel, Hoffmann & Baron, LLP, that we do not infringe this
third party patent. Based upon those opinions, as well as our review, in
conjunction with our special patent counsel, of other relevant patents, we
believe that we will be able to commercialize IMC-C225 alone and in combination
with chemotherapy and radiation therapy provided we successfully complete our
clinical trials and receive the necessary FDA approvals. Those opinions of
counsel, however, are not binding on any court or the U.S. Patent and Trademark
Office. In addition, there can be no assurance that we will not in the future,
in the U.S. or any other country, be subject to patent infringement claims,
patent interference proceedings or adverse judgments in patent litigation.
The IMC-C225 monoclonal antibody is chimerized, meaning that it is made of
antibody fragments derived from more than one type of animal (specifically, in
the case of IMC-C225, mouse and human). Patents have been issued to other
biotechnology companies that cover the chimerization of antibodies. Therefore,
we may be required to obtain licenses under these patents, some of which have
already been obtained, before we can commercialize our own chimerized
monoclonal antibodies, including IMC-C225. We cannot be certain that we will be
able to obtain such licenses in the territories where we want to commercialize,
or how much such licenses would cost.
6
<PAGE>
We know that others have been issued patents in the U.S. and Europe
covering anti-idiotypic antibodies or their use for the treatment of tumors.
These patents, if valid, could be interpreted to cover our BEC2 monoclonal
antibody and certain uses of BEC2. Merck KGaA, our worldwide licensee of BEC2,
has informed us that it has obtained non-exclusive, worldwide licenses to these
patents in order to market BEC2 in its territory. We are entitled to co-promote
BEC2 in North America. However, we cannot be certain that we can obtain the
necessary licenses on commercially acceptable terms, if at all.
We have patents and have filed patent applications to protect our
proprietary rights to anti-angiogenic therapeutics, as well as therapeutic
methods of treating angiogenic disease. We are aware that others have filed
patent applications that could affect our ability to commercialize some of our
anti-angiogenic therapeutics or therapeutic treatments.
We are aware that third parties have filed patent applications in areas
that could affect our ability or that of our licensee, Abbott Laboratories, to
commercialize our diagnostic products. These areas could include target
amplification technology and signal amplification technology. Third party
patents have already been issued in the field of target amplification such as
polymerase chain reaction technology.
There has been significant litigation in the biopharmaceutical industry
over patents and other proprietary rights. The defense and prosecution of
intellectual property suits and related legal and administrative proceedings
can be both costly and time consuming. Litigation and interference proceedings
could result in substantial expense to us and significant diversion of effort
by our technical and management personnel. An adverse determination in any such
interference or litigation, particularly with respect to IMC-C225, to which we
may become a party could subject us to significant liabilities to third parties
or require us to seek licenses from third parties. If required, the necessary
licenses may not be available on acceptable terms or at all. Adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent us, in whole or in part, from commercializing
our products, which could have a material adverse effect on our business,
financial condition and results of operations.
We currently have limited manufacturing capacity and will need to enter into
arrangements with third party manufacturers
So far, we have manufactured only small quantities of our products in the
laboratory and our pilot-scale manufacturing facility. In some cases, we have
produced enough for pre-clinical animal trials and early-stage clinical trials.
We can only be profitable if our products are manufactured in commercial
quantities in compliance with regulatory requirements and at acceptable costs.
However, it may be difficult for us to produce large enough quantities for
late-stage clinical trials or for more than one product candidate. Production
in commercial quantities will require us to expand our manufacturing
capabilities significantly and hire and train additional personnel. We have
limited experience in clinical-scale manufacturing and no experience in
commercial-scale manufacturing. To date, IMC-C225 has been manufactured at a
2,000 liter scale. We expect that the commercial supply of IMC-C225 will be
manufactured at the 10,000 liter scale. There can be no assurance, however,
that we will be successful in scaling up the production process for IMC-C225 to
the 10,000 liter scale. Therefore, we cannot be certain that we will be able to
make the transition to late-stage clinical or commercial production of IMC-C225
or any other of our products successfully. In addition, we cannot be certain
that our production costs will not be higher than expected.
We have acquired land adjacent to our current facility in New Jersey on
which we are building a commercial-scale manufacturing plant for our products.
The cost to build such a facility will be high and the construction process
will take approximately two years. We have completed plans for, and have begun,
construction of the plant before we have received FDA approval for any of our
product candidates. If we do not obtain FDA approval for these product
candidates, the financing and other costs associated with the new manufacturing
facility could have an adverse effect on our liquidity and financial condition.
Alternatively, if any of our products are approved for sale, and we encounter
difficulty or delays in completing the new manufacturing facility, obtaining
the required FDA approval of the facility or in manufacturing commercial
quantities of our products, such difficulties or delays could have a material
adverse effect on our business, financial condition or results of operations.
7
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If we obtain FDA approval of IMC-C225 prior to FDA approval of our
proposed manufacturing facility, we will need to obtain commercial-scale
quantities of IMC-C225 from one or more contract manufacturers in order to have
sufficient quantities of IMC-C225 for product launch. In any event, we intend
to seek to enter into arrangements with contract manufacturers in order to
provide a second source for our products as well as additional capacity for the
manufacture of our products. To date, we have entered into an agreement with
Boehringer Ingelheim Pharmaceuticals KG, more commonly know as BI, under which
BI manufactured IMC-C225 in relatively small quantities to supplement the
quantities of IMC-C225 that we produce and that we and Merck KGaA use in
clinical trials. In December 1999, we entered into a development and
manufacturing services agreement with Lonza Biologies PLC, more commonly known
as Lonza. Under the agreement, Lonza is engaging in process development and
scale-up for the manufacture of IMC-C225. These steps are being taken to assure
that its process will produce bulk material that conforms with our reference
material. Under our arrangements with Lonza, Lonza will manufacture six 5,000
liter production runs under cGMP conditions of material that may be used for
clinical and/or commercial supply. We also have agreed in principle with Lonza
to the material terms of a three-year commercial supply agreement for which the
definitive agreement is being completed. We cannot be certain that we will be
able to enter into this agreement for commercial supply or any other agreements
with third party manufacturers, if required, on terms acceptable to us or at
all. Even if we are able to enter into such agreements, we cannot be certain
that we will be able to produce or obtain sufficient quantities for the
commercial sale of our products. Any delays in producing or obtaining
commercial quantities of our products could have a material adverse effect on
our business, financial condition and results of operations.
We are also dependent upon a sole supplier of a component of the media
used in the production of IMC-C225. If this supply were to cease, it could
hinder our ability to manufacture IMC-C225 in the quantities required.
Our business depends upon our corporate partners
So far, we have earned almost all of our revenues from research and
development funding and license fees and royalties paid to us under agreements
with our corporate partners. We expect this to continue over the next several
years. License fees may be payable to us either when we first enter into an
agreement or when and if we or our corporate partners, depending on the
agreement, reach agreed-upon research, regulatory and commercialization
milestones, or both. We do not receive any of these payments at regular
intervals; the amounts have fluctuated in the past and we expect them to
continue to fluctuate in the future. In most cases, our corporate partners can
terminate these arrangements, including their payment obligations, on
relatively short notice under specified circumstances. We cannot be certain
that we will continue to receive revenues from these arrangements, or that we
will enter into any new similar agreements.
The successful development, marketing and sale of our products worldwide
is subject to the risk of financial or other difficulties with respect to our
relationships with our corporate partners. The amount and timing of payments we
receive under our arrangements with these parties depend upon variables that
are out of our control. In addition, our corporate partners or their affiliates
may be developing their own products or technologies which may directly compete
with products that are the subject of their arrangements with us. While we
believe that our corporate partners are or will be economically motivated to
work toward successful arrangements with us, we cannot be certain that their
corporate interests and motivations will remain consistent with ours.
In December 1998, we entered into an agreement with Merck KGaA, a
German-based drug company, relating to the development, marketing and sale of
IMC-C225. Under this agreement:
o we have retained the rights to develop and market IMC-C225 within the
United States and Canada
o we have granted Merck KGaA exclusive rights, except in Japan, to
develop and market IMC-C225 outside of the United States and Canada
o we have agreed to supply Merck KGaA, and Merck KGaA has agreed to
purchase, IMC-C225 for the conduct of clinical trials and the
commercialization of the product outside the United States and Canada
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o we will co-develop and co-market IMC-C225 in Japan with Merck KGaA
o we have granted Merck KGaA an exclusive license outside of the United
States and Canada, without the right to sublicense, to apply certain
of our patents to a humanized EGF receptor antibody on which Merck
KGaA has performed preclinical studies
In return, Merck KGaA agreed to pay up-front fees and to make cash
payments and equity investments in our business if specific milestones are
achieved. Merck KGaA will also pay us royalties on any sales of IMC-C225
outside the United States and Canada. In addition, Merck KGaA has agreed to
provide a guaranty of our obligations under a credit agreement relating to the
construction of our new IMC-C225 manufacturing facility.
We have also granted Merck KGaA a license to develop and market BEC2
worldwide. We have retained the right to co-promote BEC2 with Merck KGaA within
North America and it is intended that we will be the bulk manufacturer of BEC2
for worldwide production. In return, Merck KGaA has agreed to pay up-front
fees, to make cash milestone payments and to make royalty payments to us on all
sales of BEC2 outside North America.
If Merck KGaA fails to complete development of or does not commence
commercialization of IMC-C225 and BEC2, we would not receive any royalties on
sales by Merck KGaA, although the product rights would revert to us. Merck KGaA
can terminate its relationship with us under the agreement with respect to
IMC-C225 at its discretion on any milestone payment date. If Merck KGaA were to
terminate that agreement or we failed to meet certain requirements of that
agreement, we would lose one of our primary sources of funding and would have
to look elsewhere for financing. As well as losing future payments, if Merck
KGaA were to terminate the agreement because it determined that
commercialization of IMC-C225 was economically unfeasible, we would have to pay
back up to 50% of the cash-based milestone payments made to date out of
revenues, if any, based upon a royalty rate applied to the gross profit from
IMC-C225 sales or IMC-C225 license fees in the United States and Canada.
Additionally, the termination of the agreement due to Merck KGaA's failure to
provide the guaranty of our credit agreement obligations with respect to our
new IMC-C225 manufacturing facility, or our failure to obtain the necessary
collateral license agreements, would require us to return all milestone
payments made to date. As of March 31, 2000, we have received $24 million in
milestone payments. Finally, upon termination we would be required to use our
reasonable best efforts to have Merck KGaA released from its guaranty of our
credit agreement obligations with respect to our new IMC-C225 manufacturing
facility. This release of Merck KGaA would likely cause the acceleration of our
obligations under this credit agreement. Thus, termination of the agreement
with Merck KGaA relating to IMC-C225 could have a material adverse effect on
our business, financial condition and results of operations.
We will continue to need significant amounts of additional cash and we
cannot be sure that additional cash will be available to us
At this time and for the foreseeable future, we will need to spend a
significant amount of money for, among others, the following purposes:
o ongoing pre-clinical and clinical trials of our product candidates
o research and development of new products
o establishing both clinical-scale and commercial-scale manufacturing
capability in our own facilities and/or in the facilities of others
o marketing our products if we receive necessary regulatory approvals
o payment of dividends on our convertible Series A Preferred Stock
o payment of interest on the outstanding 5 1/2% Convertible Subordinated
Notes due 2005
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We believe that our existing cash on hand and amounts expected to be
available under our credit facilities will be sufficient to fund ImClone
through at least 2002. We are also entitled to reimbursement from our corporate
partners for certain research and development expenditures and to certain
milestone payments. However, we will only receive future milestone payments
from our corporate partners if we meet specified research and development
milestones. We have not yet achieved some of those milestones and we cannot be
certain that we will ever do so. Our IMC-C225 agreement with Merck KGaA is
subject to termination at Merck's discretion on certain dates and so we cannot
be certain of the level of future payments, if any, under this agreement. The
cash available from our existing corporate partners may be insufficient to meet
our needs. We may also need to seek additional capital through equity or debt
financings or from other sources. We cannot be certain that we will
successfully complete any such arrangements or financings. If adequate funds
are not available from operations or additional sources of financing, we may
have to delay, reduce the scope of or eliminate one or more of our research or
development programs, which would materially and adversely affect our business,
financial condition and operations.
Acceptance of our products in the marketplace is uncertain, and failure to
achieve market acceptance will harm our business
Even if approved for marketing, our products may not achieve market
acceptance. The degree of market acceptance of our products will depend upon a
number of factors, including:
o the receipt of regulatory approvals for the uses that we are studying
o the establishment and demonstration in the medical community of the
safety and clinical efficacy of our products and their potential
advantages over existing therapeutic products
o pricing and reimbursement policies of government and third-party
payors such as insurance companies, health maintenance organizations
and other plan administrators
Physicians, patients, payors or the medical community in general may be
unwilling to accept, utilize or recommend any of our products.
We need to establish our sales, marketing and distribution capability
To date, we have had no experience in selling, marketing or distributing
new products. If we are successful in developing and obtaining regulatory
approval for our products under development, we will need to establish our
sales, marketing and distribution capability. Under our agreement with Merck
KGaA for IMC-C225, we have the exclusive right to market IMC-C225 in the United
States and Canada if it is approved for sale there. We also will co-develop and
co-market IMC-C225 with Merck KGaA in Japan. Under our agreement with Merck
KGaA for BEC2, we have the right to co-promote BEC2 in North America if it is
approved for sale there. If and when we want to market a new product on our
own, we will need expertise in sales and marketing. We currently plan to build
our own sales force to market and sell IMC-C225 in the United States and
Canada. However, we cannot be certain that we will be able to hire and train
qualified or experienced sales and marketing personnel or that any marketing or
sales efforts by such personnel will be successful. If we are unable to recruit
or retain suitable sales and marketing personnel, it could have a material
adverse effect on our business, financial condition and results of operations.
Our quarterly operating results may fluctuate
Our products are now in research and various stages of development or
clinical studies. Accordingly, we do not sell or receive any revenues from
sales of these products. At this time, most of our revenues come from payments
we receive from our corporate partners under license and research arrangements.
Our results of operations historically have fluctuated on a quarterly basis and
can be expected to continue to be subject to quarterly fluctuations. The level
of our revenues and results of operations at any given time is based primarily
on the following factors:
o the status of development of our various products
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<PAGE>
o the time at which we enter into research and license agreements with
corporate partners that provide for payments to us, and the timing
and accounting treatment of payments to us under those agreements
o whether or not we achieve specified research or commercialization
milestones
o timely payment by our corporate partners of amounts payable to us
o the addition or termination of research programs or funding support
o variations in the level of expenses related to our proprietary
products during any given period
We believe that quarterly comparisons of our financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance. These fluctuations may cause the price of our stock to fluctuate,
perhaps substantially.
Our success depends upon our ability to attract and retain key personnel and
consultants
Our ability to successfully develop marketable products and to maintain a
competitive position will depend in large part on our ability to attract and
retain highly qualified scientific and management personnel. We will also need
to develop and maintain relationships with leading research institutions and
consultants. Our success is also very dependent upon the principal members of
our management, scientific staff and scientific advisory board, many of whom
have special expertise and would be difficult to replace. Competition for such
personnel and relationships is intense, and we cannot be certain that we will
be able to continue to attract and retain such personnel and maintain such
relationships.
We may not be able to keep pace with technological change or with the
advances of our competitors
The biopharmaceutical industry is subject to rapid and significant
technological change. We have many competitors, including major drug and
chemical companies, specialized biotechnology firms, universities and other
research institutions. These competitors may develop technologies and products
that are more effective than our products or which would make our technology
and products obsolete and non-competitive. Many of these competitors have much
greater financial and technical resources and production and marketing
capabilities than we do. In addition, many of our competitors have much more
experience than we do in pre-clinical testing and human clinical trials of new
or improved drugs, as well as in obtaining FDA and other regulatory approvals.
We know that competitors are developing or manufacturing various products
that are used for the prevention, diagnosis or treatment of diseases that we
have targeted for product development. Some of these competitive products use
therapeutic approaches that compete directly with certain of our product
candidates. Our competitors may succeed in obtaining FDA approval for their
competitive products sooner than we do for ours. This could hurt our ability to
further develop and market our products. Also, if we do begin significant
commercial sales of our products, we will have to compete with the established
manufacturing and marketing capabilities of our competitors. Manufacturing and
marketing are areas in which we have limited or no experience.
We may have product liability exposure
Because our product candidates are new treatments for diseases, with
limited, if any, past use on humans, their use during testing or after approval
could expose us to product liability claims. We cannot be certain that we would
have enough money available to satisfy any liability that might result from any
such claims. We try to obtain indemnification from our corporate partners
against certain of these types of claims. However, we cannot be certain that
these parties would honor any such indemnity obligations. Although we carry
product liability insurance, we cannot be certain that this coverage will be
adequate to protect us in the event of a successful product liability claim or
that the insurance will continue to be available on commercially reasonable
terms.
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Health care insurers and other organizations may not pay for our products,
or may impose limits on reimbursements
The continuing efforts of government and insurance companies, health
maintenance organizations and other payors of healthcare costs to contain or
reduce costs of health care may affect our future revenues and profitability,
and the future revenues and profitability of our potential customers, suppliers
and collaborative partners and the availability of capital. For example, in
certain foreign markets, pricing or profitability of prescription
pharmaceuticals is subject to government control. In the United States, given
recent federal and state government initiatives directed at lowering the total
cost of health care, the U.S. Congress and state legislatures will likely
continue to focus on health care reform, the cost of prescription
pharmaceuticals and on the reform of the Medicare and Medicaid systems. While
we cannot predict whether any such legislative or regulatory proposals will be
adopted, the announcement or adoption of such proposals could have a material
adverse effect on our business, financial condition and results of operations.
Our ability to commercialize our products successfully will depend in part
on the extent to which appropriate reimbursement levels for the cost of our
products and related treatment are obtained by governmental authorities,
private health insurers and other organizations, such as HMOs. Third-party
payors are increasingly challenging the prices charged for medical products and
services. Also, the trend toward managed health care in the United States and
the concurrent growth of organizations such as HMOs, which could control or
significantly influence the purchase of health care services and products, as
well as legislative proposals to reform health care or reduce government
insurance programs, may all result in lower prices for or rejection of our
products. The cost containment measures that health care payors and providers
are instituting and the effect of any health care reform could materially
adversely affect our ability to operate profitably.
Events with respect to our share capital could cause the price of our common
stock to decline
Sales of substantial amounts of our common stock in the open market, or
the availability of such shares for sale, could adversely affect the price of
our common stock. As of May 1, 2000, we had 31,236,166 shares of common stock
outstanding, excluding shares reserved for issuance upon the exercise of
outstanding stock options, warrants and preferred stock. The following
securities that may be exercised for, or are convertible into, shares of our
common stock were issued and outstanding as of May 1, 2000:
o Warrants. Various warrants to purchase 1,133,520 shares of our common
stock, all of which are currently exercisable, at an average exercise
price of approximately $3.10 per share (subject to adjustment in
certain circumstances).
o Options. Stock options to purchase 6,724,809 shares of our common
stock at an average exercise price of approximately $22.02 per share
(subject to adjustment in certain circumstances); of this total,
1,924,234 are currently exercisable at an average exercise price of
approximately $8.73 per share.
o Series A Preferred Stock. 300,000 shares of our Series A Preferred
Stock are outstanding, of which 100,000 shares are currently
convertible into 249,610 shares of our common stock, at a conversion
price of $40.063 per share. These shares are held by Merck KGaA.
o Convertible Notes. An aggregate of $240,000,000 principal amount of 5
1/2% Convertible Subordinated Notes due 2005 are currently
convertible into common stock at a conversion price of $110.18 per
share (subject to adjustment in certain circumstances).
The shares of our common stock that may be issued under the warrants and
options are either currently registered with the SEC, or will be registered
with the SEC before the shares are purchased by the holders of the warrants and
options.
Under our license agreement with Merck KGaA for IMC-C225, we are entitled
to receive from Merck KGaA up to $60 million upon our achievement of various
milestones in the development of IMC-C225. In connection with
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making the final $30 million of these milestone payments, Merck KGaA is
entitled to receive milestone shares from us, which, if issued, will be shares
of our common stock (or other capital stock convertible into our common stock).
The number of milestone shares issued will be determined based on premiums to
then-market prices of our common stock at the time the milestones are achieved.
As of May 1, 2000, Merck KGaA has not acquired any milestone shares convertible
into common stock.
We have granted Merck KGaA certain registration rights regarding the
shares of common stock that it may acquire upon conversion of the series A
preferred shares and upon receipt of milestone shares. Specifically, Merck KGaA
has the right to require us to register, at our expense, the number of shares
of common stock into which the shares of series A preferred stock are converted
according to their terms and the number of milestone shares that are issued.
Merck KGaA may also exercise rights to have such registrable common stock
registered at any time that we file a registration statement for other shares
of our common stock. Merck KGaA may exercise these rights at any time after
conversion of its shares of series A preferred stock into shares of common
stock or receipt of milestone shares. In December 1999, Merck KGaA converted
100,000 shares of series A preferred stock into 800,000 shares of common stock.
The notes are subordinated
The notes are unsecured and subordinated in right of payment to all of our
existing and future senior indebtedness. In the event of our bankruptcy,
liquidation or reorganization or upon acceleration of the notes due to an event
of default under the indenture and in certain other events, our assets will be
available to pay obligations on the notes only after all senior indebtedness
has been paid. As a result, there may not be sufficient assets remaining to pay
amounts due on any or all of the outstanding notes. We are not prohibited from
incurring debt, including senior indebtedness, under the indenture. If we were
to incur additional debt or liabilities, our ability to pay our obligations on
the notes could be adversely affected. As of May 1, 2000, we had approximately
$3.9 million of senior indebtedness outstanding. See "Description of
Notes--Subordination of Notes."
We may be unable to redeem the notes upon a fundamental change
We may be unable to redeem the notes in the event of a fundamental change.
Upon a fundamental change, holders of the notes may require us to redeem all or
a portion of the notes. If a fundamental change were to occur, we may not have
enough funds to pay the redemption price for all tendered notes. In addition,
in certain situations, a fundamental change could result in an event of default
under our current forms of indebtedness. Any future credit agreements or other
agreements relating to our indebtedness may contain similar provisions, or
expressly prohibit the repurchase of the notes upon a fundamental change or may
provide that a fundamental change constitutes an event of default under that
agreement. If a fundamental change occurs at a time when we are prohibited from
purchasing or redeeming notes, we could seek the consent of our lenders to
redeem the notes or could attempt to refinance this debt. If we do not obtain a
consent, we could not purchase or redeem the notes. Our failure to redeem
tendered notes would constitute an event of default under the indenture, which
might constitute a default under the terms of our other indebtedness. In such
circumstances, or if a fundamental change would constitute an event of default
under our senior indebtedness, the subordination provisions of the indenture
would restrict payments to the holders of notes. The term "fundamental change"
is limited to certain specified transactions and may not include other events
that might adversely affect our financial condition or the market value of the
notes or our common stock. Our obligation to offer to redeem the notes upon a
fundamental change would not necessarily afford holders of the notes protection
in the event of a highly leveraged transaction, reorganization, merger or
similar transaction involving us. See "Description of Notes--Redemption at
Option of the Holder."
A public market for the notes may fail to develop or be sustained
The initial purchasers of the notes, although they have advised us that
they intend to make a market in the notes, are not obligated to do so and may
discontinue this market making activity at any time without notice. In
addition, market making activity by the initial purchasers will be subject to
the limits imposed by the Securities Act and the Exchange Act. As a result, we
cannot assure you that any market for the notes will develop or, if one does
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<PAGE>
develop, that it will be maintained. If an active market for the notes fails to
develop or be sustained, the trading price of the notes could be materially
adversely affected.
Our stock price may continue to experience short-term fluctuations which may
significantly affect the trading price of the notes
The market prices of securities of small capitalization biotechnology
companies, including ours, have historically been highly volatile. The market
has from time to time experienced significant price and volume fluctuations
unrelated to the operating performance of particular companies. In recent
years, the price of our common stock has fluctuated greatly. Fluctuations in
the trading price of our common stock will affect the trading price of the
notes. The market price of our common stock may continue to fluctuate
significantly in the future due to a variety of factors, including:
o the results of preclinical testing and clinical trials by us or our
competitors
o the formation or termination of our corporate alliances
o determinations regarding our patent applications and those of others
o variations in our quarterly operating results
In addition, if any of the risks described in these "Risk Factors"
actually occurred, it could have a dramatic and adverse impact on the market
price of our common stock.
We have a significant amount of debt that we may be unable to service or
repay
The annual interest payments on the convertible subordinated notes will be
$13.2 million, which we intend to fund from cash flow from operations. We will
need to generate substantial amounts of cash from our operations to fund
interest payments and to repay the principal amount of debt when it matures,
while at the same time funding capital expenditures and our other working
capital needs. If we do not have sufficient cash to repay our debts as they
become due, we may be unable to refinance our debt on reasonable terms or at
all. For example, the notes could be declared immediately due and payable if we
do not make timely payments. If we cannot meet out debt obligations from the
cash generated by our business, we may not be able to develop and sell new
products, respond to changing business or economic conditions adequately, make
acquisitions or otherwise fund our business.
The market for unrated debt is subject to disruptions, which could have an
adverse effect on the market price of the notes
The notes have not been rated. As a result, holders of the notes have the
risks associated with an investment in unrated debt. Historically, the market
for unrated debt has been subject to disruptions that have caused substantial
volatility in the prices of such securities and greatly reduced liquidity for
the holders of such securities. If the notes are traded, they may trade at a
discount from their initial offering price, depending on, among other things,
prevailing interest rates, the markets for similar securities, general economic
conditions and our financial condition, results of operations and prospects.
The liquidity of, and trading markets for, the notes also may be adversely
affected by general declines in the market for unrated debt. Such declines may
adversely affect the liquidity of, and trading markets for, the notes,
independent of our financial performance or prospects. In addition, certain
regulatory restrictions prohibit certain types of financial institutions from
investing in unrated debt, which may further suppress demand for such
securities. We cannot assure the holders of the notes that the market for the
notes will not be subject to similar disruptions. Any such disruptions may have
an adverse effect on the holders of the notes.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this
prospectus are forward-looking statements concerning our operations, economic
performance and financial condition. These statements involve known and unknown
risks, uncertainties, and other factors that may cause our or our industry's
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, those listed under "Risk Factors" and elsewhere
in this prospectus or incorporated by reference in this prospectus. In some
cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "intend," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential," or "continue" or the negative of such terms
or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels
of activity, performance, or achievements. We do not assume responsibility for
the accuracy and completeness of the forward-looking statements. We do not
intend to update any of the forward-looking statements after the date of this
prospectus to conform them to actual results.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was negative for all periods presented
because of the net losses incurred by ImClone. The dollar amounts of the
deficiencies are disclosed below (in thousands):
<TABLE>
Three
Months
Year Ended Ended
-------------------------------------------------- -------
March
1999 1998 1997 1996 1995 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Deficiency of earnings
available to cover
fixed charges (*)....... $(34,815) $(21,382) $(15,491) $(16,015) $(9,641) $(12,211)
</TABLE>
- -------------------
(*) Earnings consist of net loss plus fixed charges less capitalized interest
and preferred stock dividends. Fixed charges consist of interest expense,
including amortization of debt issuance costs and that portion of rental
expense we believe to be representative of interest.
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling holders of
the notes and the underlying common stock.
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DESCRIPTION OF NOTES
The notes are issued under an indenture dated as of February 29, 2000,
between ImClone and The Bank of New York, as trustee. The notes are covered by
a registration rights agreement. You may request a copy of the indenture and
the registration rights agreement relating to the notes from the trustee.
The following description is a summary of the material provisions of the
notes, the indenture and the registration rights agreement. It does not purport
to be complete. This summary is subject to and is qualified by reference to all
the provisions of the indenture, including the definitions of certain terms
used in the indenture. Wherever particular provisions or defined terms of the
indenture or form of note are referred to, these provisions or defined terms
are incorporated in this prospectus by reference.
General
The notes are general unsecured obligations of ImClone, subordinate in
right of payment to certain current and future indebtedness as described under
"--Subordination of Notes." The notes are convertible into common stock as
described under "Conversion of Notes." The notes are limited to $240,000,000
aggregate principal amount. The notes are issued only in denominations of
$1,000 and multiples of $1,000. The notes will mature on March 1, 2005 unless
earlier converted, redeemed at our option or redeemed at the holder's option
upon a fundamental change.
We are not subject to any financial covenants under the indenture. In
addition, we are not restricted under the indenture from paying dividends,
incurring debt (including senior indebtedness), or issuing or repurchasing our
securities.
Holders of notes are not afforded protection in the event of a highly
leveraged transaction or a change in control of ImClone under the indenture
except to the extent described below under "--Redemption at Option of the
Holder."
The notes bear interest at the annual rate of 5 1/2% from February 29,
2000. We pay interest in arrears on March 1 and September 1 of each year,
beginning September 1, 2000 to record holders at the close of business on the
preceding February 15 and August 15, as the case may be, except:
o that interest payable upon redemption will be paid to the person to
whom principal is payable, unless the redemption date is an interest
payment date; and
o as set forth in the next sentence.
In the case of any note, or portion of any note, which is converted into
our common stock during the period after any record date for any interest
payment but prior to the next interest payment date:
o if the note has been called for redemption on a redemption date that
occurs during this period, we will not be required to pay interest on
the interest payment date;
o if the note is to be redeemed in connection with a fundamental change
on a redemption date that occurs during this period, we will not be
required to pay interest on the interest payment date; or
o if otherwise, any note not called for redemption that is submitted
for conversion during this period must also be accompanied by an
amount equal to the interest due on the interest payment date on the
converted principal amount, unless at the time of conversion there is
a default in the payment of interest on the notes.
See "--Conversion of Notes."
We maintain an office in New York, New York for the payment of interest,
which shall initially be an office or agency of the trustee.
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We may pay interest either:
o by check mailed to a holder's address as it appears in the note
register, provided that a holder of notes with an aggregate principal
amount in excess of $2.0 million, shall be paid, at such holder's
written election, by wire transfer in immediately available funds; or
o by transfer to an account maintained by such holder in the United
States.
However, payments to The Depository Trust Company, New York, New York,
which we refer to as DTC, will be made by wire transfer of immediately
available funds to the account of DTC or its nominee. Interest will be computed
on the basis of a 360-day year composed of twelve 30-day months.
Form, Denomination and Registration
The notes are issued:
o in fully registered form;
o without interest coupons; and
o in denominations of $1,000 principal amount and integral multiples of
$1,000.
Global Note, Book-Entry Form
Notes sold to "qualified institutional buyers" as defined in Rule 144A
under the Securities Act, whom we refer to as QIBs, are evidenced by one or
more global notes. We have deposited the global note or notes with DTC and have
registered the global notes in the name of Cede & Co. as DTC's nominee. Except
as set forth below, a global note may be transferred, in whole or in part, only
to another nominee of DTC or to a successor of DTC or its nominee.
QIBs may hold their interests in a global note directly through DTC if
such holder is a participant in DTC, or indirectly through organizations which
are participants in DTC (called "participants"). Transfers between participants
will be effected in the ordinary way in accordance with DTC rules and will be
settled in clearing house funds. The laws of some states require that certain
persons take physical delivery of securities in definitive form. As a result,
the ability to transfer beneficial interests in the global note to such persons
may be limited.
QIBs who are not participants may beneficially own interests in a global
note held by DTC only through participants, or certain banks, brokers, dealers,
trust companies and other parties that clear through or maintain a custodial
relationship with a participant, either directly or indirectly (called
"indirect participants"). So long as Cede & Co., as the nominee of DTC, is the
registered owner of a global note, Cede & Co. for all purposes will be
considered the sole holder of such global note. Except as provided below,
owners of beneficial interests in a global note will:
o not be entitled to have certificates registered in their names;
o not receive physical delivery of certificates in definitive registered
form; and
o not be considered holders of the global note.
We will pay interest on and the redemption price of a global note to Cede
& Co., as the registered owner of the global note, by wire transfer of
immediately available funds on each interest payment date or the redemption or
repurchase date, as the case may be. Neither we, the trustee nor any paying
agent will be responsible or liable:
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o for the records relating to, or payments made on account of,
beneficial ownership interests in a global note; or
o for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
We have been informed that DTC's practice is to credit participants'
accounts on a payment date with payments in amounts proportionate to their
respective beneficial interests in the principal amount represented by a global
note as shown on the records of DTC, unless DTC has reason to believe that it
will not receive payment on that payment date. Payments by participants to
owners of beneficial interests in the principal amount represented by a global
note held through participants will be the responsibility of the participants,
as is now the case with securities held for the accounts of customers
registered in "street name."
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge such
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing the interest.
Neither ImClone, nor any trustee, registrar, paying agent or conversion
agent will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations. DTC has advised us that it
will take any action permitted to be taken by a holder of notes, including the
presentation of notes for exchange, only at the direction of one or more
participants to whose account with DTC interests in the global note are
credited, and only in respect of the principal amount of the notes represented
by the global note as to which the participant or participants has or have
given such direction.
DTC has advised us that it is:
o a limited purpose trust company organized under the laws of the State
of New York
o a member of the Federal Reserve System
o a "clearing corporation" within the meaning of the Uniform Commercial
Code
o a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants.
Participants include securities brokers, dealers, banks, trust companies and
clearing corporations and other organizations. Some of the participants or
their representatives, together with other entities, own DTC. Indirect access
to the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
DTC has agreed to the foregoing procedures to facilitate transfers of
interests in a global note among participants. However, DTC is under no
obligation to perform or continue to perform these procedures, and may
discontinue these procedures at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
us within 90 days, we will issue notes in certificated form in exchange for
global notes.
Certificated Notes
Notes sold to investors that are institutional accredited investors are
issued in certificated form. In addition, QIBs may request that certificated
notes be issued in exchange for notes represented by a global note.
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Conversion of Notes
Holders of notes may convert their notes, in whole or in part, into common
stock through the final maturity date of the notes, subject to prior redemption
of the notes. If we call notes for redemption, holders may convert the notes
only until the close of business on the business day prior to the redemption
date unless we fail to pay the redemption price. If holders have submitted
their notes for redemption upon a fundamental change, then holders may only
convert their notes upon the withdrawal of their redemption election. Holders
may convert their notes in part so long as this part is $1,000 in principal
amount or an integral multiple of $1,000. If any notes not called for
redemption are converted after a record date for any interest payment date and
prior to the next interest payment date, the notes so converted must be
accompanied by an amount equal to the interest payable on the interest payment
date on the converted principal amount unless a default exists at the time of
conversion.
The initial conversion price for the notes is $110.18 per share of common
stock, subject to adjustment as described below. We will not issue fractional
shares of common stock upon conversion of notes. Instead, we will pay cash for
such fractional shares based upon the market price of the common stock on the
business day prior to the conversion date. Except as described below, holders
of notes will not receive any accrued interest or dividends upon conversion.
To convert a note into common stock a holder must:
o complete and manually sign the conversion notice on the back of the
note or a facsimile of the conversion notice and deliver this notice
to the conversion agent
o surrender the note to the conversion agent
o if required, furnish appropriate endorsements and transfer documents
o if required, pay all transfer or similar taxes
o if required, pay funds equal to interest payable on the next interest
payment date
The date the holder complies with these requirements is the conversion
date under the indenture.
We will adjust the conversion price if the following events occur:
(1) we issue common stock as a dividend or distribution on our common
stock
(2) we issue to all holders of common stock certain rights or warrants
to purchase our common stock
(3) we subdivide or combine our common stock
(4) we distribute to all common stock holders capital stock,
evidences of indebtedness or assets, including securities but excluding:
o rights or warrants listed in (2) above
o dividends or distributions listed in (1) above
o cash distributions listed in (5) below
(5) we distribute cash to all holders of our common stock, excluding
any quarterly cash dividend on the common stock, to the extent that the
aggregate cash dividend per share of common stock in any quarter does not
exceed the greater of:
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o the amount per share of common stock of the next preceding quarterly
cash dividend on the common stock to the extent that the preceding
quarterly dividend did not require an adjustment of the conversion
price pursuant to this clause (5), as adjusted to reflect
subdivisions or combinations of the common stock
o 3.75% of the average of the last reported sale price of the common
stock during the ten trading days immediately prior to the
declaration date of the dividend
excluding any dividend or distribution in connection with the liquidation,
dissolution or winding up of ImClone.
If an adjustment is required to be made under this clause (5) as a result
of a distribution that is a quarterly dividend, the adjustment would be based
upon the amount by which the distribution exceeds the amount of the quarterly
cash dividend permitted to be excluded pursuant to this clause (5). If an
adjustment is required to be made under this clause (5) as a result of a
distribution that is not a quarterly dividend, the adjustment would be based
upon the full amount of the distribution;
(6) we make a payment in respect of a tender offer or exchange offer
for our common stock to the extent that the cash and value of any other
consideration included in the payment per share of common stock exceeds
the current market price per share of common stock on the trading day next
succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange offer; and
(7) someone other than us makes a payment in respect of a tender
offer or exchange offer in which, as of the closing date of the offer, our
board of directors is not recommending rejection of the offer. The
adjustment referred to in this clause (7) will only be made if:
o the tender offer or exchange offer is for an amount that increases
the offeror's ownership of common stock to more than 25% of the total
shares of common stock outstanding, and
o the cash and value of any other consideration included in the payment
per share of common stock exceeds the current market price per share
of common stock on the business day next succeeding the last date on
which tenders or exchanges may be made pursuant to the tender or
exchange offer.
However, the adjustment referred to in this clause (7) will generally not
be made if, as of the closing of the offer, the offering documents disclose a
plan or an intention to cause us to engage in a consolidation or merger of
ImClone or a sale of all or substantially all of our assets.
In the event of:
o any reclassification of our common stock;
o consolidation, merger or combination involving ImClone; or
o a sale or conveyance to another person of all or substantially all of
the property and assets of ImClone;
in which holders of common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, holders of
notes will generally be entitled thereafter to convert their notes into the
same type of consideration they would have been entitled to receive had the
notes been converted into common stock immediately prior to one of these types
of events.
You may in certain situations be deemed to have received a distribution
subject to United States federal income tax as a dividend in the event of any
taxable distribution to holders of common stock or in certain other situations
requiring a conversion price adjustment. See "Certain United States Federal
Income Tax Considerations."
We may from time to time reduce the conversion price for a period of at
least 20 days if our board of directors has made a determination that this
reduction would be in our best interests. Any such determination by our board
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will be conclusive. We would give holders at least 15 days' notice of any
reduction in the conversion price. In addition, we may reduce the conversion
price if our board of directors deems it advisable to avoid or diminish any
income tax to holders of common stock resulting from any stock or rights
distribution. See "Certain United States Federal Income Tax Considerations."
We will not be required to make an adjustment in the conversion price
unless the adjustment would require a change of at least 1% in the conversion
price. However, we will carry forward any adjustments that are less than one
percent of the conversion price. Except as described above in this section, we
will not adjust the conversion price for any issuance of our common stock or
convertible or exchangeable securities or rights to purchase our common stock
or convertible or exchangeable securities.
Optional Redemption by ImClone
Provisional Redemption
We may redeem some or all of the notes at any time prior to March 6, 2003,
at a redemption price equal to $1,000 per $1,000 aggregate principal amount of
notes plus accrued and unpaid interest to the redemption date if:
o the closing price of the common stock has exceeded 150% of the
conversion price for at least 20 trading days in any consecutive
30-trading day period; and
o if the redemption would occur before March 1, 2002, the shelf
registration statement covering resale of the notes and the common
stock is effective and expected to remain effective and available for
use for the 30 days following the redemption date.
We must mail the notice for redemption within five trading days of the
consecutive 30-trading day period. The provisional redemption date shall be not
less than 30 nor more than 60 days after the notice.
If we redeem the notes under these circumstances, we will make an
additional payment on the redeemed notes equal to $152.54 per $1,000 aggregate
principal amount of notes, minus the amount of any interest we actually paid on
the note prior to the date we mailed the notice. We must make these payments on
all notes called for redemption, including notes converted after the date we
mailed the notice.
Non-Provisional Redemption
The notes are not entitled to any sinking fund. At any time on or after
March 6, 2003, we may redeem some or all of the notes on at least 30 but not
more than 60 days' notice, at the following redemption prices (expressed in
percentages of the principal amount).
If redeemed during the 12-month period:
Redemption
Twelve-Month Period Price
- ------------------- ----------
Beginning on March 6, 2003 and ending February 29, 2004........... 102.20%
Beginning on March 1, 2004 and ending February 28, 2005........... 101.10
and 100% at March 1, 2005. In addition, we will pay interest on the notes being
redeemed, including those notes which are converted into our common stock after
the date the notice of the redemption is mailed and prior to the redemption
date. This interest will include interest accrued and unpaid to, but excluding,
the redemption date. If the redemption date is an interest payment date, we
will pay the interest to the holder of record on the corresponding record date,
which may or may not be the same person to whom we will pay the redemption
price.
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If less than all of the outstanding notes are to be redeemed, the trustee
shall select the notes to be redeemed in principal amounts of $1,000 or
integral multiples of $1,000 by lot, pro rata or by another method the trustee
considers fair and appropriate.
We may not redeem the notes if we have failed to pay any interest or
premium on the notes and such failure to pay is continuing.
Redemption at Option of the Holder
If a fundamental change occurs prior to March 1, 2005, holders may require
us to redeem their notes, in whole or in part, on a repurchase date that is 30
days after the date of our notice of the fundamental change. The notes will be
redeemable in multiples of $1,000 principal amount. We shall redeem the notes
at a price equal to 100% of the principal amount to be redeemed, plus accrued
interest to, but excluding, the repurchase date. If the repurchase date is an
interest payment date, we will pay interest to the record holder on the
relevant record date.
We will mail to all record holders a notice of the fundamental change
within 10 days after the occurrence of the fundamental change. We are also
required to deliver to the trustee a copy of the fundamental change notice and
issue a press release announcing the fundamental change. If holders elect to
redeem the notes, each such holder must deliver to us or our designated agent,
on or before the 30th day after the date of our fundamental change notice, the
redemption notice and any notes to be redeemed, duly endorsed for transfer. We
will promptly pay the redemption price for notes surrendered for redemption
following the repurchase date.
A "fundamental change" is any transaction or event in connection with
which all or substantially all of our common stock will be exchanged for,
converted into, acquired for or constitute solely the right to receive,
consideration, whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification, recapitalization
or otherwise, which consideration is not all or substantially all common stock:
o listed on, or that will be listed on or immediately after the
transaction or event on a United States national securities exchange;
or
o approved for quotation on the Nasdaq National Market or any similar
United States system of automated dissemination of quotations of
securities prices.
We will comply with any applicable provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act in the event of a fundamental change.
These fundamental change redemption rights could discourage a potential
acquiror of ImClone. However, this fundamental change redemption feature is not
the result of management's knowledge of any specific effort to obtain control
of ImClone by means of a merger, tender offer or solicitation, or part of a
plan by management to adopt a series of anti-takeover provisions. The term
"fundamental change" is limited to certain specified transactions and may not
include other events that might adversely affect our financial condition. Our
obligation to offer to redeem the notes upon the occurrence of a fundamental
change would not necessarily afford the holders of notes protection in the
event of a highly leveraged transaction, reorganization, merger or similar
transaction involving ImClone.
We may be unable to redeem the notes in the event of a fundamental change.
If a fundamental change were to occur, we may not have enough funds to pay the
redemption price for all tendered notes. In addition, in certain situations, a
fundamental change could result in an event of default under our current forms
of indebtedness. Any future credit agreements or other agreements relating to
our indebtedness may contain similar provisions, or expressly prohibit the
repurchase of the notes upon a fundamental change or may provide that a
fundamental change constitutes an event of default under that agreement. If a
fundamental change occurs at a time when we are prohibited from purchasing or
redeeming notes, we could seek the consent of our lenders to redeem the notes
or could attempt to refinance this debt. If we were not able to obtain such a
consent, we could not purchase or redeem the notes. Our failure to redeem
tendered notes would constitute an event of default under the indenture, which
might constitute a default under the terms of our other indebtedness. In such
circumstances, or if a fundamental
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change would constitute an event of default under our senior indebtedness, the
subordination provisions of the indenture would restrict payments to the
holders of notes.
Subordination of Notes
Payment on the notes will, to the extent provided in the indenture, be
subordinated in right of payment to the prior payment in full of all of our
senior indebtedness.
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization, the payment of the principal of, or premium, if
any, interest, and liquidated damages, if any, on, the notes will be
subordinated in right of payment to the prior payment in full in cash or other
payment satisfactory to the holders of all senior indebtedness. In the event of
any acceleration of the notes because of an event of default, the holders of
any outstanding senior indebtedness would be entitled to payment in full in
cash or other payment satisfactory to the holders of senior indebtedness of all
senior indebtedness obligations before the holders of the notes are entitled to
receive any payment or distribution. We are required under the indenture to
promptly notify holders of senior indebtedness, if payment of the notes is
accelerated because of an event of default.
We cannot make any payment on the notes if:
o a default in the payment of senior indebtedness occurs and is
continuing beyond any applicable period of grace (called a "payment
default"); or
o a default other than a payment default on any designated senior
indebtedness occurs and is continuing that permits holders of
designated senior indebtedness to accelerate its maturity, or in the
case of a lease, a default occurs and is continuing that permits the
lessor to either terminate the lease or require us to make an
irrevocable offer to terminate the lease following an event of
default under the lease, and the trustee receives a notice of such
default (called a "payment blockage notice") from us or any other
person permitted to give such notice under the indenture (called a
"non-payment default").
We may resume payments and distributions on the notes:
o in case of a payment default, upon the date on which such default is
cured or waived or ceases to exist; and
o in case of a non-payment default, the earlier of the date on which
such non-payment default is cured or waived or ceases to exist or 179
days after the date on which the payment blockage notice is received,
if the maturity of the designated senior indebtedness has not been
accelerated, or in the case of any lease, 179 days after notice is
received if we have not received notice that the lessor under such
lease has exercised its right to terminate the lease or require us to
make an irrevocable offer to terminate the lease following an event
of default under the lease.
No new period of payment blockage may be commenced pursuant to a payment
blockage notice unless 365 days have elapsed since the initial effectiveness of
the immediately prior payment blockage notice. No non-payment default that
existed or was continuing on the date of delivery of any payment blockage
notice shall be the basis for any later payment blockage notice.
If the trustee or any holder of the notes receives any payment or
distribution of our assets in contravention of the subordination provisions on
the notes before all senior indebtedness is paid in full in cash or other
payment satisfactory to holders of senior indebtedness, then such payment or
distribution will be held in trust for the benefit of holders of senior
indebtedness or their representatives to the extent necessary to make payment
in full in cash or payment satisfactory to the holders of senior indebtedness
of all unpaid senior indebtedness.
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In the event of our bankruptcy, dissolution or reorganization, holders of
senior indebtedness may receive more, ratably, and holders of the notes may
receive less, ratably, than our other creditors. This subordination will not
prevent the occurrence of any event of default under the indenture.
As of May 1, 2000, we had approximately $3.9 million of senior
indebtedness outstanding. We are not prohibited from incurring debt, including
senior indebtedness, under the indenture. We may from time to time incur
additional debt, including senior indebtedness. The indenture will not limit:
o the amount of additional senior indebtedness, which ImClone can
create, incur, assume or guarantee; or
o the amount of indebtedness or other liabilities any future subsidiary
can create, incur, assume or guarantee.
We are obligated to pay reasonable compensation to the trustee and to
indemnify the trustee against certain losses, liabilities or expenses incurred
by the trustee in connection with its duties relating to the notes. The
trustee's claims for these payments will generally be senior to those of
noteholders in respect of all funds collected or held by the trustee.
Certain Definitions
"designated senior indebtedness" shall mean all indebtedness existing on
the date of this offering memorandum plus any senior indebtedness incurred
after such date.
"indebtedness" means:
(1) all indebtedness, obligations and other liabilities for borrowed
money, including overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements and any loans or advances
from banks, or evidenced by bonds, notes, notes or similar instruments,
other than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with
the obtaining of materials or services;
(2) obligations with respect to letters of credit, bank guarantees or
bankers' acceptances;
(3) obligations in respect of capital leases and real or personal
property leases required in conformity with generally accepted accounting
principles to be accounted for as capitalized lease obligations on our
balance sheet;
(4) all obligations and other liabilities under any lease or related
document, including purchase agreements, in connection with the lease of
real property which provides that we are contractually obligated to
purchase or cause a third party to purchase the leased property and
thereby guarantee a minimum residual value of the leased property to the
lessor and our obligations under the lease or related document to purchase
or to cause a third party to purchase the leased property;
(5) all obligations with respect to an interest rate or other swap,
cap or collar agreement or foreign currency hedge, exchange or purchase
agreement;
(6) all direct or indirect guaranties, our obligations or liabilities
to purchase, acquire or otherwise assure a creditor against loss in
respect of, indebtedness, obligations or liabilities of others of the type
described in (1) through (5) above;
(7) any obligations described in (1) through (5) above secured by any
mortgage, pledge, lien or other encumbrance existing on property which is
owned or held by us; and
(8) any deferrals, renewals, extensions, refundings, amendments,
modifications or supplements to (1) through (7) above.
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"senior indebtedness" means the principal, premium, if any, interest,
including any interest accruing after bankruptcy and rent or termination
payment on or other amounts due on our current or future indebtedness, whether
created, incurred, assumed, guaranteed or in effect guaranteed by us. However,
senior indebtedness does not include:
o indebtedness that expressly provides that it shall not be senior in
right of payment to the notes or expressly provides that it is on the
same basis or junior to the notes
o the notes
Events of Default; Notice and Waiver
The following will be events of default under the indenture:
o we fail to pay principal or premium, if any, upon redemption or
otherwise on the notes, whether or not the payment is prohibited by
subordination provisions
o we fail for 30 days to pay any interest and liquidated damages, if
any, on the notes, whether or not the payment is prohibited by
subordination provisions of the indenture
o we fail to perform or observe any of the covenants in the indenture
for 60 days after notice
o certain events involving bankruptcy, insolvency or reorganization of
ImClone
The trustee may withhold notice to the holders of the notes of any
default, except defaults in payment of principal, premium, interest or
liquidated damages, if any, on the notes. However, the trustee must consider it
to be in the interest of the holders of the notes to withhold this notice.
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding notes may declare the
principal, premium, and accrued interest and liquidated damages, if any, on the
outstanding notes to be immediately due and payable. In case of certain events
of bankruptcy or insolvency involving ImClone, the principal, premium and
accrued interest and liquidated damages, if any, on the notes will
automatically become due and payable. Subject to certain limitations, the
holders of a majority of the principal amount of outstanding notes may waive
any default other than non-payment defaults. Payments of principal, premium, or
interest on the notes that are not made when due will accrue interest at the
annual rate of 5 1/2% from the required payment date.
The holders of a majority of outstanding notes will have the right to
direct the time, method and place of any proceedings for any remedy available
to the trustee, subject to limitations specified in the indenture. No holder of
the notes may pursue any remedy under the indenture, except in the case of a
default in the payment of principal, premium or interest on the notes, unless:
o the holder has given the trustee written notice of an event of default
o the holders of at least 25% in principal amount of outstanding notes
make a written request, and offer reasonable indemnity, to the
trustee to pursue the remedy
o the trustee does not receive an inconsistent direction from the
holders of a majority in principal amount of the notes
o the trustee fails to comply with the request within 60 days after
receipt
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Modification of the Indenture
The consent of the holders of a majority in principal amount of the
outstanding notes is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each
outstanding note if it would:
o extend the fixed maturity of any note
o reduce the rate or extend the time for payment of interest of any note
o reduce the principal amount or premium of any note
o reduce any amount payable upon redemption of any note
o adversely change our obligation to redeem any note upon a fundamental
change
o impair the right of a holder to institute suit for payment on any note
o change the currency in which any note is payable
o impair the right of a holder to convert any note
o adversely modify the subordination provisions of the indenture
o reduce the percentage of notes required for consent to any
modification of the indenture
We are permitted to modify certain provisions of the indenture without the
consent of the holders of the notes.
Registration Rights of the Noteholders
Under a registration rights agreement, we are required to use our
reasonable efforts to cause the shelf registration statement, of which this
prospectus is a part, to become effective and to use reasonable efforts to keep
the shelf registration statement effective until the earlier of:
o all of the registrable securities have been sold pursuant to the
shelf registration statement
o the expiration of the holding period under Rule 144(k) under the
Securities Act, or any successor provision, subject to certain
permitted exceptions
When we use the term "registrable securities" in this section, we are
referring to the notes and the common stock issuable upon conversion of the
notes until the earliest of:
o the effective registration under the Securities Act and resale of the
securities in accordance with the registration statement
o the expiration of the holding period under Rule 144(k)
o the sale to the public pursuant to Rule 144 under the Securities Act,
or any similar provision then in force, but not Rule 144A
We may suspend the use of the prospectus under certain circumstances
relating to pending corporate developments, public filings with the Securities
and Exchange Commission and similar events. Any suspension period shall not:
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o exceed 30 days in any 3-month period
o an aggregate of 90 days for all periods in any 12-month period
However, we will be permitted to suspend the use of the prospectus not to
exceed 60 days under certain circumstances, relating to possible acquisitions,
financings or similar transactions.
If the shelf registration statement is not timely filed or made effective
or if the prospectus is unavailable for periods in excess of those permitted
above, we will pay predetermined liquidated damages:
o on the notes at an annual rate equal to 0.5% of the principal amount
of the notes
o on the common stock at an annual rate equal to 0.5% of the conversion
price
A holder who elects to sell registrable securities pursuant to the shelf
registration statement will be required to:
o be named as a selling stockholder in the related prospectus
o deliver a prospectus to purchasers
o be subject to the provisions of the registration rights agreement,
including indemnification provisions
Under the registration rights agreement we will
o pay all expenses of the shelf registration statement
o provide each registered holder copies of the prospectus
o notify holders when the shelf registration statement has become
effective
o take other actions as are required to permit unrestricted resales of
the registrable securities
The plan of distribution of the shelf registration statement will permit
resales of registrable securities by selling security holders through brokers
and dealers.
We will give notice of the filing and effectiveness of the shelf
registration statement to all holders of the notes or the underlying common
stock by issuing a press release to Reuters Economic Services and Bloomberg
Business News. In order for a holder to sell registrable securities, such
holder must complete and deliver a questionnaire which can be obtained from
Catherine M. Vaczy, Associate General Counsel, 180 Varick Street, New York, New
York 10014, and our telephone number is (212) 645-1405. This completed
questionnaire should be forwarded to us at least three business days prior to
intended distribution. Such holder should complete and deliver the
questionnaire prior to the effectiveness of the shelf registration statement so
that such holder may be named as selling stockholders in the prospectus at the
time of effectiveness. Upon receipt of a completed questionnaire, together with
any other information we may reasonably request following the effectiveness, we
will, within five business days, file any amendments to the shelf registration
statement or supplements to the related prospectus as are necessary to permit
any holder to deliver a prospectus to purchasers of registrable securities,
subject to our right to suspend the use of the prospectus. We will pay
liquidated damages to the holder if we fail to make the filing in the time
required or, if such filing is a post-effective amendment to the shelf
registration statement required to be declared effective under the Securities
Act, if such amendment is not declared effective within 45 days of the filing.
If a holder does not complete and deliver a questionnaire or provide the other
information we may request, such holder will not be named as a selling
stockholder in the prospectus and will not be permitted to sell registrable
securities pursuant to the shelf registration statement.
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The summary of the registration rights agreement is not complete. This
summary is subject to, and is qualified in its entirety by reference to, all
the provisions of the registration rights agreement. You can request a copy of
the registration rights agreement from us.
Rule 144A Information Requirement
We will furnish to the holders or beneficial holders of the notes or the
underlying common stock and prospective purchasers, upon their request, the
information required under Rule 144A(d)(4) under the Securities Act until such
time as such securities are no longer "restricted securities" within the
meaning of Rule 144 under the Securities Act, assuming these securities have
not been owned by an affiliate of ImClone.
Information Concerning the Trustee
We have appointed The Bank of New York, the trustee under the indenture,
as paying agent, conversion agent, note registrar and custodian for the notes.
The trustee or its affiliates may provide banking and other services to us in
the ordinary course of their business. The indenture contains certain
limitations on the rights of the trustee, as long as it or any of its
affiliates remains our creditor, to obtain payment of claims in certain cases
or to realize on certain property received on any claim as security or
otherwise. The trustee and its affiliates will be permitted to engage in other
transactions with us. However, if the trustee or any affiliate continues to
have any conflicting interest and a default occurs with respect to the notes,
the trustee must eliminate such conflict or resign.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax
considerations relating to the purchase, ownership and disposition of the notes
and common stock into which notes may be converted, but does not purport to be
a complete analysis of all the potential tax considerations relating thereto.
This summary is based on laws, regulations, rulings and decisions now in
effect, all of which are subject to change or differing interpretation,
possibly with retroactive effect. Except as specifically discussed below with
regard to non-U.S. holders (as defined below), this summary applies only to
beneficial owners that will hold notes and common stock into which notes may be
converted as "capital assets," within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended, referred to as the "Code," and who,
for U.S. federal income tax purposes, are:
o individual citizens or residents of the U.S., including non-resident
alien individuals who are lawful permanent residents of the U.S. or
meet the "substantial presence" test under Section 7701(b) of the
Code;
o corporations, partnerships or other entities created or organized in
or under the laws of the U.S. or of any political subdivision thereof
(unless, in the case of a partnership, Treasury Regulations otherwise
provide);
o estates, the incomes of which are subject to U.S. federal income
taxation regardless of the source of such income; or
o trusts subject to the primary supervision of a U.S. court and the
control of one or more U.S. persons,
referred to as "U.S. holders."
Beneficial owners of a note or common stock that are not U.S. holders
(referred to as "non-U.S. holders") are subject to special U.S. federal income
tax considerations, some of which are discussed below.
This discussion does not address tax considerations applicable to an
investor's particular circumstances or to investors that may be subject to
special tax rules, such as banks, holders subject to the alternative minimum
tax, S corporations, tax-exempt organizations, insurance companies, foreign
persons or entities (except to the extent specifically set forth below),
dealers in securities or currencies, persons that will hold notes as a position
in a hedging transaction, "straddle" or "conversion transaction" for tax
purposes or persons deemed to sell notes or common stock under the constructive
sale provisions of the Code.
Investors considering the purchase of notes should consult their own tax
advisors with respect to the application of the United States federal income
tax laws to their particular situations as well as any tax consequences arising
under the federal estate or gift tax rules or under the laws of any state,
local or foreign taxing jurisdiction or under any applicable tax treaty.
U.S. Holders
Taxation of Interest
Interest paid on the notes will be included in the income of a U.S. holder
as ordinary income at the time it is treated as received or accrued, in
accordance with such holder's regular method of accounting for U.S. federal
income tax purposes. Under Treasury Regulations, the possibility of an
additional payment under a note may be disregarded for purposes of determining
the amount of interest income to be recognized by the holder in respect of such
note (or the timing of such recognition) if the likelihood of the payment, as
of the date the notes are issued, is remote. Holders may require ImClone to
redeem any and all of their notes in the event of a fundamental change, and
ImClone may redeem some or all of the notes pursuant to the provisional
redemption features of the notes. ImClone intends to take the position that a
"fundamental change" or a provisional redemption is remote under the Treasury
Regulations, and likewise does not intend to treat the possibility of a
"fundamental change" or a provisional redemption as affecting the yield to
maturity of any note. In the event any of these contingencies occurs, it would
affect the amount and timing of the income that must be recognized by a U.S.
holder of notes.
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Sale, Exchange or Redemption of the Notes
Upon the sale, exchange (other than a conversion, or other exchange for
stock or debt of ImClone) or redemption of a note, a U.S. holder generally will
recognize gain or loss equal to the difference between:
o the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption; and
o such holder's adjusted tax basis in the note. A U.S. holder's
adjusted tax basis in a note generally will equal the cost of the
note to such holder, increased by any market discount previously
includible in income by such holder with respect to the notes, and
reduced by any amortizable bond premium used to offset interest
income on the notes.
Such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if the U.S. holder's holding period in the note is more
than one year at the time of sale, exchange or redemption, except to the extent
such amount is attributable to accrued interest or market discount not
previously included in income, which will be taxable as ordinary income. See
"Market Discount and Bond Premium" below. Long-term capital gains recognized by
certain noncorporate U.S. holders, including individuals, will generally be
subject to a maximum stated rate of tax of 20%. The deductibility of capital
losses is subject to limitations.
Market Discount and Bond Premium
If a U.S. holder purchases a note after the original issue for an amount
less than its principal amount, the difference will be treated as market
discount. Under the market discount rules, such holder will be required,
subject to a de minimis exception, to treat any principal payment on a note or
any gain on the sale, exchange, retirement or other disposition of a note, as
ordinary income to the extent of the market discount that has not previously
been included in income and that is treated as having accrued on such note at
the time of such payment or disposition. If a note with accrued market discount
is converted into common stock pursuant to the conversion feature, the amount
of such accrued market discount generally will be taxable as ordinary income
upon the disposition of the common stock. In addition, a U.S. holder may be
required to defer, until the maturity of the note or its earlier disposition in
a taxable transaction, the deduction of all or a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry such
note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless a U.S.
holder elects to accrue on a constant interest method. Such holder may elect to
include market discount in income currently as it accrues (on either a ratable
or constant interest method), in which case the rule described above regarding
deferral of interest deductions will not apply. This election to include market
discount in income currently, once made, applies to all market discount
obligations acquired by a U.S. holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS.
If a U.S. holder purchases a note for an amount in excess of its stated
principal amount, plus accrued interest, such holder generally will be
considered to have purchased the note with "amortizable bond premium." Such
holder generally may elect to amortize such premium from the purchase date to
the note's maturity date under a constant yield method. Amortizable bond
premium generally is treated as an offset to interest income on the note and
not as a separate deduction. Amortizable bond premium, however, will not
include any premium attributable to the value of the note's conversion feature.
Also, because the notes may be redeemed by ImClone at a price in excess of
their principal amount, a U.S. holder may be required to amortize any premium
based on an earlier call date and the call price payable at that time. An
election to amortize amortizable bond premium on a constant yield method, once
made, generally applies to all debt obligations held or subsequently acquired
by such holder on or after the first day of the first taxable year to which the
election applies and may not be revoked without the consent of the IRS.
U.S. holders should consult their own tax advisors concerning the
existence of, and tax consequences of, market discount and amortizable bond
premium.
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Conversion of the Notes
A U.S. holder generally will not recognize any income, gain or loss upon
conversion of a note into common stock except for (i) cash received in lieu of
a fractional share of common stock, and (ii) any cash received as an additional
payment upon conversion of a note after receipt of notice of a provisional
redemption, to the extent described below. Although the treatment of the
additional payment that ImClone will be required to make if a U.S. holder
converts notes after receiving notice of a provisional redemption is unclear,
such holder may be required to treat an amount equal to interest that has
accrued but has not been included in income as ordinary interest income. Such
holder will be required to recognize gain, if any, to the extent of the excess
of such additional payment over the amount, if any, treated as interest. Any
gain so recognized will generally be capital gain. A U.S. holder's tax basis in
the common stock received on conversion of a note will be the same as such
holder's adjusted tax basis in the note at the time of conversion (increased by
the amount of recognized gain, if any, and reduced by the amount of any basis
allocable to a fractional share interest for which cash was received). The
holding period for the common stock received on conversion will generally
include the holding period of the note converted. Cash received in lieu of a
fractional share of common stock upon conversion will be treated as a payment
in exchange for the fractional share of common stock, which will result in
capital gain or loss, measured by the difference between the cash received for
the fractional share and the holder's adjusted tax basis in the fractional
share.
Dividends
Distributions, if any, made on the common stock after a conversion
generally will be included in the income of a U.S. holder as ordinary dividend
income to the extent of ImClone's current or accumulated earnings and profits.
Distributions in excess of ImClone's current and accumulated earnings and
profits will be treated as a return of capital to the extent of the U.S.
holder's tax basis in the common stock and thereafter as capital gain.
Adjustments to Conversion Price
The conversion price of the notes is subject to adjustment under certain
circumstances. See "Description of Notes--Conversion of Notes". Under Section
305 of the Code and the Treasury Regulations issued thereunder, certain
adjustments to the conversion price may be treated as a taxable distribution to
U.S. holders, resulting in ordinary income (subject to a possible
dividends-received deduction for corporate holders) to the extent of ImClone's
current or accumulated earnings and profits if, and to the extent that
adjustments in the conversion price increase such holder's proportionate
interest in the earnings and profits or assets of ImClone. Such adjustments may
occur in limited circumstances (particularly adjustments to reflect taxable
dividends to holders of common stock of ImClone) and in such a case a
constructive distribution would arise, whether or not the holders ever convert
the notes. U.S. holders, therefore, could have taxable income as a result of an
event in which they received no cash or property. A holder's tax basis in a
note, however, generally will be increased by the amount of any constructive
dividend included in taxable income. Similarly, a failure to adjust the
conversion rate to reflect a stock dividend or other event increasing the
proportionate interest, of the holders of outstanding common stock, in
ImClone's earnings and profits or assets could, in some circumstances, give
rise to deemed dividend income to holders of ImClone's common stock.
Sale of Common Stock
Upon the sale or exchange of common stock a U.S. holder generally will
recognize gain or loss equal to the difference between (1) the amount of cash
and the fair market value of any property received upon the sale or exchange
and (2) such U.S. holder's adjusted tax basis in the common stock. Such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if
the U.S. holder's holding period in the common stock is more than one year at
the time of the sale or exchange (except to the extent of any accrued market
discount attributable to such stock, which will be taxable as ordinary income,
as described above under "Market Discount and Bond Premium.") The deductibility
of capital losses is subject to limitations.
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Special Tax Rules Applicable to Non-U.S. Holders
The rules governing the U.S. federal income and estate taxation of a
non-U.S. holder are complex, and no attempt will be made herein to provide more
than a summary of those rules.
Non-U.S. holders should consult with their own tax advisors to determine
the effect of federal, state, local and foreign tax laws with regard to an
investment in the notes and common stock, including any reporting requirements.
In general, subject to the discussion below concerning backup withholding
and income effectively connected with a U.S. trade or business:
(a) Payments on the notes by ImClone or any paying agent to a beneficial
owner of a note that is a non-U.S. holder will not be subject to U.S. federal
withholding tax, provided that, in the case of interest,
(i) such non-U.S. holder does not own, actually or constructively,
10% or more of the total combined voting power of all classes of
ImClone's stock entitled to vote (including the stock into which
the notes are convertible),
(ii) such non-U.S. holder is not a "controlled foreign corporation"
related to ImClone actually or constructively through stock
ownership,
(iii) such non-U.S. holder is not a bank receiving interest on a loan
entered into in the ordinary course of business, and
(iv) the certification requirements under Section 871(h) or Section
881(c) of the Code and Treasury Regulations thereunder (discussed
below) are satisfied,
referred to as the "portfolio interest exemption."
(b) A non-U.S. holder of a note or common stock will generally not be
subject to U.S. federal income tax or withholding tax on gains realized on the
sale, exchange, redemption or other disposition of such note or common stock
(including the receipt of cash in lieu of fractional shares upon conversion of
a note into common stock) unless
(i) such gain is effectively connected with the conduct by the non-U.S.
holder of a trade or business in the U.S. and, if certain U.S.
income tax treaties apply, is attributable to a U.S. permanent
establishment maintained by the non-U.S. holder, or
(ii) in the case of common stock held by a person who holds more than
5% of such stock, ImClone is or has been, at any time within the
shorter of the five-year period preceding such sale or other
disposition or the period such non-U.S. holder held the common
stock, a U.S. real property holding corporation for U.S. federal
income tax purposes. ImClone does not believe that it is currently
a U.S. real property holding corporation or that it will become
one in the future.
(c) Interest on notes not excluded from U.S. withholding tax as
described in (a) above and dividends on common stock after conversion generally
will be subject to U.S. withholding tax at a 30% rate, except where an
applicable tax treaty provides for the reduction or elimination of such
withholding tax. ImClone may be required to report annually to the IRS and to
each non-U.S. holder the amount of interest paid to, and the tax withheld, if
any, with respect to each non-U.S. holder; and
(d) No U.S. federal income tax or withholding tax will generally be
imposed upon the conversion of a note into common stock by a non-U.S. holder
except with respect to the receipt of cash in lieu of fractional shares by
non-U.S. holders upon conversion of a note where any of the conditions
described above in (b) are satisfied.
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To satisfy the certification requirements referred to in (a)(iv) above,
either (1) the beneficial owner of a note must certify, under penalties of
perjury, to ImClone or its paying agent, as the case may be, that such owner is
a non-U.S. holder and must provide such owner's name and address, and U.S.
taxpayer identification number, if any, or (2) a securities clearing
organization, bank or other financial institution that holds customer
securities in the ordinary course of its trade or business (a "Financial
Institution") and holds the note on behalf of the beneficial owner thereof must
certify, under penalties of perjury, to ImClone or its paying agent, as the
case may be, that such certificate has been received from the beneficial owner
and must furnish the payor with a copy thereof. Such requirement will be
fulfilled if the beneficial owner of a note certifies on IRS Form W-8 or
successor form, under penalties of perjury, that it is a non-U.S. holder and
provides its name and address, or any Financial Institution holding the note on
behalf of the beneficial owner files a statement with the withholding agent to
the effect that it has received such a statement from the beneficial owner and
furnishes the withholding agent with a copy thereof.
Treasury Regulations effective for payments made after December 31, 2000,
will provide alternative methods for satisfying the certification requirements
described above and below, subject to certain transition rules. Non-U.S.
holders are urged to consult their own tax advisors regarding these new
regulations.
If a non-U.S. holder of a note or common stock is engaged in a trade or
business in the U.S. and if interest on the note, dividends on the common
stock, or gain realized on the sale, exchange or other disposition of the note
or common stock is effectively connected with the conduct of such trade or
business and, if certain tax treaties apply, is attributable to a U.S.
permanent establishment maintained by the non-U.S. holder in the U.S., the
non-U.S. holder, although exempt from U.S. withholding tax (provided that the
certification requirements discussed in the next sentence are met), will
generally be subject to U.S. federal income tax on such interest, dividends or
gain on a net income basis in the same manner as if it were a U.S. holder. In
lieu of the certificate described above, such non-U.S. holder will be required,
under currently effective Treasury Regulations, to provide the payor with a
properly executed IRS Form 4224 or successor form in order to claim an
exemption from withholding tax. In addition, if such non-U.S. holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30%, or
such lower rate provided by an applicable treaty, of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments.
U.S. Federal Estate Tax
If interest on the notes qualifies for the portfolio interest exemption
with respect to a non-U.S. holder at the time of such holder's death, the notes
will not be included in the estate of the deceased non-U.S. holder for U.S.
federal estate tax purposes. Common stock held by an individual who at the time
of death is not a citizen or resident of the U.S. (as specially defined for
U.S. federal estate tax purposes) will be included in such individual's estate
for U.S. federal estate tax purposes, unless an applicable estate tax treaty
otherwise applies.
Non-U.S. holders should consult with their tax advisors regarding U.S. and
foreign tax consequences with respect to the notes and common stock.
Backup Withholding and Information Reporting
Backup withholding of U.S. federal income tax at a rate of 31% may apply
to payments, pursuant to the terms of a note or common stock, to a U.S. holder
that is not an "exempt recipient" and that fails to provide certain identifying
information, such as the holder's taxpayer identification number, in the manner
required. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities are exempt recipients. Payments made in
respect of a note or common stock must be reported to the IRS unless the U.S.
holder is an exempt recipient or otherwise establishes an exemption.
In the case of payments of interest on a note to a non-U.S. holder,
Treasury Regulations provide that backup withholding and information reporting
will not apply to payments with respect to which either requisite certification
has been received or an exemption has otherwise been established, provided that
neither ImClone nor a paying agent has actual knowledge that the holder is a
U.S. holder or that the conditions of any other exemption are not in fact
satisfied.
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Dividends on the common stock paid to non-U.S. holders that are subject to
U.S. withholding tax, as described above, generally will be exempt from U.S.
backup withholding tax but will be subject to certain information reporting.
Payments of the proceeds of the sale of a note or common stock to or
through a foreign office of a U.S. broker, a foreign broker that is a
"controlled foreign corporation" within the meaning of the Code, or a foreign
person (50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment was
effectively connected with the conduct of a trade or business within the U.S.)
are currently subject to certain information reporting requirements, unless the
payee is an exempt recipient or such broker has evidence in its records that
the payee is a non-U.S. holder and has no actual knowledge that such evidence
is false and certain other conditions are met. Temporary Treasury Regulations
indicate that such payments are not currently subject to backup withholding.
Under current Treasury Regulations, payments of the proceeds of a sale of
a note or common stock to or through the U.S. office of a broker will be
subject to information reporting and backup withholding unless the payee
certifies under penalties of perjury as to his or her status as a non-U.S.
holder and satisfies certain other qualifications (and no agent of the broker
who is responsible for receiving or reviewing such statement has actual
knowledge that it is incorrect) and provides his or her name and address or the
payee otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to
a holder of a note or common stock may be allowed as a refund or credit against
such holder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS in a timely manner.
Treasury regulations that apply to payments made after December 31, 2000
will modify current information reporting and backup withholding procedures and
requirements. These regulations provide certain presumptions regarding the
status of holders when payments to the holders cannot be reliably associated
with appropriate documentation provided to the payer. For payments made after
December 31, 2000, holders must provide certification, if applicable, that
conforms to the requirements of the regulations, subject to certain
transitional rules permitting certification in accordance with current Treasury
regulations until December 31, 2000. Holders of a note or common stock should
consult with their tax advisors regarding the application of the backup
withholding rules to their particular situation, the availability of an
exemption therefrom, the procedure for obtaining such an exemption, if
available, and the impact of these new regulations on payments made with
respect to notes or common stock after December 31, 2000.
The preceding discussion of certain U.S. federal income tax considerations
is for general information only and is not tax advice. Accordingly, prospective
investors should consult their own tax advisors as to the particular U.S.
federal, state, local, estate, gift and foreign tax consequences of purchasing,
holding and disposing of the notes and common stock of ImClone, as well as the
consequences of any proposed change in applicable laws.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 60,000,000 shares of common
stock, par value $.001 per share, and 4,000,000 shares of preferred stock, par
value $1.00 per share. As of May 1, 2000, there were 31,236,166 shares of
common stock outstanding held of record by approximately 380 stockholders and
there were 300,000 shares of series A preferred stock outstanding, which are
all held by Merck KGaA.
The registrar and transfer agent for the common stock is Equiserve.
Common Stock
Holders of shares of common stock are entitled to one vote per share on
matters to be voted upon by our stockholders. Holders of shares of common stock
do not have cumulative voting rights. Therefore, the holders of more than 50%
of the shares of the common stock will have the ability to select all of our
directors. Holders of shares of common stock will be entitled to receive
dividends when, as and if declared by our board of directors. In the event of a
liquidation, dissolution or winding up of ImClone, holders of common stock have
the right to share ratably in all assets remaining after the payment of all
liabilities, subject to preference in liquidation of any outstanding preferred
stock. Holders of common stock have neither preemptive rights nor rights to
convert their common stock into any other securities and are not subject to
future calls or assessments by ImClone. There are no redemption or sinking fund
provisions applicable to the common stock. The rights, preferences and
privileges of the holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of the series A preferred stock, as well
as any additional preferred stock that ImClone may designate and issue in the
future.
Preferred Stock
Our board of directors has the authority to issue preferred stock in one
or more series, and to fix the rights, preferences, privileges and
restrictions, including the dividend, conversion, voting, redemption (including
sinking fund provisions) and other rights, liquidation preferences and the
number of shares constituting any series and the designations of such series,
without any further vote or action by our stockholders. The provisions of any
preferred stock could adversely affect the voting power of the holders of
common stock and could, among other things, have the effect of delaying,
deferring or preventing a change in control of ImClone.
Series A Preferred Stock
In December 1997, in connection with an amendment to our research and
license agreement with Merck KGaA for BEC2, Merck KGaA purchased from us
400,000 shares of series A preferred stock for total consideration of $40
million. 100,000 of these shares of series A preferred stock were converted
into 800,000 shares of common stock in December 1999. Holders of series A
preferred stock generally have no voting rights, except:
o that two-thirds of the outstanding shares must consent to changes in
the terms of the series A preferred stock
o in certain cases, if we default in the timely payment of dividends on
the series A preferred stock, the holders will have the right to
elect a nominee to our board of directors
o as otherwise required by law
The holders of the series A preferred stock are entitled to receive annual
cumulative dividends of $6.00 per share. Dividends on the outstanding series A
preferred stock accrue as of their issuance date and are payable in cash
annually on the earlier of
o December 31st or
o at the time of conversion or redemption of the series A preferred
stock on which the dividend is to be paid
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100,000 shares of series A preferred stock were converted in December
1999, an additional 100,000 shares became convertible into 249,610 shares of
common stock at a conversion price of $40.063 per share on January 1, 2000 and
an additional 100,000 preferred shares will become convertible, into a number
of shares of common stock based on the applicable conversion price on each of
January 1, 2001 and January 1, 2002.
During the period from January 1, 2000 through December 31, 2000 the
series A preferred stock is convertible at a price equal to $40.063 per share.
During the period from January 1, 2001 through December 31, 2001 the series A
preferred stock is convertible at a price equal to the average of the closing
prices for the common stock for the five trading days ending one trading day
prior to December 31, 2000. During the period from January 1, 2002 through
December 31, 2002 the series A preferred stock is convertible at a price equal
to 88% of the average of the closing prices for the common stock for the five
trading days ending one trading day prior to December 31, 2001 (the "beneficial
conversion feature"). Anytime after January 1, 2003 the series A preferred
stock is convertible at a price equal to the average of the closing prices for
the common stock for the five trading days ending one trading day prior to the
receipt by us of the notice of conversion.
The conversion price is subject to adjustment in the case of certain
dilutive events. Further, in the event the average market price of the common
stock for the five consecutive trading days ending one trading day prior to any
trading day during which any series A preferred stock is outstanding exceeds
150% of the conversion price then in effect, we have the right, as long as such
price exceeds 150% of the conversion price, to require the holder of the series
A preferred stock to convert all its series A preferred stock as may then be
convertible. We may also redeem in whole or any part of the series A preferred
stock then outstanding at a redemption price of $120 per share, plus accrued
and unpaid dividends thereon.
In the event of our liquidation, dissolution or winding up, holders of the
series A preferred stock are entitled to receive in cash out of our assets
available for distribution to our stockholders an amount equal to the stated
value of $100 per share outstanding, plus accrued and unpaid dividends. Such
payments will be made before any amount will be paid to the holders of the
common stock or holders of other classes or series of our capital stock or if
the assets are insufficient to pay the full amount due to the holders of series
A preferred stock such holders will receive a pro rata portion thereof.
In accordance with the terms of the series A preferred stock, we are
required to recognize an assumed incremental yield of $5,455,000 (calculated at
the date of issuance and based on the beneficial conversion feature noted
above). This amount is being amortized as a preferred stock dividend over a
four-year period beginning with the day of issuance. The assumed incremental
yield and related amortization for the period after the December 1999
conversion of the series A preferred stock has been adjusted to reflect a
decrease in the aggregate assumed incremental yield of $709,000 as a result of
the conversion of 100,000 shares of series A preferred stock prior to the
period in which the beneficial conversion feature is available. Accrued
dividends of approximately $4,894,000 were paid in December 1999 with respect
to the 100,000 shares of series A preferred stock that were converted and the
300,000 shares of series A preferred stock that remained outstanding at
December 31, 1999. Additionally, we recognized an incremental yield
attributable to the beneficial conversion feature of $2,650,000 for the period
from the date of issuance through December 31, 1999. The unamortized assumed
incremental yield amounted to $2,096,000 at December 31, 1999.
Milestone Shares
Under our license agreement with Merck KGaA for IMC-C225, we are entitled
to receive from Merck KGaA up to $60 million upon our achievement of various
milestones in the development of IMC-C225. In connection with making the final
$30 million of these milestone payments, Merck KGaA is entitled to receive
milestone shares from us, which, if issued, will be shares of our common stock
(or other capital stock convertible into our common stock). We describe the
milestone shares more fully under the heading "Business--Collaborations with
Merck KGaA-- IMC-C225 License and Development Agreement."
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Options and Warrants
Options
In February 1986, our board of directors adopted an incentive stock option
plan and a non-qualified stock option plan (the "86 Plans"). In February 1996,
we adopted an additional incentive stock option plan and non-qualified stock
option plan (the "96 Plans"). In May 1998, we adopted an additional
non-qualified stock option plan (the "98 Plan"). Combined the 86 Plans, the 96
Plans, as amended, and the 98 Plan, as amended, provide for the granting of
options to purchase up to 8,500,000 shares of common stock to our key
employees, directors, consultants and advisors. Incentive stock options may not
be granted at a price less than the fair market value of the stock at the date
of grant and may not be granted to non-employees. Options may not be granted
under the 98 Plan to officers or directors. Options under all the plans, unless
earlier terminated, expire ten years from the date of grant. Certain options
granted under these plans vest over one-to-five-year periods. At May 1, 2000,
options to purchase 4,954,809 shares of common stock were outstanding under the
86 Plans, the 96 Plans and the 98 Plan, and 1,212,798 shares were available for
grant under the 96 Plans and the 98 Plan. Options may no longer be granted
under the 86 Plans pursuant to the terms of the 86 Plans.
In September 1998 and January 1999, we granted to both our Vice President
of Marketing and Vice President of Product and Process Development options to
purchase 60,000 shares of common stock each. These options were not granted
under any of the above mentioned incentive stock option or non-qualified stock
option plans. The terms of these options are substantially similar to those
granted under the 98 Plan.
In May 1999, our stockholders approved the grant of an option to our
President and Chief Executive Officer and Executive Vice President and Chief
Operating Officer to purchase 1,000,000 and 650,000 shares, respectively, of
common stock at a per share exercise price equal to $18.25, the last reported
sale price of the common stock on the date shareholder approval was obtained.
The options will vest no later than seven years from the grant date and
specified amounts are subject to earlier vesting if specified common stock
price thresholds are met. In December 1999, the Compensation and Stock Option
Committee amended the options, subject to shareholder approval, to provide that
specified amounts are subject to immediate vesting if specified common stock
price thresholds are met. All common stock price thresholds have now been met
and if the amendment is approved by our shareholders, the options will become
fully vested and exercisable.
Warrants
As of May 1, 2000, a total of 1,133,520 shares of common stock were
issuable upon exercise of outstanding warrants. Such warrants have been issued
to our officers, directors, other employees, certain scientific advisory board
members, as well as certain investors and certain credit providers. The
warrants, all of which are currently exercisable, have exercise prices ranging
from $.0687 to $13.33 per share, with an average exercise price of
approximately $3.099. The warrants have standard anti-dilution provisions
including adjustments for stock splits, reverse stock splits and stock
dividends as well as adjustments for capital reorganizations.
Registration Rights
We have granted Merck KGaA certain registration rights regarding the
shares of common stock that it may acquire upon conversion of the series A
preferred shares and upon receipt of milestone shares. Specifically, Merck KGaA
has the right to require us to register upon its request once during any
12-month period, up to a total of four times, at our expense, the number of
shares of common stock into which the shares of series A preferred stock are
converted according to their terms and the number of milestone shares that are
issued. Merck KGaA may also exercise rights to have such registrable common
stock registered at any time that we file a registration statement for other
shares of our common stock. Merck KGaA may exercise these rights at any time
after conversion of its shares of series A preferred stock into shares of
common stock or receipt of milestone shares. As of May 1, 2000, Merck KGaA had
converted 100,000 shares of series A preferred stock into 800,000 shares of
common stock. Merck KGaA has not acquired any milestone shares.
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<PAGE>
Limitation of Liability
As permitted by the Delaware General Corporation Law, our certificate of
incorporation provides that our directors shall not be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
o for any breach of the director's duty of loyalty to ImClone or its
stockholders
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law
o under Section 174 of the Delaware General Corporation Law, relating
to prohibited dividends or distributions or the repurchase or
redemption of stock or
o for any transaction from which the director derives an improper
personal benefit
As a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his duty of care.
Although stockholders may continue to seek injunctive or other equitable relief
for an alleged breach of fiduciary duty by a director, stockholders may not
have any effective remedy against the challenged conduct if equitable remedies
are unavailable.
We have obtained directors and officers liability insurance against claims
made in the aggregate amount of $13 million per loss and per year. In addition,
our by-laws provide for indemnification of all officers and directors against
liabilities or expenses incurred in connection with any action, suit or
proceeding if the director or officer acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, our best interests, unless the
action, suit or proceeding involved liability by the director or officer to us
and no court determines that such director or officer is entitled to
indemnification. Our by-laws also provide that expenses incurred by a director
or officer in defending any such action may be advanced by us if the director
or officer agrees to repay such amount if it is subsequently determined that he
is not entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers or persons controlling ImClone pursuant to the foregoing provisions,
we have been informed that in the opinion of the SEC such indemnification is
against public policy and is therefore unenforceable.
Business Combination Provisions
The business combination provision contained in Section 203 of the
Delaware General Corporation Law ("Section 203") defines an interested
stockholder as any person that
o owns, directly or indirectly 15% or more of the outstanding voting
stock of a corporation or
o is an affiliate or associate of a corporation and was the owner of
15% or more of the outstanding voting stock at any time within the
three-year period immediately prior to the date on which it is sought
to be determined whether such person is an interested stockholder,
and the affiliates and the associates of such person
Under Section 203, a resident domestic corporation may not engage in any
business combination with any interested stockholder for a period of three
years following the date such stockholder became an interested stockholder,
unless
o prior to such date the board of directors of the corporation approved
either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder
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o upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding, for
determining the number of shares outstanding, (a) shares owned by
persons who are directors and officers and (b) employee stock plans,
in certain instances) or
o on or subsequent to such date the business combination is approved by
the board of directors and authorized at an annual or special meeting
of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested
stockholder
The restrictions imposed by Section 203 will not apply to a corporation if
o the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by Section 203 and
o the corporation by the action of its stockholders holding a majority
of outstanding stock adopts an amendment to its certificate of
incorporation or by-laws expressly electing not to be governed by
Section 203
Such amendment will not be effective until 12 months after adoption and
shall not apply to any business combination between such corporation and any
person that became an interested stockholder of such corporation on or prior to
such adoption.
We have not elected out of the statute and therefore the restrictions
imposed by Section 203 will apply to us.
39
<PAGE>
SELLING HOLDERS
The notes were originally issued by ImClone and sold by the initial
purchasers in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by such initial purchasers to be
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) or other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7)) under the Securities Act. Selling holders, which
term includes their transferees, pledges or donees or their successors, may
from time to time offer and sell pursuant to this prospectus any or all of the
notes and the underlying common stock.
Prior to any use of this prospectus in connection with an offering of the
notes and the underlying common stock, this prospectus will be supplemented to
set forth the name of the selling holder and the number of notes and underlying
common stock beneficially owned by such holder. The prospectus supplement will
also disclose whether any selling holder has held any position or office with,
been employed by or otherwise has had a material relationship with, the company
or any of its affiliates during the three years prior to the date of the
prospectus supplement.
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<PAGE>
PLAN OF DISTRIBUTION
The selling holders and their successors (which term includes their
transferees, pledgees or donees or their successors) may sell the notes and the
common stock into which the notes are convertible directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions from the selling holders or
the purchasers (which discounts, concessions or commissions as to any
particular underwriter, broker-dealer or agent may be in excess of those
customary in the types of transactions involved).
The notes and the common stock into which the notes are convertible may be
sold in one or more transactions at fixed prices, at prevailing market prices
at the time of sale, at prices related to such prevailing market prices, at
varying prices determined at the time of sale, or at negotiated prices. Such
sales may be effected in transactions (which may involve crosses or block
transactions) (1) on any national securities exchange or quotation service on
which the notes or the common stock may be listed or quoted at the time of
sale, (2) in the over-the-counter market, (3) in transactions otherwise than on
such exchanges or services or in the over-the-counter market, (4) through the
writing of options (whether such options are listed on an options exchange or
otherwise), or (5) through the settlement of short sales. In connection with
the sale of the notes and the common stock into which the notes are convertible
or otherwise, the selling holders may enter into hedging transactions with
broker-dealers or other financial institutions which may in turn engage in
short sales of the notes or the common stock into with the notes are
convertible and deliver these securities to close out such short positions, or
loan or pledge the notes or the common stock into which the notes are
convertible to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling holders from the sale of the notes
or common stock into which the notes are convertible offered by them hereby
will be the purchase price of such notes or common stock less discounts and
commissions, if any. Each of the selling holders reserves the right to accept
and, together with their agents from time to time, to reject, in whole or in
part, any proposed purchase of notes or common stock to be made directly or
through agents. We will not receive any of the proceeds from the sale of the
notes and the underlying common stock covered by this prospectus.
Our outstanding common stock is listed for trading on the Nasdaq National
Market. We do not intend to list the notes for trading on any national
securities exchange or on the Nasdaq National Market and can give no assurance
about the development of any trading market for the notes.
In order to comply with the securities laws of some states, if applicable,
the notes and common stock into which the notes are convertible may be sold in
such jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the notes and common stock into which the notes are
convertible may not be sold unless they have been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.
The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the notes and common stock into which the notes are
convertible may be "underwriters" within the meaning of Section 2(11) of the
Securities Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under
the Securities Act. Selling holders who are "underwriters" within the meaning
of Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act. The selling holders have
acknowledged that they understand their obligations to comply with the
provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M, and have agreed that they will not
engage in any transaction in violation of such provisions.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling holder
may not sell any notes or common stock described herein and may not transfer,
devise or gift such securities by other means not described in this prospectus.
41
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To the extent required, the specific notes or common stock to be sold, the
name of the selling holders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth
in an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement of which this prospectus is a part.
We entered into a registration rights agreement for the benefit of holders
of the notes to register their notes and common stock under applicable federal
and state securities laws under certain circumstances and at certain times. The
registration rights agreement provides for cross-indemnification of the selling
holders and ImClone and their respective directors, officer and controlling
persons against certain liabilities in connection with the offer and sale of
the notes and common stock, including liabilities under the Securities Act.
ImClone will pay substantially all of the expenses incurred by the selling
holders and ImClone incident to the offering and sale of the notes and the
common stock, provided that each selling holder will be responsible for payment
of commission, concessions and discounts of underwriters, broker-dealers or
agents.
LEGAL MATTERS
Certain legal matters relating to the notes and the underlying common
stock will be passed upon for ImClone by Davis Polk & Wardwell, New York, New
York.
EXPERTS
The statements in this prospectus in the second sentence of the eighth
paragraph under the caption "Risk Factors -- Our success depends upon our
ability to protect our intellectual property and our proprietary technology" on
matters of U.S. intellectual property law that refer to the opinion of Kenyon &
Kenyon, have been reviewed and approved by Kenyon & Kenyon, patent counsel for
ImClone, as experts in U.S. intellectual property law, and are included herein
in reliance upon such review and approval. The statements in this prospectus in
the third sentence of the eighth paragraph under the caption "Risk Factors --
Our success depends upon our ability to protect our intellectual property and
our proprietary technology" on matters of U.S. intellectual property law that
refer to the opinion of Hoffmann & Baron, LLP, have been reviewed and approved
by Hoffmann & Baron, LLP, special patent counsel for ImClone, as experts in
U.S. intellectual property law, and are included herein in reliance upon such
review and approval.
The consolidated financial statements of ImClone Systems Incorporated and
subsidiary as of December 31, 1999 and 1998, and for each of the years in the
three-year period ended December 31, 1999, have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
43
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
materials that we have filed with the SEC at the following SEC public reference
rooms:
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms.
Our common stock is quoted on the Nasdaq National Market under the symbol
"IMCL," and our SEC filings can also be read at the following Nasdaq address:
Nasdaq Operations
1735 K Street, N.W.
Washington, D.C. 20006
Our SEC filings are also available to the public on the SEC's Internet
website at http://www.sec.gov.
We incorporate by reference into this prospectus the documents listed
below and any future filings we make with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended, including any
filings after the date of this prospectus, until either of the following has
occurred: (1) all the notes have been sold, or (2) the holding period
applicable to the notes and the underlying common stock under Rule 144(k) under
the Securities Act, or any successor provision, has expired. The information
incorporated by reference is an important part of this prospectus. Any
statement in a document incorporated by reference into this prospectus will be
deemed to be modified or superseded to the extent a statement contained in (x)
this prospectus or (y) any other subsequently filed document that is
incorporated by reference into this prospectus modifies or supersedes such
statement.
o Our Annual Report on Form 10-K for our fiscal year ended December 31,
1999
o Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000
o Our definitive proxy statement filed with the SEC, for the Company's
Annual Meeting of Stockholders, on April 25, 2000
o Our Current Report on Form 8-K filed with the SEC on February 24,
2000.
You may request a copy of these filings, at no cost, by writing to us at
the following address or telephoning us at (212) 645-1405 between the hours of
9:00 a.m. and 4:00 p.m., Eastern Standard time:
ImClone Systems Incorporated
Attention: Investor Relations
180 Varick Street
New York, New York 10014
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. The selling
holders are not making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of the document.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of the securities being registered
hereby. All amounts are estimates except the registration fee.
Amount to be
Paid
-------------
Registration fee................................................ $ 63,360
Transfer agent and registrar fees............................... 5,000
Legal fees and expenses......................................... 48,000
Accounting fees and expenses.................................... 15,000
Miscellaneous................................................... 28,640
---------
TOTAL........................................................ $ 160,000
=========
Item 15. Indemnification of Directors and Officers
Our Certificate of Incorporation and Bylaws set forth the extent to which
our officers and directors may be indemnified by us against any liabilities
which they may incur. The general effect of our such provisions is that, on the
terms and conditions set forth in our Certificate of Incorporation and Bylaws,
any person made a party or threatened to be made a party to an action, suit or
proceeding by reason of the fact that he or she is or was a director or
officer, or is or was serving as a director, officer, employee or agent of
another corporation or other enterprise at our request, shall be indemnified by
us against expenses (including attorneys' fees, judgments, fines and amounts
paid in settlement) reasonably incurred or suffered by him or her in connection
with such action, suit or proceeding, to the full extent permitted under the
laws of the State of Delaware; provided, however, that, subject to certain
limited exceptions, we shall indemnify any such person seeking indemnification
in connection with a proceeding initiated by such person only if such
proceeding was authorized by our Board of Directors. Our Certificate of
Incorporation gives our Board of Directors the authority to extend such
indemnification to our employees and other agents as well.
The general effect of the indemnification provisions contained in Section
145 of the General Corporation Law of the State of Delaware (the "DGCL") is as
follows: A director or officer who, by reason of such directorship or
officership, is involved in any action, suit or proceeding (other than an
action by or in the right of the corporation) may be indemnified by the
corporation against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe that his or her conduct was
unlawful. A director or officer who, by reason of such directorship or
officership, is involved in any action or suit by or in the right of the
corporation may be indemnified by the corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification may be made in respect of any claim, issue or matter as to
which he or she shall have been adjudged to be liable to the corporation unless
and only to the extent that a court of appropriate jurisdiction shall approve
such indemnification.
Our Certificate of Incorporation provides that, to the maximum extent
permitted under the DGCL, a director of ImClone shall not be personally liable
to us or to any stockholders for monetary damages for breach of fiduciary duty
as director or ImClone. Section 102(b)(7) of the DGCL permits a corporation to
include in its certificate of incorporation a provision that eliminates or
limits the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, that such provision shall not eliminate or limit
II-1
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the liability of a director (1) for any breach of the Director's duty of
loyalty to the corporation or its stockholders, (2) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (3) under Section 174 of the DGCL or (4) for any transaction from which
the director derived in improper personal benefit.
Item 16. Exhibits and Financial Statement Schedules
(a) The following exhibits are filed as part of this Registration
Statement:
Exhibit No. Document
- ----------- --------
4.1 Indenture, dated as of February 29, 2000, between the Registrant
and The Bank of New York, as trustee, including the form of
5 1/2% Convertible Subordinated Note due 2005 attached as Exhibit
A thereto+
4.2 Registration Rights Agreement between the Registrant and Merrill
Lynch & Co., as the purchaser, dated as of January 19, 2000
5.1 Opinion of Davis Polk & Wardwell
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of KPMG LLP, Independent Certified Public Accountants
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
23.3 Consent of Kenyon & Kenyon
23.4 Consent of Hoffman & Baron, LLP
24.1 Power of Attorney (included on the signature page of the Registration
Statement)
25.1 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the indenture
- ---------
+ Incorporated by reference to the registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act,
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registrant statement,
II-2
<PAGE>
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that clauses (a) and (b) do not apply if the information
required to be included in a post-effective amendment by such clauses is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to
Section 13(a) of Section 15(d) of the Exchange Act that is
incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as the indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions referenced in Item 15 of
this Registration Statement, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 24th day of May, 2000.
IMCLONE SYSTEMS INCORPORATED
By: /s/ Samuel D. Waksal
-----------------------------------
Name: Samuel D. Waksal
Title: President, Chief Executive
Officer and Director
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<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Samuel D. Waksal, President, Chief
Executive Officer and Director and John B. Landes, Vice President, Legal and
General Counsel, and each or any one of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capabilities, to sign
any and all amendments (including post-effective amendments) to this
registration statement and any and all additional registration statements
pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file
the same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in- fact
and agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert F. Goldhammer Chairman of the Board and May 24, 2000
- -------------------------- Director
Robert F. Goldhammer
/s/ Samuel D. Waksal President, Chief Executive May 24, 2000
- -------------------------- Officer and Director
Samuel D. Waksal
/s/ Harlan W. Waksal Executive Vice President, May 24, 2000
- -------------------------- Chief Operating Office and
Harlan W. Waksal Director
/s/ Carl Goldfischer Vice President and Chief May 24, 2000
- -------------------------- Financial Officer
Carl Goldfischer
/s/ Vincent T. DeVita, Jr. Director May 24, 2000
- --------------------------
Vincent T. DeVita, Jr.
/s/ Paul B. Kopperl Director May 24, 2000
- --------------------------
Paul B. Kopperl
/s/ William R. Miller Director May 24, 2000
- --------------------------
William R. Miller
/s/ David M. Kies Director May 24, 2000
- --------------------------
David M. Kies
/s/ John Mendelsohn Director May 24, 2000
- --------------------------
John Mendelsohn
/s/ Richard Barth Director May 24, 2000
- --------------------------
Richard Barth
/s/ Arnold J. Levine Director May 24, 2000
- --------------------------
Arnold J. Levine
II-5
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EXHIBIT INDEX
Exhibit No. Document
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4.1 Indenture, dated as of February 29, 2000, between the Registrant
and The Bank of New York, as trustee, including the form of
5 1/2% Convertible Subordinated Note due 2005 attached as Exhibit
A thereto+
4.2 Registration Rights Agreement between the Registrant and Merrill
Lynch & Co., as the purchaser, dated as of January 19, 2000
5.1 Opinion of Davis Polk & Wardwell
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of KPMG LLP, Independent Certified Public Accountants
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
23.3 Consent of Kenyon & Kenyon
23.4 Consent of Hoffman & Baron, LLP
24.1 Power of Attorney (included on the signature page of the Registration
Statement)
25.1 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the indenture
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+ Incorporated by reference to the registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.
Exhibit 4.2
Execution copy
REGISTRATION RIGHTS AGREEMENT
by and among
IMCLONE SYSTEMS INCORPORATED
as Issuer,
and
MORGAN STANLEY & CO. INCORPORATED
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
as Initial Purchasers
Dated as of February 29, 2000
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THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of February
29, 2000, by and among ImClone Systems Incorporated, a Delaware corporation
(the "Company"), and Morgan Stanley & Co. Incorporated and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (together, the "Initial Purchasers")
pursuant to the Purchase Agreement, dated February 23, 2000 (the "Purchase
Agreement") among the Company and the Initial Purchasers. In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement. The
execution of this Agreement is a condition to the closing under the Purchase
Agreement.
The Company agrees with the Initial Purchasers, (i) for their benefit as
Initial Purchasers and (ii) for the benefit of the beneficial owners (including
the Initial Purchasers) from time to time of the Notes (as defined herein) and
the beneficial owners from time to time of the Underlying Common Stock (as
defined herein) issued upon conversion of the Notes (each of the foregoing a
"Holder" and together the "Holders"), as follows:
SECTION 1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
"Affiliate" means with respect to any specified person, an "affiliate," as
defined in Rule 144, of such person.
"Amendment Effectiveness Deadline Date" has the meaning set forth in
Section 2(d) hereof.
"Applicable Conversion Price" as of any date of determination means the
Conversion Price in effect as of such date of determination or, if no Notes are
then outstanding, the Conversion Price that would be in effect were Notes then
outstanding.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
"Common Stock" means the shares of common stock, par value $.001 per
share, of the Company and any other shares of common stock as may constitute
"Common Stock" for purposes of the Indenture, including the Underlying Common
Stock.
"Conversion Price" has the meaning assigned such term in the Indenture.
"Damages Accrual Period" has the meaning set forth in Section 2(e) hereof.
"Damages Payment Date" means each interest payment date under the
Indenture in the case of Notes, and each March 1 and September 1 in the case of
the Underlying Common Stock.
"Deferral Notice" has the meaning set forth in Section 3(i) hereof.
"Deferral Period" has the meaning set forth in Section 3(i) hereof.
"Effectiveness Deadline Date" has the meaning set forth in Section 2(a)
hereof.
"Effectiveness Period" means the period commencing on the date hereof and
ending on the date that all Registrable Securities have ceased to be
Registrable Securities.
"Event" has the meaning set forth in Section 2(e) hereof.
"Event Date" has the meaning set forth in Section 2(e) hereof.
"Event Termination Date" has the meaning set forth in Section 2(e) hereof.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Filing Deadline Date" has the meaning set forth in Section 2(a) hereof.
"Holder" has the meaning set forth in the second paragraph of this
Agreement.
"Indenture" means the Indenture, dated as of February 29, 2000, between
the Company and The Bank of New York, as trustee, pursuant to which the Notes
are being issued.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
"Initial Shelf Registration Statement" has the meaning set forth in
Section 2(a) hereof.
"Issue Date" means the first date of original issuance of the Notes.
"Liquidated Damages Amount" has the meaning set forth in Section 2(e)
hereof.
"Losses" has the meaning set forth in Section 6 hereof.
"Material Event" has the meaning set forth in Section 3(i) hereof.
"Notes" means the 5 1/2% Convertible Subordinated Notes due 2005 of the
Company to be purchased pursuant to the Purchase Agreement.
"Notice and Questionnaire" means a written notice delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex B to the Offering
Memorandum of the Company issued February 23, 2000 relating to the Notes.
"Notice Holder" means, on any date, any Holder that has delivered a Notice
and Questionnaire to the Company on or prior to such date.
"Purchase Agreement" has the meaning set forth in the preamble hereof.
"Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all materials incorporated by reference or
explicitly deemed to be incorporated by reference in such Prospectus.
"Record Holder" means (i) with respect to any Damages Payment Date
relating to any Notes as to which any such Liquidated Damages Amount has
accrued, the holder of record of such Note on the record date with respect to
the interest payment date under the Indenture on which such Damages Payment
Date shall occur and (ii) with respect to any Damages Payment Date relating to
the Underlying Common Stock as to which any such Liquidated Damages Amount has
accrued, the registered holder of such Underlying Common Stock fifteen (15)
days prior to such Damages Payment Date.
"Registrable Securities" means the Notes until such Notes have been
converted into or exchanged for the Underlying Common Stock and, at all times
subsequent to any such conversion or exchange the Underlying Common Stock and
any securities into or for which such Underlying Common Stock has been
converted or exchanged, and any security issued with respect thereto upon any
stock dividend, split or similar event until, in the case of any such security,
(A) the earliest of (i) its effective registration under the Securities Act and
resale in accordance with the Registration Statement covering it, (ii)
expiration of the holding period that would be applicable
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thereto under Rule 144(k) or (iii) its sale to the public pursuant to Rule 144
(or any similar provision then in force, but not Rule 144A) under the
Securities Act, and (B) as a result of the event or circumstance described in
any of the foregoing clauses (i) through (iii), the legend with respect to
transfer restrictions required under the Indenture are removed or removable in
accordance with the terms of the Indenture or such legend, as the case may be.
"Registration Expenses" has the meaning set forth in Section 5 hereof.
"Registration Statement" means any registration statement of the Company
that covers any of the Registrable Securities pursuant to the provisions of
this Agreement including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all materials incorporated by reference or explicitly deemed to be incorporated
by reference in such registration statement.
"Restricted Securities" means "Restricted Securities" as defined in Rule
144.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Shelf Registration Statement" has the meaning set forth in Section 2(a)
hereof.
"Special Counsel" means Ropes & Gray or such other successor counsel as
shall be specified by the Holders of a majority of the Registrable Securities,
but which may, with the written consent of the Initial Purchasers (which shall
not be unreasonably withheld), be another nationally recognized law firm
experienced in securities law matters designated by the Company, the reasonable
fees and expenses of which will be paid by the Company pursuant to Section 5
hereof.
"Subsequent Shelf Registration Statement" has the meaning set forth in
Section 2(b) hereof.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trustee" means The Bank of New York, the Trustee under the Indenture.
"Underlying Common Stock" means the Common Stock into which the Notes are
convertible or issued upon any such conversion.
SECTION 2. Shelf Registration. (a) The Company shall use its reasonable
efforts to prepare and file or cause to be prepared and filed with the SEC, as
soon as practicable but in any event by the date (the "Filing Deadline Date")
ninety (90) days after the Issue Date, a Registration Statement for an offering
to be made on a delayed or continuous basis pursuant to Rule 415 of the
Securities Act (a "Shelf Registration Statement") registering the resale from
time to time by Holders thereof of all of the Registrable Securities (the
"Initial Shelf Registration Statement"). The Initial Shelf Registration
Statement shall be on Form S-3 or another appropriate form permitting
registration of such Registrable Securities for resale by such Holders in
accordance with the methods of distribution elected by the Holders and set
forth in the Initial Shelf Registration Statement. The Company shall use its
reasonable efforts to cause the Initial Shelf Registration Statement to be
declared effective under the Securities Act as promptly as is practicable but
in any event by the date (the "Effectiveness Deadline Date") that is one
hundred eighty (180) days after the Issue Date, and to keep the Initial Shelf
Registration Statement (or any Subsequent Shelf Registration Statement, as
defined below) continuously effective under the Securities Act until the
expiration of the Effectiveness
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Period. At the time the Initial Shelf Registration Statement is declared
effective, each Holder that became a Notice Holder on or prior to the date ten
(10) Business Days prior to such time of effectiveness shall be named as a
selling securityholder in the Initial Shelf Registration Statement and the
related Prospectus in such a manner as to permit such Holder to deliver such
Prospectus to purchasers of Registrable Securities in accordance with
applicable law. Except for the piggyback registration rights granted to Merck
KGaA under its Development and License Agreement dated December 14, 1998 with
the Company for which the Company will use its reasonable efforts to obtain a
waiver or offer Merck KGaA a separate shelf registration, none of the Company's
security holders (other than the Holders of Registrable Securities) shall have
the right to include the Company's securities in the Shelf Registration
Statement.
(b) If the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement ceases to be effective for any reason at any time
during the Effectiveness Period (other than because all Registrable Securities
registered thereunder shall have been resold pursuant thereto or shall have
otherwise ceased to be Registrable Securities), the Company shall use its
reasonable efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within thirty (30) days of such
cessation of effectiveness amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a "Subsequent Shelf Registration Statement"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use its
reasonable efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is practicable after such filing and to keep
such Registration Statement (or subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration
Statement, if required by the Securities Act or as reasonably requested by the
Initial Purchasers or by the Trustee on behalf of the Holders of the
Registrable Securities covered by such Shelf Registration Statement.
(d) Each Holder of Registrable Securities agrees that if such Holder
wishes to sell Registrable Securities pursuant to a Shelf Registration
Statement and related Prospectus, it will do so only in accordance with this
Section 2(d) and Section 3(i). Each Holder of Registrable Securities wishing to
sell Registrable Securities pursuant to a Shelf Registration Statement and
related Prospectus agrees to deliver a Notice and Questionnaire to the Company
at least three (3) Business Days prior to any intended distribution of
Registrable Securities under the Shelf Registration Statement. From and after
the date the Initial Shelf Registration Statement is declared effective, the
Company shall, as promptly as practicable after the date a Notice and
Questionnaire is delivered, and in any event upon the later of (x) five (5)
Business Days after such date or (y) five (5) Business Days after the
expiration of any Deferral Period in effect when the Notice and Questionnaire
is delivered, (i) if required by applicable law, file with the SEC a
post-effective amendment to the Shelf Registration Statement or prepare and, if
required by applicable law, file a supplement to the related Prospectus or a
supplement or amendment to any document incorporated therein by reference or
file any other required document so that the Holder delivering such Notice and
Questionnaire is named as a selling securityholder in the Shelf Registration
Statement and the related Prospectus in such a manner as to permit such Holder
to deliver such Prospectus to purchasers of the Registrable Securities in
accordance with applicable law and, if the Company shall file a post-effective
amendment to the Shelf Registration Statement, use its reasonable efforts to
cause such post-effective amendment to be declared effective under the
Securities Act as promptly as is practicable, but in any event by the date (the
"Amendment Effectiveness Deadline Date") that is forty-five (45) days after the
date such post-effective amendment is required by this clause to be filed; (ii)
provide such Holder copies of any documents filed pursuant to Section 2(d)(i);
and (iii) notify such Holder as promptly as practicable after the effectiveness
under the Securities Act of any post-effective amendment filed pursuant to
Section 2(d)(i); provided, that if such Notice and Questionnaire is delivered
during a Deferral Period, the Company shall so inform the Holder delivering
such Notice and Questionnaire and shall take the actions set forth in clauses
(i), (ii) and (iii) above upon expiration of the Deferral Period in accordance
with Section 3(i). Notwithstanding anything contained herein to the contrary,
(i) the Company shall be under no obligation to name any Holder that is not a
Notice Holder as a selling securityholder in any Registration Statement or
related Prospectus and (ii) the Amendment Effectiveness Deadline Date shall be
extended by up to ten (10) Business Days from the expiration of a
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Deferral Period (and the Company shall incur no obligation to pay Liquidated
Damages during such extension) if such Deferral Period shall be in effect on
the Amendment Effectiveness Deadline Date.
(e) The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if (i) the Initial Shelf
Registration Statement has not been filed on or prior to the Filing Deadline
Date, (ii) the Initial Shelf Registration Statement has not been declared
effective under the Securities Act on or prior to the Effectiveness Deadline
Date, (iii) the Company has failed to perform its obligations set forth in
Section 2(d) within the time period required therein, (iv) the aggregate
duration of Deferral Periods in any period exceeds the number of days permitted
in respect of such period pursuant to Section 3(i) hereof or (v) the number of
Deferral Periods in any period exceeds the number permitted in respect of such
period pursuant to Section 3(i) hereof (each of the events of a type described
in any of the foregoing clauses (i) through (v) are individually referred to
herein as an "Event," and the Filing Deadline Date in the case of clause (i),
the Effectiveness Deadline Date in the case of clause (ii), the date by which
the Company is required to perform its obligations set forth in Section 2(d) in
the case of clause (iii) (including the filing of any post-effective amendment
prior to the Amendment Effectiveness Deadline Date), the date on which the
aggregate duration of Deferral Periods in any period exceeds the number of days
permitted by Section 3(i) hereof in the case of clause (iv), and the date of
the commencement of a Deferral Period that causes the limit on the number of
Deferral Periods in any period under Section 3(i) hereof to be exceeded in the
case of clause (v), being referred to herein as an "Event Date"). Events shall
be deemed to continue until the "Event Termination Date," which shall be the
following dates with respect to the respective types of Events: the date the
Initial Shelf Registration Statement is filed in the case of an Event of the
type described in clause (i), the date the Initial Shelf Registration Statement
is declared effective under the Securities Act in the case of an Event of the
type described in clause (ii), the date the Company performs its obligations
set forth in Section 2(d) in the case of an Event of the type described in
clause (iii) (including, without limitation, the date the relevant
post-effective amendment to the Shelf Registration Statement is declared
effective under the Securities Act), termination of the Deferral Period that
caused the limit on the aggregate duration of Deferral Periods in a period set
forth in Section 3(i) to be exceeded in the case of the commencement of an
Event of the type described in clause (iv), and termination of the Deferral
Period the commencement of which caused the number of Deferral Periods in a
period permitted by Section 3(i) to be exceeded in the case of an Event of the
type described in clause (v).
Accordingly, commencing on (and including) any Event Date and ending on
(but excluding) the next date on which there are no Events that have occurred
and are continuing (a "Damages Accrual Period"), the Company agrees to pay, as
liquidated damages and not as a penalty, an amount (the "Liquidated Damages
Amount"), payable on the Damages Payment Dates to Record Holders of Notes that
are Registrable Securities and of shares of Underlying Common Stock issued upon
conversion of Notes that are Registrable Securities, as the case may be,
accruing, for each portion of such Damages Accrual Period beginning on and
including a Damages Payment Date (or, in respect of the first time that the
Liquidated Damages Amount is to be paid to Holders on a Damages Payment Date as
a result of the occurrence of any particular Event, from the Event Date) and
ending on but excluding the first to occur of (A) the date of the end of the
Damages Accrual Period or (B) the next Damages Payment Date, at a rate per
annum equal to one-half of one percent (0.5 %) of the aggregate principal
amount of such Notes or, in the case of Notes that have been converted into or
exchanged for Underlying Common Stock, the Applicable Conversion Price of such
shares of Underlying Common Stock, as the case may be, in each case determined
as of the Business Day immediately preceding the next Damages Payment Date;
provided, that in the case of a Damages Accrual Period that is in effect solely
as a result of an Event of the type described in clause (iii) of the
immediately preceding paragraph, such Liquidated Damages Amount shall be paid
only to the Holders that have delivered Notice and Questionnaires that caused
the Company to incur the obligations set forth in Section 2(d) the
non-performance of which is the basis of such Event, provided further, that any
Liquidated Damages Amount accrued with respect to any Note or portion thereof
called for redemption on a redemption date or converted into Underlying Common
Stock on a conversion date prior to the Damages Payment Date, shall, in any
such event, be paid instead to the Holder who submitted such Note or portion
thereof for redemption or conversion on the applicable redemption date or
conversion date, as the case may be, on such date (or promptly following the
conversion date, in the case of conversion). Notwithstanding the foregoing, no
Liquidated Damages Amounts shall accrue as to any Registrable Security from and
after the earlier of (x) the date such security is no longer a Registrable
Security and (y) expiration of the Effectiveness Period. The rate of accrual of
the Liquidated Damages Amount with respect to any period shall
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not exceed the rate provided for in this paragraph notwithstanding the
occurrence of multiple concurrent Events. Following the cure of all Events
requiring the payment by the Company of Liquidated Damages Amounts to the
Holders of Registrable Securities pursuant to this Section, the accrual of
Liquidated Damages Amounts will cease (without in any way limiting the effect
of any subsequent Event requiring the payment of Liquidated Damages Amount by
the Company).
The Trustee shall be entitled, on behalf of Holders of Notes or Underlying
Common Stock, to seek any available remedy for the enforcement of this
Agreement, including for the payment of any Liquidated Damages Amount.
Notwithstanding the foregoing, the parties agree that the sole damages payable
for a violation of the terms of this Agreement with respect to which liquidated
damages are expressly provided shall be such liquidated damages. Nothing shall
preclude a Notice Holder or Holder of Registrable Securities from pursuing or
obtaining specific performance or other equitable relief with respect to this
Agreement.
All of the Company's obligations set forth in this Section 2(e) that are
outstanding with respect to any Registrable Security at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).
The parties hereto agree that the liquidated damages provided for in this
Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof.
SECTION 3. Registration Procedures. In connection with the registration
obligations of the Company under Section 2 hereof, the Company shall:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Holders thereof in
accordance with the intended method or methods of distribution thereof, and use
its reasonable efforts to cause each such Registration Statement to become
effective and remain effective as provided herein; provided, that before filing
any Registration Statement or Prospectus or any amendments or supplements
thereto with the SEC, furnish to the Initial Purchasers and the Special Counsel
copies of all such documents proposed to be filed and use its reasonable
efforts to reflect in each such document when so filed with the SEC such
comments as the Special Counsel reasonably shall propose within five (5)
Business Days of the delivery of such copies to the Initial Purchasers and the
Special Counsel.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 2(a); cause the related Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) under the Securities Act;
and use its reasonable efforts to comply with the provisions of the Securities
Act applicable to it with respect to the disposition of all securities covered
by such Registration Statement during the Effectiveness Period in accordance
with the intended methods of disposition by the sellers thereof set forth in
such Registration Statement as so amended or such Prospectus as so
supplemented.
(c) As promptly as practicable give notice to the Notice Holders, the
Initial Purchasers and the Special Counsel (i) when any Prospectus, Prospectus
supplement, Registration Statement or post-effective amendment to a
Registration Statement has been filed with the SEC and, with respect to a
Registration Statement or any post-effective amendment, when the same has been
declared effective, (ii) of any request, following the effectiveness of the
Initial Shelf Registration Statement under the Securities Act, by the SEC or
any other federal or state governmental authority for amendments or supplements
to any Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any
Registration Statement or the initiation or threatening of any proceedings for
that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of
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the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (v) of the occurrence of (but not the nature of or
details concerning) a Material Event and (vi) of the determination by the
Company that a post-effective amendment to a Registration Statement will be
filed with the SEC, which notice may, at the discretion of the Company (or as
required pursuant to Section 3 (i)), state that it constitutes a Deferral
Notice, in which event the provisions of Section 3(i) shall apply.
(d) Use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction in which they have been
qualified for sale, in either case at the earliest possible moment, and provide
prompt notice to each Notice Holder and the Initial Purchasers of the
withdrawal of any such order.
(e) If reasonably requested by the Initial Purchasers or any Notice
Holder, as promptly as practicable incorporate in a Prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Initial Purchasers, the Special Counsel or such Notice Holder shall, on the
basis of a written opinion of nationally-recognized counsel experienced in such
matters, determine to be required to be included therein by applicable law and
make any required filings of such Prospectus supplement or such post-effective
amendment.
(f) As promptly as practicable furnish to each Notice Holder, the
Special Counsel and the Initial Purchasers, without charge, at least one (1)
conformed copy of the Registration Statement and any amendment thereto,
including financial statements but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits
(unless requested in writing to the Company by such Notice Holder, Special
Counsel, counsel or Initial Purchasers).
(g) During the Effectiveness Period, deliver to each Notice Holder,
the Special Counsel and the Initial Purchasers, in connection with any sale of
Registrable Securities pursuant to a Registration Statement, without charge, as
many copies of the Prospectus or Prospectuses relating to such Registrable
Securities (including each preliminary prospectus) and any amendment or
supplement thereto as such Notice Holder may reasonably request; and the
Company hereby consents (except during such periods that a Deferral Notice is
outstanding and has not been revoked) to the use of such Prospectus or each
amendment or supplement thereto by each Notice Holder, in connection with any
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto in the manner set forth therein.
(h) Prior to any public offering of the Registrable Securities
pursuant to the Shelf Registration Statement, register or qualify or cooperate
with the Notice Holders in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Notice Holder reasonably requests
in writing (which request may be included in the Notice and Questionnaire);
prior to any public offering of the Registrable Securities pursuant to the
Shelf Registration Statement, keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period in connection
with such Notice Holder's offer and sale of Registrable Securities pursuant to
such registration or qualification (or exemption therefrom) and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of such Registrable Securities in the manner
set forth in the relevant Registration Statement and the related Prospectus;
provided, that the Company will not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Agreement or (ii) take any action
that would subject it to general service of process in suits or to taxation in
any such jurisdiction where it is not then so subject.
(i) Upon (A) the issuance by the SEC of a stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Securities Act, (B) the occurrence of any event or the existence
of any fact (a "Material Event") as a result of which any Registration
Statement shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, or any
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Prospectus shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (C) the occurrence or existence of any pending
corporate development that, in the reasonable discretion of the Company, makes
it appropriate to suspend the availability of the Shelf Registration Statement
and the related Prospectus, (i) in the case of clause (B) above, subject to the
next sentence, as promptly as practicable prepare and file, if necessary
pursuant to applicable law, a post-effective amendment to such Registration
Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document that
would be incorporated by reference into such Registration Statement and
Prospectus so that such Registration Statement does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading
(except for any such untrue statement or omission made in reliance on and in
conformity with information relating to any Notice Holder furnished to the
Company in writing by such Notice Holder expressly for use therein), and such
Prospectus does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except for any such untrue statement or omission made in
reliance on and in conformity with information relating to any Notice Holder
furnished to the Company in writing by such Notice Holder expressly for use
therein), as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, and, in the case of a post-effective
amendment to a Registration Statement, subject to the next sentence, use its
reasonable efforts to cause it to be declared effective as promptly as is
practicable, and (ii) give notice to the Notice Holders and the Special Counsel
that the availability of the Shelf Registration Statement is suspended (a
"Deferral Notice") and, upon receipt of any Deferral Notice, each Notice Holder
agrees not to sell any Registrable Securities pursuant to the Registration
Statement until such Notice Holder's receipt of copies of the supplemented or
amended Prospectus provided for in clause (i) above, or until it is advised in
writing by the Company that the Prospectus may be used, and has received copies
of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in such Prospectus. The Company will use all
reasonable efforts to ensure that the use of the Prospectus may be resumed (x)
in the case of clause (A) above, as promptly as is practicable, (y) in the case
of clause (B) above, as soon as, in the sole judgment of the Company, public
disclosure of such Material Event would not be prejudicial to or contrary to
the interests of the Company or, if necessary to avoid unreasonable burden or
expense, as soon as practicable thereafter and (z) in the case of clause (C)
above, as soon as, in the discretion of the Company, such suspension is no
longer appropriate. The Company shall be entitled to exercise its right under
this Section 3(i) to suspend the availability of the Shelf Registration
Statement or any Prospectus, without incurring or accruing any obligation to
pay liquidated damages pursuant to Section 2(e), no more than one (1) time in
any three month period or three (3) times in any twelve month period, and any
such period during which the availability of the Registration Statement and any
Prospectus is suspended (the "Deferral Period") shall, without incurring any
obligation to pay liquidated damages pursuant to Section 2(e), not exceed 30
days; provided, that in the case of a Material Event relating to an acquisition
or a probable acquisition or financing, recapitalization, business combination
or other similar transaction, the Company may, without incurring any obligation
to pay liquidated damages pursuant to Section 2(e), deliver to Notice Holders a
second notice to the effect set forth above, which shall have the effect of
extending the Deferral Period by up to an additional 30 days, or such shorter
period of time as is specified in such second notice, provided, that the
aggregate duration of any Deferral Periods shall not, without incurring any
obligation to pay liquidated damages pursuant to Section 2(e), exceed 30 days
in any three month period (or 60 days in any three month period in the event of
a Material Event pursuant to which the Company has delivered a second notice as
required above) or 90 days in any twelve (12) month period.
(j) If requested in writing in connection with a disposition of
Registrable Securities pursuant to a Registration Statement, make reasonably
available for inspection during normal business hours by a representative for
the Notice Holders of such Registrable Securities, and any managing
underwriter, broker-dealers, attorneys and accountants retained by such Notice
Holders, all relevant financial and other records and pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
appropriate officers, directors and employees of the Company and its
subsidiaries to make reasonably available for inspection during normal business
hours on reasonable notice all relevant information reasonably requested by
such representative for the Notice Holders, or any such managing underwriter,
broker-dealers, attorneys or accountants in connection with such disposition,
in each case as is customary for similar "due diligence" examinations;
provided, however, that such persons shall first agree in writing with the
Company that any information that is reasonably and in good faith
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designated by the Company in writing as confidential at the time of delivery of
such information shall be kept confidential by such persons and shall be used
solely for the purposes of exercising rights under this Agreement, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities, (ii) disclosure
of such information is required by law (including any disclosure requirements
pursuant to federal securities laws in connection with the filing of any
Registration Statement or the use of any Prospectus referred to in this
Agreement), (iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by any such
person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement, and provided, that the foregoing inspection and information
gathering shall, to the greatest extent possible, be coordinated on behalf of
all the Notice Holders and the other parties entitled thereto by the counsel
referred to in Section 5 and provided further, that the Company shall not be
required to disclose any information subject to the attorney-client or attorney
work product privilege if and to the extent such disclosure would constitute a
waiver of such privilege.
(k) Use all reasonable efforts to comply with all applicable rules and
regulations of the SEC and make generally available to its securityholders
earning statements (which need not be audited) satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later than 45 days after the end
of any 3-month period (or 90 days after the end of any 12-month period if such
period is a fiscal year) commencing on the first day of the first fiscal
quarter of the Company commencing after the effective date of a Registration
Statement, which statements shall cover said periods.
(l) Cooperate with each Notice Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
sold or to be sold pursuant to a Registration Statement, which certificates
shall not bear any restrictive legends, and cause such Registrable Securities
to be in such denominations as are permitted by the Indenture and registered in
such names as such Notice Holder may request in writing at least two (2)
Business Days prior to any sale of such Registrable Securities.
(m) Provide a CUSIP number for all Registrable Securities covered by
each Registration Statement not later than the effective date of such
Registration Statement and provide the Trustee and the transfer agent for the
Common Stock with printed certificates for the Registrable Securities that are
in a form eligible for deposit with The Depository Trust Company.
(n) Cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc.
(o) Upon (i) the filing of the Initial Registration Statement and (ii)
the effectiveness of the Initial Registration Statement, announce the same, in
each case by release to Reuters Economic Services and Bloomberg Business News.
SECTION 4. Holder's Obligations. Each Holder agrees, by acquisition of the
Registrable Securities, that no Holder of Registrable Securities shall be
entitled to sell any of such Registrable Securities pursuant to a Registration
Statement or to receive a Prospectus relating thereto, unless such Holder has
furnished the Company with a Notice and Questionnaire as required pursuant to
Section 2(d) hereof (including the information required to be included in such
Notice and Questionnaire) and the information set forth in the next sentence.
Each Notice Holder agrees promptly to furnish to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Notice Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Registrable
Securities as the Company may from time to time reasonably request. Any sale of
any Registrable Securities by any Holder shall constitute a representation and
warranty by such Holder that the information relating to such Holder and its
plan of distribution is as set forth in the Prospectus delivered by such Holder
in connection with such disposition, that such Prospectus does not as of the
time of such sale contain any untrue statement of a material fact relating to
or provided by such Holder or its plan of distribution and that such Prospectus
does not as of the time of such sale omit to state any material fact relating
to or provided by such Holder or its plan of distribution necessary to make the
statements in such Prospectus, in the light of the circumstances under which
they were made, not misleading.
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SECTION 5. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance by the Company of its
obligations under Sections 2 and 3 of this Agreement whether or not any of the
Registration Statements are declared effective. Such fees and expenses shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (x) with respect to filings required to
be made with the National Association of Securities Dealers, Inc. and (y) of
compliance with federal and state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of the Special Counsel in
connection with Blue Sky qualifications of the Registrable Securities under the
laws of such jurisdictions as the Notice Holders of a majority of the
Registrable Securities being sold pursuant to a Registration Statement may
designate), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with The Depository Trust Company, (iii) duplication expenses relating to
copies of any Registration Statement or Prospectus delivered to any Holders
hereunder, (iv) fees and disbursements of counsel for the Company and the
Special Counsel in connection with the Shelf Registration Statement (provided
that the Company shall not be liable for the fees and expenses of more than one
separate firm for all parties participating in any transaction hereunder), (v)
reasonable fees and disbursements of the Trustee and its counsel and of the
registrar and transfer agent for the Common Stock and (vi) Securities Act
liability insurance obtained by the Company in its sole discretion. In
addition, the Company shall pay the internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing by the
Company of the Registrable Securities on any securities exchange on which
similar securities of the Company are then listed and the fees and expenses of
any person, including special experts, retained by the Company. Notwithstanding
the provisions of this Section 5, each seller of Registrable Securities shall
pay selling expenses and all registration expenses to the extent required by
applicable law.
SECTION 6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and
hold harmless each Notice Holder and each person, if any, who controls any
Notice Holder (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) from and against any losses, liabilities,
claims, damages and expenses (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (collectively, "Losses"), arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided, however, that the Company shall not be liable in any such case to the
extent that any such Losses arise out of or are based upon an untrue statement
or alleged untrue statement contained in or omission or alleged omission from
any of such documents in reliance upon and conformity with any of the
information relating to the Holders furnished to the Company in writing by a
Holder expressly for use therein; provided further, that the indemnification
contained in this paragraph shall not inure to the benefit of any Holder of
Registrable Securities (or to the benefit of any person controlling such
Holder) on account of any such Losses arising out of or based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus provided in each case the Company has performed its
obligations under Section 3(a) hereof if either (A) (i) such Holder failed to
send or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale by such Holder to the person asserting the
claim from which such Losses arise and (ii) the Prospectus would have corrected
such untrue statement or alleged untrue statement or such omission or alleged
omission, or (B) (x) such untrue statement or alleged untrue statement,
omission or alleged omission is corrected in an amendment or supplement to the
Prospectus and (y) having previously been furnished by or on behalf of the
Company with copies of the Prospectus as so amended or supplemented, such
Holder thereafter fails to deliver such Prospectus as so amended or
supplemented, with or prior to the delivery of written confirmation of the sale
of a Registrable Security to the person asserting the claim from which such
Losses arise.
(b) Indemnification by Holders of Registrable Securities. Each Holder
agrees severally and not jointly to indemnify and hold harmless the Company and
its respective directors and officers, and each person, if any, who controls
the Company (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) or any other Holder, from and against all
Losses arising out of or based upon any untrue statement or alleged
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<PAGE>
untrue statement of a material fact contained in any Registration Statement or
Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with information
furnished to the Company by such Holder expressly for use in such Registration
Statement or Prospectus or amendment or supplement thereto. In no event shall
the liability of any selling Holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds received by such
Holder upon the sale of the Registrable Securities pursuant to the Registration
Statement giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the reasonable fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all indemnified parties,
and that all such fees and expenses shall be reimbursed as they are incurred.
Such separate firm shall be designated in writing by, in the case of parties
indemnified pursuant to Section 6(a), the Holders of a majority (with Holders
of Notes deemed to be the Holders, for purposes of determining such majority,
of the number of shares of Underlying Common Stock into which such Notes are or
would be convertible or exchangeable as of the date on which such designation
is made) of the Registrable Securities covered by the Registration Statement
held by Holders that are indemnified parties pursuant to Section 6(a) and, in
the case of parties indemnified pursuant to Section 6(b), the Company. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) Contribution. To the extent that the indemnification provided for
in this Section 6 is unavailable to an indemnified party under Section 6(a) or
6(b) hereof in respect of any Losses or is insufficient to hold such
indemnified party harmless, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party or
parties on the other hand or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the indemnifying party or parties on the one hand
and of the indemnified party or parties on the other hand in connection with
the statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the total net proceeds from the initial placement
pursuant to the Purchase Agreement (before deducting expenses) of the
Registrable Securities to which such Losses relate. Benefits received by any
Holder shall be deemed to be equal to the value of receiving Registrable
Securities that are registered under the Securities Act. The relative fault of
the Holders on the one hand and the Company on the other hand shall be
determined by
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reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Holders or by the Company,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this paragraph are several in
proportion to the respective number of Registrable Securities they have sold
pursuant to a Registration Statement, and not joint.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the Losses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding this
Section 6(d), an indemnifying party that is a selling Holder of Registrable
Securities shall not be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities sold by
such indemnifying party and distributed to the public were offered to the
public exceeds the amount of any damages that such indemnifying party has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The indemnity, contribution and expense reimbursement obligations
of the parties hereunder shall be in addition to any liability any indemnified
party may otherwise have hereunder, under the Purchase Agreement or otherwise.
(f) The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or any person controlling any Holder, or the Company, or the
Company's officers or directors or any person controlling the Company and (iii)
the sale of any Registrable Securities by any Holder.
SECTION 7. Information Requirements. (a) The Company covenants that, if at
any time before the end of the Effectiveness Period the Company is not subject
to the reporting requirements of the Exchange Act, it will cooperate with any
Holder of Registrable Securities and take such further reasonable action as any
Holder of Registrable Securities may reasonably request in writing (including,
without limitation, making such reasonable representations as any such Holder
may reasonably request), all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144 and
Rule 144A under the Securities Act and customarily taken in connection with
sales pursuant to such exemptions. Upon the written request of any Holder of
Registrable Securities, the Company shall deliver to such Holder a written
statement as to whether it has complied with such filing requirements, unless
such a statement has been included in the Company's most recent report filed
pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the Company to
register any of its securities (other than the Common Stock) under any section
of the Exchange Act.
(b) The Company shall file the reports required to be filed by it
under the Exchange Act and shall comply with all other requirements set forth
in the instructions to Form S-3 in order to allow the Company to be eligible to
file registration statements on Form S-3.
SECTION 8. Miscellaneous.
(a) No Conflicting Agreements. Except for the piggyback registration
rights granted to Merck KGaA under its Development and License Agreement dated
December 14, 1998 with the Company for which the Company will use its
reasonable efforts to obtain a waiver or offer Merck KGaA a separate shelf
registration:
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(i) The Company is not, as of the date hereof, a party to, nor shall
it, on or after the date of this Agreement, enter into, any agreement with
respect to its securities that conflicts with the rights granted to the
Holders of Registrable Securities in this Agreement.
(ii) The Company represents and warrants that the rights granted to
the Holders of Registrable Securities hereunder do not in any way conflict
with the rights granted to the holders of the Company's securities under
any other agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of
Holders of a majority of the then outstanding Underlying Common Stock
constituting Registrable Securities (with Holders of Notes deemed to be the
Holders, for purposes of this Section, of the number of outstanding shares of
Underlying Common Stock into which such Notes are or would be convertible or
exchangeable as of the date on which such consent is requested).
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders of Registrable Securities may be given by
Holders of at least a majority of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement; provided, that the provisions
of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence. Each
Holder of Registrable Securities outstanding at the time of any such amendment,
modification, supplement, waiver or consent or thereafter shall be bound by any
such amendment, modification, supplement, waiver or consent effected pursuant
to this Section 8(b), whether or not any notice, writing or marking indicating
such amendment, modification, supplement, waiver or consent appears on the
Registrable Securities or is delivered to such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, by telecopier,
by courier guaranteeing overnight delivery or by first-class mail, return
receipt requested, and shall be deemed given (i) when made, if made by hand
delivery, (ii) upon confirmation, if made by telecopier, (iii) one (1) Business
Day after being deposited with such courier, if made by overnight courier or
(iv) on the date indicated on the notice of receipt, if made by first-class
mail, to the parties as follows:
(w) if to a Holder of Registrable Securities, at the most current
address given by such Holder to the Company in a Notice and
Questionnaire or any amendment thereto;
(x) if to the Company, to:
ImClone Systems Incorporated
180 Varick Street, 7th Floor
New York, NY 10014
Attention: General Counsel
Telecopy No.: (212) 645-2054
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Richard A. Drucker, Esq.
Telecopy No.: (212) 450-4800
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<PAGE>
(y) if to the Initial Purchasers, to:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York
Attention: Equity Capital Markets
Telecopy No.: (212) 761-0538
and
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Patrick O'Brien, Esq.
Telecopy No. (617) 951-7050
or to such other address as such person may have furnished to the other persons
identified in this Section 8(c) in writing in accordance herewith.
(d) Approval of Holders. Whenever the consent or approval of Holders
of a specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Initial
Purchasers or subsequent Holders of Registrable Securities if such subsequent
Holders are deemed to be such affiliates solely by reason of their holdings of
such Registrable Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
(e) Successors and Assigns. Any person who purchases any Registrable
Securities from the Initial Purchasers shall be deemed, for purposes of this
Agreement, to be an assignee of the Initial Purchasers. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties and shall inure to the benefit of and be binding upon each
Holder of any Registrable Securities.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
(i) Severability. If any term provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction, it being intended that all of the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and the registration rights
granted by the Company with respect to the Registrable Securities. Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights
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<PAGE>
granted by the Company with respect to the Registrable Securities. This
Agreement supersedes all prior agreements and undertakings among the parties
with respect to such registration rights. No party hereto shall have any
rights, duties or obligations other than those specifically set forth in this
Agreement. In no event will such methods of distribution take the form of an
underwritten offering of the Registrable Securities without the prior agreement
of the Company.
(k) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Section 4, 5 or 6 hereof and the
obligations to make payments of and provide for liquidated damages under
Section 2(e) hereof to the extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
its terms.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
IMCLONE SYSTEMS INCORPORATED
By /s/ Carl S. Goldfischer
---------------------------------
Name: Carl S. Goldfischer
Title: Vice President, Finance and
Chief Financial Officer
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: Morgan Stanley & Co. Incorporated
By /s/ John D. Tyree
-------------------------------
Name: John D. Tyree
Title: Vice President
Exhibit 5.1
Davis Polk & Wardwell
450 Lexington Avenue
New York, N.Y. 10017
212-450-4000
May 24, 2000
ImClone Systems Incorporated
180 Varick Street
New York, NY 10014
Ladies and Gentlemen:
We have acted as counsel to ImClone Systems Incorporated, a Delaware
corporation (the "Company"), in connection with the preparation of the
Company's Registration Statement on Form S-3 (the "Registration Statement'),
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Securities Act"), relating to the registration of (i)
$240,000,000 principal amount at maturity of 5 1/2% Convertible Subordinated
Notes due 2005 (the "Notes"), and (ii) a presently indeterminate number of
shares (the "Shares") of common stock, par value $0.001 per share, of the
Company issuable upon conversion of the Notes.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments as we have deemed necessary for the purposes of
rendering this opinion.
We are of the opinion that the Notes have been duly authorized by the
Company and, assuming execution and authentication in accordance with the terms
of the Indenture (the "Indenture") referred to in the prospectus contained in
the Registration Statement and delivery and payment therefor in accordance with
the Purchase Agreement dated February 23, 2000, constitute valid and binding
obligations of the Company, enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally and general principles of equity, and are entitled to the
benefits of the Indenture.
On the basis of the foregoing and assuming the due execution and delivery
of certificates representing the Shares, we are of the opinion that the Shares
have been duly authorized and, when issued and delivered upon conversion of the
Notes in accordance with the terms of the Notes and the Indenture, will be
validly issued, fully paid and non-assessable.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the prospectus contained in this Registration Statement. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Davis Polk & Wardwell
Exhibit 12.1
ImClone Systems Incorporated
Ratio of Earnings to Fixed Charges
(in thousands)
<TABLE>
Three
Months
Year Ended Ended
---------------------------------------------------------- ---------
March 31,
1999 1998 1997 1996 1995 2000
--------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net loss.......................... $ (34,611) $ (21,382) $ (15,491) $ (16,015) $ (9,641) $ (12,057)
Add:
Fixed charges.................. 766 624 734 991 1,217 1,436
Less:
Capitalized Interest........... 204 -- -- -- -- 154
--------- --------- --------- --------- -------- ---------
Net loss as adjusted.............. $ (34,049) $ (20,758) $ (14,757) $ (15,024) $ (8,424) $ (10,775)
========= ========= ========= ========= ======== =========
Fixed Charges:
Interest (gross), including 1,375
amortization of debt
issuance costs.............. $ 496 $ 435 $ 551 $ 823 $ 1,054 $ 1,375
Portion of rent representative
of the interest factor...... 270 189 183 168 163 61
--------- --------- --------- --------- -------- ---------
Fixed charges..................... $ 766 $ 624 $ 734 $ 991 $ 1,217 $ 1,436
--------- --------- --------- --------- -------- ---------
Deficiency of earnings available
to cover fixed charges......... $ (34,815) $ (21,382) $ (15,491) $ (16,015) $ (9,641) $ (12,211)
========= ========= ========= ========= ======== =========
</TABLE>
Exhibit 23.1
[Letterhead of KPMG LLP]
The Board of Directors
ImClone Systems Incorporated:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Princeton, New Jersey
May 24, 2000
Exhibit 23.3
[Letterhead of Kenyon & Kenyon]
CONSENT OF PATENT COUNSEL
We hereby consent to the reference to our firm under the caption "Experts"
in the Registration Statement on Form S-3 and related Prospectus of ImClone
Systems Incorporated.
By: /s/ Kenyon & Kenyon
-------------------------------
Kenyon & Kenyon
New York, New York
May 23, 2000
Exhibit 23.4
[Letterhead of Hoffman & Baron, LLP]
CONSENT OF SPECIAL PATENT COUNSEL
We hereby consent to the reference to our firm under the caption "Experts"
in the Registration Statement on Form S-3 and related Prospectus of ImClone
Systems Incorporated.
By: /s/ Hoffman & Baron, LLP
--------------------------
Hoffman & Baron, LLP
Syosset, New York
May 24, 2000
Exhibit 25.1
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
-----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York (State of incorporation if not a U.S.
national bank) 13-5160382
One Wall Street, (Address of principal executive (I.R.S. employer
New York, N.Y. offices) identification no.)
10286
(Zip code)
-----------------------
ImClone Systems Incorporated
(Exact name of obligor as specified in its charter)
Delaware (State or other jurisdiction of
incorporation or organization) 04-2834797
180 Varick Street (Address of principal executive (I.R.S. employer
New York, New York offices) identification no.)
10014
(Zip code)
-----------------------
5-1/2% Convertible Subordinated Notes due 2005
(Title of the indenture securities)
===============================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Name Address
Superintendent of Banks of the 2 Rector Street,
State of New York New York, NY 10006, and
Albany, NY 12203
Federal Reserve Bank of New York 33 Liberty Plaza
New York, NY 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 16th day of May, 2000.
THE BANK OF NEW YORK
By: /s/ MICHAEL CULHANE
-----------------------------
Name: MICHAEL CULHANE
Title: VICE PRESIDENT
-3-
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
Dollar
Amounts
In Thousands
<S> <C> <C>
ASSETS In Thousands Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........................... $ 3,247,576
Interest-bearing balances.................................................... 6,207,543
Securities:
Held-to-maturity securities.................................................. 827,248
Available-for-sale securities 5,092,464
Federal funds sold and Securities purchased under agreements to resell Loans
and lease financing receivables:
Loan and leases, net of unearned income...................................... 37,734,000
LESS: Allowance for loan and lease losses.................................... 575,224
LESS: Allocated transfer risk reserve........................................ 13,278
Loans and leases, net of unearned income, allowance, and reserve............. 37,145,498
Trading Assets.................................................................... 8,573,870
Premises and fixed assets (including capitalized leases).......................... 723,214
Other real estate owned........................................................... 10,962
Investments in unconsolidated subsidiaries and associated companies............... 215,006
Customers' liability to this bank on acceptances outstanding...................... 682,590
Intangible assets................................................................. 1,219,736
Other assets...................................................................... 2,542,157
Total assets................................................................. $ 71,794,790
LIABILITIES
Deposits:
In domestic offices.......................................................... $ 27,551,017
Noninterest-bearing.......................................................... 11,354,172
Interest-bearing............................................................. 16,196,845
In foreign offices, Edge and Agreement subsidiaries, and IBFs................ 27,950,004
Noninterest-bearing.......................................................... 639,410
Interest-bearing............................................................. 27,310,594
Federal funds purchased and Securities sold under agreements to repurchase........ 1,349,708
Demand notes issued to the U.S. Treasury.......................................... 300,000
Trading liabilities............................................................... 2,339,554
Other borrowed money:
With remaining maturity of one year or less.................................. 638,106
With remaining maturity of more than one year through
three years.................................................................. 449
With remaining maturity of more than three years............................. 31,080
Bank's liability on acceptances executed and outstanding.......................... 684,185
Subordinated notes and debentures................................................. 1,552,000
Other liabilities................................................................. 3,704,252
Total liabilities................................................................. 66,100,355
<PAGE>
Dollar
Amounts
In Thousands
<S> <C> <C>
EQUITY CAPITAL
Common Stock...................................................................... 1,135,284
Surplus........................................................................... 866,947
Undivided profits and capital reserves............................................ 3,765,900
Net unrealized holding gains (losses) on available-for-sale securities (44,599)
Cumulative foreign currency translation adjustments............................... (29,097)
Total equity capital 5,694,435
Total liabilities and equity capital $ 71,794,790
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Directors
Thomas A. Renyi
Alan R. Griffith
Gerald L. Hassell
-2-
